What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-28 compared with 2022-04-28 · 136 added, 90 removed, 295 unchanged (43% of the section changed)

90 unchanged sentences

We are a REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate.

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.

As a REIT, we are not subject to federal corporate income tax on the taxable income we distribute to our stockholders.

15 unchanged sentences

Our Properties

As of March 31, 2022, we leased 1,003 of our properties to tenants under triple-net leases.

As of June 30, 2022, we leased 1,013 of our properties to tenants under triple-net leases.

Our net lease properties include 846 properties leased under 36 separate unitary or master triple-net leases and 167 properties leased under single unit triple-net leases.

3 unchanged sentences

Redevelopment .

As of March 31, 2022, we were actively redeveloping five of our properties either for new convenience and gasoline use or for alternative single-tenant net lease retail uses.

As of March 31, 2022, six of our properties were vacant.

As of June 30, 2022, we were actively redeveloping five of our properties either for new convenience and gasoline use or for alternative single-tenant net lease retail uses.

As of June 30, 2022, six of our properties were vacant.

We expect that we will either sell or enter into new leases on these properties over time.

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A key element of our investment strategy is to invest in properties that will enhance our property type, tenant, and geographic diversification.

During the three months ended March 31, 2022, we acquired fee simple interests in two properties for an aggregate purchase price of $7.0 million.

During the three months ended March 31, 2021, we acquired fee simple interests in six properties for an aggregate purchase price of $21.9 million.

During the six months ended June 30, 2022, we acquired fee simple interests in 14 properties for an aggregate purchase price of $54.2 million.

During the six months ended June 30, 2021, we acquired fee simple interests in 55 properties for an aggregate purchase price of $63.3 million.

We also 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 $1.7 million, including accrued interest, and, as of March 31, 2022, had outstanding $7.5 million of such construction loans, including accrued interest.

During the six months ended June 30, 2022, we funded $5.1 million, including accrued interest, and, as of June 30, 2022, had outstanding $10.8 million of such construction loans, including accrued interest.

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

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We believe that the redeveloped properties can be leased or sold at higher values than their current use.

During the six months ended June 30, 2022, there were no rent commencements.

Since the inception of our redevelopment program in 2015, we have completed 24 redevelopment projects.

As of March 31, 2022, we had five properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio, including two properties for which we have signed new leases or letters of intent and which will be transferred to redevelopment when the appropriate entitlements, permits and approvals have been secured.

As of June 30, 2022, we had five properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio, including two properties for which we have signed new leases or letters of intent and which will be transferred to redevelopment when the appropriate entitlements, permits and approvals have been secured.

Asset Impairment

We perform an impairment analysis for the carrying amounts of our properties in accordance with GAAP when indicators of impairment exist.

We reduced the carrying amounts to fair value, and recorded impairment charges aggregating $1.0 million for the three months ended March 31, 2022, and $0.8 million for the three months ended March 31, 2021, where the carrying amounts of the properties exceed the estimated undiscounted cash flows expected to be received during the assumed holding period which includes the estimated sales value expected to be received at disposition.

We reduced the carrying amounts to fair value, and recorded impairment charges aggregating $0.4 million and $1.4 million for the three and six months ended June 30, 2022, and $0.8 million and $1.5 million for the three and six months ended June 30, 2021, where the carrying amounts of the properties exceed the estimated undiscounted cash flows expected to be received during the assumed holding period which includes the estimated sales value expected to be received at disposition.

The impairment charges were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, (ii) reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties, and (iii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

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A reconciliation of net earnings to FFO and AFFO is as follows (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,

Net earnings (1)

Depreciation and amortization of real estate assets

5 unchanged sentences

Insurance reimbursements

Legal settlements and judgments

Retirement and severance costs

3 unchanged sentences

Basic per share amounts:

Net earnings (1)

Diluted per share amounts:

Net earnings (1)

Weighted average common shares outstanding:

Net earnings and FFO for the three and six months ended June 30, 2022 included a $16.3 million credit related to removal of environmental remediation obligations at certain properties.

