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JERICHO, N.Y. -- Getty Realty Corp. achieved several significant milestones in its 2013 fiscal second quarter, President and CEO David B. Driscoll said during its earnings call this morning. Chief among them was Getty Petroleum Marketing Inc.'s (GPMI) settlement with parent company Lukoil Americas Corp. on July 18.
GPMI declared bankruptcy in December 2011, at which time Getty Realty became one of its largest creditors. Getty Realty formerly leased 799 convenience stores and gas stations under a master lease.
In its lawsuit, GPMI accused Lukoil of stripping its most profitable gas stations. As part of the settlement, Lukoil will pay GPMI's creditors $93 million. According to Driscoll, Getty will receive $32.5 million of the settlement, with the chance for more funds in the future.
Not only will these funds tremendously help Getty Realty, but its legal costs will also decline as a result and employees' time will be freed up to work on other projects, the chief executive noted.
The fallout from the GPMI bankruptcy is not completely over, though, Driscoll stressed. Getty Realty has commenced eviction proceedings for 26 Connecticut properties it owns that were formerly leased to GPMI, which in turn subleased them to NEGC Holdings Corp. The Connecticut Superior Court ruled in favor of evicting NEGC from the properties, but NEGC is currently appealing the decision.
Shifting gears to other properties in its portfolio, Getty Realty sold 77 sites in the first six months of this year. The most notable were a gas station and convenience store located at 24th Street and 10th Avenue in New York City for $23.5 million.
Despite the disposition of some assets, Getty Realty is actively pursuing other purchases. However, this has proven difficult because of a "frothy financing market."
"There are fewer large portfolios [for purchase] than in previous years," Driscoll said during the earnings call. "We need to be creative to find properties."
The real estate investment trust did find one portfolio that met its needs as it purchased 36 convenience stores and gas stations in May for $72.5 million from Capital Petroleum Group LLC.
As for earnings, Getty Realty achieved a $12.7-million profit for its fiscal second quarter ended June 30, vs. $3.6 million during the same period in 2012. Driscoll said net earnings were "distorted" by the Lukoil settlement, which will also be a boon to Getty Realty's earnings in its fiscal third quarter.
Revenues from rental properties -- perhaps a better gauge of earnings -- dropped slightly from $24.3 million to $24.1 million in Getty Realty's most recent quarter. Jericho, N.Y.-based Getty Realty owns and leases approximately 1,050 convenience stores and gas stations nationwide.