Good morning, ladies and gentlemen, welcome to Getty Realty's Earnings Conference Call for the first quarter 2023. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to the starting of the call, Joshua Dicker, Executive Vice President, General Counsel, and Secretary of the company, will read a safe harbor statement and provide information about the non-GAAP financial measures. Please go ahead, Mr. Dicker.
Thank you, operator. I would like to thank you all for joining us for Getty Realty's first quarter earnings conference call. Yesterday afternoon, the company released its financial and operating results for the quarter ended March 31, 2023. 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 2023 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's future company 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, 2022, and our subsequent 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 any 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 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, welcome to our earnings call for the first quarter of 2023. 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 financial results and investment activities for the first quarter and provide perspective on the company's positioning given the uncertain economic landscape. As usual, Mark will then take you through our portfolio, and Brian will further discuss our financial results and guidance. We are pleased to report a 7.2% increase in our base rental income and a 7.7% increase in our AFFO per share versus the prior year's first quarter.
This growth was driven by a robust investment activity and thoughtful capital markets execution over the past year, including during the first quarter, which is driving the increase in our 2023 outlook. Year to date, we have invested $73.4 million, including more than $60 million in the first quarter. I would note that the majority of our activity for the quarter was in the car wash sector. While we continue to pursue transactions across the broader convenience retail landscape, car washes are currently providing us with the most attractive investment opportunities, along with additional diversification across geographies and tenants. Our success in the car wash space is a result of our targeted investment strategy, which leverages direct sourcing capabilities and underwriting expertise to identify assets that meet our stringent acquisition criteria.
As a reminder, we closed our first car wash transaction less than four years ago, and car wash has now comprised more than 14% of our ABR, even as we continue to invest in our core C-store space. We hope to see similar results in auto service and drive-thru retail over the next few years as we continue to ramp up our efforts in those areas. Our committed investment pipeline currently includes more than $105 million under contract for the acquisition and/or development of convenience stores, automotive service centers, express tunnel car washes, and QSRs, which we expect to fund over the next approximately 12 months. Equally important, we continue to be proactive with our capital raising activities, including our successful overnight equity offering in February.
With approximately $145 million of unsettled forward equity as of March 31st, our investment pipeline is fully funded with capital available for future deals. Our undrawn revolver and conservative leverage also provide additional flexibility and access to capital. We look ahead, our portfolio is well positioned to perform despite the economic headwinds that persisted throughout 2022 and which have continued this year. Convenience and automotive retailers have proven to be largely recession and e-commerce resistant, our tenants are currently generating strong profits and maintaining healthy rent coverage ratios. In fact, most of our tenants are focused on expanding their businesses to meet consumer demand for essential goods and services.
Our disciplined strategy continues to emphasize owning high-quality real estate in major metropolitan areas and partnering with growing regional and national operators across the convenience and automotive retail sectors. We carefully underwrite each opportunity with a model that evaluates and weighs a combination of real estate characteristics, site-level operations, and tenant credit. We benefit from our sector expertise and the direct nature of our transactions, which often provides us with the ability to obtain detailed due diligence materials related to our tenant partners and their underlying properties. We also continue to benefit from investments we have made in our team over the last couple of years, which are driving an increasing set of transaction opportunities and ultimately closed deals for Getty. As we move through the balance of 2023, our dedicated team is focused on the continued growth and diversification of our portfolio.
We believe the strength of our balance sheet and our demonstrated access to capital will allow us to maintain this progression and create additional value for our shareholders. With that, I will turn the call over to Mark to discuss our portfolio and investment activities.
Thank you, Chris. At the end of the quarter, our leased portfolio included 1,040 net leased properties and 4 active redevelopment sites. Excluding the active redevelopments, occupancy was 99.7%, and our weighted average lease term was 8.8 years. Our portfolio spans 39 states plus Washington, D.C., with 64% of our annualized base rent coming from top 50 MSAs and 83% coming from top 100 MSAs. Our rents are well covered with a trailing twelve-month tenant rent coverage ratio of 2.7 times. Turning to our investment activities, we had a strong start to the year as we invested more than $60 million for the first quarter.
