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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 139 added, 93 removed, 547 unchanged (30% of the section changed)

44 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended March 31,

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Revenues from rental properties

18 unchanged sentences

(in thousands)

Three Months Ended March 31,

For the Six Months

Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

50 unchanged sentences

Our predecessor was originally founded in 1955 and our common stock was listed on the NYSE in 1997.

As of March 31, 2022, our portfolio included 1,014 properties located in 38 states and Washington, D.C., and our tenants operated under a variety of national and regional retail brands.

As of June 30, 2022, our portfolio included 1,024 properties located in 38 states and Washington, D.C., and our tenants operated under a variety of national and regional retail brands.

Our company is headquartered in New York, New York and is internally managed by our management team, which has extensive experience acquiring, owning and managing convenience, automotive and other single tenant retail real estate.

44 unchanged sentences

In addition, we determine whether there has been a permanent decline in the current estimate of the residual value of the property.

There were no indicators for impairments of any of our direct financing leases during the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022, we did no t record any additional allowance for credit losses.

There were no indicators for impairments of any of our direct financing leases during the three and six months ended June 30, 2022 and 2021.

For the three and six months ended June 30, 2022 we did no t record any additional allowance for credit losses.

When we enter into a contract to sell properties that are recorded as direct financing leases, we evaluate whether we believe that it is probable that the disposition will occur.

11 unchanged sentences

As of December 31, 2021, we had recorded an allowance for credit losses of $ 297,000 on these notes and mortgages receivable.

There were no indicators for impairments related to our notes and mortgages receivable during the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022, we did no t record any additional allowance for credit losses.

There were no indicators for impairments related to our notes and mortgages receivable during the three and six months ended June 30, 2022 and 2021.

For the three and six months ended June 30, 2022 we did no t record any additional allowance for credit losses.

From time to time, we may originate construction loans for the construction of income-producing properties, which we expect to purchase via sale-leaseback transactions at the end of the construction period.

During the three months ended March 31, 2022, we funded $ 1,782,000 , including accrued interest, and, as of March 31, 2022, had outstanding $ 7,487,000 of such construction loans, including accrued interest.

During the six months ended June 30, 2022, we funded

$ 5,094,000 , including accrued interest, and , as of June 30, 2022 , had outstanding $ 10,799,000 of such construction loans, including accrued interest.

Our construction loans generally provide for funding only during the construction period , which is typically up to nine months, although our policy is to consider construction periods as long as 24 months.

Funds are disbursed based on inspections in accordance with a schedule reflecting the completion of portions of the projects.

Funds are disbursed based on inspections in accordance with a schedule reflecting the completion of portions of the project s .

We also review and inspect each property before disbursement of funds during the term of the construction loan.

At the end of the construction period, the construction loans will be repaid with the proceeds from the sale of the properties.

At the end of the construction period , the construction loan s will be repaid with the proceeds from the sale of the propert ies .

Revenue Recognition and Deferred Rent Receivable

18 unchanged sentences

We elected to treat lease concessions with option (1) above.

There were no outstanding balances for lease concessions provided as a result of COVID-19 as of March 31, 2022.

There were no outstanding balances for lease concessions provided as a result of COVID-19 as of June 30, 2022.

The present value of the difference between the fair market rent and the contractual rent for above-market and below-market leases at the time properties are acquired is amortized into revenues from rental properties over the remaining terms of the in-place leases.

5 unchanged sentences

Assets held for disposal are written down to fair value less estimated disposition costs.

We recorded impairment charges aggregating $ 1,038,000 for the three months ended March 31, 2022 and $ 776,000 for the three months ended March 31, 2021.

Our estimated fair values, as they relate to property carrying values, were primarily based upon (i) estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids, for which we do not have access to the unobservable inputs used to determine these estimated fair values, and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence (this method was used to determine $ 694,000 of impairments recognized during the three months ended March 31, 2022) and (ii) discounted cash flow models (this method was used to determine $ 0 of impairments recognized during the three months ended March 31, 2022).

The remaining $ 344,000 of impairments recognized during the three months ended March 31, 2022, was due to the accumulation of asset retirement costs at certain properties as a result of changes in estimates associated with our estimated environmental liabilities, which increased the carrying values of these properties

in excess of their fair values.

For the three months ended March 31, 2022 and 2021 , impairment charges aggregating $ 62,000 and $ 335,000 , respectively, were related to properties that were previously disposed of by us.

We recorded impairment charges aggregating $ 391,000 and $ 1,429,000 for the three and six months ended June 30, 2022 and $ 756,000 and $ 1,532,000 for the three and six months ended June 30, 2021.

Our estimated fair values, as they relate to property carrying values, were primarily based upon (i) estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids, for which we do not have access to the unobservable inputs used to determine these estimated fair values, and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence (this method was used to determine $ 694,000 of impairments recognized during the six months ended June 30, 2022) and (ii) discounted cash flow models (this method was used to determine $ 0 of impairments recognized during the six months ended June 30, 2022).