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

Dividends paid and undistributed earnings allocated, if any, to unvested restricted stockholders are deducted from FFO and AFFO for the computation of the per share amounts.

The following amounts were deducted:

Three Months Ended March 31,

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Results of Operations

The following discussion describes our results of operations for the three and nine months ended March 31, 2022.

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three months ended March 31, 2022, we are actively monitoring the impact of COVID-19, which may negatively impact our business and results of operations for subsequent quarters.

Three months ended March 31, 2022 , compared to the three months ended March 31, 2021

Revenues from rental properties increased by $2.0 million to $39.0 million for the three months ended March 31, 2022, as compared to $37.0 million for the three months ended March 31, 2021.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties during the last twelve months, along with contractual rent increases, partially offset by property dispositions.

Rental income contractually due from our tenants included in revenues from rental properties was $36.4 million for the three months ended March 31, 2022, as compared to $33.5 million for the three months ended March 31, 2021.

Tenant reimbursements, which are included in revenues from rental properties, and which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $3.1 million and $3.8 million for the three months ended March 31, 2022 and 2021, respectively.

Interest income on notes and mortgages receivable was $0.3 million for the three months ended March 31, 2022, and 2021.

The following discussion describes our results of operations for the three and six months ended June 30, 2022.

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three and six months ended June 30, 2022, we are actively monitoring the impact of COVID-19, which may negatively impact our business and results of operations for subsequent quarters.

Three months ended June 30, 2022, compared to the three months ended June 30, 2021

Revenues from rental properties increased by $2.5 million to $40.8 million for the three months ended June 30, 2022, as compared to $38.3 million for the three months ended June 30, 2021.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties and contractual rent increases, partially offset by property dispositions.

Rental income contractually due from our tenants included in revenues from rental properties was $37.1 million for the three months ended June 30, 2022, as compared to $34.4 million for the three months ended June 30, 2021.

Tenant reimbursements, which are included in revenues from rental properties, and which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $4.1 million and $4.3 million for the three months ended June 30, 2022 and 2021, respectively.

Interest income on notes and mortgages receivable was $0.4 million for the three months ended June 30, 2022 and 2021.

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

basis over the current lease term, (ii) the net amortization of above-market and below-market leases, (iii) recognition of rental income under direct financing leases using the effective interest rate 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.

Revenues from rental properties include Revenue Recognition Adjustments which de creased rental revenue by $ 0.

6 million and $ 0.

3 million f or the three months ended March 31, 2022 and 2021 , respectively .

Property costs, which are primarily comprised of rent expense, real estate and other state and local taxes, municipal charges, professional fees, maintenance expense and reimbursable tenant expenses, were $4.6 million for the three months ended March 31, 2022, as compared to $5.3 million for the three months ended March 31, 2021.

The decrease in property costs for the three months ended March 31, 2022 was principally due to reductions in rent expense and reimbursable and non-reimbursable real estate taxes.

Impairment charges were $1.0 million for the three months ended March 31, 2022, as compared to $0.8 million for the three months ended March 31, 2021.

As a result, revenues from rental properties include Revenue Recognition Adjustments comprised of (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) recognition of rental income under direct financing leases using the effective interest rate 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.

Revenues from rental properties include Revenue Recognition Adjustments which decreased rental revenue by $0.4 million for the three months ended June 30, 2022 and 2021.

Property costs, which are comprised of property operating expenses and leasing and redevelopment expenses, were $5.3 million for the three months ended June 30, 2022, as compared to $5.6 million for the three months ended June 30, 2021.

The decrease in property costs for the three months ended June 30, 2022 was principally due to reductions in property operating expenses, including lower rent expense and real estate taxes, partially offset by increased leasing and redevelopment expenses, primarily demolition costs for active redevelopment projects.

Impairment charges were $0.4 million for the three months ended June 30, 2022, as compared to $0.8 million for the three months ended June 30, 2021.

Impairment charges are recorded when the carrying value of a property is reduced to fair value.

Impairment charges for the three months ended March 31, 2022 and 2021 were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, and (ii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

Environmental expenses for the three months ended March 31, 2022 was a credit of $0.1 million, as compared to an expense of $0.5 million for the three months ended March 31, 2021.

