**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D. C.  20549**





**FORM
      10-Q**


(Mark
      one)


**[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





For
      the
      quarterly period ended **September 30, 2007**





**OR**


**[   ]
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





For
      the
      transition period from __________ to __________





Commission
      file number **001-13777**





**GETTY
      REALTY CORP.**


(Exact
      name of registrant as specified in its charter)




**MARYLAND**
              **11-3412575**(State
                  or other jurisdiction
              (I.R.S.
                  Employerof
                  incorporation or
              Identification
                  No.)organization)




**125
        Jericho Turnpike, Suite 103**
 **Jericho,
        New York 11753**
 (Address
        of principal executive offices)
 (Zip
        Code)
 
 **(516)
        478 - 5400**
 (Registrant's
        telephone number, including area code)
 _________________________________________________________________
 (Former
        name, former address and former fiscal year, if changed since last
        report)
  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
          [X]  No [   ]
 
 Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer or a non-accelerated filer. See definition of “accelerated
          filer and large accelerated filer” in Rule 12b-2 of the Exchange
          Act.
 Large
          Accelerated Filer [   ] Accelerated Filer
          [X]  Non-Accelerated Filer [   ]
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act).
 Yes
          [   ]  No [X]
 
 Registrant
          had outstanding 24,764,875 shares of Common Stock, par value $.01 per share,
          as
          of November 6, 2007.


GETTY
      REALTY CORP.





INDEX




Part
                  I.  FINANCIAL INFORMATION
              Page
                  NumberItem
                  1. Financial
                  Statements (unaudited)Consolidated
                  Balance Sheets as of September 30, 2007 andDecember
                  31, 2006
              1Consolidated
                  Statements of Operations for
                  theThree
                  and Nine Months ended September 30,
                  2007 and 2006
              2Consolidated
                  Statements of Comprehensive Income
                  for theThree
                  and Nine Months ended September 30, 2007
                  and 2006
              3Consolidated
                  Statements of Cash Flows for theNine
                  months ended September 30, 2007 and
                  2006
              4Notes
                  to Consolidated Financial
                  Statements
              5Item
                  2. Management's
                  Discussion and Analysis of Financial Conditionand
                  Results of Operations
              15Item
                  3. Quantitative
                  and Qualitative Disclosures about Market Risk
              30Item
                  4. Controls
                  and Procedures
              31Part
                  II. OTHER
                  INFORMATIONItem
                  1. Legal
                  Proceedings
              33Item
                  1A. Risk Factors
              36Item
                  6. Exhibits
              39Signatures
              40









GETTY
                  REALTY CORP. AND
                  SUBSIDIARIESCONSOLIDATED
                  BALANCE SHEETS(in
                  thousands, except share data)(unaudited)*September
                  30,*
              
              
              *December
                  31,*Assets:
              
              *2007*
              
              
              *2006*Real
                  Estate:Land
              
              $
              222,497
              
              
              $
              180,409Buildings
                  and
                  improvements
              
              
              251,597
              
              
              
              203,149474,094
              
              
              
              383,558Less
–
accumulated
                  depreciation
                  and amortization
              
              
              (120,586
              )
              
              
              (116,089
              )Real
                  estate,
                  net
              
              
              353,508
              
              
              
              267,469Deferred
                  rent receivable
              
              
              34,219
              
              
              
              32,297Cash
                  and cash equivalents
              
              
              1,504
              
              
              
              1,195Recoveries
                  from state underground storage tank funds, net
              
              
              4,409
              
              
              
              3,845Mortgages
                  and accounts receivable, net
              
              
              4,612
              
              
              
              3,440Prepaid
                  expenses and other assets
              
              
              6,412
              
              
              
              1,037Total
                  assets
              
              $
              404,664
              
              
              $
              309,283Liabilities
                  and Shareholders' Equity:Debt
              
              $
              128,820
              
              
              $
              45,194Environmental
                  remediation costs
              
              
              19,581
              
              
              
              17,201Dividends
                  payable
              
              
              11,538
              
              
              
              11,284Accounts
                  payable and accrued expenses
              
              
              20,422
              
              
              
              10,029Total
                  liabilities
              
              
              180,361
              
              
              
              83,708Commitments
                  and contingencies
              
              
              --
              
              
              
              --Shareholders'
                  equity:Common
                  stock, par value $.01 per
                  share; authorized50,000,000
                  shares; issued 24,764,875 at September 30, 2007
                and
                  24,764,765 at December 31, 2006
              
              
              248
              
              
              
              248Paid-in
                  capital
              
              
              258,837
              
              
              
              258,647Dividends
                  paid in excess of
                  earnings
              
              
              (33,558
              )
              
              
              (32,499
              )Accumulated
                  other comprehensive
                  loss
              
              
              (1,224
              )
              
              
              (821
              )Total
                  shareholders'
                  equity
              
              
              224,303
              
              
              
              225,575Total
                  liabilities and
                  shareholders' equity
              
              $
              404,664
              
              
              $
              309,283




*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


-1-


GETTY
                REALTY CORP. AND
                SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF OPERATIONS(in
                thousands, except per share amounts)(unaudited)*Three
                months ended September 30,*
            
            
            *Nine
                months ended September 30,**2007*
            
            
            *2006*
            
            
            *2007*
            
            
            *2006*Revenues
                from rental properties
            
            $
            20,255
            
            
            $
            17,994
            
            
            $
            58,823
            
            
            $
            54,112Expenses:Rental
                property expenses
            
            
            2,295
            
            
            
            2,404
            
            
            
            7,082
            
            
            
            7,370Environmental
                expenses, net
            
            
            2,838
            
            
            
            1,638
            
            
            
            6,862
            
            
            
            3,528General
                and administrative expenses
            
            
            1,525
            
            
            
            1,383
            
            
            
            4,758
            
            
            
            4,123Depreciation
                and amortization expense
            
            
            2,598
            
            
            
            1,886
            
            
            
            7,164
            
            
            
            5,787Total
                expenses
            
            
            9,256
            
            
            
            7,311
            
            
            
            25,866
            
            
            
            20,808Operating
                income
            
            
            10,999
            
            
            
            10,683
            
            
            
            32,957
            
            
            
            33,304Other
                income, net
            
            
            1,419
            
            
            
            809
            
            
            
            1,809
            
            
            
            1,367Interest
                expense
            
            
            (2,314
            )
            
            
            (979
            )
            
            
            (5,502
            )
            
            
            (2,607
            )Net
                earnings before income taxes anddiscontinued
                operations
            
            
            10,104
            
            
            
            10,513
            
            
            
            29,264
            
            
            
            32,064Income
                tax benefit
            
            
            -
            
            
            
            700
            
            
            
            -
            
            
            
            700Net
                earnings before discontinued operations
            
            
            10,104
            
            
            
            11,213
            
            
            
            29,264
            
            
            
            32,764Discontinued
                operations:Net
                earnings from discontinued operations
            
            
            144
            
            
            
            63
            
            
            
            272
            
            
            
            155Gains
                on dispositions of real estate fromdiscontinued
                operations
            
            
            2,598
            
            
            
            -
            
            
            
            3,771
            
            
            
            -Net
                earnings from discontinued operations
            
            
            2,742
            
            
            
            63
            
            
            
            4,043
            
            
            
            155Net
                earnings
            
            $
            12,846
            
            
            $
            11,276
            
            
            $
            33,307
            
            
            $
            32,919Basic
                earnings per common share:Net
                earnings before discontinued operations
            
            $
            .41
            
            
            $
            .46
            
            
            $
            1.18
            
            
            $
            1.32Discontinued
                operations
            
            
            .11
            
            
            
            -
            
            
            
            .16
            
            
            
            .01Net
                earnings
            
            $
            .52
            
            
            $
            .46
            
            
            $
            1.34
            
            
            $
            1.33Diluted
                earnings per common share:Net
                earnings before discontinued operations
            
            $
            .41
            
            
            $
            .46
            
            
            $
            1.18
            
            
            $
            1.32Discontinued
                operations
            
            
            .11
            
            
            
            -
            
            
            
            .16
            
            
            
            .01Net
                earnings
            
            $
            .52
            
            
            $
            .46
            
            
            $
            1.34
            
            
            $
            1.33Weighted
                average shares outstanding:Basic
            
            
            24,765
            
            
            
            24,739
            
            
            
            24,765
            
            
            
            24,727Stock
                options and restricted stock units
            
            
            27
            
            
            
            25
            
            
            
            23
            
            
            
            25Diluted
            
            
            24,792
            
            
            
            24,764
            
            
            
            24,788
            
            
            
            24,752Dividends
                declared per share
            
            $
            .465
            
            
            $
            .455
            
            
            $
            1.385
            
            
            $
            1.365




*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




-2-




GETTY
                REALTY CORP. AND
                SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF COMPREHENSIVE INCOME(in
                thousands)(unaudited)


*Three
                  months ended September 30,*
              
              
              *Nine
                  months ended September 30,**2007*
              
              
              *2006*
              
              
              *2007*
              
              
              *2006*Net
                  earnings
              
              $
              12,846
              
              
              $
              11,276
              
              
              $
              33,307
              
              
              $
              32,919Other
                  comprehensive loss:Net
                  unrealized loss on interest rate
                swap
              
              
              (1,033
              )
              
              
              (1,071
              )
              
              
              (403
              )
              
              
              (894
              )Comprehensive
                  income
              
              $
              11,813
              
              
              $
              10,205
              
              
              $
              32,904
              
              
              $
              32,025
  *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  -3-




GETTY
                  REALTY CORP. AND
                  SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF CASH FLOWS(in
                  thousands)(unaudited)*Nine
                  months ended September 30,**2007*
              
              
              *2006**Cash
                  flows from operating activities:*Net
                  earnings
              
              $
              33,307
              
              
              $
              32,919*Adjustments
                  to reconcile net earnings to**net
                  cash flow provided by operating activities:*Depreciation
                  and amortization
                  expense
              
              
              7,186
              
              
              
              5,803Deferred
                  rental
                  revenue
              
              
              (1,922
              )
              
              
              (2,345
              )Net
                  amortization of above-market and below-market leases
              
              
              (942
              )
              
              
              -Gains
                  on dispositions of real
                  estate
              
              
              (5,386
              )
              
              
              (1,152
              )Accretion
                  expense
              
              
              648
              
              
              
              576Stock-based
                  employee compensation expense
              
              
              188
              
              
              
              137*Changes
                  in assets and liabilities:*Recoveries
                  from state
                  underground storage tank funds, net
              
              
              (287
              )
              
              
              457Mortgages
                  and accounts
                  receivable, net
              
              
              (1,402
              )
              
              
              (1,000
              )Prepaid
                  expenses and other
                  assets
              
              
              323
              
              
              
              354Environmental
                  remediation
                  costs
              
              
              1,455
              
              
              
              (935
              )Accounts
                  payable and accrued expenses
              
              
              474
              
              
              
              (207
              )Accrued
                  income
                  taxes
              
              
              -
              
              
              
              (700
              )Net
                  cash flow provided by operating activities
              
              
              33,642
              
              
              
              33,907*Cash
                  flows from investing activities:*Property
                  acquisitions and
                  capital expenditures
              
              
              (89,354
              )
              
              
              (15,512
              )Collection
                  (issuance) of
                  mortgages receivable, net
              
              
              230
              
              
              
              (84
              )Proceeds
                  from dispositions of
                  real estate
              
              
              7,138
              
              
              
              1,813Net
                  cash flow used in investing activities
              
              
              (81,986
              )
              
              
              (13,783
              )*Cash
                  flows from financing activities:*Borrowings
                  under credit
                  agreement, net
              
              
              83,650
              
              
              
              12,500Cash
                  dividends
                  paid
              
              
              (34,112
              )
              
              
              (33,542
              )Credit
                  agreement origination costs
              
              
              (863
              )
              
              
              -Repayment of
                  mortgages
                  payable
              
              
              (24
              )
              
              
              (23
              )Proceeds
                  from stock options
                  exercised
              
              
              2
              
              
              
              647Net
                  cash flow provided by (used in) financing activities
              
              
              48,653
              
              
              
              (20,418
              )Net
                  increase in cash and cash equivalents
              
              
              309
              
              
              
              (294
              )Cash
                  and cash equivalents at beginning of period
              
              
              1,195
              
              
              
              1,247Cash
                  and cash equivalents at end of period
              
              $
              1,504
              
              
              $
              953Supplemental
                  disclosures of cash flow information*Cash
                  paid (refunded) during the
                  year for:*Interest
              
              $
              3,961
              
              
              $
              1,785Income
                  taxes, net
              
              
              490
              
              
              
              472Recoveries
                  from state underground storage tank funds
              
              
              (1,244
              )
              
              
              (1,396
              )Environmental
                  remediation costs
              
              
              3,779
              
              
              
              3,283*The
                  accompanying notes are an integral part of these consolidated financial
                  statements.*
  -4-
  GETTY
        REALTY CORP. AND SUBSIDIARIES
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 1.  General:
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with accounting principles generally accepted in the United States of America
        (“GAAP”). 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
        financial statements have been prepared in conformity with GAAP, which requires
        the Company’s management to make its best 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 materially 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, recoveries from state underground
        storage tank funds, environmental remediation costs, real estate, depreciation
        and amortization, impairment of long-lived assets, litigation, accrued expenses
        and income taxes.
 
