Getty Realty Corp. Q2 FY2026 earnings call

Portfolio Resilience & Performance Highlights

• The in-place portfolio, built over a decade via sale-leaseback transactions, features long initial lease terms and contractual rent escalators, with proven durability through economic volatility.
• Convenience store tenant fuel margins averaged 46 cents per gallon in Q1 2026, a 10%+ increase year-over-year, with no material deterioration in consumer demand for the company's core categories.
• Public company tenants have reported modest same-store sales growth, and broader market data shows continued year-over-year growth in convenience retail and automotive service revenue.
• Only ~2% of total ABR is scheduled to expire by the end of 2027, following recent lease extensions, acquisitions, and portfolio adjustments.

Investment Activity Highlights

• Year-to-date 2026 deployed capital totals more than $172 million at an initial cash yield of 7.6%, with an additional $95 million of investments under contract and a robust pipeline of transactions under non-binding letters of intent.
• 28 of the 35 properties acquired in Q2 2026 (representing 60% of acquired ABR) were automotive service or drive-through QSR assets, expanding the company's diversification beyond core convenience stores and adding six new tenants to the portfolio.
• Most assets under contract are in the automotive service sector, followed by drive-through QSRs and convenience stores, mostly development funding transactions with initial cash yields in the high 7% range. Most LOI-stage pipeline opportunities are traditional relationship-driven convenience store sale-leasebacks.
• One new redevelopment project commenced in Q2 2026, with four signed redevelopment leases and additional projects in negotiation; the active project is expected to generate an 18% return on invested capital.

Capital Position Highlights

• The company has a strong liquidity position with more than $570 million of total liquidity as of quarter-end, including ~$190.5 million in anticipated gross proceeds from outstanding forward equity sale agreements, and significant unused capacity on its $450 million revolving credit facility.
• No debt maturities are scheduled until June 2028, with the existing senior unsecured notes portfolio carrying a weighted average interest rate of 4.6% and weighted average maturity of 5.5 years.
• Improved cost of capital over the past year has opened up opportunities to compete on a wider range of transactions than was possible 12 months prior, with net spreads remaining stable even as blended cap rates have moved slightly lower.

Getty Realty operates a single portfolio of net lease properties focused on convenience, automotive service, and QSR retail real estate. As of Q2 2026, the portfolio includes 1,220 net lease properties and 1 active redevelopment site, with 99.8% occupancy excluding the redevelopment and a weighted average remaining lease term of 10.3 years. Annualized base rent (ABR) is 59% concentrated in top 50 MSAs and 75% concentrated in top 100 MSAs across 46 states plus Washington D.C., with a trailing 12-month rent coverage ratio of 2.5x. For Q2 2026, adjusted funds from operations (AFFO) per share was $0.62, up 5.1% year-over-year; year-to-date AFFO per share was $1.25, up 5% year-over-year. The G&A ratio (excluding stock-based compensation and non-recurring retirement costs) was 9.3% for Q2 2026, a 60 bps decrease year-over-year, and 9.2% for the first half of 2026, a 100 bps decrease year-over-year. Investment activity in Q2 2026 totaled $128.3 million, including $117.7 million for 35 acquired properties and $10.6 million in incremental development funding, with an initial cash yield of 7.4% on closed investments. Four properties were sold in Q2 2026 for gross proceeds of $8.2 million. As of quarter-end, total debt outstanding was ~$1.1 billion, with a net debt to EBITDA leverage ratio of 5.3x (4.3x including unsettled forward equity), within the company's 4.5x-5.5x target range.

• Management increased the full-year 2026 AFFO per share guidance to a range of $2.52 to $2.54, marking the second upward guidance revision of 2026.
• Full-year G&A expense growth is expected to remain below 2%, with the full-year G&A ratio projected to fall below 9% as the company continues to scale operations without proportional overhead increases.
• Guidance reflects the current run rate of the in-place portfolio, and excludes the impact of future prospective investments or capital market activities.

• Forward-looking statements, including guidance, are subject to uncertainty and potential risks that could cause actual results to differ materially from current expectations, including macroeconomic volatility, geopolitical instability, and changes to capital market conditions.
• The small increase in the share of properties with sub-1x rent coverage is driven by incremental ramping new car wash projects, which are currently ramping slightly slower than expected, though management notes this is not a material concern as the projects reach stabilization in their third year of operation.
• Any material slowdown in consumer demand or weakness in tenant operating performance could negatively impact rent coverage and increase credit loss risk.
• Overly large pre-funded equity positions at current share prices could reduce future earnings growth if share prices rise over time, so the company balances pre-funding with avoiding excessive equity issuance at lower valuations.

Q: QSR investment momentum has grown since you added a dedicated QSR-focused team member; has the team been expanded, and what is driving this momentum? / A: Momentum is coming from the success of the existing dedicated QSR specialist, as relationship-building in this sector takes time. The company is now seeing consistent quarterly deal flow in QSR similar to its other core sectors, and expects balanced investment volumes across sectors for the rest of the year. (307 characters)

Q: How has improved cost of capital affected your investment pipeline size and pace? / A: Improved cost of capital has opened up many transactions the company could not compete for 12 months ago. Underwriting pace is currently at or near record levels, and the increased velocity of deal flow directly reflects this expanded opportunity set. (239 characters)

Q: Do you plan to enter new asset classes beyond your existing four core sectors, and how do you expect the development funding business to scale? / A: Management is thoughtfully evaluating potential new asset classes but currently sees plenty of opportunity to grow within its existing core sectors. Development funding is offered as a flexible product to existing growing tenant partners, and it is viewed as an additional path to long-term fee ownership rather than a separate standalone business; demand grows in line with tenant partners' expansion plans. (410 characters)

Q: What is Getty's philosophy on the size of forward equity pre-funding relative to peers that hold large pre-funded positions? / A: Getty prioritizes a balanced approach: pre-funding reduces funding risk and gives the investment team clarity on capital costs for deal pricing, which is valuable. However, management avoids over-issuing equity at current lower prices, as it expects growing earnings will push the share price higher over time, so excessive pre-funding would reduce future long-term returns. (385 characters)

Q: What is driving the small increase in sub-1x rent coverage, and is there any broad softening in tenant performance? / A: The increase comes solely from the same portfolio of ramping new car wash projects that have been reported for multiple quarters, with a few more units aging into the bucket this reporting period. Projects are ramping slightly slower than historical averages but are showing positive trajectory, and management expects stabilization as they enter their third year of operation, with no material concern at this time. (392 characters)