Getty Realty's Q2 2025: Key Contradictions in Car Wash Rent Coverage, Investment Activity, and Cap Rate Expectations

Car wash rent coverage improvement, investment activity and pricing, comfort level with car wash space, rent coverage improvements in car wash segment, cap rate expectations are the key contradictions discussed in Getty Realty Corp.'s latest 2025Q2 earnings call.



Investment Activity and Pipeline Growth:
- Getty Realty Corp closed $95.5 million in investments during the first half of 2025, with an initial cash yield of 8.1%.
- The investment pipeline has surpassed $90 million, with expectations to fund deals in the high 7% initial cash yield range over the next 6 to 9 months.
- Growth in investment activity is attributed to a more constructive stance from operators and increased transaction activity, particularly towards the end of Q2.

Adjusted Funds from Operations (AFFO) and Earnings Growth:
- Adjusted Funds from Operations (AFFO) per share increased by 1.7% to $0.59 compared to the prior year.
- The company raised its full-year 2025 AFFO guidance to a range of $2.40 to $2.41.
- Earnings growth is driven by accretive investment activity and steady performance of the in-place portfolio, with nearly 100% rent collections and stable rent coverage.

Portfolio Performance and Tenant Dynamics:
- The company reported trailing 12-month rent coverage of 2.6x for Q2, with improvements in nearly all convenience store portfolios and the car wash sector.
- Healthy fuel margins, stable fuel volumes, and expanding profit margins inside the store contributed to rent coverage improvements.
- The focus on profitability and reduced new store counts in the car wash sector positively impacted coverage for Getty's tenants.

Lease Terms and Investment Strategy:
- Getty continues to prioritize unitary master leases with escalations generally hovering in the 2% area.
- Security guarantees and true triple net leases are maintained as part of the business model.
- The investment strategy remains focused on strong lease terms and market and real estate fundamentals to mitigate credit risks inherent in net lease business.