The remaining $ 735,000 of impairments recognized during the six months ended June 30, 2022, was due to the accumulation of asset retirement costs at certain properties as a result of changes in estimates associated with our estimated environmental liabilities, which increased the

carrying values of these properties in excess of their fair values.

For the six months ended June 30, 2022 and 2021 , impairment charges aggregating $ 204,000 and $ 614,000 , respectively, were related to properties that were previously disposed of by us.

The estimated fair value of real estate is based on the price that would be received from the sale of the property in an orderly transaction between market participants at the measurement date.

25 unchanged sentences

We accrue for environmental liabilities that we believe are allocable to other potentially responsible parties if it becomes probable that the other parties will not pay their environmental remediation obligations.

For additional information regarding environmental obligations, see Note 6 – Environmental Obligations.

We file a federal income tax return on which we consolidate our tax items and the tax items of our subsidiaries that are pass-through entities.

10 unchanged sentences

We are currently evaluating the impact the adoption of ASU 2020-04 will have on our consolidated financial statements.

As of March 31, 2022, our portfolio included 1,014 properties of which we owned 968 properties and leased 46 properties from third-party landlords.

As of June 30, 2022, our portfolio included 1,024 properties of which we owned 979 properties and leased 45 properties from third-party landlords.

These 1,024 properties are located in 38 states across the United States and Washington, D.C.

7 unchanged sentences

Pursuant to ASU 2016-02, for leases in which we are the lessor, we (i) retained the classification of our historical leases as we were not required to reassess classification upon adoption of the new standard , (ii) expense indirect leasing costs in connection with new or extended tenant leases, the recognition of which would have been deferred under prior accounting guidance and (iii) aggregate revenue from our lease components and non-lease components (comprised of tenant reimbursements) into revenue from rental properties.

Revenues from rental properties were $ 38,984,000 and $ 36,951,000 for the three months ended March 31, 2022 and 2021, respectively.

Rental income contractually due from our tenants included in revenues from rental properties was $ 36,425,000 and $ 33,539,000 for the three months ended March 31, 2022 and 2021, respectively.

Revenues from rental properties were $ 40,814,000 and $ 79,797,000 for the three and six months ended June 30, 2022 and $ 38,263,000 and $ 75,214,000 for the three and six months ended June 30, 2021, respectively.

Rental income contractually due from our tenants included in revenues from rental properties was $ 37,175,000 and $ 73,600,000 for the three and six months ended June 30, 2022 and $ 34,366,000 and $ 67,904,000 for the three and six months ended June 30, 2021, respectively.

In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due during the periods presented.

As a result, revenues from rental properties include (i) non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, (ii) the net amortization of above-market and below-market leases, (iii) rental income recorded under direct financing leases using the effective interest method which produces a constant periodic rate of return on the net investments in the leased properties and (iv) the amortization of deferred lease incentives (collectively, “Revenue Recognition Adjustments”).

Revenue Recognition Adjustments included in revenues from rental properties resulted in a reduction in revenue of $ 576,000 and $ 343,000 for the three months ended March 31, 2022 and 2021, respectively.

Tenant reimbursements, which are included in revenues from rental properties and which consist of real estate taxes and other municipal charges paid by us and reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $ 3,135,000 and $ 3,756,000 for the three months ended March 31, 2022 and 2021, respectively.

The components of the $ 70,376,000 investment in direct financing leases as of March 31, 2022, are lease payments receivable of $ 95,262,000 plus unguaranteed estimated residual value of $ 13,928,000 less unearned income of $ 37,988,000 and allowance for credit losses of $ 826,000 .

Revenue Recognition Adjustments included in revenues from rental properties resulted in a reduction in revenue of $ 449,000 and $ 1,025,000 for the three and six months ended June 30, 2022, respectively, and $ 383,000 and $ 726,000 for the three and six months ended June 30, 2021, respectively.

Tenant reimbursements, which are included in revenues from rental properties and which consist of real estate taxes and other municipal charges paid by us and reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $ 4,088,000 and $ 7,223,000 for the three and six months ended June 30, 2022, respectively, as compared to $ 4,280,000 and $ 8,036,000 for the three and six months ended June 30, 2021, respectively.

The components of the $ 69,048,000 investment in direct financing leases as of June 30, 2022, are lease payments receivable of $ 91,963,000 plus unguaranteed estimated residual value of $ 13,928,000 less unearned income of $ 36,017,000 and allowance for credit losses of $ 826,000 .

The components of the $ 71,647,000 investment in direct financing leases as of December 31, 2021, are lease payments receivable of $ 98,539,000 plus unguaranteed estimated residual value of $ 13,928,000 less unearned income of $ 39,994,000 and allowance for credit losses of $ 826,000 .

