10-K 1 c63529e10vk.htm FORM 10-K e10vk
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13777
GETTY REALTY CORP.
(Exact name of registrant as specified in its charter)
     
Maryland   11-3412575
     
(State or other jurisdiction of incorporation or organization)   (I.R.S. employer identification no.)
     
125 Jericho Turnpike, Suite 103, Jericho, New York   11753
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (516) 478-5400
Securities registered pursuant to Section 12(b) of the Act:
     
TITLE OF EACH CLASS   NAME OF EACH EXCHANGE ON WHICH REGISTERED
     
Common Stock, $0.01 par value   New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
The aggregate market value of common stock held by non-affiliates (22,494,667 shares of common stock) of the Company was $504,105,487 as of June 30, 2010.
The registrant had outstanding 33,394,155 shares of common stock as of March 16, 2011.
DOCUMENTS INCORPORATED BY REFERENCE
     
DOCUMENT   PART OF FORM
10-K
Selected Portions of Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders (the “Proxy Statement”), which will be filed by the registrant on or prior to 120 days following the end of the registrant’s year ended December 31, 2010 pursuant to Regulation 14A.
  III
 
 


 

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 EX-21
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 EX-31.I.1
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 EX-32.1
 EX-32.2

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Cautionary Note Regarding Forward-Looking Statements
     Certain statements in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When we use the words “believes,” “expects,” “plans,” “projects,” “estimates,” “predicts” and similar expressions, we intend to identify forward-looking statements. (All capitalized and undefined terms used in this section shall have the same meanings hereafter defined below in this Annual Report on Form 10-K.) Examples of forward-looking statements include, but are not limited to, statements regarding: our primary tenant, Marketing, and the Marketing Leases included in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Marketing and the Marketing Leases” and elsewhere in this Annual Report on Form 10-K; the impact of any modification or termination of the Marketing Leases on our business and ability to pay dividends or our stock price; the impact of Lukoil’s transfer of its ownership interest in Marketing on Marketing’s ability or willingness to perform its rental, environmental and other obligations under the Marketing Leases; the reasonableness of and assumptions regarding our accounting estimates, judgments, assumptions and beliefs; our beliefs regarding Marketing and its operations, including our belief that it is not probable that Marketing will not pay for substantially all of the Marketing Environmental Liabilities; our ability to predict if, or when, the Marketing Leases will be modified, what composition of properties, if any, may be removed from the Marketing Leases as part of any such modification; what the terms of any agreement for modification of the Marketing Leases may be or what our recourse will be if the Marketing Leases are modified or terminated; our belief that it is not probable that we will not collect all the rent due related to the properties we identified as being most likely to be removed from the Marketing Leases; our exposure and liability due to and our estimates and assumptions regarding our environmental liabilities and remediation costs; our estimates and assumptions regarding the Marketing Environmental Liabilities and other environmental remediation costs; our belief that our accruals for environmental and litigation matters were appropriate; compliance with federal, state and local provisions enacted or adopted pertaining to environmental matters; the probable outcome of litigation or regulatory actions and its impact on us; our expected recoveries from underground storage tank funds; our expectations regarding the indemnification obligations of the Company and others; future acquisitions and financing opportunities and their impact on our financial performance; our ability to renew expired leases; the adequacy of our current and anticipated cash flows from operations, borrowings under our Credit Agreement and available cash and cash equivalents; our expectation as to our continued compliance with the financial covenants in our Credit Agreement and our Term Loan Agreement; our ability to re-let properties at market rents or sell properties and our ability to maintain our federal tax status as a real estate investment trust (“REIT”).
     These forward-looking statements are based on our current beliefs and assumptions and information currently available to us, and involve known and unknown risks (including the risks described below in “Item 1A. Risk Factors” and other risks that we describe from time to time in this and our other filings with the SEC), uncertainties and other factors which may cause our actual results, performance and achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.
     These risks include, but are not limited to risks associated with: material dependence on Marketing as a tenant; the transfer of Lukoil’s ownership interest in Marketing; the possibility that Marketing may not perform its rental, environmental or other obligations under the Marketing Leases; the possibility that Marketing may file for bankruptcy protection and seek to reorganize or liquidate its business; the impact of Marketing’s announced restructuring of its business; the modification or termination of the Marketing Leases; our inability to provide access to financial information about Marketing; the uncertainty of our estimates, judgments and assumptions associated with our accounting policies and methods; costs of completing environmental remediation and of compliance with environmental legislation and regulations; our ability to acquire or develop new properties; potential future acquisitions; owning and leasing real estate generally; adverse developments in general business, economic or political conditions; performance of our tenants of their lease obligations, tenant non-renewal and our ability to re-let or sell vacant properties; our dependence on external sources of capital; generalized credit market dislocations and contraction of available credit; our business operations generating sufficient cash for distributions or debt service; changes in interest rates and our ability to manage or mitigate this risk effectively; expenses not covered by insurance; potential exposure related to pending lawsuits and claims; owning real estate primarily concentrated in the Northeast and Mid-Atlantic regions of the United States; substantially all of our tenants depending on the same industry for their revenues; the impact of our electing to be treated as a REIT under the federal income tax laws, including subsequent failure to qualify as a REIT; our potential inability to pay dividends; changes to our dividend policy; changes in market conditions; adverse affect of inflation; the loss of a member or members of our management team; and terrorist attacks and other acts of violence and war.
     You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. We undertake no obligation to publicly release revisions to these forward-looking statements that reflect future events or circumstances or reflect the occurrence of unanticipated events.

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PART I
Item 1. Business
Recent Developments
     Transfer of Ownership Interest in Marketing
     On February 28, 2011, OAO LUKoil (“Lukoil”), one of the largest integrated Russian oil companies, transferred its ownership interest in Getty Petroleum Marketing Inc. (“Marketing”), our largest tenant, to Cambridge Petroleum Holding Inc. (“Cambridge”). We have commenced discussions with the new owners and management of Marketing; however, we cannot predict the impact the transfer of Marketing may have on our business. For information regarding factors that could adversely affect us relating to Marketing and the Marketing Leases (as defined below), see “Item 1A. Risk Factors”. For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.)
     Acquisition
     As part of our overall growth strategy, we regularly review acquisition and financing opportunities to acquire additional properties, and we expect to continue to pursue acquisitions that we believe will benefit our financial performance. In January 2011, we acquired fee or leasehold title to 59 Mobil branded gasoline stations and convenience store properties for $111.3 million in a sale/leaseback and loan transaction with CPD NY Energy Corp. (“CPD NY”), a subsidiary of Chestnut Petroleum Dist. Inc. This transaction was financed entirely with borrowings under our existing $175.0 million amended and restated senior unsecured credit agreement (the “Credit Agreement”).
     Public Stock Offering
     In the first quarter of 2011, we completed a public stock offering of 3,450,000 shares of our common stock. Substantially all of the aggregate $91,753,000 net proceeds from the offering were used to repay a portion of the outstanding balance under the Credit Agreement and the remainder was used for general corporate purposes.
The History of Our Company
     Getty Realty Corp., a Maryland corporation, is the leading publicly-traded real estate investment trust (“REIT”) in the United States specializing in the ownership, leasing and financing of retail motor fuel and convenience store properties and petroleum distribution terminals. Our properties are located primarily in the Northeast and the Mid-Atlantic regions in the United States. We own or lease properties in New York, Massachusetts, New Jersey, Pennsylvania, Connecticut, Maryland, Virginia, New Hampshire, Maine, Rhode Island, Texas, North Carolina, Delaware, Hawaii, California, Florida, Ohio, Arkansas, Illinois, North Dakota and Vermont.
     Our founders started the business in 1955 with the ownership of one gasoline service station in New York City and combined real estate ownership, leasing and management with service station operation and petroleum distribution. We held our initial public offering in 1971 under the name Power Test Corp. We acquired, from Texaco in 1985, the petroleum distribution and marketing assets of Getty Oil Company in the Northeast United States along with the Getty® name and trademark in connection with our real estate and the petroleum marketing business in the United States. We became one of the leading independent owner/operators of petroleum marketing assets in the country, serving retail and wholesale customers through a distribution and marketing network of Getty® and other branded retail motor fuel and convenience store properties and petroleum distribution terminals.
     Marketing was formed to facilitate the spin-off of our petroleum marketing business to our shareholders which was completed in 1997. At that time, our shareholders received a tax-free dividend of one share of common stock of Marketing for each share of our common stock. Marketing was acquired by a U.S. subsidiary of Lukoil in December 2000. On February 28, 2011, Lukoil transferred its ownership interest in Marketing to Cambridge. In connection with Lukoil’s acquisition of Marketing, we renegotiated our long-term unitary triple-net lease (the “Master Lease”) with Marketing. As of December 31, 2010, we leased approximately 78% of our 1,052 owned and leased properties on a long-term triple-net lease basis to Marketing. Marketing does not itself directly operate the retail motor fuel and convenience store properties it leases from us.

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Rather, Marketing generally subleases our retail properties to subtenants that either operate their gas stations, convenience stores, automotive repair services or other businesses at our properties or are petroleum distributors who may operate our properties directly and/or sublet our properties to the operators.
Company Operations
     The operators of our properties are primarily distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products, and automotive repair services. Over the past decade, these lines of business have matured into a single industry as operators have increased their emphasis on co-branded locations with multiple uses. The combination of petroleum product sales with other offerings, particularly convenience store products, has helped provide one-stop shopping for consumers, and we believe has represented an important driver behind the industry’s growth.
     As of December 31, 2010, we owned 907 properties and leased 145 properties. Nine of the properties we own are petroleum distribution terminals. As of December 31, 2010, Marketing leased from us 808 properties under the Master Lease and 9 properties under supplemental leases (collectively with the Master Lease, the “Marketing Leases”). Our typical property is used as a retail motor fuel outlet and convenience store, and is located on between one-half and three quarters of an acre of land in a metropolitan area. The properties that we have been acquiring since 2007 are generally located on larger parcels of land. We believe our network of retail motor fuel and convenience store properties and terminal properties across the Northeast and the Mid-Atlantic regions of the United States is unique and that comparable networks of properties are not readily available for purchase or lease from other owners or landlords. Many of our properties are located at highly trafficked urban intersections or conveniently close to highway entrance or exit ramps. Nearly all of our properties are leased or sublet to distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products and automotive repair services. These tenants are responsible for managing the operations conducted at these properties and for the payment of taxes, maintenance, repair, insurance and other operating expenses related to our properties. Our tenants’ financial results are largely dependent on the performance of the petroleum marketing industry, which is highly competitive and subject to volatility. In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, we will seek an alternative tenant or buyer for the property. We lease or sublet approximately 20 of our properties for such uses as fast food restaurants, automobile sales and other retail purposes.
     We are self-administered and self-managed by our management team, which has extensive experience in owning, leasing and managing retail motor fuel and convenience store properties. We have invested, and will continue to invest, in real estate and real estate related investments, such as mortgage loans, when appropriate opportunities arise.
     The sector of the real estate industry in which we operate is highly competitive, and we compete for tenants with a large number of property owners. Our principal means of competition are rents charged in relation to the income producing potential of the location. In addition, we expect other major real estate investors with significant capital will continue to compete with us for attractive acquisition opportunities. These competitors include petroleum manufacturing, distributing and marketing companies, other REITs, investment funds and private institutional investors. We generally have long-term leases with our tenants. Generally, we seek leases with our tenants that have an initial term of 15 years and include provisions for rental increases during the term of the lease. As of December 31, 2010, our average lease term, weighted by the number of underlying properties, was in excess of 14.9 years, with an average of 5.8 years remaining, excluding renewal options. Retail motor fuel properties are an integral component of the transportation infrastructure. Stability within the retail motor fuel and convenience store industry is driven by highly inelastic demand for petroleum products and day-to-day consumer goods and fast foods, which supports our tenants.
     Revenues from rental properties included in continuing operations for the year ended December 31, 2010 were $88.3 million which is comprised of $86.9 million of lease payments received and $1.4 million of “Rental Revenue Adjustments” consisting of deferred rental income recognized due to the straight-line method of accounting for the leases with Marketing and certain of our other tenants, amortization of above-market and below-market rent for acquired in-place leases and income recognized for direct financing leases. In 2010, we received lease payments from Marketing aggregating approximately $60.3 million, or 69%, of the $86.9 million lease payments received included in continuing operations. Our financial results are materially dependent upon the ability of Marketing to meet its rental, environmental and other obligations under the Marketing Leases. Marketing’s financial results depend on retail petroleum marketing margins from the sale of refined petroleum products and rental income from its subtenants. Marketing’s subtenants either operate their gas stations, convenience stores, automotive repair services or other businesses at our properties or are petroleum distributors who may operate our properties directly and/or sublet our properties to the operators. Since a substantial portion of our revenues are

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derived from the Marketing Leases, any factor that adversely affects Marketing’s ability to meet its obligations under the Marketing Leases may have a material adverse effect on our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price. (For information regarding factors that could adversely affect us relating to our lessees, including our primary tenant, Marketing, see “Item 1A. Risk Factors”. For additional information regarding the portion of our financial results that are attributable to Marketing, see Note 11 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements.” For additional information regarding Marketing and the Marketing Leases (as defined below), see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”).
     The Master Lease has an initial term expiring in December 2015, and provides Marketing with three renewal options of ten years each and a final renewal option of three years and ten months extending to 2049. If Marketing elects to exercise any renewal option, Marketing is required to notify us of such election one year in advance of the commencement of the renewal term. The Master Lease is a unitary lease and, therefore, Marketing’s exercise of any renewal option can only be for all of the properties subject of the Master Lease. The supplemental leases have initial terms of varying expiration dates. The Marketing Leases are “triple-net” leases, pursuant to which Marketing is responsible for the payment of taxes, maintenance, repair, insurance and other operating expenses. We believe that as of March 16, 2011, Marketing was not operating any of the nine terminals it leases from us and had removed, or has scheduled removal of the underground gasoline storage tanks and related equipment at approximately 140 of our retail properties, and we also believe that most of these properties are either vacant or provide negative or marginal contribution to Marketing’s results.
     We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. A REIT is a corporation, or a business trust that would otherwise be taxed as a corporation, which meets certain requirements of the Internal Revenue Code. The Internal Revenue Code permits a qualifying REIT to deduct dividends paid, thereby effectively eliminating corporate level federal income tax and making the REIT a pass-through vehicle for federal income tax purposes. To meet the applicable requirements of the Internal Revenue Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on loans secured by mortgages on real property, and distribute to shareholders annually a substantial portion of its otherwise taxable income. As a REIT, we are required to distribute at least ninety percent of our taxable income to our shareholders each year and would be subject to corporate level federal income taxes on any taxable income that is not distributed.
Acquisition Strategy and Activity
     As part of our overall growth strategy, we regularly review acquisition and financing opportunities to acquire additional properties, and we expect to continue to pursue acquisitions that we believe will benefit our financial performance. We review such opportunities on an ongoing basis and may have one or more potential acquisitions under consideration at any point in time, which may be at varying stages of the negotiation and due diligence review process. To the extent that our current sources of liquidity are not sufficient to fund such acquisitions, we will require other sources of capital, which may or may not be available on favorable terms or at all. Since May 2003, we have acquired approximately 270 properties in various states in transactions valued at approximately $319 million. These acquisitions have ranged in size from a portfolio comprised of 18 properties with an aggregate value of approximately $13 million up to a portfolio comprised of 59 properties with an aggregate value of approximately $111 million. In addition, from time to time we acquire individual properties when opportunities arise including through the exercise of purchase options for leased locations or in conjunction with tax-free exchanges.
     In January 2011, we acquired fee or leasehold title to 59 Mobil-branded gasoline station and convenience store properties and also took a security interest in six other Mobil-branded gasoline stations and convenience store properties in a sale/leaseback and loan transaction with CPD NY. Our total investment in the transaction was $111.3 million, which was financed entirely with borrowings under our Credit Agreement. Of our aggregate investment, $92.9 million was made by way of sale/leaseback and $18.4 million was made by way of a secured, self-amortizing loan having a 10-year term (the “CPD Loan”). The properties were acquired or financed in a simultaneous transaction among ExxonMobil, CPD NY and us whereby CPD NY acquired a portfolio of 65 gasoline station and convenience stores from ExxonMobil and simultaneously completed a sale/leaseback of 59 of the acquired properties with us. The lease between us, as lessor, and CPD NY, as lessee, governing the properties is a unitary triple-net lease agreement (the “CPD Lease”), with an initial term of 15 years, and options for up to three successive renewal terms of ten years each. The CPD Lease requires CPD NY to pay a

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fixed annual rent for the properties (the “Rent”), plus an amount equal to all rent due to third party landlords pursuant to the terms of third party leases. The Rent is scheduled to increase on the third anniversary of the date of the CPD Lease and on every third anniversary thereafter. As a triple-net lessee, CPD NY is required to pay all amounts pertaining to the properties subject to the CPD Lease, including environmental expenses, taxes, assessments, licenses and permit fees, charges for public utilities and all governmental charges. Net rent payments under the CPD Lease together with interest earned on the CPD Loan are expected to aggregate approximately $10.2 million in calendar year 2011.
     In September 2009, we acquired the real estate assets of 36 Exxon-branded gasoline stations and convenience store properties for $49.0 million in a triple-net sale/leaseback transaction with White Oak Petroleum LLC (“White Oak”). This transaction was financed with $24.5 million of borrowings under our Credit Agreement and $24.5 million of indebtedness under a new $25.0 million term loan agreement with TD Bank, N.A. (the “Term Loan Agreement” or “Term Loan”).
     In March 2007, we acquired 59 convenience store and retail motor fuel properties in ten states for approximately $79.3 million from various subsidiaries of FF-TSY Holding Company II, LLC (the successor to Trustreet Properties, Inc.) (“Trustreet”), a subsidiary of General Electric Capital Corporation. This transaction was financed with funds drawn under our Credit Agreement. We subsequently acquired five additional properties from Trustreet for approximately $5.2 million. The aggregate cost of these acquisitions, including transaction costs, was approximately $84.5 million.
Trademarks
     We own the Getty® name and trademark in connection with our real estate and the petroleum marketing business in the United States and have licensed the Getty® trademarks to Marketing on an exclusive basis in its marketing territory as of December 2000. We have also licensed the trademarks to Marketing on a non-exclusive basis outside that territory, subject to a gallonage-based royalty, although to date, Marketing has not used the trademark outside that territory. The trademark licenses with Marketing are coterminous with the Master Lease.
Regulation
     We are subject to numerous existing federal, state and local laws and regulations including matters related to the protection of the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, underground storage tanks (“UST” or “USTs”) and other equipment. Petroleum properties are governed by numerous federal, state and local environmental laws and regulations. These laws have included: (i) requirements to report to governmental authorities discharges of petroleum products into the environment and, under certain circumstances, to remediate the soil and/or groundwater contamination pursuant to governmental order and directive, (ii) requirements to remove and replace USTs that have exceeded governmental-mandated age limitations, and (iii) the requirement to provide a certificate of financial responsibility with respect to claims relating to UST failures. Our tenants are directly responsible for compliance with various environmental laws and regulations as the operators of our properties.
     We believe that we are in substantial compliance with federal, state and local provisions enacted or adopted pertaining to environmental matters. Although we are unable to predict what legislation or regulations may be adopted in the future with respect to environmental protection and waste disposal, existing legislation and regulations have had no material adverse effect on our competitive position. (For additional information with respect to pending environmental lawsuits and claims see “Item 3. Legal Proceedings”.)
     Environmental expenses are principally attributable to remediation costs which include installing, operating, maintaining and decommissioning remediation systems, monitoring contamination, and governmental agency reporting incurred in connection with contaminated properties. We seek reimbursement from state UST remediation funds related to these environmental expenses where available. We enter into leases and various other agreements which allocate responsibility for known and unknown environmental liabilities by establishing the percentage and method of allocating responsibility between the parties. In accordance with leases with certain tenants, we have agreed to bring the leased properties with known environmental contamination to within applicable standards, and to either regulatory or contractual closure (“Closure”) in an efficient and economical manner. Generally, upon achieving Closure at each individual property, our environmental liability under the lease for that property will be satisfied and future remediation obligations will be the responsibility of our tenant. As of December 31, 2010, we have regulatory approval for remediation action plans in place for 227 (94%) of the 241 properties for which we continue to retain remediation responsibility and the remaining 14 (6%) were in the assessment

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phase. In addition, we have nominal post-closure compliance obligations at 29 properties where we have received “no further action” letters.
     Our tenants are directly responsible to pay for (i) remediation of environmental contamination they cause and compliance with various environmental laws and regulations as the operators of our properties, and (ii) environmental liabilities allocated to them under the terms of our leases and various other agreements. Generally, the liability for the retirement and decommissioning or removal of USTs and other equipment is the responsibility of our tenants. We are contingently liable for these obligations in the event that our tenants do not satisfy their responsibilities. A liability has not been accrued for obligations that are the responsibility of our tenants based on our tenants’ past histories of paying such obligations and/or our assessment of their respective financial abilities to pay their share of such costs. 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.
     It is possible that our assumptions regarding the ultimate allocation methods and share of responsibility that we used to allocate environmental liabilities may change, which may result in adjustments to the amounts recorded for environmental litigation accruals, environmental remediation liabilities and related assets. We will be required to accrue for environmental liabilities that we believe are allocable to others under various agreements if we determine that it is probable that the counter-party will not meet its environmental obligations. We may ultimately be responsible to pay for environmental liabilities as the property owner if the counterparty fails to pay them. The ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
     For additional information please refer to “Item 1A. Risk Factors” and to “General — Marketing and the Marketing Leases,” “Liquidity and Capital Resources,” “Environmental Matters” and “Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which appear in Item 7. of this Annual Report on Form 10-K.
Personnel
     As of March 16, 2011, we had twenty employees.
Access to our filings with the Securities and Exchange Commission and Corporate Governance Documents
     Our website address is www.gettyrealty.com. Our address, phone number and a list of our officers is available on our website. Our website contains a hyperlink to the EDGAR database of the Securities and Exchange Commission at www.sec.gov where you can access, free-of-charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such reports are filed. Our website also contains our business conduct guidelines, corporate governance guidelines and the charters of the Compensation, Nominating/Corporate Governance and Audit Committees of our Board of Directors. We also will provide copies of these reports and corporate governance documents free-of-charge upon request, addressed to Getty Realty Corp., 125 Jericho Turnpike, Suite 103, Jericho, NY 11753, Attn: Investor Relations. Information available on or accessible through our website shall not be deemed to be a part of this Annual Report on Form 10-K. You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.
Item 1A. Risk Factors
     We are subject to various risks, many of which are beyond our control. As a result of these and other factors, we may experience material fluctuations in our future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. An investment in our stock involves various risks, including those mentioned below and elsewhere this Annual Report on Form 10-K and those that are described from time to time in our other filings with the SEC.

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Our financial results are materially dependent on the performance of Marketing. In the event that Marketing does not perform its rental, environmental or other obligations under the Marketing Leases, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price could be materially adversely affected. The financial performance of Marketing has deteriorated in recent years.
     Our financial results are materially dependent upon the ability of Marketing to meet its rental, environmental and other obligations under the Marketing Leases. A substantial portion of our revenues (66% for the year ended December 31, 2010) are derived from the Marketing Leases. Accordingly, any factor that adversely affects Marketing’s ability to meet its rental, environmental and other obligations under the Marketing Leases may have a material adverse effect on our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price. For additional information regarding the portion of our financial results that are attributable to Marketing, see Note 11 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements.”
     As of the date of this Form 10-K, we have not yet received Marketing’s unaudited consolidated financial statements for the year ended December 2010. For the year ended December 31, 2009, Marketing reported a significant loss, continuing a trend of reporting large losses in recent years. Based on the interim reports we have received through 2010, Marketing’s significant losses have continued. As a result of Marketing’s significant losses, including the losses reported to us subsequent to Marketing’s reorganization in 2009 (discussed in more detail below) and the cumulative impact of those losses on Marketing’s financial position as of September 30, 2010, we continue to believe that Marketing likely does not have the ability to generate cash flows from its business operations sufficient to meet its rental, environmental and other obligations under the terms of the Marketing Leases unless Marketing shows significant improvement in its financial results, reduces the number of properties under the Marketing Leases, or receives additional capital or credit support. There can be no assurance that Marketing will be successful in any of these efforts. It is also possible that the deterioration of Marketing’s financial condition may continue or that Marketing may file bankruptcy and seek to reorganize or liquidate its business. It is possible that Marketing may aggressively pursue seeking a modification of the Marketing Leases, including, removal of properties from the Marketing Leases, or a reduction in the rental payments owed by Marketing under the Marketing Lease.
     As of December 31, 2010, the net carrying value of the deferred rent receivable attributable to the Marketing Leases was $21.2 million and the aggregate Marketing Environmental Liabilities (as defined below), net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay but have not accrued range between $13 million and $20 million. The actual amount of the Marketing Environmental Liabilities may differ from our estimated range and we can provide no assurance as to the accuracy of our estimate. Although our 2010 financial statements were not affected by the transfer of Lukoil’s ownership interest in Marketing to Cambridge, our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that we may be required to increase or decrease the deferred rent reserve, record additional impairment charges related to the properties, or accrue for Marketing Environmental Liabilities as a result of changes in our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases that affect the amounts reported in our financial statements. It is possible also that as a result of material adjustments to the amounts recorded for certain of our assets and liabilities that we may not be in compliance with the financial covenants in our Credit Agreement or Term Loan Agreement.
     If Marketing does not meet its rental, environmental and other obligations under the Marketing Leases, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
Lukoil transferred its ownership interest in Marketing. We cannot predict what impact such transfer will have on Marketing’s ability or willingness to perform its rental, environmental and other obligations under the Master Lease and on our business.
     On February 28, 2011, Lukoil, one of the largest integrated Russian oil companies, transferred its ownership interest in Marketing to Cambridge. We are not privy to the terms and conditions pertaining to this transaction between Lukoil and Cambridge. In connection with the transfer, we do not know what type or amount of consideration, if any, was paid or is payable by Lukoil or its subsidiaries to Cambridge, or by Cambridge to Lukoil or its subsidiaries. We do not know if there are any ongoing contractual or business relationships between Lukoil or its subsidiaries or affiliates and Cambridge or its subsidiaries or affiliates, including Marketing. We have commenced discussions with the new owners and management of Marketing, however, we cannot predict the impact the transfer of Marketing may have on our business.

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     While Lukoil had provided capital to Marketing in the past, there can be no assurance that Cambridge will provide financial support or will have the capacity to provide capital or financial support to Marketing in the future. It is possible that Marketing may file for bankruptcy protection and seek to reorganize or liquidate its business. It is also possible that Marketing may take other actions such as aggressively seeking to modify the terms of the Marketing Leases. We cannot predict what impact Lukoil’s transfer of its ownership interest to Cambridge will have on Marketing’s ability and willingness to perform its rental, environmental and other obligations under the Marketing Leases. If Marketing does not meet its rental, environmental and other obligations under the Marketing Leases, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected. It is possible that we may be required to increase or decrease the deferred rent receivable reserve, record additional impairment charges related to our properties, or accrue for environmental liabilities as a result of the potential or actual filing for bankruptcy protection by Marketing or any potential or actual modification or termination of the Marketing Leases. It is possible that as a result of material adjustments to the amounts recorded for certain of our assets and liabilities that we may not be in compliance with the financial covenants in our Credit Agreement or Term Loan Agreement.
We cannot predict what impact Marketing’s restructuring, dispute with Bionol and other changes in its business model will have on us.
     In November 2009, Marketing announced a restructuring of its business. Marketing disclosed that the restructuring included the sale of all assets unrelated to the properties it leases from us, the elimination of parent-guaranteed debt, and steps to reduce operating costs. Although Marketing’s press release stated that its restructuring included the sale of all assets unrelated to the properties it leases from us, we have concluded, based on the press releases related to the Marketing/Bionol contract dispute described below, that Marketing’s restructuring did not include the sale of all assets unrelated to the properties it leases from us. Marketing sold certain assets unrelated to the properties it leases from us to its affiliates, LUKOIL Pan Americas LLC and LUKOIL North America LLC. We believe that Marketing retained other assets, liabilities and business matters unrelated to the properties it leases from us. As part of the restructuring, Marketing paid off debt which had been guaranteed or held by Lukoil with proceeds from the sale of assets to Lukoil affiliates.
     In June 2010, Marketing and Bionol Clearfield LLC (“Bionol”) each issued press releases regarding a significant contractual dispute between them. Bionol owns and operates an ethanol plant in Pennsylvania. Bionol and Marketing entered into a five-year contract under which Marketing agreed to purchase substantially all of the ethanol production from the Bionol plant, at formula-based prices. Bionol stated that Marketing breached the contract by not paying the agreed-upon price for the ethanol. According to Bionol’s press release, the cumulative gross purchase commitment under the contract could be on the order of one billion dollars. Marketing stated in its press release that it continues to pay Bionol millions of dollars each month for the ethanol, withholding only the amount of the purchase price in dispute and that it has filed for arbitration to resolve the dispute. Among other items related to this matter, we do not know: (i) the accuracy of the statements made by Marketing and Bionol when made or if such statements reflect the current status of the dispute; (ii) the cumulative or projected amount of the purchase price in dispute and how Marketing has accounted for the ethanol contract in its financial statements; or (iii) how the formula-based price compares to the market price of ethanol. We cannot predict how the ultimate resolution of this matter may impact Marketing’s long-term financial performance and its ability to meet its rental, environmental and other obligations to us as they become due under the terms of the Marketing Leases.
     We cannot predict what impact Marketing’s restructuring, dispute with Bionol or other changes in its business model will have on us. If Marketing does not meet its rental, environmental and other obligations under the Marketing Leases, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
If it becomes probable that Marketing will not pay its environmental obligations, or if we change our assumptions for environmental liabilities related to the Marketing Leases we would be in default of our Credit Agreement or Term Loan Agreement, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price could be materially adversely affected.
     Marketing is directly responsible to pay for (i) remediation of environmental contamination it causes and compliance with various environmental laws and regulations as the operator of our properties, and (ii) known and unknown environmental liabilities allocated to Marketing under the terms of the Marketing Leases and various other agreements with us relating to Marketing’s business and the properties it leases from us (collectively the “Marketing Environmental Liabilities”). However, we continue to have ongoing environmental remediation obligations at 186 retail sites and for certain pre-existing conditions

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at six of the terminals we lease to Marketing. If Marketing fails to pay the Marketing Environmental Liabilities, we may ultimately be responsible to pay for Marketing Environmental Liabilities as the property owner. We do not maintain pollution legal liability insurance to protect us from potential future claims for Marketing Environmental Liabilities. We will be required to accrue for Marketing Environmental Liabilities if we determine that it is probable that Marketing will not meet its environmental obligations and we can reasonably estimate the amount of the Marketing Environmental Liabilities for which we will be responsible to pay, or if our assumptions regarding the ultimate allocation methods or share of responsibility that we used to allocate environmental liabilities changes. However, we continue to believe that it is not probable that Marketing will not pay for substantially all of the Marketing Environmental Liabilities. Accordingly, we have not accrued for the Marketing Environmental Liabilities. Nonetheless, we have determined that the aggregate amount of the Marketing Environmental Liabilities (as estimated by us) would be material to us if we were required to accrue for all of the Marketing Environmental Liabilities since as a result of such accrual, we would not be in compliance with the existing financial covenants in our Credit Agreement and our Term Loan Agreement. Such non-compliance would result in an event of default under the Credit Agreement and the Term Loan Agreement which, if not waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of all of our indebtedness under such agreements. It is possible that we may change our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, we may be required to accrue for Marketing Environmental Liabilities. If we determine that it is probable that Marketing will not meet the Marketing Environmental Liabilities and we accrue for such liabilities, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
     We estimate that, the aggregate Marketing Environmental Liabilities, net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay range between $13 million and $20 million, of which between $6 million and $9 million relate to the properties that we identified as the basis for our estimate of the deferred rent receivable reserve. Since we generally do not have access to certain site specific information available to Marketing, which is the party responsible for paying and managing its environmental remediation expenses at our properties, our estimates were developed in large part by review of the limited publically available information gathered through electronic databases and freedom of information requests and assumptions we made based on that data and on our own experiences with environmental remediation matters. The actual amounts of the ranges estimated above may differ materially from our estimates and we can provide no assurance as to the accuracy of these estimates.
If the Marketing Leases are modified significantly or terminated, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price could be materially adversely affected.
     From time to time when it was owned by Lukoil, we held discussions with representatives of Marketing regarding potential modifications to the Marketing Leases. These discussions did not result in a common understanding with Marketing that would form a basis for modification of the Marketing Leases. We have recently initiated discussions with the new owners and management of Marketing, subsequent to Lukoil’s transfer of its ownership interest in Marketing to Cambridge. It is possible that the new management of Marketing may aggressively seek to modify the terms of the Marketing Leases or seek to remove a substantial number of properties from the Marketing Leases. We intend to continue to pursue the removal of individual properties from the Marketing Leases, and we remain open to removal of groups of properties; however, there is no agreement in place providing for removal of properties from the Marketing Leases. If Marketing ultimately determines that its business strategy is to exit all or a portion of the properties it leases from us, it is our intention to cooperate with Marketing in accomplishing those objectives if we determine that it is prudent for us to do so. Any modification of the Marketing Leases that removes a significant number of properties from the Marketing Leases would likely significantly reduce the amount of rent we receive from Marketing and increase our operating expenses. We cannot accurately predict if, or when, the Marketing Leases will be modified; what composition of properties, if any, may be removed from the Marketing Leases as part of any such modification; or what the terms of any agreement for modification of the Marketing Leases may be. We also cannot accurately predict what actions Marketing may take, and what our recourse may be, whether the Marketing Leases are modified or not. We may be required to increase or decrease the deferred rent receivable reserve, record additional impairment charges related to our properties, or accrue for environmental liabilities as a result of the potential or actual modification or termination of the Marketing Leases.
     As permitted under the terms of the Marketing Leases, Marketing generally can, subject to any contrary terms under applicable third party leases, use each property for any lawful purpose, or for no purpose whatsoever. We believe that as of

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March 16, 2011, Marketing was not operating any of the nine terminals it leases from us and had removed, or has scheduled removal of, the underground gasoline storage tanks and related equipment at approximately 140 of our retail properties and we also believe that most of these properties are either vacant or provide negative contribution to Marketing’s results. In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, at the appropriate time we will seek an alternative tenant or buyer for such property. With respect to properties that are vacant or have had underground gasoline storage tanks and related equipment removed, it may be more difficult or costly to re-let or sell such properties as gas stations because of capital costs or possible zoning or permitting rights that are required and that may have lapsed during the period since gasoline was last sold at the property.
     We intend either to re-let or sell any properties that are removed from the Marketing Leases, whether such removal arises consensually by negotiation or as a result of default by Marketing, and reinvest any realized sales proceeds in new properties. We intend to offer properties removed from the Marketing Leases to replacement tenants or buyers individually, or in groups of properties, or by seeking a single tenant for the entire portfolio of properties subject to the Marketing Leases. In the event that properties are removed from the Marketing Leases, we cannot accurately predict if, when, or on what terms such properties could be re-let or sold. If the Marketing Leases are significantly modified or terminated, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
Although we periodically receive and review the unaudited financial statements and other financial information from Marketing, this information is not publicly available to investors. You will not have access to financial information about Marketing provided to us by Marketing to allow you to independently assess Marketing’s financial condition or its ability to satisfy its rental, environmental and other obligations under the Marketing Leases.
     We periodically receive and review Marketing’s unaudited financial statements and other financial information that we receive from Marketing pursuant to the terms of the Marketing Leases. However, the financial statements and other financial information are not publicly available to investors and Marketing contends that the terms of the Marketing Leases prohibit us from including the financial statements and other financial information in our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q or in our Annual Reports to Shareholders. The Marketing Leases provide that Marketing’s financial information which is not publicly available shall be delivered to us within one hundred fifty days after the end of each fiscal year. As of the date of this Form 10-K, we have not yet received Marketing’s unaudited consolidated financial statements for the year ended December 31, 2010. The financial statements and other financial information that we receive from Marketing is unaudited and neither we, nor our auditors, have been involved with its preparation and as a result have no assurance as to its correctness or completeness. You will not have access to financial statements and other financial information about Marketing provided to us by Marketing to allow you to independently assess Marketing’s financial condition or its ability to satisfy its rental, environmental and other obligations under the Marketing Leases, which may put your investment in us at greater risk of loss.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations, and they require management to make estimates, judgments and assumptions about matters that are inherently uncertain.
     Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations. We have identified several accounting policies as being critical to the presentation of our financial position and results of operations because they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be recorded under different conditions or using different assumptions. Because of the inherent uncertainty of the estimates, judgments and assumptions associated with these critical accounting policies, we cannot provide any assurance that we will not make subsequent significant adjustments to our consolidated financial statements. Estimates, judgments and assumptions underlying our consolidated financial statements include, but are not limited to, deferred rent receivable, income under direct financing leases, recoveries from state UST funds, environmental remediation costs, real estate including impairment charges related to the reduction in market value of our real estate, depreciation and amortization, impairment of long-lived assets, litigation, accrued expenses, income taxes and the allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed.
     For example, we have made judgments regarding the level of environmental reserves and reserves for our deferred rent receivable relating to Marketing and the Marketing Leases and leases with our other tenants. As of December 31, 2010, the

