Good morning, and welcome to the Getty Realty's Earnings Conference Call for the fourth quarter of 2021. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel, and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker.
Thank you. Excuse me. I would like to thank you all for joining us for Getty Realty's fourth quarter and year-end earnings conference call. Yesterday afternoon, the company released its financial results for the quarter and year ended December 31, 2021. The Form 8-K and earnings release are available in the investor relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Examples of forward-looking statements include our 2022 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's future operations, future financial performance, and the company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2020, subsequent quarterly reports filed on Form 10-Q, and our other filings made with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements made today.
You should not place undue reliance on forward-looking statements which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our updated definition of adjusted funds from operations or AFFO and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.
Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the fourth quarter and full year 2021. Joining us on the call today are Mark Olear, our Chief Operating Officer, and Brian Dickman, our Chief Financial Officer. I will lead off today's call by providing commentary on our year, summarize our performance for the fourth quarter and year end in 2021, and highlight the company's investment in capital markets activities. As usual, Mark and Brian are prepared to take you through the portfolio and financial results in detail. As we enter 2021, we set a number of goals related to further diversifying and growing our portfolio, scaling our platform, increasing earnings, and delivering strong returns to shareholders. I'm pleased to report that we achieved, and in many cases exceeded, all of our 2021 objectives.
We invested over $200 million across more than 100 convenience and automotive retail properties during the year, including more than $64 million for the fourth quarter, and benefited from the continued strength of our in-place portfolio from which we collected 100% of this year's rents and all of last year's COVID-related rent defaults. Our strong external growth, contractual rent escalations, and contributions from our completed redevelopment projects resulted in growth of 8% cash rental income, a 14% [audio distortion] and a 7% [audio distortion]. Our investment activity for the year reflected a more diversified set of target asset classes while maintaining a disciplined investment approach.
Our strategy is to acquire high-quality real estate across the convenience and automotive retail sectors and to partner with strong and growing regional and national branded operators. Our investment spending in 2021 was the most diverse in the company's history as we acquired a variety of high-quality convenience store, car wash, auto service, and drive-through restaurant assets. We also introduced several new tenants to our portfolio, including Flash Market, Mavis Tires, Ref uel, Splash Car Wash, Valvoline, and WhiteWater Express Car Wash, and expanded our existing tenant relationships with high-quality operators such as Go Car Wash, United Pacific, and ZIPS Car Wash. We are pleased by the success of our development funding program for new industry sites throughout the year and believe it complements both our core sale-leaseback financing product and our ongoing redevelopment initiative.
Having a flexible offering allows Getty to support our tenants as they grow their businesses through acquisitions, ground-up development or redevelopment, and modernization of existing stores. In addition, rent commenced on two redevelopments with 7-Eleven for new convenience store locations during the quarter, bringing our 2021 total to five completed projects. Since inception of the program, we have completed 24 projects, and we maintain a solid pipeline of additional redevelopments which we expect to come online over the next one to five years. Our balance sheet ended 2021 in excellent shape. We recast our revolving credit facility at more favorable terms in October, and we were active with our ATM throughout the fourth quarter, ending the year with leverage under 5x net debt to EBITDA.
As further demonstration to our commitment to financing our company for the long term and supporting our growth initiatives. Two days ago, we announced the issuance of $225 million of senior unsecured notes to fund investment activity and proactively refinance our notes maturing in June 2023. Post this transaction, our revolving credit facility is completely undrawn, and we've addressed all debt maturities until 2025. I wanna reiterate our commitment to effectively executing on both new investments and the active asset management of our portfolio. We remain focused on acquiring high-quality retail real estate occupied by national and regional operators. Our investment strategy continues to focus on the automobile as the dominant form of consumer transportation in the United States, and we believe mobile consumers are prioritizing convenience, speed, quality, and service more than ever before.
Convenience stores, car washes, auto service centers, parts retailers, and drive-thru restaurants, these are the places where consumers are spending money in their cars and on their cars, and where we will continue to allocate capital. Our team is as focused as ever on the growth of this company, and we are all working diligently to source and underwrite new opportunities in strong metropolitan markets across the country, as well as to unlock embedded value through selective redevelopments. We believe our success in 2021 demonstrates our ability to source opportunities that align with our investment strategies and that we are in a position to continue driving additional shareholder value in 2022 and beyond. With that, I'll turn the call over to Mark to discuss our portfolio and investment activities.