As of March 31, 2022, future contractual annual rentals receivable from our tenants, which have terms in excess of one year are as follows (in thousands):

As of June 30, 2022, future contractual annual rentals receivable from our tenants, which have terms in excess of one year are as follows (in thousands):

Financing Leases

24 unchanged sentences

The following presents our total lease costs (in thousands) :

Three Months Ended March 31, 2022

Three months ended June 30, 2022

Six Months Ended June 30, 2022

Operating lease cost

5 unchanged sentences

The following presents supplemental cash flow information related to our leases (in thousands) :

Three Months Ended March 31, 2022

Three months ended June 30, 2022

Six Months Ended June 30, 2022

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

Financing cash flows for finance leases

As of March 31, 2022, scheduled lease liabilities mature as follows (in thousands) :

As of June 30, 2022, scheduled lease liabilities mature as follows (in thousands) :

Financing Leases

3 unchanged sentences

Major Tenants

As of March 31, 2022, we had three significant tenants by revenue:

As of June 30, 2022, we had three significant tenants by revenue:

We leased 150 properties in three separate unitary leases and two stand-alone leases to subsidiaries of Global Partners LP (NYSE:

GLP) (“Global”).

In the aggregate, our leases with subsidiaries of Global represented 15 % of our total revenues for each of the three months ended March 31, 2022 and 2021.

In the aggregate, our leases with subsidiaries of Global represented 16 % and 15 % of our total revenues for the six months ended June 30, 2022 and 2021.

All of our unitary leases with subsidiaries of Global are guaranteed by the parent company.

1 unchanged sentence

ARKO) (“Arko”).

In the aggregate, our leases with subsidiaries of Arko represented 15 % of our total revenues for each of the three months ended March 31, 2022 and 2021.

In the aggregate, our leases with subsidiaries of Arko represented 14 % and 15 % of our total revenues for the six months ended June 30, 2022 and 2021.

All of our unitary leases with subsidiaries of Arko are guaranteed by the parent company.

We leased 78 properties pursuant to three separate unitary leases and one stand-alone lease to Apro, LLC (d/b/a “United Oil”).

In the aggregate, our leases with United Oil represented 12 % of our total revenues for the three months ended March 31, 2022 and 2021.

In the aggregate, our leases with United Oil represented 11 % and 12 % of our total revenues for the six months ended June 30, 2022 and 2021.

Getty Petroleum Marketing Inc.

1 unchanged sentence

(“Marketing”) was our largest tenant from 1997 until 2012 under a unitary triple-net master lease that was terminated in April 2012 as a consequence of Marketing’s bankruptcy, at which time we either sold or re-leased these properties.

As of March 31, 2022, 333 of the properties we own or lease were previously leased to Marketing, of which 303 properties are subject to long-term triple-net leases with petroleum distributors across 15 separate portfolios and 23 properties are leased as single unit triple-net leases (an additional three properties are under redevelopment and four are vacant).

As of June 30, 2022, 332 of the properties we own or lease were previously leased to Marketing, of which 303 properties are subject to long-term triple-net leases with petroleum distributors across 13 separate portfolios and 23 properties are leased as single unit triple-net leases (an additional three properties are under redevelopment and three are vacant).

The portfolio leases covering properties previously leased to Marketing are unitary triple-net lease agreements generally with an initial term of 15 years and options for successive renewal terms of up to 20 years.

2 unchanged sentences

In addition, the majority of the portfolio leases require the tenants to invest capital in our properties, substantially all of which is related to the replacement of USTs that are owned by our tenants.

As of March 31, 2022, we have a remaining commitment to fund up to $ 6,595,000 in the aggregate with our tenants for our portion of such capital improvements.

As of June 30, 2022, we have a remaining commitment to fund up to $ 6,577,000 in the aggregate with our tenants for our portion of such capital improvements.

Our commitment provides us with the option to either reimburse our tenants or to offset rent when these capital expenditures are made.

2 unchanged sentences

We remain contingently liable for this obligation in the event that our tenants do not satisfy their responsibilities.

Accordingly, through March 31, 2022, we removed $ 13,813,000 of asset retirement obligations and $ 10,808,000 of net asset retirement costs related to USTs from our balance sheet.

Accordingly, through June 30, 2022, we have removed $ 13,813,000 of asset retirement obligations and $ 10,808,000 of net asset retirement costs related to USTs from our balance sheet.

The cumulative change of $ 999,000 (net of accumulated amortization of $ 2,006,000 ) is recorded as deferred rental revenue and will be recognized on a straight-line basis as additional revenues from rental properties over the terms of the various leases.

5 unchanged sentences

We are involved in various legal proceedings and claims which arise in the ordinary course of our business.

As of March 31, 2022 and December 31, 2021, we had accrued $ 1,925,000 for certain of these matters which we believe were appropriate based on information then currently available.

As of June 30, 2022 and December 31, 2021, we had accrued $ 1,875,000 and $1,925,000, respectively, for certain of these matters which we believe were appropriate based on information then currently available.

We are unable to estimate ranges in excess of the amount accrued with any certainty for these matters.

88 unchanged sentences

Total debt, net

Unamortized debt issuance costs, related to the Revolving Facility, at March 31, 2022 and December 31, 2021, of $ 2,551 and $ 2,730 , respectively, are included in prepaid expenses and other assets on our consolidated balance sheets.