 The
        operating results and gains from certain dispositions of real estate are
        reclassified as discontinued operations. The operating results of such
        properties for the three and nine months ended September 30, 2006 have been
        reclassified to discontinued operations to conform to the 2007 presentation.
        Discontinued operations for the quarter and nine months ended September 30,
        2007
        are primarily comprised of gains or losses from five and seven property
        dispositions, respectively. The revenue from rental properties and expenses
        related to these properties are insignificant for the three and nine months
        ended September 30, 2007 and 2006.
 
 The
        consolidated financial statements are unaudited but, in the Company’s opinion,
        reflect all adjustments (consisting of normal recurring accruals) necessary
        for
        a fair statement of the results for the periods presented. These statements
        should be read in conjunction with the consolidated financial statements
        and
        related notes, which appear in the Company’s Annual Report on Form 10-K for the
        year ended December 31, 2006.
 
 2.  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 with high
        credit
        quality institutions. Temporary cash investments, if any, are held in overnight
        bank time deposits and an institutional money market fund.
 
 -5-
  As
        of
        September 30, 2007, the Company leased eight hundred ninety-five of its one
        thousand eighty-five properties on a long-term net basis to Getty Petroleum
        Marketing Inc. (“Marketing”) under a master lease (“Master Lease”) and
        supplemental leases for four properties (collectively the “Marketing Leases”)
        (see note 2 to the consolidated financial statements which appear in the
        Company’s Annual Report on Form 10-K for the year ended December 31, 2006). A
        substantial portion of our revenues (75% for the three months ended
        September 30, 2007), are derived from the Marketing Leases. Marketing operated
        substantially all of the Company’s petroleum marketing businesses when it was
        spun-off to the Company’s shareholders as a separate publicly held company in
        March 1997 (the “Spin-off”). In December 2000, Marketing was acquired by a
        subsidiary of OAO Lukoil, one of Russia’s largest integrated oil companies. The
        Company’s financial results depend largely on rental income from Marketing, and
        to a lesser extent on rental income from other tenants, and are therefore
        materially dependent upon the ability of Marketing to meet its obligations
        under
        the Marketing Leases. A substantial portion of the deferred rent receivable,
        $32,041,000 of the $34,219,000 recorded as of September 30, 2007, is due
        to
        recognition of rental revenue on a straight-line basis under the Marketing
        Leases. Marketing’s financial results depend largely on retail petroleum
        marketing margins and rental income from its sub-tenants who operate their
        convenience store, automotive repair services or other businesses at the
        Company’s properties, most of whom were the Company’s tenants when Marketing was
        spun-off to the Company’s shareholders. The petroleum marketing industry has
        been and continues to be volatile and highly competitive. Marketing has made
        all
        required monthly rental payments under the Marketing Leases when due. The
        Company has noted a significant decline in Marketing’s annual financial results
        based on the financial statements and other financial data Marketing has
        provided to date. No assurance can be given that Marketing will have the
        ability
        to pay its debts and meet its rent and other financial obligations under
        the
        Marketing Leases as they become due. Although Marketing is wholly owned by
        a
        subsidiary of Lukoil and Lukoil has provided capital, and we believe currently
        provides credit enhancement, to Marketing, Lukoil is not a guarantor of the
        Marketing Leases and no assurance can be given that Lukoil will provide any
        credit enhancement or additional capital to Marketing for the remainder of
        the
        terms of the Marketing Leases or otherwise cause Marketing to fulfill any
        of its
        rental or other financial obligations under the Marketing Leases.
 
 While
        the
        initial term of the Marketing Leases are effective through December 2015,
        representatives of Marketing have indicated to the Company their desire to
        modify the Marketing Leases to (i) remove a significant number of properties
        from the Marketing Leases and eliminate Marketing’s payment of rent to the
        Company with respect to those properties and eliminate or reduce Marketing’s
        direct payment of operating expenses with respect to those properties, and
        (ii)
        reduce the aggregate amount of rent paid to the Company for the properties
        remaining under the Marketing Leases. The effect of any such modification
        may
        significantly reduce the amount of rent we receive from Marketing and increase
        the Company’s operating expenses. We can not accurately predict whether or when
        the Marketing Leases will be modified or, what the terms of any such agreement
        may be if the Marketing Leases are modified.
 
 The
        Company continues to believe that the deferred rent receivable recorded under
        the straight-line method of accounting for the Marketing Leases referred
        to
        above is collectable when due. Given the uncertainties regarding a possible
        modification to the Marketing Leases, the Company believes it is reasonably
        possible that its assumption that Marketing will make all contractual lease
        payments during the initial term of the Marketing Leases when due, when applying
        the straight-line method of accounting for rental revenue, may change, which
        may
        result in an adjustment to the deferred rent receivable that
        could
        be material to the Company’s financial condition or results of operations for
        any single fiscal year or interim period. Although the Company is the owner
        of
        the properties and the Getty brand and has prior experience with Marketing’s
        tenants, in the event that properties are removed from the Marketing Leases,
        the
        Company can not accurately predict whether, when or on what terms such
        properties could be re-let or sold. Accordingly, a significant modification
        of
        the Marketing Leases could materially adversely affect the Company’s financial
        condition, revenues, operating expenses and results of
        operations.
 
 -6-
  Under
        the
        Master Lease, the Company has also agreed to provide limited environmental
        indemnification to Marketing, capped at $4,250,000 and expiring in 2010,
        for
        certain pre-existing conditions at six of the terminals which are owned by
        the
        Company. Under the agreement, Marketing will pay the first $1,500,000 of
        costs
        and expenses incurred in connection with remediating any such pre-existing
        conditions, Marketing and the Company will share equally the next $8,500,000
        of
        those costs and expenses and Marketing will pay all additional costs and
        expenses over $10,000,000. The Company has accrued $300,000 as of September
        30,
        2007 and December 31, 2006 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 of the spin-off.
        The Company accrues its allocable share of joint and several environmental
        liabilities based on its estimate of the ultimate allocation method and
        percentage that will be used by the responsible parties. As of September
        30,
        2007 and December 31, 2006 the Company had accrued $2,632,000 and $2,822,000,
        respectively, for certain of these matters which it believes were appropriate
        based on information then currently available. The Company has not accrued
        for
        approximately $950,000 in costs allegedly 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. Marketing is responsible for such costs
        under the terms of the Master Lease but Marketing has denied its liability
        for the claim and its responsibility to defend against, and indemnify the
        Company for, the claim. It is reasonably possible that the Company’s assumption
        that Marketing will be ultimately responsible for the claim may change, which
        may result in the Company providing an accrual for this matter. Although
        the ultimate resolution of these matters may have a significant impact on
        results of operations for any single fiscal year or interim period, the Company
        currently believes that such matters will not have a material adverse effect
        on
        the Company’s long-term financial position.
  In
        September 2003, the Company was notified by the State of New Jersey Department
        of Environmental Protection that the Company is one of approximately sixty
        potentially responsible parties for natural resource damages resulting from
        discharges of hazardous substances into the Lower Passaic River. The definitive
        list of potentially responsible parties and their actual 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. In September
        2004, the Company received a General Notice Letter from the United States
        Environmental Protection Agency (the “EPA”) (the “EPA Notice”), advising the
        Company that it may be a potentially responsible party for costs of remediating
        certain conditions resulting from discharges of hazardous substances into
        the
        Lower Passaic River. ChevronTexaco received the same EPA Notice regarding
        those
        same conditions. Additionally, the Company believes that ChevronTexaco is
        contractually obligated to indemnify the Company, pursuant to an indemnification
        agreement, for most of the conditions at the property identified by the New
        Jersey Department of Environmental Protection and the EPA. Accordingly, the
        ultimate legal and financial liability of the Company, if any, cannot be
        estimated with any certainty at this time.
 
 -7-
  From
        October 2003 through September 2007 the Company was notified that the Company
        was made party to forty-nine cases, in Connecticut, Florida, Massachusetts,
        New
        Hampshire, New Jersey, New York, Pennsylvania, Vermont, Virginia and West
        Virginia brought by local water providers or governmental agencies. These
        cases
        allege various theories of liability due to contamination of groundwater
        with
        MTBE as the basis for claims seeking compensatory and punitive damages. Each
        case names as defendants approximately fifty petroleum refiners, manufacturers,
        distributors and retailers of MTBE, or gasoline containing MTBE. The accuracy
        of
        the allegations as they relate to the Company, its defenses to such claims,
        the
        aggregate amount of damages, the definitive list of defendants and the method
        of
        allocating such amounts among the defendants have not been determined.
        Accordingly, the ultimate legal and financial liability of the Company, if
        any,
        cannot be estimated with any certainty at this time.
 
 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 September 30, 2007 and December 31,
        2006,
        the Company’s consolidated balance sheets included, in accounts payable and
        accrued expenses, $313,000 and $332,000, 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. Although loss reserve adjustments may have
        a
        significant impact on results of operations for any single fiscal year or
        interim period, the Company currently believes that such adjustments will
        not
        have a material adverse effect on the Company’s long-term financial position.
        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 pay out substantially
        all of its “earnings and profits” (as defined in the Internal Revenue Code) 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 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. The Company
        accrues for this and other uncertain 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. Accordingly,
        an
        income tax benefit of $700,000 was recorded in the third quarter of 2006
        due to
        the elimination of the amount 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. In June 2006 the Financial Accounting Standards Board
        (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”) “Accounting for
        Uncertainty in Income Taxes.” FIN 48 addresses the recognition and measurement
        of tax positions taken or expected to be taken in a tax return. The adoption
        of
        FIN 48 in January 2007 did not have any impact on the Company’s financial
        position or results of operation.
 
 -8-
  3.  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 enters into leases and various other agreements which define its
        share
        of joint and several environmental liabilities and commitments by establishing
        the percentage and method of allocating responsibility between the parties.
        Uncertainties related to the determination of the Company’s share of net
        environmental costs include, among others, determining when known environmental
        contamination may have occurred and the effectiveness of remediation efforts
        to
        date, determining when costs associated with asset retirement obligations
        will
        be incurred and predicting who the responsible party will be at that time
        and
        the interpretation and enforceability of, or potential modifications to,
        the
        various agreements, including the Marketing Leases. It is possible that the
        Company’s assumptions regarding the ultimate allocation method and its share of
        responsibility that are used when accruing its allocable share of joint and
        several environmental liabilities, may change, which may result in adjustments
        to the amounts recorded for environmental litigation accruals, environmental
        remediation liabilities and related assets. Although
        the ultimate resolution of these matters may have a significant impact on
        results of operations for any single fiscal year or interim period, the Company
        currently believes that such matters will not have a material adverse effect
        on
        the Company’s long-term financial position.
  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. For the three and nine months ended September
        30,
        2007,thenet
        change in estimated
        remediation costs included in environmental expenses in the Company’s
        consolidated statements of operations were $1,899,000 and $4,352,000,
        respectively, as compared to $1,159,000 and $1,985,000, respectively, for
        the
        comparable prior year periods, which amounts were net of changes in estimated
        recoveries from state underground storage tank (“UST”) remediation funds. In
        addition to net change in estimated remediation costs, environmental expenses
        also include project management fees, legal fees and provisions for
        environmental litigation loss reserves.
 
