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JERICHO, N.Y. – Further questions await convenience store owners who sub-lease properties from Getty Petroleum Marketing Inc. (GPMI), as Getty Realty Corp. announced today that it has begun the repositioning and sale process of 160 gas stations/convenience stores formerly leased by GPMI. GPMI declared its bankruptcy on Dec. 5.
"We're finally in a position to reposition GPMI properties," David Driscoll, Getty Realty's CEO, said during an earnings conference call this morning. "[GPMI] has been reporting poor results [at its stores] for some time."
Of the 160 properties currently for sale, Driscoll said Getty Realty expects to sell 75 percent of the locations by the end of 2013. "[In fact], we expect to make tangible progress in the repositioning in the second quarter of this year," he noted.
Getty Realty also needs to take control of the additional 637 properties leased by GPMI, many of which are sub-leased by independent c-store owners in the Northeast.
Driscoll said if the U.S. Bankruptcy Court for the Southern District of New York approves the rent payment plan agreed upon between his company and GPMI, the leases that independent proprietors have with GPMI would become moot and Getty Realty would negotiate new leases with those tenants. He acknowledged that some tenants could be on month-to-month leases until longer-term deals are struck.
Judge Shelly C. Chapman will determine if the rental payment agreement between Getty Realty and GPMI should be approved at a hearing in New York City on April 2.
Currently, sub-lessees are still paying rent to GPMI. Any rental profits being realized after expenses are paid by GPMI are being sent directly to Getty Realty, according to Driscoll. If Chapman throws out the agreement completely, Driscoll said "[t]hings will happen quickly. Stay tuned." He did not elaborate on the comment.
Due to several charges associated with GPMI's bankruptcy declaration, Getty Realty lost $19.5 million for its 2011 fiscal fourth quarter, which ended Dec. 31. The company cited several one-time charges for the loss, including legal and impairment costs associated with GPMI's bankruptcy. Getty Realty earned a profit of $12.48 million in its 2010 fiscal fourth quarter.
"Our overall results were materially affected by GPMI's Dec. 5 bankruptcy," Driscoll said. "We never recouped our November 2011 rent owed under our master lease – which we may never recoup – plus we had more real estate-related charges.
Moving forward, Getty Realty will incur more environmental and administrative costs due to GPMI's bankruptcy, the CEO said. And due to an uncertain immediate financial future, Getty Realty announced it was suspending dividend payments to shareholders. The company was previously paying 25 cents per quarter, per share.
"We desire to maintain financial flexibility," Driscoll said of the dividend deferment. "We understand we have challenges before us….Understand, it will take time." Driscoll added that Getty Realty could have drawn out the repositioning and sale process for years, but the company wants to take on those challenges now, in order to provide for a strong future.
"We could have had this significant overhang last until 2015," he said. "But we're resolving those issues now." Getty Realty's chief exec said the company could resume paying dividends to shareholders once some properties are sold, but he stopped short of saying when a dividend would again be paid.