Unamortized debt issuance costs, related to the Revolving Facility, at June 30, 2022 and December 31, 2021, of $ 2,374 and $ 2,730 , respectively, are included in prepaid expenses and other assets on our consolidated balance sheets.

Credit Agreement

40 unchanged sentences

We may be prohibited from drawing funds under the Revolving Facility if there is any event or condition that constitutes an event of default under the Restated Credit Agreement or that, with the giving of any notice, the passage of time, or both, would be an event of default under the Restated Credit Agreement.

As of March 31, 2022, we are in compliance with all of the material terms of the Restated Credit Agreement and our senior unsecured notes, including the various financial covenants described herein.

As of June 30, 2022, we are in compliance with all of the material terms of the Restated Credit Agreement and our senior unsecured notes, including the various financial covenants described herein.

Debt Maturities

As of March 31, 2022, scheduled debt maturities, including balloon payments, are as follows (in thousands):

As of June 30, 2022, scheduled debt maturities, including balloon payments, are as follows (in thousands):

Unsecured Notes

1 unchanged sentence

The Revolving Facility matures in October 2025.

Subject to the terms of the Second Restated Credit Agreement and our continued compliance with its provisions, we have the option to extend the term of the Revolving Facility for two six months periods to October 2026

— ENVIRONMENTAL OBLIGATIONS

6 unchanged sentences

However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in the past will continue to do so.

We may ultimately be responsible to pay for environmental liabilities as the property owner if our tenant fails to pay them.

As the property owner, we may ultimately be responsible for the payment of environmental liabilities if our tenant fails to pay them.

The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has been incurred and a reasonable estimate of fair value can be made.

The accrued liability is the aggregate of our estimate of the fair value of cost for each component of the liability, net of estimated recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience with the funds.

For substantially all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and regulations, removal of USTs at the end of their lease term (the cost of which in certain cases is partially borne by us) and remediation of any environmental contamination that arises during the term of their tenancy.

Under the terms of our leases covering properties previously leased to Marketing (substantially all of which commenced in 2012), we have agreed to be responsible for environmental contamination at the premises that was known at the time the lease commenced, and for environmental contamination which existed prior to commencement of the lease and is discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a minority of such leases).

After expiration of such 10 -year (or, in certain cases, shorter) period, responsibility for all newly discovered contamination, even if it relates to periods prior to commencement of the lease, is contractually allocated to our tenant.

Our tenants at properties previously leased to Marketing are in all cases responsible for the cost of any remediation of contamination that results from their use and occupancy of our properties.

Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the lease) is the responsibility of our tenant.

We anticipate that USTs at a number of properties we currently own and which were previously leased to Marketing will be replaced in the years ahead as these USTs near the end of their useful lives.

For long-term, triple-net leases covering sites previously leased to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of contamination found during such UST removal and replacement, unless such contamination was found during the first 10 years of the lease term and also existed prior to commencement of the lease.

In those cases, we are responsible for costs associated with the remediation of such preexisting contamination.

We have also agreed to be responsible for environmental contamination that existed prior to the sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the first five years after the sale of the properties.

In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and continues to be discovered.

As a result, we have developed an estimate of fair value for the prospective future environmental liability resulting from preexisting unknown environmental contamination and have accrued for these estimated costs.

These estimates are based primarily upon quantifiable trends which we believe allow us to make reasonable estimates of fair value for the future costs of environmental remediation resulting from the removal and replacement of USTs.

Our accrual of the additional liability represents our estimate of the fair value of cost for each component of the liability, net of estimated recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience with the funds.

In arriving at our accrual, we analyzed the ages of USTs at properties where we would be responsible for preexisting contamination found within 10 years after commencement of a lease (for properties subject to long-term triple-net leases) or five years from a sale (for divested properties) and projected a cost to closure for preexisting unknown environmental contamination.

For substantially all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and regulations, removal of USTs at the end of their lease term (the cost of which is mainly the responsibility of our tenant, but in certain cases partially paid for by us) and remediation of any environmental contamination that arises during the term of their tenancy.

In addition, for substantially all of our triple-net leases, our tenants are contractually responsible for known environmental contamination that existed at the commencement of the lease and for preexisting unknown environmental contamination that is discovered during the term of the lease.

For the subset of our triple-net leases which cover properties previously leased to Marketing (substantially all of which commenced in 2012), the allocation of responsibility differs from our other triple-net leases as it relates to preexisting known and unknown contamination.

Under the terms of our leases covering properties previously leased to Marketing, we agreed to be responsible for environmental contamination that was known at the time the lease commenced, and for unknown environmental contamination which existed prior to commencement of the lease and which is discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a minority of such leases) (a “Lookback Period”).

Similarly, for certain properties previously leased to Marketing which we have sold, we have agreed to be responsible for environmental contamination that was known at the time of the sale and for unknown environmental contamination which existed prior to the sale and which is discovered (other than as a result of a voluntary site investigation) within 5 years of the closing (also, a “Lookback Period”).

