Getty Realty (NYSE: GTY) is a US real estate investment trust (REIT) that owns and leases retail motor fuel and convenience store properties, as well as petroleum distribution terminals. The company makes money by fusing all sectors into a single industry as operators of co-branded locations with multiple uses. By consolidating all operations, GTY has created a one-stop shop for consumers, and this unique aspect is GTYs source to growth. Of GTY's 908 owned and 145 leased properties, the typical property is used as a retail motor fuel outlet and convenience store located on a 0.5 to 0.75 acre of land in a metropolitan area.[1] GTY's primary tenants sell gasoline, and as such their ability to sell gasoline is highly tied to the petroleum industry and volatile oil prices.

Business Growth

Since 2007, the company has turned around its business policy by acquiring larger parcels of land.[2] In particular, GTY attempts to locate at highly trafficked urban intersections or conveniently close to highway entrance or exit ramps. Retail motor fuel properties that GTY owns are an integral component of the transportation infrastructure, and as such stability and growth within the retail motor fuel and convenience store industry is driven by highly inelastic demand for petroleum products and day-to-day consumer goods and fast foods. Top-line from rental properties added to $88.3 million in FY2010, of which $86.9 million came from lease payments received and another $1.5 million was comprised of rental revenue adjustments coming from deferred rental income.[3]

Key Trends and Forces

Volatility and Instability in Credit Markets bring High Barriers to Financing for REITS

Because REITs are obligated to pay out 90% of income to shareholders, which therefore allow it to become a pass-through entity, REITS such as GTY have difficulty simply retaining cash on hand. Without a large surplus of cash at hand to fund growth, GTY must resort to external financing from either credit or equity markets. Equity markets tend to be dilutive to shareholders, and as such stable credit markets are necessary to insure a continuance of refinancing opportunities as REITS are traditionally unable to keep large amounts of cash at hand to pay off balloon payments.

Tenants' Ability to Pay through Long-Term Contracts are Impacted by Macroeconomic Factors

GTY tries to achieve long-term contracts with its tenants, at roughly 15 years. By signing long-term leases GTY and easily project out its future cash flows to control its acquisition strategy for newer properties. However, because these contracts are so long term, the ability for tenants to pay out these leases are highly respondent to tenant's ability to make money. For GTY, these revenues come primarily from gasoline. With gasoline prices so volatile, the instability causes the tenants' inability to forecast out future revenues and profits, and thus making it less likely for tenants to pay GTY. Therefore, the ability to secure stable tenants for long-term leases is dependent upon macroeconomic factors.


The real estate market for gasoline and retail properties is highly fragmented and scattered with both private, family-owners, investment funds and other REITS. In particular with its convenience store attributes, community centers play a huge competitive force. Some of GTY's competitors include:

  • Equity One (EQY) is a REIT that principally owns, manages, acquires and develops neighborhood and community shopping centers.[4]
  • Glimcher Realty Trust (GRT) is a self-administered and self-managed real estate investment trust (REIT) and its affiliates, of owning, leasing, acquiring, developing and operating a portfolio of retail properties consisting of regional and super regional malls, and community shopping centers.[5]
  • Macerich Company (MAC) is involved in acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers located throughout the United States.[6]


  1. GTY Form 10-K FY2010, Pg 2
  2. Getty Realty acquires 59 properties
  3. Getty Realty Completes Acquisition Of 59 Mobil Branded Properties
  4. EQY Form 10-K, FY2010, Pg 2
  5. GRT FY2010 Form 10-K, Pg 3
  6. MAC Form 10-K, FY2010, Pg 1
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