The decrease in environmental expenses for the three months ended March 31, 2022 was principally due to reduction in environmental legal fees and net environmental remediation costs and estimates.

Impairment charges for the three months ended June 30, 2022 and 2021 were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, and (ii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

Environmental expenses for the three months ended June 30, 2022 was a credit of $15.9 million, as compared to an expense of $0.1 million for the three months ended June 30, 2021.

The decrease in environmental expenses for the three months ended June 30, 2022 was principally due to a reduction in estimates related to unknown environmental liabilities.

Specifically, during the three months ended June 30, 2022, 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 $16.8 million of unknown reserve liabilities which had previously been accrued for these properties.

This resulted in a net credit of $16.3 million being recorded to environmental expense for the three months ended June 30, 2022.

Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of changes in reported environmental expenses for one period, as compared to prior periods.

General and administrative expense was $5.1 million for the three months ended March 31, 2022, as compared to $5.5 million for the three months ended March 31, 2021.

The decrease in general and administrative expense for the three months ended March 31, 2022 was principally due to $0.5 million of non-recurring severance and retirement costs incurred during the three months ended March 31, 2021, partially offset by increased personnel costs.

Depreciation and amortization expense was $9.6 million for the three months ended March 31, 2022, as compared to $8.4 million for the three months ended March 31, 2021.

The increase in depreciation and amortization expense for the three months ended March 31, 2022 was primarily due to depreciation and amortization of properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Gains on dispositions of real estate were $6.2 million for the three months ended March 31, 2022, as compared to $7.2 million for the three months ended March 31, 2021.

The gains were the result of the disposition of 15 properties and one partial condemnation during the three months ended March 31, 2022 and the sale of five properties during the three months ended March 31, 2021, respectively.

Interest expense was $6.5 million for the three months ended March 31, 2022, as compared to $6.1 million for the three months ended March 31, 2021.

The increase was due to higher average borrowings outstanding partially offset by a decrease in average interest rates on borrowings outstanding for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

General and administrative expense was $5.3 million for the three months ended June 30, 2022, as compared to $5.1 million for the three months ended June 30, 2021.

The increase in general and administrative expense for the three months ended June 30, 2022 was principally due to increased personnel costs.

Depreciation and amortization expense was $9.9 million for the three months ended June 30, 2022, as compared to $8.6 million for the three months ended June 30, 2021.

The increase in depreciation and amortization expense for the three months ended June 30, 2022 was primarily due to depreciation and amortization of properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Gains on dispositions of real estate were $1.1 million for the three months ended June 30, 2022, as compared to $0.3 million for the three months ended June 30, 2021.

The gains were the result of the disposition of one property during the three months ended June 30, 2022 and one partial condemnation during the three months ended June 30, 2021, respectively.

Interest expense was $6.9 million for the three months ended June 30, 2022, as compared to $6.2 million for the three months ended June 30, 2021.

The increase was due to higher average borrowings outstanding partially offset by a decrease in average interest rates on borrowings outstanding for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

Six Months Ended June 30, 2022, compared to the six months ended June 30, 2020

Revenues from rental properties increased by $4.6 million to $79.8 million for the six months ended June 30, 2022, as compared to $75.2 million for the six months ended June 30, 2021.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties and contractual rent increases, partially offset by property dispositions.

Rental income contractually due from our tenants included in revenues from rental properties was $73.6 million for the six months ended June 30, 2022, as compared to $67.9 million for the six months ended June 30, 2021.

Tenant reimbursements, which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $7.2 million and $8.0 million for the six months ended June 30, 2022 and 2021, respectively.

Interest income on notes and mortgages receivable was $0.7 million for the six months ended June 30, 2022 and 2021.

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

under direct financing leases using the effective interest rate 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.

Revenues from rental properties includes Revenue Recognition Adjustments which de creased rental revenue by $ 1.0 million and $ 0.

7 million for the six months ended June 30, 202 2 and 202 1 , respectively .

Property costs, which are comprised of property operating expenses and leasing and redevelopment expenses, were $10.0 million for the six months ended June 30, 2022, as compared to $10.8 million for the six months ended June 30, 2021.