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net carrying value of the deferred rent receivable attributable to the Marketing Leases was $21.2 million and the aggregate Marketing Environmental Liabilities, net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay but not have accrued range between $13 million and $20 million. The actual amount of the Marketing Environmental Liabilities may differ from our estimated range and we can provide no assurance as to the accuracy of our estimate. Although our 2010 financial statements were not affected by the transfer of Lukoil’s ownership interest in Marketing to Cambridge, our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plans, strategies, operating results and its capital resources. It is possible that we may be required to increase or decrease our deferred rent receivable reserve, record additional impairment charges related to our properties, or accrue for Marketing Environmental Liabilities as a result of changes in our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases that affect the amounts reported in our financial statements. It is possible that as a result of material adjustments to the amounts recorded for certain of our assets and liabilities that we may not be in compliance with the financial covenants in our Credit Agreement or Term Loan Agreement.
     If our judgments, assumptions and allocations prove to be incorrect, or if circumstances change, our business, financial condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected. (For information regarding our critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies”.)
We may acquire or develop new properties, and this may create risks.
     We may acquire or develop properties or acquire other real estate companies when we believe that an acquisition or development matches our business strategies. These properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential. It is possible that the operating performance of these properties may decline after we acquire them, they may not perform as expected and, if financed using debt or new equity issuances, may result in shareholder dilution. Our acquisitions of new properties will also expose us to the liabilities of those properties, some of which we may not be aware of at the time of acquisition. We face competition in pursuing these acquisitions and we may not succeed in leasing newly developed or acquired properties at rents sufficient to cover their costs of acquisition or development and operations. Newly acquired properties may require significant management attention that would otherwise be devoted to our ongoing business. We may not succeed in consummating desired acquisitions or in completing developments on time or within our budget. Consequences arising from or in connection with any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
While we seek to grow through accretive acquisitions, acquisitions of properties may be dilutive and may not produce the returns that we expect and we may not be able to successfully integrate acquired properties into our portfolio or manage our growth effectively, which could have a material adverse effect on our results of operations, financial condition and growth prospects.
     One or more acquisition of properties may initially be dilutive to our net income, and acquired properties may not perform as we expect or produce the returns that we anticipate (including, without limitation, as a result of tenant bankruptcies, tenant concessions, our inability to collect rents and higher than anticipated operating expenses). Further, we may not successfully integrate one or more of these property acquisitions into our existing portfolio without operating disruptions or unanticipated costs. Additionally, as we increase the size of our portfolio, we may not be able to adapt our management, administrative, accounting and operational systems, or hire and retain sufficient operational staff to integrate acquired properties into our portfolio or manage any future acquisitions of properties without operating disruptions or unanticipated costs. Moreover, the continued growth of our portfolio will require increased investment in management personnel, professional fees, other personnel, financial and management systems and controls and facilities, which will result in additional operating expenses. Under the circumstances described above, our results of operations, financial condition and growth prospects may be materially and adversely affected.
We are subject to risks inherent in owning and leasing real estate.
     We are subject to varying degrees of risk generally related to leasing and owning real estate many of which are beyond our control. In addition to general risks related to owning properties used in the petroleum marketing industry, our risks include, among others:

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  our liability as a lessee for long-term lease obligations regardless of our revenues,
 
  deterioration in national, regional and local economic and real estate market conditions,
 
  potential changes in supply of, or demand for, rental properties similar to ours,
 
  competition for tenants and declining rental rates,
 
  difficulty in selling or re-letting properties on favorable terms or at all,
 
  impairments in our ability to collect rent payments when due,
 
  increases in interest rates and adverse changes in the availability, cost and terms of financing,
 
  the potential for uninsured casualty and other losses due to natural disasters or other causes,
 
  the impact of present or future environmental legislation and compliance with environmental laws,
 
  adverse changes in zoning laws and other regulations, and
 
  acts of terrorism and war.
     Each of these factors could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. In addition, real estate investments are relatively illiquid, which means that our ability to vary our portfolio of properties in response to changes in economic and other conditions may be limited.
Adverse developments in general business, economic, or political conditions could have a material adverse effect on us.
     Adverse developments in general business and economic conditions, including through recession, downturn or otherwise, either in the economy generally or in those regions in which a large portion of our business is conducted, could have a material adverse effect on us and significantly increase certain of the risks we are subject to. The general economic conditions in the United States are, and for an extended period of time may be, significantly less favorable than that of prior years. Among other effects, adverse economic conditions could depress real estate values, impact our ability to re-let or sell our properties and have an adverse effect on our tenants’ level of sales and financial performance generally. Our revenues are dependent on the economic success of our tenants and any factors that adversely impact our tenants could also have a material adverse effect on our business, financial condition and results of operations liquidity, ability to pay dividends or stock price.
Substantially all of our tenants depend on the same industry for their revenues.
     We derive substantially all of our revenues from leasing, primarily on a triple-net basis, retail motor fuel and convenience store properties and petroleum distribution terminals to tenants in the petroleum marketing industry. Accordingly, our revenues will be dependent on the economic success of the petroleum marketing industry, and any factors that adversely affect that industry, such as disruption in the supply of petroleum or a decrease in the demand for conventional motor fuels due to conservation, technological advancements in petroleum-fueled motor vehicles, or an increase in the use of alternative fuel vehicles, or “green technology” could also have a material adverse effect on our business, financial condition and results of operations liquidity, ability to pay dividends or stock price. The success of participants in the petroleum marketing industry depends upon the sale of refined petroleum products at margins in excess of fixed and variable expenses. The petroleum marketing industry is highly competitive and volatile. Petroleum products are commodities, the prices of which depend on numerous factors that affect supply and demand. The prices paid by our tenants and other petroleum marketers for products are affected by global, national and regional factors. A large, rapid increase in wholesale petroleum prices would adversely affect the profitability and cash flows of our tenants if the increased cost of petroleum products could not be passed on to their customers or if automobile consumption of gasoline was to decline significantly. We cannot be certain how these factors will affect petroleum product prices or supply in the future, or how in particular they will affect our tenants.

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Our future cash flow is dependent on the performance of our tenants of their lease obligations, renewal of existing leases and either re-letting or selling our vacant properties.
     We are subject to risks that financial distress, default or bankruptcy of our existing tenants may lead to vacancy at our properties or disruption in rent receipts as a result of partial payment or nonpayment of rent or that expiring leases may not be renewed. Under unfavorable general economic conditions, there can be no assurance that our tenants’ level of sales and financial performance generally will not be adversely affected, which in turn, could impact the reliability of our rent receipts. We are subject to risks that the terms governing renewal or re-letting of our properties (including the cost of required renovations, replacement of gasoline tanks and related equipment or environmental remediation) may be less favorable than current lease terms, or that the values of our properties that we sell may be adversely affected by unfavorable general economic conditions. Unfavorable general economic conditions may also negatively impact our ability to re-let or sell our properties. Numerous properties compete with our properties in attracting tenants to lease space. The number of available or competitive properties in a particular area could have a material adverse effect on our ability to lease or sell our properties and on the rents we are able to charge. In addition to the risk of disruption in rent receipts, we are subject to the risk of incurring real estate taxes, maintenance, environmental and other expenses at vacant properties.
     The financial distress, default or bankruptcy of our tenants may also lead to protracted and expensive processes for retaking control of our properties than would otherwise be the case, including, eviction or other legal proceedings related to or resulting from the tenant’s default. These risks are greater with respect to certain of our tenants who lease multiple properties from us, such as Marketing. It is possible that Marketing may file for bankruptcy protection and seek to reorganize or liquidate its business. (For additional information regarding the portion of our financial results that are attributable to Marketing, see Note 11 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements.” For additional information with respect to concentration of tenant risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.) If a tenant files for bankruptcy protection it is possible that we would recover substantially less than the full value of our claims against the tenant.
     If our tenants do not perform their lease obligations; or we are unable to renew existing leases and promptly recapture and re-let or sell vacant locations; or if lease terms upon renewal or re-letting are less favorable than current lease terms; or if the values of properties that we sell are adversely affected by market conditions; or if we incur significant costs or disruption related to or resulting from tenant financial distress, default or bankruptcy; then our cash flow could be significantly adversely affected.
Property taxes on our properties may increase without notice.
     Each of the properties we own or lease is subject to real property taxes. The leases for certain of the properties that we lease from third parties obligate us to pay real property taxes with regard to those properties. The real property taxes on our properties and any other properties that we develop, acquire or lease in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. To the extent that our tenants are unable or unwilling to pay such increase in accordance with their leases, our net operating expenses may increase.
We incur significant operating costs as a result of environmental laws and regulations which costs could significantly rise and reduce our profitability.
     We are subject to numerous existing federal, state and local laws and regulations, including matters relating to the protection of the environment. Under certain environmental laws, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances or petroleum products at, on, or under, such property, and may be required to investigate and clean-up such contamination. Such laws typically impose liability and clean-up responsibility without regard to whether the owner or operator knew of or caused the presence of the contaminants, or the timing or cause of the contamination, and the liability under such laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. For example, liability may arise as a result of the historical use of a property or from the migration of contamination from adjacent or nearby properties. Any such contamination or liability may also reduce the value of the property. In addition, the owner or operator of a property may be subject to claims by third parties based on injury, damage and/or costs, including investigation and clean-up costs, resulting from environmental contamination present at or emanating from a property. The properties owned or controlled by us are leased primarily as retail motor fuel and convenience store properties, and therefore may

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contain, or may have contained, USTs for the storage of petroleum products and other hazardous or toxic substances, which creates a potential for the release of such products or substances. Some of our properties may be subject to regulations regarding the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment. Some of the properties may be adjacent to or near properties that have contained or currently contain USTs used to store petroleum products or other hazardous or toxic substances. In addition, certain of the properties are on, adjacent to, or near properties upon which others have engaged or may in the future engage in activities that may release petroleum products or other hazardous or toxic substances. There may be other environmental problems associated with our properties of which we are unaware. These problems may make it more difficult for us to re-let or sell our properties on favorable terms, or at all.
     For additional information with respect to pending environmental lawsuits and claims, environmental remediation costs and estimates, and Marketing and the Marketing Leases see “Item 3. Legal Proceedings”, “Environmental Matters” and “General — Marketing and the Marketing Leases” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 5 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” each of which is incorporated by reference herein.
     We enter into leases and various other agreements which allocate responsibility for known and unknown environmental liabilities by establishing the percentage and method of allocating responsibility between the parties. Our tenants are directly responsible to pay for (i) remediation of environmental contamination they cause and compliance with various environmental laws and regulations as the operators of our properties, and (ii) environmental liabilities allocated to them under the terms of our leases and various other agreements. Generally, the liability for the retirement and decommissioning or removal of USTs and other equipment is the responsibility of our tenants. We are contingently liable for these obligations in the event that our tenants do not satisfy their responsibilities. A liability has not been accrued for obligations that are the responsibility of our tenants based on our tenants’ past histories of paying such obligations and/or our assessment of their respective financial abilities to pay their share of such costs. 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.
     As of December 31, 2010, we had accrued $10.9 million as management’s best estimate of the net fair value of reasonably estimable environmental remediation costs which was comprised of $14.9 million of estimated environmental obligations and liabilities offset by $4.0 million of estimated recoveries from state UST remediation funds, net of allowance. Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent 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, as well as the time it takes to remediate contamination. In developing our liability for probable and reasonably estimable environmental remediation costs on a property by property basis, we consider among other things, enacted laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as environmental contingencies become more clearly defined and reasonably estimable. Adjustments to accrued liabilities for environmental remediation costs will be reflected in our financial statements as they become probable and a reasonable estimate of fair value can be made.
     We have not accrued for approximately $1.0 million in costs incurred by the current property owner in connection with removal of USTs and soil remediation at a property that was leased to and operated by Marketing. We believe that Marketing is responsible for such costs under the terms of the Master Lease, and on that basis we tendered the matter to Marketing for defense and indemnification, but Marketing denied its liability for claims and its responsibility to defend and indemnify us. We were sued by the current property owner and filed third party claims against Marketing for indemnification. The property owner’s claim for reimbursement of costs incurred and our claim for indemnification from Marketing were actively litigated leading to a trial held before a judge. The trial court issued its decision in August 2009 under which the company and Marketing were held jointly and severally responsible to the current property owner for the costs incurred by the owner to remove USTs and remediate contamination at the site, but, as between the company and Marketing, Marketing was held accountable for such costs under the indemnification provisions of the Master Lease. Marketing has appealed the decision; however, we believe the probability that the trial court decision will be reversed or remanded and that Marketing will not ultimately be held responsible for the clean-up costs incurred by the current property owner is remote.
     It is possible that our assumptions regarding the ultimate allocation methods and share of responsibility that we used to allocate environmental liabilities may change, which may result in adjustments to the amounts recorded for environmental

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litigation accruals, environmental remediation liabilities and related assets. We will be required to accrue for environmental liabilities that we believe are allocable to others under various other agreements if we determine that it is probable that the counter-party will not meet its environmental obligations. We may ultimately be responsible to pay for environmental liabilities as the property owner if the counterparty fails to pay them.
     We cannot predict what environmental legislation or regulations may be enacted in the future, or if or how existing laws or regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied. We cannot predict whether state UST fund programs will be administered and funded in the future in a manner that is consistent with past practices and if future environmental spending will continue to be eligible for reimbursement at historical recovery rates under these programs. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws which may develop in the future, could have an adverse effect on our financial position, or that of our tenants, and could require substantial additional expenditures for future remediation.
     As a result of the factors discussed above, or others, compliance with environmental laws and regulations could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
We are defending pending lawsuits and claims and are subject to material losses.
     We are subject to various lawsuits and claims, including litigation related to environmental matters, such as those arising from leaking USTs and releases of motor fuel into the environment, and toxic tort claims. The ultimate resolution of certain matters cannot be predicted because considerable uncertainty exists both in terms of the probability of loss and the estimate of such loss. Our ultimate liabilities resulting from such lawsuits and claims, if any, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. For additional information with respect to pending environmental lawsuits and claims and environmental remediation costs and estimates see “Item 3. Legal Proceedings” and “Environmental Matters” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 3 and 5 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” each of which is incorporated by reference herein.
A significant portion of our properties are concentrated in the Northeast and Mid-Atlantic regions of the United States, and adverse conditions in those regions, in particular, could negatively impact our operations.
     A significant portion of the properties we own and lease are located in the Northeast and Mid-Atlantic regions of the United States. Because of the concentration of our properties in those regions, in the event of adverse economic conditions in those regions, we would likely experience higher risk of default on payment of rent to us (including under the Marketing Leases) than if our properties were more geographically diversified. Additionally, the rents on our properties may be subject to a greater risk of default than other properties in the event of adverse economic, political, or business developments or natural hazards that may affect the Northeast or Mid-Atlantic United States and the ability of our lessees to make rent payments. This lack of geographical diversification could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
We are in a competitive business.
     The real estate industry is highly competitive. Where we own properties, we compete for tenants with a large number of real estate property owners and other companies that sublet properties. Our principal means of competition are rents we are able to charge in relation to the income producing potential of the location. In addition, we expect other major real estate investors, some with much greater financial resources or more experienced personnel than we have, will compete with us for attractive acquisition opportunities. These competitors include petroleum manufacturing, distributing and marketing companies, other REITs, investment banking firms and private institutional investors. This competition has increased prices for properties we seek to acquire and may impair our ability to make suitable property acquisitions on favorable terms in the future.

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We are exposed to counterparty credit risk and there can be no assurances that we will effectively manage or mitigate this risk .
     We regularly interact with counterparties in various industries. The types of counterparties most common to our transactions and agreements include, but are not limited to, landlords, tenants, vendors and lenders. Our most significant counterparties include, but are not limited to, Marketing as our primary tenant, the members of the Bank Syndicate that are counterparties to our Credit Agreement as our primary source of financing and JPMorgan Chase as the counterparty to our interest rate Swap Agreement. The default, insolvency or other inability of a significant counterparty to perform its obligations under an agreement or transaction, including, without limitation, as a result of the rejection of an agreement or transaction in bankruptcy proceedings, could have a material adverse effect on us. (For additional information with respect to, and definitions of, the Bank Syndicate, the Credit Agreement and the Swap Agreement, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risks”.)
We are subject to losses that may not be covered by insurance.
     Marketing, and other tenants, as the lessees of our properties, are required to provide insurance for such properties, including casualty, liability, fire and extended coverage in amounts and on other terms as set forth in our leases. We do not maintain pollution legal liability insurance to protect the Company from potential future claims for environmental contamination, including the environmental liabilities that are the responsibility of our tenants. We carry insurance against certain risks and in such amounts as we believe are customary for businesses of our kind. However, as the costs and availability of insurance change, we may decide not to be covered against certain losses (such as certain environmental liabilities, earthquakes, hurricanes, floods and civil disorder) where, in the judgment of management, the insurance is not warranted due to cost or availability of coverage or the remoteness of perceived risk. There is no assurance that our insurance coverages are or will be sufficient to cover actual losses incurred. The destruction of, or significant damage to, or significant liabilities arising out of conditions at, our properties due to an uninsured cause would result in an economic loss and could result in us losing both our investment in, and anticipated profits from, such properties. When a loss is insured, the coverage may be insufficient in amount or duration, or a lessee’s customers may be lost, such that the lessee cannot resume its business after the loss at prior levels or at all, resulting in reduced rent or a default under its lease. Any such loss relating to a large number of properties could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Failure to qualify as a REIT under the federal income tax laws would have adverse consequences to our shareholders.
     We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. We cannot, however, guarantee that we will continue to qualify in the future as a REIT. We cannot give any assurance that new legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements relating to our qualification. If we fail to qualify as a REIT, we would not be allowed a deduction for distributions to shareholders in computing our taxable income and will again be subject to federal income tax at regular corporate rates, we could be subject to the federal alternative minimum tax, we could be required to pay significant income taxes and we would have less money available for our operations and distributions to shareholders. This would likely have a significant adverse effect on the value of our securities. We could also be precluded from treatment as a REIT for four taxable years following the year in which we lost the qualification, and all distributions to shareholders would be taxable as regular corporate dividends to the extent of our current and accumulated earnings and profits. Loss of our REIT status would result in an event of default that, if not cured or waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of all of our indebtedness under our Credit Agreement and Term Loan Agreement which could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.

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We are dependent on external sources of capital which may not be available on favorable terms, or at all.
     We are dependent on external sources of capital to maintain our status as a REIT and must distribute to our shareholders each year at least ninety percent of our net taxable income, excluding any net capital gain. Because of these distribution requirements, it is not likely that we will be able to fund all future capital needs, including acquisitions, from income from operations. Therefore, we will have to continue to rely on third-party sources of capital, which may or may not be available on favorable terms, or at all. As part of our overall growth strategy we regularly review opportunities to acquire additional properties and we expect to continue to pursue acquisitions that we believe will benefit our financial performance. To the extent that our current sources of liquidity are not sufficient to fund such acquisitions we will require other sources of capital, which may or may not be available on favorable terms or at all. Other sources of capital may significantly increase our interest rate risk or adversely impact how we manage our interest rate risk. We cannot accurately predict how periods of illiquidity in the credit markets will impact our access to or cost of capital. In addition, additional equity offerings may result in substantial dilution of shareholders’ interests, and additional debt financing may substantially increase our leverage. Our access to third-party sources of capital depends upon a number of factors including general market conditions, the market’s perception of our growth potential, our current and potential future earnings and cash distributions, covenants and limitations imposed under our Credit Agreement and our Term Loan Agreement and the market price of our common stock.
     If one or more of the financial institutions that supports our Credit Agreement fails, we may not be able to find a replacement, which would negatively impact our ability to borrow under our the Credit Agreement. We may not be able to refinance our outstanding debt under the Credit Agreement when due in March 2012 or under the Term Loan when due in September 2012, which could have a material adverse effect on us.
     Our ability to meet the financial and other covenants relating to our Credit Agreement and our Term Loan Agreement may be dependent on the performance of our tenants, including Marketing. Should our assessments, assumptions and beliefs that affect our accounting prove to be incorrect, or if circumstances change, we may have to materially adjust the amounts recorded in our financial statements for certain assets and liabilities, and, as a result, we may not be in compliance with the financial covenants in our Credit Agreement and our Term Loan Agreement. We have determined that the aggregate amount of the Marketing Environmental Liabilities (as estimated by us, based on our assumptions and analysis of information currently available to us described in more detail above) would be material to us if we were required to accrue for all of the Marketing Environmental Liabilities since as a result of such accrual, we would not be in compliance with the existing financial covenants in our Credit Agreement and our Term Loan Agreement. (For additional information with respect to The Marketing Environmental Liabilities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.) If we are not in compliance with one or more of our covenants which if not complied with could result in an event of default under our Credit Agreement or our Term Loan Agreement, there can be no assurance that our lenders would waive such non-compliance. An event of default if not cured or waived would increase by 2.0% the interest rate we pay under our Credit Agreement. A default under our Credit Agreement or our Term Loan Agreement, if not cured or waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of all of our indebtedness under such agreements. We may be unable to fulfill our commitments to complete pending acquisitions and incur monetary losses or damage our reputation if we cannot draw sufficient funds against the Credit Agreement. This could have a material adverse affect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
The downturn in the credit markets has increased the cost of borrowing and has made financing difficult to obtain, which may negatively impact our business, and may have a material adverse effect on us. Lenders may require us to enter into more restrictive covenants relating to our operations.
     During 2007, the United States housing and residential lending markets began to experience accelerating default rates, declining real estate values and increasing backlog of housing supply. The residential sector issues quickly spread more broadly into the corporate, asset-backed and other credit and equity markets and the volatility and risk premiums in most credit and equity markets have increased dramatically, while liquidity has decreased. These issues continued throughout 2010 and into the beginning of 2011. Increasing concerns regarding the United States and world economic outlook, such as large asset write-downs at banks, volatility in oil prices, declining business and consumer confidence and increased unemployment and bankruptcy filings, are compounding these issues and risk premiums in most capital markets remain at elevated levels. These factors are precipitating generalized credit market dislocations and a significant contraction in available credit. As a result, it is more difficult to obtain cost-effective debt capital to finance new investment activity or to refinance maturing

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debt, and most lenders are imposing more stringent restrictions on the terms of credit. Any future credit agreements or loan documents we execute may contain additional or more restrictive covenants. The negative impact on the tightening of the credit markets and continuing credit and liquidity concerns could have negative effects on our business such as (i) we could have difficulty in acquiring or developing properties, which would adversely affect our business strategy, (ii) our liquidity could be adversely affected, (iii) we may be unable to repay or refinance our indebtedness or (iv) we may need to make higher interest and principal payments or sell some of our assets on unfavorable terms to fund our liquidity needs. These negative effects may cause other material adverse effects on our business, financial condition, results of operations, ability to pay dividends or stock price. Additionally, there is no assurance that the increased financing costs, financing with increasingly restrictive terms or the increase in risk premiums that are demanded by investors will not have a material adverse effect on us.
Our business operations may not generate sufficient cash for distributions or debt service.
     There is no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock, to pay our indebtedness, or to fund our other liquidity needs. We may not be able to repay or refinance existing indebtedness on favorable terms, which could force us to dispose of properties on disadvantageous terms (which may also result in losses) or accept financing on unfavorable terms.
We are exposed to interest rate risk and there can be no assurances that we will manage or mitigate this risk effectively.
     We are exposed to interest rate risk, primarily as a result of our $175.0 million Credit Agreement and our $25.0 million Term Loan Agreement. Borrowings under our Credit Agreement and our Term Loan Agreement bear interest at a floating rate. Accordingly, an increase in interest rates will increase the amount of interest we must pay under our Credit Agreement and our Term Loan Agreement. A significant increase in interest rates could also make it more difficult to find alternative financing on desirable terms. We have entered into an interest rate Swap Agreement with a major financial institution which expires in June 2011 with respect to a portion of our variable rate debt outstanding under our Credit Agreement and our Term Loan agreement. We are, and will be, exposed to interest rate risk to the extent that our aggregate borrowings floating at market rates exceed the $45.0 million notional amount of the Swap Agreement. We will be fully exposed to interest rate risk on our aggregate borrowings floating at market rates upon expiration of the Swap Agreement in June 2011 unless we enter into another swap agreement. Although the Swap Agreement is intended to lessen the impact of rising interest rates, it also exposes us to the risk that the other party to the agreement will not perform, the agreement will be unenforceable and the underlying transactions will fail to qualify as a highly-effective cash flow hedge for accounting purposes. Further, there can be no assurance that the use of an interest rate swap will always be to our benefit. While the use of an interest rate Swap Agreement is intended to lessen the adverse impact of rising interest rates, it also conversely limits the positive impact that could be realized from falling interest rates with respect to the portion of our variable rate debt covered by the interest rate Swap Agreement. (For additional information with respect to interest rate risk, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risks”.)
We may be unable to pay dividends.
     Under the Maryland General Corporation Law, our ability to pay dividends would be restricted if, after payment of the dividend, (1) we would not be able to pay indebtedness as it becomes due in the usual course of business or (2) our total assets would be less than the sum of our liabilities plus the amount that would be needed, if we were to be dissolved, to satisfy the rights of any shareholders with liquidation preferences. There currently are no shareholders with liquidation preferences. No assurance can be given that our financial performance in the future will permit our payment of any dividends at the level historically paid, if at all. (For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.) In particular, our Credit Agreement and our Term Loan Agreement prohibit the payments of dividends during certain events of default. As a result of the factors described above, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, stock price and ability to pay dividends.

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We may change the dividend policy of our common stock in the future.
     The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Directors and will depend on such factors as the Board of Directors deems relevant and the dividend paid may vary from expected amounts. No assurance can be given that our financial performance in the future will permit our payment of any dividends at the level historically paid, if at all. (For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.) Any change in our dividend policy could adversely affect our business and the market price of our common stock. A recent Internal Revenue Service (“IRS”) revenue procedure allows us to satisfy the REIT income distribution requirement by distributing up to 90% of our dividends on our common stock in shares of our common stock in lieu of paying dividends entirely in cash. Although we reserve the right to utilize this procedure in the future, we currently have no intent to do so. In the event that we pay a portion of a dividend in shares of our common stock, taxable U.S. shareholders would be required to pay tax on the entire amount of the dividend, including the portion paid in shares of common stock, in which case such shareholders might have to pay the tax using cash from other sources. If a U.S. shareholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividend, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our shareholders sell shares of our common stock in order to pay taxes owed on dividends, such sales would put downward pressure on the market price of our common stock.
Changes in market conditions could adversely affect the market price of our publicly traded common stock.
     As with other publicly traded securities, the market price of our publicly traded common stock depends on various market conditions, which may change from time-to-time. Among the market conditions that may affect the market price of our publicly traded common stock are the following:
    our financial condition and performance and that of our significant tenants, including Marketing (for additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.);
 
    the market’s perception of our growth potential and potential future earnings;
 
    the reputation of REITs generally and the reputation of REITs with portfolios similar to us;
 
    the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);
 
    an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for publicly traded securities;
 
    the extent of institutional investor interest in us; and
 
    general economic and financial market conditions.
In order to preserve our REIT status, our charter limits the number of shares a person may own, which may discourage a takeover that could result in a premium price for our common stock or otherwise benefit our stockholders.
     Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT for federal income tax purposes. Unless exempted by our board of directors, no person may actually or constructively own more than 5% (by value or number of shares, whichever is more restrictive) of the outstanding shares of our common stock or the outstanding shares of any class or series of our preferred stock, which may inhibit large investors from desiring to purchase our stock. This restriction may have the effect of delaying, deferring, or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock or otherwise be in the best interest of our stockholders.
Maryland law may discourage a third party from acquiring us.
     We are subject to the provisions of Maryland Business Combination Act (the “Business Combination Act”) which prohibits transactions between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder for 5 (five) years after the most recent date on which the interested stockholder becomes an interested

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stockholder. Generally, pursuant to the Business Combination Act, an “interested stockholder” is a person who, together with affiliates and associates, beneficially owns, directly or indirectly, 10% or more of a Maryland corporation’s voting stock. These provisions could have the effect of delaying, preventing or deterring a change in control of our company or reducing the price that certain investors might be willing to pay in the future for shares of our capital stock. Additionally, the Maryland Control Share Acquisition Act may deny voting rights to shares involved in an acquisition of one-tenth or more of the voting stock of a Maryland corporation. In our charter and bylaws, we have elected not to have the Maryland Control Share Acquisition Act apply to any acquisition by any person of shares of stock of our company. However, in the case of the control share acquisition statute, our board of directors may opt to make this statute applicable to us at any time by amending our bylaws, and may do so on a retroactive basis. Finally, the “unsolicited takeovers” provisions of the Maryland General Corporation Law permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain provisions that may have the effect of inhibiting a third party from making an acquisition proposal for our Company or of delaying, deferring or preventing a change in control of our Company under circumstances that otherwise could provide the holders of our common stocks with the opportunity to realize a premium over the then current market price or that stockholders may otherwise believe is in their best interests.
Inflation may adversely affect our financial condition and results of operations.
     Although inflation has not materially impacted our results of operations in the recent past, increased inflation could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation. Likewise, even though our triple-net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue, which may adversely affect the tenants’ ability to pay rent.
The loss of certain members of our management team could adversely affect our business.
     We depend upon the skills and experience of our executive officers. Loss of the services of any of them could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. Except for the employment agreement with our President and Chief Executive Officer, David Driscoll, we do not have employment agreements with any of our executives.
Amendments to the Accounting Standards Codification made by the Financial Accounting Standards Board (the “FASB”) or changes in accounting standards issued by other standard-setting bodies may adversely affect our reported revenues, profitability or financial position.
     Our financial statements are subject to the application of GAAP in accordance with the Accounting Standards Codification, which is periodically amended by the FASB. The application of GAAP is also subject to varying interpretations over time. Accordingly, we are required to adopt amendments to the Accounting Standards Codification or comply with revised interpretations that are issued from time-to-time by recognized authoritative bodies, including the FASB and the SEC. Those changes could adversely affect our reported revenues, profitability or financial position.
Terrorist attacks and other acts of violence or war may affect the market on which our common stock trades, the markets in which we operate, our operations and our results of operations.
     Terrorist attacks or other acts of violence or war could affect our business or the businesses of our tenants or of Marketing or its parent. The consequences of armed conflicts are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. Terrorist attacks also could be a factor resulting in, or a continuation of, an economic recession in the United States or abroad. Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Item 1B.   Unresolved Staff Comments
     NONE

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Item 2. Properties
     Nearly all of our properties are leased or sublet to petroleum distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products and automotive repair services who are responsible for managing the operations conducted at these properties and for the payment of taxes, maintenance, repair, insurance and other operating expenses relating to our properties. In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, we will seek an alternative tenant or buyer for the property. We lease or sublet approximately 20 of our properties under similar lease terms primarily for uses such as fast food restaurants, automobile sales and other retail purposes.
     The following table summarizes the geographic distribution of our properties at December 31, 2010. The table also identifies the number and location of properties we lease from third-parties and which Marketing leases from us under the Marketing Leases. In addition, we lease 5,800 square feet of office space at 125 Jericho Turnpike, Jericho, New York, which is used for our corporate headquarters, which we believe will remain suitable and adequate for such purposes for the immediate future.
                                                 
    OWNED BY GETTY REALTY     LEASED BY GETTY REALTY     TOTAL     PERCENT  
    MARKETING     OTHER     MARKETING     OTHER     PROPERTIES     OF TOTAL  
    AS TENANT (1)     TENANTS     AS TENANT     TENANTS     BY STATE     PROPERTIES  
New York (2)
    233       33       55       6       327       31.0 %
Massachusetts
    127       1       17             145       13.8  
New Jersey
    106       6       18       6       136       12.9  
Pennsylvania
    103       7       1       4       115       10.9  
Connecticut
    60       27       12       11       110       10.4  
Maryland
    4       40             2       46       4.4  
New Hampshire
    25       3       3             31       2.9  
Virginia
    3       24       3       1       31       2.9  
Maine
    18       1       2             21       2.0  
Rhode Island
    15       1       2             18       1.7  
Texas
          17                   17       1.6  
Hawaii
          10                   10       1.0  
North Carolina
          10                   10       1.0  
California
          8             1       9       0.9  
Delaware
    8             1             9       0.9  
Florida
          6                   6       0.6  
Ohio
          4                   4       0.4  
Arkansas
          3                   3       0.3  
Illinois
          2                   2       0.2  
North Dakota
          1                   1       0.1  
Vermont
    1                         1       0.1  
 
                                   
Total
    703       204       114       31       1,052       100.0 %
 
                                   
 
(1)   Includes nine terminal properties owned in New York, New Jersey, Connecticut and Rhode Island.
 
(2)   Excludes 45 fee owned and 14 leased properties acquired in January 2011 which are leased to a single tenant.

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     The properties that we lease from third-parties have a remaining lease term, including renewal option terms, averaging over 11 years. The following table sets forth information regarding lease expirations, including renewal and extension option terms, for properties that we lease from third parties:
                         
            PERCENT        
    NUMBER OF     OF TOTAL     PERCENT  
    LEASES     LEASED     OF TOTAL  
CALENDAR YEAR   EXPIRING     PROPERTIES     PROPERTIES  
                   
2011
    9       6.21 %     0.86 %
2012
    13       8.96       1.24  
2013
    4       2.76       0.38  
2014
    3       2.07       0.28  
2015
    7       4.83       0.66  
 
                 
Subtotal
    36       24.83       3.42  
Thereafter
    109       75.17       10.36  
 
                 
Total
    145       100.00 %     13.78 %
 
                 
     We have rights-of-first refusal to purchase or lease 114 of the properties we lease from third-parties. Approximately 65% of the properties we lease from third-parties are subject to automatic renewal or extension options.
     For the year ended December 31, 2010 we received $86.9 million of lease payments with respect to 1,062 average rental properties held during the year or an average annual rent received of approximately $82,000 per rental property. For the year ended December 31, 2009 we received $82.8 million of lease payments with respect to 1,061 average rental properties held during the year or an average annual rent received of approximately $78,000 per rental property.
     Rental unit expirations and the annualized contracted rent as of December 31, 2010 are as follows (in thousands, except for the number of rental units data):
                                         
            ANNUALIZED CONTRACTUAL RENT (a)  
    NUMBER OF                             PERCENTAGE  
    RENTAL                             OF TOTAL  
    UNITS             OTHER             ANNUALIZED  
CALENDAR YEAR   EXPIRING (b)     MARKETING     TENANTS     TOTAL     RENT  
     
2011
    23     $ 929     $ 289     $ 1,218       1.42 %
2012
    35       1,723       575       2,298       2.67  
2013
    16       640       904       1,544       1.80  
2014
    22       729       1,440       2,169       2.52  
2015
    776       56,174       281       56,455       65.65  
2016
    4             332       332       0.39  
2017
    4             452       452       0.53  
2018
    9             1,156       1,156       1.34  
2019
    56             5,287       5,287       6.15  
2020
    32             3,810       3,810       4.43  
Thereafter
    81             11,269       11,269       13.10  
 
                             
Total
    1,058     $ 60,195     $ 25,795     $ 85,990       100.00 %
 
                             
 
(a)   Represents the monthly contractual rent due from tenants under existing leases as of December 31, 2010 multiplied by 12. This amount excludes real estate tax reimbursements which are billed to the tenant when paid.
 
