There are some bright spots emerging from our pandemic-influenced economy. Sometimes you just need to look in some under-the-radar places. Getty Realty (GTY) , the largest REIT specializing in gas stations and convenience stores displayed this with the release of third quarter results last week.
Revenue of $37.2 million rose just over 4% for the quarter (Y/Y) which was about $1.3 million better than expected, while the company exceeded expectations for funds from operations or FFO (48 cents vs. 45 cent estimate). Without the pandemic, this might have looked like a fairly routine quarter, but with it, it shows how resilient this business is.
GTY generates its revenue through rents collected on its 954 properties in 35 states - potentially problematic for the company if lessees can't pay the rent. In fact that's what happened back in 2011 when its largest tenant, which leased 69% of the company's properties, missed a lease payment, and ultimately filed for Chapter 11. GTY repossessed the properties, but along the way cut, then temporarily eliminated its dividend. The company has made a fairly solid recovery from this debacle since then, but it was an ugly chapter in company history, and one that it learned lessons from, such as not relying on one lessee for more than two-thirds of your leased properties. The top tenant now accounts for 15% of annualized base rent (ABR).
Given the economic uncertainty brought by the pandemic, and the affect on small businesses, you could see potential disaster again if lessees can't make their payments. However, GTY reported collecting 98% of rents and mortgage payments for October, as well as just about all of the deferred payments that were for the month.
GTY also continues to build its portfolio, having acquired 24 properties for $105 million year-to-date in 2020, including nine properties for $36.1 million in the third quarter, and another eight for $36.6 million since the quarter ended on September 30.
Perhaps the best news here for investors is that the company just increased the dividend 5.4% to 39 cents/quarter, good for a 5.9% yield. That equates to a 14% compound annual growth rate over the past eight years, and 11% over the past four. Granted, GTY still has a way to go to get back to the 48-cent quarterly dividend it was paying in 2011 before all the trouble started, but the company has made a great deal of progress.