Press Release

Getty Realty Corp. Announces Preliminary Financial Results for the Quarter and Nine Months Ended September 30, 2008

Company Release - 10/28/2008 5:00 PM ET

JERICHO, N.Y.--(BUSINESS WIRE)--

Getty Realty Corp. (NYSE-GTY) today reported its preliminary financial results for the quarter and nine months ended September 30, 2008.

Net earnings decreased by $2.3 million to $10.5 million for the quarter ended September 30, 2008, as compared to $12.8 million for the quarter ended September 30, 2007. Net earnings decreased by $0.8 million to $32.5 million for the nine months ended September 30, 2008, as compared to $33.3 million for the nine months ended September 30, 2007. Earnings from continuing operations increased by $0.1 million to $10.0 million for the quarter ended September 30, 2008, as compared to $9.9 million for the quarter ended September 30, 2007. Earnings from continuing operations increased by $1.7 million to $30.3 million for the nine months ended September 30, 2008, as compared to $28.6 million for the nine months ended September 30, 2007. Earnings from continuing operations for the quarter and nine months ended September 30, 2008 and 2007 exclude the operating results and gains from the disposition of eight properties sold in 2008 and eleven properties sold in 2007, which results applicable to the quarters and nine months ended September 30, 2008 and 2007 have been reclassified and are included in earnings from discontinued operations. Earnings from discontinued operations, primarily comprised of gains on dispositions of real estate, were $0.5 million and $2.2 million for the quarter and nine months ended September 30, 2008, respectively, as compared to $2.9 million and $4.7 million for the respective prior year periods.

The financial results for the nine months ended September 30, 2008 and 2007 include the effect of the $84.6 million acquisition of convenience stores and gas station properties from FF-TSY Holding Company II LLC (successor to Trustreet Properties, Inc.) which was not substantially completed until the end of the first quarter of 2007. Accordingly, the financial results for the nine months ended September 30, 2007 only partially include the results of such acquisition. Net earnings and earnings from continuing operations for the nine months ended September 30, 2008 reflect the full effect of rental revenue attributable to the properties acquired in 2007, which was partially offset by additional depreciation and amortization and interest expenses related to the property acquisitions.

Funds from operations, or FFO, increased by $1.4 million to $12.9 million for the quarter ended September 30, 2008 and by $3.6 million to $38.7 million for the nine months ended September 30, 2008, as compared to $11.5 million and $35.1 million for the respective prior year periods. Adjusted funds from operations, or AFFO, increased by $1.6 million to $12.2 million for the quarter ended September 30, 2008 and by $4.7 million to $36.9 million for the nine months ended September 30, 2008, as compared to $10.6 million and $32.2 million for the respective prior year periods. Certain items, which are included in the changes in net earnings, are excluded from the changes in FFO and AFFO. The increases in FFO were primarily due to the changes in net earnings but exclude the increases in depreciation and amortization expense for the quarter and nine months ended September 30, 2008 and the decreases in gains on dispositions of real estate for the quarter and nine months ended September 30, 2008. The increases in AFFO for the quarter and nine months ended September 30, 2008 also exclude the decreases in deferred rental revenue and the decreases in net amortization of above-market and below-market leases (which are included in net earnings and FFO but are excluded from AFFO). FFO and AFFO are supplemental non-GAAP measures of the performance of real estate investment trusts and are defined and reconciled to net earnings in the financial tables at the end of this release.

Diluted earnings per share decreased by $0.10 per share for the quarter ended September 30, 2008 and by $0.03 per share for the nine months ended September 30, 2008 to $0.42 per share and $1.31 per share, respectively, as compared to $0.52 per share and $1.34 per share for the respective prior year periods. Diluted FFO per share increased by $0.06 per share for the quarter ended September 30, 2008 and by $0.14 per share for the nine months ended September 30, 2008 to $0.52 per share and $1.56 per share, respectively, as compared to $0.46 per share and $1.42 per share for the respective prior year periods. Diluted AFFO per share increased by $0.06 per share for the quarter ended September 30, 2008 and by $0.19 per share for the nine months ended September 30, 2008 to $0.49 per share and $1.49 per share, respectively, as compared to $0.43 per share and $1.30 per share for the respective prior year periods.

Leo Liebowitz, the Company's Chairman and Chief Executive Officer stated that, "I am pleased with the increases in funds from operations and adjusted funds from operations reported for both the three and nine month periods ended September 30, 2008 as compared to the respective prior year periods." Mr. Liebowitz continued, "In regard to discussions with Getty Petroleum Marketing, Inc., our primary tenant, we continue our internal review of a number of possible proposals to negotiate a modification of the unitary Master Lease with Marketing since we believe that a deal benefiting both parties is possible. However, we cannot predict if, or when, a modification of the Master Lease on terms acceptable to the Company and Marketing could be accomplished or what the terms of any such modification agreement may be."