(b)   Rental units include properties subdivided into multiple premises with separate tenants. Rental units also include individual properties comprising a single “premises” as such term is defined under a unitary master lease related to such properties. With respect to a unitary master lease that includes properties that we lease from third parties, the expiration dates for rental units refers to the dates that the leases with the third parties expire and upon which date our tenant must vacate those properties, not the expiration date of the unitary master lease itself.
     In the opinion of our management, our owned and leased properties are adequately covered by casualty and liability insurance. In addition, we require our tenants to provide insurance for all properties they lease from us, including casualty,liability, fire and extended coverage in amounts and on other terms satisfactory to us. We have no plans for material

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improvements to any of our properties. However, our tenants frequently make improvements to the properties leased from us at their expense. We are not aware of any material liens or encumbrances on any of our properties.
     We lease 808 retail motor fuel and convenience store properties and nine petroleum distribution terminals to Marketing under the Marketing Leases. The Master Lease is a unitary lease and has an initial term expiring in 2015, and provides Marketing with three renewal options of ten years each and a final renewal option of three years and ten months extending to 2049. If Marketing elects to exercise any renewal option, Marketing is required to notify us of such one year in advance of the commencement of the renewal term. The Master Lease is a unitary lease and, therefore, Marketing’s exercise of any renewal option can only be exercised for all of the properties subject of the Master Lease. The Marketing Leases are “triple-net” leases, under which Marketing is responsible for the payment of taxes, maintenance, repair, insurance and other operating expenses. As permitted under the terms of our leases with Marketing, Marketing can generally use each property for any lawful purpose, or for no purpose whatsoever. We believe that as of March 16, 2011, Marketing was not operating any of the nine terminals it leases from us and had removed, or has scheduled removal of the gasoline tanks and related equipment at approximately 140 of our retail properties and we also believe that most of these properties are either vacant or provide negative or marginal contribution to Marketing’s results. (For additional information regarding the portion of our financial results that are attributable to Marketing, see Note 11 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements.” For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.)
     If Marketing fails to pay rent, taxes or insurance premiums when due under the Marketing Leases and the failure is not cured by Marketing within a specified time after receipt of notice, we have the right to terminate the Marketing Leases and to exercise other customary remedies against Marketing. If Marketing fails to comply with any other obligation under the Master Lease after notice and opportunity to cure, we do not have the right to terminate the Master Lease. In the event of Marketing’s default where we do not have the right to terminate the Master Lease, our available remedies under the Master Lease are to seek to obtain an injunction or other equitable relief requiring Marketing to comply with its rental, environmental and other obligations under the Master Lease and to recover damages from Marketing resulting from the failure. If any lease we have with a third-party landlord for properties that we lease to Marketing is terminated as a result of our default and the default is not caused by Marketing, we have agreed to indemnify Marketing for its losses with respect to the termination. Marketing has the right-of-first refusal to purchase any property leased to Marketing under the Marketing Leases that we decide to sell.
     We have also agreed to provide limited environmental indemnification to Marketing, capped at $4.25 million, for certain pre-existing conditions at six of the terminals we own and lease to Marketing. Under the agreement, Marketing is obligated to pay the first $1.5 million of costs and expenses incurred in connection with remediating any pre-existing terminal condition, Marketing will share equally with us the next $8.5 million of those costs and expenses and Marketing is obligated to pay all additional costs and expenses over $10.0 million. We have accrued $0.3 million as of December 31, 2010 and 2009 in connection with this indemnification agreement. Under the Master Lease, we continue to have additional ongoing environmental remediation obligations at 186 scheduled sites and our agreements with Marketing provide that Marketing otherwise remains liable for all environmental matters. (For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.)
Item 3. Legal Proceedings
     The Company is engaged in a number of legal proceedings, many of which we consider to be routine and incidental to our business. The following is a description of material legal proceedings, including those involving private parties and governmental authorities under federal, state and local laws regulating the discharge of materials into the environment. We are vigorously defending all of the legal proceedings involving the Company, including each of the legal proceedings matters listed below.
     In September 2004, the State of New York commenced an action against us United Gas Corp., and Costa Gas Station, Inc., The Ingraham Bedell Corporation, Exxon Mobil Corporation, Shell Oil Company, Shell Oil Products Company, Motiva Enterprises, LLC, and related parties, in New York Supreme Court in Albany County seeking recovery for reimbursement of investigation and remediation costs claimed to have been incurred by the New York Environmental Protection and Spill Compensation Fund relating to contamination it alleges emanated from various retail motor fuel properties located in the

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same vicinity in Uniondale, N.Y., including a site formerly owned by the Company and at which a petroleum release and cleanup occurred. The complaint also seeks future costs for remediation, as well as interest and penalties. We have served an answer to the complaint denying responsibility. Discovery in this case is ongoing.
     In October 2007, the Company received a demand from the State of New York to pay costs allegedly arising from investigation and remediation of petroleum spills that occurred at a property formerly owned by us and taken by eminent domain by the State of New York in 1991. We responded to the State’s demand and denied responsibility for reimbursement of such costs. In August 2010, the State commenced a lawsuit in New York Supreme Court, Albany County against us, Bryant Taconic Corp. and related parties seeking damages under the New York Navigation Law. The Company has interposed an answer asserting numerous affirmative defenses. Discovery in this case is ongoing.
     In September 2008, we received a directive and notice of violation from the NJDEP calling for a remedial investigation and cleanup, to be conducted by us and Gary and Barbara Galliker, individually and trading Millstone Auto Service, Auto Tech, and other named parties, of petroleum-related contamination found at a retail motor fuel property located in Millstone Township, New Jersey. We did not own or lease this property, but did supply gas to the operator of this property in 1985 and 1986. We responded to the NJDEP, denying liability, and we also tendered the matter to Marketing for defense and indemnification under the Reorganization and Distribution Agreement between Getty Petroleum Corp. (n/k/a/ Getty Properties Corp.) and Marketing dated as of February 1, 1997 (the “Spin-Off Agreement”). Marketing has denied responsibility for this matter. In November 2009, the NJDEP issued an Administrative Order and Notice of Civil Administrative Penalty Assessment (the “Order and Assessment”) to the Company, Marketing and Gary and Barbara Galliker, individually and trading as Millstone Auto Service. Both Marketing and the Company have filed requests for a hearing to contest the allegations of the Order and Assessment. The hearing request was granted in February 2010, but the date of the hearing has not yet been scheduled. (For additional information regarding Marketing and the Marketing Leases (as defined below), see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.)
     In November 2009, an action was commenced by the State of New York in the Supreme Court, Albany County, seeking the recovery of costs incurred in remediating alleged petroleum contamination down gradient of a gasoline station formerly owned by us, and gasoline stations that were allegedly owned or operated by other named defendants, including M&A Realty, Inc., Gas Land Petroleum, Inc., and Mid-Valley Oil Company. The Company answered the complaint, denying liability and asserting affirmative defenses and cross claims against co-defendants. The Company has also tendered the matter to M&A Realty Inc. for defense and indemnification as relates to discharges of petroleum that were reported on or after July of 1994 at the site which is the subject of allegations against the Company. This site was leased by the Company to M & A Realty Inc. in 1994 and sold to M & A Realty Inc. in 2002. M&A Realty Inc. demanded defense and indemnity from the Company for contamination at this site as of 1994. The State of New York has also commenced a separate but related action in the Supreme Court, Albany County, against the Company and M&A Realty, Inc. seeking recovery of costs for clean-up of petroleum contamination at the site of the gas station which is the subject of allegations against the Company and M&A Realty, Inc. in the first action. The Company answered the complaint, denying liability and asserting affirmative defenses and cross claims against M&A Realty, Inc. The Company also tendered the matter to M&A Realty, Inc. for indemnity on the same basis as in the first action, and M&A Realty, Inc. likewise has demanded defense and indemnity from the Company on the same basis as it put forth in the first action. Discovery in these cases is ongoing.
MTBE Litigation
     During 2010, the Company was defending 53 lawsuits brought on behalf of private and public water providers and governmental agencies located in Connecticut, Florida, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Vermont, Virginia, and West Virginia. A majority of these cases were among the more than one hundred cases that were transferred from various state and federal courts throughout the country and consolidated in the United States District Court for the Southern District of New York for coordinated Multi-District Litigation (“MDL”) proceedings. The balance of these cases against us were pending in the Supreme Court of New York, Nassau County. All of the cases against the Company alleged (and, as described below with respect to one remaining case, continue to allege) various theories of liability due to contamination of groundwater with methyl tertiary butyl ether (a fuel derived from methanol, commonly referred to as “MTBE”) as the basis for claims seeking compensatory and punitive damages. The cases named us as a defendant along with approximately fifty petroleum refiners, manufacturers, distributors and retailers of MTBE, or gasoline containing MTBE, including Irving Oil Corporation, Mobil Oil Corporation, Sunoco, Inc., Texaco, Inc., Tosco Corporation, Unocal Corporation, Valero Energy Corporation, Marathon Oil Company, Shell Oil Company, Giant Yorktown, Inc., BP Amoco Chemical Company, Inc., Atlantic Richfield Company, Coastal Oil New

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England, Inc., Chevron Texaco Corporation, Amerada Hess Corp., Chevron U.S.A., Inc., CITGO Petroleum Corporation, ConocoPhillips Company, Exxon Mobil Corporation, Getty Petroleum Marketing, Inc., and Gulf Oil Limited Partnership. During the quarter ended March 31, 2010, the Company reached agreements to settle two plaintiff classes covering 52 of the 53 pending cases. A settlement payment of $1,250,000 was made during the third quarter of 2010 covering 27 cases and a settlement payment of $475,000 was made during the first quarter of 2011 covering 25 cases. Presently the Company remains a defendant in one MTBE case involving multiple locations throughout the State of New Jersey brought by various governmental agencies of the State of New Jersey, including the NJDEP. This case is still in discovery stages.
     We have tendered all of our MTBE cases for defense and indemnification to Marketing and its insurers under the Spin-Off Agreement and the Master Lease. Marketing has rejected this tender. We have provided a litigation reserve as to the remaining MDL case pending against us, however, there remains uncertainty as to the accuracy of the allegations in this MTBE case as they relate to us, our defenses to the claims, our rights to indemnification or contribution from Marketing, and the aggregate possible amount of damages for which we might be held liable.
Matters related to our Newark, New Jersey Terminal and the Lower Passaic River
     In September 2003, we received a directive (the “Directive”) issued by the NJDEP under the New Jersey Spill Compensation and Control Act. The Directive indicated that we are one of approximately 66 potentially responsible parties for alleged Natural Resource Damages (“NRD” or “NRDs”) resulting from the discharges of hazardous substances along the lower Passaic River (the “Lower Passaic River”). Other named recipients of the Directive are 360 North Pastoria Environmental Corporation, Amerada Hess Corporation, American Modern Metals Corporation, Apollo Development and Land Corporation, Ashland Inc., AT&T Corporation, Atlantic Richfield Assessment Company, Bayer Corporation, Benjamin Moore & Company, Bristol Myers-Squibb, Chemical Land Holdings, Inc., Chevron Texaco Corporation, Diamond Alkali Company, Diamond Shamrock Chemicals Company, Diamond Shamrock Corporation, Dilorenzo Properties Company, Dilorenzo Properties, L.P., Drum Service of Newark, Inc., E.I. Dupont De Nemours and Company, Eastman Kodak Company, Elf Sanofi, S.A., Fine Organics Corporation, Franklin-Burlington Plastics, Inc., Franklin Plastics Corporation, Freedom Chemical Company, H.D. Acquisition Corporation, Hexcel Corporation, Hilton Davis Chemical Company, Kearny Industrial Associates, L.P., Lucent Technologies, Inc., Marshall Clark Manufacturing Corporation, Maxus Energy Corporation, Monsanto Company, Motor Carrier Services Corporation, Nappwood Land Corporation, Noveon Hilton Davis Inc., Occidental Chemical Corporation, Occidental Electro-Chemicals Corporation, Occidental Petroleum Corporation, Oxy-Diamond Alkali Corporation, Pitt-Consol Chemical Company, Plastics Manufacturing Corporation, PMC Global Inc., Propane Power Corporation, Public Service Electric & Gas Company, Public Service Enterprise Group, Inc., Purdue Pharma Technologies, Inc., RTC Properties, Inc., S&A Realty Corporation, Safety-Kleen Envirosystems Company, Sanofi S.A., SDI Divestiture Corporation, Sherwin Williams Company, SmithKline Beecham Corporation, Spartech Corporation, Stanley Works Corporation, Sterling Winthrop, Inc., STWB Inc., Texaco Inc., Texaco Refining and Marketing Inc., Thomasset Colors, Inc., Tierra Solution, Incorporated, Tierra Solutions, Inc., and Wilson Five Corporation.
     The Directive provided, among other things, that the recipients thereof must conduct an assessment of the natural resources that have been injured by the discharges into the Lower Passaic River and must implement interim compensatory restoration for the injured natural resources. NJDEP alleges that our liability arises from alleged discharges originating from our Newark, New Jersey Terminal site. We responded to the Directive by asserting that we were not liable. There has been no material activity and/or communications by NJDEP with respect to the Directive since early after its issuance.
     Effective May 2007, the United States Environmental Protection Agency (“EPA”) entered into an Administrative Settlement Agreement and Order on Consent (“AOC”) with over 70 parties comprising a Cooperating Parties Group (“CPG”) (many of whom also named in the Directive) who have collectively agreed to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the Lower Passaic River. The Company is a party to the AOC and is a member of the CPG. The RI/FS is intended to address the investigation and evaluation of alternative remedial actions with respect to alleged damages to the Lower Passaic River, and is scheduled to be completed in or about 2014. The RI/FS does not resolve liability issues for remedial work or restoration of, or compensation for, natural resource damages to the Lower Passaic River, which are not known at this time. As to such matters, separate proceedings or activities are currently ongoing.
     In a related action, in December 2005, the State of New Jersey through various state agencies brought suit in the Superior Court of New Jersey, Law Division, against certain parties to the Directive, Occidental Chemical Corporation, Tierra Solutions, Inc., Maxus Energy Corporation and related entities which the State alleges are responsible for various categories of past and future damages resulting from discharges of hazardous substances to the Passaic River by a manufacturing facility

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located on Lister Avenue in Newark, NJ. In February 2009, certain of these defendants filed third-party complaints against approximately 300 additional parties, including the Company and other members of the CPG, seeking contribution for such parties’ proportionate share of response costs, cleanup and removal costs, and other damages, based on their relative contribution to pollution of the Passaic River and adjacent bodies of water. The Company has answered the complaint, denying responsibility for any discharges of hazardous substances released into the Passaic River. The litigation is still in a pre-trial stage with a significant amount of discovery remaining, particularly as to third-parties.
     We have made a demand upon Chevron/Texaco for indemnity under certain agreements between the Company and Chevron/Texaco that allocate environmental liabilities for the Newark Terminal Site between the parties. In response, Chevron/Texaco has asserted that the proceedings and claims are still not yet developed enough to determine the extent to which indemnities apply. The Company and Chevron/Texaco are engaged in discussions regarding the Company’s demands for indemnification, and, to facilitate said discussions, in October 2009 entered into a Tolling/Standstill Agreement which tolls all claims by and among the Company and Chevron/Texaco that relate to the various Lower Passaic River matters from May 8, 2007, until either party terminates such Tolling/Standstill Agreement.
     Our ultimate liability, if any, in the pending and possible future proceedings pertaining to the Lower Passaic River is uncertain and subject to numerous contingencies which cannot be predicted and the outcome of which are not yet known.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Capital Stock
     Our common stock is traded on the New York Stock Exchange (symbol: “GTY”). There were approximately 23,000 beneficial holders of our common stock as of March 16, 2011, of which approximately 1,300 were holders of record. The price range of our common stock and cash dividends declared with respect to each share of common stock during the years ended December 31, 2010 and 2009 was as follows:
                         
                    CASH
    PRICE RANGE   DIVIDENDS
QUARTER ENDED   HIGH   LOW   PER SHARE
March 31, 2009
  $ 21.87     $ 13.25     $ .4700  
June 30, 2009
    20.99       16.36       .4700  
September 30, 2009
    26.32       18.61       .4750  
December 31, 2009
    25.63       21.50       .4750  
March 31, 2010
    24.68       20.76       .4750  
June 30, 2010
    25.59       15.52       .4750  
September 30, 2010
    27.27       21.30       .4800  
December 31, 2010
    32.20       26.33       .4800  
     For a discussion of potential limitations on our ability to pay future dividends see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.
Issuer Purchases of Equity Securities
     None
Sales of Unregistered Securities
     None

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Stock Performance Graph
     We have chosen as our Peer Group the following companies: National Retail Properties, Entertainment Properties Trust, Realty Income Corp. and Hospitality Properties Trust. We have chosen these companies as our Peer Group because a substantial segment of each of their businesses is owning and leasing commercial properties. We cannot assure you that our stock performance will continue in the future with the same or similar trends depicted in the graph above. We do not make or endorse any predictions as to future stock performance.
     This performance graph and related information shall not be deemed filed for the purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section and shall not be deemed to be incorporated by reference into any filing that we make under the Securities Act or the Exchange Act.
(STOCK LOGO)
                                                 
    12/31/2005     12/31/2006     12/31/2007     12/31/2008     12/31/2009     12/31/2010  
Getty Realty Corp.
    100.00       125.09       115.51       101.05       123.96       173.66  
Standard &Poors 500
    100.00       113.62       117.63       72.36       89.33       100.75  
Peer Group
    100.00       131.83       117.33       88.18       118.17       152.56  
Assumes $100 invested at the close of trading 12/04 in Getty Realty Corp. common stock, Standard &Poors 500, and Peer Group.
 
*   Cumulative total return assumes reinvestment of dividends.

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Item 6. Selected Financial Data
GETTY REALTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of properties)
                                         
    FOR THE YEARS ENDED DECEMBER 31,  
    2010     2009(a)     2008     2007 (b)     2006  
OPERATING DATA:
                                       
Revenues from rental properties
  $ 88,332     $ 84,416     $ 82,654     $ 78,852     $ 72,126  
Earnings before income taxes and discontinued operations
    50,107       41,653       38,716       27,500 (c)     40,642  
Income tax benefit (d)
                            700  
 
                             
Earnings from continuing operations
    50,107       41,653       38,716       27,500       41,342  
Earnings from discontinued operations
    1,593       5,396       3,094       6,394 (c)     1,383  
 
                             
Net earnings
    51,700       47,049       41,810       33,894       42,725  
Diluted earnings per common share:
                                       
Earnings from continuing operations
    1.79       1.68       1.56       1.11       1.67  
Net earnings
    1.85       1.90       1.69       1.37       1.73  
Diluted weighted-average common shares outstanding
    27,953       24,767       24,767       24,769       24,752  
Cash dividends declared per share
    1.91       1.89       1.87       1.85       1.82  
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATION (e):
                                       
Net earnings
    51,700       47,049       41,810       33,894       42,725  
Depreciation and amortization of real estate assets
    9,738       11,027       11,875       9,794       7,883  
Gains on dispositions of real estate
    (1,705 )     (5,467 )     (2,787 )     (6,179 )     (1,581 )
 
                             
Funds from operations
    59,733       52,609       50,898       37,509       49,027  
Revenue Recognition Adjustments
    (1,487 )     (2,065 )     (2,593 )     (4,159 )     (3,010 )
Allowance for deferred rental revenue
                      10,494        
Impairment charges
          1,135                    
Income tax benefit (d)
                            (700 )
 
                             
Adjusted funds from operations
    58,246       51,679       48,305       43,844       45,317  
BALANCE SHEET DATA (AT END OF YEAR):
                                       
Real estate before accumulated depreciation and amortization
  $ 504,587     $ 503,874     $ 473,567     $ 474,254     $ 383,558  
Total assets
    427,144       432,872       387,813       396,911       310,922  
Debt
    64,890       175,570       130,250       132,500       45,194  
Shareholders’ equity
    314,935       207,669       205,897       212,178       225,575  
NUMBER OF PROPERTIES:
                                       
Owned
    907       910       878       880       836  
Leased
    145       161       182       203       216  
 
                             
Total properties
    1,052       1,071       1,060       1,083       1,052  
 
                             
 
(a)   Includes (from the date of the acquisition) the effect of the $49.0 million acquisition of the real estate assets and improvements of 36 convenience store properties from White Oak Petroleum LLC which were acquired on September 25, 2009.
 
(b)   Includes (from the date of the acquisition) the effect of the $84.5 million acquisition of convenience stores and gas station properties from FF-TSY Holding Company II LLC (successor to Trustreet Properties, Inc.) which was substantially completed by the end of the first quarter of 2007.
 
(c)   Includes the effect of a $10.5 million non-cash deferred rent receivable reserve, $10.2 million of which is included in earnings from continuing operations and $0.3 million of which is included in earnings from discontinued operations, based on the deferred rent receivable related to certain properties under leases with our primary tenant, Getty Petroleum Marketing, Inc. (For additional information regarding Marketing and the Marketing Leases, see “Item 7. Management’s

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    Discussion and Analysis of Financial Condition and Results of Operations — General — Marketing and the Marketing Leases”.)
 
(d)   The year ended 2006 includes an income tax benefit recognized due to the elimination of, or reduction in, amounts accrued for uncertain tax positions related to being taxed as a C-corp. prior to our election to be taxed as a real estate investment trust (“REIT”) under the federal income tax laws in 2001. Income taxes have not had a significant impact on our earnings since we first elected to be treated as a REIT.
 
(e)   In addition to measurements defined by accounting principles generally accepted in the United States of America (“GAAP”), our management also focuses on funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) to measure our performance. FFO is generally considered to be an appropriate supplemental non-GAAP measure of the performance of real estate investment trusts (“REITs”). FFO is defined by the National Association of Real Estate Investment Trusts as net earnings before depreciation and amortization of real estate assets, gains or losses on dispositions of real estate (including such non-FFO items reported in discontinued operations), extraordinary items, and cumulative effect of accounting change. Other REITs may use definitions of FFO and/or AFFO that are different than ours and; accordingly, may not be comparable.
 
    We believe that FFO and AFFO are helpful to investors in measuring our performance because both FFO and AFFO exclude various items included in GAAP net earnings that do not relate to, or are not indicative of, our fundamental operating performance. FFO excludes various items such as gains or losses from property dispositions and depreciation and amortization of real estate assets. In our case, however, GAAP net earnings and FFO typically include the impact of deferred rental revenue (straight-line rental revenue), the net amortization of above-market and below-market leases and income recognized from direct financing leases on its recognition of revenue from rental properties (collectively the “Revenue Recognition Adjustments”), as offset by the impact of related collection reserves. GAAP net earnings and FFO from time to time may also include impairment charges and/or income tax benefits. Deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with our tenants. In accordance with GAAP, the aggregate minimum rent due over the current term of these leases are recognized on a straight-line (or an average) basis rather than when the payment is contractually due. The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases. Income from direct financing leases is recognized over the lease term using the effective interest method which produces a constant periodic rate of return on the net investment in the leased property. Impairment of long-lived assets represents charges taken to write-down real estate assets to fair value estimated when events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. In prior periods, income tax benefits have been recognized due to the elimination of, or a net reduction in, amounts accrued for uncertain tax positions related to being taxed as a C-corp., rather than as a REIT, prior to 2001 (see note (d) above).
 
    Management pays particular attention to AFFO, a supplemental non-GAAP performance measure that we define as FFO less Revenue Recognition Adjustments, impairment charges and income tax benefit. In management’s view, AFFO provides a more accurate depiction than FFO of our fundamental operating performance related to: (i) the impact of scheduled rent increases from operating leases; (ii) the rental revenue from acquired in-place leases; (iii) the impact of rent due from direct financing leases; (iv) our rental operating expenses (exclusive of impairment charges); and (v) our election to be treated as a REIT under the federal income tax laws beginning in 2001. Neither FFO nor AFFO represent cash generated from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative for GAAP net earnings or as a measure of liquidity.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following discussion and analysis should be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” on page 2; the risks and uncertainties described in “Item 1A. Risk Factors”; the selected financial data in “Item 6. Selected Financial Data”; and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data”.
GENERAL
Real Estate Investment Trust
     We are a real estate investment trust (“REIT”) specializing in the ownership, leasing and financing of retail motor fuel and convenience store properties and petroleum distribution terminals. We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. As a REIT, we are not subject to federal corporate income tax on the taxable income we distribute to our shareholders. In order to continue to qualify for taxation as a REIT, we are required, among other things, to distribute at least ninety percent of our taxable income to shareholders each year.
Retail Petroleum Marketing Business
     We lease or sublet our properties primarily to distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products and automotive repair services. These tenants are responsible for managing the operations conducted at these properties and for the payment of taxes, maintenance, repair, insurance and other operating expenses relating to our properties. Our tenants’ financial results are largely dependent on the performance of the petroleum marketing industry, which is highly competitive and subject to volatility. In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, we will seek an alternative tenant or buyer for the property. We lease or sublet approximately twenty of our properties for uses such as fast food restaurants, automobile sales and other retail purposes. (See “Item 1. Business — Real Estate Business” and “Item 2. Properties” for additional information regarding our real estate business and our properties.) (For information regarding factors that could adversely affect us relating to our lessees, including our primary tenant, Getty Petroleum Marketing Inc., see “Item 1A. Risk Factors”.)
Marketing and the Marketing Leases
     As of December 31, 2010, Marketing leased from us 808 properties under the Master Lease and nine properties under the Supplemental Leases. The Master Lease has an initial term expiring in December 2015, and provides Marketing with three renewal options of ten years each and a final renewal option of three years and ten months extending to 2049. If Marketing elects to exercise any renewal option, Marketing is required to notify us of such one year in advance of the commencement of the renewal term. The Master Lease is a unitary lease and, therefore, Marketing’s exercise of any renewal option can only be for all of the properties subject of the Master Lease. The supplemental leases have initial terms of varying expiration dates. The Marketing Leases are “triple-net” leases, pursuant to which Marketing is responsible for the payment of taxes, maintenance, repair, insurance and other operating expenses. We believe that as of March 16, 2011, Marketing was not operating any of the nine terminals it leases from us and had removed, or has scheduled removal of the gasoline tanks and related equipment at approximately 140 of our retail properties and we also believe that most of these properties are either vacant or provide negative or marginal contribution to Marketing’s results.
     On February 28, 2011 OAO LUKoil (“Lukoil”), one of the largest integrated Russian oil companies transferred its ownership interest in Getty Petroleum Marketing Inc. (“Marketing”), our largest tenant, to Cambridge Petroleum Holding Inc. (“Cambridge”). We are not privy to the terms and conditions pertaining to this transaction between Lukoil and Cambridge. In connection with the transfer, we do not know what type or amount of consideration, if any, was paid or is payable by Lukoil or its subsidiaries to Cambridge, or by Cambridge to Lukoil or its subsidiaries. We do not know whether there are any ongoing contractual or business relationships between Lukoil or its subsidiaries or affiliates and Cambridge or its subsidiaries or affiliates, including Marketing.
     While we did not believe that Lukoil would allow Marketing to fail to meet its obligations under the Marketing Leases, there can be no assurance that additional capital investment or financial support will be made available to Marketing by Cambridge or others in the future and it is possible that Marketing may file for bankruptcy protection and seek to reorganize or liquidate its business. It is also possible that Marketing may take other actions such as aggressively seeking to modify the

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terms of the Marketing Leases. While we have commenced discussions with the new owners and management of Marketing, we cannot predict the impact the transfer of Marketing may have on our business.
     Our financial results are materially dependent upon the ability of Marketing to meet its rental, environmental and other obligations under the Marketing Leases. Marketing’s financial results depend on retail petroleum marketing margins from the sale of refined petroleum products and rental income from its subtenants. Marketing’s subtenants either operate their gas stations, convenience stores, automotive repair services or other businesses at our properties or are petroleum distributors who may operate our properties directly and/or sublet our properties to the operators. Since a substantial portion of our revenues (66% for the year ended December 31, 2010) are derived from the Marketing Leases, any factor that adversely affects Marketing’s ability to meet its rental, environmental and other obligations under the Marketing Leases may have a material adverse effect on our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price. (For additional information regarding the portion of our financial results that are attributable to Marketing, see Note 11 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements.”)
     As of the date of this Form 10-K, we have not yet received Marketing’s unaudited consolidated financial statements for the year ended December 2010. For the year ended December 31, 2009, Marketing reported a significant loss, continuing a trend of reporting large losses in recent years. Based on the interim reports we have received through 2010, Marketing’s significant losses have continued. Based on our review of Marketing’s financial statements, we continue to believe that Marketing likely does not have the ability to generate cash flows from its business operations sufficient to meet its rental, environmental and other obligations under the terms of the Marketing Leases unless Marketing shows significant improvement in its financial results, reduces the number of properties under the Marketing Leases, or receives additional capital or credit support. There can be no assurance that Marketing will be successful in any of these efforts. It is possible that the deterioration of Marketing’s financial condition may continue or that Marketing may file bankruptcy and seek to reorganize or liquidate its business. We cannot predict what impact Lukoil’s transfer of its ownership interest to Cambridge will have on Marketing’s ability and willingness to perform its rental, environmental and other obligations under the Marketing Leases.
     As of December 31, 2010, the net carrying value of the deferred rent receivable attributable to the Marketing Leases was $21.2 million and the aggregate Marketing Environmental Liabilities (as defined below), net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay but have not accrued range between $13 million and $20 million. The actual amount of the Marketing Environmental Liabilities may differ from our estimated range and we can provide no assurance as to the accuracy of our estimate. Although our 2010 financial statements were not affected by the transfer of Lukoil’s ownership interest in Marketing to Cambridge, our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that we may be required to increase or decrease the deferred rent reserve, record additional impairment charges related to the properties, or accrue for Marketing Environmental Liabilities as a result of changes in our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases that affect the amounts reported in our financial statements. It is also possible that as a result of material adjustments to the amounts recorded for certain of our assets and liabilities that we may not be in compliance with the financial covenants in our Credit Agreement or Term Loan Agreement.
     In November 2009, Marketing announced a restructuring of its business. Marketing disclosed that the restructuring included the sale of all assets unrelated to the properties it leases from us, the elimination of parent-guaranteed debt, and steps to reduce operating costs. Although Marketing’s press release stated that its restructuring included the sale of all assets unrelated to the properties it leases from us, we have concluded, based on the press releases related to the Marketing/Bionol contract dispute described below, that Marketing’s restructuring did not include the sale of all assets unrelated to the properties it leases from us. Marketing sold certain assets unrelated to the properties it leases from us to its affiliates, LUKOIL Pan Americas LLC and LUKOIL North America LLC. We believe that Marketing retained other assets, liabilities and business matters unrelated to the properties it leases from us. As part of the restructuring, Marketing paid off debt which had been guaranteed or held by Lukoil with proceeds from the sale of assets to Lukoil affiliates.
     In June 2010, Marketing and Bionol each issued press releases regarding a significant contractual dispute between them. Bionol owns and operates an ethanol plant in Pennsylvania. Bionol and Marketing entered into a five-year contract under which Marketing agreed to purchase substantially all of the ethanol production from the Bionol plant, at formula-based prices. Bionol stated that Marketing breached the contract by not paying the agreed-upon price for the ethanol. According to Bionol’s press release, the cumulative gross purchase commitment under the contract could be on the order of one billion dollars.

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Marketing stated in its press release that it continues to pay Bionol millions of dollars each month for the ethanol, withholding only the amount of the purchase price in dispute and that it has filed for arbitration to resolve the dispute. Among other items related to this matter, we do not know: (i) the accuracy of the statements made by Marketing and Bionol when made or if such statements reflect the current status of the dispute; (ii) the cumulative or projected amount of the purchase price in dispute and how Marketing has accounted for the ethanol contract in its financial statements; or (iii) how the formula-based price compares to the market price of ethanol. We cannot predict how the ultimate resolution of this matter may impact Marketing’s long-term financial performance and its ability to meet its rental, environmental and other obligations to us as they become due under the terms of the Marketing Leases.
     We cannot predict what impact Marketing’s restructuring, dispute with Bionol and other changes in its business model or impact on its business will have on us. If Marketing should fail to meet its rental, environmental and other obligations to us, such default could lead to a protracted and expensive process for retaking control of our properties as a result of which, our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected. In addition to the risk of disruption in rent receipts, we are subject to the risk of incurring real estate taxes, maintenance, environmental and other expenses at properties subject to the Marketing Leases.
     From time to time when it was owned by Lukoil, we held discussions with representatives of Marketing regarding potential modifications to the Marketing Leases. These discussions did not result in a common understanding with Marketing that would form a basis for modification of the Marketing Leases. While we have recently initiated discussions with the new owners and management of Marketing, subsequent to Lukoil’s transfer of its ownership interests in Marketing to Cambridge, we do not at this time know what Marketing’s business strategy under its new ownership is or how it may change in the future. We intend to continue to pursue the removal of individual properties from the Marketing Leases, and we remain open to removal of groups of properties; however, there is no agreement in place providing for removal of properties from the Marketing Leases. If Marketing ultimately determines that its business strategy is to exit all or a portion of the properties it leases from us, it is our intention to cooperate with Marketing in accomplishing those objectives if we determine that it is prudent for us to do so. Any modification of the Marketing Leases that removes a significant number of properties from the Marketing Leases would likely significantly reduce the amount of rent we receive from Marketing and increase our operating expenses. We cannot accurately predict if, or when, the Marketing Leases will be modified; what composition of properties, if any, may be removed from the Marketing Leases as part of any such modification; or what the terms of any agreement for modification of the Marketing Leases may be. We also cannot accurately predict what actions Marketing may take, and what our recourse may be, whether the Marketing Leases are modified or not. We may be required to increase or decrease the deferred rent receivable reserve, record additional impairment charges related to our properties, or accrue for environmental liabilities as a result of the potential or actual modification or termination of the Marketing Leases.
     We intend either to re-let or sell any properties removed from the Marketing Leases, whether such removal arises consensually by negotiation or as a result of default by Marketing, and reinvest any realized sales proceeds in new properties. We intend to offer properties removed from the Marketing Leases to replacement tenants or buyers individually, or in groups of properties, or by seeking a single tenant for the entire portfolio of properties subject to the Marketing Leases. Although we are the fee or leasehold owner of the properties subject to the Marketing Leases and the owner of the Getty® brand, and have prior experience with tenants who operate their gas stations, convenience stores, automotive repair services or other businesses at our properties, in the event that properties are removed from the Marketing Leases, we cannot accurately predict if, when, or on what terms such properties could be re-let or sold.
     As permitted under the terms of the Marketing Leases, Marketing generally can, subject to any contrary terms under applicable third party leases, use each property for any lawful purpose, or for no purpose whatsoever. We believe that as of March 16, 2011, Marketing was not operating any of the nine terminals it leases from us and had removed, or has scheduled removal of, underground gasoline storage tanks and related equipment at approximately 140 of our retail properties and we also believe that most of these properties are either vacant or provide negative or marginal contribution to Marketing’s results. In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, at the appropriate time we will seek an alternative tenant or buyer for such property. With respect to properties that are vacant or have had underground gasoline storage tanks and related equipment removed, it may be more difficult or costly to re-let or sell such properties as gas stations because of capital costs or possible zoning or permitting rights that are required and that may have lapsed during the period since gasoline was last sold at the property. Conversely, it may be easier to re-let or sell properties where underground gasoline storage tanks and related equipment have been removed if the property will not be used as a retail motor fuel outlet or if environmental contamination has been remediated.

