Under the radar real estate investment trust (REIT) Getty Realty (GTY) continues to plow ahead, unencumbered by a great deal of coverage. If you are not familiar with the name, it is the leading U.S. publicly traded REIT that specializes in gas stations and convenience stores. As of late February, the company, which traces its roots back to 1955 and one New York City service station, had 933 properties (859 owned, 74 leased) in 30 states, with a 99% occupancy rate.
Still growing, GTY acquired 41 properties in 2018 for $78 million, and sold 10 properties for $7 million. The biggest 2018 pickup was GPM Investments, LLC, which included 30 convenience store and gas station locations in Arkansas, Louisiana, Oklahoma, and Texas for $52 million. That followed the 2017 acquisition of 33 convenience stores and five Burger King locations in South Carolina for $68 million. The company currently has 13 properties in various stages of development that should be completed between 2019 and 2021.
REIT investors are typically attracted by dividends, and GTY has delivered a 12.3% compound annual dividend growth rate over the past four years. Most recently, the company increased its quarterly payout 9.4% in October to 35 cents, which equates to a 4.3% yield. Indeed, there are a great deal of REITs that have higher yields, but GTY has delivered on the total return front, up an average of more than 21% per year over the past three years.
I am often asked how I come up with my investment ideas; often they are generated out of some sort of strife, and GTY is no different. The company experienced a rough patch back in 2011 when it's largest tenant, Getty Petroleum Marketing missed a lease payment to the company, and ultimately filed for bankruptcy. As a result, GTY slashed, and then stopped paying a dividend, and shares fell nearly 60% between late 2010 and early 2011. In May of 2011, GTY repossessed 788 properties, and resumed paying a dividend the following month. It was a much smaller dividend at 12.5 cents (down from 48 cents before the trouble started), but a display that the market's reaction was overdone. In 2015, the company received an $18.3 million payment from the Getty Petroleum Marketing bankruptcy proceeds.
The dividend at 35 cents has a way to go get back to the 48 cent peak from 2011, but GTY has made a great deal of progress, and I'd expect another increase perhaps to the 37-39 cent range in late 2019. We'll see.
The company, not surprisingly has debt, which totaled about $442 million at year end. With a current enterprise value of about $1.7 billion (market cap + debt -cash) that equates to just under $2 million per owned property (enterprise value/owned properties) - that's a homegrown measure that may seem meaningless, but helps put property ownership in terms I can understand.
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