Revenues from rental properties increased by $0.4 million for the quarter ended September 30, 2008 and increased by $2.7 million for the nine months ended September 30, 2008 to $20.4 million and $60.8 million, respectively, as compared to $20.0 million and $58.1 million for the respective prior year periods. Rent received increased by $0.6 million for the quarter ended September 30, 2008 and by $3.6 million for the nine months ended September 30, 2008, as compared to the respective prior year periods primarily due to rental income from properties acquired at the end of the first quarter in 2007 and rent escalations. In addition to rent received, revenues from rental properties include deferred rental revenues accrued due to the recognition of rental income on a straight-line basis and net amortization of above-market and below-market leases. Straight-line rent decreased to $0.5 million for the quarter ended September 30, 2008 and decreased to $1.2 million for the nine months ended September 30, 2008, as compared to $0.6 million and $1.7 million for the respective prior year periods. Net amortization of above-market and below-market leases decreased to $0.2 million for the quarter ended September 30, 2008 and to $0.6 million for the nine months ended September 30, 2008, as compared to $0.4 million for the quarter and $0.9 million for the nine months ended September 30, 2007.

Environmental expenses, net for the quarter ended September 30, 2008 decreased by $0.5 million to $2.3 million, as compared to $2.8 million recorded for the prior year quarter, and decreased by $1.9 million to $5.0 million for the nine months ended September 30, 2008, as compared to $6.9 million recorded for the nine months ended September 30, 2007. The decreases in environmental expenses were primarily due to lower change in estimated environmental costs net of estimated recoveries from state underground storage tank funds, which decreased by $0.5 million to $1.4 million for the quarter ended September 30, 2008 and by $1.6 million to $2.8 million for the nine months ended September 30, 2008, as compared to the respective prior year periods. The decreases in environmental expenses were also due to lower loss provisions recorded for environmental related litigation reserves which decreased by $0.4 million for the quarter ended September 30, 2008 and by $0.7 million for the nine months ended September 30, 2008, as compared the respective prior year periods.

General and administrative expenses for the quarter ended September 30, 2008 were comparable to the prior year period and increased by $0.4 million to $5.2 million for the nine months ended September 30, 2008, as compared to $4.8 million recorded for the prior year period. The increase in general and administrative expenses for the nine months ended September 30, 2008 was primarily due to higher professional fees associated with the previously disclosed potential modification of the Company's unitary master lease with its primary tenant, Getty Petroleum Marketing, Inc., and related matters.

Depreciation and amortization expense increased by $0.2 million to $2.8 million for the quarter ended September 30, 2008 and by $1.5 million to $8.6 million for the nine months ended September 30, 2008, as compared to $2.6 million and $7.1 million for the respective prior year periods. The increases in depreciation and amortization expense were due to the acquisition of properties at the end of the first quarter of 2007 and the acceleration of depreciation expense resulting from the reduction in the estimated useful lives of certain assets which may be removed from the unitary lease with Marketing, which increases were partially offset by the effect of dispositions of real estate and lease expirations.

Other income, net for the quarter ended September 30, 2008 decreased by $1.2 million to $0.2 million, as compared to $1.4 million recorded for the quarter ended September 30, 2007, and decreased by $1.1 million to $0.7 million for the nine months ended September 30, 2008, as compared to $1.8 million recorded for the nine months ended September 30, 2007. The decreases in other income, net were primarily due to a reduction in gains on dispositions of real estate, which decreased by $1.3 million for both the quarter and nine months ended September 30, 2008, as compared to the respective prior year periods.

The aggregate gain on dispositions of real estate, partially included in both other income and discontinued operations, was $0.5 million for the quarter ended September 30, 2008 and $2.4 million for the nine months ended September 30, 2008, as compared to $3.9 million and $5.4 million for the respective prior year periods.

Interest expense decreased by $0.6 million to $1.7 million for the quarter ended September 30, 2008, as compared to $2.3 million for the prior year period. The decrease in interest expense for the quarter ended September 30, 2008 was primarily due to a reduction in interest rates. Interest expense decreased by $0.2 million to $5.3 million for the nine months ended September 30, 2008, as compared to $5.5 million for the prior year period. The decrease in interest expense for the nine months ended September 30, 2008 was primarily due to a reduction in interest rates, which was partially offset by increased borrowings used to finance the acquisition of properties at the end of the first quarter in 2007.

Getty Realty Corp.'s Third Quarter Earnings Conference Call is scheduled for tomorrow, Wednesday, October 29, 2008 at 9:00 a.m. Eastern Time. To participate in the conference call, please dial 719-325-4805 five to ten minutes before the scheduled start time and reference pass code 4547604. If you cannot participate in the live event, a replay will be available on October 29, 2008 beginning at 12:00 noon though midnight, November 1, 2008. To access the replay, please dial 719-457-0820 and reference pass code 4547604.