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     In accordance with accounting principles generally accepted in the United States of America (“GAAP”), the aggregate minimum rent due over the current terms of the Marketing Leases, substantially all of which are scheduled to expire in December 2015, is recognized on a straight-line (or an average) basis rather than when payment contractually is due. We record the cumulative difference between lease revenue recognized under this straight line accounting method and the lease revenue recognized when payment is due under the contractual payment terms as deferred rent receivable on our consolidated balance sheets. We provide reserves for a portion of the recorded deferred rent receivable if circumstances indicate that a property may be disposed of before the end of the current lease term or if it is not reasonable to assume that a tenant will make all of its contractual lease payments during the current lease term. Our assessments and assumptions regarding the recoverability of the deferred rent receivable related to the properties subject to the Marketing Leases are reviewed on a quarterly basis and such assessments and assumptions are subject to change.
     Based in part on our decision to remain open to negotiate with Marketing for a modification of the Marketing Leases, and our belief that the Marketing Leases will be modified prior to the expiration of the current lease term, we believe that it is probable that we would not collect all of the rent due related to properties we identified as being the most likely to be removed from the Marketing Leases. As of December 31, 2010 and December 31, 2009, the net carrying value of the deferred rent receivable attributable to the Marketing leases was $21.2 million and $22.8 million, respectively, which was comprised of a gross deferred rent receivable of $29.4 million and $32.2 million, respectively, partially offset by a valuation reserve of $8.2 million and $9.4 million, respectively. The valuation reserves were estimated based on the deferred rent receivable attributable to properties identified by us as being the most likely to be removed from the Marketing Leases. We have not provided deferred rent receivable reserves related to the remaining properties subject to the Marketing Leases since, based on our assessments and assumptions as of December 31, 2010, we continued to believe that it was probable that we would collect the deferred rent receivables related to those remaining properties and that Lukoil would not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases. It is possible that the deterioration of Marketing’s financial condition may continue, that Marketing may file bankruptcy and seek to reorganize or liquidate its business, or that Marketing may aggressively pursue seeking a modification of the Marketing Leases, including, removal of either a group of or individual properties from the Marketing Leases, or a reduction in the rental payments owed by Marketing under the Marketing Lease. Our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that we may change our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, we may be required to increase or decrease our deferred rent receivable reserve or provide deferred rent receivable reserves related to the remaining properties subject to the Marketing Leases.
     Marketing is directly responsible to pay for (i) remediation of environmental contamination it causes and compliance with various environmental laws and regulations as the operator of our properties, and (ii) known and unknown environmental liabilities allocated to Marketing under the terms of the Marketing Leases and various other agreements with us relating to Marketing’s business and the properties it leases from us (collectively the “Marketing Environmental Liabilities”). However, we continue to have ongoing environmental remediation obligations at 186 retail sites and for certain pre-existing conditions at six of the terminals we lease to Marketing. If Marketing fails to pay the Marketing Environmental Liabilities, we may ultimately be responsible to pay for Marketing Environmental Liabilities as the property owner. We do not maintain pollution legal liability insurance to protect from potential future claims for Marketing Environmental Liabilities. We will be required to accrue for Marketing Environmental Liabilities if we determine that it is probable that Marketing will not meet its environmental obligations and we can reasonably estimate the amount of the Marketing Environmental Liabilities for which we will be responsible to pay, or if our assumptions regarding the ultimate allocation methods or share of responsibility that we used to allocate environmental liabilities changes. However, as of December 31, 2010 we continued to believe that it was not probable that Marketing would not pay for substantially all of the Marketing Environmental Liabilities since we believed that Lukoil would not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases. Accordingly, we did not accrue for the Marketing Environmental Liabilities as of December 31, 2010 or December 31, 2009. Nonetheless, we have determined that the aggregate amount of the Marketing Environmental Liabilities (as estimated by us) would be material to us if we were required to accrue for all of the Marketing Environmental Liabilities since as a result of such accrual, we would not be in compliance with the existing financial covenants in our $175.0 million amended and restated senior unsecured revolving Credit Agreement expiring in March 2012 (the “Credit Agreement”) and our $25.0 million three-year term loan agreement expiring in September 2012 (the “Term Loan Agreement”). Such non-compliance would result in an event of default under the Credit Agreement and the Term Loan Agreement which, if not waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of our indebtedness under the Credit Agreement and the Term Loan Agreement. Our estimates, judgments, assumptions and beliefs

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regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that we may change our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, we may be required to accrue for the Marketing Environmental Liabilities.
     We estimate that as of December 31, 2010, the aggregate Marketing Environmental Liabilities, net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay range between $13 million and $20 million, of which between $6 million to $9 million relate to the properties that we identified as the basis for our estimate of the deferred rent receivable reserve. Although we do not have a common understanding with Marketing that would form a basis for modification of the Marketing Leases, if the Marketing Leases are modified to remove any composition of properties, it is not our intention to assume Marketing’s Environmental Liabilities related to the properties that are so removed without adequate consideration from Marketing. Since we generally do not have access to certain site specific information available to Marketing, which is the party responsible for paying and managing its environmental remediation expenses at our properties, our estimates were developed in large part by review of the limited publically available information gathered through electronic databases and freedom of information requests and assumptions we made based on that data and on our own experiences with environmental remediation matters. The actual amounts of the ranges estimated above may differ from our estimates and we can provide no assurance as to the accuracy of these estimates.
     Should our assessments, assumptions and beliefs made effective as of December 31, 2010, prove to be incorrect or if circumstances change, the conclusions reached by us may change relating to (i) whether any or what combination of the properties subject to the Marketing Leases are likely to be removed from the Marketing Leases; (ii) recoverability of the deferred rent receivable for some or all of the properties subject to the Marketing Leases; (iii) potential impairment of the properties subject to the Marketing Leases; and (iv) Marketing’s ability to pay the Marketing Environmental Liabilities. We intend to regularly review our assumptions that affect the accounting for deferred rent receivable; long-lived assets; environmental litigation accruals; environmental remediation liabilities; and related recoveries from state underground storage tank funds. Our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. Accordingly, it is possible that we may be required to increase or decrease the deferred rent receivable reserve, record additional impairment charges related to the properties subject of the Marketing Leases, or accrue for Marketing Environmental Liabilities as a result of the potential or actual bankruptcy filing by Marketing or as a result of the potential or actual modification of the Marketing Leases or other factors, which may result in material adjustments to the amounts recorded for these assets and liabilities, and as a result of which, we may not be in compliance with the financial covenants in our Credit Agreement and our Term Loan Agreement.
     We cannot provide any assurance that Marketing will continue to meet its rental, environmental or other obligations under the Marketing Leases. In the event that Marketing does not perform its rental, environmental or other obligations under the Marketing Leases; if the Marketing Leases are modified significantly or terminated; if we determine that it is probable that Marketing will not meet its rental, environmental or other obligations and we accrue for certain of such liabilities; if we are unable to promptly re-let or sell the properties upon recapture from the Marketing Leases; or, if we change our assumptions that affect the accounting for rental revenue or Marketing Environmental Liabilities related to the Marketing Leases and various other agreements; our business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
Supplemental Non-GAAP Measures
     We manage our business to enhance the value of our real estate portfolio and, as a REIT, place particular emphasis on minimizing risk and generating cash sufficient to make required distributions to shareholders of at least ninety percent of our taxable income each year. In addition to measurements defined by accounting principles generally accepted in the United States of America (“GAAP”), our management also focuses on funds from operations available to common shareholders (“FFO”) and adjusted funds from operations available to common shareholders (“AFFO”) to measure our performance. FFO is generally considered to be an appropriate supplemental non-GAAP measure of the performance of REITs. FFO is defined by the National Association of Real Estate Investment Trusts as net earnings before depreciation and amortization of real

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estate assets, gains or losses on dispositions of real estate (including such non-FFO items reported in discontinued operations), extraordinary items and cumulative effect of accounting change. Other REITs may use definitions of FFO and/or AFFO that are different than ours and; accordingly, may not be comparable.
     We believe that FFO and AFFO are helpful to investors in measuring our performance because both FFO and AFFO exclude various items included in GAAP net earnings that do not relate to, or are not indicative of, our fundamental operating performance. FFO excludes various items such as gains or losses from property dispositions and depreciation and amortization of real estate assets. In our case, however, GAAP net earnings and FFO typically include the impact of the “Revenue Recognition Adjustments” comprised of deferred rental revenue (straight-line rental revenue), the net amortization of above-market and below-market leases, and income recognized from direct financing leases on our recognition of revenues from rental properties, as offset by the impact of related collection reserves. GAAP net earnings and FFO from time to time may also include impairment charges and/or income tax benefits. Deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with our tenants. In accordance with GAAP, the aggregate minimum rent due over the current term of these leases are recognized on a straight-line (or an average) basis rather than when payment is contractually due. The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases. Income from direct financing leases is recognized over the lease term using the effective interest method which produces a constant periodic rate of return on the net investment in the leased property. Impairment of long-lived assets represents charges taken to write-down real estate assets to fair value estimated when events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. In prior periods, income tax benefits have been recognized due to the elimination of, or a net reduction in, amounts accrued for uncertain tax positions related to being taxed as a C-corp., rather than as a REIT, prior to 2001.
     Management pays particular attention to AFFO, a supplemental non-GAAP performance measure that we define as FFO less Revenue Recognition Adjustments, impairment charges and income tax benefit. In management’s view, AFFO provides a more accurate depiction than FFO of our fundamental operating performance related to: (i) the impact of scheduled rent increases under these leases; (ii) the rental revenue earned from acquired in-place leases; (iii) the impact of rent due from direct financing leases, (iv) our rental operating expenses (exclusive of impairment charges); and (v) our election to be treated as a REIT under the federal income tax laws beginning in 2001. Neither FFO nor AFFO represent cash generated from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative for GAAP net earnings or as a measure of liquidity. For a reconciliation of FFO and AFFO, see “Item 6. Selected Financial Data”.
     Net earnings, earnings from continuing operations and FFO for 2007 were reduced by all or substantially all of the $10.5 million non-cash deferred rent receivable reserve recorded as of December 31, 2007 for certain properties leased to Marketing under the Marketing Leases. (See “— General — Marketing and the Marketing Leases” above for additional information.) If the applicable amount of the non-cash deferred rent receivable reserve were added to our 2007 net earnings, earnings from continuing operations and FFO; net earnings would have been $44.4 million, or $1.79 per share, for the year ended December 31, 2007; earnings from continuing operations would have been $37.7 million for the year ended December 31, 2007; and FFO would have been $48.0 million, or $1.94 per share, for the year ended December 31, 2007. Accordingly, as compared to the respective prior year periods; net earnings for 2008 would have decreased by $2.6 million and for 2007 would have increased by $1.7 million; earnings from continuing operations for 2008 would have increased by $1.1 million and for 2007 would have decreased by $3.7 million; and FFO for 2008 would have increased by $2.9 million and for 2007 would have decreased by $1.0 million. We believe that these supplemental non-GAAP measures for 2007 are important to assist in the analysis of our performance for 2008 as compared to 2007 and 2007 as compared to 2006, exclusive of the impact of the non-cash deferred rent receivable reserve on our results of operations and are reconciled below (in thousands):
                         
    Non-              
    adjusted     Reserve     As Adjusted  
Net earnings
  $ 33,894     $ 10,494     $ 44,388  
Earnings from continuing operations
    27,500       10,153       37,653  
Funds from operations
    37,509       10,494       48,003  

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2010 and 2009 Acquisitions
     In 2010, we purchased three properties.
     On September 25, 2009, we acquired the real estate assets and improvements of 36 gasoline stations and convenience store properties located primarily in Prince George’s County Maryland for $49.0 million from White Oak Petroleum LLC (“White Oak”) for cash with $24.5 million draw under our existing Credit Agreement and $24.5 provided by the three-year Term Loan Agreement entered into on that date.
     The real estate assets were acquired in a simultaneous transaction among ExxonMobil, White Oak and us, whereby White Oak acquired the real estate assets and the related businesses from ExxonMobil and simultaneously completed a sale/leaseback of the real estate assets of all 36 properties with us. We entered into a unitary triple-net lease for the real estate assets with White Oak which has an initial term of 20 years and provides White Oak with options for three renewal terms of ten years each extending to 2059. The unitary triple-net lease provides for annual rent escalations of 21/2% per year. White Oak is responsible to pay for all existing and future environmental liabilities related to the properties.
     In 2009 we also exercised our fixed price purchase option for one leased property and purchased three properties.
RESULTS OF OPERATIONS
Year ended December 31, 2010 compared to year ended December 31, 2009
     Revenues from rental properties included in continuing operations were $88.3 million for the year ended December 31, 2010, as compared to $84.4 million for the year ended December 31, 2009. We received approximately $60.3 million and $60.6 million in rent for the years ended December 31, 2010 and December 31, 2009, respectively, from properties leased to Marketing under the Marketing Leases. We also received rent of $26.6 million and $21.8 million for the years ended December 31, 2010 and 2009, respectively, from other tenants. The increase in rent received for the year ended December 31, 2010 was primarily due to rental income from properties we acquired from, and leased back to, White Oak in September 2009 and, to a lesser extent, due to rent escalations, partially offset by the effect of dispositions of real estate and lease expirations. In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due or received during the periods presented. As a result, revenues from rental properties include Revenue Recognition Adjustments comprised of 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, net amortization of above-market and below-market leases and recognition of rental income under a direct financing lease using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Rental revenue includes Revenue Recognition Adjustments which increased rental revenue by $1.4 million for the year ended December 31, 2010 and $2.0 million for the year ended December 31, 2009.
     Rental property expenses included in continuing operations, which are primarily comprised of rent expense and real estate and other state and local taxes, were $10.1 million for the year ended December 31, 2010 as compared to $10.7 million for the year ended December 31, 2009. The decrease in rental property expenses is due to a reduction in rent expense caused by a decrease in the number of leased properties sublet to tenants due to third party lease expirations as compared to the prior year.
     Environmental expenses, net of estimated recoveries from underground storage tank (“UST” or ”USTs”) funds included in continuing operations for the year ended December 31, 2010 decreased by $3.4 million, to $5.4 million, as compared to $8.8 million for the year ended December 31, 2009. The decrease in net environmental expenses for the year ended December 31, 2010 was primarily due to a lower provision for litigation loss reserves and legal fees which decreased by $2.1 million for 2010, and a lower provision for estimated environmental remediation costs which decreased by an aggregate $1.2 million to $2.7 million for the year ended December 31, 2010, as compared to $3.9 million for the year ended December 31, 2009. Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for one period as compared to prior periods.
     General and administrative expenses were $8.2 million for the year ended December 31,2010 as compared to $6.8 million recorded for the year ended December 31, 2009. The increase in general and administrative expenses was principally due to higher employee compensation and benefit expenses and provisions for doubtful accounts.

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     Depreciation and amortization expense included in continuing operations for 2010 was $9.7 million for the year ended December 31, 2010, as compared to $10.8 million for the year ended December 31, 2009. The decrease was primarily due to the effect of certain assets becoming fully depreciated, lease terminations and dispositions of real estate partially offset by depreciation charges related to properties acquired.
     The $1.1 million of impairment charges recorded in the year ended December 31, 2009 was attributable to general reductions in real estate valuations and, in certain cases, the removal or scheduled removal of underground storage tanks by Marketing. There were no impairment charges recorded for the year ended December 31, 2010.
     As a result, total operating expenses decreased by approximately $4.8 million for the year ended December 31, 2010, as compared to the year ended December 31, 2009.
     Other income, net, included in income from continuing operations was $0.3 million for the year ended December 31, 2010, as compared to $0.6 million for the year ended December 31, 2009. Gains from dispositions of real estate included in discontinued operations were $1.7 million for the year ended December 31, 2010 and $5.3 million for the year ended December 31, 2009. For the year ended December 31, 2010, there were five property dispositions, including four properties that were mutually agreed by the Company and Marketing to be removed from the Marketing Leases prior to the expirations of the current term of the Master Lease. For the year ended December 31, 2009, there were eight property dispositions, including four properties that were mutually agreed by the Company and Marketing to be removed from the Marketing Leases prior to the expirations of the current term of the Master Lease. Other income, net and gains on disposition of real estate vary from period to period and accordingly, undue reliance should not be placed on the magnitude or the directions of change in reported gains for one period as compared to prior periods.
     Interest expense was $5.1 million for each of 2010 and 2009. While there was no significant change in interest expense recorded for the year ended December 31, 2010 as compared to the prior year period, the weighted average interest rate on borrowings outstanding increased due to changes in the relative amounts of debt outstanding under our Credit Agreement and Term Loan, (each described in “Liquidity and Capital Resources” below) and average borrowings outstanding for the year ended December 31, 2010 were less than average borrowings outstanding for the year ended December 31, 2009. The lower average borrowings outstanding was principally due to the repayment of a portion of the outstanding balance of our Credit Agreement with a portion of the $108.2 million net proceeds from a public stock offering of 5.2 million shares of our common stock during the second quarter of 2010, partially offset by $49.0 million borrowed in September 2009 under our Term Loan and our Credit Agreement which was used to finance the acquisition of properties.
     The operating results and gains from certain dispositions of real estate sold in 2010 and 2009 are reclassified as discontinued operations. The operating results of such properties for the year ended December 31, 2009 has also been reclassified to discontinued operations to conform to the 2010 presentation. Earnings from discontinued operations decreased by $3.8 million to $1.6 million for the year ended December 31, 2010, as compared to $5.4 million for the year ended December 31, 2009. The decrease was primarily due to lower gains on dispositions of real estate. Gains on disposition of real estate vary from period to period and accordingly, undue reliance should not be placed on the magnitude or the directions of change in reported gains for one period as compared to prior periods.
     As a result, earnings from continuing operations were $50.1 million for the year ended December 31, 2010, as compared to $41.7 million for the year ended December 31, 2009 and net earnings increased by $4.7 million to $51.7 million for the year ended December 31, 2010, as compared to $47.0 million for the year ended December 31, 2009.
     For the year ended December 31, 2010, FFO increased by $7.1 million to $59.7 million, as compared to $52.6 million for the year ended December 31, 2009, and AFFO increased by $6.5 million to $58.2 million, as compared to $51.7 million for the prior year. The increase in FFO for the year ended December 31, 2010 was primarily due to the changes in net earnings but excludes a $1.3 million decrease in depreciation and amortization expense and a $3.8 million decrease in gains on dispositions of real estate. The increase in AFFO for the year ended December 31, 2010 also excludes $1.1 million of impairment charges recorded in 2009 and a $0.6 million decrease in Rental Revenue Adjustments which cause our reported revenues from rental properties to vary from the amount of rent payments contractually due or received by us during the periods presented (which are included in net earnings and FFO but are excluded from AFFO).

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     The calculations of net earnings per share, FFO per share, and AFFO per share for the year ended December 31, 2010 were impacted by an increase in the weighted average number of shares outstanding as a result of the issuance of 5.2 million shares of common stock in May 2010. The weighted average number of shares outstanding used in our per share calculations increased by 3.2 million shares, or 12.9%, for the year ended December 31, 2010, as compared to the year ended December 31, 2009. Accordingly, the percentage or direction of the changes in net earnings, FFO and AFFO discussed above may differ from the changes in the related per share amounts. Diluted earnings per share decreased by $0.05 per share for the year ended December 31, 2010 to $1.85 per share as compared to $1.90 per share for the year ended December 31, 2009. Diluted FFO per share increased by $0.02 per share for the year ended December 31, 2010 to $2.14 per share, as compared to $2.12 per share for the year ended December 31, 2009. Diluted AFFO per share decreased by $0.01 per share for the year ended December 31, 2010 to $2.08 per share, as compared to $2.09 per share for the year ended December 31, 2009.
Year ended December 31, 2009 compared to year ended December 31, 2008
     Revenues from rental properties included in continuing operations were $84.4 million for the year ended December 31, 2009, as compared to $82.7 million for the year ended December 31, 2008. We received approximately $60.6 million and $60.0 million for the years ended December 31, 2009 and 2008, respectively, from properties leased to Marketing under the Marketing Leases. We also received rent of $21.8 million and $20.1 million for the years ended December 31, 2009 and 2008, respectively, from other tenants. The increase in rent received was primarily due to rent escalations, and rental income from properties acquired, partially offset by the effect of lease expirations. In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due or received during the periods presented. As a result, revenues from rental properties include Revenue Recognition Adjustments comprised of 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, net amortization of above-market and below-market leases and recognition of rental income recorded under a direct financing lease using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Rental revenue includes Revenue Recognition Adjustments which increased rental revenue by $2.0 million for the year ended December 31, 2009 and by $2.5 million for the year ended December 31, 2008.
     Rental property expenses included in continuing operations, which are primarily comprised of rent expense and real estate and other state and local taxes, were $10.7 million for the year ended December 31, 2009, as compared to $11.4 million for the year ended December 31, 2008. The decrease in rental property expenses is due to a reduction in rent expense incurred as a result of third party lease expirations as compared to the prior year.
     Environmental expenses, net of estimated recoveries from state underground storage tank funds included in continuing operations for the year ended December 31, 2009 were $8.8 million, as compared to $7.3 million for 2008. The increase was due to a $2.2 million net increase in environmental related litigation reserves, which was partially offset by a reduction in legal fees of $0.3 million and a reduction in estimated environmental remediation costs of $0.7 million. The increase in environmental litigation reserves was principally attributed to settlement of 27 MTBE cases in which we were named a defendant. See Environmental Matters — Environmental Litigation below for additional information related to our defense of MTBE cases. Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for one period as compared to prior periods.
     General and administrative expenses for 2009 were $6.8 million, which was comparable to 2008.
     Depreciation and amortization expense included in continuing operations for 2009 was $10.8 million, as compared to $11.7 million for 2008. The decrease was primarily due to the effect of assets becoming fully depreciated, lease terminations and property dispositions partially offset by depreciation charges related to properties acquired.
     The $1.1 million of impairment charges recorded in the year ended December 31, 2009 was attributable to general reductions in real estate valuations and, in certain cases, the removal or scheduled removal of underground storage tanks by Marketing.
     As a result, total operating expenses increased by approximately $1.0 million for 2009 as compared to 2008.

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     Other income, net, included in income from continuing operations increased by $0.2 million to $0.6 million for 2009, as compared to $0.4 million for 2008. Gains on dispositions of real estate included in discontinued operations were $5.3 million for 2009 as compared to $2.4 million for 2008. Gains on dispositions of real estate in 2009 increased by an aggregate of $2.7 million to $5.5 million, as compared to $2.8 million for the prior year. For 2009, there were eight property dispositions and two partial land takings under eminent domain. For 2008, there were eleven property dispositions and four partial land takings under eminent domain. Property dispositions for 2009 and 2008 include four and seven properties, respectively, that were mutually agreed to be removed from the Marketing Leases prior to their scheduled lease expiration. Other income, net and gains on disposition of real estate vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported gains for one period as compared to prior periods.
     Interest expense was $5.1 million for 2009, as compared to $7.0 million for 2008. The decrease was due to lower average interest rates in 2009 on our floating rate borrowings, partially offset by increased average borrowings outstanding relating to the acquisition of properties in the third quarter of 2009.
     The operating results and gains from certain dispositions of real estate sold in 2010 and 2009 are reclassified as discontinued operations. The operating results of such properties for the year ended December 31, 2008 has also been reclassified to discontinued operations to conform to the 2010 and 2009 presentation. Earnings from discontinued operations increased by $2.3 million to $5.4 million for the year ended December 31, 2009, as compared to $3.1 million for the year ended December 31, 2008. The decrease was primarily due to lower gains on dispositions of real estate. Gains on disposition of real estate vary from period to period and accordingly, undue reliance should not be placed on the magnitude or the directions of change in reported gains for one period as compared to prior periods.
     As a result, net earnings were $47.0 million for 2009, as compared to $41.8 million for 2008, an increase of 12.4%, or $5.2 million. Earnings from continuing operations were $41.7 million for 2009, as compared to $38.7 million for 2008, an increase of 7.8%, or $3.0 million. For the same period, FFO increased by 3.3% to $52.6 million, as compared to $50.9 million for prior year period and AFFO increased by 7.0%, or $3.4 million, to $51.7 million, as compared to $48.3 million for 2008. The increase in FFO for 2009 was primarily due to the changes in net earnings described above but excludes a $0.9 million decrease in depreciation and amortization expense and a $2.7 million increase in gains on dispositions of real estate. The increase in AFFO for 2009 also excludes a $0.5 million reduction in Rental Revenue Adjustments which cause our reported revenues from rental properties to vary from the amount of rent payments contractually due or received by us during the periods presented, and a $1.1 million impairment charge recorded in 2009 (which are included in net earnings and FFO but are excluded from AFFO).
     Diluted earnings per share were $1.90 per share for 2009, an increase of $0.21 per share, as compared to $1.69 per share for 2008. Diluted FFO per share for 2009 was $2.12 per share, an increase of $0.06 per share, as compared to 2008. Diluted AFFO per share for 2009 was $2.09 per share, an increase of $0.14 per share, as compared to 2008.

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LIQUIDITY AND CAPITAL RESOURCES
     Our principal sources of liquidity are the cash flows from our operations, funds available under our revolving Credit Agreement that expires in March 2012, described below, and available cash and cash equivalents. Management believes that our operating cash needs for the next twelve months can be met by cash flows from operations, borrowings under our existing Credit Agreement and available cash and cash equivalents. Net cash flow provided by operating activities reported on our consolidated statement of cash flows for 2010, 2009 and 2008 were $56.9 million, $52.5 million and $47.6 million, respectively. It is possible that our business operations or liquidity may be adversely affected by Marketing and the Marketing Leases discussed in “General — Marketing and the Marketing Leases” above and as a result we may be in default of our Credit Agreement or Term Loan Agreement which if such default was not cured or waived would prohibit us from drawing funds against the Credit Agreement. We may be required to enter into alternative loan agreements, sell assets or issue additional equity at unfavorable terms if we do not have access to funds under our Credit Agreement.
     We cannot accurately predict how periods of illiquidity in the credit markets may impact our access to capital and the costs associated with any additional borrowings. We may not be able to obtain additional financing on favorable terms, or at all. If one or more of the financial institutions that supports our Credit Agreement fails, we may not be able to find a replacement, which would negatively impact our ability to borrow under our Credit Agreement. In addition, we may not be able to refinance our outstanding debt when due, which could have a material adverse effect on us.
     During the second quarter of 2010, we completed a public stock offering of 5.2 million shares of our common stock. The $108.2 million net proceeds from the offering was used in part to repay a portion of the outstanding balance under our Credit Agreement, described below, and the remainder was used for general corporate purposes. During the first quarter of 2011, we completed a public stock offering of 3.5 million shares of our common stock. Substantially all of the $91.8 million net proceeds from the offering was used to repay a portion of the outstanding balance under our Credit Agreement and the remainder was used for general corporate purposes.
     We are party to a $175.0 million amended and restated senior unsecured revolving credit agreement (the “Credit Agreement”) with a group of domestic commercial banks led by JPMorgan Chase Bank, N.A. (the “Bank Syndicate”) which expires in March 2012. As of December 31, 2010, borrowings under the Credit Agreement were $41.3 million bearing interest at a rate of 1.31% per annum. We had $133.7 million available under the terms of the Credit Agreement as of December 31, 2010. The Credit Agreement does not provide for scheduled reductions in the principal balance prior to its maturity. The Credit Agreement permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.0% or 0.25% or a LIBOR rate plus a margin of 1.0%, 1.25% or 1.5%. The applicable margin is based on our leverage ratio at the end of the prior calendar quarter, as defined in the Credit Agreement, and is adjusted effective mid-quarter when our quarterly financial results are reported to the Bank Syndicate. Based on our leverage ratio as of December 31, 2010, the applicable margin will remain at 0.0% for base rate borrowings and 1.0% for LIBOR rate borrowings.
     The annual commitment fee on the unused Credit Agreement ranges from 0.10% to 0.20% based on the average amount of borrowings outstanding. The Credit Agreement contains customary terms and conditions, including financial covenants such as those requiring us to maintain minimum tangible net worth, leverage ratios and coverage ratios which may limit our ability to incur debt or pay dividends. The Credit Agreement contains customary events of default, including change of control, failure to maintain REIT status and a material adverse effect on our business, assets, prospects or condition. Any event of default, if not cured or waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of our indebtedness under our Credit Agreement, an inability to draw additional funds from the Credit Agreement and could also give rise to an event of default and consequent acceleration of our indebtedness under our Term Loan Agreement. Additionally, in such an event, we may be required to enter into alternative loan agreements, sell assets or issue additional equity at unfavorable terms if we do not have access to funds under our Credit Agreement.
     Subject to the terms of the Credit Agreement, and continued compliance with the covenants therein, we have the option, subject to approval by the Bank Syndicate, increase the amount of the credit facility available pursuant to the Credit Agreement by $125.0 million to $300.0 million. We do not expect to exercise our option to increase the amount of the Credit Agreement. In addition, we believe that we would need to renegotiate certain terms in the Credit Agreement in order to obtain approval from the Bank Syndicate to increase the amount of the Credit Agreement. No assurance can be given that such approval from the Bank Syndicate will be obtained on terms acceptable to us, if at all. We are considering amending the

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existing Credit Agreement or entering into a new revolving credit agreement. There can be no assurance that we will be able to amend the existing Credit Agreement or enter into a new revolving credit agreement on favorable terms, if at all.
     We are party to a $45.0 million LIBOR based interest rate Swap Agreement with JPMorgan Chase Bank, N.A. as the counterparty (the “Swap Agreement”), effective through June 30, 2011. The Swap Agreement is intended to hedge our current exposure to market interest rate risk by effectively fixing, at 5.44%, the LIBOR component of the interest rate determined under our existing LIBOR based loan agreements or future exposure to variable interest rate risk due to borrowing arrangements that may be entered into prior to the expiration of the Swap Agreement. We will be fully exposed to interest rate risk on our aggregate borrowings floating at market rates upon expiration of the Swap Agreement unless we enter into another swap agreement.
     In order to partially finance the acquisition of 36 properties in September 2009, we entered into a $25.0 million three-year Term Loan Agreement with TD Bank (the “Term Loan Agreement” or “Term Loan”) which expires in September 2012. As of December 31, 2010, borrowings under the Term Loan Agreement were $23.6 million bearing interest at a rate of 3.5% per annum. The Term Loan Agreement provides for annual reductions of $0.8 million in the principal balance with a $22.2 million balloon payment due at maturity. The Term Loan Agreement bears interest at a rate equal to a thirty day LIBOR rate (subject to a floor of 0.4%) plus a margin of 3.1%. The Term Loan Agreement contains customary terms and conditions, including financial covenants such as those requiring us to maintain minimum tangible net worth, leverage ratios and coverage ratios and other covenants which may limit our ability to incur debt or pay dividends. The Term Loan Agreement contains customary events of default, including change of control, failure to maintain REIT status or a material adverse effect on our business, assets, prospects or condition. Any event of default, if not cured or waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of our indebtedness under the Term Loan Agreement.
     Since we generally lease our properties on a triple-net basis, we do not incur significant capital expenditures other than those related to acquisitions. As part of our overall business strategy, we regularly review opportunities to acquire additional properties and we expect to continue to pursue acquisitions that we believe will benefit our financial performance. Capital expenditures, including acquisitions, for 2010, 2009 and 2008 amounted to $4.7 million, $55.3 million and $6.6 million, respectively. To the extent that our current sources of liquidity are not sufficient to fund capital expenditures and acquisitions we will require other sources of capital, which may or may not be available on favorable terms or at all. We cannot accurately predict how periods of illiquidity in the credit markets may impact our access to capital.
     We elected to be treated as a REIT under the federal income tax laws with the year beginning January 1, 2001. As a REIT, we are required, among other things, to distribute at least ninety percent of our taxable income to shareholders each year. Payment of dividends is subject to market conditions, our financial condition and other factors, and therefore cannot be assured. In particular, our Credit Agreement prohibits the payment of dividends during certain events of default. Dividends paid to our shareholders aggregated $52.3 million, $46.8 million and $46.3 million for 2010, 2009 and 2008, respectively, and were paid on a quarterly basis during each of those years. We presently intend to pay common stock dividends of $0.48 per share each quarter ($1.92 per share, or $64.4 million, on an annual basis including dividends on 3.5 million common shares issued during the first quarter of 2011 and dividend equivalents paid on outstanding restricted stock units), and commenced doing so with the quarterly dividend declared in August 2010. Due to the developments related to Marketing and the Marketing Leases discussed in “General -Marketing and the Marketing Leases” above, there can be no assurance that we will be able to continue to pay dividends at the rate of $0.48 per share per quarter, if at all.

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CONTRACTUAL OBLIGATIONS
     Our significant contractual obligations and commitments are comprised of borrowings under the Credit Agreement and the Term Loan Agreement, operating lease payments due to landlords and estimated environmental remediation expenditures, net of estimated recoveries from state UST funds. In addition, as a REIT, we are required to pay dividends equal to at least 90% of our taxable income in order to continue to qualify as a REIT. Our contractual obligations and commitments as of December 31, 2010 are summarized below (in thousands):
                                         
                            THREE     MORE  
            LESS     ONE-TO     TO     THAN  
            THAN-     THREE     FIVE     FIVE  
    TOTAL     ONE YEAR     YEARS     YEARS     YEARS  
Operating leases
  $ 20,373     $ 6,193     $ 7,984     $ 3,863     $ 2,333  
Borrowing under the Credit Agreement (a)
    41,300             41,300              
Borrowings under the Term Loan Agreement (a)
    23,590       780       22,810              
Estimated environmental remediation expenditures (b)
    14,874       4,980       5,812       2,068       2,014  
Estimated recoveries from state underground storage tank funds (b)
    (3,966 )     (1,393 )     (1,508 )     (718 )     (347 )
 
                             
Estimated net environmental remediation expenditures (b)
    10,908       3,587       4,304       1,350       1,667  
 
                             
Total
  $ 96,171     $ 10,560     $ 76,398     $ 5,213     $ 4,000  
 
                             
 
(a)   Excludes related interest payments. (See “— Liquidity and Capital Resources” above and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for additional information.)
 