Thank you, Chris. As of the end of 2021, our portfolio includes 1,019 net lease properties, four active redevelopment sites, and five vacant properties. Our weighted average lease term was 8.8 years, and our overall occupancy, excluding active redevelopments, remained constant at 99.5%. Our portfolio now spans 38 states across the country, plus Washington, D.C., and our annualized base rents, 64% of which come from the top 50 MSAs in the U.S., continue to be well covered by our trailing 12-month tenant rent coverage ratio of 2.6x . During 2021, Getty underwrote a record $2.9 billion of opportunities to acquire freestanding convenience and automotive retail real estate. Convenience stores represented approximately 60% of our underwriting, with the remaining 40% being focused on the other automotive retail categories.
In terms of our investment activities, we had a very strong quarter in which we acquired or provided development funding for 23 properties totaling $64.4 million, bringing our full year totals to 100 properties and $200 million. The 2021 activity included the acquisition of 97 properties for $94.3 million with a weighted average initial lease term of 13.8 years and an aggregate initial cash yield of 6.7%. In addition, we ended the year with $5.7 million of funded construction loans for new-to-industry developments which were accruing interest at 6.9%. To provide more color on our investment activity, we completed three transactions in the convenience and gas sector during the quarter.
Highlights of activity in the C&G sector include closing on the second tranche of our sale-leaseback with Flash Markets, a subsidiary of Transit Energy Group. We acquired seven additional properties for $30.3 million in this tranche, which are located throughout the southeastern United States with a concentration around the Charlotte, North Carolina MSA. Completing the acquisition of our second development funding project with Refuel in the Charleston, South Carolina MSA. Our total investment in the project was $5.5 million, including our final investment of $1.1 million during the fourth quarter. As for the terms of our development funding transactions, we acquired the property on completion of development in conjunction with our final funding payment and simultaneously entering into a long-term triple-net lease.
In the car wash sector, we completed two transactions in the quarter, including acquiring our sixth newly constructed express tunnel car wash from WhiteWater Express Car Wash in Michigan for $3.6 million and acquiring two additional properties from Splash Car Wash, which are located in the New York and Vermont markets. Our purchase price for the properties was $8.9 million. In the auto service sector, we acquired seven properties during the quarter. Highlights include the acquisition of a Mavis Tires store in the Greater Chicago MSA for $1.8 million and the acquisition of six automotive service sites in Chicago and Kansas City MSAs for $8.2 million in the aggregate.
We also acquired one drive-thru quick serve restaurant in the Detroit MSA for $1.9 million and advanced $1.1 million of development funding with Splash for a new express car wash located in the New Haven, Connecticut MSA. As part of this transaction, we will accrue interest on our investment during the construction phase of the project, and we expect to acquire the property via sale-leaseback upon completion and final funding. The weighted average initial lease term of our completed transactions for the quarter was 13.8 years, and our aggregate initial cash yield on our fourth quarter acquisitions was 6.7%. We began 2022 with a robust investment pipeline to support future growth, and it is comprised of a diverse set of asset classes, tenants, and opportunities.
These include direct sale-leasebacks, acquisitions of net lease properties, and development funding for new industry assets. Subsequent to quarter end, we acquired two convenience store properties in the New Haven, Connecticut MSA from Global Partners for $7 million. Moving to our development platform, during the quarter, we invested approximately $300,000 in both completed projects and sites which remain in our pipeline. In addition, rent commenced on two development projects during the quarter. Both projects were leased to 7-Eleven to new industry convenience stores in Texas. We invested $820,000 in these two 7-Eleven projects and generated return on invested capital of approximately 26%. For the year, we invested $1 million across our entire redevelopment platform and completed five redevelopment projects.
The completed projects required $1.3 million of total investment, which was spent over multiple years and will generate an aggregate $420,000 of incremental rent to the company. Looking ahead, we have seven signed leases or letters of intent, which includes four active projects, two projects of properties which are currently subject to triple net leases and have not yet been recaptured from the current tenants, and one signed LOI on a vacant property. The company expects rent to commence at several additional projects over the next one to three years. Turning to our asset management activities for the fourth quarter, we sold 10 properties, realizing $13.7 million in gross proceeds and exited two lease properties. For the year, we sold 16 properties, realizing $24.5 million in gross proceeds and exited 11 lease properties.
Of the seven properties sold in the fourth quarter, which represented the closing of one tranche of a planned divestiture of 21 sites to the existing tenant in the State of New York. Subsequent to quarter end, we sold the remaining sites for $10.1 million. We will continue to selectively dispose of properties that we've determined are no longer competitive in their current format and do not have compelling redevelopment potential. With that, I will turn the call to Brian to discuss our financial results.
