Gas station real estate investment trust Getty Realty Corp. (GTY) quietly is building an empire, continuing to put its 2011 crisis further in the rearview mirror. For a very brief recap, it was six years ago when the REIT's largest tenant, Getty Petroleum Marketing, which occupied 69% of Getty Realty's properties, missed a lease payment. That forced Getty Realty to slash its quarterly dividend from 48 cents in June 2011 to 12.5 cents the following year. Between February and December of 2011, its shares fell nearly 60%.
Ultimately, Getty Realty took back possession of the affected properties and has been in recovery mode ever since. Shares are back to pre-crisis levels following a 20% surge since July, and the dividend has been increased to 28 cents quarterly. While that's a far cry from pre-crisis levels, it has been growing at an 8.8% compound annual rate over the past four years. Pre-crisis stockholders may not be jumping for joy given the odyssey of the past six years, but this has turned out to be an excellent play for the bottom fishers among us who believed the market was overly punishing the stock during the crisis.
More recently, Getty Realty has been in acquisition mode, with announced or completed acquisitions in 2017 totaling 101 properties at a cost of $210.9 million, or about $2.09 million per property. On Wednesday, the company closed the acquisition of 49 convenience store/gas station properties from Empire Petroleum Partners for $123 million. The sale/leaseback transaction is expected to generate $9 million in annual rent and be immediately accretive to earnings. Properties are located in seven states
Another deal, a $70 million transaction for 42 properties in South Carolina that include 34 convenience store/gas stations and eight Burger King locations, is expected to close in the fourth quarter and generate $5 million in rent. By my count, that should put total properties by year-end at 916, of which 830 are owned by Getty Realty and the balance leased. With a current enterprise value (EV) of about $1.4 billion, that puts the EV/owned property (a home-grown calculation) at about $1.7 million.
July's hiccup in the stock came when the company priced a secondary offering of 4.1 million shares at $23.15 a share, which resulted in an 8% drop. On that very same day the South Carolina acquisition was announced. Secondary offerings are rarely good news for current shareholders, especially when priced below the current market price. But Getty shares have rallied since, and a solid second-quarter earnings report did not hurt.
Getty Realty currently yields around 4%, and there appears to be room for dividend increases. The 28-cent dividend has been the same for the past four quarters, but if recent history is any indication the company should up it next quarter. Time will tell.