(b)   Estimated environmental remediation expenditures and estimated recoveries from state UST funds have been adjusted for inflation and discounted to present value.
     Generally, the leases with our tenants are “triple-net” leases, with the tenant responsible for managing the operations conducted at these properties and for the payment of taxes, maintenance, repair, insurance, environmental remediation and other operating expenses. We estimate that Marketing makes annual real estate tax payments for properties leased under the Marketing Leases of approximately $13.0 million and makes additional payments for other operating expenses related to our properties, including environmental remediation costs other than those liabilities that were retained by us. These costs are not reflected in our consolidated financial statements. (See “— General — Marketing and the Marketing Leases” above for additional information.)
     We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements. We have no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the Exchange Act.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
     The consolidated financial statements included in this Annual Report on Form 10-K include the accounts of Getty Realty Corp. and our wholly-owned subsidiaries. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in its financial statements. Although we have made estimates, judgments and assumptions regarding future uncertainties relating to the information included in our financial statements, giving due consideration to the accounting policies selected and materiality, actual results could differ from these estimates, judgments and assumptions and such differences could be material.
     Estimates, judgments and assumptions underlying the accompanying consolidated financial statements include, but are not limited to, deferred rent receivable, income under direct financing leases, recoveries from state underground storage tank funds, environmental remediation costs, real estate, depreciation and amortization, impairment of long-lived assets, litigation, accrued expenses, income taxes, allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed and exposure to paying an earnings and profits deficiency dividend. The information included in our financial

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statements that is based on estimates, judgments and assumptions is subject to significant change and is adjusted as circumstances change and as the uncertainties become more clearly defined.
     As of December 31, 2010, the net carrying value of the deferred rent receivable attributable to the Marketing Leases was $21.2 million and the aggregate Marketing Environmental Liabilities, net of expected recoveries from underground storage tank funds, for which we may ultimately be responsible to pay but have not accrued range between $13 million and $20 million. The actual amount of the Marketing Environmental Liabilities may differ from our estimated range and we can provide no assurance as to the accuracy of our estimate. Although our 2010 financial statements were not affected by the transfer of Lukoil’s ownership interest in Marketing to Cambridge, our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as we develop a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that we may be required to increase or decrease the deferred rent reserve, record additional impairment charges related to the properties, or accrue for Marketing Environmental Liabilities as a result of changes in our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases that affect the amounts reported in our financial statements. It is also possible that as a result of material adjustments to the amounts recorded for certain of our assets and liabilities that we may not be in compliance with the financial covenants in our Credit Agreement or Term Loan Agreement. (See “— General —Marketing and the Marketing Leases” above for additional information.)
     Our accounting policies are described in Note 1 of Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements”. We believe the following are our critical accounting policies:
     Revenue recognition — We earn revenue primarily from operating leases with Marketing and other tenants. We recognize income under the Master Lease with Marketing, and with other tenants, on the straight-line method, which effectively recognizes contractual lease payments evenly over the current term of the leases. The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases. A critical assumption in applying the straight-line accounting method is that the tenant will make all contractual lease payments during the current lease term and that the net deferred rent receivable of $27.4 million recorded as of December 31, 2010 will be collected when the payment is due, in accordance with the annual rent escalations provided for in the leases. Historically our tenants have generally made rent payments when due. However, we may be required to reverse, or provide reserves for, or adjust our $8.2 million reserve as of December 31, 2010 for, a portion of the recorded deferred rent receivable if it becomes apparent that a property may be disposed of before the end of the current lease term or if circumstances indicate that the tenant may not make all of its contractual lease payments when due during the current term of the lease. The straight-line method requires that rental income related to those properties for which a reserve was specifically provided is effectively recognized in subsequent periods when payment is due under the contractual payment terms. (See Marketing and the Marketing Leases in “— General — Marketing and the Marketing Leases” above for additional information.)
     Direct Financing Lease — Income under direct financing leases is included in revenues from rental properties and is recognized over the lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Net investment in direct financing lease represents the investment in leased assets accounted for as a direct financing lease. The investment is reduced by the receipt of lease payments, net of interest income earned and amortized over the life of the lease.
     Impairment of long-lived assets — Real estate assets represent “long-lived” assets for accounting purposes. We review the recorded value of long-lived assets for impairment in value whenever any events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. We may become aware of indicators of potentially impaired assets upon tenant or landlord lease renewals, upon receipt of notices of potential governmental takings and zoning issues, or upon other events that occur in the normal course of business that would cause us to review the operating results of the property. We believe our real estate assets are not carried at amounts in excess of their estimated net realizable fair value amounts.
     Income taxes — Our financial results generally do not reflect provisions for current or deferred federal income taxes since we elected to be treated as a REIT under the federal income tax laws effective January 1, 2001. Our intention is to operate in a manner that will allow us to continue to be treated as a REIT and, as a result, we do not expect to pay substantial corporate-level federal income taxes. Many of the REIT requirements, however, are highly technical and complex. If we were to fail to meet the requirements, we may be subject to federal income tax, excise taxes, penalties and interest or we may have to pay a

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deficiency dividend to eliminate any earnings and profits that were not distributed. Certain states do not follow the federal REIT rules and we have included provisions for these taxes in rental property expenses.
     Environmental costs and recoveries from state UST funds — We provide for the estimated fair value of future environmental remediation costs when it is probable that a liability has been incurred and a reasonable estimate of fair value can be made (see “— Environmental Matters” below for additional information). Environmental liabilities and related recoveries are measured based on their expected future cash flows which have been adjusted for inflation and discounted to present value. Since environmental exposures are difficult to assess and estimate and knowledge about these liabilities is not known upon the occurrence of a single event, but rather is gained over a continuum of events, we believe that it is appropriate that our accrual estimates are adjusted as the remediation treatment progresses, as circumstances change and as environmental contingencies become more clearly defined and reasonably estimable. A critical assumption in accruing for these liabilities is that the state environmental laws and regulations will be administered and enforced in the future in a manner that is consistent with past practices. Recoveries of environmental costs from state UST remediation funds, with respect to past and future spending, are accrued as income, net of allowance for collection risk, based on estimated recovery rates developed from our experience with the funds when such recoveries are considered probable. A critical assumption in accruing for these recoveries is that the state UST fund programs will be administered and funded in the future in a manner that is consistent with past practices and that future environmental spending will be eligible for reimbursement at historical rates under these programs. We accrue environmental liabilities based on our share of responsibility as defined in our lease contracts with our tenants and under various other agreements with others or if circumstances indicate that the counter-party may not have the financial resources to pay its share of the costs. 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 material adjustments to the amounts recorded for environmental litigation accruals, environmental remediation liabilities and related assets. (See “— General — Marketing and the Marketing Leases” above for additional information.) We may ultimately be responsible to pay for environmental liabilities as the property owner if Marketing or our other tenants or other counter-parties fail to pay them. In certain environmental matters the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists both in terms of the probability of loss and the estimate of such loss. The ultimate liabilities resulting from such lawsuits and claims, if any, may be material to our results of operations in the period in which they are recognized.
     Litigation — Legal fees related to litigation are expensed as legal services are performed. We provide for litigation reserves, including certain environmental litigation (see “— Environmental Matters” below for additional information), when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made. If the estimate of the liability can only be identified as a range, and no amount within the range is a better estimate than any other amount, the minimum of the range is accrued for the liability.
     Recent Accounting Developments and Amendments to the Accounting Standards Codification — In September 2006, the FASB amended the accounting standards related to fair value measurements of assets and liabilities (the “Fair Value Measurements Amendment”). The Fair Value Measurements Amendment generally applies whenever other standards require assets or liabilities to be measured at fair value. The Fair Value Measurements Amendment was effective in fiscal years beginning after November 15, 2007. The FASB subsequently delayed the effective date of the Fair Value Measurements Amendment by one year for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008. The adoption of the Fair Value Measurements Amendment in January 2008 and the adoption of the provisions of the Fair Value Measurements Amendment for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis in January 2009 did not have a material impact on our financial position and results of operations.
     In December 2007, the FASB amended the accounting standards related to business combinations (the “Business Combinations Amendment”), affecting how the acquirer shall recognize and measure in its financial statements at fair value the identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree and goodwill acquired in a business combination. The Business Combinations Amendment requires that acquisition costs, which could be material to our future financial results, will be expensed rather than included as part of the basis of the acquisition. The adoption of this standard by us on January 1, 2009 did not result in a write-off of acquisition related transactions costs associated with transactions not yet consummated.

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ENVIRONMENTAL MATTERS
General
     We are subject to numerous existing federal, state and local laws and regulations, including matters relating to the protection of the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment. Our tenants are directly responsible for compliance with various environmental laws and regulations as the operators of our properties. Environmental expenses are principally attributable to remediation costs which include installing, operating, maintaining and decommissioning remediation systems, monitoring contamination, and governmental agency reporting incurred in connection with contaminated properties. We seek reimbursement from state UST remediation funds related to these environmental expenses where available.
     We enter into leases and various other agreements which allocate responsibility for known and unknown environmental liabilities by establishing the percentage and method of allocating responsibility between the parties. In accordance with the leases with certain of our tenants, we have agreed to bring the leased properties with known environmental contamination to within applicable standards, and to either regulatory or contractual closure (“Closure”). Generally, upon achieving Closure at an individual property, our environmental liability under the lease for that property will be satisfied and future remediation obligations will be the responsibility of our tenant. As of December 31, 2010, we have regulatory approval for remediation action plans in place at 227 (94%) of the 241 properties at which we continue to retain remediation responsibility and the remaining 14 properties (6%) were in the assessment phase. In addition, we have nominal post-closure compliance obligations at 29 properties where we have received “no further action” letters.
     Our tenants are directly responsible to pay for (i) remediation of environmental contamination they cause and compliance with various environmental laws and regulations as the operators of our properties, and (ii) environmental liabilities allocated to them under the terms of our leases and various other agreements. Generally, the liability for the retirement and decommissioning or removal of USTs and other equipment is the responsibility of our tenants. We are contingently liable for these obligations in the event that our tenants do not satisfy their responsibilities. A liability has not been accrued for obligations that are the responsibility of our tenants based on our tenants’ past histories of paying such obligations and/or our assessment of their respective financial abilities to pay their share of such costs. 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.
     It is possible that our assumptions regarding the ultimate allocation methods or share of responsibility that we used to allocate environmental liabilities may change, which may result in adjustments to the amounts recorded for environmental litigation accruals, environmental remediation liabilities and related assets. We will be required to accrue for environmental liabilities that we believe are allocable to others under various other agreements if we determine that it is probable that the counter-party will not meet its environmental obligations. We may ultimately be responsible to pay for environmental liabilities as the property owner if the counter-party fails to pay them. The ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. (See “— General —Marketing and the Marketing Leases” above for additional information.)
     We have also agreed to provide limited environmental indemnification to Marketing, capped at $4.25 million, for certain pre-existing conditions at six of the terminals we own and lease to Marketing. Under the indemnification agreement, Marketing is required to pay (and has paid) the first $1.5 million of costs and expenses incurred in connection with remediating any such pre-existing conditions, Marketing shares equally with us the next $8.5 million of those costs and expenses and Marketing is obligated to pay all additional costs and expenses over $10.0 million. We have accrued $0.3 million as of December 31, 2010 and December 31, 2009 in connection with this indemnification agreement. Under the Master Lease, we continue to have additional ongoing environmental remediation obligations at 186 scheduled sites.
     As the operator of our properties under the Marketing Leases, Marketing is directly responsible to pay for the remediation of environmental contamination it causes and to comply with various environmental laws and regulations. In addition, the Marketing Leases and various other agreements between Marketing and us allocate responsibility for known and unknown environmental liabilities between Marketing and us relating to the properties subject to the Marketing Leases. Based on various factors, including our assessments and assumptions at this time that Lukoil would not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases, we believe that Marketing will continue

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to pay for substantially all environmental contamination and remediation costs allocated to it under the Marketing Leases. It is possible that our assumptions regarding the ultimate allocation methods or share of responsibility that we used to allocate environmental liabilities may change, which may result in adjustments to the amounts recorded for environmental litigation accruals, environmental remediation liabilities and related assets. If Marketing fails to pay them, we may ultimately be responsible to pay for environmental liabilities as the property owner. We are required to accrue for environmental liabilities that we believe are allocable to Marketing under the Marketing Leases and various other agreements if we determine that it is probable that Marketing will not pay its environmental obligations and we can reasonably estimate the amount of the Marketing Environmental Liabilities for which we will be responsible to pay.
     Based on our assessment of Marketing’s financial condition and our assumption that Lukoil would not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases and certain other factors, including but not limited to those described above, we believed effective as of December 31, 2010 and prior thereto that it was not probable that Marketing will not pay the environmental liabilities allocable to it under the Marketing Leases and various other agreements and, therefore, have not accrued for such environmental liabilities. Our assessments and assumptions that affect the recording of environmental liabilities related to the properties subject to the Marketing Leases are reviewed on a quarterly basis and such assessments and assumptions are subject to change. It is possible that we may change our estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, we may be required to accrue for the Marketing Environmental Liabilities.
     We have determined that the aggregate amount of the environmental liabilities attributable to Marketing related to our properties (as estimated by us, based on our assumptions and our analysis of information currently available to us described in more detail above) (the “Marketing Environmental Liabilities”) would be material to us if we were required to accrue for all of the Marketing Environmental Liabilities since as a result of such accrual, we would not be in compliance with the existing financial covenants in our Credit Agreement and our Term Loan Agreement. Such non-compliance would result in an event of default under the Credit Agreement and our Term Loan Agreement which, if not waived, would prohibit us from drawing funds against the Credit Agreement and could result in the acceleration of our indebtedness under the Credit Agreement and the Term Loan Agreement. (See “— General —Marketing and the Marketing Leases” above for additional information.)
     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. Environmental liabilities and related recoveries are measured based on their expected future cash flows which have been adjusted for inflation and discounted to present value. The environmental remediation liability is estimated based on the level and impact of contamination at each property and other factors described herein. The accrued liability is the aggregate of the best estimate for the fair value of cost for each component of the liability. Recoveries of environmental costs from state UST remediation funds, with respect to both past and future environmental spending, are accrued at fair value as an offset to environmental expense, net of allowance for collection risk, based on estimated recovery rates developed from our experience with the funds when such recoveries are considered probable.
     Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent 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, as well as the time it takes to remediate contamination. In developing our liability for probable and reasonably estimable environmental remediation costs on a property by property basis, we consider among other things, enacted laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as environmental contingencies become more clearly defined and reasonably estimable.
     As of December 31, 2010, we had accrued $10.9 million as management’s best estimate of the net fair value of reasonably estimable environmental remediation costs which was comprised of $14.9 million of estimated environmental obligations and liabilities offset by $4.0 million of estimated recoveries from state UST remediation funds, net of allowance. Environmental expenditures, net of recoveries from UST funds, were $4.7 million, $4.7 million and $5.0 million, respectively, for 2010, 2009, and 2008. For 2010, 2009 and 2008 estimated environmental remediation cost and accretion expense included in environmental expenses in continuing operations in our consolidated statements of operations amounted

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to $2.7 million, $3.9 million and $4.6 million, respectively, which amounts were net of probable recoveries from state UST remediation funds.
     Environmental liabilities and related assets are currently measured at fair value based on their expected future cash flows which have been adjusted for inflation and discounted to present value. We also use probability weighted alternative cash flow forecasts to determine fair value. We assumed a 50% probability factor that the actual environmental expenses will exceed engineering estimates for an amount assumed to equal one year of gross expenses aggregating $5.1 million before recoveries from UST funds. Accordingly, the environmental accrual as of December 31, 2010 was increased by $1.9 million, net of assumed recoveries and before inflation and present value discount adjustments. The resulting net environmental accrual as of December 31, 2010 was then further increased by $0.8 million for the assumed impact of inflation using an inflation rate of 2.75%. Assuming a credit-adjusted risk-free discount rate of 7.0%, we then reduced the net environmental accrual, as previously adjusted, by a $1.8 million discount to present value. Had we assumed an inflation rate that was 0.5% higher and a discount rate that was 0.5% lower, net environmental liabilities as of December 31, 2010 would have increased by $0.2 million and $0.1 million, respectively, for an aggregate increase in the net environmental accrual of $0.3 million. However, the aggregate net change in environmental estimates expense recorded during the year ended December 31, 2010 would not have changed significantly if these changes in the assumptions were made effective December 31, 2009.
     In view of the uncertainties associated with environmental expenditures, contingencies concerning Marketing and the Marketing Leases and contingencies related to other parties, however, we believe it is possible that the fair value of future actual net expenditures could be substantially higher than these estimates. (See “— General —Marketing and the Marketing Leases” above for additional information.) Adjustments to accrued liabilities for environmental remediation costs will be reflected in our financial statements as they become probable and a reasonable estimate of fair value can be made. Future environmental costs could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
     We cannot accurately predict what environmental legislation or regulations may be enacted in the future or how existing laws or regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied. We cannot accurately predict if state UST fund programs will be administered and funded in the future in a manner that is consistent with past practices and if future environmental spending will continue to be eligible for reimbursement at historical recovery rates under these programs. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws, which may develop in the future, could have an adverse effect on our financial position, or that of our tenants, and could require substantial additional expenditures for future remediation.
Environmental litigation
     We are subject to various legal proceedings and claims which arise in the ordinary course of our business. In addition, we have retained responsibility for certain legal proceedings and claims relating to the petroleum marketing business that were identified at the time of the Spin-Off. As of December 31, 2010 and December 31, 2009, we had accrued $3.3 million and $3.8 million, respectively, 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. Matters related to the Lower Passaic River and certain MTBE multi-district litigation cases, in particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. See “Item 3. Legal Proceedings” for additional information with respect these and other pending environmental lawsuits and claims.
The Lower Passaic River
     In September 2003, we received a directive (the “Directive”) from the State of New Jersey Department of Environmental Protection (the “NJDEP”) that we are one of approximately sixty-six potentially responsible parties for natural resource damages resulting from discharges of hazardous substances into the Lower Passaic River. The Directive calls for an assessment of the natural resources that have been injured by the discharges into the Lower Passaic River and interim compensatory restoration for the injured natural resources. NJDEP alleges that our liability arises from alleged discharges originating from our Newark, New Jersey Terminal site. There has been no material activity with respect to the NJDEP Directive since early after its issuance. The responsibility for the alleged damages, the aggregate cost to remediate the Lower

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Passaic River, the amount of natural resource damages and the method of allocating such amounts among the potentially responsible parties have not been determined. Effective May 2007, the United States Environmental Protection Agency (“EPA”) entered into an Administrative Settlement Agreement and Order on Consent (“AOC”) with over 70 parties comprising a Cooperating Parties Group (“CPG”) (many of whom also named in the Directive) who have collectively agreed to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the Lower Passaic River. We are a party to the AOC and a member of the CPG. The RI/FS is intended to address the investigation and evaluation of alternative remedial actions with respect to alleged damages to the Lower Passaic River, and is scheduled to be completed in or about 2014. The RI/FS does not resolve liability issues for remedial work or restoration of, or compensation for, natural resource damages to the Lower Passaic River, which are not known at this time.
     In a related action, in December 2005, the State of New Jersey through various state agencies brought suit against certain companies which the State alleges are responsible for various categories of past and future damages resulting from discharges of hazardous substances to the Lower Passaic River. In February 2009, certain of these defendants filed third-party complaints against approximately three hundred additional parties, including us, seeking contribution for such parties’ proportionate share of response costs, cleanup, and other damages, based on their relative contribution to pollution of the Passaic River and adjacent bodies of water.
     We believe that ChevronTexaco is contractually obligated to indemnify us, pursuant to an indemnification agreement for most, if not all of the conditions at the property identified by the NJDEP and the EPA. Our ultimate liability, if any, in the pending and possible future proceedings pertaining to the Lower Passaic River is uncertain and subject to numerous contingencies which cannot be predicted and the outcome of which are not yet known. (See “Item 3. Legal Proceedings” for additional information with respect to claims relates to the Lower Passaic River matter.)
MTBE Litigation
     During 2010, we were defending against 53 lawsuits brought by or on behalf of private and public water providers and governmental agencies. These cases alleged(and, as described below with respect to one remaining case, continue to allege) various theories of liability due to contamination of groundwater with MTBE as the basis for claims seeking compensatory and punitive damages, and name as defendant approximately 50 petroleum refiners, manufacturers, distributors and retailers of MTBE, or gasoline containing MTBE. During the quarter ended March 31, 2010, the Company reached agreements to settle two plaintiff classes covering 52 cases of the 53 pending cases. A settlement payment of $1,250,000 was made during the third quarter of 2010 covering 27 cases and a settlement payment of $475,000 was made during the first quarter of 2011 covering 25 cases. Presently, we remain a defendant in one MTBE case involving multiple locations throughout the State of New Jersey brought by various governmental agencies of the State of New Jersey, including the NJDEP.
     In the years ended December 31, 2009 and 2010, we provided litigation reserves aggregating $2.5 million relating to the MTBE cases. However, we are still unable to estimate with certainty our liability for the case involving the State of New Jersey as there remains uncertainty as to the accuracy of the allegations in this case as they relate to us, our defenses to the claims, our rights to indemnification or contribution from Marketing, and the aggregate possible amount of damages for which we may be held liable. (See “Item 3. Legal Proceedings” for additional information with respect to the MTBE litigation.)
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
     Prior to April 2006, when we entered into the Swap Agreement with JPMorgan Chase, N.A. (the “Swap Agreement”), we had not used derivative financial or commodity instruments for trading, speculative or any other purpose, and had not entered into any instruments to hedge our exposure to interest rate risk. We do not have any foreign operations, and are therefore not exposed to foreign currency exchange rate.
     We are exposed to interest rate risk, primarily as a result of our $175.0 million Credit Agreement and our $25.0 million Term Loan Agreement. We use borrowings under the Credit Agreement to finance acquisitions and for general corporate purposes. We used borrowings under the Term Loan Agreement to partially finance an acquisition in September 2009. Total borrowings outstanding as of December 31, 2010 under the Credit Agreement and the Term Loan Agreement were $41.3 million and $23.6 million, respectively, bearing interest at a weighted-average rate of 1.8% per annum, or a weighted-average effective rate of 3.1% including the impact of the Swap Agreement discussed below. The weighted-average effective rate is based on (i) $41.3 million of LIBOR rate borrowings outstanding under the Credit Agreement floating at market rates plus a margin of 1.00%, (ii) $23.6 million of LIBOR based borrowings outstanding under the Term Loan Agreement floating at

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market rates (subject to a 30 day LIBOR floor of 0.4%) plus a margin of 3.1% and (iii) the impact of the Swap Agreement effectively fixing at 5.44% the LIBOR component on $45.0 million of floating rate debt. Our Credit Agreement, which expires in March 2012, permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.0% or 0.25% or a LIBOR rate plus a margin of 1.0%, 1.25% or 1.5%. The applicable margin is based on our leverage ratio at the end of the prior calendar quarter, as defined in the Credit Agreement, and is adjusted effective mid-quarter when our quarterly financial results are reported to the Bank Syndicate. Based on our leverage ratio as of December 31, 2010, the applicable margin will remain at 0.0% for base rate borrowings and 1.00% for LIBOR rate borrowings. It is possible that our business operations or liquidity may be adversely affected by Marketing and the Marketing Leases discussed in “General - Marketing and the Marketing Leases” above and as a result we may be in default of our Credit Agreement or Term Loan Agreement which if such default was not cured or waived would prohibit us from drawing funds against the Credit Agreement. An event of default if not cured or waived would increase by 2.0% the interest rate we pay under our Credit Agreement. We may be required to enter into alternative loan agreements, sell assets or issue additional equity at unfavorable terms if we do not have access to funds under our Credit Agreement.
     We manage our exposure to interest rate risk by minimizing, to the extent feasible, our overall borrowing and monitoring available financing alternatives. Our interest rate risk as of December 31, 2010 has decreased significantly, as compared to December 31, 2009 primarily as a result of repayment of $110.7 million of floating interest rate debt. Subsequent to December 31, 2010 we borrowed an additional $111.3 million under the Credit Agreement to finance the transaction with CPD NY and repaid approximately $92.3 of the borrowings then outstanding under the Credit Agreement with funds primarily received from the proceeds of a 3.5 million share common stock offering. (For additional information regarding these subsequent events, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments”.)Our interest rate risk may materially change in the future if we increase our borrowings under the Credit Agreement, seek other sources of debt or equity capital or refinance our outstanding debt.
     We entered into a $45.0 million LIBOR based interest rate Swap Agreement, effective through June 30, 2011, to manage a portion of our interest rate risk. The Swap Agreement is intended to hedge $45.0 million of our current exposure to variable interest rate risk by effectively fixing, at 5.44%, the LIBOR component of the interest rate determined under our existing loan agreements or future exposure to variable interest rate risk due to borrowing arrangements that may be entered into prior to the expiration of the Swap Agreement. As a result, we are, and will be, exposed to interest rate risk to the extent that our aggregate borrowings floating at market rates exceed the $45.0 million notional amount of the Swap Agreement. As of December 31, 2010, our aggregate borrowings floating at market rates exceeded the notional amount of the Swap Agreement by $19.9 million. We have not determined if we will enter into other swap agreements either before or after the expiration of the Swap Agreement in June 2011. It is possible that we may significantly change how we manage our interest rate risk in the near future due to, among other factors, the acquisition of properties or seeking other sources of capital.
     We entered into the $45.0 million notional five year interest rate Swap Agreement, designated and qualifying as a cash flow hedge to reduce our exposure to the variability in future cash flows attributable to changes in the LIBOR rate. Our primary objective when undertaking hedging transactions and derivative positions is to reduce our variable interest rate risk by effectively fixing a portion of the interest rate for existing debt and anticipated refinancing transactions. This in turn, reduces the risks that the variability of cash flows imposes on variable rate debt. Our strategy protects us against future increases in interest rates. Although the Swap Agreement is intended to lessen the impact of rising interest rates, it also exposes us to the risk that the other party to the agreement will not perform, the agreement will be unenforceable and the underlying transactions will fail to qualify as a highly-effective cash flow hedge for accounting purposes. Further, there can be no assurance that the use of an interest rate swap will always be to our benefit. While the use of an interest rate Swap Agreement is intended to lessen the adverse impact of rising interest rates, it also conversely limits the positive impact that could be realized from falling interest rates with respect to the portion of our variable rate debt covered by the interest rate Swap Agreement.
     In the event that we were to settle the Swap Agreement prior to its maturity, if the corresponding LIBOR swap rate for the remaining term of the Swap Agreement is below the 5.44% fixed strike rate at the time we settle the Swap Agreement, we would be required to make a payment to the Swap Agreement counter-party; if the corresponding LIBOR swap rate is above the fixed strike rate at the time we settle the Swap Agreement, we would receive a payment from the Swap Agreement counter-party. The amount that we would either pay or receive would equal the present value of the basis point differential between the fixed strike rate and the corresponding LIBOR swap rate at the time we settle the Swap Agreement.

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     Based on our aggregate average outstanding borrowings under the Credit Agreement and the Term Loan Agreement projected at $84.3 million for 2011, an increase in market interest rates of 0.5% for 2011 would decrease our 2011 net income and cash flows by $0.3 million. This amount was determined by calculating the effect of a hypothetical interest rate change on our aggregate borrowings floating at market rates that is not covered by our $45.0 million interest rate Swap Agreement through the June 2011 and the full amount of such borrowings after the expiration of the Swap Agreement, and assumes that the $42.1 million average outstanding borrowings under the Credit Agreement during the fourth quarter of 2010 plus $19.0 million representing the net incremental borrowings under the Credit Agreement related to the subsequent events discussed above plus the $23.2 million average scheduled outstanding borrowings for 2011 under the Term Loan Agreement is indicative of our future average borrowings for 2011 before considering additional borrowings required for future acquisitions or repayment of outstanding borrowings from proceeds of future equity offerings. The calculation also assumes that there are no other changes in our financial structure or the terms of our borrowings. Our exposure to fluctuations in interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our Credit Agreement, with decreases in the outstanding amount under our Term Loan Agreement and with increases or decreases in amounts outstanding under borrowing agreements entered into with interest rates floating at market rates.
     In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments with high-credit-quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit with JPMorgan Chase Bank, N.A.
Item 8. Financial Statements and Supplementary Data
GETTY REALTY CORP. INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
                         
    YEAR ENDED DECEMBER 31,  
    2010     2009     2008  
Revenues from rental properties
  $ 88,332     $ 84,416     $ 82,654  
Operating expenses:
                       
Rental property expenses
    10,128       10,689       11,443  
Impairment charges
          1,135        
Environmental expenses, net
    5,427       8,811       7,306  
General and administrative expenses
    8,178       6,849       6,831  
Depreciation and amortization expense
    9,731       10,773       11,727  
 
                 
Total operating expenses
    33,464       38,257       37,307  
 
                 
Operating income
    54,868       46,159       45,347  
Other income, net
    289       585       403  
Interest expense
    (5,050 )     (5,091 )     (7,034 )
 
                 
Earnings from continuing operations
    50,107       41,653       38,716  
Discontinued operations:
                       
Earnings (loss) from operating activities
    (112 )     70       696  
Gains on dispositions of real estate
    1,705       5,326       2,398  
 
                 
Earnings from discontinued operations
    1,593       5,396       3,094  
 
                 
Net earnings
  $ 51,700     $ 47,049     $ 41,810  
 
                 
 
Basic and diluted earnings per common share:
                       
Earnings from continuing operations
  $ 1.79     $ 1.68     $ 1.56  
Earnings from discontinued operations
  $ .06     $ .22     $ .12  
Net earnings
  $ 1.85     $ 1.90     $ 1.69  
 
Weighted average shares outstanding:
                       
Basic
    27,950       24,766       24,766  
Stock options
    3       1       1  
 
                 
Diluted
    27,953       24,767       24,767  
 
                 
The accompanying notes are an integral part of these consolidated financial statements.
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
                         
    YEAR ENDED DECEMBER 31,  
    2010     2009     2008  
Net earnings
  $ 51,700     $ 47,049     $ 41,810  
Other comprehensive gain (loss):
                       
Net unrealized gain (loss) on interest rate swap
    1,840       1,303       (1,997 )
 
                 
Comprehensive Income
  $ 53,540     $ 48,352     $ 39,813  
 
                 
The accompanying notes are an integral part of these consolidated financial statements.

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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
                 
    DECEMBER 31,  
    2010     2009  
ASSETS:
               
Real Estate:
               
Land
  $ 253,413     $ 252,083  
Buildings and improvements
    251,174       251,791  
 
           
 
    504,587       503,874  
Less — accumulated depreciation and amortization
    (144,217 )     (136,669 )
 
           
Real estate, net
    360,370       367,205  
Net investment in direct financing lease
    20,540       19,156  
Deferred rent receivable (net of allowance of $8,170 at December 31, 2010 and $9,389 at December 31, 2009)
    27,385       27,481  
Cash and cash equivalents
    6,122       3,050  
Recoveries from state underground storage tank funds, net
    3,966       3,882  
Mortgages and accounts receivable, net
    1,796       2,402  
Prepaid expenses and other assets
    6,965       9,696  
 
           
Total assets
  $ 427,144     $ 432,872  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY:
               
Borrowings under credit line
  $ 41,300     $ 151,200  
Term loan
    23,590       24,370  
Environmental remediation costs
    14,874       16,527  
Dividends payable
    14,432       11,805  
Accounts payable and accrued expenses
    18,013       21,301  
 
           
Total liabilities
    112,209       225,203  
 
           
Commitments and contingencies (notes 2, 3, 5 and 6)
           
Shareholders’ equity:
               
Common stock, par value $.01 per share; authorized 50,000,000 shares; issued 29,944,155 at December 31, 2010 and 24,766,376 at December 31, 2009
    299       248  
Paid-in capital
    368,093       259,459  
Dividends paid in excess of earnings
    (52,304 )     (49,045 )
Accumulated other comprehensive loss
    (1,153 )     (2,993 )
 
           
Total shareholders’ equity
    314,935       207,669  
 
           
Total liabilities and shareholders’ equity
  $ 427,144     $ 432,872  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                         
    YEAR ENDED DECEMBER 31,  
    2010     2009     2008  
CASH FLOWS FROM OPERATING ACTIVITIES:
                       
Net earnings
  $ 51,700     $ 47,049     $ 41,810  
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
                       
Depreciation and amortization expense
    9,738       11,027       11,875  
Impairment charges
          1,135        
Gain from dispositions of real estate
    (1,705 )     (5,467 )     (2,787 )
Deferred rental revenue, net of allowance
    96       (763 )     (1,803 )
Amortization of above-market and below-market leases
    (1,260 )     (1,217 )     (790 )
Amortization of investment in direct financing lease
    (323 )     (85 )      
Accretion expense
    775       884       956  
Stock-based employee compensation expense
    480       390       326  
Changes in assets and liabilities:
                       
Recoveries from state underground storage tank funds, net
    291       724       827  
Accounts receivable
    448       (724 )     (5 )
Prepaid expenses and other assets
    (483 )     339       423  
Environmental remediation costs
    (2,803 )     (2,400 )     (2,217 )
Accounts payable and accrued expenses
    (31 )     1,640       (1,031 )
 
                 
Net cash flow provided by operating activities
    56,923       52,532       47,584  
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Property acquisitions and capital expenditures
    (4,725 )     (55,317 )     (6,579 )
Proceeds from dispositions of real estate
    2,858       6,939       5,295  
(Increase) decrease in cash held for property acquisitions
    2,665       (1,623 )     2,397  
Collection of mortgages receivable, net
    158       (145 )     (55 )
 
                 
Net cash flow provided by (used in) investing activities
    956       (50,146 )     1,058  
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
(Repayments) borrowings under credit agreement, net
    (109,900 )     20,950       (2,250 )
(Repayments) borrowings under term loan agreement, net
    (780 )     24,370        
Cash dividends paid
    (52,332 )     (46,834 )     (46,294 )
Net proceeds from issuance of common stock
    108,205             9  
 
                 
Net cash flow used in financing activities
    (54,807 )     (1,514 )     (48,535 )
 
                 
Net increase in cash and cash equivalents
    3,072       872       107  
Cash and cash equivalents at beginning of period
    3,050       2,178       2,071  
 
                 
Cash and cash equivalents at end of year
  $ 6,122     $ 3,050     $ 2,178  
 
                 
Supplemental disclosures of cash flow information
                       
Cash paid (refunded)during the year for:
                       
Interest
  $ 4,863     $ 5,046     $ 6,728  
Income taxes, net
    365       467       708  
Recoveries from state underground storage tank funds
    (1,250 )     (1,411 )     (1,511 )
Environmental remediation costs
    5,917       6,154       6,542  
The accompanying notes are an integral part of these consolidated financial statements.

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GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     Basis of Presentation: The consolidated financial statements include the accounts of Getty Realty Corp. and its wholly-owned subsidiaries (the “Company”). The Company is a real estate investment trust (“REIT”) specializing in the ownership and leasing of retail motor fuel and convenience store properties and petroleum distribution terminals. The Company manages and evaluates its operations as a single segment. All significant intercompany accounts and transactions have been eliminated.
     The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In 2009, the Financial Accounting Standards Board (“FASB”) established the Accounting Standards Codification, as amended (the “ASC”), as the sole reference source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. The Company adopted the codification during the quarter ended September 30, 2009 which had no impact on the Company’s financial position, results of operations or cash flows.
     Use of Estimates, Judgments and Assumptions: The financial statements have been prepared in conformity with GAAP, which requires the Company’s management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. While all available information has been considered, actual results could differ from those estimates, judgments and assumptions. Estimates, judgments and assumptions underlying the accompanying consolidated financial statements include, but are not limited to, deferred rent receivable, net investment in direct financing lease, recoveries from state underground storage tank (“UST” or ‘USTs”) funds, environmental remediation costs, real estate, depreciation and amortization, impairment of long-lived assets, litigation, accrued expenses, income taxes and the allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed.
     Discontinued Operations: The operating results and gains from certain dispositions of real estate sold in 2010, 2009 and 2008 are reclassified as discontinued operations. The operating results for the years ended 2009 and 2008 of such properties sold in 2010 have also been reclassified to discontinued operations to conform to the 2010 presentation. Discontinued operations for the year ended December 31, 2010, 2009 and 2008 are primarily comprised of gains or losses from property dispositions. The revenue from rental properties and expenses related to these properties are insignificant for the each of the three years ended December 31, 2010, 2009 and 2008.
     Real Estate: Real estate assets are stated at cost less accumulated depreciation and amortization. Upon acquisition of real estate operating properties and leasehold interests, the Company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant” and identified intangible assets and liabilities (consisting of leasehold interests, above-market and below-market leases, in-place leases and tenant relationships) and assumed debt. Based on these estimates, the Company allocates the purchase price to the applicable assets and liabilities. When real estate assets are sold or retired, the cost and related accumulated depreciation and amortization is eliminated from the respective accounts and any gain or loss is credited or charged to income. Expenditures for maintenance and repairs are charged to income when incurred.
     Depreciation and amortization: Depreciation of real estate is computed on the straight-line method based upon the estimated useful lives of the assets, which generally range from 16 to 25 years for buildings and improvements, or the term of the lease if shorter. Leasehold interests, in-place leases and tenant relationships are amortized over the remaining term of the underlying lease.
     Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of: Assets are written down to fair value (determined on a nonrecurring basis using a discounted cash flow method and significant unobservable inputs) when events and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company reviews and adjusts as necessary its depreciation estimates and method when long-lived assets are tested for recoverability. Assets held for disposal are written down to fair value less disposition costs.