Highlights of this quarter's investments include the acquisition of eight car wash properties located in various markets across the U.S. for $38.3 million, one convenience store located in Las Vegas for $5.4 million, four under-construction car wash properties for $8.5 million. As part of this acquisition, we agreed to provide additional funding during the construction period to complete these projects. We also advanced construction loans in the amount of $8.5 million, including accrued interest for the development of 13 new-to-industry car wash properties and convenience stores. As part of these funding transactions, we will accrue interest on our investments during the construction phase of the project and acquire the properties via sale leaseback upon completion and final funding.
For the first quarter, the aggregate initial cash yield on our investment activity was approximately 7.2%, and the weighted average lease term for acquired properties was 19.5 years. Subsequent to quarter end, we invested an additional $12.7 million for the development and acquisition of five properties located in various markets across the U.S. Looking ahead, regarding the $105 million of commitments to fund acquisitions and developments that Chris referenced, we expect to fund these transactions throughout the next approximately 12 months at an average initial yield in the 7% area. It's noteworthy that this is greater than our 2022 levels, but slightly inside of where we deployed capital for the first quarter, given the age of some of the transactions in the pipeline.
We continue to evaluate and underwrite a variety of potential investment opportunities across our target asset classes. Cap rates for retail properties are moving, albeit slowly and uneven at times, as the market continues to adjust to the changing economic landscape and tighter access to credit. We are pleased that we are sourcing the vast majority of opportunities through our broad network. We believe we are well-positioned to invest creatively as we move through the remainder of 2023. Moving to our redevelopment platform, during the quarter, we invested approximately $437,000 in projects which are in various stages in our pipeline. We ended the quarter with four properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio.
We expect rent to commence at these and other projects over the next couple of years, including several in 2023. Turning to our asset management activities for the first quarter, we sold three properties, realizing $2.8 million in gross proceeds and exited two lease properties. We will continue to pursue dispositions of non-core properties that we have determined are no longer competitive in their current format, do not have compelling redevelopment potential, but which we believe have attractive valuations that when may allow us to recycle capital as part of managing our balance sheet and sources of capital. With that, I'll turn the call over to Brian to discuss our financial results.
Thanks, Mark. Good morning, everyone. Last night, we reported AFFO per share of $0.56 for Q1 2023, representing an increase of 7.7% versus the $0.52 per share we reported in Q1 2022. AFFO and net income for the quarter were $0.50 and $0.28 per share, respectively. Our total revenues were $43 million for the first quarter, representing a 9.4% increase over the prior year's first quarter. Base rental income, which excludes tenant reimbursements, GAAP revenue adjustments, and any additional rent, grew 7.2% to $38.8 million. 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 at completed redevelopment projects.
On the expense side, G&A costs were $6.3 million in the first quarter as compared to $5.1 million in the first quarter of 2022. The change in G&A for the quarter was largely due to $850,000 of non-recurring retirement expenses, with the balance coming from increased personnel costs, including non-cash stock-based compensation. Property costs for the first quarter were in line with reported amounts from the first quarter of 2022. Property operating expenses increased by $200,000, driven primarily by reimbursable real estate taxes, partially offset by lower rent expense. Leasing and redevelopment expenses declined by $150,000 due to reduced demolition costs for redevelopment projects.
Environmental expenses, which are highly variable due to a number of estimates and non-cash adjustments, were $300,000 in the quarter as compared to a credit of $100,000 in the first quarter of 2022. The increase was primarily due to changes in estimates related to environmental liabilities, partially offset by lower accretion expense. Turning to the balance sheet and our capital markets activities. We ended the quarter with $675 million of total debt outstanding, which consists entirely of senior unsecured notes with a weighted average interest rate of 3.9% and a weighted average maturity of 7.2 years. As of March 31st, net debt to EBITDA was 4.9 times and total debt to total capitalization was 30%.