After expiration of the applicable Lookback Period, responsibility for all newly discovered contamination at these properties, even if it relates to periods prior to commencement of the lease or sale, is contractual responsibility of our tenant or buyer, as the case may be.

In the course of UST removals and replacements at certain properties previously leased to Marketing where we retained responsibility for preexisting unknown environmental contamination until expiration of the applicable Lookback Period, environmental contamination has been and continues to be discovered.

As a result, we developed an estimate of fair value for the prospective future environmental liability resulting from preexisting unknown environmental contamination and accrued for these estimated costs.

Our accrual of this liability represents our estimate of the fair value of the cost for each component of the liability, net of estimated recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience.

In arriving at our accrual, we analyzed the ages and expected useful lives of USTs at properties where we would be responsible for preexisting unknown environmental contamination and we projected a cost to closure for remediation of such contamination.

During the quarter ended June 30, 2022, the Lookback Periods for many properties we previously leased to Marketing expired.

Based on the expiration of the Lookback Periods, together with other factors which have significantly mitigated our potential liability for preexisting environmental obligations, including the absence of any contractual obligations relating to properties which have been sold, quantifiable trends associated with types and ages of USTs at issue, expectations regarding future UST replacements, and historical trends and expectations regarding discovery of preexisting unknown environmental contamination and/or attempted pursuit of Getty therefor, we concluded that there is no material continued risk of having to satisfy contractual obligations relating to preexisting unknown environmental contamination at certain properties.

Accordingly, we removed $ 16,790,000 of unknown reserve liabilities which had previously been accrued for these properties.

This resulted in a net credit of $ 16,333,000 being recorded to environmental expense for the three months ended June 30, 2022.

We continue to anticipate that our tenants under leases where the Lookback Periods have expired will replace USTs in the years ahead as these USTs near the end of their expected useful lives.

At many of these properties the USTs in use are fabricated with older generation materials and technologies and we believe it is prudent to expect that upon their removal preexisting unknown environmental contamination will be identified.

Although contractually these tenants are now responsible for preexisting unknown environmental contamination that is discovered during UST replacements, because the applicable Lookback Periods have expired before the end of the initial term of these leases, together with other relevant factors, we believe there remains continued risk that we will be responsible for remediation of preexisting environmental contamination associated with future UST removals at certain properties.

Accordingly, we believe it is appropriate at this time to maintain $ 7,400,000 of unknown reserve liabilities for certain properties with respect to which the Lookback Periods have expired as of June 30, 2022.

We measure our environmental remediation liabilities at fair value based on expected future net cash flows, adjusted for inflation (using a range of 2.0 % to 2.75 %), and then discount them to present value (using a range of 4.0 % to 7.0 %).

We adjust our environmental remediation liabilities quarterly to reflect changes in projected expenditures, changes in present value due to the passage of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter.

As of March 31, 2022, we had accrued a total of $ 46,957,000 for our prospective environmental remediation obligations.

This accrual consisted of (a) $ 11,201,000 , which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $ 35,756,000 for future environmental liabilities related to preexisting unknown contamination.

As of June 30, 2022, we had accrued a total of $ 29,549,000 for our prospective environmental remediation obligations.

This accrual consisted of (a) $ 10,643,000 of known reserve liabilities which was our estimate of reasonably estimable environmental remediation liability,

including obligations to remove USTs for which we are responsible, net of estimated recoveries , and (b) $ 18,906,000 of unknown reserve liabilities, which was our estimate of future environmental liabilities related to preexisting unknown contamination.

As of December 31, 2021 , we had accrued a total of $ 47,597,000 for our prospective environmental remediation obligations.

This accrual consisted of (a) $ 11,382,000 , which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $ 36,215,000 for future environmental liabilities related to preexisting unknown contamination.

Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $ 444,000 and $ 461,000 of net accretion expense was recorded for the three months ended March 31, 2022 and 2021, respectively, which is included in environmental expenses.

In addition, during the three months ended March 31, 2022 and 2021, we recorded credits to environmental expenses aggregating $ 821,000 and $ 308,000 , respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.

This accrual consisted of (a) $ 11,382,000 of known reserve liabilit ies and (b) $ 36,215,000 of unknown reserve liabilities .

Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $ 822,000 and $ 863,000 of net accretion expense was recorded for the six months ended June 30, 2022 and 2021, respectively, which is included in environmental expenses.

In addition, during the six months ended June 30, 2022 and 2021, we recorded credits to environmental expenses aggregating $ 17,534,000 and $ 1,039,000 , respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.

Environmental expenses also include project management fees, legal fees and environmental litigation accruals.

For the three months ended March 31, 2022 and 2021, changes in environmental estimates aggregating, $ 40,000 and $ 39,000 , respectively, for each three-month period, were related to properties that were previously disposed of by us.

During the three months ended March 31, 2022 and 2021, we increased the carrying values of certain of our properties by $ 526,000 and $ 922,000 , respectively, due to changes in estimated environmental remediation costs.