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     Cash and Cash Equivalents: The Company considers highly liquid investments purchased with an original maturity of 3 (three) months or less to be cash equivalents.
     Deferred Rent Receivable and Revenue Recognition: The Company earns rental income under operating and direct financing leases with tenants. Minimum lease payments from operating leases are recognized on a straight-line basis over the term of the leases. The cumulative difference between lease revenue recognized under this method and the contractual lease payment terms is recorded as deferred rent receivable on the consolidated balance sheet. The Company provides reserves for a portion of the recorded deferred rent receivable if circumstances indicate that a property may be disposed of before the end of the current lease term or if it is not reasonable to assume that the tenant will not make all of its contractual lease payments when due during the current term of the lease. The straight-line method requires that rental income related to those properties for which a reserve was provided is effectively recognized in subsequent periods when payment is due under the contractual payment terms. Lease termination fees are recognized as rental income when earned upon the termination of a tenant’s lease and relinquishment of space in which the Company has no further obligation to the tenant. 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 revenue from rental properties over the remaining lives of the in-place leases.
     Direct Financing Lease: Income under a direct financing lease is included in revenues from rental properties and is recognized over the lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Net investment in direct financing lease represents the investment in leased assets accounted for as a direct financing lease. The investment in direct financing lease is increased for interest income earned and amortized over the life of the lease and reduced by the receipt of lease payments.
     Environmental Remediation Costs and Recoveries from State UST Funds, Net: The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has been incurred, including legal obligations associated with the retirement of tangible long-lived assets if the asset retirement obligation results from the normal operation of those assets and a reasonable estimate of fair value can be made. The environmental remediation liability is estimated based on the level and impact of contamination at each property. The accrued liability is the aggregate of the best estimate of the fair value of cost for each component of the liability. Recoveries of environmental costs from state UST remediation funds, with respect to both past and future environmental spending, are accrued at fair value as an offset to environmental expense, net of allowance for collection risk, based on estimated recovery rates developed from prior experience with the funds when such recoveries are considered probable. Environmental liabilities and related assets are currently measured based on their expected future cash flows which have been adjusted for inflation and discounted to present value. The Company will accrue for environmental liabilities that it believes are allocable to other potentially responsible parties if it becomes probable that the other parties will not pay their environmental obligations.
     Litigation: Legal fees related to litigation are expensed as legal services are performed. The Company provides for litigation reserves, including certain litigation related to environmental matters, when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made. If the estimate of the liability can only be identified as a range, and no amount within the range is a better estimate than any other amount, the minimum of the range is accrued for the liability. The Company accrues its share of environmental liabilities based on its assumptions of the ultimate allocation method and share that will be used when determining its share of responsibility.
     Income Taxes: The Company and its subsidiaries file a consolidated federal income tax return. Effective January 1, 2001, the Company elected to qualify, and believes it is operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Internal Revenue Code. If the Company sells any property within ten years after its REIT election that is not exchanged for a like-kind property, it will be taxed on the built-in gain realized from such sale at the highest corporate rate. This ten-year built-in gain tax period ended on January 1, 2011.
     Interest Expense and Interest Rate Swap Agreement: In April 2006 the Company entered into an interest rate swap agreement with JPMorgan Chase Bank, N.A. as the counterparty, designated and qualifying as a cash flow hedge, to reduce its variable interest rate risk by effectively fixing a portion of the interest rate for existing debt and anticipated refinancing transactions. The Company has not entered into financial instruments for trading or speculative purposes. The fair value of the derivative is reflected on the consolidated balance sheet and will be reclassified as a component of interest expense over the remaining term of the interest rate swap agreement since the Company does not expect to settle the interest rate swap prior to its maturity. The fair value of the interest rate swap obligation is based upon the estimated amounts the Company

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would receive or pay to terminate the contract and is determined using an interest rate market pricing model. Changes in the fair value of the agreement are included in the consolidated statements of comprehensive income and would be recorded in the consolidated statements of operations if the agreement was not an effective cash flow hedge for accounting purposes.
     Earnings per Common Share: Basic earnings per common share gives effect, utilizing the two-class method, to the potential dilution from the issuance of common shares in settlement of restricted stock units (“RSUs” or “RSU”) which provide for non-forfeitable dividend equivalents equal to the dividends declared per common share. Basic earnings per common share is computed by dividing net earnings less dividend equivalents attributable to RSUs by the weighted-average number of common shares outstanding during the year. Diluted earnings per common share also gives effect to the potential dilution from the exercise of stock options utilizing the treasury stock method. (in thousands).
                         
    Year ended December 31,  
    2010     2009     2008  
Earnings from continuing operations
  $ 50,107     $ 41,653     $ 38,716  
Less dividend equivalents attributable to restricted stock units outstanding
    (228 )     (162 )     (117 )
 
                 
Earnings from continuing operations attributable to common shareholders used for basic earnings per share calculation
    49,879       41,491       38,599  
Discontinued operations
    1,593       5,396       3,094  
 
                 
Net earnings attributable to common shareholders used for basic earnings per share calculation
  $ 51,472     $ 46,887     $ 41,693  
 
                 
 
                       
Weighted-average number of common shares outstanding:
                       
Basic
    27,950       24,766       24,766  
Stock options
    3       1       1  
 
                 
Diluted
    27,953       24,767       24,767  
 
                 
 
                       
Restricted stock units outstanding at the end of the period
    123       86       62  
 
                 
     Stock-Based Compensation: Compensation cost for the Company’s stock-based compensation plans using the fair value method was $480,000, $390,000 and $326,000 for the years ended December 31, 2010, 2009 and 2008, respectively, and is included in general and administrative expense. The impact of the accounting for stock-based compensation is, and is expected to be, immaterial to the Company’s financial position and results of operations.
     Recent Accounting Developments and Amendments to the Accounting Standards Codification: In September 2006, the FASB amended the accounting standards related to fair value measurements of assets and liabilities (the “Fair Value Measurements Amendment”). The Fair Value Measurements Amendment generally applies whenever other standards require assets or liabilities to be measured at fair value. The Fair Value Measurements Amendment was effective in fiscal years beginning after November 15, 2007. Subsequently, the FASB delayed the effective date of the Fair Value Measurements Amendment by one year for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis to fiscal years beginning after November 15, 2008. The adoption of the Fair Value Measurements Amendment in January 2008 and the adoption of the provisions of the Fair Value Measurements Amendment for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis in January 2009 did not have a material impact on the Company’s financial position and results of operations.
     In December 2007, the FASB amended the accounting standards related to business combinations (the “Business Combinations Amendment”) affecting how the acquirer shall recognize and measure in its financial statements at fair value the identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree and goodwill acquired in a business combination. The Business Combinations Amendment requires that acquisition costs, which could be material to the Company’s future financial results, will be expensed rather than included as part of the basis of the acquisition. The adoption

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of the Business Combinations Amendment by the Company in January 2009 did not result in a write-off of acquisition related transactions costs associated with transactions not yet consummated.
     The FASB amended the accounting standards related to determining earnings per share (the “Earnings Per Share Amendment”). Due to the adoption of the “Earnings Per Share Amendment” effective as of January 1, 2009 and retrospectively applied to the years ended 2008 and 2007, basic earnings per common share gives effect, utilizing the two-class method, to the potential dilution from the issuance of common shares in settlement of restricted stock units (“RSUs” or “RSU”) which provide for non-forfeitable dividend equivalents equal to the dividends declared per common share. The adoption of the “Earnings Per Share Amendment” did not have a material impact in the determination of earnings per common share for the years ended December 31, 2010, 2009 and 2008.
2. LEASES
     The Company leases or sublets its properties primarily to distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products and automotive repair services who are responsible for managing the operations conducted at these properties and for the payment of taxes, maintenance, repair, insurance and other operating expenses related to these properties. In those instances where the Company determines that the best use for a property is no longer as a retail motor fuel outlet, the Company will seek an alternative tenant or buyer for the property. The Company leases or subleases approximately twenty of its properties for uses such as fast food restaurants, automobile sales and other retail purposes. The Company’s properties are primarily located in the Northeast and Mid-Atlantic regions of the United States. The Company owns or leases properties in New York, Connecticut, Massachusetts, New Jersey, Delaware, Maine, Maryland, New Hampshire, Pennsylvania, Rhode Island, Virginia, Vermont, Texas, North Carolina, Hawaii, California, Florida, Ohio, Arkansas, Illinois, and North Dakota.
     As of December 31, 2010, Getty Petroleum Marketing Inc. (“Marketing”) leased from the Company, 817 properties. Eight hundred eight of the properties are leased to Marketing under a unitary master lease (the “Master Lease”) and nine properties are leased under supplemental leases (collectively with the Master Lease, the “Marketing Leases”). The Master Lease has an initial term of 15 years commencing December 9, 2000, and provides Marketing with options for three renewal terms of ten years each and a final renewal option of three years and ten months extending to 2049 (or such shorter initial or renewal term as the underlying lease may provide). If Marketing elects to exercise any renewal option, Marketing is required to notify us of such one year in advance of the commencement of the renewal term. The Master Lease is a unitary lease and, therefore, Marketing’s exercise of any renewal option can only be for all of the properties subject of the Master Lease. The supplemental leases have initial terms of varying expiration dates. The Marketing Leases include provisions for 2.0% annual rent escalations. (See note 11 for additional information regarding the portion of the Company’s financial results that are attributable to Marketing. See note 3 for additional information regarding contingencies related to Marketing and the Marketing Leases).
     The Company estimates that Marketing makes annual real estate tax payments for properties leased under the Marketing Leases of approximately $13,000,000. Marketing also makes additional payments for other operating expenses related to these properties, including environmental remediation costs other than those liabilities that were retained by the Company. These costs, which have been assumed by Marketing under the terms of the Marketing Leases, are not reflected in the Company’s consolidated financial statements.
     Revenues from rental properties included in continuing operations for the years ended December 31, 2010, 2009 and 2008 were $88,332,000, $84,416,000 and $82,654,000, respectively, of which $60,276,000, $60,615,000 and $60,047,000, respectively, were received from Marketing under the Marketing Leases and $26,609,000, $21,776,000 and $20,070,000, respectively, were received from other tenants. Rent received and rental property expenses include $1,849,000, $2,236,000 and $2,113,000 for the years ended December 31, 2010, 2009 and 2008, respectively, for real estate taxes paid by the Company which were reimbursed by Marketing and other tenants. In accordance with GAAP, the Company recognizes rental revenue in amounts which vary from the amount of rent contractually due or received during the periods presented. As a result, revenues from rental properties include non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line (or an average) basis over the current lease term, net amortization of above-market and below-market leases and recognition of rental income recorded under a direct financing lease using the effective interest method which produces a constant periodic rate of return on the net investment in the leased property (the “Revenue Recognition Adjustments”). Revenues from rental properties included in continuing operations which increased rental

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revenue by $1,447,000, $2,025,000 and $2,537,000 for the years ended December 31, 2010, 2009 and 2008, respectively, include Revenue Recognition Adjustments respectively (See footnote 3 for additional information related to the Marketing Leases and the reserve.)
     The components of the $20,540,000 net investment in direct financing lease as of December 31, 2010, are minimum lease payments receivable of $77,971,000 plus unguaranteed estimated residual value of $2,013,000 less unearned income of $59,444,000.
     Future contractual minimum annual rentals receivable from Marketing under the Marketing Leases and from other tenants, which have terms in excess of one year as of December 31, 2010, are as follows (in thousands)(See footnote 3 for additional information related to the Marketing Leases and the reserve):
                                         
                                   
                            DIRECT        
YEAR ENDING   OPERATING LEASES     FINANCING        
DECEMBER 31,   MARKETING     OTHER TENANTS     SUBTOTAL     LEASE     TOTAL(a)  
2011
  $ 59,680     $ 22,679     $ 82,359     $ 3,308     $ 85,667  
2012
    59,587       22,742       82,329       3,391       85,720  
2013
    59,643       22,264       81,907       3,478       85,385  
2014
    60,279       21,497       81,776       3,566       85,342  
2015
    56,698       20,788       77,486       3,655       81,141  
Thereafter
          146,054       146,054       60,573       206,627  
 
(a)     Includes $54,594,000 of future minimum annual rentals receivable under subleases.
     Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to $7,007,000, $7,323,000 and $8,100,000 for the years ended December 31, 2010, 2009 and 2008, respectively, and is included in rental property expenses using the straight-line method. Rent received under subleases for the years ended December 31, 2010, 2009 and 2008 was $11,868,000, $12,760,000 and $13,986,000, respectively.
     The Company has obligations to lessors under non-cancelable operating leases which have terms (excluding renewal term options) in excess of one year, principally for gasoline stations and convenience stores. The leased properties have a remaining lease term averaging over eleven years, including renewal options. Future minimum annual rentals payable under such leases, excluding renewal options, are as follows: 2011 — $6,193,000, 2012 — $4,589,000, 2013 — $3,395,000, 2014 — $2,456,000, 2015 — $1,407,000 and $2,333,000 thereafter.
3. COMMITMENTS AND CONTINGENCIES
     In order to minimize the Company’s exposure to credit risk associated with financial instruments, the Company places its temporary cash investments, if any, with high credit quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit with JPMorgan Chase Bank, N.A.
     As of December 31, 2010, the Company leased 817, or 78% of its 1,052 properties, on a long-term triple-net basis to Marketing. (See note 2 for additional information). The Company’s financial results are materially dependent upon the ability of Marketing to meet its rental, environmental and other obligations under the Marketing Leases. Marketing’s financial results depend on retail petroleum marketing margins from the sale of refined petroleum products and rental income from its subtenants. Marketing’s subtenants either operate their gas stations, convenience stores, automotive repair services or other businesses at the Company’s properties or are petroleum distributors who may operate the Company’s properties directly and/or sublet the Company’s properties to the operators. Since a substantial portion of the Company’s revenues (66% for the year December 31, 2010), are derived from the Marketing Leases, any factor that adversely affects Marketing’s ability to meet its obligations under the Marketing Leases may have a material adverse effect on the Company’s business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price. (See note 11 for additional information regarding the portion of the Company’s financial results that are attributable to Marketing.)
     The Company has not yet received Marketing’s unaudited consolidated financial statements for the year ended December 31, 2010. For the year ended December 31, 2009, Marketing reported a significant loss, continuing a trend of reporting large

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losses in recent years. As a result of Marketing’s significant losses, including Marketing’s losses reported to the Company subsequent to Marketing’s reorganization in 2009 (discussed in more detail below) and the cumulative impact of those losses on Marketing’s financial position as of September 30, 2010, the Company continues to believe that Marketing likely does not have the ability to generate cash flows from its business operations sufficient to meet its obligations as they come due in the ordinary course under the terms of the Marketing Leases unless Marketing shows significant improvement in its financial results, reduces the number of properties under the Marketing Leases, or receives additional capital or credit support. There can be no assurance that Marketing will be successful in any of these efforts. It is possible that the deterioration of Marketing’s financial condition may continue or that Marketing may file bankruptcy and seek to reorganize or liquidate its business. It is also possible that Marketing may aggressively pursue seeking a modification of the Marketing Leases, including, removal of properties from the Marketing Leases, or a reduction in the rental payments owed by Marketing under the Marketing Lease. If Marketing does not meet its rental, environmental or other obligations under the Marketing Leases to the Company, such default could lead to a protracted and expensive process for retaking control of the Company’s properties. In addition to the risk of disruption in rent receipts, the Company is subject to the risk of incurring real estate taxes, maintenance, environmental and other expenses at properties subject to the Marketing Leases.
     On February 28, 2011, OAO LUKoil (“Lukoil”), one of the largest integrated Russian oil companies, transferred its ownership interest in Marketing to Cambridge Petroleum Holding Inc. (“Cambridge”). The Company is not privy to the terms and conditions pertaining to this transaction between Lukoil and Cambridge. In connection with the transfer, the Company does not know what type or amount of consideration, if any, was paid or is payable by Lukoil or its subsidiaries to Cambridge or by Cambridge to Lukoil or its subsidiaries. The Company does not know if there are any ongoing contractual or business relationships between Lukoil or its subsidiaries or affiliates and Cambridge or its subsidiaries or affiliates. The Company has commenced discussions with the new owners and management of Marketing; however, it cannot predict the impact Lukoil’s transfer of its ownership interest in of Marking may have on the Company. While Lukoil had provided capital to Marketing in the past, there can be no assurance that Cambridge will provide financial support or will have the capacity to provide capital or financial support to Marketing in the future. The Company cannot predict what impact Lukoil’s transfer of its ownership interest to Cambridge will have on Marketing’s ability and willingness to perform its rental, environmental and other obligations under the Marketing Leases.
     In the fourth quarter of 2009, Marketing announced a restructuring of its business. Marketing disclosed that the restructuring included the sale of all assets unrelated to the properties it leases from the Company, the elimination of parent-guaranteed debt, and steps to reduce operating costs. Although Marketing’s press release stated that its restructuring included the sale of all assets unrelated to the properties it leases from the Company, the Company has concluded, based on the press releases related to the Marketing/Bionol contract dispute described below, that Marketing’s restructuring did not include the sale of all assets unrelated to the properties it leases from the Company. Marketing sold certain assets unrelated to the properties it leases from the Company to its affiliates, LUKOIL Pan Americas LLC and LUKOIL North America LLC. The Company believes that Marketing retained other assets, liabilities and business matters unrelated to the properties it leases from the Company. As part of the restructuring, Marketing paid off debt which had been guaranteed or held by Lukoil with proceeds from the sale of assets to Lukoil affiliates. The Company cannot predict what impact Marketing’s restructuring, dispute with Bionol and other changes in its business model or impact on its business will have on the Company.
     In June 2010, Marketing and Bionol Clearfield LLC (“Bionol”) each issued press releases regarding a contractual dispute between them. Bionol owns and operates an ethanol plant in Pennsylvania. Bionol and Marketing entered into a five-year contract under which Marketing agreed to purchase substantially all of the ethanol production from the Bionol plant, at formula-based prices. Bionol stated that Marketing breached the contract by not paying the agreed-upon price for the ethanol. According to Bionol’s press release, the cumulative gross purchase commitment under the contract could be on the order of one billion dollars. Marketing stated in its press release that it continues to pay Bionol millions of dollars each month for the ethanol, withholding only the amount of the purchase price in dispute and that it has filed for arbitration to resolve the dispute. Among other things related to this matter, the Company does not know: (i) the accuracy of the statements made by Marketing and Bionol when made or if such statements reflect the current status of the dispute; (ii) the cumulative or projected amount of the purchase price in dispute and how Marketing has accounted for the ethanol contract in its financial statements; or (iii) how the formula-based price compares to the market price of ethanol. The Company cannot predict with any certainty how the ultimate resolution of this matter may impact Marketing’s long-term financial performance and its ability to meet its obligations to the Company as they become due under the terms of the Marketing Leases.

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     From time to time when it was owned by Lukoil, the Company held discussions with representatives of Marketing regarding potential modifications to the Marketing Leases. These discussions did not result in a common understanding with Marketing that would form a basis for modification of the Marketing Leases. While we have recently initiated discussions with the new owners and management of Marketing, the Company at this time does not know what Marketing’s business strategy under its new ownership is or how it may change in the future. It is possible that Marketing may aggressively seek to modify the terms of the Marketing Leases or seek to remove a substantial number of properties from the Marketing Leases. The Company intends to continue to pursue the removal of individual properties from the Marketing Leases, and it remains open to removal of groups of properties; however, there is no agreement in place providing for removal of properties from the Marketing Leases. If Marketing ultimately determines that its business strategy is to exit all or a portion of the properties it leases from the Company, it is the Company’s intention to cooperate with Marketing in accomplishing those objectives if the Company determines that it is prudent for it to do so. Any modification of the Marketing Leases that removes a significant number of properties from the Marketing Leases would likely significantly reduce the amount of rent the Company receives from Marketing and increase the Company’s operating expenses. The Company cannot accurately predict if, or when, the Marketing Leases will be modified; what composition of properties, if any, may be removed from the Marketing Leases as part of any such modification; or what the terms of any agreement for modification of the Marketing Leases may be. The Company also cannot accurately predict what actions Marketing may take, and what the Company’s recourse may be, whether the Marketing Leases are modified or not. The Company may be required to increase or decrease the deferred rent receivable reserve, record additional impairment charges related to our properties, or accrue for environmental liabilities as a result of the potential or actual modification or termination of the Marketing Leases.
     As permitted under the terms of the Marketing Leases, Marketing generally can, subject to any contrary terms under applicable third party leases, use each property for any lawful purpose, or for no purpose whatsoever. The Company believes that as of March 16, 2011, Marketing was not operating any of the nine terminals it leases from the Company and had removed, or has scheduled removal of, underground gasoline storage tanks and related equipment at approximately 140 of the Company’s retail properties and the Company also believes that most of these properties are either vacant or provide negative or marginal contribution to Marketing’s results. In those instances where the Company determines that the best use for a property is no longer as a retail motor fuel outlet, at the appropriate time the Company will seek an alternative tenant or buyer for such property. With respect to properties that are vacant or have had underground gasoline storage tanks and related equipment removed, it may be more difficult or costly to re-let or sell such properties as gas stations because of capital costs or possible zoning or permitting rights that are required and that may have lapsed during the period since gasoline was last sold at the property. Conversely, it may be easier to re-let or sell properties where underground gasoline storage tanks and related equipment have been removed if the property will not be used as a retail motor fuel outlet or if environmental contamination has been remediated.
     The Company intends either to re-let or sell any properties removed from the Marketing Leases, whether such removal arises consensually by negotiation or as a result of default by Marketing, and reinvest any realized sales proceeds in new properties. The Company intends to offer any properties removed from the Marketing Leases to replacement tenants or buyers individually, or in groups of properties, or by seeking a single tenant for the entire portfolio of properties subject to the Marketing Leases. Although the Company is the fee or leasehold owner of the properties subject to the Marketing Leases and the owner of the Getty® brand and has prior experience with tenants who operate their convenience stores, automotive repair services or other businesses at its properties; in the event that properties are removed from the Marketing Leases, the Company cannot accurately predict if, when, or on what terms, such properties could be re-let or sold.
     Based in part on the Company’s decision to remain open to negotiate with Marketing for a modification of the Marketing Leases, and its belief that the Marketing Leases will be modified prior to the expiration of the current lease term, the Company believes that it is probable that it will not collect all of the rent due related to properties the Company identified as being the most likely to be removed from the Marketing Leases. As of December 31, 2010 and 2009, the net carrying value of the deferred rent receivable attributable to the Marketing leases was $21,221,000 and $22,801,000, respectively, which was comprised of a gross deferred rent receivable of $29,391,000 and $32,190,000, respectively, partially offset by a valuation reserve of $8,170,000 and $9,389,000, respectively. The valuation reserves were estimated based on the deferred rent receivable attributable to properties identified by the Company as being the most likely to be removed from the Marketing Leases. The Company has not provided deferred rent receivable reserves related to the remaining properties subject to the Marketing Leases since, based on its assessments and assumptions as of December 31, 2010, the Company continued to believe that it was probable that it will collect the deferred rent receivable related to those remaining properties and that Lukoil will not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases. It is possible that Marketing may aggressively pursue seeking a modification of the Marketing Leases

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including removal of properties from the Marketing Leases or a reduction in the rental payments owed by Marketing under the Marketing Lease. The Company’s estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as it develops a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that the Company may change its estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, the Company may be required to increase or decrease its deferred rent receivable reserve or provide deferred rent receivable reserves related to the remaining properties subject to the Marketing Leases.
     The Company has performed an impairment analysis of the carrying amount of the properties subject to the Marketing Leases from time to time in accordance with GAAP when indicators of impairment exist. During the year ended December 31, 2009, the Company reduced the estimated useful lives of certain long-lived assets for properties subject to the Marketing Leases resulting in accelerating the depreciation expense recorded for those assets. The impact to depreciation expense due to adjusting the estimated lives for certain long-lived assets beginning with the year ended December 31, 2009 was not material. During the year ended December 31, 2009, the Company reduced the carrying amount to fair value, and recorded impairment charges aggregating $1,135,000, for certain properties leased to Marketing where the carrying amount of the property exceeded the estimated undiscounted cash flows expected to be received during the assumed holding period and the estimated net sales value expected to be received at disposition. The impairment charges were attributable to general reductions in real estate valuations and, in certain cases, by the removal or scheduled removal of underground storage tanks by Marketing. The fair value of real estate is estimated based on the price that would be received to sell the property in an orderly transaction between marketplace participants at the measurement date, net of disposal costs. The valuation techniques that the Company used included discounted cash flow analysis, an income capitalization approach on prevailing or earnings multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring the fair value of a property, all of which are based on assumptions that are classified within Level 3 of the fair value hierarchy.
     Marketing is directly responsible to pay for (i) remediation of environmental contamination it causes and compliance with various environmental laws and regulations as the operator of the Company’s properties, and (ii) known and unknown environmental liabilities allocated to Marketing under the terms of the Marketing Leases and various other agreements with the Company relating to Marketing’s business and the properties it leases from the Company (collectively the “Marketing Environmental Liabilities”). However, the Company continues to have ongoing environmental remediation obligations at 186 retail sites and for certain pre-existing conditions at six of the terminals the Company leases to Marketing. If Marketing fails to pay the Marketing Environmental Liabilities, the Company may ultimately be responsible to pay for Marketing Environmental Liabilities as the property owner. The Company does not maintain pollution legal liability insurance to protect it from potential future claims for Marketing Environmental Liabilities. The Company will be required to accrue for Marketing Environmental Liabilities if the Company determines that it is probable that Marketing will not meet its environmental obligations and the Company can reasonably estimate the amount of the Marketing Environmental Liabilities for which it will be responsible to pay, or if the Company’s assumptions regarding the ultimate allocation methods or share of responsibility that it used to allocate environmental liabilities changes. However, as of December 31, 2010 the Company continued to believe that it was not probable that Marketing would not pay for substantially all of the Marketing Environmental Liabilities since the Company believed that Lukoil would not allow Marketing to fail to perform its rental, environmental and other obligations under the Marketing Leases. Accordingly, the Company did not accrue for the Marketing Environmental Liabilities as of December 31, 2010 or 2009. Nonetheless, the Company has determined that the aggregate amount of the Marketing Environmental Liabilities (as estimated by the Company) would be material to the Company if it was required to accrue for all of the Marketing Environmental Liabilities since as a result of such accrual, the Company would not be in compliance with the existing financial covenants in its Credit Agreement and its Term Loan Agreement. Such non-compliance would result in an event of default pursuant to each agreement which, if not waived, would prohibit the Company from drawing funds against the Credit Agreement and could result in the acceleration of the Company’s indebtedness under the Company’s restated senior unsecured revolving credit agreement expiring in March 2012 (the “Credit Agreement”) and the Company’s $25.0 million three-year term loan agreement expiring in September 2012 (the “Term Loan Agreement” or “Term Loan”). The Company’s estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as the Company develops a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that the Company may change its estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases, and accordingly, the Company may be required to accrue for the Marketing Environmental Liabilities.

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     Should the Company’s assessments, assumptions and beliefs made effective as of December 31, 2010 prove to be incorrect, or if circumstances change, the conclusions reached by the Company relating to the following may change (i) whether any or what combination of the properties subject to the Marketing Leases are likely to be removed from the Marketing Leases, (ii) recoverability of the deferred rent receivable for some or all of the properties subject to the Marketing Leases, (iii) potential impairment of the properties subject to the Marketing Leases and, (iv) Marketing’s ability to pay the Marketing Environmental Liabilities. The Company intends to regularly review its assumptions that affect the accounting for deferred rent receivable; long-lived assets; environmental litigation accruals; environmental remediation liabilities; and related recoveries from state underground storage tank funds. Accordingly, it is possible that the Company may be required to (i) increase or decrease the deferred rent receivable reserve related to the properties subject to the Marketing Leases, (ii) record an additional impairment charge related to the properties subject to the Marketing Leases, or (iii) accrue for Marketing Environmental Liabilities that the Company believes are allocable to Marketing under the Marketing Leases and various other agreements as a result of the potential or actual filing for bankruptcy protection by Marketing or as a result of the potential or actual modification of the Marketing Leases or other factors, which may result in material adjustments to the amounts recorded for these assets and liabilities, and as a result of which, the Company may not be in compliance with the financial covenants in its Credit Agreement and its Term Loan Agreement.
     The Company cannot provide any assurance that Marketing will continue to meet its rental, environmental or other obligations under the Marketing Leases. In the event that Marketing does not perform its rental, environmental or other obligations under the Marketing Leases; if the Marketing Leases are modified significantly or terminated; if the Company determines that it is probable that Marketing will not meet its rental, environmental or other obligations and the Company accrues for certain of such liabilities; if the Company is unable to promptly re-let or sell the properties upon recapture from the Marketing Leases; or, if the Company changes its assumptions that affect the accounting for rental revenue or Marketing Environmental Liabilities related to the Marketing Leases and various other agreements; the Company’s business, financial condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends or stock price may be materially adversely affected.
     The Company has also agreed to provide limited environmental indemnification to Marketing, capped at $4,250,000, for certain pre-existing conditions at six of the terminals which are owned by the Company and leased to Marketing. Under the agreement, Marketing is required to pay (and has paid) the first $1,500,000 of costs and expenses incurred in connection with remediating any such pre-existing conditions, Marketing and the Company share equally the next $8,500,000 of those costs and expenses and Marketing is obligated to pay all additional costs and expenses over $10,000,000. The Company has accrued $300,000 as of December 31, 2010 and 2009 in connection with this indemnification agreement.
     The Company is subject to various legal proceedings and claims which arise in the ordinary course of its business. In addition, the Company has retained responsibility for certain legal proceedings and claims relating to the petroleum marketing business that were identified at the time the Company’s petroleum marketing business was spun-off to our shareholders in March 1997 (the “Spin-Off”). As of December 31, 2010 and December 31, 2009, the Company had accrued $3,273,000 and $3,790,000, respectively, for certain of these matters which it believes were appropriate based on information then currently available. It is possible that the Company’s assumptions regarding, among other items, the ultimate resolution of and/or the Company’s ultimate share of responsibility for these matters may change, which may result in the Company providing or adjusting its accruals for these matters.
     In September 2003, the Company received a directive (the “Directive”) from the State of New Jersey Department of Environmental Protection (the “NJDEP”) notifying the Company that it is one of approximately 66 potentially responsible parties for natural resource damages resulting from discharges of hazardous substances into the Lower Passaic River. The Directive calls for an assessment of the natural resources that have been injured by the discharges into the Lower Passaic River and interim compensatory restoration for the injured natural resources. There has been no material activity with respect to the NJDEP Directive since early after its issuance. The responsibility for the alleged damages, the aggregate cost to remediate the Lower Passaic River, the amount of natural resource damages and the method of allocating such amounts among the potentially responsible parties have not been determined. Effective May 2007, the United States Environmental Protection Agency (“EPA”) entered into an Administrative Settlement Agreement and Order on Consent (“AOC”) with over 70 parties comprising a Cooperating Parties Group (“CPG”) (many of whom also named in the Directive) who have collectively agreed to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the Lower Passaic River. The Company is a party to the AOC and is a member of the CPG. The RI/FS is intended to address the investigation and evaluation of alternative remedial actions with respect to alleged damages to the Lower Passaic River, and is scheduled to be completed in or about 2014. The RI/FS does not resolve liability issues for remedial

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work or restoration of, or compensation for, natural resource damages to the Lower Passaic River, which are not known at this time.
     In a related action, in December 2005, the State of New Jersey through various state agencies brought suit against certain companies which the State alleges are responsible for various categories of past and future damages resulting from discharges of hazardous substances to the Passaic River. In February 2009, certain of these defendants filed third-party complaints against approximately 300 additional parties, including the Company, seeking contribution for such parties’ proportionate share of response costs, cleanup, and other damages, based on their relative contribution to pollution of the Passaic River and adjacent bodies of water. The Company believes that ChevronTexaco is contractually obligated to indemnify the Company, pursuant to an indemnification agreement, for most if not all of the conditions at the property identified by the NJDEP and the EPA. Accordingly, the ultimate legal and financial liability of the Company, if any, cannot be estimated with any certainty at this time.
     During 2010, the Company was defending against 53 lawsuits brought by or on behalf of private and public water providers and governmental agencies. These cases alleged (and, as described below with respect to one remaining case, continue to allege) various theories of liability due to contamination of groundwater with methyl tertiary butyl ether (a fuel derived from methanol, commonly referred to as “MTBE”) as the basis for claims seeking compensatory and punitive damages, and name as defendant approximately 50 petroleum refiners, manufacturers, distributors and retailers of MTBE, or gasoline containing MTBE. During the quarter ended March 31, 2010, the Company reached agreements to settle two plaintiff classes covering 52 of the 53 pending cases. A settlement payment of $1,250,000 was made during the third quarter of 2010 covering 27 cases and settlement payment of $475,000 was made during the first quarter of 2011 covering 25 cases. Presently, the Company remains a defendant in one MTBE case involving multiple locations throughout the State of New Jersey brought by various governmental agencies of the State of New Jersey, including the NJDEP.
     In 2010 and 2009, the Company provided litigation reserves aggregating $2,500,000 relating to the MTBE cases. However, the Company is still unable to estimate with certainty its liability for the case involving the State of New Jersey as there remains uncertainty as to the accuracy of the allegations in this case as they relate to it, the Company’s defenses to the claims, its rights to indemnification or contribution from Marketing, and the aggregate possible amount of damages for which the Company may be held liable.
     The ultimate resolution of the matters related to the Lower Passaic River and the MTBE litigation discussed above could cause a material adverse effect on the Company’s business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
     Prior to the Spin-Off, the Company was self-insured for workers’ compensation, general liability and vehicle liability up to predetermined amounts above which third-party insurance applies. As of December 31, 2010 and December 31, 2009, the Company’s consolidated balance sheets included, in accounts payable and accrued expenses, $278,000 and $292,000, respectively, relating to self-insurance obligations. The Company estimates its loss reserves for claims, including claims incurred but not reported, by utilizing actuarial valuations provided annually by its insurance carriers. The Company is required to deposit funds for substantially all of these loss reserves with its insurance carriers, and may be entitled to refunds of amounts previously funded, as the claims are evaluated on an annual basis. The Company’s consolidated statements of operations for the years ended December 31, 2009 and 2008 include, in general and administrative expenses, a charge of $25,000 and a credit of $72,000, respectively, for self-insurance loss reserve adjustments. Since the Spin-Off, the Company has maintained insurance coverage subject to certain deductibles.
     In order to qualify as a REIT, among other items, the Company must distribute at least ninety percent of its “earnings and profits” (as defined in the Internal Revenue Code) to shareholders each year. Should the Internal Revenue Service successfully assert that the Company’s earnings and profits were greater than the amounts distributed, the Company may fail to qualify as a REIT; however, the Company may avoid losing its REIT status by paying a deficiency dividend to eliminate any remaining earnings and profits. The Company may have to borrow money or sell assets to pay such a deficiency dividend.