While total indebtedness to total asset value, as calculated pursuant to our credit agreement, was 36%. Taking into account unsettled forward equity of approximately $145 million, net debt to EBITDA was 3.8x. During the first quarter, we closed on our previously announced unsecured senior notes offering, raising $125 million at 3.65% and maturing in January 2033. We used the proceeds to repay in full $75 million of unsecured notes maturing in June of this year, and to reduce out-amounts outstanding under our $300 million revolving credit facility. Our credit facility was undrawn at quarter end, and our nearest debt maturity is in 2025. Moving to our ATM program.
During the quarter, we settled approximately 2.7 million shares of common stock that were subject to forward sale agreements for net proceeds of $83 million. We currently have approximately 1 million shares subject to forward sale agreements remaining under the ATM program, which, upon settlement, are anticipated to raise total gross proceeds of $32.2 million. In addition, in February, we completed a follow-on public offering of 3.45 million shares of common stock in connection with forward sale agreements. Upon settlement, the offering is anticipated to raise total gross proceeds of $112.5 million. As of today, no shares from the offering have been settled by the company. Returning to our $105 million committed investment pipeline.
As Chris mentioned, these transactions are fully funded through outstanding forward equity agreements, which also provide dry powder for additional investments along with our undrawn revolver. Pro forma for this investment in capital activity, we expect our balance sheets to remain well positioned to support continued growth. Leverage is expected to remain in line with our targeted range of 4.5x-5.5x net debt to EBITDA, probably on the lower end of that range in the current environment, and we expect to maintain ample capacity under our revolving credit facility. As our investment pipeline evolves, we will continue to evaluate all capital sources to ensure that we are funding transactions in an accretive manner while maintaining our investment-grade profile.
With respect to our environmental liability, we ended the quarter at $23 million, which was a reduction of $135,000 since the end of 2022. Our net environmental remediation spending in the first quarter was approximately $900,000. Finally, with respect to our 2023 outlook, as a result of our first quarter investment in capital markets activities, we are raising our 2023 AFFO guidance to a range of $2.22-$2.24 per share from our previous range of $2.19-$2.21. As a reminder, our outlook includes transaction and capital markets activities to date, but does not otherwise assume any potential acquisitions, dispositions, or capital markets activities for the remainder of 2023.
Specific factors which continue to impact our AFFO guidance include variability with respect to certain operating and deal pursuit costs, and approximately $300,000 of anticipated demolition costs for redevelopment projects, which run through property costs on our P&L. With that, I'll ask the operator to open the call for questions.
Thank you, sir. We will now be conducting the question and answer session. If you would like to ask a question, please press star then one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to leave the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Josh Dennerlein of Bank of America.
Hi, this is Farrell Granath speaking on behalf of Josh Dennerlein. My question was from the 4Q earnings call. There was highlighted that the investment spend would be back half weighted for 2023. I'm curious if you can give some color on if you hold that expectation going forward.
Apologies. The volume was very low. Can you repeat the question? I think we can hear you now.
Yes. Sorry. Can you hear me?
Yes. Much better. Thank you.
Great. Sorry about that. For the 4Q earnings call, it was highlighted that the investment spend would be back half weighted in 2023. I'm just curious about your expectations going forward, if you still hold that view.
This is Brian. Yeah, I think that's right. If you just look at the pipeline and in general our activity, it consists of, you know, development funding transactions, which have, you know, typically 9-15 months, but sometimes as long as 18, you know, months of a development timing over which we're deploying the capital. You have acquisitions, regular acquisition activity, which may be the, you know, 2- to 4-month timeframe from origination to closing. As we sit at any point in time, our investment pipeline, because of those dynamics, is often weighted towards development funding, which is the case in this quarter as well. We do continue to.
suggest that that same type of deployment schedule a little bit, you know, back-end weighted from the 12-month, you know, range that Chris articulated earlier.
Great. Thank you. The next question comes from Wes Golladay of Baird.
Hey, good morning, guys. I wanna go to the capital raise. Is this more of a function of a strong view of backfill in the pipeline, or is it more a view of uncertainty on capital markets?