Getty Realty Corp. is the largest publicly-traded real estate investment trust in the United States specializing in ownership and leasing of convenience store/gas station properties and petroleum distribution terminals. The Company owns and leases approximately 1,100 properties throughout the United States.

CERTAIN STATEMENTS IN THIS CURRENT REPORT ON FORM 8-K MAY CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WHEN THE WORDS "BELIEVES," "EXPECTS," "PLANS," "PROJECTS," "ESTIMATES" AND SIMILAR EXPRESSIONS ARE USED, THEY IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT BELIEFS AND ASSUMPTIONS AND INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. INFORMATION CONCERNING FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS CAN BE FOUND IN OUR PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. EXAMPLES OF FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS ABOUT THE DEVELOPMENTS WITH MARKETING AND THE UNITARY MASTER LEASE WITH MARKETING, THE COMPANY'S ATTEMPT TO NEGOTIATE A MUTUALLY BENEFICIAL MODIFICATION OF THE MASTER LEASE WITH MARKETING AND THE STATEMENTS MADE BY MR. LIEBOWITZ RELATED TO MARKETING AND THE UNITARY LEASE WITH MARKETING. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES OR REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

                 GETTY REALTY CORP. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS
                  (in thousands, except share data)
                             (unaudited)

----------------------------------------------------------------------
                                           September 30,  December 31,
----------------------------------------------------------------------
Assets:                                        2008           2007
----------------------------------------------------------------------

Real Estate:
   Land                                        $221,377      $222,194
   Buildings and improvements                   253,500       252,060
                                           -------------  ------------
                                                474,877       474,254
   Less - accumulated depreciation and
    amortization                               (127,465)     (122,465)
                                           -------------  ------------
       Real estate, net                         347,412       351,789
Deferred rent receivable (net of allowance
 of $10,109 as of September 30, 2008 and
 $10,494 as of December 31, 2007)                26,200        24,915
Cash and cash equivalents                         6,968         2,071
Recoveries from state underground storage
 tank funds, net                                  4,570         4,652
Mortgages and accounts receivable, net            1,526         1,473
Prepaid expenses and other assets                 8,528        12,011
                                           -------------  ------------
      Total assets                             $395,204      $396,911
                                           =============  ============

----------------------------------------------------------------------
Liabilities and Shareholders' Equity:
----------------------------------------------------------------------

Debt                                           $134,750      $132,500
Environmental remediation costs                  17,827        18,523
Dividends payable                                11,669        11,534
Accounts payable and accrued expenses            20,659        22,176
                                           -------------  ------------
      Total liabilities                         184,905       184,733
                                           -------------  ------------
Commitments and contingencies                        --            --
Shareholders' equity:
   Common stock, par value $.01 per share;
    authorized 50,000,000 shares; issued
    24,765,685 at September 30, 2008 and
    24,765,065 at December 31, 2007                 248           248
   Paid-in capital                              258,984       258,734
   Dividends paid in excess of earnings         (46,769)      (44,505)
   Accumulated other comprehensive loss          (2,164)       (2,299)
                                           -------------  ------------
      Total shareholders' equity                210,299       212,178
                                           -------------  ------------
      Total liabilities and shareholders'
       equity                                  $395,204      $396,911
                                           =============  ============
                 GETTY REALTY CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF OPERATIONS
               (in thousands, except per share amounts)
                             (unaudited)

----------------------------------------------------------------------
                              Three months ended    Nine months ended
                                  September 30,        September 30,
----------------------------------------------------------------------
                                 2008      2007       2008      2007
----------------------------------------------------------------------

Revenues from rental
 properties                     $20,354  $20,035     $60,832  $58,082

Operating expenses:
  Rental property expenses        2,256    2,272       7,025    7,059
  Environmental expenses,
   net                            2,270    2,844       5,039    6,860
  General and administrative
   expenses                       1,483    1,525       5,235    4,758
  Depreciation and
   amortization expense           2,841    2,588       8,583    7,109
                              ---------- ---------  --------- --------
    Total expenses                8,850    9,229      25,882   25,786
                              ---------- ---------  --------- --------

Operating income                 11,504   10,806      34,950   32,296

  Other income, net                 224    1,417         652    1,808
  Interest expense               (1,703)  (2,314)     (5,349)  (5,502)
                              ---------- ---------  --------- --------
Earnings from continuing
 operations                      10,025    9,909      30,253   28,602