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4. CREDIT AGREEMENT, TERM LOAN AGREEMENT AND INTEREST RATE SWAP AGREEMENT
     The Company is a party to a $175,000,000 amended and restated senior unsecured revolving credit agreement (the “Credit Agreement”) with a group of domestic commercial banks led by JPMorgan Chase Bank, N.A. (the “Bank Syndicate”) which was scheduled to expire in March 2011; however, subsequent to December 31, 2010, the maturity date was extended by an additional year to March 2012. As of December 31, 2010, borrowings under the Credit Agreement were $41,300,000, bearing interest at a rate of 1.31% per annum. The Company had $133,700,000 available under the terms of the Credit Agreement as of December 31, 2010. The Credit Agreement does not provide for scheduled reductions in the principal balance prior to its maturity. The Credit Agreement permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.0% or 0.25% or a LIBOR rate plus a margin of 1.0%, 1.25% or 1.5%. The applicable margin is based on the Company’s leverage ratio at the end of the prior calendar quarter, as defined in the Credit Agreement, and is adjusted effective mid-quarter when the Company’s quarterly financial results are reported to the Bank Syndicate. Based on the Company’s leverage ratio as of December 31, 2010, the applicable margin will remain at 0.0% for base rate borrowings and 1.00% for LIBOR rate borrowings.
     Subject to the terms of the Credit Agreement and continued compliance with the covenants therein, the Company has the option, subject to approval by the Bank Syndicate, to increase the amount of the credit facility available pursuant to the Credit Agreement by $125,000,000 to $300,000,000. The Company does not expect to exercise its option to increase the amount of the Credit Agreement. In addition, the Company believes that it would need to renegotiate certain terms in the Credit Agreement in order to obtain approval from the Bank Syndicate to increase the amount of the credit facility. No assurance can be given that such approval from the Bank Syndicate will be obtained on terms acceptable to the Company, if at all. The annual commitment fee on the unused Credit Agreement ranges from 0.10% to 0.20% based on the amount of borrowings. The Credit Agreement contains customary terms and conditions, including financial covenants such as those requiring the Company to maintain minimum tangible net worth, leverage ratios and coverage ratios and other covenants which may limit the Company’s ability to incur debt or pay dividends. The Credit Agreement contains customary events of default, including change of control, failure to maintain REIT status or a material adverse effect on the Company’s business, assets, prospects or condition. Any event of default, if not cured or waived, would prohibit the Company from drawing funds against the Credit Agreement and could result in the acceleration of the Company’s indebtedness under the Credit Agreement and could also give rise to an event of default and consequent acceleration of the Company’s indebtedness under its Term Loan Agreement described below.
     On September 25, 2009, the Company entered into a $25,000,000 three-year Term Loan Agreement with TD Bank (the “Term Loan Agreement” or “Term Loan”) which expires in September 2012. As of December 31, 2010, borrowings under the Term Loan Agreement were $23,590,000 bearing interest at a rate of 3.5% per annum. The Term Loan Agreement provides for annual reductions of $780,000 in the principal balance with a $22,160,000 balloon payment due at maturity. The Term Loan Agreement bears interest at a rate equal to a thirty day LIBOR rate (subject to a floor of 0.4%) plus a margin of 3.1%. The Term Loan Agreement contains customary terms and conditions, including financial covenants such as those requiring the Company to maintain minimum tangible net worth, leverage ratios and coverage ratios and other covenants which may limit the Company’s ability to incur debt or pay dividends. The Term Loan Agreement contains customary events of default, including change of control, failure to maintain REIT status or a material adverse effect on the Company’s business, assets, prospects or condition. Any event of default, if not cured or waived, could result in the acceleration of the Company’s indebtedness under the Term Loan Agreement and could also give rise to an event of default and would prohibit the Company from drawing funds against the Credit Agreement and could result in the acceleration of the Company’s indebtedness under its Credit Agreement.
     The aggregate maturity of the Company’s outstanding debt is as follows: 2011 — $780,000, and 2012 — $64,110,000.
     The Company is a party to a $45,000,000 LIBOR based interest rate swap, effective through June 30, 2011 (the “Swap Agreement”). The Swap Agreement is intended to effectively fix, at 5.44%, the LIBOR component of the interest rate determined under the Company’s LIBOR based loan agreements. The Company entered into the Swap Agreement with JPMorgan Chase Bank, N.A., designated and qualifying as a cash flow hedge, to reduce its exposure to the variability in future cash flows attributable to changes in the LIBOR rate. The Company’s primary objective when undertaking the hedging transaction and derivative position was to reduce its variable interest rate risk by effectively fixing a portion of the interest rate for existing debt and anticipated refinancing transactions. The Company determined, as of the Swap Agreement’s inception and as of December 31, 2010 and December 31, 2009, that the derivative used in the hedging transaction is highly

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effective in offsetting changes in cash flows associated with the hedged item and that no gain or loss was required to be recognized in earnings during 2010, 2009 or 2008 representing the hedge’s ineffectiveness. At December 31, 2010 and 2009, the Company’s consolidated balance sheets include, in accounts payable and accrued expenses, an obligation for the fair value of the Swap Agreement of $1,153,000 and $2,993,000, respectively. For the year end December 31, 2010, 2009 and 2008, the Company has recorded, in accumulated other comprehensive loss in the Company’s consolidated balance sheets, a gain of $1,840,000, $1,303,000, and a loss of $1,997,000, respectively, from the change in the fair value of the Swap Agreement obligation related to the effective portion of the interest rate contract. The accumulated comprehensive loss of $1,153,000 recorded as of December 31, 2010 will be recognized as an increase in interest expense as quarterly payments are made to the counter-party over the remaining term of the Swap Agreement since it is expected that the Company’s LIBOR based borrowings will be refinanced with variable interest rate debt at their maturity.
     The fair value of the Swap Agreement obligation was $1,153,000 as of December 31, 2010, determined using (i) a discounted cash flow analysis on the expected cash flows of the Swap Agreement, which is based on market data obtained from sources independent of the Company consisting of interest rates and yield curves that are observable at commonly quoted intervals and are defined by GAAP as “Level 2” inputs in the “Fair Value Hierarchy”, and (ii) credit valuation adjustments, which are based on unobservable “Level 3” inputs. The fair value of the borrowings outstanding under the Credit Agreement was $40,400,000 as of December 31, 2010. The fair value of the borrowings outstanding under the Term Loan Agreement was $23,700,000 as of December 31, 2010. The fair value of the projected average borrowings outstanding under the Credit Agreement and the borrowings outstanding under the Term Loan Agreement were determined using a discounted cash flow technique that incorporates a market interest yield curve, “Level 2 inputs”, with adjustments for duration, optionality, risk profile and projected average borrowings outstanding or borrowings outstanding, which are based on unobservable “Level 3 inputs”. As of December 31, 2010, accordingly, the Company classified its valuation of the Swap Agreement in its entirety within Level 2 of the Fair Value Hierarchy since the credit valuation adjustments are not significant to the overall valuation of the Swap Agreement.
5. ENVIRONMENTAL EXPENSES
     The Company is subject to numerous existing federal, state and local laws and regulations, including matters relating to the protection of the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment. Environmental expenses are principally attributable to remediation costs which include installing, operating, maintaining and decommissioning remediation systems, monitoring contamination, and governmental agency reporting incurred in connection with contaminated properties. The Company seeks reimbursement from state UST remediation funds related to these environmental expenses where available.
     The Company enters into leases and various other agreements which allocate responsibility for known and unknown environmental liabilities by establishing the percentage and method of allocating responsibility between the parties. In accordance with the leases with certain tenants, the Company has agreed to bring the leased properties with known environmental contamination to within applicable standards, and to either regulatory or contractual closure (“Closure”). Generally, upon achieving Closure at each individual property, the Company’s environmental liability under the lease for that property will be satisfied and future remediation obligations will be the responsibility of the Company’s tenant. Generally the liability for the retirement and decommissioning or removal of USTs and other equipment is the responsibility of the Company’s tenants. The Company is contingently liable for these obligations in the event that the tenants do not satisfy their responsibilities. A liability has not been accrued for obligations that are the responsibility of the Company’s tenants based on the tenants’ history of paying such obligations and/or the Company’s assessment of their financial ability to pay their share of such costs. However, there can be no assurance that the Company’s assessments are correct or that the Company’s tenants who have paid their obligations in the past will continue to do so.
     Of the 817 properties leased to Marketing as of December 31, 2010, the Company has agreed to pay all costs relating to, and to indemnify Marketing for, certain environmental liabilities and obligations at 186 retail properties that have not achieved Closure and are scheduled in the Master Lease. The Company will continue to seek reimbursement from state UST remediation funds related to these environmental expenditures where available.
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environmental litigation accruals, environmental remediation liabilities and related assets. The Company is required to accrue for environmental liabilities that the Company believes are allocable to others under various other agreements if the Company determines that it is probable that the counter-party will not meet its environmental obligations. The ultimate resolution of these matters could cause a material adverse effect on the Company’s business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. (See note 3 for contingencies related to Marketing and the Marketing Leases for additional information.)
     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 environmental remediation liability is estimated based on the level and impact of contamination at each property. The accrued liability is the aggregate of the best estimate of the fair value of cost for each component of the liability. Recoveries of environmental costs from state UST remediation funds, with respect to both past and future environmental spending, are accrued at fair value as an offset to environmental expense, net of allowance for collection risk, based on estimated recovery rates developed from prior experience with the funds when such recoveries are considered probable.
     Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent 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, as well as the time it takes to remediate contamination. In developing the Company’s liability for probable and reasonably estimable environmental remediation costs on a property by property basis, the Company considers among other things, enacted laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as environmental contingencies become more clearly defined and reasonably estimable. As of December 31, 2010, the Company had regulatory approval for remediation action plans in place for 227 (94%) of the 241 properties for which it continues to retain environmental responsibility and the remaining 14 properties (6%) remain in the assessment phase. In addition, the Company has nominal post-closure compliance obligations at 29 properties where it has received “no further action” letters.
     Environmental remediation liabilities and related assets are measured at fair value based on their expected future cash flows which have been adjusted for inflation and discounted to present value. The estimated environmental remediation cost and accretion expense included in environmental expenses in the Company’s consolidated statements of operations aggregated $2,738,000, $3,922,000 and $4,590,000 for 2010, 2009 and 2008, respectively, which amounts were net of changes in estimated recoveries from state UST remediation funds. In addition to estimated environmental remediation costs, environmental expenses also include project management fees, legal fees and provisions for environmental litigation loss reserves.
     As of December 31, 2010, 2009, 2008 and 2007, the Company had accrued $14,874,000, $16,527,000, $17,660,000 and $18,523,000, respectively, as management’s best estimate of the fair value of reasonably estimable environmental remediation costs. As of December 31, 2010, 2009, 2008 and 2007, the Company had also recorded $3,966,000, $3,882,000, $4,223,000 and $4,652,000, respectively, as management’s best estimate for recoveries from state UST remediation funds, net of allowance, related to environmental obligations and liabilities. The net environmental liabilities of $12,645,000, $13,437,000 and $13,871,000 as of December 31, 2009, 2008 and 2007, respectively, were subsequently accreted for the change in present value due to the passage of time and, accordingly, $775,000, $884,000, and $956,000 of net accretion expense was recorded for the years ended December 31, 2010, 2009 and 2008, respectively, substantially all of which is included in environmental expenses.
     In view of the uncertainties associated with environmental expenditures, contingencies related to Marketing and the Marketing Leases and contingencies related to other parties, however, the Company believes it is possible that the fair value of future actual net expenditures could be substantially higher than amounts currently recorded by the Company. (See note 3 for contingencies related to Marketing and the Marketing Leases for additional information.) Adjustments to accrued liabilities for environmental remediation costs will be reflected in the Company’s financial statements as they become probable and a reasonable estimate of fair value can be made. Future environmental expenses could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.

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6. INCOME TAXES
     Net cash paid for income taxes for the years ended December 31, 2010, 2009 and 2008 of $365,000, $467,000, and $708,000, respectively, includes amounts related to state and local income taxes for jurisdictions that do not follow the federal tax rules, which are provided for in rental property expenses in the Company’s consolidated statements of operations.
     Earnings and profits (as defined in the Internal Revenue Code) is used to determine the tax attributes of dividends paid to stockholders and will differ from income reported for financial statement purposes due to the effect of items which are reported for income tax purposes in years different from that in which they are recorded for financial statement purposes. Earnings and profits were $50,563,000, $47,349,000, and $40,906,000 for the years ended December 31, 2010, 2009 and 2008, respectively. The federal tax attributes of the common dividends for the years ended December 31, 2010, 2009 and 2008 were: ordinary income of 97.5%, 100.0%, and 87.4%; capital gain distributions of 0.4%, 0.0%, and 1.2% and non-taxable distributions of 2.1%, 0.0%, and 11.4%, respectively.
     In order to qualify as a REIT, among other items, the Company must pay out substantially all of its earnings and profits in cash distributions to shareholders each year. Should the Internal Revenue Service successfully assert that the Company’s earnings and profits were greater than the amount distributed, the Company may fail to qualify as a REIT; however, the Company may avoid losing its REIT status by paying a deficiency dividend to eliminate any remaining earnings and profits. The Company may have to borrow money or sell assets to pay such a deficiency dividend. The Company accrues for this and certain other tax matters when appropriate based on information currently available. The accrual for uncertain tax positions is adjusted as circumstances change and as the uncertainties become more clearly defined, such as when audits are settled or exposures expire. Tax returns filed for the years 2007, 2008 and 2009, and tax returns which will be filed for the year ended 2010, remain open to examination by federal and state tax jurisdictions under the respective statute of limitations. In 2006 the Company eliminated the amount it had accrued for uncertain tax positions since the Company believes that the uncertainties regarding these exposures have been resolved or that it is no longer likely that the exposure will result in a liability upon review. However, the ultimate resolution of these matters may have a significant impact on the results of operations for any single fiscal year or interim period.

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7. SHAREHOLDERS’ EQUITY
     A summary of the changes in shareholders’ equity for the years ended December 31, 2010, 2009 and 2008 is as follows (in thousands, except per share amounts):
                                                 
                            DIVIDEND     ACCUMULATED        
                            PAID     OTHER        
    COMMON STOCK     PAID-IN     IN EXCESS     COMPREHENSIVE        
    SHARES     AMOUNT     CAPITAL     OF EARNINGS     LOSS     TOTAL  
     
BALANCE, DECEMBER 31, 2007
    24,765     $ 248     $ 258,734     $ (44,505 )   $ (2,299 )   $ 212,178  
Net earnings
                            41,810               41,810  
Dividends — $1.87 per share
                            (46,429 )             (46,429 )
Stock-based compensation
    1               326                       326  
Stock options exercised
                    9                       9  
Net unrealized loss on interest rate swap
                                    (1,997 )     (1,997 )
     
BALANCE, DECEMBER 31, 2008
    24,766       248       259,069       (49,124 )     (4,296 )     205,897  
Net earnings
                            47,049               47,049  
Dividends — $1.89 per share
                            (46,970 )             (46,970 )
Stock-based compensation
                    390                       390  
Net unrealized gain on interest rate swap
                                    1,303       1,303  
     
BALANCE, DECEMBER 31, 2009
    24,766       248       259,459       (49,045 )     (2,993 )     207,669  
Net earnings
                            51,700               51,700  
Dividends — $1.91 per share
                            (54,959 )             (54,959 )
Stock-based compensation
    1               480                       480  
Stock options exercised
    2                                        
Proceeds from issuance of common stock
    5,175       51       108,154                       108,205  
Net unrealized gain on interest rate swap
                                    1,840       1,840  
     
BALANCE, DECEMBER 31, 2010
    29,944     $ 299     $ 368,093       ($52,304 )   $ (1,153 )   $ 314,935  
     
     The Company is authorized to issue 20,000,000 shares of preferred stock, par value $.01 per share, for issuance in series, of which none were issued as of December 31, 2010, 2009, 2008 and 2007.
     During the second quarter of 2010, the Company completed a public stock offering of 5,175,000 shares of the Company’s common stock. The $108,205,000 net proceeds from the issuance of common stock (after related transaction costs of $522,000) was used in part to repay a portion of the outstanding balance under the Credit Agreement and the remainder was used for general corporate purposes.
     In the first quarter of 2011, the Company completed a public stock offering of 3,450,000 shares of the Company’s common stock, of which 3,000,000 shares were issued in January 2011 and 450,000 shares, representing the underwriter’s over-allotment, were issued in February 2011. Substantially all of the aggregate $91,753,000 net proceeds from the issuance of common stock (after related transaction costs of $500,000) was used to repay a portion of the outstanding balance under the Company’s Credit Agreement and the remainder was used for general corporate purposes.
8. EMPLOYEE BENEFIT PLANS
     The Getty Realty Corp. 2004 Omnibus Incentive Compensation Plan (the “2004 Plan”) provides for the grant of restricted stock, restricted stock units, performance awards, dividend equivalents, stock payments and stock awards to all employees and members of the Board of Directors. The 2004 Plan authorizes the Company to grant awards with respect to an aggregate of 1,000,000 shares of common stock through 2014. The aggregate maximum number of shares of common stock that may be subject to awards granted under the 2004 Plan during any calendar year is 80,000.
     The Company awarded to employees and directors 37,600, 23,600, and 23,800 restricted stock units (“RSUs”) and dividend equivalents in 2010, 2009 and 2008, respectively. RSUs granted before 2009 provide for settlement upon

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termination of employment with the Company or termination of service from the Board of Directors and RSUs granted in 2009 and thereafter upon the earlier of 10 (ten) years after grant or termination. On the settlement date each vested RSU will have a value equal to one share of common stock and may be settled, at the sole discretion of the Compensation Committee, in cash or by the issuance of one share of common stock. The RSUs do not provide voting or other shareholder rights unless and until the RSU is settled for a share of common stock. The RSUs vest starting one year from the date of grant, on a cumulative basis at the annual rate of twenty percent of the total number of RSUs covered by the award. The dividend equivalents represent the value of the dividends paid per common share multiplied by the number of RSUs covered by the award. For the years ended December 31, 2010, 2009 and 2008, dividend equivalents aggregating approximately $228,000, $162,000 and $117,000, respectively, were charged against retained earnings when common stock dividends were declared.
     The following is a schedule of the activity relating to the restricted stock units outstanding:
                         
    NUMBER OF     FAIR VALUE  
    RSUs             AVERAGE  
    OUTSTANDING     AMOUNT     PER RSU  
RSUs OUTSTANDING AT DECEMBER 31, 2007
    39,200                  
Granted
    23,800     $ 639,000     $ 26.86  
Settled (a)
    (400 )                
Cancelled
    (600 )                
 
                     
RSUs OUTSTANDING AT DECEMBER, 2008
    62,000                  
Granted
    23,600     $ 393,000     $ 16.64  
 
                     
RSUs OUTSTANDING AT DECEMBER 31, 2009
    85,600                  
Granted
    37,600     $ 864,000     $ 22.97  
 
                     
RSUs OUTSTANDING AT DECEMBER 31, 2010
    123,200                  
 
                     
 
(a)   The intrinsic value of the 400 RSUs settled in 2008 was $7,000.
     The fair values of the RSUs were determined based on the closing market price of the Company’s stock on the date of grant. The fair value of the grants is recognized as compensation expense ratably over the five-year vesting period of the RSUs. Compensation expense related to RSUs for the years ended December 31, 2010, 2009 and 2008 was $466,000, $382,000 and $313,000, respectively, and is included in general and administrative expense in the accompanying consolidated statements of operations. As of December 31, 2010, there was $1,379,000 of unrecognized compensation cost related to RSUs granted under the 2004 Plan which cost is expected to be recognized over a weighted average period of approximately 2.9 years. The aggregate intrinsic value of the 123,200 outstanding RSUs and the 45,400 vested RSUs as of December 31, 2010 was $3,854,000 and $1,420,000, respectively.
     The following is a schedule of the vesting activity relating to the restricted stock units outstanding:
                 
    NUMBER        
    OF RSUs     FAIR  
    VESTED     VALUE  
     
RSUs VESTED AT DECEMBER 31, 2007
    9,960          
Vested
    7,840     $ 213,000  
Settled
    (400 )        
 
             
RSUs VESTED AT DECEMBER 31, 2008
    17,400          
Vested
    12,400     $ 335,000  
 
             
RSUs VESTED AT DECEMBER 31, 2009
    29,800          
Vested
    15,600     $ 379,000  
 
             
RSUs VESTED AT DECEMBER 31, 2010
    45,400          
 
             
     The Company has a retirement and profit sharing plan with deferred 401(k) savings plan provisions (the “Retirement Plan”) for employees meeting certain service requirements and a supplemental plan for executives (the “Supplemental Plan”). Under the terms of these plans, the annual discretionary contributions to the plans are determined by the Compensation Committee of the Board of Directors. Also, under the Retirement Plan, employees may make voluntary contributions and the Company has elected to match an amount equal to fifty percent of such contributions but in no event more than three percent of the employee’s eligible compensation. Under the Supplemental Plan, a participating executive may receive an amount equal to ten percent of eligible compensation, reduced by the amount of any contributions allocated to such executive under

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the Retirement Plan. Contributions, net of forfeitures, under the retirement plans approximated $220,000, $159,000 and $151,000 for the years ended December 31, 2010, 2009 and 2008, respectively. These amounts are included in general and administrative expense in the accompanying consolidated statements of operations.
     The Company has a stock option plan (the “Stock Option Plan”). The Company’s authorization to grant options to purchase shares of the Company’s common stock under the Stock Option Plan expired. The total intrinsic value of the 5,250 and 500 options exercised during the years ended December 31, 2010 and 2008 was $76,000 and $5,000, respectively. As of December 31, 2010, there were 7,000 and 5,000 options outstanding which were exercisable at prices of $18.30 and $27.68 with a remaining contractual life of two and seven years, respectively. As of December 31, 2010, the aggregate intrinsic value of the 12,000 options outstanding was $109,000.
9. QUARTERLY FINANCIAL DATA
     The following is a summary of the quarterly results of operations for the years ended December 31, 2010 and 2009 (unaudited as to quarterly information) (in thousands, except per share amounts):
                                         
    THREE MONTHS ENDED     YEAR ENDED  
YEAR ENDED DECEMBER 31, 2010   MARCH 31,     JUNE 30,     SEPTEMBER 30,     DECEMBER 31,     DECEMBER 31,  
Revenues from rental properties
  $ 22,449     $ 21,734     $ 21,981     $ 22,168     $ 88,332  
Earnings from continuing operations
    11,575       12,590       13,532       12,410       50,107  
Net earnings
    11,905       13,959       13,351       12,485       51,700  
Diluted earnings per common share:
                                       
Earnings from continuing operations
    .47       .46       .45       .41       1.79  
Net earnings
    .48       .51       .45       .41       1.85  
                                         
    THREE MONTHS ENDED     YEAR ENDED  
YEAR ENDED DECEMBER 31, 2009 (a)   MARCH 31,     JUNE 30,     SEPTEMBER 30,     DECEMBER 31,     DECEMBER 31,  
Revenues from rental properties
  $ 20,622     $ 20,529     $ 20,754     $ 22,511     $ 84,416  
Earnings from continuing operations
    9,597       10,547       10,668       10,841       41,653  
Net earnings
    9,928       13,605       12,185       11,331       47,049  
Diluted earnings per common share:
                                       
Earnings from continuing operations
    .39       .43       .43       .44       1.68  
Net earnings
    .40       .55       .49       .46       1.90  
 
(a)   Includes the effect of the $49.0 million acquisition of gasoline stations and convenience store properties from White Oak Petroleum LLC from its inception on September 25, 2009 through December 31, 2009.
10. PROPERTY ACQUISITIONS
     In 2010, the Company purchased three properties. In addition to the acquisition of 36 properties from White Oak Petroleum LLC (“White Oak”), described in more detail below, in 2009 the Company also exercised its fixed purchase price option for one property and purchased three properties. In 2008, the Company exercised its fixed price purchase option for three leased properties and purchased six properties.
Acquisition of thirty-six properties from White Oak
     On September 25, 2009, the Company acquired the real estate assets of 36 gasoline station and convenience store properties located primarily in Prince George’s County, Maryland for $49,000,000 in a sale/leaseback transaction with White Oak. The Company financed this transaction with $24,500,000 of borrowings under the Company’s existing Credit Agreement and $24,500,000 of indebtedness under the Term Loan Agreement entered into on that date.
     The real estate assets were acquired in a simultaneous transaction among ExxonMobil, White Oak, and the Company, whereby White Oak acquired the properties and related businesses from ExxonMobil and simultaneously completed a sale/leaseback of the real estate of all 36 properties with the Company. The unitary triple-net lease for the properties between White Oak and the Company has an initial term of 20 years and provides White Oak with options for three renewal terms of ten years each extending to 2059. The unitary triple-net lease provides for 21/2% annual rent escalations. White Oak is responsible for all existing and future environmental conditions at the properties.

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     The purchase price has been allocated among the assets acquired based on the estimates of fair value. The Company estimated the fair value of acquired tangible assets (consisting of land, buildings and equipment) “as if vacant.” Based on these estimates, the Company allocated $29,929,000 of the purchase price to land, which is accounted for as an operating lease, and $19,071,000 to buildings and equipment, which is accounted for as a direct financing lease.
     The following unaudited pro forma condensed consolidated financial information has been prepared utilizing the historical financial statements of Getty Realty Corp. and the effect of additional revenue and expenses from the properties acquired assuming that the acquisitions had occurred as of the beginning of each of the years presented, after giving effect to certain adjustments including (a) rental income adjustments resulting from the straight-lining of scheduled rent increases and (b) rental income adjustments resulting from the recognition of revenue under direct financing leases over the lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. The following information also gives effect to the additional interest expense resulting from the assumed increase in borrowing outstanding drawn under the Credit Agreement and borrowings outstanding provided by the Term Loan Agreement to fund the acquisition.
     The unaudited pro forma condensed financial information, presented below, is not indicative of the results of operations that would have been achieved had the acquisition from White Oak reflected herein been consummated on the dates indicated or that will be achieved in the future.
                 
    Year Ended December 31,
(in thousands)   2009     2008  
     
Revenue from rental properties
  $ 89,372     $ 89,370  
 
           
 
               
Net earnings
  $ 50,930     $ 45,885  
 
           
 
               
Basic and diluted net earnings per common share
  $ 2.06     $ 1.85  
     The selected financial data of White Oak, LLC as of December 31, 2010 and for the year then ended and as of December 31, 2009 and for the period then ended, which has been prepared by White Oak’s management, is provided below.
                 
    Year / Period Ended December 31,
    2010     2009(a)  
     
(in thousands)                
Operating Data (for the year / period ended December 31):
               
Gross sales
  $ 169,237     $ 44,198  
Gross profit
    5,971       1,082  
Net loss
    (383 )     (1,382 )
 
               
Balance Sheet Data (at December 31):
               
Current assets
    5,398       4,251  
Noncurrent assets
    53,559       54,841  
Current liabilities
    5,776       7,442  
Noncurrent liabilities
    53,883       51,968  
 
(a)   Operating data from its inception on September 26, 2009 through December 31, 2009.
11. SUPPLEMENTAL CONDENSED COMBINING FINANCIAL INFORMATION
     Condensed combining financial information as of December 31, 2010 and 2009 and for the three year period ended December 31, 2010 has been derived from the Company’s books and records and is provided below to illustrate, for

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informational purposes only, the net contribution to the Company’s financial results that are realized from the leasing operations of properties leased to Marketing (which represents approximately 78% of the Company’s properties as of December 31, 2010) and from properties leased to other tenants. The condensed combining financial information set forth below presents the results of operations, net assets, and cash flows of the Company, related to Marketing, the Company’s other tenants and the Company’s corporate functions necessary to arrive at the information for the Company on a combined basis. The assets, liabilities, lease agreements and other leasing operations attributable to the Marketing Leases and other tenant leases are not segregated in legal entities. However, the Company generally maintains its books and records in site specific detail and has classified the operating results which are clearly applicable to each owned or leased property as attributable to Marketing or to the Company’s other tenants or to non-operating corporate functions. The condensed combining financial information has been prepared by the Company using certain assumptions, judgments and allocations. Each of the Company’s properties were classified as attributable to Marketing, other tenants or corporate for all periods presented based on the property’s use as of December 31, 2010 or the property’s use immediately prior to its disposition or third party lease expiration.
     Environmental remediation expenses have been attributed to Marketing or other tenants on a site specific basis and environmental related litigation expenses and professional fees have been attributed to Marketing or other tenants based on the pro rata share of specifically identifiable environmental expenses for the three year period ended December 31, 2010. The Company enters into leases and various other agreements which allocate responsibility for known and unknown environmental liabilities by establishing the percentage and method of allocating responsibility between the parties. In accordance with the leases with certain tenants, the Company has agreed to bring the leased properties with known environmental contamination to within applicable standards, and to either regulatory or contractual closure (“Closure”). Generally, upon achieving Closure at each individual property, the Company’s environmental liability under the lease for that property will be satisfied and future remediation obligations will be the responsibility of the Company’s tenant. Of the 817 properties leased to Marketing as of December 31, 2010, the Company has agreed to pay all costs relating to, and to indemnify Marketing for, certain environmental liabilities and obligations at 186 retail properties that have not achieved Closure and are scheduled in the Master Lease. (See note 5 for additional information.)
     The heading “Corporate” in the statements below includes assets, liabilities, income and expenses attributed to general and administrative functions, financing activities and parent or subsidiary level income taxes, capital taxes or franchise taxes which were not incurred on behalf of the Company’s leasing operations and are not reasonably allocable to Marketing or other tenants. With respect to general and administrative expenses, the Company has attributed those expenses clearly applicable to Marketing and other tenants. The Company considered various methods of allocating to Marketing and other tenants amounts included under the heading “Corporate” and determined that none of the methods resulted in a reasonable allocation of such amounts or an allocation of such amounts that more clearly summarizes the net contribution to the Company’s financial results realized from the leasing operations of properties leased to Marketing and of properties leased to other tenants. Moreover, the Company determined that each of the allocation methods it considered resulted in a presentation of these amounts that would make it more difficult to understand the clearly identifiable results from its leasing operations attributable to Marketing and other tenants. The Company believes that the segregated presentation of assets, liabilities, income and expenses attributed to general and administrative functions, financing activities and parent or subsidiary level income taxes, capital taxes or franchise taxes provides the most meaningful presentation of these amounts since changes in these amounts are not fully correlated to changes in the Company’s leasing activities.
     While the Company believes these assumptions, judgments and allocations are reasonable, the condensed combining financial information is not intended to reflect what the net results would have been had assets, liabilities, lease agreements and other operations attributable to Marketing or its other tenants had been conducted through stand-alone entities during any of the periods presented.

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     The condensed combining statement of operations of Getty Realty Corp. for the year ended December 31, 2010 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
Revenues from rental properties
  $ 58,656     $ 29,676     $     $ 88,332  
Operating expenses:
                               
Rental property expenses
    (7,046 )     (2,604 )     (478 )     (10,128 )
Environmental expenses, net
    (5,300 )     (127 )           (5,427 )
General and administrative expenses
    (146 )     (135 )     (7,897 )     (8,178 )
Depreciation and amortization expense
    (4,223 )     (5,471 )     (37 )     (9,731 )
 
                       
Total operating expenses
    (16,715 )     (8,337 )     (8,412 )     (33,464 )
 
                       
Operating income (loss)
    41,941       21,339       (8,412 )     54,868  
Other income, net
                289       289  
Interest expense
                (5,050 )     (5,050 )
 
                       
Earnings (loss) from continuing operations
    41,941       21,339       (13,173 )     50,107  
Discontinued operations:
                               
Loss from operating activities
    (106 )     (6 )           (112 )
Gains on dispositions of real estate
    1,685       20             1,705  
 
                       
Earnings from discontinued operations
    1,579       14             1,593  
 
                       
Net earnings (loss)
  $ 43,520     $ 21,353     $ (13,173 )   $ 51,700  
 
                       
     The condensed combining statement of operations of Getty Realty Corp. for the year ended December 31, 2009 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
Revenues from rental properties
  $ 60,476     $ 23,940     $     $ 84,416  
Operating expenses:
                               
Rental property expenses
    (6,925 )     (3,204 )     (560 )     (10,689 )
Impairment Charges
    (1,135 )                 (1,135 )
Environmental expenses, net
    (8,610 )     (201 )           (8,811 )
General and administrative expenses
    (280 )     (231 )     (6,338 )     (6,849 )
Depreciation and amortization expense
    (5,554 )     (5,148 )     (71 )     (10,773 )
 
                       
Total operating expenses
    (22,504 )     (8,784 )     (6,969 )     (38,257 )
 
                       
Operating income (loss)
    37,972       15,156       (6,969 )     46,159  
Other income, net
    153       (12 )     444       585  
Interest expense
                (5,091 )     (5,091 )
 
                       
Earnings (loss) from continuing operations
    38,125       15,144       (11,616 )     41,653  
Discontinued operations:
                               
Earnings (loss) from operating activities
    181       (111 )           70  
Gains on dispositions of real estate
    4,591       735             5,326  
 
                       
Earnings from discontinued operations
    4,772       624             5,396  
 
                       
Net earnings (loss)
  $ 42,897     $ 15,768     $ (11,616 )   $ 47,049  
 
                       

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     The condensed combining statement of operations of Getty Realty Corp. for the year ended December 31, 2008 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
Revenues from rental properties
  $ 60,526     $ 22,128     $     $ 82,654  
Operating expenses:
                               
Rental property expenses
    (6,938 )     (3,904 )     (601 )     (11,443 )
Environmental expenses, net
    (7,126 )     (180 )           (7,306 )
General and administrative expenses
    (686 )     (193 )     (5,952 )     (6,831 )
Depreciation and amortization expense
    (6,749 )     (4,939 )     (39 )     (11,727 )
 
                       
Total operating expenses
    (21,499 )     (9,216 )     (6,592 )     (37,307 )
 
                       
Operating income (loss)
    39,027       12,912       (6,592 )     45,347  
Other income, net
    599       (210 )     14       403  
Interest expense
                (7,034 )     (7,034 )
 
                       
Earnings (loss) from continuing operations
    39,626       12,702       (13,612 )     38,716  
Discontinued operations:
                               
Earnings from operating activities
    527       169             696  
Gains on dispositions of real estate
    697       1,701             2,398  
 
                       
Earnings from discontinued operations
    1,224       1,870             3,094  
 
                       
Net earnings (loss)
  $ 40,850     $ 14,572     $ (13,612 )   $ 41,810  
 
                       
     The condensed combining balance sheet of Getty Realty Corp. as of December 31, 2010 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
ASSETS:
                               
Real Estate:
                               
Land
  $ 137,151     $ 116,262     $     $ 253,413  
Buildings and improvements
    152,570       98,233       371       251,174  
 
                       
 
    289,721       214,495       371       504,587  
Less — accumulated depreciation and amortization
    (118,784 )     (25,241 )     (192 )     (144,217 )
 
                       
Real estate, net
    170,937       189,254       179       360,370  
Net investment in direct financing lease
          20,540             20,540  
Deferred rent receivable, net
    21,221       6,164             27,385  
Cash and cash equivalents
                6,122       6,122  
Recoveries from state underground storage tank funds, net
    3,874       92             3,966  
Mortgages and accounts receivable, net
    13       509       1,274       1,796  
Prepaid expenses and other assets
          3,444       3,521       6,965  
 
                       
Total assets
    196,045       220,003       11,096       427,144  
 
                       
 
LIABILITIES:
                               
Borrowings under credit line
                41,300       41,300  
Term loan
                23,590       23,590  
Environmental remediation costs
    13,841       1,033             14,874  
Dividends payable
                14,432       14,432  
Accounts payable and accrued expenses
    962       6,953       10,098       18,013  
 
                       
Total liabilities
    14,803       7,986       89,420       112,209  
 
                       
 
                               
Net assets (liabilities)
  $ 181,242     $ 212,017     $ (78,324 )   $ 314,935  
 
                       

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     The condensed combining balance sheet of Getty Realty Corp. as of December 31, 2009 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
ASSETS:
                               
Real Estate:
                               
Land
  $ 137,887     $ 114,196     $     $ 252,083  
Buildings and improvements
    154,345       97,171       275       251,791  
 
                       
 
    292,232       211,367       275       503,874  
Less — accumulated depreciation and amortization
    (116,128 )     (20,386 )     (155 )     (136,669 )
 
                       
Real estate, net
    176,104       190,981       120       367,205  
Net investment in direct financing lease
          19,156             19,156  
Deferred rent receivable, net
    22,801       4,680             27,481  
Cash and cash equivalents
                3,050       3,050  
Recoveries from state underground storage tank funds, net
    3,784       98             3,882  
Mortgages and accounts receivable, net
          970       1,432       2,402  
Prepaid expenses and other assets
          4,052       5,644       9,696  
 
                       
Total assets
    202,689       219,937       10,246       432,872  
 
                       
 
LIABILITIES:
                               
Borrowings under credit line
                151,200       151,200  
Term loan
                24,370       24,370  
Environmental remediation costs
    16,055       472             16,527  
Dividends payable
                11,805       11,805  
Accounts payable and accrued expenses
    920       8,643       11,738       21,301  
 
                       
Total liabilities
    16,975       9,115       199,113       225,203  
 
                       
 
                               
Net assets (liabilities)
  $ 185,714     $ 210,822     $ (188,867 )   $ 207,669  
 
                       

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     The condensed combining statement of cash flows of Getty Realty Corp. for the year ended December 31, 2010 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
CASH FLOWS FROM OPERATING ACTIVITIES:
                               
Net earnings (loss)
  $ 43,520     $ 21,353     $ (13,173 )   $ 51,700  
Adjustments to reconcile net earnings (loss) to net cash flow provided by operating activities:
                               
Depreciation and amortization expense
    4,229       5,472       37       9,738  
Impairment charges
                       
Gain from dispositions of real estate
    (1,685 )     (20 )           (1,705 )
Deferred rental revenue
    1,580       (1,484 )           96  
Amortization of above-market and below-market leases
          (1,260 )           (1,260 )
Amortization of investment in direct financing lease
          (323 )           (323 )
Accretion expense
    758       17             775  
Stock-based employee compensation expense
                480       480  
Changes in assets and liabilities:
                               
Recoveries from state underground storage tank funds, net
    276       15             291  
Mortgages and accounts receivable, net
    (13 )     461             448  
Prepaid expenses and other assets
          59       (542 )     (483 )
Environmental remediation costs
    (3,338 )     535             (2,803 )
Accounts payable and accrued expenses
    42       (273 )     200       (31 )
 
                       
Net cash flow provided by (used in) operating activities
    45,369       24,552       (12,998 )     56,923  
 
                       
 