For the six months ended June 30, 2022 and 2021, changes in environmental estimates aggregating, $ 1,749,000 and $ 92,000 , respectively, for each six-month period, were related to properties that were previously disposed of by us.

During the six months ended June 30, 2022 and 2021, we increased the carrying values of certain of our properties by $ 1,194,000 and $ 1,211,000 , respectively, due to changes in estimated environmental remediation costs.

The recognition and subsequent changes in estimates in environmental liabilities and the increase or decrease in carrying values of the properties are non-cash transactions which do not appear on our consolidated statements of cash flows.

Capitalized asset retirement costs are being depreciated over the estimated remaining life of the UST, a 10 -year period if the increase in carrying value is related to environmental remediation obligations or such shorter period if circumstances warrant, such as the remaining lease term for properties we lease from others.

Depreciation and amortization expense related to capitalized asset retirement costs in our consolidated statements of operations for the three months ended March 31, 2022 and 2021 was $ 1,002,000 and $ 975,000 , respectively.

Capitalized asset retirement costs were $ 39,310,000 (consisting of $ 24,476,000 of known environmental liabilities and $ 14,834,000 of reserves for future environmental liabilities related to preexisting unknown contamination) as of March 31, 2022, and $ 39,670,000 (consisting of $ 24,075,000 of known environmental liabilities and $ 15,595,000 of reserves for future environmental liabilities related to preexisting unknown contamination) as of December 31, 2021.

We recorded impairment charges aggregating $ 344,000 and $ 744,000 for the three months ended March 31, 2022 and 2021, respectively, for capitalized asset retirement costs.

Depreciation and amortization expense related to capitalized asset retirement costs in our consolidated statements of operations for the six months ended June 30, 2022 and 2021 was $ 1,946,000 and $ 1,971,000 , respectively.

Capitalized asset retirement costs were $ 37,642,000 (consisting of $ 24,739,000 of known environmental liabilities and $ 12,903,000 of reserves for future environmental liabilities related to preexisting unknown contamination) as of June 30, 2022, and $ 39,670,000 (consisting of $ 24,075,000 of known environmental liabilities and $ 15,595,000 of reserves for future environmental liabilities related to preexisting unknown contamination) as of December 31, 2021.

We recorded impairment charges aggregating $ 735,000 and $ 1,500,000 for the six months ended June 30, 2022 and 2021, respectively, for capitalized asset retirement costs.

Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon initial assessment of contamination, alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations and their interpretations, changes in costs associated with environmental remediation services and equipment, the availability of state UST remediation funds and the possibility of existing legal claims giving rise to allocation of responsibilities to others, as well as the time it takes to remediate contamination and receive regulatory approval.

5 unchanged sentences

Our intention in purchasing this policy was to obtain protection predominantly for significant events.

In addition, we also took assignment of certain environmental insurance policies, and rights to reimbursement for claims made thereunder, from Marketing, by order of the U.S.

Bankruptcy Court during Marketing’s bankruptcy proceedings.

Under these assigned polices, we have received and expect to continue to receive reimbursement of certain remediation expenses for covered claims.

Management is in the process of evaluating different options available to us for a potential new pollution legal liability insurance policy.

In light of the uncertainties associated with environmental expenditure contingencies, we are unable to estimate ranges in excess of the amount accrued with any certainty;

2 unchanged sentences

— STOCKHOLDERS’ EQUITY

A summary of the changes in stockholders’ equity for the three months ended March 31, 2022 and 2021, is as follows (in thousands except per share amounts):

A summary of the changes in stockholders’ equity for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands except per share amounts):

Paid In Excess

BALANCE, MARCH 31, 2022

Dividends declared — $ 0.41 per share

Shares issued pursuant to ATM Program, net

Shares issued pursuant to dividend reinvestment

Stock-based compensation/settlements

BALANCE, JUNE 30, 2022

BALANCE, DECEMBER 31, 2021

3 unchanged sentences

Stock-based compensation/settlements

BALANCE, JUNE 30, 2022

Paid In Excess

BALANCE, MARCH 31, 2021

Dividends declared — $ 0.39 per share

Shares issued pursuant to ATM Program, net

Shares issued pursuant to dividend reinvestment

Stock-based compensation/settlements

BALANCE, JUNE 30, 2021

BALANCE, DECEMBER 31, 2020

3 unchanged sentences

Stock-based compensation/settlements

BALANCE, MARCH 31, 2021

BALANCE, JUNE 30, 2021

On March 1, 2022, our Board of Directors granted 238,850 restricted stock units (“RSU” or “RSUs”), under our Amended and Restated 2004 Omnibus Incentive Compensation Plan.

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Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined in Rule 415 of the Securities Act, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the applicable agent.

During the three months ended March 31, 2022, no shares of common stock were issued under the ATM Program.

During the three months ended March 31, 2021, we issued a total of 743,000 shares of common stock and received net proceeds of $ 20,266,000 under the ATM Program and the 2018 ATM Program.

During the three and six months ended June 30, 2022, no shares of common stock were issued under the ATM Program.