Impairment charges were $1.4 million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively.

Impairment charges are recorded when the carrying value of a property is reduced to fair value.

Impairment charges for the six months ended June 30, 2022 and 2021 were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, and (ii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

Environmental expenses for the six months ended June 30, 2022 was a credit of $16.1 million, as compared to an expense of $0.6 million for the six months ended June 30, 2021.

The decrease in environmental expenses for the six months ended June 30, 2022 was principally due to a reduction in estimates related to unknown environmental liabilities.

Specifically, during the six months ended June 30, 2022, 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 $16.8 million of unknown reserve liabilities which had previously been accrued for these properties.

This resulted in a net credit of $16.3 million being recorded to environmental expense for the six months ended June 30, 2022.

General and administrative expense was $10.4 million for the six months ended June 30, 2022, as compared to $10.6 million for the six months ended June 30, 2021.

The decrease in general and administrative expense for the six months ended June 30, 2022 was principally due to $0.6 million of non-recurring severance and retirement costs incurred during the six months ended June 30, 2021, partially offset by increased personnel costs.

Depreciation and amortization expense was $19.6 million for the six months ended June 30, 2022, as compared to $17.1 million for the six months ended June 30, 2021.

The increase in depreciation and amortization expense for the six months ended June 30, 2022 was primarily due to depreciation and amortization charges related to properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Gains on dispositions of real estate were $7.3 million for the six months ended June 30, 2022, as compared to $7.5 million for the six months ended June 30, 2021.

The gains were primarily the result of the dispositions of 16 properties during the six months ended June 30, 2022 and five properties during the six months ended June 30, 2021, respectively.

Interest expense was $13.4 million for the six months ended June 30, 2022, as compared to $12.3 million for the six months ended June 30, 2021.

The increase was due to higher average borrowings outstanding and a decrease in average interest rates on borrowings outstanding for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

Liquidity and Capital Resources

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We believe that our operating cash needs for the next twelve months and our long-term liquidity requirements, can be met by cash flows from operations, borrowings under our Revolving Facility, proceeds from the sale of shares of our common stock under our ATM Program and available cash and cash equivalents.

Our cash flow activities for the three months ended March 31, 2022 and 2021, are summarized as follows (in thousands):

Three Months Ended March 31,

Our cash flow activities for the six months ended June 30, 2022 and 2021, are summarized as follows (in thousands):

For the Six Months

Ended June 30,

Net cash flow provided by operating activities

Net cash flow used in investing activities

Net cash flow provided by (used in) financing activities

Net cash flow used in financing activities

Operating Activities

Net cash flow from operating activities increased by $1.4 million for the three months ended March 31, 2022, to $20.8 million, as compared to $19.4 million for the three months ended March 31, 2021.

Net cash provided by operating activities represents cash received primarily from rental and interest income less cash used for property costs, environmental expense, general and

administrative expense, and interest expense.

The change in net cash flow provided by operating activities for the three months ended March 31, 2022 and 2021 is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the other changes in assets and liabilities on our consolidated statements of cash flows .

Net cash flow from operating activities increased by $3.4 million for the six months ended June 30, 2022, to $43.4 million, as compared to $40.0 million for the six months ended June 30, 2021.

Net cash provided by operating activities represents cash received primarily from rental and interest income less cash used for property costs, environmental expense, general and administrative expense, and interest expense.

The change in net cash flow provided by operating activities for the six months ended June 30, 2022 and 2021 is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the other changes in assets and liabilities on our consolidated statements of cash flows.

Investing Activities

1 unchanged sentence

Because we generally lease our properties on a triple-net basis, we have not historically incurred significant capital expenditures other than those related to investments in real estate and our redevelopment activities.

Net cash flow used in investing activities decreased by $11.9 million for the three months ended March 31, 2022, to $7.9 million, as compared to $19.8 million for the three months ended March 31, 2021.

The decrease in net cash flow used in investing activities was primarily due to an decrease of $14.9 million for property acquisitions, a decrease of $6.7 million in issuance of notes and mortgages receivable and an increase of $1.9 million in proceeds from dispositions of real estate, partially offset by an increase of $11.9 million in deposits on property acquisitions for the three months ended March 31, 2022.