Thanks, Mark. Good morning, everyone. Before I provide a recap of earnings, I wanna note that we've updated our definition of AFFO to adjust for stock-based compensation and amortization of debt issuance costs. This update was based on a comprehensive review of AFFO definitions across the net lease sector and was done to improve the comparability of Getty's AFFO when evaluating our results alongside our net lease peers. Our earnings release last night provided our results under both the updated and prior definitions. My commentary this morning will focus on our updated definition. With that said, we reported AFFO per share of $0.54 for the fourth quarter, representing a year-over-year increase of 8% versus the $0.50 per share reported in the fourth quarter of 2020. FFO was $0.47 per share for the fourth quarter of 2021.
For the full year of 2021, AFFO per share was $2.08, representing a year-over-year increase of 7% versus the $1.94 per share reported in 2020. FFO was $1.88 per share for the full year of 2021. Our total revenues were $39.4 million for the fourth quarter and $155.4 million for the year, representing year-over-year increases of 6.1% and 5.5%, respectively. Base rental income grew 8.7% to $35.6 million for the fourth quarter and 8.1% to $137.5 million for 2021.
Strong acquisition activity over the last 12 months and recurring rent escalators in our leases were the primary drivers of the increase, with additional contribution from rent commencements and completed redevelopment projects. On the expense side, G&A costs increased for both the quarter and the year, primarily due to employee-related expenses, including non-cash stock-based compensation, and for the year, $800,000 of retirement and severance expenses. Property costs declined in the fourth quarter and for the year due to reductions in both property operating expenses and leasing and redevelopment costs. Property operating expenses decreased due to lower rent expense and non-reimbursable expenses as we continue to exit lease sites and sell or redevelop other legacy properties. Leasing and redevelopment costs were lower primarily as a result of improved cost management within our redevelopment program.
Environmental expenses, which are highly variable due to a number of estimates and non-cash adjustments, increased in both the quarter and the year due to certain litigation accruals and changes in net remediation costs, partially offset by a decrease in legal and professional fees. Turning to the balance sheet and our capital markets activities, we ended the year with $585 million of total debt outstanding, including $525 million of long-term fixed rate unsecured notes and $60 million outstanding on our $300 million revolving credit facility. Excluding the revolver, our weighted average borrowing cost was 4.2%, and the weighted average maturity of our debt was 6.5 years.
Total indebtedness to total asset value was 34% based on the definitions in our credit agreements, while total debt to total capitalization was 31% and net debt to EBITDA was 4.6x . These latter two metrics have historically been reported using our credit agreement definition of total indebtedness but have now been updated to use a more standard definition of debt, which does not include dividends payable and capitalized lease obligations. Similar to our AFFO update, this change was based on a comprehensive review of credit metrics used across the net lease sector and was done to improve the comparability of Getty's leverage profile alongside our net lease peers.
As Chris mentioned, yesterday, we closed on the private placement of $225 million of senior unsecured notes, including $100 million of notes that were funded at closing, bear interest at a fixed rate of 3.45% and mature in February 2032. $125 million of notes that'll be funded in January 2023. They bear interest at a fixed rate of 3.65% and mature in January 2033. Proceeds from the notes funded at closing will be used to repay all amounts currently outstanding on our revolver, with the balance used to fund investment activity.
Proceeds from the delayed funding notes will be used to prepay in full the $75 million of 5.35% unsecured notes that come due in June 2023, and the balance will be used to fund investment activity. Pro forma for yesterday's closing, our weighted average debt maturity increases to seven years. Pro forma for the delayed funding tranche, our weighted average debt maturity will be 7.4 years at the time of funding, and our weighted average borrowing costs will decrease to 3.9%. Moving to our ATM program, we were relatively active in the fourth quarter, raising gross proceeds of $44 million at an average price of $31.98 per share.
For the year, we raised total gross proceeds of $94.1 million through the ATM program at an average price of $30.93 per share. We're pleased with the results of our capital raising activities in the fourth quarter and thus far in 2022, and believe our balance sheet and overall credit profile position the company well to continue to execute on its growth plans. With respect to our environmental liability, we ended the year at $47.6 million, which was a decrease of approximately $500,000 from the end of 2020. For the quarter and year, net environmental remediation spending was approximately $1.3 million and $4.4 million, respectively.
Finally, we're introducing our 2022 AFFO per share guidance at a range of $2.08-$2.10 per share. Our guidance includes transaction activity to date, but does not otherwise assume any potential acquisitions, dispositions, or capital markets activities for the remainder of 2022. Specific factors that impact our initial AFFO guidance this year include cash proceeds from our recent notes offering that have not yet been deployed, the disposition of the Upstate New York portfolio, but not the redeployment of the sale proceeds, and approximately $700,000 of demolition costs for anticipated redevelopment projects, which run through property costs on our P&L. With that, I will ask the operator to open the call for questions.