Discontinued operations:
  Earnings from operating
   activities                         2      337         149      933
  Gains on dispositions of
   real estate                      462    2,600       2,093    3,772
                              ---------- ---------  --------- --------
Earnings from discontinued
 operations                         464    2,937       2,242    4,705
                              ---------- ---------  --------- --------
Net earnings                    $10,489  $12,846     $32,495  $33,307
                              ========== =========  ========= ========


Basic earnings per common
 share:
  Earnings from continuing
   operations                      $.40     $.40       $1.22    $1.15
  Earnings from discontinued
   operations                       .02      .12         .09      .19
  Net earnings                     $.42     $.52       $1.31    $1.34

Diluted earnings per common
 share:
  Earnings from continuing
   operations                      $.40     $.40       $1.22    $1.15
  Earnings from discontinued
   operations                       .02      .12         .09      .19
  Net earnings                     $.42     $.52       $1.31    $1.34

Weighted average shares
 outstanding:
  Basic                          24,766   24,765      24,766   24,765
  Stock options and
   restricted stock units             7       27           8       23
                              ---------- ---------  --------- --------
  Diluted                        24,773   24,792      24,774   24,788
                              ========== =========  ========= ========

Dividends declared per share      $.470    $.465      $1.400   $1.385
                 GETTY REALTY CORP. AND SUBSIDIARIES
                  RECONCILIATION OF NET EARNINGS TO
                      FUNDS FROM OPERATIONS AND
                    ADJUSTED FUNDS FROM OPERATIONS
               (in thousands, except per share amounts)
                             (unaudited)

----------------------------------------------------------------------
                                    Three months
                                        ended        Nine months ended
                                    September 30,      September 30,
----------------------------------------------------------------------
                                    2008     2007      2008     2007
----------------------------------------------------------------------
Net earnings                      $10,489  $12,846   $32,495  $33,307

Depreciation and amortization of
 real estate assets                 2,875    2,614     8,638    7,186
Gains on dispositions of real
 estate                              (490)  (3,948)   (2,395)  (5,386)
                                  -------- --------  -------- --------
Funds from operations              12,874   11,512    38,738   35,107
Deferred rental revenue
 (straight-line rent)                (485)    (571)   (1,285)  (1,922)
Net amortization of above-market
 and below-market leases             (198)    (388)     (600)    (942)
                                  -------- --------  -------- --------
Adjusted funds from operations    $12,191  $10,553   $36,853  $32,243
                                  ======== ========  ======== ========

Diluted per share amounts:
   Earnings per share                $.42     $.52     $1.31    $1.34
   Funds from operations per
    share                            $.52     $.46     $1.56    $1.42
   Adjusted funds from operations
    per share                        $.49     $.43     $1.49    $1.30

Diluted weighted average shares
 outstanding                       24,773   24,792    24,774   24,788

In addition to measurements defined by generally accepted accounting principles ("GAAP"), Getty also focuses on funds from operations ("FFO") and adjusted funds from operations ("AFFO") to measure its performance. FFO is generally considered to be an appropriate supplemental non-GAAP measure of the performance of REITs. FFO is defined by the National Association of Real Estate Investment Trusts as net earnings before depreciation and amortization of real estate assets, gains or losses on dispositions of real estate, (including such non-FFO items reported in discontinued operations) and extraordinary items. Other REITs may use definitions of FFO and/or AFFO that are different than Getty's and, accordingly; may not be comparable.

Getty believes that FFO is helpful to investors in measuring its performance because FFO excludes various items included in GAAP net earnings that do not relate to, or are not indicative of, Getty's fundamental operating performance such as gains or losses from property dispositions and depreciation and amortization of real estate assets. In Getty's case, however, GAAP net earnings and FFO include the significant impact of deferred rental revenue (straight-line rental revenue) and the net amortization of above-market and below-market leases on its recognition of revenues from rental properties, as offset by the impact of collection related reserves. Deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with its tenants. In accordance with GAAP, the aggregate minimum rent due over the current term of these leases are recognized on a straight-line basis rather than when payment is due. The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases. GAAP net earnings and FFO may also include an income tax provision or benefit recognized due to adjustments in amounts accrued for uncertain tax positions related to being taxed as a C-corp., rather than as a REIT, prior to 2001. As a result, Getty pays particular attention to AFFO, a supplemental non-GAAP performance measure that Getty defines as FFO less straight-line rental revenue, net amortization of above-market and below-market leases and income taxes. In Getty's view, AFFO provides a more accurate depiction than FFO of the impact of scheduled rent increases under these leases, rental revenue from acquired in-place leases and Getty's election to be taxed as a REIT beginning in 2001. Neither FFO nor AFFO represent cash generated from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative for GAAP net earnings or as a measure of liquidity.

Source: Getty Realty Corp.

Contact: Getty Realty Corp. Thomas J. Stirnweis, 516-478-5403