Net cash flow used in investing activities decreased by $14.5 million for the six months ended June 30, 2022, to $47.6 million, as compared to $62.1 million for the six months ended June 30, 2021.

The decrease in net cash flow used in investing activities was primarily due to a decrease of $9.1 million for property acquisitions, a decrease of $6.3 million in issuance of notes and mortgages receivable and an increase of $1.9 million in proceeds from dispositions of real estate, partially offset by a decrease of $3.0 million in deposits on property acquisitions for the six months ended June 30, 2022.

Financing Activities

Net cash flow provided by financing activities increased by $42.2 million for the three months ended March 31, 2022, to $19.3 million, as compared to a use of $22.9 million for the three months ended March 31, 2021.

The increase in net cash flow provided by financing activities was primarily due to an increase in borrowings under senior unsecured notes of $100.0 million, partially offset by a decrease in net proceeds under the ATM agreement of $20.2 million, an increase in net repayments under the credit agreement of $35.0 million, an increase in dividends paid of $2.2 million, and an increase in debt issuance costs of $0.6 million.

Net cash flow used in financing activities decreased by $13.6 million for the six months ended June 30, 2022, to $0.5 million, as compared to $14.1 million for the six months ended June 30, 2021.

The decrease in net cash flow used in by financing activities was primarily due to an increase in net borrowings under senior unsecured notes of $100.0 million, partially offset by a decrease in net proceeds under the ATM agreement of $29.5 million, an increase in net repayments under the credit agreement of $52.5 million and an increase in dividends paid of $4.1 million.

Credit Agreement

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Pursuant to the Second Restated Credit Agreement, we (i) extended the maturity date of the Revolving Facility from March 2022 to October 2025, (ii) reduced the interest rate for borrowings under the Revolving Facility and (iii) amended certain financial covenants and other provisions.

The Second Restated Credit Agreement provides for the Revolving Facility in an aggregate principal amount of $300.0 and includes an accordion feature to increase the revolving commitments or add one or more tranches of term loans up to an additional aggregate amount not to exceed $300.0 million, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amount and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

The Second Restated Credit Agreement provides for the Revolving Facility in an aggregate principal amount of $300.0 million and includes an accordion feature to increase the revolving commitments or add one or more tranches of term loans up to an additional aggregate amount not to exceed $300.0 million, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amount and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

The Revolving Facility matures October 27, 2025, subject to two six-month extensions (for a total of 12 months) exercisable at our option.

Our exercise of an extension option is subject to the absence of any default under the Second Restated Credit Agreement and our compliance with certain conditions, including the payment of extension fees to the Lenders under the Revolving Facility and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

of 1.30% to 1.90% based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.

Our exercise of an extension option is subject to the absence of any default under the Second Restated Credit Agreement

and our compliance with certain conditions, including the payment of extension fees to the Lenders under the Revolving Facility and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

The Second Restated Credit Agreement reflects reductions in the interest rates for borrowings under the Revolving Facility and permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.30% to 0.90% or a LIBOR rate plus a margin of 1.30% to 1.90% based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.

The Revolving Facility includes customary LIBOR transition language that addresses the succession of LIBOR at a future date.

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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 $20.3 million under the 2018 ATM Program and the 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, respectively, and received net proceeds of $9.3 million and $29.6 million, respectively, under the 2018 ATM Program and the 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.

1 unchanged sentence

As part of our overall business strategy, we regularly review acquisition and financing opportunities to invest in additional convenience, automotive and other single tenant retail real estate, and we expect to continue to pursue acquisitions that we believe will benefit our financial performance.

During the three months ended March 31, 2022, we acquired fee simple interests in two properties for an aggregate purchase price of $7.0 million.

During the three months ended March 31, 2021, we acquired fee simple interests in six properties for an aggregate purchase price of $21.9 million.

During the six months ended June 30, 2022, we acquired fee simple interests in 14 properties for an aggregate purchase price of $54.2 million.