Thank you. At this time, we will be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Brad Heffern with RBC Capital Markets. Please proceed with your question.
Hey, good morning, everyone. I was wondering if you could walk through the current pipeline and a directional expectation for acquisition volumes and cap rates in 2022?
This is Chris. I'll start, and then Mark can probably maybe address in more detail. I think, as we've laid out, a more diversified strategy, which you've seen in recent years, is an accelerating pace of acquisition and investment activity or diversification, within the asset classes, how we're deploying that capital, where we're deploying that capital, and we expect those trends to continue. Mark might also want to comment on the current state of the pipeline.
Yeah. As we mentioned, we had a record year coming out of last year, and opportunities that meet our initial underwriting criteria. Coming out of last year, going into this year, through the first few months of the year, we're, you know, ahead of the pace we were at last year this time as far as active underwriting. That's a result of not only the efforts of our acquisition investment team, but you know, you're starting to see the delivery of the entry into the car wash vertical two, three years ago. You know, we brought in our investment criteria into other automotive verticals approximately a year or so ago, and we're starting to deliver on in those sectors.
We expect to continue to grow momentum with regard to seeing opportunities that are out there in all those verticals. By creating as much opportunity as possible, we feel confident to maintain our standards for qualifying real estate, qualifying geographies, market qualities, you know, tenant balance sheet, tenant operation quality, so we don't have to deviate from our commitment to, you know, the standards that we've delivered on in the past.
Okay. Got it. Thanks for that. Just on the cap rate front, I mean, it seems like your acquisition number's been pretty stable for the past few quarters. Is that consistent with what you're seeing in the market? Have you seen any sort of upward pressure, you know, on cap rates from where rates have gone? Or are you maybe seeing any thinning out of the, you know, the competition that you're seeing?
I'll address a few questions in there. We certainly do not see any thinning out of competition. There's a lot of capital chasing transactions. That leads to the second answer, which is we have not really seen cap rates respond to you know, whether it's our costs or the market in general. You know, we expect that to eventually filter in, but I think it's gonna take six, nine months plus, too, just given how much capital is chasing at least retail assets.
Okay. Thank you.
Thank you. Our next question is from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
Hi. Thanks. Good morning. Just sticking with acquisitions, I guess, and thinking about on the funding side. Brian, you know, Getty ended 20 21, a little below the long-term leverage target at 4.6x you mentioned. You know, where do you expect leverage to be roughly at year-end? You know, are you planning to increase leverage from current levels as you fund investments and redeploy the proceeds from the dispositions?
Yeah. Morning, Todd. The short answer there is, you know, balance sheet leverage philosophy remains unchanged. O bviously as we go through the year, as you mentioned, we do have, you know, a material amount of liquidity coming out of the recent capital raising. We're gonna pursue the same paths we really have, right? As that activity, the investment activity drives capital needs, we'll work through our cash balances. We obviously have the revolver to continue to fund acquisitions, and we'll utilize the ATM program, you know, as it's prudent and appropriate to do so. In terms of year-end leverage, again, I would just say, you know, our range, the 4.5x to 5.5x is still applicable. Any actual number will really be, you know, dependent on the underlying activity.
Okay. You know, I appreciate the change in methodology, the reporting methodology around the new guidance. For the equity-based comp and amortization of debt issuance costs, I'm just curious if you can, you know, sort of provide maybe what the guidance would look like on a comparable basis to the 2021 guidance, just in order to improve, you know, comparability as you transition to the new reporting methodology or at least provide a little bit of detail around, you know, those line items just to help us sort through it a bit here.
Yeah, of course. You know, in 2021 it was about an $0.11 aggregate difference there, and I would think that I would use for your question, Todd, a similar number there. You'd be looking at, you know, $1.97-$1.99 on a comparable basis.
Okay. Then just a bigger picture question. You know, I'm just curious if you could maybe talk a little bit about, you know, provide some insights perhaps around, you know, the impact that maybe a shock in gas prices, you know, might have on the gas segment here, you know, in the near term and potentially in the longer term if prices stay high for an extended period of time. Just any insights just given the, you know, fluid and developing situation overseas.
I'll do my best to answer that, although it's pretty unprecedented what's happening at least in my time here. You know, typically, rapid movements in wholesale pricing, which is what we're seeing right now, leads to margin compression at the street level. The positive for Getty right now or for our tenants, excuse me, is that we're starting from a very strong place from a retail fuel margin, ± $0.30 , which is pretty significantly above the historical average of our profitability per gallon pumped. As the prices move up rapidly, I think you, if you're an operator, you probably expect to see some margin compression. The good news is I think the consumer has been absorbing that across the board, right?
