Getty Realty Corp. (GTY) Q2 2013 Earnings Report, Transcript and Summary

Good day, and welcome to the Getty Realty Corp Second Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I’d now like to turn the conference over to Mr. David Driscoll, CEO and President. Please go ahead.

Thank you, Operator. Our General Counsel, Josh Dicker cannot be with us today. So, I’m going to play his role as well as my own. And just talk to you a little bit about the disclaimer which is posted. Thank you all for joining the Getty Realty’s second quarter 2013 quarterly earnings conference call. Yesterday evening, the company released its financial results for the quarter. The 8-K is available in the Investor Relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements including those that I may make regarding financial guidance for the calendar year of 2013, expected asset sales and reinvestment of proceeds, cost reductions, future company operations, run rate stabilization and the company’s acquisition prospects. We caution you that such statements reflect our best judgment based on the factors currently known to us and then actual events or results could differ materially. I refer you to the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 as well as our quarterly and other filings with the SEC for a more detailed discussion of these risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that maybe made in the course of this call. With that I would like to…

Thank you. (Operator Instructions) And we will take our first question from Yasmine Kamaruddin with JPMorgan.

Hi.

Hello.

I just have a – hi, I just have a few questions. So, first on the NEGC issue that you have right now how many properties exactly are leased to NEGC in total?

82 I believe.

So 82.

84

Oh, 84, okay.

84

So, according to your release 26 of them are problematic is that it?

Approximately 26 of them are tied up in the litigation in Connecticut, that’s correct.

Okay, all right. Great. So for these 84 properties what is the total and cash and cap rent on an annual basis?

I’m not sure we provided those numbers and so that one unnecessarily just like (inaudible) on a call right now --

Well, you can also tell me per property, what is the average cash and GAAP rent?

My recollection is that the GAAP rent number is on the order of $5 million to $6 million, I don’t know that -- we can be anymore precise than that.

Okay, all right. And no color in the cash rent?

Like I said, we decided that we are going to sort of sweep the whole deck on this thing.

Okay

And we write the lease. So I think on a going forward basis, we will make a disclosure when we get that restructured which will give you a better idea what the run rate is.

Okay, all right. So for these 26 properties in litigation, is it fair to assume that these properties will be removed the lease?

No, actually, I think it’s fair to say those are the once that are going to stay in the lease. It’s a very complicated situation, the 26, while they represent only approximately a little over 25% to 30% of the entire portfolio on account basis, probably represents 75% to 80% of the value of the portfolio on a value basis. So, like I said, it’s a very complicated situation and the likelihood is in fact those are the properties that will stay in the restructured lease once we get through -- get -- frankly get occupancy of the properties back and our tenant NECG can view the times of repositioning of both properties that it wanted to do in the first place.

Okay, all right got it. All right and well, I know you said before that you don’t want to comment on the cash and GAAP rent specifically, do you have any color on -- as you go through the litigation what will those numbers be?

No, not at this point because we haven’t finished our restructuring of that particular lease.

Okay, all right. Now moving forward to property expenses, so forth the second quarter, I know that it declined (inaudible) this, so which means that your NOI got better, so that’s great. So is that a good NOI run rate at this point for the properties that you have in your portfolio?

No, because you see the decline occurred because during the quarter what we were doing is we were disposing, even during the first quarter. We were disposing our property that were mainly a drag in incurring most of the maintenance and other expenses in the property operating expense. So what you are seeing now in the reduction there is the effect of the dispositions of the re-letting of those properties. And that process, which you are seeing -- reflected in this quarter reflects properties that were disposed off in the -- early in the first quarter and frankly even in the fourth quarter of 2012. And at the beginning of the second quarter and you are going to see that continue to ripple through that line with the number going down as we continue to dispose the property through the rest of the year. And also make the additional comment that we expect that the pace of dispositions will -- if anything accelerate between now and the end of the year.

Okay, all right. So essentially the $1.1 million decline in property expenses, you mean, even be bigger for the third and fourth quarter?

That is what we hope.

All right that sounds great. And those are all my questions. Thank you.

You are welcome to -- comeback if you got anymore.

Okay. Thank you so much.

(Operator Instructions) I think we have no further questions at this time.

Okay. Well, thank you all for joining the call. Thank you all for your continued interest in our company and we look forward to talking to you again in the fall.