During the six months ended June 30, 2021, we acquired fee simple interests in 55 properties for an aggregate purchase price of $63.3 million.

We accounted for the acquisitions of fee simple interests as asset acquisitions.

4 unchanged sentences

However, our tenants frequently make improvements to the properties leased from us at their expense.

As of March 31, 2022, we have a remaining commitment to fund up to $6.6 million in the aggregate of capital improvements at certain properties previously leased to Marketing and now subject to unitary triple-net leases with other tenants.

As of June 30, 2022, we have a remaining commitment to fund up to $6.6 million in the aggregate of capital improvements at certain properties previously leased to Marketing and now subject to unitary triple-net leases with other tenants.

We elected to be treated as a REIT under the federal income tax laws with the year beginning January 1, 2001.

4 unchanged sentences

In particular, the Restated Credit Agreement and our senior unsecured notes prohibit the payment of dividends during certain events of default.

Regular quarterly dividends paid to our stockholders for the three months ended March 31, 2022 were $19.5 million, or $0.41 per share.

Regular quarterly dividends paid to our stockholders for the six months ended June 30, 2022 were $39.1 million, or $0.82 per share.

There can be no assurance that we will continue to pay dividends at historical rates, if at all.

20 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 $16.8 million of unknown reserve liabilities which had previously been accrued for these properties.

This resulted in a net credit of $16.3 million 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 $7.4 million 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 $47.0 million for our prospective environmental remediation obligations.

This accrual consisted of (a) $11.2 million, 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) $35.8 million for future environmental liabilities related to preexisting unknown contamination.

As of June 30, 2022, we had accrued a total of $29.5 million for our prospective environmental remediation obligations.

This accrual consisted of (a) $10.6 million 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) $18.9 million 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 $47.6 million for our prospective environmental remediation obligations.

This accrual consisted of (a) $11.4 million, 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) $36.2 million 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, $0.4 million and $0.5 million 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 $0.8 million and $0.3 million, respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.

This accrual consisted of (a) $11.4 million of known reserve liabilities and (b) $36.2 million of unknown reserve liabilities, which was our estimate of 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, $0.8 million and $0.9 million 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 $17.5 million and $1.0 million, 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 .

During the three months ended March 31, 2022 and 2021, we increased the carrying values of certain of our properties by $0.5 million and $0.9 million, respectively, due to changes in estimated environmental remediation costs.

During the six months ended June 30, 2022 and 2021, we increased the carrying values of certain of our properties by $1.2 million for both periods, 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 each 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 was $1.0 million for each of the three months ended March 31, 2022 and 2021.

Capitalized asset retirement costs were $39.3 million (consisting of $24.5 million of known environmental liabilities and $14.8 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of March 31, 2022, and $39.7 million (consisting of $24.1 million of known environmental liabilities and $15.6 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of December 31, 2021.

We recorded impairment charges aggregating $0.3 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively, for capitalized asset retirement costs.

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 was $1.9 million and $2.0 million for the six months ended June 30, 2022 and 2021.

Capitalized asset retirement costs were $37.6 million (consisting of $24.7 million of known environmental liabilities and $12.9 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of June 30, 2022, and $39.7 million (consisting of $24.1 million of known environmental liabilities and $15.6 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of December 31, 2021.

We recorded impairment charges aggregating $0.7 million and $1.5 million 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.

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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 policies, we have received and expect to continue to receive reimbursement of certain remediation expenses for covered claims.

[Placeholder for update on 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;

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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 $1.9 million 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 $1.9 million for certain of these matters which we believe were appropriate based on information then currently available.

It is possible that our assumptions regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change, which may result in our providing an accrual, or adjustments to the amounts recorded, for environmental litigation accruals.

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We use borrowings under the Second Restated Credit Agreement to finance acquisitions and for general corporate purposes.

There were no borrowings outstanding at variable interest rates under the Restated Credit Agreement as of March 31, 2022.

There were no borrowings outstanding at variable interest rates under the Restated Credit Agreement as of June 30, 2022

In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments, if any, with high credit quality institutions.

7 unchanged sentences

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 2. Management’s Discussion and Analysis