Hey, Wes. It's Brian again. you know, I wanna say a little bit all of the above, but I think it goes beyond that. I think when you just look at the full set of facts and circumstances, you look at our pipeline, both the under contract pipeline that we disclosed, as well as the visibility we have into opportunities beyond that.
When you look at the cost of capital, equity capital, debt capital, and then to your last point, when you look at the macro environment and certainly the uncertainty that exists out there, we just felt it was prudent across the board to go and, you know, fully fund the pipeline for the year, de-risk the balance sheet, over-equitize the balance sheet, and put ourselves in a position to, you know, not just work through, but, you know, hopefully thrive through any economic environment.
Got it. I guess maybe looking forward over the next maybe 12-24 months, do you see if rates were to stay higher, the potential for maybe some owners to be, you know, cut a little bit too much floating rate, too much leverage, maybe loan to values go down, so maybe a time to be opportunistic. Is it too soon for that?
I don't think it's too soon for that. I think what we're seeing is a lot of operators in the sector who maybe have not explored sale and lease back financing in the past are evaluating it. As you point out, there's maturities, there's maybe a higher percentage of floating rate debt given that, you know, these folks are generally private operators as opposed to large public companies. I would say yes, and I think to go back to your original question on the capital raise, you know, we think the balance sheet's in great shape at Getty to be in a position to be ready to finance attractive opportunities should they come our way.
Fantastic. Just one question on the severance. Can you maybe elaborate on what happened in the quarter? Will this lead to a lower run rate going forward of G&A?
Thanks, Wes. Those are retirement costs. We had a director retire in the first quarter, and those are just related to that.
Okay, fantastic. Thanks, everyone.
Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then one on your telephone keypad. The next question comes from Mitch Germain of JMP Securities. Thank you.
Hi. Good morning. This is Judy for Mitch . Question on property mix. We see that C-store comprises a smaller share portion of the pie now, and of course, as you mentioned, car washes higher now. Is there an ideal property mix that you all are aiming for over the next couple of years?
I think that's a great question. you know, obviously, the C-store business is the company's history. It still represents 70% of our ABR. We still like the C-store sector and are actively investing there, but certainly, as we ramp up our efforts in car wash and auto service and drive-through retail, naturally you'd expect to see our revenue become sort of more equally weighted across all the sectors. Just given the starting point, I think C-stores will continue to be, you know, certainly the largest piece of the pie, for the foreseeable future. Again, I would just, as I said in my script, like, you know, this quarter happened to be car washes.
We're still evaluating all of the sectors and the fundamentals and would hope to be able to invest across all the asset classes as we move through this year.
Right. The acquisition that happened after the first quarter and I think it's around $12 million or so, is that also focused on car wash properties?
It's a mixture of a couple of different asset classes.
Okay, perfect. Thank you for that. Just one quick follow-up. Has the competitive landscape also changed? Like, what is the bidding pool looking like right now?
It remains competitive. I mean, there's a lot of interest as we keep saying. The asset classes are performing well. The essential and durable goods and services have proven out over the last few years. Our tenants and our both in our portfolio and tenants we're targeting continue to have very strong performances. You know, so there's a lot of activity and interest in the in the verticals that we are in our targeted asset classes. You know, pricing is moving a little bit. As we mentioned, it's. Different verticals are moving at different paces.
We experienced approximately, you know, if you look at last year's pricing as a whole or maybe at the end of the year versus what we just announced, you know, maybe a 30 basis points widening of pricing in our favor. You know, we continue to, you know, press the market to, you know, to improve upon that as we have new dialogues across all the new opportunities we're evaluating.
Okay, perfect. Thank you so much.
Thank you. Ladies and gentlemen, with no further questions in the queue, we have reached the end of our question and answer session. I will now turn the call over to Mr. Christopher Constant for closing remarks.
Great. Thank you, operator. Thank you all for joining us this morning. We look forward to getting back on with everyone when we report our second quarter earnings. Again, we appreciate your interest in Getty Realty.
Thank you very much, sir. Ladies and gentlemen, that does conclude today's teleconference. Thank you for your participation, and you may now disconnect your line.