With the prices for everything going up, this isn't necessarily isolated to the cost of gasoline in their daily lives. You know, our tenants at this point have not seen any erosion to volume. In fact, I think it's going the other way as the virus has subsided. Multiple factors at play. This is certainly an unprecedented time, but I think the one thing I would leave you with is that we're starting from a very strong place from a profitability standpoint from the fuel side of the business.
Okay. Do you think that this could potentially create any added uncertainty in the transaction market, either you know around you know gas stations but also you know even car washes and other automotive if you know sort of consumption is changing or there's some potential behavioral changes you know if anything were to endure for an extended period of time, could there be some hiccups in the transaction market for some of these segments at all?
I really don't see this from a transaction market perspective, you know, especially as you get away from the C&G portion of our business. Mark might wanna comment on that. You know, in my view, our C&G tenants are healthy, and there's a significant amount of transaction activity across our pipeline that is, you know, certainly some in the C&G area, but in all of our other asset verticals as well.
Yeah. I don't see any impact on the ability to transact, so.
That's it.
Okay. All right. Thank you.
Thank you. Our next question is from Wes Golladay with Baird. Please proceed with your question.
Hey. Good morning, guys. Can you give us an update on what you expect for G&A this year? Can you also comment on the uptick in the environmental expense that was about $2 million this quarter?
Yeah, sure, Wes. This is Brian. In terms of G&A, I think, you know, last year we were around $20 million. You know, if you apply a, you know, in this environment a, you know, kind of typical 4% or 5%, that'll get you to about $21 million. Feel like that's a good number for the year. And of that, you know, about $5 million, again, round numbers, is stock-based comp. Hopefully that gives you some guidance around that. In terms of environmental, it was primarily around a litigation accrual in the fourth quarter, you know, Chris, I don't know if you wanna go into any more of that, but it was a, you know, relatively nominal litigation accrual, you know, related to a potential settlement on one of our active and ongoing cases.
Okay. [crosstalk]
Sorry. Go ahead, Wes. Sorry, go ahead.
Oh, okay. Nothing else. Okay. Sorry about that. Okay. On the dispositions, is there any more to do with that tenant? I guess what drove the decision to sell? Was it the tenant coming to you saying they wanted to buy it? If you could also kind of give some more color, were these at the bottom 10% of the portfolio, bottom quartile? How should we think about the quality of these assets?
Yeah. You know, I wouldn't put these assets in a quartile. You know, this is a portfolio that was all leased to one tenant. The properties. Our tenant was looking to invest in the property to update and modernize the stores. You know, we were debating whether you know, how we'd structure that. Ultimately, our tenant felt most comfortable putting the investment in if he owned the properties, and that led to a negotiation, and we ultimately decided to exit to exit that lease. You know, I wouldn't characterize those.
Yeah.
Certainly properties that need some updating and, you know, some capital to do that, you know.
Got it. I believe you said that the pipeline was about 60, 40 C-stores last year. Do you expect that to be the same this year? Is there any segment where you have just a higher close rate of the volume that you're seeing?
I think we'd like to grow all sectors and continue to balance the pipeline across all the verticals. You know, I think it's, you know, sometimes just a snapshot in time as the kind of the lumpiness of different opportunities present themselves to us. I mean, the key is growing the top-line pipeline to give us the most opportunities that we can, you know, have a really good, you know, view of in our underwriting model. I think the, you know, the goal is to grow all sectors throughout the pipeline.
Got it. Thanks for the time.
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from James Allen Villard with Ladenburg Thalmann. Please proceed with your question.
Good morning, guys.
Morning.
Yeah. Was the drive-thru restaurant transaction a one-off deal, or do you view QSR as another growth vertical as you move forward?
Yeah, it certainly fits with our broader, you know, convenience, automotive, retail, right? As we think about our property characteristics that we like to buy, you know, we think those assets fit well with the portfolio, fits well with our themes on the convenience, you know, consumers spending money while they're out in their vehicles. You know, we have a number in our portfolio already, so this is just another transaction for us. We certainly expect to continue to invest in that sector as well as our other verticals as we go forward.
Yeah, that's it for me. Thanks for the answer.
We have reached the end of the question and answer session, and I will now turn the call over to Chris Constant for closing remarks.
Great. Well, thanks everyone for attending our fourth quarter call for 2021. We appreciate the interest in Getty, and we look forward to getting back on with everybody at the end of April when we report our first quarter of 2022 results.
This concludes today's conference, and you may disconnect your lines at this time. Thank you, everybody.