 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 regulatory or contractual closure (“Closure”) in an
        efficient and economical manner. 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.
 
 -9-
 Of
        the
        eight hundred ninety-five properties leased to Marketing, the Company has
        agreed
        to pay all costs relating to, and to indemnify Marketing for, certain
        environmental liabilities and obligations for two hundred nineteen properties
        that have not achieved Closure as of September 30, 2007 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.
 
 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 income, 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. These accrual estimates are subject to
        significant change, and are adjusted as the remediation treatment progresses,
        as
        circumstances change and as these contingencies become more clearly defined
        and
        reasonably estimable. As of September 30, 2007, the Company had remediation
        action plans in place for two hundred sixty-six (93%) of the two hundred
        eighty-five properties for which it retained environmental responsibility
        and
        has not received a “no further action” letter and the remaining nineteen
        properties (7%) remain in the assessment phase.
 
 As
        of
        September 30, 2007, December 31, 2006 and December 31, 2005, the Company
        had
        accrued $19,581,000, $17,201,000 and $17,350,000, respectively, as management’s
        best estimate of the fair value of reasonably estimable environmental
        remediation costs. As of September 30, 2007, December 31, 2006 and December
        31,
        2005, the Company had also recorded $4,409,000, $3,845,000 and $4,264,000,
        respectively, as management’s best estimate for recoveries from state UST
        remediation funds, net of allowance, related to environmental obligations
        and
        liabilities. Accrued environmental remediation costs and recoveries from
        state
        UST remediation funds have been accreted for the change in present value
        due to
        the passage of time and, accordingly, $648,000 and $576,000 of net accretion
        expense is included in the net change in estimated remediation costs for
        the
        nine months ended September 30, 2007 and 2006, respectively.
 
 -10-
 In
        view of
        the uncertainties associated with environmental expenditures, however, the
        Company believes it is possible that the fair value of future actual net
        expenditures could be substantially higher than these estimates. 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. Although future environmental expenses may have
        a
        significant impact on results of operations for any single fiscal year or
        interim period, the Company currently believes that such costs will not have
        a
        material adverse effect on the Company’s long-term financial
        position.
 
 4.  Shareholders'
        Equity:
 
 A
        summary
        of the changes in shareholders' equity for the nine months ended September
        30,
        2007 is as follows (in thousands, except share amounts):
 
 Dividends
              
              
              AccumulatedPaid
                  In
              
              
              OtherCommon
                  Stock
              
              
              Paid-in
              
              
              Excess
                  Of
              
              
              ComprehensiveShares
              
              
              Amount
              
              
              Capital
              
              
              Earnings
              
              
              Loss
              
              
              TotalBalance,
                December
                  31, 2006
              
              
              24,764,765
              
              
              $
              248
              
              
              $
              258,647
              
              
              $
              (32,499
              )
              
              $
              (821
              )
              
              $
              225,575Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              33,307
              
              
              
              
              
              
              
              33,307Dividends
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (34,366
              )
              
              
              
              
              
              
              (34,366
              )Stock-based
                  employee
                compensation
                  expense
              
              
              
              
              
              
              
              
              
              
              188
              
              
              
              
              
              
              
              
              
              
              
              188Net
                  unrealized loss on
                interest
                  rate swap
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (403
              )
              
              
              (403
              )Stock
                  issued
              
              
              110
              
              
              
              -
              
              
              
              2
              
              
              
              
              
              
              
              
              
              
              
              2Balance,
                September
                  30,2007
              
              
              24,764,875
              
              
              $
              248
              
              
              $
              258,837
              
              
              $
              (33,558
              )
              
              $
              (1,224
              )
              
              $
              224,303
 The
        Company is authorized to issue 20,000,000 shares of preferred stock, par
        value
        $.01 per share, of which none were issued as of September 30, 2007 or December
        31, 2006.
  5.  Debt
 On
        March
        27, 2007, the Company entered into an amended and restated senior unsecured
        revolving credit agreement (the “Credit Agreement”) with a group of domestic
        commercial banks.
 
 The
        Credit
        Agreement, among other items, increases the aggregate amount of the Company’s
        credit facility by $75,000,000 to $175,000,000; reduces the interest rate
        margin
        on LIBOR based borrowings by 0.25% and extends the term of the Credit Agreement
        from June 2008 to March 2011. 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, as defined in the Credit Agreement.
        Based
        on the Company’s leverage ratio as of September 30, 2007, the applicable margin
        is 0.0% for base rate borrowings and 1.25% for LIBOR rate borrowings. The
        benefit of the 0.25% reduction in the interest rate margin effective with
        the
        amendment of the Credit Agreement was offset by the increase in the Company’s
        leverage ratio caused by an increase its outstanding borrowings used for
        the
        acquisition discussed in note 7, resulting in no net change in the LIBOR
        rate
        margin.
 
 -11-
 Subject
        to
        the terms of the Credit Agreement, the Company has options to extend the
        term of
        the Credit Agreement for one additional year and/or increase the amount of
        the
        credit facility available pursuant to the Credit Agreement by $125,000,000
        to
        $300,000,000, subject to approval by the Company’s Board of Directors and the
        Bank Syndicate. The Credit Agreement contains customary terms and conditions,
        including customary financial covenants such as leverage and coverage ratios
        and
        other customary covenants, including limitations on the Company’s ability to
        incur debt, pay dividends and maintenance of tangible net worth, and events
        of
        default, including change of control and failure to maintain REIT status.
        The
        Company believes that the Credit Agreement’s terms, conditions and covenants
        will not limit its current business practices.
 
 6.  Other
        Income
 
 Other
        income, net, is substantially comprised of certain gains on dispositions
        of real
        estate and leasehold interests that have not been reclassified to discontinuing
        operations including two property dispositions,  one partial land
        taking under eminent domain and increased awards for two takings that occurred
        in prior years recorded in the nine months ended September 30, 2007, as compared
        to four property dispositions and seven partial land takings under eminent
        domain recorded in the prior year period.
 
 7.  Acquisitions
 
 On
        February 28, 2006, the Company acquired eighteen retail motor fuel and
        convenience store properties located in Western New York for $13,389,000.
        Simultaneous with the closing on the acquisition, the Company entered into
        a
        triple-net lease with a single tenant for all of the properties. The lease
        provides for annual rentals at a competitive rate and provides for escalations
        thereafter. The lease has an initial term of fifteen years and provides the
        tenant options for three renewal terms of five years each. The lease also
        provides that the tenant is responsible for all existing and future
        environmental conditions at the properties.
 
 Effective
        March 31, 2007 the Company acquired fifty-nine convenience store and retail
        motor fuel properties in ten states for approximately $79,335,000 from various
        subsidiaries of FF-TSY Holding Company II, LLC (the successor to Trustreet
        Properties, Inc.) (“Trustreet”), a subsidiary of General Electric Capital
        Corporation, for cash with funds drawn under its Credit Agreement. Effective
        April 23, 2007, the Company acquired five additional properties from Trustreet
        for approximately $5,200,000. The aggregate cost of the acquisitions, including
        transaction costs, is approximately $84,535,000. Substantially all of the
        properties are triple-net-leased to tenants who previously leased the properties
        from the seller. The leases generally provide that the tenants are responsible
        for substantially all existing and future environmental conditions at the
        properties.
 
 The
        Company's allocation of the purchase price to the assets acquired and
        liabilities assumed as of September 30, 2007 is subject to change. The purchase
        price has been allocated between assets, liabilities and intangible assets
        based
        on the estimates of fair value. These allocations may not be indicative of
        the
        final allocations. The Company continues to evaluate the existence of
        pre-acquisition contingencies and the assumptions used in valuing the real
        estate. The Company anticipates finalizing these allocations during the fourth
        quarter of 2007. A change in the final allocation from what is presented
        may
        result in an increase or decrease in identified intangible assets and changes
        in
        depreciation, amortization or other expenses.
 
 -12-
 The
        Company estimated 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 and in-place leases) and assumed liabilities.
 
 Based
        on
        these estimates, the Company allocated the purchase price to the applicable
        assets and liabilities as follows (in thousands):
 
 Consideration:Purchase
                  price paid to Trustreet
              
              $
              83,404Allocated
                  transaction costs
              
              
              1,131Total
                  Consideration
              
              $
              84,535Assets
                  Acquired:Real
                  estate investment properties
              
              $
              89,908Above-market
                  leases
              
              
              1,955Leases
                  in place
              
              
              3,396Total
              
              
              95,259Liabilities
                  Assumed:Below-market
                  leases
              
              
              10,724Net
                  assets acquired
              
              $
              84,535
  The
        following unaudited pro forma condensed consolidated financial information
        has
        been prepared utilizing the historical financial statements of Getty Realty
        Corp. and the historical financial information of the properties acquired
        which
        was derived from the consolidated books and records of Trustreet. The unaudited
        pro forma condensed consolidated financial information assumes that the
        acquisitions had occurred as of the beginning of each of the periods presented,
        after giving effect to certain adjustments including (a) rental income
        adjustments resulting from (i) the straight-lining of scheduled rent increases;
        and (ii) the net amortization of the intangible assets relating to above-market
        leases and intangible liabilities relating to below-market leases over the
        remaining lease terms which average eleven years and (b) depreciation and
        amortization adjustments resulting from (i) the depreciation of real estate
        assets over their useful lives which average seventeen years and (ii) the
        amortization of intangible assets relating to leases in place  over
        the remaining lease terms. The following unaudited pro forma condensed
        consolidated financial information also gives effect to the additional interest
        expense resulting from the assumed increase in borrowing outstanding drawn
        under
        the Credit Agreement to fund the acquisition.
  -13-
  The
        unaudited pro forma condensed financial information is not indicative of
        the
        results of operations that would have been achieved had the acquisition from
        Trustreet reflected herein been consummated on the dates indicated or that
        will
        be achieved in the future.
  *Three
                  Months Ended September*
              
              
              *Nine
                  Months Ended September**2007*
              
              
              *2006*
              
              
              *2007*
              
              
              *2006*Revenues
              
              $
              20,255
              
              
              $
              20,891
              
              
              $
              61,705
              
              
              $
              62,873Net
                  earnings
              
              $
              12,846
              
              
              $
              11,726
              
              
              $
              33,761
              
              
              $
              34,595Net
                  earnings per shareBasic
              
              $
              0.52
              
              
              $
              0.47
              
              
              $
              1.36
              
              
              $
              1.40Diluted
              
              $
              0.52
              
              
              $
              0.47
              
              
              $
              1.36
              
              
              $
              1.40
  8.  Subsequent
        Event
  Effective
        on October 31, 2007, Andrew M. Smith resigned his positions as President,
        Secretary and Chief Legal Officer of the Company. The Company expects to
        enter
        into a Severance Agreement and General Release with Mr. Smith. The estimated
        severance cost is not expected to be material to the Company's financial
        condition or results of operations for any single fiscal year or interim
        period.
  -14-
  Item
        2. Management’s Discussion and Analysis of Financial
        Condition and Results of Operations
 
 *This
        discussion and analysis of financial condition and results of operations
        should
        be read in conjunction with the sections entitled “Part I, Item 1A. Risk
        Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial
        Condition and Results of Operations,” which appear in our Annual Report on Form
        10-K for the year ended December 31, 2006, and “Part I, Item 1. Financial
        Statements” and “Part II, Item 1A. Risk Factors,” which appear in this Quarterly
        Report on Form 10-Q.*
 
 Recent
        Developments
 
 On
        March
        31, 2007, we acquired fifty-nine convenience store and retail motor fuel
        properties in ten states from various subsidiaries of FF-TSY Holding Company
        II,
        LLC (the successor to Trustreet Properties, Inc.) (“Trustreet”), a subsidiary of
        General Electric Capital Corporation, for cash with funds drawn under our
        credit
        facility. On April 23, 2007 we acquired five additional properties from
        Trustreet. The aggregate cost of the acquisitions, including transaction
        costs,
        is approximately $84.5 million. Substantially all of the properties are
        triple-net leased to tenants who previously leased the properties from the
        seller. The leases generally provide that the tenants are responsible for
        substantially all existing and future environmental conditions at the
        properties. For more information with respect to the acquisition from Trustreet,
        see note 7 to our unaudited consolidated financial statements included in
        this
        Quarterly Report on Form 10-Q.
  Effective
        on October 31, 2007, Andrew M. Smith resigned his positions as President,
        Secretary and Chief Legal Officer of the Company. We expect to enter into
        a
        Severance Agreement and General Release with Mr. Smith. The estimated cost
        is
        not expected to be material to our financial condition or results of operations
        for any single fiscal year or interim period.
 