                               
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
Property acquisitions and capital expenditures
          (4,629 )     (96 )     (4,725 )
Proceeds from dispositions of real estate
    2,623       235             2,858  
Decrease in cash held for property acquisitions
                2,665       2,665  
Collection (issuance) of mortgages receivable, net
                158       158  
 
                       
Net cash flow provided by (used in) investing activities
    2,623       (4,394 )     2,727       956  
 
                       
 
                               
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Borrowings (repayments) under credit agreement, net
                (109,900 )     (109,900 )
Repayments under term loan agreement, net
                (780 )     (780 )
Cash dividends paid
                (52,332 )     (52,332 )
Net proceeds from issuance of common stock
                108,205       108,205  
Cash consolidation- Corporate
    (47,992 )     (20,158 )     68,150        
 
                       
Net cash flow (used in) provided by financing activities
    (47,992 )     (20,158 )     13,343       (54,807 )
 
                       
 
                               
Net increase in cash and cash equivalents
                3,072       3,072  
Cash and cash equivalents at beginning of period
                3,050       3,050  
 
                       
Cash and cash equivalents at end of year
  $     $     $ 6,122     $ 6,122  
 
                       

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     The condensed combining statement of cash flows of Getty Realty Corp. for the year ended December 31, 2009 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
CASH FLOWS FROM OPERATING ACTIVITIES:
                               
Net earnings (loss)
  $ 42,897     $ 15,768     $ (11,616 )   $ 47,049  
Adjustments to reconcile net earnings (loss) to net cash flow provided by operating activities:
                               
Depreciation and amortization expense
    5,605       5,351       71       11,027  
Impairment charges
    1,135                   1,135  
Gain from dispositions of real estate
    (4,744 )     (723 )           (5,467 )
Deferred rental revenue
    99       (862 )           (763 )
Amortization of above-market and below-market leases
          (1,217 )           (1,217 )
Amortization of investment in direct financing lease
          (85 )           (85 )
Accretion expense
    864       20             884  
Stock-based employee compensation expense
                390       390  
Changes in assets and liabilities:
                               
Recoveries from state underground storage tank funds, net
    650       74             724  
Mortgages and accounts receivable, net
    7       (731 )           (724 )
Prepaid expenses and other assets
          (47 )     386       339  
Environmental remediation costs
    (2,384 )     (16 )           (2,400 )
Accounts payable and accrued expenses
    (232 )     305       1,567       1,640  
 
                       
Net cash flow provided by (used in) operating activities
    43,897       17,837       (9,202 )     52,532  
 
                       
 
                               
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
Property acquisitions and capital expenditures
    (483 )     (54,785 )     (49 )     (55,317 )
Proceeds from dispositions of real estate
    5,701       1,238             6,939  
Increase in cash held for property acquisitions
                (1,623 )     (1,623 )
Collection (issuance) of mortgages receivable, net
                (145 )     (145 )
 
                       
Net cash flow provided by (used in) investing activities
    5,218       (53,547 )     (1,817 )     (50,146 )
 
                       
 
                               
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Borrowings (repayments) under credit agreement, net
                20,950       20,950  
Borrowings under term loan agreement, net
                24,370       24,370  
Cash dividends paid
                (46,834 )     (46,834 )
Cash consolidation — Corporate
    (49,115 )     35,710       13,405        
 
                       
Net cash flow (used in) provided by financing activities
    (49,115 )     35,710       11,891       (1,514 )
 
                       
 
                               
Net increase in cash and cash equivalents
                872       872  
Cash and cash equivalents at beginning of period
                2,178       2,178  
 
                       
Cash and cash equivalents at end of year
  $     $     $ 3,050     $ 3,050  
 
                       

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     The condensed combining statement of cash flows of Getty Realty Corp. for the year ended December 31, 2008 is as follows (in thousands):
                                 
    Getty                    
    Petroleum     Other              
    Marketing     Tenants     Corporate     Consolidated  
CASH FLOWS FROM OPERATING ACTIVITIES:
                               
Net earnings (loss)
  $ 40,850     $ 14,572     $ (13,612 )   $ 41,810  
Adjustments to reconcile net earnings (loss) to net cash flow provided by operating activities:
                               
Depreciation and amortization expense
    6,839       4,997       39       11,875  
Gain from dispositions of real estate
    (1,296 )     (1,491 )           (2,787 )
Deferred rental revenue
    (539 )     (1,264 )           (1,803 )
Amortization of above-market and below-market leases
          (790 )           (790 )
Accretion expense
    934       22             956  
Stock-based employee compensation expense
                326       326  
Changes in assets and liabilities:
                               
Recoveries from state underground storage tank funds, net
    691       136             827  
Mortgages and accounts receivable, net
    8       (13 )           (5 )
Prepaid expenses and other assets
          12       411       423  
Environmental remediation costs
    (1,945 )     (272 )           (2,217 )
Accounts payable and accrued expenses
    (222 )     382       (1,191 )     (1,031 )
 
                       
Net cash flow provided by (used in) operating activities
    45,320       16,291       (14,027 )     47,584  
 
                       
 
                               
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
Property acquisitions and capital expenditures
    (1,233 )     (5,346 )           (6,579 )
Proceeds from dispositions of real estate
    3,268       2,027             5,295  
Increase in cash held for property acquisitions
                2,397       2,397  
Collection (issuance) of mortgages receivable, net
                (55 )     (55 )
 
                       
Net cash flow (used in) provided by investing activities
    2,035       (3,319 )     2,342       1,058  
 
                       
 
                               
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Borrowings (repayments) under credit agreement, net
                (2,250 )     (2,250 )
Cash dividends paid
                (46,294 )     (46,294 )
Cash paid in settlement of restricted stock units
                9       9  
Cash consolidation — Corporate
    (47,355 )     (12,972 )     60,327        
 
                       
Net cash flow (used in) provided by financing activities
    (47,355 )     (12,972 )     11,792       (48,535 )
 
                       
 
                               
Net increase in cash and cash equivalents
                107       107  
Cash and cash equivalents at beginning of period
                2,071       2,071  
 
                       
Cash and cash equivalents at end of year
  $     $     $ 2,178     $ 2,178  
 
                       
     12. SUBSEQUENT EVENTS
     Acquisition: In January 2011, the Company acquired fee or leasehold title to 59 Mobil-branded gasoline station and convenience store properties and also took a security interest in six other Mobil-branded gasoline stations and convenience store properties in a sale/leaseback and loan transaction with CPD NY Energy Corp. (“CPD NY”), a subsidiary of Chestnut Petroleum Dist. Inc. The Company’s total investment in the transaction was $111.3 million, which was financed entirely with borrowings under the Company’s Credit Agreement.
     The properties were acquired or financed in a simultaneous transaction among ExxonMobil, CPD NY and the Company whereby CPD NY acquired a portfolio of 65 gasoline station and convenience stores from ExxonMobil and simultaneously completed a sale/leaseback of 59 of the acquired properties with the Company. The lease between the Company, as lessor, and CPD NY, as lessee, governing the properties is a unitary triple-net lease agreement (the “CPD Lease”), with an initial term of 15 years, and options for up to three successive renewal terms of ten years each. The CPD Lease requires CPD NY to pay a fixed annual rent for the properties (the “Rent”), plus an amount equal to all rent due to third party landlords pursuant

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to the terms of third party leases. The Rent is scheduled to increase on the third anniversary of the date of the CPD Lease and on every third anniversary thereafter. As a triple-net lessee, CPD NY is required to pay all amounts pertaining to the properties subject to the CPD Lease, including taxes, assessments, licenses and permit fees, charges for public utilities and all governmental charges. Partial funding to CPD NY for the transaction was also provided by the Company under a secured, self-amortizing loan having a 10-year term (the “CPD Loan”) Net rent payments under the CPD Lease together with interest earned on the CPD Loan are expected to aggregate approximately $10.2 million in calendar year 2011.
     It is impractical to provide pro forma financial information showing the impact on the Company’s historical financial statements related to the acquisition since the initial accounting for the acquisitions in accordance with accounting standards codification 805-10 is incomplete at this time.
     Public Stock Offering: In the first quarter of 2011, the Company completed a public stock offering of 3,450,000 shares of the Company’s common stock, of which 3,000,000 shares were issued in January 2011 and 450,000 shares, representing the underwriter’s over-allotment, were issued in February 2011. Substantially all of the aggregate $91,753,000 net proceeds from the issuance of common stock was used to repay a portion of the outstanding balance under the Credit Agreement and the remainder was used for general corporate purposes.
     Transfer of Ownership Interest in Marketing: On February 28, 2011 Lukoil, one of the largest integrated Russian oil companies transferred its ownership interest in Marketing, our largest tenant, to Cambridge. The Company has commenced discussions with the new owners and management of Marketing; however, it cannot predict the impact the transfer of Marketing may have on the Company’s business.
     As of December 31, 2010, the net carrying value of the deferred rent receivable attributable to the Marketing Leases was $21,221,000. Although the Company’s 2010 financial statements were not affected by the transfer of Lukoil’s ownership interest in Marketing to Cambridge, the Company’s estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases made effective December 31, 2010 are subject to reevaluation and possible change as the Company develops a greater understanding of factors relating to the new ownership and management of Marketing, Marketing’s business plan and strategies and its capital resources. It is possible that he Company may be required to increase or decrease the deferred rent reserve, record additional impairment charges related to the properties, or accrue for Marketing Environmental Liabilities as a result of changes in its estimates, judgments, assumptions and beliefs regarding Marketing and the Marketing Leases that affect the amounts reported in the Company’s financial statements. It is also possible that as a result of material adjustments to the amounts recorded for certain of the Company’s assets and liabilities that it may not be in compliance with the financial covenants in the Company’s Credit Agreement or Term Loan Agreement.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Getty Realty Corp.:
     In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income and cash flows present fairly, in all material respects, the financial position of Getty Realty Corp. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
     A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 16, 2011

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
     None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or furnished pursuant to the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
     As required by the Exchange Act Rule 13a-15(b), the Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2010.
Management’s Report on Internal Control Over Financial Reporting
     Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.
     The effectiveness of our internal control over financial reporting as of December 31, 2010, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in “Item 8. Financial Statements and Supplementary Data”.
     There have been no changes in the Company’s internal control over financial reporting during the latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
     None.

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PART III
Item 10. Directors, Executive Officers and Corporate Governance
     Information with respect to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to information under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. Information with respect to directors, the audit committee and the audit committee financial expert, and procedures by which shareholders may recommend to nominees to the board of directors in response to this item is incorporated herein by reference to information under the headings “Election of Directors” and “Directors’ Meetings, Committees and Executive Officers” in the Proxy Statement. The following table lists our executive officers, their respective ages, and the offices and positions held.
                     
NAME   AGE   POSITION   OFFICER SINCE
David B. Driscoll
    56     President, Chief Executive Officer and Director     2010  
Leo Liebowitz
    83     Director and Chairman of the Board     1971  
Joshua Dicker
    50     Vice President, General Counsel and Secretary     2008  
Kevin C. Shea
    51     Executive Vice President     2001  
Thomas J. Stirnweis
    52     Vice President, Treasurer and Chief Financial Officer     2001  
     Mr. Driscoll was appointed to the position of President of the Company, effective in April 2010. In addition, Mr. Driscoll was appointed as the Company’s Chief Executive Officer, effective May 2010. Mr. Driscoll is also a Director of the Company. Mr. Driscoll was a Managing Director at Morgan Joseph and Co. Inc. where he was a founding shareholder. Prior to his work at Morgan Joseph, Mr. Driscoll was a Managing Director for ING Barings, where he was Global Coordinator of the real estate practice and prior to ING Barings, Mr. Driscoll was the founder of the real estate group at Smith Barney, which he ran for more than a decade.
     Mr. Liebowitz co-founded the Company in 1955 and served as Chief Executive Officer from 1985 until May 2010. He was the President of the Company from May 1971 to May 2004. Mr. Liebowitz served as Chairman, Chief Executive Officer and a director of Marketing from October 1996 until December 2000. He is also a director of the Regional Banking Advisory Board of J.P. Morgan Chase & Co. Mr. Liebowitz is also Chairman of the Company’s Board of Directors and will retain an active role in the Company through May 2013 at which time he intends to retire.
     Mr. Dicker has served as Vice President, General Counsel and Secretary since February 2009. He was General Counsel and Secretary since joining the Company in February 2008. Prior to joining Getty, he was a partner at the law firm Arent Fox, LLP, resident in its New York City office, specializing in corporate and transactional matters.
     Mr. Shea has been with the Company since 1984 and has served as Executive Vice President since May 2004. He was Vice President since January 2001 and Director of National Real Estate Development prior thereto.
     Mr. Stirnweis has been with the Company or Getty Petroleum Marketing Inc. since 1988 and has served as Vice President, Treasurer and Chief Financial Officer of the Company since May 2003. He joined the Company in January 2001 as Corporate Controller and Treasurer. Prior to joining the Company, Mr. Stirnweis was Manager of Financial Reporting and Analysis of Marketing.
     There are no family relationships between any of the Company’s directors or executive officers.
     The Getty Realty Corp. Business Conduct Guidelines (“Code of Ethics”), which applies to all employees, including our chief executive officer and chief financial officer, is available on our website at www.gettyrealty.com.

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Item 11. Executive Compensation
     Information in response to this item is incorporated herein by reference to information under the heading “Executive Compensation” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
     Information in response to this item is incorporated herein by reference to information under the heading “Beneficial Ownership of Capital Stock” and “Executive Compensation — Compensation Discussion and Analysis — Equity Compensation — Equity Compensation Plan Information” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
     There were no such relationships or transactions to report for the year ended December 31, 2010.
     Information with respect to director independence is incorporated herein by reference to information under the heading “Directors’ Meetings, Committees and Executive Officers — Independence of Directors” in the Proxy Statement.
Item 14. Principal Accountant Fees and Services
     Information in response to this item is incorporated herein by reference to information under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

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PART IV
Item 15. Exhibits and Financial Statement Schedules
     (a)(1) Financial Statements
     Information in response to this Item is included in “Item 8. Financial Statements and Supplementary Data”.
     (a)(2) Financial Statement Schedules
GETTY REALTY CORP.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Item 15(a)(2)
     (a)(3) Exhibits
Information in response to this Item is incorporated herein by reference to the Exhibit Index on page 109 of this Annual Report on Form 10-K.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Getty Realty Corp.:
     Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated March 16, 2011 appearing in Item 8 of this Annual Report on Form 10-K also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 16, 2011
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2010, 2009 and 2008
(in thousands)
                                 
    BALANCE AT                     BALANCE  
    BEGINNING                     AT END  
    OF YEAR     ADDITIONS     DEDUCTIONS     OF YEAR  
December 31, 2010:
                               
Allowance for deferred rent receivable
  $ 9,389     $     $ 1,219     $ 8,170  
Allowance for mortgages and accounts receivable
  $ 135     $ 226     $     $ 361  
Allowance for deposits held in escrow
  $ 377     $     $     $ 377  
Allowance for recoveries from state underground storage tank funds
  $ 650     $     $     $ 650  
 
                               
December 31, 2009:
                               
Allowance for deferred rent receivable
  $ 10,029     $     $ 640     $ 9,389  
Allowance for mortgages and accounts receivable
  $ 100     $ 120     $ 85     $ 135  
Allowance for deposits held in escrow
  $ 377     $     $     $ 377  
Allowance for recoveries from state underground storage tank funds
  $ 650     $     $     $ 650  
 
                               
December 31, 2008:
                               
Allowance for deferred rent receivable
  $ 10,494     $     $ 465     $ 10,029  
Allowance for mortgages and accounts receivable
  $ 100     $ 71     $ 71     $ 100  
Allowance for deposits held in escrow
  $     $ 377     $     $ 377  
Allowance for recoveries from state underground storage tank funds
  $ 650     $     $     $ 650  

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GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2010
(in thousands)
     The summarized changes in real estate assets and accumulated depreciation are as follows:
                         
    2010     2009     2008  
Investment in real estate:
                       
Balance at beginning of year
  $ 503,874     $ 473,567     $ 474,254  
Acquisitions and capital expenditures
    3,664       36,246       6,540  
Impairment
          (1,135 )      
Sales and condemnations
    (1,819 )     (3,298 )     (3,939 )
Lease expirations
    (1,132 )     (1,506 )     (3,288 )
 
                 
Balance at end of year
  $ 504,587     $ 503,874     $ 473,567  
 
                 
 
                       
Accumulated depreciation and amortization:
                       
Balance at beginning of year
  $ 136,669     $ 129,322     $ 122,465  
Depreciation and amortization expense
    9,346       10,679       11,576  
Sales and condemnations
    (666 )     (1,826 )     (1,431 )
Lease expirations
    (1,132 )     (1,506 )     (3,288 )
 
                 
Balance at end of year
  $ 144,217     $ 136,669     $ 129,322  
 
                 
     We are not aware of any material liens or encumbrances on any of our properties.

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    Initial Cost     Cost                                     Date of  
    of Leasehold     Capitalized     Gross Amount at Which Carried             Initial  
    or Acquisition     Subsequent             at Close of Period                     Leasehold or  
    Investment to     to Initial             Building and             Accumulated     Acquisition  
Description   Company (1)     Investment     Land     Improvements     Total     Depreciation     Investment (1)  
BROOKLYN, NY
  $ 282,104     $ 301,052     $ 176,292     $ 406,864     $ 583,156     $ 380,561       1967  
JAMAICA, NY
    12,000       295,750       12,000       295,750       307,750       236,475       1970  
REGO PARK, NY
    33,745       281,380       23,000       292,125       315,125       261,199       1974  
BROOKLYN, NY
    74,808       125,120       30,694       169,234       199,928       166,113       1967  
BRONX, NY
    60,000       353,955       60,800       353,155       413,955       305,133       1965  
CORONA, NY
    114,247       300,172       112,800       301,619       414,419       245,295       1965  
OCEANSIDE, NY
    40,378       169,929       40,000       170,307       210,307       144,868       1970  
BLUEPOINT, NY
    96,163       118,524       96,068       118,619       214,687       118,158       1972  
BRENTWOOD, NY
    253,058       84,485       125,000       212,543       337,543       211,813       1968  
BAY SHORE, NY
    47,685       289,972               337,657       337,657       337,657       1969  
WHITE PLAINS, NY
            527,925       302,607       225,318       527,925       135,248       1972  
PELHAM MANOR, NY
    127,304       85,087       75,800       136,591       212,391       134,071       1972  
BRONX, NY
            309,235       176,558       132,677       309,235       92,746       1971  
BRONX, NY
            293,507               293,507       293,507       293,507       1972  
BROOKLYN, NY
            365,767               365,767       365,767       365,767       1970  
POUGHKEEPSIE, NY
    32,885       168,354       35,904       165,335       201,239       162,305       1971  
WAPPINGERS FALLS, NY
    114,185       159,162       111,785       161,562       273,347       158,741       1971  
STONY POINT, NY
    59,329       203,448       55,800       206,977       262,777       206,977       1971  
KINGSTON, NY
    29,010       159,986       12,721       176,275       188,996       175,375       1972  
LAGRANGEVILLE, NY
    129,133       101,140       64,626       165,647       230,273       165,049       1972  
BRONX, NY
    128,419       221,197       100,681       248,935       349,616       218,546       1972  
STATEN ISLAND, NY
    40,598       256,262       26,050       270,810       296,860       226,359       1973  
BRONX, NY
    141,322       141,909       86,800       196,431       283,231       192,721       1972  
NEW YORK, NY
    125,923       168,772       78,125       216,570       294,695       215,406       1972  
MIDDLE VILLAGE, NY
    130,684       73,741       89,960       114,465       204,425       112,103       1972  
BROOKLYN, NY
    100,000       254,503       66,890       287,613       354,503       261,144       1972  
BROOKLYN, NY
    135,693       91,946       100,035       127,604       227,639       114,148       1972  
BROOKLYN, NY
    147,795       228,379       103,815       272,359       376,174       249,080       1972  
STATEN ISLAND, NY
    101,033       371,591       75,650       396,974       472,624       324,405       1972  
STATEN ISLAND, NY
    25,000       325,918               350,918       350,918       350,918       1972  
BRONX, NY
    543,833       693,438       473,695       763,576       1,237,271       761,876       1970  
BRONX, NY
    90,176       183,197       40,176       233,197       273,373       213,494       1976  
BRONX, NY
    45,044       196,956       10,044       231,956       242,000       215,941       1976  
BRONX, NY
    128,049       315,917       83,849       360,117       443,966       298,182       1972  
BRONX, NY
    130,396       184,222       90,396       224,222       314,618       220,666       1972  
BRONX, NY
    118,025       290,298       73,025       335,298       408,323       306,680       1972  
BRONX, NY
    70,132       322,265       30,132       362,265       392,397       303,186       1972  
BRONX, NY
    78,168       450,267       65,680       462,755       528,435       401,874       1972  
BRONX, NY
    69,150       300,279       34,150       335,279       369,429       289,006       1972  
YONKERS, NY
    291,348       170,478       216,348       245,478       461,826       236,480       1972  
SLEEPY HOLLOW, NY
    280,825       102,486       129,744       253,567       383,311       249,725       1969  
OLD BRIDGE, NJ
    85,617       109,980       56,190       139,407       195,597       139,407       1972  
BREWSTER, NY
    117,603       78,076       72,403       123,276       195,679       120,392       1972  
FLUSHING, NY
    118,309       280,435       78,309       320,435       398,744       263,591       1973  

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    Initial Cost     Cost                                     Date of  
    of Leasehold     Capitalized     Gross Amount at Which Carried             Initial  
    or Acquisition     Subsequent             at Close of Period                     Leasehold or  
    Investment to     to Initial             Building and             Accumulated     Acquisition  
Description   Company (1)     Investment     Land     Improvements     Total     Depreciation     Investment (1)  
BRONX, NY
            278,517               278,517       278,517       261,528       1976  
STATEN ISLAND, NY
    173,667       133,198       113,369       193,496       306,865       186,432       1976  
BRIARCLIFF MANOR, NY
    652,213       103,753       501,687       254,279       755,966       252,578       1976  
BRONX, NY
    95,328       102,639       73,750       124,217       197,967       122,885       1976  
BRONX, NY
    88,865       193,679       63,315       219,229       282,544       218,914       1976  
NEW YORK, NY
    106,363       103,035       79,275       130,123       209,398       128,858       1976  
NEW YORK, NY
    146,159       407,286       43,461       509,984       553,445       431,343       1976  
GLENDALE, NY
    124,438       287,907       86,160       326,185       412,345       291,970       1976  
OZONE PARK, NY
    57,289       331,799       44,715       344,373       389,088       310,408       1976  
LONG ISLAND CITY, NY
    106,592       151,819       73,260       185,151       258,411       184,526       1976  
RIDGE, NY
    276,942       73,821       200,000       150,763       350,763       138,113       1977  
NEW CITY, NY
    180,979       100,597       109,025       172,551       281,576       172,386       1978  
W. HAVERSTRAW, NY
    194,181       38,141       140,000       92,322       232,322       90,798       1978  
BROOKLYN, NY
    74,928       250,382       44,957       280,353       325,310       235,518       1978  
RONKONKOMA, NY
    76,478       208,121       46,057       238,542       284,599       236,284       1978  
STONY BROOK, NY
    175,921       44,529       105,000       115,450       220,450       115,157       1978  
MILLER PLACE, NY
    110,000       103,160       66,000       147,160       213,160       146,858       1978  
LAKE RONKONKOMA, NY
    87,097       156,576       51,000       192,673       243,673       191,794       1978  
E. PATCHOGUE, NY
    57,049       210,390       34,213       233,226       267,439       233,226       1978  
AMITYVILLE, NY
    70,246       139,953       42,148       168,051       210,199       168,051       1978  
BETHPAGE, NY
    210,990       38,356       126,000       123,346       249,346       123,213       1978  
HUNTINGTON STATION, NY
    140,735       52,045       84,000       108,780       192,780       108,780       1978  
BALDWIN, NY
    101,952       106,328       61,552       146,728       208,280       127,618       1978  
ELMONT, NY
    388,848       114,933       231,000       272,781       503,781       246,521       1978  
NORTH BABYLON, NY
    91,888       117,066       59,059       149,895       208,954       149,029       1978  
CENTRAL ISLIP, NY
    103,183       151,449       61,435       193,197       254,632       193,197       1978  
WHITE PLAINS, NY
    120,393       67,315               187,708       187,708       187,708       1979  
STATEN ISLAND, NY
            222,525               222,525       222,525       222,525       1981  
BROOKLYN, NY
    116,328       232,254       75,000       273,582       348,582       269,208       1980  
LONG ISLAND CITY, NY
    191,420       390,783       116,554       465,649       582,203       374,139       1981  
BAY SHORE, NY
    156,382       123,032       85,854       193,560       279,414       192,923       1981  
BRISTOL, CT
    108,808       81,684       44,000       146,492       190,492       145,631       1982  
CROMWELL, CT
    70,017       183,119       24,000       229,136       253,136       229,136       1982  
EAST HARTFORD, CT
    208,004       60,493       84,000       184,497       268,497       184,497       1982  
FRANKLIN, CT
    50,904       168,470       20,232       199,142       219,374       198,997       1982  
MANCHESTER, CT
    65,590       156,628       64,750       157,468       222,218       157,331       1982  
MERIDEN, CT
    207,873       39,829       84,000       163,702       247,702       163,646       1982  
NEW MILFORD, CT
    113,947       121,174               235,121       235,121       235,121       1982  
NORWALK, CT
    257,308       128,940       104,000       282,248       386,248       281,997       1982  
SOUTHINGTON, CT
    115,750       158,561       70,750       203,561       274,311       203,189       1982  
TERRYVILLE, CT
    182,308       98,911       74,000       207,219       281,219       207,179       1982  
TOLLAND, CT
    107,902       100,178       44,000       164,080       208,080       163,042       1982  
WATERFORD, CT
    76,981       133,059               210,040       210,040       208,789       1982  
WEST HAVEN, CT
    185,138       48,619       74,000       159,757       233,757       158,911       1982  

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    Initial Cost     Cost                                     Date of  
    of Leasehold     Capitalized     Gross Amount at Which Carried             Initial  
    or Acquisition     Subsequent             at Close of Period                     Leasehold or  
    Investment to     to Initial             Building and             Accumulated     Acquisition  
Description   Company (1)     Investment     Land     Improvements     Total     Depreciation     Investment (1)  
GRANBY, MA
    58,804       232,477       24,000       267,281       291,281       228,899       1982  
HADLEY, MA
    119,276       68,748       36,080       151,944       188,024       149,726       1982  
PITTSFIELD, MA
    123,167       118,273       50,000       191,440       241,440       191,114       1982  
SOUTH HADLEY, MA
    232,445       54,351       90,000       196,796       286,796       194,200       1982  
SPRINGFIELD, MA
    139,373       239,713       50,000       329,086       379,086       273,794       1983  
SPRINGFIELD, MA
            239,087               239,087       239,087       204,303       1984  
WESTFIELD, MA
    123,323       96,093       50,000       169,416       219,416       167,631       1982  
OSSINING, NY
    140,992       104,761       97,527       148,226       245,753       145,058       1982  
FREEHOLD, NJ
    494,275       68,507       402,834       159,948       562,782       98,772       1978  
LAKEWOOD, NJ
    130,148       77,265       70,148       137,265       207,413       137,014       1978  
NORTH PLAINFIELD, NJ
    227,190       239,709       175,000       291,899       466,899       287,519       1978  
SOUTH AMBOY, NJ
    299,678       94,088       178,950       214,816       393,766       214,228       1978  
GLEN HEAD, NY
    234,395       192,295       102,645       324,045       426,690       324,045       1982  
NEW ROCHELLE, NY
    188,932       34,649       103,932       119,649       223,581       119,562       1982  
ELMONT, NY
    108,348       85,793       64,290       129,851       194,141       103,941       1982  
MERIDEN, CT
    126,188       106,805       72,344       160,649       232,993       160,649       1982  
PLAINVILLE, CT
    80,000       290,433               370,433       370,433       354,114       1983  
FRANKLIN SQUARE, NY
    152,572       121,756       137,315       137,013       274,328       102,543       1978  
SEAFORD, NY
    32,000       157,665               189,665       189,665       181,736       1978  
BROOKLYN, NY
    276,831       376,706       168,423       485,114       653,537       396,802       1978  
NEW HAVEN, CT
    1,412,860       56,420       898,470       570,810       1,469,280       322,933       1985  
BRISTOL, CT
    359,906                       359,906       359,906       221,945       2004  
BRISTOL, CT
    1,594,129               1,036,184       557,945       1,594,129       137,628       2004  
BRISTOL, CT
    253,639               149,553       104,086       253,639       25,672       2004  
BRISTOL, CT
    365,028               237,268       127,760       365,028       31,512       2004  
COBALT, CT
    395,683                       395,683       395,683       244,003       2004  
DURHAM, CT
    993,909                       993,909       993,909       612,911       2004  
ELLINGTON, CT
    1,294,889               841,678       453,211       1,294,889       111,789       2004  
ENFIELD, CT
    259,881                       259,881       259,881       188,540       2004  
FARMINGTON, CT
    466,271               303,076       163,195       466,271       40,256       2004  
HARTFORD, CT
    664,966               432,228       232,738       664,966       57,412       2004  
HARTFORD, CT
    570,898               371,084       199,814       570,898       49,290       2004  
MERIDEN, CT
    1,531,772               989,165       542,607       1,531,772       137,535       2004  
MIDDLETOWN, CT
    1,038,592               675,085       363,507       1,038,592       89,663       2004  
NEW BRITAIN, CT
    390,497               253,823       136,674       390,497       33,713       2004  
NEWINGTON, CT
    953,512               619,783       333,729       953,512       82,319       2004  
NORTH HAVEN, CT
    405,389               251,985       153,404       405,389       48,039       2004  
PLAINVILLE, CT
    544,503               353,927       190,576       544,503       47,009       2004  
PLYMOUTH, CT
    930,885               605,075       325,810       930,885       80,364       2004  
SOUTH WINDHAM, CT
    644,141       1,397,938       598,394       1,443,685       2,042,079       201,798       2004  
SOUTH WINDSOR, CT
    544,857               336,737       208,120       544,857       71,527       2004  
SUFFIELD, CT
    237,401       602,635       200,878       639,158       840,036       277,652       2004  
VERNON, CT
    1,434,223                       1,434,223       1,434,223       884,436       2004  
WALLINGFORD, CT
    550,553               334,901       215,652       550,553       66,261       2004  

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    Initial Cost     Cost                                     Date of  
    of Leasehold     Capitalized     Gross Amount at Which Carried             Initial  
    or Acquisition     Subsequent             at Close of Period                     Leasehold or  
    Investment to     to Initial             Building and             Accumulated     Acquisition  
Description   Company (1)     Investment     Land     Improvements     Total     Depreciation     Investment (1)  
WATERBURY, CT
    804,040               516,387       287,653       804,040       77,694       2004  
WATERBURY, CT
    515,172               334,862       180,310       515,172       44,474       2004  
WATERBURY, CT
    468,469               304,505       163,964       468,469       40,447       2004  
WATERTOWN, CT
    924,586               566,986       357,600       924,586       127,607       2004  
WETHERSFIELD, CT
    446,610                       446,610       446,610       430,749       2004  
WEST HAVEN, CT
    1,214,831               789,640       425,191       1,214,831       104,883       2004  
WESTBROOK, CT
    344,881                       344,881       344,881       212,676       2004  
WILLIMANTIC, CT
    716,782               465,908       250,874       716,782       61,883       2004  
WINDSOR, CT
    1,042,081               669,804       372,277       1,042,081       302,484       2004  
WINDSOR LOCKS, CT
    1,433,330                       1,433,330       1,433,330       883,887       2004  
WINDSOR LOCKS, CT
    360,664                       360,664       360,664       88,967       2004  
BLOOMFIELD, CT
    141,452       54,786       90,000       106,238       196,238       105,206       1986  
SIMSBURY, CT
    317,704       144,637       206,700       255,641       462,341       201,142       1985  
RIDGEFIELD, CT
    535,140       33,590       347,900       220,830       568,730       130,129       1985  
BRIDGEPORT, CT
    349,500       56,209       227,600       178,109       405,709       118,789       1985  
NORWALK, CT
    510,760       209,820       332,200       388,380       720,580       276,668       1985  
BRIDGEPORT, CT
    313,400       20,303       204,100       129,603       333,703       76,623       1985  
STAMFORD, CT
    506,860       15,635       329,700       192,795       522,495       107,322       1985  
BRIDGEPORT, CT
    245,100       20,652       159,600       106,152       265,752       64,538       1985  
BRIDGEPORT, CT
    313,400       24,314       204,100       133,614       337,714       80,572       1985  
BRIDGEPORT, CT
    377,600       83,549       245,900       215,249       461,149       151,595       1985  
BRIDGEPORT, CT
    526,775       63,505       342,700       247,580       590,280       158,841       1985  
BRIDGEPORT, CT
    338,415       27,786       219,800       146,401       366,201       88,196       1985  
NEW HAVEN, CT
    538,400       176,230       350,600       364,030       714,630       273,261       1985  
DARIEN, CT
    667,180       26,061       434,300       258,941       693,241       146,164       1985  
WESTPORT, CT
    603,260       23,070       392,500       233,830       626,330       129,223       1985  
STAMFORD, CT
    603,260       112,305       392,500       323,065       715,565       220,035       1985  
STAMFORD, CT
    506,580       40,429       329,700       217,309       547,009       131,260       1985  
STRATFORD, CT
    301,300       70,735       196,200       175,835       372,035       124,931       1985  
STRATFORD, CT
    285,200       14,728       185,700       114,228       299,928       65,990       1985  
CHESHIRE, CT
    490,200       19,050       319,200       190,050       509,250       107,401       1985  
MILFORD, CT
    293,512       43,846       191,000       146,358       337,358       95,466       1985  
FAIRFIELD, CT
    430,000       13,631       280,000       163,631       443,631       90,266       1985  
NORWALK, CT
            619,018       401,996       217,022       619,018       47,799       1988  
HARTFORD, CT
    233,000       32,563       151,700       113,863       265,563       74,228       1985  
NEW HAVEN, CT
    217,000       23,889       141,300       99,589       240,889       62,572       1985  
RIDGEFIELD, CT
    401,630       47,610       166,861       282,379       449,240       278,895       1985  
BRIDGEPORT, CT
    346,442       16,990       230,000       133,432       363,432       132,588       1985  
WILTON, CT
    518,881       71,425       337,500       252,806       590,306       163,498       1985  
MIDDLETOWN, CT
    133,022       86,915       131,312       88,625       219,937       88,625       1987  
EAST HARTFORD, CT
    555,826       13,797       301,322       268,301       569,623       105,964       1991  
WATERTOWN, CT
    351,771       58,812       204,027       206,556       410,583       125,188       1992  
AVON, CT
    730,886               402,949       327,937       730,886       126,360       2002  
WILMINGTON, DE
    309,300       67,834       201,400       175,734       377,134       123,451       1985  

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    Initial Cost     Cost                                     Date of  
    of Leasehold     Capitalized     Gross Amount at Which Carried             Initial  
    or Acquisition     Subsequent             at Close of Period                     Leasehold or  
    Investment to     to Initial             Building and             Accumulated     Acquisition  
Description   Company (1)     Investment     Land     Improvements     Total     Depreciation     Investment (1)  
ST. GEORGES, DE
    442,014       218,906       324,725       336,195       660,920       306,132       1985  
WILMINGTON, DE
    313,400       103,748       204,100       213,048       417,148       153,604       1985  
WILMINGTON, DE
    381,700       156,704       248,600       289,804       538,404       225,473       1985  
CLAYMONT, DE
    237,200       30,878       151,700       116,378       268,078       76,928       1985  
NEWARK, DE
    405,800       35,844       264,300       177,344       441,644       108,557       1985  
WILMINGTON, DE
    446,000       33,323       290,400       188,923       479,323       113,717       1985  
WILMINGTON, DE
    337,500       21,971       219,800       139,671       359,471       82,617       1985  
LEWISTON, ME
    341,900       89,500       222,400       209,000       431,400       151,436       1985  
PORTLAND, ME
    325,400       42,652       211,900       156,152       368,052       101,295       1985  
BIDDEFORD, ME
    618,100       8,009       235,000       391,109       626,109       391,109       1985  
SACO, ME
    204,006