During the three and six months ended June 30, 2021, we issued a total of 289,000 and 1,032,000 shares of common stock and received net proceeds of $ 9,312,000 and $ 29,578,000 under the ATM Program and the 2018 ATM Program.

Future sales, if any, will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us.

For the three months ended March 31, 2022, we paid regular quarterly dividends of $ 19,467,000 or $ 0.41 per share.

For the three months ended March 31, 2021, we paid regular quarterly dividends of $ 17,332,000 or $ 0.39 per share.

For the six months ended June 30, 2022, we paid regular quarterly dividends of $ 39,085,000 or $ 0.82 per share.

For the six months ended June 30, 2021, we paid regular quarterly dividends of $ 35,022,000 or $ 0.78 per share.

Dividend Reinvestment Plan

Our dividend reinvestment plan provides our common stockholders with a convenient and economical method of acquiring additional shares of common stock by reinvesting all or a portion of their dividend distributions.

During the three months ended March 31, 2022 and 2021, we issued 504 and 649 shares of common stock, under the dividend reinvestment plan and received proceeds of $ 16,000 and $ 18,000 , respectively.

During the six months ended June 30, 2022 and 2021, we issued 996 and 1,258 shares of common stock, respectively, under the dividend reinvestment plan and received proceeds of $ 30,000 and $ 36,000 , respectively.

Stock-Based Compensation

Compensation cost for our stock-based compensation plans using the fair value method was $ 1,084,000 and $ 905,000 for the three months ended March 31, 2022 and 2021, respectively, and is included in general and administrative expense in our consolidated statements of operations.

Compensation cost for our stock-based compensation plans using the fair value method was $ 2,316,000 and $ 1,937,000 for the six months ended June 30, 2022 and 2021, respectively, and is included in general and administrative expense in our consolidated statements of operations.

— EARNINGS PER COMMON SHARE

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The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (in thousands except per share data ):

Three Months Ended March 31,

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Less earnings attributable to RSUs outstanding

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Debt Instruments

As of March 31, 2022 and December 31, 2021, the carrying value of the borrowings under the Restated Credit Agreement approximated fair value.

As of March 31, 2022 and December 31, 2021, the fair value of the borrowings under our senior unsecured notes was $ 614,200,000 and $ 561,600,000 , respectively.

The fair value of the borrowings outstanding as of March 31, 2022 and December 31, 2021 was determined using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, risk profile and borrowings outstanding, which are based on unobservable inputs within Level 3 of the Fair Value Hierarchy.

As of June 30, 2022 and December 31, 2021, the carrying value of the borrowings under the Restated Credit Agreement approximated fair value.

As of June 30, 2022 and December 31, 2021, the fair value of the borrowings under our senior unsecured notes was $ 571,000,000 and $ 561,600,000 , respectively.

The fair value of the borrowings outstanding as of June 30, 2022 and

December 31, 2021 was determined using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, risk profile and borrowings outstanding, which are based on unobservable inputs within Level 3 of the Fair Value Hierarchy.

Supplemental Retirement Plan

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We have liability to the executives participating in the Supplemental Retirement Plan for the participant account balances equal to the aggregate of the amount invested at the executives’ direction and the income earned in such mutual funds.

The following summarizes as of March 31, 2022, our assets and liabilities measured at fair value on a recurring basis by level within the Fair Value Hierarchy (in thousands):

The following summarizes as of June 30, 2022, our assets and liabilities measured at fair value on a recurring basis by level within the Fair Value Hierarchy (in thousands):

Deferred compensation

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Real Estate Assets

We have certain real estate assets that are measured at fair value on a non-recurring basis using Level 3 inputs as of March 31, 2022 and December 31, 2021, of $ 705,000 and $ 1,102,000 , where impairment charges have been recorded.

We have certain real estate assets that are measured at fair value on a non-recurring basis using Level 3 inputs as of June 30, 2022 and December 31, 2021, of $ 705,000 and $ 1,102,000 , where impairment charges have been recorded.

Due to the subjectivity inherent in the internal valuation techniques used in estimating fair value, the amounts realized from the sale of such assets may vary significantly from these estimates.

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Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell.

As of March 31, 2022, one property met the criteria to be classified as held for sale.

Real estate held for sale consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

As of June 30, 2022, one property met the criteria to be classified as held for sale.

Real estate held for sale consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

Buildings and improvements

1 unchanged sentence

Real estate held for sale, net

During the three months ended March 31, 2022 , we sold 15 properties, resulting in an aggregate gain of $ 6,015,000 , which is included in gains on dispositions of real estate in our consolidated statements of operations.

In addition, during the three months ended March 31, 2022 we received funds from one partial property condemnation resulting in a gain of $ 138,000 , which is included in gains on dispositions of real estate in our consolidated statements of operations.

During the six months ended June 30, 2022 , we sold 16 properties, resulting in an aggregate gain of $ 7,164,000 , which is included in gains on dispositions of real estate in our consolidated statements of operations.