 General
 
 We
        are a
        real estate investment trust specializing in the ownership and leasing 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.
 
 -15-
  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 the payment
        of
        taxes, maintenance, repair, insurance and other operating expenses and for
        managing the actual operations conducted at these properties. As of September
        30, 2007, we leased eight hundred ninety-five of our one thousand eighty-five
        properties on a long-term basis under a unitary master lease (the “Master
        Lease”) and supplemental leases for four properties, (collectively the
“Marketing Leases”) to Getty Petroleum Marketing Inc. (“Marketing”) which was
        spun-off to our shareholders as a separate publicly held company in March
        1997.
        In December 2000, Marketing was acquired by a subsidiary of OAO Lukoil
        (“Lukoil”), one of Russia’s largest integrated oil companies.
 
 A
        substantial portion of our revenues (75% for the three months ended September
        30, 2007), are derived from the Marketing Leases. Accordingly, our revenues
        are
        dependent to a large degree on the economic performance of Marketing and
        of the
        petroleum marketing industry and any factor that adversely affects Marketing
        or
        our other lessees, or our relationship with Marketing, may have a material
        adverse effect on our financial condition and results of operations. Marketing’s
        financial results depend largely on retail petroleum marketing margins and
        rental income from subtenants who operate their convenience store, automotive
        repair services or other businesses at our properties. The petroleum marketing
        industry has been and continues to be volatile and highly competitive. Factors
        that could adversely affect Marketing or our other lessees include those
        described under “Part I, Item 1A. Risk Factors,” in our Annual Report on Form
        10-K and “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.
        In the event that Marketing cannot or will not perform its monetary obligations
        under the Marketing Leases, our financial condition and results of operations
        would be materially adversely affected. Although Marketing is wholly owned
        by a
        subsidiary of Lukoil, and Lukoil has provided capital, and we believe
        currently provides credit enhancement, to Marketing, Lukoil is not a guarantor
        of the Marketing Leases and no assurance can be given that Lukoil will provide
        any credit enhancement or additional capital to Marketing for the remainder
        of
        the terms of the Marketing Leases, or otherwise cause Marketing to fulfill
        any
        of its rental or other financial obligations under the Marketing
        Leases.
 
 While
        the
        initial term of the Marketing Leases are effective through December 2015,
        representatives of Marketing have indicated to us their desire to modify
        the
        Marketing Leases to (i) remove a significant number of properties from the
        Marketing Leases and eliminate Marketing’s payment of rent to us with respect to
        those properties and eliminate or reduce Marketing’s direct payment of operating
        expenses with respect to those properties, and (ii) reduce the aggregate
        amount
        of rent paid to us for the properties remaining under the Marketing Leases.
        The
        effect of any such modification may significantly reduce the amount of rent
        we
        receive from Marketing and increase our operating expenses. We can not
        accurately predict whether or when the Marketing Leases will be modified
        or what
        the terms of any such agreement may be if the Marketing Leases are
        modified.
  -16-
  We
        believe
        that the $32.0 million deferred rent receivable recorded under the straight-line
        method of accounting for the Marketing Leases as of September 30, 2007 is
        collectable when due. Given the uncertainties regarding a possible modification
        to the Marketing Leases, we believe it is reasonably possible that our
        assumption that Marketing will make all contractual lease payments during
        the
        initial term of the Marketing Leases when due, when applying the straight-line
        method of accounting for rental revenue, may change, which may result in
        an
        adjustment to the deferred rent receivable that could be material to our
        financial condition or results of operations for any single fiscal year or
        interim period. Although we are the owner of the properties and the Getty
        brand
        and have prior experience with Marketing’s tenants, in the event that properties
        are removed from the Marketing Leases, we can not accurately predict whether,
        when or on what terms such properties could be re-let or sold. A significant
        modification of the Marketing Leases could materially adversely affect our
        financial condition, revenues, operating expenses, results of operations,
        ability to pay dividends and stock price.
 
 Marketing
        continues to pay timely its rental and other financial obligations under
        the
        Marketing Leases, as it has since the inception of the Master Lease in 1997,
        although no assurance can be given that they will continue to do
        so.
 
 We
        periodically receive and review Marketing’s financial statements and other
        financial data. We receive this information from Marketing pursuant to the
        terms
        of the Master Lease. Certain of this information is not publicly available
        and
        the terms of the Master Lease prohibit us from including this 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 financial performance
        of
        Marketing may deteriorate, and Marketing may ultimately default on its monetary
        obligations to us before we and our shareholders receive financial information
        from Marketing that would indicate the deterioration.
 
 Selected
        balance sheet data of Marketing at December 31, 2005, 2004, 2003 and 2002
        and
        selected operating data of Marketing for each of the three years in the period
        ending December 31, 2004, which is publicly available, has been provided
        in
“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition
        and Results of Operations,” which appears in our Annual Report on Form 10-K for
        the year ended December 31, 2006. Certain of this financial information and
        other information concerning Marketing is available from Dun & Bradstreet
        and may be accessed by their web site (www.dnb.com) upon payment of their
        fee.
        You should not rely on the selected balance sheet data or operating data
        related
        to prior years as representative of Marketing’s current financial condition or
        current results of operations.
 
 We
        have
        noted a significant decline in Marketing’s annual financial results from the
        prior periods presented based on the financial statements and other financial
        data Marketing has provided to us to date. Accordingly, no assurance can
        be
        given that Marketing will have the ability to pay its debts and meet its
        rental
        and other financial obligations under the Marketing Leases.
  -17-
  As
        part of
        a periodic review by the Division of Corporation Finance of the Securities
        and
        Exchange Commission (“SEC”) of our Annual Report on Form 10-K for the year ended
        December 31, 2003, we received and responded to a number of comments. The
        only
        comment that remains unresolved pertains to the SEC’s position that we must
        include the financial statements and summarized financial data of Marketing
        in
        our periodic filings. The SEC subsequently indicated that, unless we file
        Marketing’s financial statements and summarized financial data with our periodic
        reports: (i) it will not consider our Annual Reports on Forms 10-K for the
        years
        beginning with  2000 to be compliant; (ii) it will not consider us to
        be current in our reporting requirements; (iii) it will not be in a position
        to
        declare effective any registration statements we may file for public offerings
        of our securities; and (iv) we should consider how the SEC’s conclusion impacts
        our ability to make offers and sales of our securities under existing
        registration statements and if we have a liability for such offers and sales
        made pursuant to registration statements that did not contain the financial
        statements of Marketing.
 
 We
        believe
        that the SEC’s position is based on their interpretation of certain provisions
        of their internal Accounting Disclosure Rules and Practices Training Material,
        Staff Accounting Bulletin No. 71 and Rule 3-13 of Regulation S-X. We do not
        believe that any of this guidance is clearly applicable to our particular
        circumstances and that, even if it were, we believe that we should be entitled
        to certain relief from compliance with such requirements. Marketing subleases
        our properties to approximately nine hundred independent, individual service
        station/convenience store operators (subtenants), most of whom were our tenants
        when Marketing was spun-off to our shareholders. Consequently, we believe
        that
        we, as the owner of these properties and the Getty brand, and based on our
        prior
        experience with Marketing’s tenants, could relet these properties to the
        existing subtenants who operate their convenience store, automotive repair
        services or other businesses at our properties or others at market rents
        although we can not accurately predict whether, when or on what terms such
        properties would be re-let or sold. Because of this particular aspect of
        our
        landlord-tenant relationship with Marketing, we do not believe that the
        inclusion of Marketing’s financial statements in our filings is necessary to
        evaluate our financial condition. Our position was included in a written
        response to the SEC. To date, the SEC has not accepted our position regarding
        the inclusion of Marketing’s financial statements in our filings. We are
        endeavoring to achieve a resolution of this issue that will be acceptable
        to the
        SEC. We can not accurately predict the consequences if we are ultimately
        unsuccessful in achieving an acceptable resolution.
 
 We
        do not
        believe that offers or sales of our securities made pursuant to existing
        registration statements that did not or do not contain the financial statements
        of Marketing constitute, by reason of such omission, a violation of the
        Securities Act of 1933, as amended, or the Exchange Act. Additionally, we
        believe that, if there ultimately is a determination that such offers or
        sales,
        by reason of such omission, resulted in a violation of those securities laws,
        we
        would not have any material liability as a consequence of any such
        determination.
 
 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 generally
        accepted accounting principles (“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 estate assets, gains or losses on dispositions of real estate, non-FFO
        items reported in discontinued operations and 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.
 
 -18-
  We
        believe
        that FFO is helpful to investors in measuring our performance because FFO
        excludes various items included in GAAP net earnings that do not relate to,
        or
        are not indicative of, our fundamental operating performance 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 include the
        significant impact of deferred rental revenue (straight-line rental revenue)
        and
        the net amortization of above-market and below-market leases on our recognition
        of revenues from rental properties. 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 initial term
        of
        these leases are recognized on a straight-line basis rather than when due.
        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. GAAP net earnings
        and FFO may also include income tax benefits 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. As a result,
        management pays particular attention to AFFO, a supplemental non-GAAP
        performance measure that we define as FFO less straight-line rental revenue,
        net
        amortization of above-market and below-market leases and income tax benefit.
        In
        management’s view, AFFO provides a more accurate depiction than FFO of the
        impact of scheduled rent increases under these leases, rental revenue from
        in-place leases and 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 generally accepted
        accounting principles and therefore these measures should not be considered
        an
        alternative for GAAP net earnings or as a measure of liquidity.
 
 -19-
 A
        reconciliation of net earnings to FFO and AFFO for the three and nine months
        ended September 30, 2007 and 2006 is as follows (in thousands, except per
        share
        amounts):
 
 *Three
                  months ended*
                *September
                  30,*
              
              
              *Nine
                  months ended*
                *September
                  30,**2007*
              
              
              *2006*
              
              
              *2007*
              
              
              *2006*Net
                  earnings
              
              $
              12,846
              
              
              $
              11,276
              
              
              $
              33,307
              
              
              $
              32,919Depreciation
                  and amortization of real estate assets
              
              
              2,598
              
              
              
              1,886
              
              
              
              7,164
              
              
              
              5,787Gains
                  on dispositions of real estate
              
              
              (1,350
              )
              
              
              (695
              )
              
              
              (1,615
              )
              
              
              (1,152
              )Non-FFO
                  items reported in discontinued operations:Depreciation
                  and amortization of real estate assets
              
              
              16
              
              
              
              5
              
              
              
              22
              
              
              
              16Gains
                  on dispositions of real estate
              
              
              (2,598
              )
              
              
              -
              
              
              
              (3,771
              )
              
              
              -Funds
                  from operations
              
              
              11,512
              
              
              
              12,472
              
              
              
              35,107
              
              
              
              37,570Deferred
                  rental revenue (straight-line rent)
              
              
              (647
              )
              
              
              (732
              )
              
              
              (1,997
              )
              
              
              (2,354
              )Net
                  amortization of above-market and below-market leases
              
              
              (374
              )
              
              
              -
              
              
              
              (928
              )
              
              
              -Income
                  tax benefit
              
              
              -
              
              
              
              (700
              )
              
              
              -
              
              
              
              (700
              )Non-AFFO
                  items reported in discontinued operations:Deferred
                  rental revenue (straight-line rent)
              
              
              76
              
              
              
              (17
              )
              
              
              75
              
              
              
              9Amortization
                  of below-market leases
              
              
              (14
              )
              
              
              -
              
              
              
              (14
              )
              
              
              -Adjusted
                  funds from operations
              
              $
              10,553
              
              
              $
              11,023
              
              
              $
              32,243
              
              
              $
              34,525Diluted
                  per share amounts:Earnings
                  per share
              
              $
              0.52
              
              
              $
              0.46
              
              
              $
              1.34
              
              
              $
              1.33Funds
                  from operations per share
              
              $
              0.46
              
              
              $
              0.50
              
              
              $
              1.42
              
              
              $
              1.52Adjusted
                  funds from operations per share
              
              $
              0.43
              
              
              $
              0.45
              
              
              $
              1.30
              
              
              $
              1.39Diluted
                  weighted average shares outstanding
              
              
              24,792
              
              
              
              24,764
              
              
              
              24,788
              
              
              
              24,752
  Results
        of
        operations
 *Three
        months ended September 30, 2007 compared to the three months ended September
        30,
        2006*
 
 Revenues
        from rental properties were $20.3 million for the three months ended September
        30, 2007 as compared to $18.0 million for the three months ended September
        30,
        2006. We received approximately $15.0 million in the three months ended
        September 30, 2007 and $14.9 million in the three months ended September
        30,
        2006 from properties leased to Marketing under the Marketing Leases. We also
        received rent of $4.3 million in the three months ended September 30, 2007
        and
        $2.4 million in the three months ended September 30, 2006 from other tenants.
        The increase in rent received was primarily due to rent from properties acquired
        in 2007 and rent escalations, partially offset by the effect of dispositions
        of
        real estate and lease expirations. In addition, revenues from rental properties
        include deferred rental revenues of $0.6 million for the three months ended
        September 30, 2007 as compared to $0.7 million for the three months ended
        September 30, 2006, recorded as required by GAAP, related to the fixed rent
        increases scheduled under certain leases with tenants. The aggregate minimum
        rent due over the initial term of these leases are recognized on a straight-line
        basis rather than when due. Revenues from rental properties also include
        $0.4
        million of net amortization of above-market and below-market leases due to
        the
        properties acquired in 2007. 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.
 
 -20-
  Rental
        property expenses, which are primarily comprised of rent expense and real
        estate
        and other state and local taxes, were $2.3 million for the three months ended
        September 30, 2007 and were comparable to $2.4 million recorded for the three
        months ended September 30, 2006.
 
 Environmental
        expenses, net for the three months ended September 30, 2007 were $2.8 million
        as
        compared to $1.6 million for the three months ended September 30, 2006. The
        increase was primarily due to a $0.7 million increase in change in estimated
        environmental costs, net of estimated recoveries from state underground storage
        tank funds, and a $0.4 million increase in environmental related litigation
        expenses as compared to the prior year period. The increase in the change
        in
        estimated environmental costs for the three months ended September 30, 2007
        was
        due to the increase in project scope or duration and related cost forecasts
        at a
        limited number of properties including one site that we agreed to remediate as a
        result of a legal settlement, with the State of New York, at which recent
        testing revealed significantly more contamination than was previously estimated
        and another site where regulators mandated a more costly approach than had
        been
        previously contemplated. The increase in environmental related litigation
        expenses was due to $0.2 million of higher legal fees and $0.2 million of
        higher
        litigation loss reserves.
 
 General
        and administrative expenses for the three months ended September 30, 2007
        were
        $1.5 million as compared to $1.4 million recorded for the three months ended
        September 30, 2006. The increase was caused by a credit of $0.1 million to
        insurance loss reserves recorded in 2006. The insurance loss reserves were
        established under our self funded insurance program that was terminated in
        1997.
 
 Depreciation
        and amortization expense was $2.6 million for the three months ended September
        30, 2007 as compared to $1.9 million recorded for the three months ended
        September 30, 2006. The increase was primarily due to properties acquired
        in
        2007 offset by the effect of dispositions in real estate and lease
        expirations.
 
 As
        a
        result, total operating expenses increased by approximately $1.9 million
        for the
        three months ended September 30, 2007, as compared to the three months ended
        September 30, 2006.
 
 Other
        income, net, substantially all of which is comprised of certain gains on
        dispositions of real estate and leasehold interests, was $1.4 million for
        the
        three months ended September 30, 2007 and $0.8 million for the three months
        ended September 30, 2006. Gains on dispositions of real estate from discontinued
        operations, was $2.6 million for three months ended September 30, 2007. Gains
        on
        dispositions of real estate for three months ended September 30, 2007 increased
        by an aggregate of $3.3 million to $3.9 million as compared to the prior
        year
        period. For the three months ended September 30, 2007, there were six property
        dispositions, including one property that was mutually agreed to be removed
        from
        the Marketing Leases prior to its scheduled lease expiration, and an increase
        in
        the award for a partial land taking under eminent domain that occurred in
        a
        prior year, as compared to two property dispositions, a partial land taking
        and
        an increase in the award for a total land taking that occurred in a prior
        year
        recorded in the prior year period.
 
 -21-
  Interest
        expense was $2.3 million for the three months ended September 30, 2007 as
        compared to $1.0 million for the three months ended September 30, 2006. The
        increase was primarily due to increased borrowings used to finance the
        acquisition of properties in 2007.
 
 As
        a
        result, net earnings were $12.8 million for the three months ended September
        30,
        2007 as compared to the $11.3 million for the prior year period. For the
        same
        period, FFO decreased to $11.5 million as compared to $12.5 million for prior
        year period and AFFO decreased by $0.5 million, to $10.6 million. The decrease
        in FFO for the quarter was primarily due to the changes in net earnings
        described above but excludes the $0.7 million increase in depreciation and
        amortization expense and the $3.3 million increase in gains on dispositions
        of
        real estate. The decrease in AFFO for the quarter also excludes the $0.7
        million
        decrease in income tax benefit, a $0.2 million decrease in deferred rental
        revenue and a $0.4 million increase in net amortization of above-market and
        below-market leases (which are included in net earnings and FFO but are excluded
        from AFFO).
 
 Diluted
        earnings per share increased by $0.06 per share to $0.52 per share for the
        three
        months ended September 30, 2007 as compared to $0.46 per share for the three
        months ended September 30, 2006. Diluted FFO per share for the three months
        ended September 30, 2007 was $0.46 per share, a decrease of $0.04 per share,
        as
        compared to the three months ended September 30, 2006. Diluted AFFO per share
        for the three months ended September 30, 2007 was $0.43 per share, a decrease
        of
        $0.02 per share as compared to the three months ended September 30,
        2006.
 
 Results
        of
        operations
 *Nine
        months ended September 30, 2007 compared to the nine months ended September
        30,
        2006*
 
 Revenues
        from rental properties were $58.8 million for the nine months ended September
        30, 2007 as compared to $54.1 million for the nine months ended September
        30,
        2006. We received approximately $45.1 million for the nine months ended
        September 30, 2007 and $44.9 million in the nine months ended September 30,
        2006
        from properties leased to Marketing under the Marketing Leases. We also received
        rent of $10.8 million in the nine months ended September 30, 2007 and $6.8
        million in the nine months ended September 30, 2006 from other tenants. The
        increase in rent received was primarily due to rent from properties acquired
        in
        March and April 2007 and February 2006 and rent escalations, partially offset
        by
        the effect of dispositions of real estate and lease expirations. In addition,
        revenues from rental properties include deferred rental revenues of $2.0
        million
        for the nine months ended September 30, 2007 as compared to $2.4 million
        for the
        nine months ended September 30, 2006, recorded as required by GAAP, related
        to
        the fixed rent increases scheduled under certain leases with tenants. The
        aggregate minimum rent due over the initial term of these leases are recognized
        on a straight-line basis rather than when due. Revenues from rental properties
        also include $0.9 million of net amortization of above-market and below-market
        leases due to the properties acquired in 2007. 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.
 
 -22-
  Rental
        property expenses, which are primarily comprised of rent expense and real
        estate
        and other state and local taxes, were $7.1 million for the nine months ended
        September 30, 2007 as compared to $7.4 million recorded for the nine months
        ended September 30, 2006. The decrease was principally due to a $0.3 million
        reduction in rent expense due to lease expirations.
 
 Environmental
        expenses, net for the nine months ended September 30, 2007 were $6.9 million
        as
        compared to $3.5 million for the nine months ended September 30, 2006. The
        increase was primarily due to a $2.4 million increase in change in estimated
        environmental costs, net of estimated recoveries from state underground storage
        tank funds, and a $0.9 million increase in environmental related litigation
        expenses as compared to the prior year period. The increase in the change
        in
        estimated environmental costs for the nine months ended September 30, 2007
        was
        due to the increase in project scope or duration and related cost forecasts
        at a
        limited number of properties including one
        site that we
        agreed to remediate as part of a legal settlement, with the State of New
        York,and regulator mandated project changes at other sites. The increase
        in
        environmental related litigation expenses was due to $0.3 million of higher
        legal fees and $0.6 million of higher litigation loss reserves.
 
 General
        and administrative expenses for the nine months ended September 30, 2007
        were
        $4.8 million as compared to $4.1 million recorded for the nine months ended
        September 30, 2006. The increase was caused by approximately $0.2 million
        of
        higher professional fees and a charge of $0.1 million to insurance loss reserves
        recorded in 2007 as compared to a credit of $0.3 million recorded in 2006.
        The
        insurance loss reserves were established under our self funded insurance
        program
        that was terminated in 1997.
 
 Depreciation
        and amortization expense for the nine months ended September 30, 2007 was
        $7.2
        million as compared to $5.8 million recorded for the nine months ended September
        30, 2006. The increase was primarily due to properties acquired in 2007 offset
        by the effect of dispositions in real estate and lease expirations.
 
 As
        a
        result, total operating expenses increased by approximately $5.1 million
        for the
        nine months ended September 30, 2007, as compared to the nine months ended
        September 30, 2006.
 
 Other
        income, net, substantially all of which is comprised of certain gains on
        dispositions of real estate and leasehold interests, was $1.8 million for
        the
        nine months ended September 30, 2007 and $1.4 million for the nine months
        ended
        September 30, 2006. Gains on dispositions of real estate from discontinued
        operations were $3.8 million for the nine months ended September 30, 2007.
        Gains
        on dispositions of real estate for the nine months ended September 30, 2007
        increased by an aggregate of $4.2 million to $5.4 million as compared to
        the
        prior year period. For the nine months ended September 30, 2007, there were
        nine
        property dispositions, including two properties that were mutually agreed
        to be
        removed from the Marketing Leases prior to their scheduled lease expiration,
        a
        partial land taking under eminent domain and an increase in the awards for
        two
        takings that occurred in prior years, as compared to three property
        dispositions, a total land taking and seven partial land takings recorded
        in the
        prior year period.
 
 -23-
  Interest
        expense was $5.5 million for the nine months ended September 30, 2007 as
        compared to $2.6 million for the nine months ended September 30, 2006. The
        increase was primarily due to increased borrowings used to finance the
        acquisition of properties in March and April 2007 and February
        2006.
 
 As
        a
        result, net earnings increased by $0.4 million to $33.3 million for the nine
        months ended September 30, 2007, as compared to the $32.9 million for the
        prior
        year period. For the same period, FFO decreased to $35.1 million as compared
        to
        $37.6 million for prior year period and AFFO decreased by $2.3 million, to
        $32.2
        million. The decrease in FFO for the nine months was primarily due to the
        changes in net earnings described above but excludes the $1.4 million increase
        in depreciation and amortization expense and the $4.2 million increase in
        gains
        on dispositions of real estate. The decrease in AFFO for the nine months
        also
        excludes the $0.7 million decrease in income tax benefit, a $0.4 million
        decrease in deferred rental revenue and a $0.9 million increase in net
        amortization of above-market and below-market leases (which are included
        in net
        earnings and FFO but are excluded from AFFO).
 
 Diluted
        earnings per share increased by $0.01 per share to $1.34 per share for the
        nine
        months ended September 30, 2007 as compared to $1.33 per share for the nine
        months ended September 30, 2006. Diluted FFO per share for the nine months
        ended
        September 30, 2007 was $1.42 per share, a decrease of $0.10 per share, as
        compared to the nine months ended September 30, 2006. Diluted AFFO per share
        for
        the nine months ended September 30, 2007 was $1.30 per share, a decrease
        of
        $0.09 per share as compared to the nine months ended September 30,
        2006.
 
 Liquidity
        and Capital Resources
 
 Our
        principal sources of liquidity are the cash flows from our business, funds
        available under a revolving credit agreement that expires in 2011 and available
        cash and equivalents. Management believes that dividend payments and cash
        requirements for our business for the next twelve months, including
        environmental remediation expenditures, capital expenditures and debt service,
        can be met by cash flows from operations, borrowings under the credit agreement
        and available cash and cash equivalents.
 
 On
        March
        27, 2007, we entered into an amended and restated senior unsecured revolving
        credit agreement (the “Credit Agreement”) with a group of domestic commercial
        banks (the “Bank Syndicate”).
 
 The
        Credit
        Agreement, among other items, increases the aggregate amount of our credit
        facility by $75,000,000 to $175,000,000; reduces the interest rate margin
        on
        LIBOR based borrowings by 0.25% and extends the term of the Credit Agreement
        from July 2008 to March 2011. 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, as defined in the Credit Agreement. Based on
        our
        leverage ratio as of September 30, 2007, the applicable margin is 0.0% for
        base
        rate borrowings and 1.25% for LIBOR rate borrowings. The benefit of the 0.25%
        reduction in the interest rate margin effective with the amendment of the
        Credit
        Agreement was offset by the increase in our leverage ratio caused by an increase
        our outstanding borrowings used for the Trustreet acquisition, resulting
        in no
        net change in the LIBOR rate margin.
 
 -24-
  Subject
        to
        the terms of the Credit Agreement, we have the options to extend the term
        of the
        Credit Agreement for one additional year and/or increase the amount of the
        credit facility available pursuant to the Credit Agreement by $125,000,000
        to
        $300,000,000, subject to approval by our Board of Directors and the Bank
        Syndicate. The Credit Agreement contains customary terms and conditions,
        including customary financial covenants such as leverage and coverage ratios
        and
        other customary covenants, including limitations on our ability to incur
        debt
        and pay dividends and maintenance of tangible net worth, and events of default,
        including change of control and failure to maintain REIT status. We believe
        that
        the Credit Agreement’s terms, conditions and covenants will not limit our
        current business practices.
 
 In
        April
        2006 we entered into a $45.0 million LIBOR based interest rate swap, effective
        May 1, 2006 through June 30, 2011. The interest rate swap is intended to
        hedge
        $45.0 million of our current exposure to variable market interest rate risk
        by
        effectively fixing, at 5.44%, the LIBOR component of the interest rate
        determined under our existing credit agreement or future exposure to variable
        interest rate risk due to borrowing arrangements that may be entered into
        prior
        to the expiration of the interest rate swap. As of September 30, 2007, $45.0
        million of our LIBOR based borrowings under the Credit Agreement bear interest
        at an effective rate of 6.69%.
 
 On
        March
        31, 2007, we acquired fifty-nine convenience store and retail motor fuel
        properties in ten states for approximately $79.3 million from Trustreet for
        cash
        with funds drawn under our Credit Agreement. Total borrowings outstanding
        under
        the Credit Agreement at September 30, 2007 were $128.7 million, bearing interest
        at an average effective rate of 6.54% per annum. Total borrowings were $131.5
        million as of November 1, 2007. Accordingly, we had $43.5 million available
        under the terms of the Credit Agreement as of November 1, 2007 or $168.5
        million
        available assuming our Board of Directors and the Bank Syndicate were to
        approve
        our request to increase the Credit Agreement by $125.0 million. Increasing
        the
        Credit Agreement is also contingent upon the existing members of the Bank
        Syndicate increasing their commitment to the Credit Agreement, and/or additional
        members joining the Bank Syndicate to increase the availability committed
        under
        the line.
 
 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 $34.1 million for
        the
        nine months ended September 30, 2007 and $33.5 million for the prior year
        period. We presently intend to pay common stock dividends of $0.465 per share
        each quarter ($1.86 per share on an annual basis), and commenced doing so
        with
        the quarterly dividend declared in May 2007.
 
 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.
 
 -25-
  Critical
        Accounting Policies
 
 Our
        accompanying unaudited interim consolidated financial statements include
        the
        accounts of Getty Realty Corp. and our wholly-owned subsidiaries. The
        preparation of financial statements in accordance with GAAP requires management
        to make estimates, judgments and assumptions that affect amounts reported
        in its
        financial statements. Although we have made our best 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. We do not believe that there is a great likelihood
        that materially different amounts would be reported related to the application
        of the accounting policies described below.
 
 Estimates,
        judgments and assumptions underlying the accompanying consolidated financial
        statements include, but are not limited to, deferred rent receivable, 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 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. Our accounting
        policies are described in note 1 to the consolidated financial statements
        that
        appear in our Annual Report on Form 10-K for the year ended December 31,
        2006.
        We believe that the more critical of our accounting policies relate to revenue
        recognition and deferred rent receivable, impairment of long-lived assets,
        income taxes, environmental costs and recoveries from state underground storage
        tank funds and litigation, each of which is discussed in “Item 7. Management’s
        Discussion and Analysis of Financial Condition and Results of Operations” in our
        Annual Report on Form 10-K for the year ended December 31, 2006.
 
 Environmental
        Matters
 
 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. We enter into leases and various other agreements
        which define our share of joint and several environmental liabilities and
        commitments by establishing the percentage and method of allocating
        responsibility between the parties. Uncertainties related to the determination
        of our share of net environmental costs include, among others, determining
        when
        known environmental contamination may have occurred and the effectiveness
        of
        remediation efforts to date, determining when costs associated with asset
        retirement obligations will be incurred and predicting who the responsible
        party
        will be at that time and the interpretation and enforceability of, or potential
        modifications to, the various agreements, including the Marketing Leases.
        It is
        possible that our assumptions of the ultimate allocation method and share
        of
        responsibility that are used when accruing our allocable share of joint and
        several environmental liabilities, may change, which may result in adjustments
        to the amounts recorded for environmental litigation accruals, environmental
        remediation liabilities and related assets. Although
        the ultimate resolution of these matters may have a significant impact on
        results of operations for any single fiscal year or interim period, we currently
        believe that such matters will not have a material  adverse effect on
        our long-term financial position.
  -26-
  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 regulatory or contractual closure (“Closure”) in an
        efficient and economical manner. 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.  We will continue to seek reimbursement
        from state UST remediation funds related to these environmental liabilities
        where available. 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.
 
 As
        of
        September 30, 2007, the Company had remediation action plans in place for
        two
        hundred sixty-six (93%) of the two hundred eighty-five properties for which
        it
        retained environmental responsibility and has not received a “no further action”
letter and the remaining nineteen properties (7%) remain in the assessment
        phase. As of September 30, 2007, we had accrued $19.6 million as management’s
        best estimate of the fair value of reasonably estimable environmental
        remediation costs. As of September 30, 2007 we had also recorded $4.4 million
        as
        management’s best estimate for net recoveries from state UST remediation funds,
        net of allowance, related to environmental obligations and liabilities.
        Environmental expenditures and recoveries from underground storage tank funds
        were $3.8 million and $1.2 million, respectively, for the nine month period
        ended September 30, 2007.
 
 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 net expenses aggregating $6.6
        million. Accordingly, the environmental accrual as of September 30, 2007
        was
        increased by $2.6 million, net of assumed recoveries and before inflation
        and
        present value discount adjustments. The resulting net environmental accrual
        as
        of September 30, 2007 was then further increased by $1.0 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 $2.1 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 September 30, 2007 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 recorded during the nine
        months
        ended September 30, 2007 would not have changed significantly if these changes
        in the assumptions were made effective December 31, 2006.
 
 -27-
  In
        view of
        the uncertainties associated with environmental expenditures, however, we
        believe it is possible that the fair value of future actual net expenditures
        could be substantially higher than these estimates. 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. For the nine months ended September 30, 2007 and 2006,
        the
        aggregate of the net change in estimated remediation costs, including accretion
        expense, included in our consolidated statement of operations amounted to
        $4.4
        million and $2.0 million, respectively, which amounts were net of probable
        recoveries from state UST remediation funds. Although future environmental
        costs
        may have a significant impact on results of operations for any single fiscal
        year or interim period, we believe that such costs will not have a material
        adverse effect on our long-term financial position.
 
 We
        cannot
        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 predict if state underground storage tank 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.
 
 Our
        discussion of environmental matters should be read in conjunction with “Item 7.
        Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” which appears in the Company’s Annual Report on Form 10-K for the
        year ended December 31, 2006 and the unaudited consolidated financial statements
        and related notes (including notes 2 and 3) which appear in this Quarterly
        Report on Form 10-Q.
 
 -28-
  Forward
        Looking Statements
 
 Certain
        statements in this Quarterly Report 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,”
“predict” and similar expressions, we intend to identify forward-looking
        statements. Examples of forward-looking statements include statements regarding
        our expectations regarding future payments from Marketing; the recovery of
        the  deferred rent receivable recorded under the straight line method
        of accounting for the Marketing Leases and the probability that our assumptions
        which affect the amount of the deferred rent receivable recorded may change;
        the
        impact of any modification of the Marketing Leases on our business and ability
        to pay dividends or our stock price; our belief that Lukoil is currently
        providing credit enhancement to Marketing; our ability to predict whether
        or
        when the Marketing Leases will be modified, the terms of any such modification
        or what actions Marketing and Lukoil will take and what our recourse will
        be
        whether the Marketing Leases are modified or not; the expected effect of
        regulations on our long-term performance; our expected ability to maintain
        compliance with applicable regulations;our
        ability to renew expired leases; the adequacy of our current and anticipated
        cash flows;  our ability to relet properties at market rents; our
        belief that we do not have a material liability for offers and sales of our
        securities made pursuant to registration statements that did not contain
        the
        financial statements or summarized financial data of Marketing; our expectations
        regarding future acquisitions; the impact of the covenants included in the
        Credit Agreement on our current business practices; our expected ability
        to
        increase our available funding under the Credit Agreement; our ability to
        maintain our REIT status;  the probable outcome of litigation or
        regulatory actions; our expected recoveries from underground storage tank
        funds;
        our exposure to environmental remediation costs; our estimates regarding
        remediation costs; our expectations as to the long-term effect of environmental
        liabilities on our financial condition; our exposure to interest rate
        fluctuations and the manner in which we expect to manage this exposure; the
        expected reduction in interest-rate risk resulting from our interest-rate
        swap
        agreement and our expectation that we will not settle the interest-rate swap
        prior to its maturity; our expectations regarding corporate level federal
        income
        taxes; the indemnification obligations of the Company and others; our intention
        to consummate future acquisitions; our assessment of the likelihood of future
        competition; assumptions regarding the future applicability of accounting
        estimates, assumptions and policies; our intention to pay future dividends
        and
        the amounts thereof; our expectation that we will finalize the allocation
        of the
        purchase price for the properties acquired from Trustreet during the fourth
        quarter of 2007; and our beliefs about the reasonableness of our accounting
        estimates, judgments and assumptions, including the preliminary allocation
        of
        the purchase price for the properties acquired from Trustreet.
 
 These
        forward-looking statements are based on our current beliefs and assumptions
        and
        information currently available to us and involve known and unknown risks,
        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.
        Information concerning factors that could cause our actual results to materially
        differ from those forward looking results can be found in “Part I, Item 1A. Risk
        Factors” of our Annual Report on Form 10-K for the year ended December 31, 2006
        and “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q, as
        well as in other filings we make with the Securities and Exchange Commission
        and
        include, but are not limited to risks associated with owning and leasing
        real
        estate generally; dependence on Marketing as a tenant and on rentals from
        companies engaged in the petroleum marketing and convenience store businesses;
        risks associated with a significant modification of the Marketing Leases;
        our
        unresolved SEC comment; competition for properties and tenants; risk of tenant
        non-renewal; the effects of taxation and other regulations; potential litigation
        exposure; costs of completing environmental remediation and of compliance
        with
        environmental regulations; the risk of loss of our management team; the impact
        of our electing to be treated as a REIT, including subsequent failure to
        qualify
        as a REIT; risks associated with owning real estate concentrated in one region
        of the United States; risks associated with potential future acquisitions;
        losses not covered by insurance; future dependence on external sources of
        capital; the risk that our business operations may not generate sufficient
        cash
        for distributions or debt service; our potential inability to increase our
        available funding under the Credit Agreement; our potential inability to
        pay
        dividends; the risk that our estimates of the fair value of the properties
        acquired from Trustreet may be revised or that other accounting judgments
        or
        assumptions used in the allocation of the purchase price thereof may prove
        incorrect; and terrorist attacks and other acts of violence and
        war.
 
 -29-
  As
        a
        result of these and other factors, we may experience material fluctuations
        in
        future operating results on a quarterly or annual basis, which could materially
        and adversely affect our business, financial condition, operating results
        and
        stock price. An investment in our stock involves various risks, including
        those
        mentioned above and elsewhere in this report and those that are detailed
        from
        time to time in our other filings with the Securities and Exchange
        Commission.
 
 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 to reflect future events or
        circumstances or reflect the occurrence of unanticipated events.
 
 Item
        3. Quantitative and Qualitative Disclosures About Market
        Risk
 
 Prior
        to
        April 2006, 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 risks.
 
 We
        are
        exposed to interest rate risk, primarily as a result of our $175.0 million
        Credit Agreement.  Our Credit Agreement, which expires in June 2011,
        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, as defined in the Credit
        Agreement. Based on our leverage ratio as of September 30, 2007, the applicable
        margin is 0.0% for base rate borrowings and 1.25% for LIBOR rate borrowings.
        At
        September 30, 2007, we had borrowings outstanding of $128.7 million under
        our
        Credit Agreement bearing interest at an average rate of 6.51% per annum (or
        an
        average effective rate of 6.54% including the impact of the interest rate
        swap
        discussed below). We use borrowings under the Credit Agreement to finance
        acquisitions and for general corporate purposes.
 
 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 September 30, 2007 increased significantly due to increased
        borrowings under the Credit Agreement as compared to December 31, 2006. In
        April
        2006, we entered into a $45.0 million LIBOR based interest rate swap, effective
        May 1, 2006 through June 30, 2011, to manage a portion of our interest rate
        risk. The interest rate swap 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 Credit
        Agreement or future exposure to variable interest rate risk due to borrowing
        arrangements that may be entered into prior to the expiration of the interest
        rate swap. As of September 30, 2007, $45.0 million of our LIBOR based borrowings
        under the Credit Agreement bear interest at an effective rate of 6.69%. As
        a
        result, we will be exposed to interest rate risk to the extent that our
        borrowings exceed the $45.0 million notional amount of the interest rate
        swap.
        As of September 30, 2007, our borrowings exceeded the notional amount of
        the
        interest rate swap by $83.7 million. As a result of the increase in the funding
        available under the Credit Agreement from $100.0 million to $175.0 million,
        and
        the subsequent increase in our total borrowings, the interest rate swap covers
        a
        smaller percentage of our total borrowings that it did previously. We do
        not
        foresee any additional significant changes in our exposure or in how we manage
        this exposure in the near future.
 
 -30-
  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 partially protects us against future increases
        in interest rates. While this 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.
 
 In
        the
        event that we were to settle the interest rate swap prior to its maturity,
        if
        the corresponding LIBOR swap rate for the remaining term of the agreement
        is
        below the 5.44% fixed strike rate at the time we settle the
        swap, we would be required to make a payment to the swap counter-party; if
        the corresponding LIBOR swap rate is above the fixed strike rate at the
        time we settle the swap, we would receive a payment from the swap
        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.
 
 Based
        on
        our projected average outstanding borrowings under the Credit Agreement for
        2007, if market interest rates increase by an average of 0.5% more than the
        market interest rates as of September 30, 2007, the additional annualized
        interest expense caused by market interest rate increases since December
        31,
        2006 would decrease 2007 net income and cash flows by approximately $105,000.
        This amount is the effect of a hypothetical interest rate change on the portion
        of our average outstanding borrowings of $83.7 million projected for the
        remainder of 2007 under our Credit Agreement that is not covered by our $45.0
        million interest rate swap. The projected average outstanding borrowings
        are
        before considering additional borrowings required for future
        acquisitions.  The calculation also assumes that there are no other
        changes in our financial structure or the terms of our borrowings. Management
        believes that the fair value of its debt equals its carrying value at September
        30, 2007 and December 31, 2006. Our exposure to fluctuations in interest
        rates
        will increase or decrease in the future with increases or decreases in the
        amount of borrowings outstanding under our Credit Agreement.
 
 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 held in overnight
        bank time deposits and an institutional money market fund.
 
 Item
        4. 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 Securities 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.
  -31-
  As
        required by Rule 13a-15(b), the Company 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 quarter covered by this report.
        Based on the foregoing, the Company's Chief Executive Officer and Chief
        Financial Officer have concluded that the Company's disclosure controls and
        procedures were effective at a reasonable assurance level as of September
        30,
        2007.
 
 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.
  -32-
  PART
        II.  OTHER INFORMATION
 
 Item
        1.  Legal Proceedings
 
 In
        1997,
        representatives of the County of Lancaster, Pennsylvania contacted the Company
        regarding alleged petroleum contamination of property owned by the County
        adjoining a property owned by the Company.  No litigation has been
        instituted as a result of this potential claim and the Company is actively
        remediating the contamination. In 2005, the County requested reimbursement
        of
        legal fees pursuant to the Access Agreement between the parties.  A
        substantial portion of the fees remains in dispute.
 
 In
        September 1999, we brought a case against one of our tenants in the United
        States District Court, District of New Jersey, seeking the return of the
        property we leased to them and the cleanup of all contamination caused by
        them.
        Our tenant filed a counterclaim alleging that all or part of the contamination
        was attributable to contamination from underground storage tanks for which
        we
        were responsible. The State of New Jersey Department of Environmental Protection
        (the “NJDEP”) has notified the tenant that it is responsible for the cleanup and
        remediation of contamination resulting from a petroleum release. The case
        has
        been settled without any payment by the Company. As a part of the settlement,
        the tenant will buy the subject property, assume responsibility for the
        remediation of all environmental conditions and fully indemnify the Company
        and
        its affiliates respecting all environmental liability.
 
 From
        January 2007 through September  2007 we have been made party to
        fourteen additional actions that are nearly identical to
        the  thirty-five cases pending as of December 31, 2006 in Connecticut,
        Florida, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania,
        Vermont, Virginia, and West Virginia, brought by local water providers or
        governmental agencies. These cases allege various theories of liability due
        to
        contamination of groundwater with MTBE as the basis for claims seeking
        compensatory and punitive damages. Each case names as defendants approximately
        fifty petroleum refiners, manufacturers, distributors and retailers of MTBE,
        or
        gasoline containing MTBE. The accuracy of the allegations as they relate
        to us,
        our defenses to such claims, the aggregate amount of damages, the definitive
        list of defendants and the method of allocating such amounts among the
        defendants have not been determined. The cases to which we are a party, together
        with other cases, have been removed to the federal court and consolidated
        for
        pre-trial purposes as federal multidistrict litigation in the Southern District
        of New York.  The removal and consolidation has been challenged
        successfully by the plaintiffs. However it is not clear how this will affect
        our
        matters.   At this time, two of the New York cases to which we
        are a party have been set for trial in March 2008. We are vigorously defending
        these matters.  In June 2006, we were served with a Toxic Substance
        Control Act (“TSCA”) Notice Letter (“Notice Letter”), advising us that
“prospective plaintiffs” listed on a schedule to the Notice Letter intend to
        file a TSCA citizens’ civil action against the entities listed on a schedule to
        the Notice Letter, including the Company’s subsidiaries, based upon alleged
        failure by such entities to provide information to the United States
        Environmental Protection Agency regarding MTBE as may be required by the
        TSCA
        and declaring that such action will be filed unless such information is
        delivered.  We do not believe that we have any such information
        Accordingly, our ultimate legal and financial liability, if any, in connection
        with the existing litigation or any future civil litigation pursuant to the
        Notice Letter cannot be estimated with any certainty at this time.
 
 -33-
 
 In
        July
        2003, we were notified by the State of Rhode Island Department of Environmental
        Management of their Notice to Enforce compliance with a Letter of Responsibility
        issued by the Department in connection with a suspected petroleum release
        at a
        property that abuts property owned by us and leased to Marketing. We responded
        to the State’s Notice in August 2003 and do not believe that we have any
        liability for the contamination, which appears to be unrelated to the products
        we stored at the property.
 
 In
        September 2005, we received a demand from a property owner for reimbursement
        of
        cleanup and soil removal costs claimed to have been incurred by it in connection
        with the development of its property located in Philadelphia, Pennsylvania,
        that, in part, is a former retail motor fuel property supplied by us with
        gasoline. The current owner claims that the costs are reimbursable pursuant
        to
        an Indemnity Agreement that we entered into with the prior property owner.
        Although we acknowledged responsibility for a portion of the contaminated
        soil,
        and were engaged in the remediation of the same, we denied responsibility
        for
        the full extent of the costs estimated to be incurred.  The matter was
        settled in June 2007, in consideration for a payment by the Company of $985,000
        on that date.
 
 In
        November 2005, we were notified that an action had been commenced in the
        Superior Court in Passaic County, New Jersey, in August 2005, by a property
        owner, seeking compensation from us on behalf of a class not yet certified,
        based upon the installation of a monitoring well on the property of the property
        owner. The NJDEP also is named as a defendant.  The matter was settled
        in the first quarter, in consideration for a payment by the Company of an
        amount
        less than $10,000.
 
 In
        December 2005, an action was commenced against us in the Superior Court in
        Providence, Rhode Island, by the owner of a pier that is adjacent to one
        of our
        terminals that is leased to Marketing seeking monetary damages of approximately
        $500,000 representing alleged costs related to the ownership and maintenance
        of
        the pier for the period from January 2003 through September 2005. We do not
        believe that we have any legal, contractual or other responsibility for such
        costs.  Additionally, we believe that, under the terms of the Master
        Lease that covers the property, Marketing is responsible for such costs and
        tendered the matter to them for defense and indemnification.  It is
        noted that Marketing has declined to accept the tender and have denied liability
        for the claim. We have filed a third party claim against Marketing seeking
        defense and indemnification that has been tolled, pending resolution of the
        underlying litigation.  In that regard, it is noteworthy that, at the
        pre-trial conference held in this matter, the Court advised the owner that
        there
        is binding legal precedent from prior litigation involving the pier that
        likely
        will defeat its claim.
 
 In
        February 2006, an action was commenced in the Supreme Court in Westchester
        County, New York against us and Marketing to recover cleanup and remediation
        costs related to a petroleum release and for damages in excess of $1.0 million
        for, among other things, lost rent and diminution of property
        value.  The matter was settled in consideration for a payment by the
        Company of $50,000 in May, 2007.
 
 -34-
  In
        May
        2006, we were advised of an action in the Superior Court of New Jersey,
        Middlesex County, against our subsidiary, filed by a property owner claiming
        damages for remediation of contaminated soil. The litigation is still in
        the
        initial discovery phase.  Although, initially, it was not clear from
        the pleadings in the matter that there was any basis at all for the claim
        against us, we have determined that it is likely that corporate successor
        liability could be the basis for prosecuting the claim against our
        subsidiary.  The Company believes that it has defenses to the claim
        and will vigorously defend the matter.
 
 In
        August
        2006, we were notified by the New Jersey Schools Corporation (“NJCC”) of their
        discovery of abandoned USTs and soil contamination at a property that they
        acquired from our subsidiary by condemnation. Prior to the taking, the property
        was leased to and operated by Marketing. NJCC is demanding reimbursement
        of
        costs allegedly incurred in connection with removal of the USTs and soil
        remediation (in the approximate amount of $950,000 in the
        aggregate).  We believe that, under the terms of the Master Lease that
        covered the property, Marketing is responsible for such costs and tendered
        the
        matter to them for defense and indemnification.  It is noted that they
        have declined to accept the tender and have denied liability for the
        claim.  We have filed a compulsory third party claim against Marketing
        seeking defense and indemnification.  In July, 2007, Marketing filed a
        claim against the Company seeking defense and indemnification.
 
 In
        May
        2007, the Company’s subsidiary received a lease default notice from its
        sub-landlord pertaining to an alleged underpayment of rent by our subsidiary
        for
        a period of time exceeding fifteen years.  In June 2007, the Company
        commenced an action against the sub-landlord seeking an injunction that would
        preclude the sub-landlord from taking any action to terminate its sublease
        with
        our subsidiary or collect the alleged underpayment of rent.  In
        support of the Company’s action for an injunction, the Company submitted a
        Memorandum of Law that fully briefed the issue of the limitation upon the
        sub-landlord’s claim imposed by the applicable statute of
        limitations.  The Court issued the injunction, and in doing so,
        acknowledged that the Company was likely to prevail on the merits. The matter
        remains pending.
 
 In
        July
        2007, subsidiaries of the Company were notified of the commencement of three
        actions by the NJDEP seeking “Natural Resource Damages” (“NRDs”) arising out of
        petroleum releases years ago.  The accuracy of the allegations as they
        relate to us, the legal right of the NJDEP to claim NRDs in these actions,
        the
        viability of our defenses to such claims, the legal basis for determining
        the
        amount of the NRDs, and the method of allocating damages, if any, between
        defendants have not been determined.
 
 Please
        refer to “Item 3. Legal Proceedings” of our Annual Report on Form 10-K for the
        year ended December 31, 2006, and note 3 to our consolidated financial
        statements in such Form 10-K  and to note 2 to our accompanying
        unaudited consolidated financial statements which appear in  this
        Quarterly Report on Form 10-Q, for additional information.
 
 -35-
  Item
        1A. Risk Factors
 
 See
“Part
        I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended
        December 31, 2006 for factors that could affect the Company’s results of
        operations, financial condition and liquidity. Other than the risk factors
        below, there have been no material changes in the risk factors disclosed
        in Part
        I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended
        December 31, 2006.
 
 *Our
        revenues are primarily dependent on the performance of Getty Petroleum Marketing
        Inc., our primary tenant. Although we periodically receive and review financial
        statements and other financial information from Marketing, some of the
        information is not publicly available. We and our shareholders may not have
        sufficient information to identify a deterioration of the financial performance
        or condition of Marketing prior to any default by Marketing on its monetary
        obligations to us that may result from such deterioration. If Marketing does
        not
        fulfill its monetary obligations to us, our financial condition and results
        of
        operations could be materially adversely affected. Representatives of Marketing
        have indicated to us their desire to modify the Marketing Leases which may
        significantly reduce the amount of rent we receive from Marketing and increase
        our operating expenses. A significant modification of the Marketing Leases
        could
        materially adversely affect our financial condition, results of operations,
        ability to pay dividends and stock price.*
 
 A
        substantial portion of our revenues (75% for the three months ended September
        30, 2007) are derived from the Marketing Leases. Accordingly, our revenues
        are
        dependent to a large degree on the economic performance of Marketing and
        of the
        petroleum marketing industry and any factor that adversely affects Marketing
        or
        our relationship with Marketing may have a material adverse effect on our
        financial condition and results of operations. In the event that Marketing
        cannot or will not perform its monetary obligations under the Marketing Leases
        with us, our financial condition and results of operations may be materially
        adversely affected. Although Marketing is wholly owned by a subsidiary of
        Lukoil, one of the largest integrated Russian oil companies, Lukoil is not
        a
        guarantor of the Marketing Leases and no assurance can be given that Lukoil
        will
        provide any credit enhancement or additional capital to Marketing in the
        future,
        or otherwise cause Marketing to fulfill any of its obligations under the
        Marketing Leases.
 
 While
        the
        initial term of the Marketing Leases are effective through December 2015,
        representatives of Marketing have indicated to us their desire to modify
        the
        Marketing Leases to (i) remove a significant number of properties from the
        Marketing Leases and eliminate Marketing’s payment of rent to us with respect to
        those properties and eliminate or reduce Marketing’s direct payment of operating
        expenses with respect to those properties, and (ii) reduce the aggregate
        amount
        of rent paid to us for the properties remaining under the Marketing Leases.
        The
        effect of any such modification may significantly reduce the amount of rent
        we
        receive from Marketing and increase our operating expenses. We can not
        accurately predict whether or when the Marketing Leases will be modified,
        or
        what the terms of any such agreement may be if the Marketing Leases are
        modified, or what actions Marketing and Lukoil will take and what our recourse
        may be whether the Marketing Leases are modified or not. Given the uncertainties
        regarding a possible modification to the Marketing Leases, we believe it
        is
        reasonably possible that our assumption that Marketing will make all contractual
        lease payments during the initial term of the Marketing Leases when due,
        when
        applying the straight-line method of accounting for rental revenue, may change,
        which may result in an adjustment to the deferred rent receivable that could
        be
        material to our financial condition or results of operations for any single
        fiscal year or interim period. Although we are the owner of the properties
        and
        the Getty brand and have prior experience with Marketing’s tenants, in the event
        that properties are removed from the Marketing Leases, we can not accurately
        predict whether, when or on what terms such properties could be re-let or
        sold.
        A significant modification of the Marketing Leases could materially adversely
        affect our financial condition, revenues, operating expenses, results of
        operations, ability to pay dividends and stock price.
 
 -36-
  We
        periodically receive and review Marketing’s financial statements and other
        financial data. We receive this information from Marketing pursuant to the
        terms
        of the Master Lease. Certain of this information is not publicly available
        and
        the terms of the Master Lease prohibit us from including this 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 financial performance
        of
        Marketing may deteriorate, and Marketing may ultimately default on its monetary
        obligations to us before we and our shareholders receive financial information
        from Marketing that would indicate the deterioration. Additionally, any
        financial data of Marketing that we are able to provide in our periodic reports
        is derived from financial data provided by Marketing and neither we, nor
        our
        auditors, have been involved with the preparation of such data and as a result
        can provide no assurance thereon. Additionally, our auditors have not been
        engaged to review or audit such data.
 
 Selected
        balance sheet data of Marketing at December 31, 2005, 2004, 2003 and 2002
        and
        selected operating data of Marketing for each of the three years in the period
        ending December 31, 2004, which is publicly available, has been provided
        in
“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition
        and Results of Operations,” which appears in our Annual Report on Form 10-K for
        the year ended December 31, 2006. Certain of this financial information and
        other information concerning Marketing is available from Dun & Bradstreet
        and may be accessed by their web site (www.dnb.com) upon payment of their
        fee.
        You should not rely on the selected balance sheet data or operating data
        related
        to prior years as representative of Marketing’s current financial condition or
        current results of operations.
 
 If
        Marketing does not fulfill its monetary obligations to us under the Marketing
        Leases, our financial condition and results of operations may be materially
        adversely affected. Based on our review of the recent financial statements
        and
        other financial data Marketing has provided to us to date, we have observed
        a
        significant decline in Marketing’s annual financial results from the prior
        periods presented. Accordingly, no assurance can be given that Marketing
        will
        have the ability to pay its debts and meet its rental and other financial
        obligations under the Marketing Leases.  Marketing continues to pay
        timely its monetary obligations under the Marketing Leases, as it has since
        the
        inception of the Master Lease in 1997, although there is no assurance that
        it
        will continue to do so.
 
 Marketing’s
        earnings and cash flow from operations depend largely upon the sale of refined
        petroleum products at margins in excess of its fixed and variable expenses
        and
        rental income from its subtenants who operate their convenience store,
        automotive repair services or other businesses at our properties. The petroleum
        marketing industry has been, and continues to be volatile and highly
        competitive. A large, rapid increase in wholesale petroleum prices would
        adversely affect Marketing’s profitability and cash flow if the increased cost
        of petroleum products could not be passed on to Marketing’s customers or if the
        consumption of gasoline for automotive use were to significantly decline.
        Petroleum products are commodities whose prices depend on numerous factors
        that
        affect supply and demand. The prices paid by Marketing and other petroleum
        marketers for products are affected by global, national and regional factors.
        We
        cannot be certain how these factors will affect petroleum product prices
        or
        supply in the future, or how in particular they will affect Marketing or
        our
        other tenants.
 
 -37-
  *We
        received a comment letter from the SEC that contains one comment that remains
        unresolved.*
 
 As
        part of
        a periodic review by the Division of Corporation Finance of the Securities
        and
        Exchange Commission (“SEC”) of our Annual Report on Form 10-K for the year ended
        December 31, 2003, we received and responded to a number of comments. The
        only
        comment that remains unresolved pertains to the SEC’s position that we must
        include the financial statements and summarized financial data of Marketing
        in
        our periodic filings, which is prohibited by the terms of the Master Lease.
        The
        SEC subsequently indicated that, unless we file Marketing’s financial statements
        and summarized financial data with our periodic reports: (i) it will not
        consider our Annual Reports on Forms 10-K for the years beginning with fiscal
        2000 to be compliant; (ii) it will not consider us to be current in our
        reporting requirements; (iii) it will not be in a position to declare effective
        any registration statements we may file for public offerings of our securities;
        and (iv) we should consider how the SEC’s conclusion impacts our ability to make
        offers and sales of our securities under existing registration statements
        and if
        we have a liability for such offers and sales made pursuant to registration
        statements that did not contain the financial statements of
        Marketing.
 
 We
        believe
        that the SEC’s position is based on their interpretation of certain provisions
        of their internal Accounting Disclosure Rules and Practices Training Material,
        Staff Accounting Bulletin No. 71 and Rule 3-13 of Regulation S-X. We do not
        believe that any of this guidance is clearly applicable to our particular
        circumstances and that, even if it were, we believe that we should be entitled
        to certain relief from compliance with such requirements. Marketing subleases
        our properties to approximately nine hundred independent, individual service
        station/convenience store operators (subtenants), most of whom were our tenants
        when Marketing was spun-off to our shareholders. Consequently, we believe
        that
        we, as the owner of these properties and the Getty brand, and based on our
        prior
        experience with Marketing’s tenants, could relet these properties to the
        existing subtenants who operate their convenience store, automotive repair
        services or other businesses at our properties or others at market rents
        although we can not accurately predict whether, when or on what terms such
        properties would be re-let or sold. Because of this particular aspect of
        our
        landlord-tenant relationship with Marketing, we do not believe that the
        inclusion of Marketing’s financial statements in our filings is necessary to
        evaluate our financial condition. Our position was included in a written
        response to the SEC. To date, the SEC has not accepted our position regarding
        the inclusion of Marketing’s financial statements in our filings. We are
        endeavoring to achieve a resolution of this issue that will be acceptable
        to the
        SEC. We can not accurately predict the consequences if we are ultimately
        unsuccessful in achieving an acceptable resolution.
 
 -38-
  We
        do not
        believe that offers or sales of our securities made pursuant to existing
        registration statements that did not or do not contain the financial statements
        of Marketing constitute, by reason of such omission, a violation of the
        Securities Act of 1933, as amended or the Exchange Act. Additionally, we
        believe
        that, if there ultimately is a determination that such offers or sales, by
        reason of such omission, resulted in a violation of those securities laws,
        we
        would not have any material liability as a consequence of any such
        determination.
 
 Item
        6. Exhibits
   Exhibit
                No.
              
              Description
                of Exhibit31(i).1
              
              Rule
                  13a-14(a) Certification of Chief Financial Officer31(i).2
              
              Rule
                  13a-14(a) Certification of Chief Executive Officer32.1
              
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. § 1350
                  (a)32.2
              
              Certifications
                  of Chief Financial Officer pursuant to 18 U.S.C. § 1350
                  (a)(a)
                These certifications are being furnished solely to accompany the
                Report
                pursuant to 18 U.S.C. § 1350, and are not being filed for purposes of
                Section 18 of the Securities Exchange Act of 1934, as amended, and
                are not
                to be incorporated by reference into any filing of the Company, whether
                made before or after the date hereof, regardless of any general
                incorporation language in such filing.
   -39-
  SIGNATURES
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  GETTY
        REALTY CORP.
 (Registrant)
   Dated:
                November 9, 2007
              
              BY:
              /s/
                Thomas J. Stirnweis(Signature)THOMAS
                J. STIRNWEISVice
                President, Treasurer andChief
                  Financial OfficerDated:
                November 9, 2007
              
              BY:
              /s/
                Leo Liebowitz(Signature)LEO
                LIEBOWITZChairman
                and Chief ExecutiveOfficer
  
 -40-