In addition, during the six months ended June 30, 2022, we received funds from one partial property condemnation resulting in a gain of $ 138,000 , which is included in gains on dispositions of real estate in our consolidated statements of operations.

— PROPERTY ACQUISITIONS

During the three months ended March 31, 2022, we acquired fee simple interests in two convenience stores located in the New Haven (CT) metropolitan area for an aggregate purchase price of $ 7,037,000 .

During the six months ended June 30, 2022, we acquired fee simple interests in 14 properties for an aggregate purchase price of $ 54,197,000 .

In April 2022, we acquired fee simple interests in eight car wash properties for an aggregate purchase price of $ 36,387,000 and entered into a unitary lease at the closing of the transaction.

We funded the transaction with available cash.

The unitary lease provides for an initial term of 15 years, with five five-year renewal options.

The unitary lease requires our tenant to pay a fixed annual rent plus all amounts pertaining to the properties, including environmental expenses, real estate taxes, assessments, license and permit fees, charges for public utilities and all other governmental charges.

Rent is scheduled to increase annually during the initial and renewal terms of the lease.

The properties are located in the Austin (TX) metropolitan area.

We accounted for the acquisitions as asset acquisitions.

We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $ 6,219,000 of the purchase price to land, $ 27,803,000 to buildings and improvements, $ 2,980,000 to in-place leases, $ 403,000 to above-market leases and $ 1,018,000 to below-market leases which is accounted for as a deferred liability.

In addition, during the six months ended June 30, 2022, we acquired fee simple interests in three convenience stores and three car wash properties in multiple transactions for an aggregate purchase price of $ 17,810,000 .

We accounted for the transactions as asset acquisitions.

We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $ 6,495,000 of the purchase price to land, $ 9,858,000 to buildings and improvements and $ 1,457,000 to in-place leases.

During the three months ended March 31, 2021, we acquired fee simple interests in six properties for an aggregate purchase price of $ 21,852,000 .

In March 2021, we acquired fee simple interests in four car wash properties for an aggregate purchase price of $ 13,947,000 and entered into a unitary lease at the closing of the transactions.

We funded the transactions with available cash.

During the six months ended June 30, 2021, we acquired fee simple interests in 55 properties for an aggregate purchase price of $ 63,304,000 .

In May 2021, we acquired fee simple interests in 46 oil change centers subject to individual leases for an aggregate purchase price of $ 31,018,000 .

We funded the transaction with available cash and funds available under our Revolving Facility.

The leases had approximately 11.5 years of initial term remaining as of the date of acquisition and include three five-year renewal options.

The leases require our tenant to pay a fixed annual rent plus all amounts pertaining to the properties, including environmental expenses, real estate taxes, assessments, license and permit fees, charges for public utilities and all other governmental charges.

Rent is scheduled to increase every five years during the initial and renewal terms of the lease.

The properties are located throughout Ohio and Michigan.

We accounted for the transactions as asset acquisitions.

We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $ 4,551,000 of the purchase price to land, $ 22,539,000 to buildings and improvements, $ 3,120,000 to in-place leases, $ 2,224,000 to above-market leases, and $ 1,416,000 to below-market leases which is accounted for as a deferred liability.

On multiple dates in March, April and May 2021, we acquired fee simple interests in a total of seven car wash properties for an aggregate purchase price of $ 24,381,000 and entered into a single unitary lease at the closing of the transactions.

We funded the transactions with available cash and funds available under our Revolving Facility.

The unitary lease provides for an initial term of 15 years, with five five-year renewal options.

1 unchanged sentence

Rent is scheduled to increase annually during the initial and renewal terms of the lease.

The properties are located within the Cincinnati (OH) and Lexington (KY) metropolitan areas.

The properties are located in the Greater Cincinnati, OH and Lexington, KY metropolitan areas.

We accounted for the acquisitions as asset acquisitions.

We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $ 2,782,000 of the purchase price to land, $ 9,997,000 to buildings and improvements, $ 1,168,000 to in-place leases.

In addition, during the three months ended March 31, 2021, we acquired fee simple interests in two car wash properties for an aggregate purchase price of $ 7,905,000 .

We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $ 4,081,000 of the purchase price to land, $ 18,262,000 to buildings and improvements, and $ 2,038,000 to in-place leases.

In addition, during the six months ended June 30, 2021, we acquired fee simple interests in two individual car wash properties for an aggregate purchase price of $ 7,905,000 .

We accounted for the acquisitions as asset acquisitions.

1 unchanged sentence

— SUBSEQUENT EVENTS

In preparing our unaudited consolidated financial statements, we have evaluated events and transactions occurring after March 31, 2022, for recognition or disclosure purposes.

Based on this evaluation, there were no significant subsequent events from March 31, 2022, through the date the financial statements were issued.

In preparing our unaudited consolidated financial statements, we have evaluated events and transactions occurring after June 30, 2022, for recognition or disclosure purposes.

Based on this evaluation, there were no significant subsequent events from June 30, 2022, through the date the financial statements were issued.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements