**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 **March
        31, 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**
                  (State
                    or other jurisdiction
                  of
                    incorporation or
                  organization)
                **11-3412575**
                  (I.R.S.
                    Employer
                  Identification
                    No.)
  **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 24,764,865 shares of Common Stock, par value $.01 per share,
        as
        of May 7, 2007.







GETTY
      REALTY CORP.





INDEX








Part
              I. FINANCIAL
              INFORMATION
            Page
                NumberItem
              1. Financial Statements (unaudited)Consolidated
                Balance Sheets as of March 31, 2007 and 
                December 31, 2006
            1Consolidated
              Statements of Operations for the Three Months
              ended March 31, 2007 and 2006
            2Consolidated
              Statements of Comprehensive Income for the Three
              Months ended March 31, 2007 and 2006
            2Consolidated
              Statements of Cash Flows for the Three months
              ended March 31, 2007 and 2006
            3Notes
              to Consolidated Financial
              Statements
            4Item
              2. Management's Discussion and Analysis of
              Financial Condition and Results of Operations
            12Item
              3. Quantitative and Qualitative Disclosures
              about Market Risk
            22Item
              4. Controls and
              Procedures
            24Part
              II. OTHER INFORMATIONItem
              1. Legal Proceedings
            25Item
              1A. Risk Factors
            26Item
              6. Exhibits
            26Signatures
            27










Part
      I. FINANCIAL
      INFORMATION


Item
      1. Financial Statements





GETTY
                REALTY CORP. AND SUBSIDIARIESCONSOLIDATED
                BALANCE SHEETS(in
                thousands, except share data)(unaudited)*March
                31,*
            
            
            *December
                31,*Assets:
            
            
            *2007*
            
            
            *2006*Real
                Estate:Land
            
            $
            216,904
            
            $
            180,409Buildings
                and
                improvements
            
            
            243,452
            
            
            203,149460,356
            
            
            383,558Less
                - accumulated depreciation
                and amortization
            
            
            (117,014
            )
            
            (116,089
            )Real
                estate, net
            
            
            343,342
            
            
            267,469Deferred
                rent receivable
            
            
            32,779
            
            
            32,297Cash
                and cash equivalents
            
            
            1,430
            
            
            1,195Recoveries
                from state underground storage tank funds, net
            
            
            3,929
            
            
            3,845Mortgages
                and accounts receivable, net
            
            
            2,791
            
            
            3,440Prepaid
                expenses and other assets
            
            
            8,346
            
            
            1,037Total
                assets
            
            $
            392,617
            
            $
            309,283Liabilities
                and Shareholders' Equity:Debt
            
            $
            126,686
            
            $
            45,194Environmental
                remediation costs
            
            
            17,028
            
            
            17,201Dividends
                payable
            
            
            11,290
            
            
            11,284Accounts
                payable and accrued expenses
            
            
            13,022
            
            
            10,029Total
                liabilities
            
            
            168,026
            
            
            83,708Commitments
                and contingencies
            
            
            --
            
            
            --Shareholders'
                equity:Common
                stock, par value $.01 per
                share; authorized50,000,000
                shares; issued 24,764,815 at
                March 31, 2007
              and
                24,764,765 at December 31, 2006
            
            
            248
            
            
            248Paid-in
                capital
            
            
            258,701
            
            
            258,647Dividends
                paid in excess of
                earnings
            
            
            (33,352
            )
            
            (32,499
            )Accumulated
                other comprehensive
                loss
            
            
            (1,006
            )
            
            (821
            )Total
                shareholders' equity
            
            
            224,591
            
            
            225,575Total
                liabilities and shareholders'
                equity
            
            $
            392,617
            
            $
            309,283*The
                accompanying notes are an integral part of these consolidated financial
                statements.*




-
          1 -





GETTY
      REALTY CORP. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(in
      thousands, except per share amounts)


(unaudited)





Three
                months ended March 31,2007
            
            
            2006Revenues
                from rental properties
            
            $
            17,993
            
            $
            18,067Operating
                expenses:Rental
                property expenses
            
            
            2,420
            
            
            2,484Environmental
                expenses, net
            
            
            969
            
            
            1,101General
                and administrative expenses
            
            
            1,453
            
            
            1,407Depreciation
                and amortization expense
            
            
            1,865
            
            
            1,916Total
                operating expenses
            
            
            6,707
            
            
            6,908Operating
                income
            
            
            11,286
            
            
            11,159Other
                income, net
            
            
            115
            
            
            82Interest
                expense
            
            
            (964
            )
            
            (710
            )Net
                earnings
            
            $
            10,437
            
            $
            10,531Net
                earnings per share:Basic
            
            $
            .42
            
            $
            .43Diluted
            
            $
            .42
            
            $
            .43Weighted-average
                shares outstanding:Basic
            
            
            24,765
            
            
            24,717Stock
                options and restricted stock units
            
            
            20
            
            
            28Diluted
            
            
            24,785
            
            
            24,745Dividends
                declared per share
            
            $
            .455
            
            $
            .455




GETTY
      REALTY CORP. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME


(in
      thousands)


(unaudited)





Three
                months ended March 31,2007
            
            
            2006Net
                earnings
            
            $
            10,437
            
            $
            10,531Other
                comprehensive loss:Net
                unrealized loss on interest rate swap
            
            
            (185
            )
            
            —Comprehensive
                income
            
            $
            10,252
            
            $
            10,531*The
                accompanying notes are an integral part of these consolidated financial
                statements.*  -
            2 -





GETTY
                REALTY CORP. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF CASH FLOWS(in
                thousands)(unaudited)*Three
                months ended March 31,**2007*
            
            
            *2006**Cash
                flows from operating activities:*Net
                earnings
            
            $
            10,437
            
            $
            10,531*Adjustments
                to reconcile net earnings to**net
                cash flow provided by operating activities:*Depreciation
                and amortization
                expense
            
            
            1,865
            
            
            1,916Deferred
                rental
                revenue
            
            
            (482
            )
            
            (823
            )Gain
                on dispositions of real
                estate
            
            
            (46
            )
            
            (34
            )Accretion
                expense
            
            
            167
            
            
            167Stock-based
                employee compensation expense
            
            
            54
            
            
            38*Changes
                in assets and liabilities:*Recoveries
                from state underground
                storage tank funds, net
            
            
            (6
            )
            
            9Mortgages
                and accounts receivable,
                net
            
            
            485
            
            
            (423
            )Prepaid
                expenses and other
                assets
            
            
            192
            
            
            268Environmental
                remediation
                costs
            
            
            (418
            )
            
            (316
            )Accounts
                payable and accrued
                expenses
            
            
            (1,195
            )
            
            (516
            )Net
                cash flow provided by operating activities
            
            
            11,053
            
            
            10,817*Cash
                flows from investing activities:*Property
                acquisitions and capital
                expenditures
            
            
            (80,494
            )
            
            (14,254
            )Collection
                of mortgages
                receivable, net
            
            
            164
            
            
            33Proceeds
                from dispositions of real
                estate
            
            
            148
            
            
            231Net
                cash flow used in investing activities
            
            
            (80,182
            )
            
            (13,990
            )*Cash
                flows from financing activities:*Borrowings
                under credit agreement,
                net
            
            
            81,500
            
            
            15,000Cash
                dividends
                paid
            
            
            (11,284
            )
            
            (11,009
            )Credit
                agreement origination costs
            
            
            (844
            )
            
            -Repayment
                of mortgages payable,
                net
            
            
            (8
            )
            
            (8
            )Proceeds
                from stock options
                exercised
            
            
            -
            
            
            48Net
                cash flow provided by financing activities
            
            
            69,364
            
            
            4,031Net
                increase in cash and cash equivalents
            
            
            235
            
            
            858Cash
                and cash equivalents at beginning of period
            
            
            1,195
            
            
            1,247Cash
                and cash equivalents at end of period
            
            $
            1,430
            
            $
            2,105Supplemental
                disclosures of cash flow information*Cash
                paid (refunded) during
                the year for:*Interest
            
            $
            1,579
            
            $
            565Income
                taxes, net
            
            
            174
            
            
            185Recoveries
                from state underground storage tank funds
            
            
            (511
            )
            
            (341
            )Environmental
                remediation costs
            
            
            1,366
            
            
            976*The
                accompanying notes are an integral part of these consolidated financial
                statements.*




-
          3 -


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
      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 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
      consolidated financial statements are unaudited but, in the opinion of
      management, 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 an
      institutional money market fund and federal agency discount notes.





As
      of
      March 31, 2007, the Company leased nine hundred ten of its one thousand
      ninety-eight 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). 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 rental revenue, $31,348,000 of
      the
      $32,779,000 recorded as of March 31, 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
      dealers. 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.


-
          4
          -


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 March 31,
      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.
      As of March 31, 2007 and December 31, 2006 the Company had accrued $2,812,000
      and $2,822,000, respectively, for certain of these matters which it believes
      were appropriate based on information then currently available. The ultimate
      resolution of these matters is not expected to have a material adverse effect
      on
      the Company’s financial condition or results of operations.





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.





-
          5 -


From
      October 2003 through May 2007 the Company was notified that the Company was
      made
      party to forty-eight 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 March 31, 2007 and December 31, 2006,
      the
      Company’s consolidated balance sheets included, in accounts payable and accrued
      expenses, $318,000 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 accumulated 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.


-
          6 -




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. 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 months ended March 31, 2007 ,
      the net
      changes in estimated remediation costs included in environmental expenses in
      the
      Company’s consolidated statements of operations were $431,000 as compared to
      $328,000 for the comparable prior year period, which amounts were net of changes
      in estimated recoveries from state underground storage tank (“UST”) remediation
      funds. 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.





Of
      the
      nine hundred ten 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 nine properties that have not
      achieved Closure as of March 31, 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.





-
          7 -


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 March 31, 2007, the Company had remediation action
      plans in place for two hundred seventy-eight (92%) of the three hundred one
      properties for which it retained environmental responsibility and has not
      received a “no further action” letter and the remaining twenty-three properties
      (8%) remain in the assessment phase.





As
      of
      March 31, 2007, December 31, 2006 and December 31, 2005, the Company had accrued
      $17,028,000, $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 March 31, 2007, December 31, 2006 and December 31, 2005, the
      Company had also recorded $3,929,000, $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, $167,000 of net accretion expense is included in environmental
      expenses for each of the three months ended March 31, 2007 and 2006.





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.


-
          8 -


4.  Shareholders' Equity:





A
      summary
      of the changes in shareholders' equity for the three months ended March 31,
      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
            
            
            
            
            
            
            
            
            
            
            
            10,437
            
            
            
            
            
            10,437Dividends
            
            
            
            
            
            
            
            
            
            
            
            (11,290
            )
            
            
            
            
            (11,290
            )Stock-based
                employee
              compensation
                expense
            
            
            
            
            
            
            
            
            54
            
            
            
            
            
            
            
            
            54Net
                unrealized loss on
              interest
                rate swap
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (185
            )
            
            (185
            )Stock
                issued
            
            
            50
            
            
            -
            
            
            -
            
            
            
            
            
            
            
            
            -Balance,
                March 31,2007
            
            
            24,764,815
            
            $
            248
            
            $
            258,701
            
            $
            (33,352
            )
            $
            (1,006
            )
            $
            224,591








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 March 31, 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 ranging from 0.0%
      to
      0.25% or a LIBOR rate plus a margin ranging from 1.0% to 1.5%. The applicable
      margin is based on the Company's leverage ratio, as defined in the Credit
      Agreement.





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 and 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.




-
          9 -





6.
      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 Trustreet
      Properties, Inc. (now known as GE Capital Solutions, Franchise Finance)
      (“GE-FF”) and its various subsidiaries for cash with funds drawn under its
      Credit Agreement. Effective April 23, 2007, the Company acquired five additional
      properties from GE-FF 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 March 31, 2007 is preliminary and subject to change.
      The purchase price has been allocated between assets, liabilities and intangible
      assets based on the initial estimates of fair value. These allocations exclude
      the properties that were acquired in April 2007, are preliminary and 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
      latter part 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.





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, in-place leases and tenant relationships) and assumed
      liabilities.


-
          10 -


Based
      on
      these estimates, the Company allocated the purchase price to the applicable
      assets and liabilities as follows (in thousands):




Consideration:Purchase
                price to GE-FF
            
            $
            78,274Allocated
                transaction costs
            
            
            1,061Total
                consideration
            
            $
            79,335Assets
              Acquired:Real
                estate investment properties
            
            $
            76,681Other
                assets:Above
                market leases
            
            
            3,706Leases
                in place and tenant relationships
            
            
            2,951Total
            
            
            83,338Liabilities
              Assumed:Below
                market leases and other liabilities
            
            
            4,003Net
                assets acquired
            
            $
            79,335




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 GE-FF. The unaudited
      pro
      forma condensed consolidated statements of earnings assume 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 the straight-lining of scheduled rent increases; (b) the amortization
      of
      the intangible assets relating to above market leases and liabilities relating
      to below market leases over the remaining lease terms; (c) adjustments to
      depreciate real estate assets over the depreciable lives and (d) the
      amortization of identifiable leases in place intangibles and tenant relationship
      intangibles over the remaining lease terms. The following 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.
      The unaudited pro forma condensed financial information is not indicative of
      the
      results of operations that would have been achieved had the acquisition from
      GE-FF reflected herein been consummated on the dates indicated or that will
      be
      achieved in the future.




Three
                Months
            
            
            Three
                MonthsEnded
                March 31,
            
            
            Ended
                March 31,2007
            
            
            2006Revenues
            
            $
            20,215
            
            $
            20,339Net
              income
            
            $
            10,281
            
            $
            10,696Net
              earnings per share:Basic
            
            $
            0.42
            
            $
            0.43Diluted
            
            $
            0.41
            
            $
            0.43




-
          11 -


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 the unaudited consolidated
      financial statements and related notes 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 Trustreet Properties, Inc. (now known as GE
      Capital Solutions, Franchise Finance) (“GE-FF”) and its various subsidiaries for
      cash with funds drawn under our credit facility. On April 23, 2007 we acquired
      five additional properties from GE-FF. 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
      GE-FF, see note 6 to our unaudited consolidated financial statements included
      in
      this Quarterly Report on Form 10-Q.





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 taxed 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.





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 March 31,
      2007, we leased nine hundred ten of our one thousand ninety-eight properties
      on
      a long-term basis under a 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.





-
          12 -


A
      substantial portion of our revenues (86% for the three months ended March 31,
      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 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
      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. 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 would be materially adversely
      affected. Although Marketing is wholly owned by a subsidiary of Lukoil, Lukoil
      is not a guarantor of the Marketing Leases, and no assurance can be given that
      Lukoil will provide additional capital to, or otherwise cause, Marketing to
      fulfill any of its monetary obligations under the Marketing Leases.





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 receive financial information from Marketing that
      would indicate the deterioration.





Certain
      financial 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.





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. 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 .





Based
      on
      our review of the recent financial statements and other financial data Marketing
      has provided us to date; we have observed a significant decline in their
      financial results from the prior periods presented. 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
      they
      will continue to do so.





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.





-
          13 -


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 our prior
      experience with Marketing’s tenants, could relet these properties to the
      existing subtenants or others at market rents. 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.





-
          14 -


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)
      on
      our recognition of revenues from rental properties, which 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.
      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., prior to 2001. Income taxes
      did
      not have a significant impact on our earnings for the periods presented, and
      accordingly, do not appear as a separate item in our statement of operations
      or
      reconciliation of AFFO from net earnings. 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 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 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.





A
      reconciliation of net earnings to FFO and AFFO for the three months ended March
      31, 2007 and 2006 is as follows (in thousands, except per share amounts):





*Three
                months ended*
              *March
                31,**2007*
            
            
            *2006*Net
                earnings
            
            $
            10,437
            
            $
            10,531Depreciation
                and amortization of real estate assets
            
            
            1,865
            
            
            1,916Gains
                on dispositions of real estate
            
            
            (46
            )
            
            (34
            )Funds
                from operations
            
            
            12,256
            
            
            12,413Deferred
                rental revenue (straight-line rent)
            
            
            (482
            )
            
            (823
            )Adjusted
                funds from operations
            
            $
            11,774
            
            $
            11,590Diluted
                per share amounts:Earnings
                per share
            
            $
            .42
            
            $
            .43Funds
                from operations per share
            
            $
            .49
            
            $
            .50Adjusted
                funds from operations per share
            
            $
            .48
            
            $
            .47Diluted
                weighted average shares outstanding
            
            
            24,785
            
            
            24,745  -
            15 -
  Results
      of
      operations


*Three
      months ended March 31, 2007 compared to the three months ended March 31,
      2006*





Revenues
      from rental properties were $18.0 million for the three months ended March
      31,
      2007 as compared to $18.1 million for the three months ended March 31, 2006.
      We
      received approximately $15.1 million for both the three months ended March
      31,
      2007 and the three months ended March 31, 2006 from properties leased to
      Marketing under the Marketing Leases. We also received rent of $2.4 million
      in
      the three months ended March 31, 2007 and $2.2 million in the three months
      ended
      March 31, 2006 from other tenants. The increase in rent received was primarily
      due to rent from properties acquired in 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 $0.5 million for the three months ended March 31, 2007 as
      compared to $0.8 million for the three months ended March 31, 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.





Rental
      property expenses, which are primarily comprised of rent expense and real estate
      and other state and local taxes, were $2.4 million for the three months ended
      March 31, 2007 as compared to $2.5 million recorded for the three months ended
      March 31, 2006.





Environmental
      expenses, net for the three months ended March 31, 2007 were $1.0 million as
      compared to $1.1 million for the three months ended March 31, 2006. The decrease
      was primarily due to a $0.2 million decrease in environmental related litigation
      expenses as compared to the prior year period partially offset by a $0.1 million
      increase in change in estimated environmental costs, net of estimated
      recoveries.





General
      and administrative expenses for the three months ended March 31, 2007 were
      $1.5
      million as compared to $1.4 million recorded for the three months ended March
      31, 2006.





Depreciation
      and amortization expense was $1.9 million for both the three months ended March
      31, 2007 and the three months ended March 31, 2006.





As
      a
      result, total operating expenses decreased by approximately $0.2 million for
      the
      three months ended March 31, 2007, as compared to the three months ended March
      31, 2006.





Other
      income, net was $0.1 million for both the three months ended March 31, 2007
      and
      the three months ended March 31, 2006





Interest
      expense was $1.0 million for the three months ended March 31, 2007 as compared
      to $0.7 million for the three months ended March 31, 2006. The increase was
      primarily due to increased borrowings used to finance the acquisition of
      properties in February 2006. Interest expense also increased due to higher
      interest rates which averaged 6.7% for the three months ended March 31, 2007
      as
      compared to 5.8% for the three months ended March 31, 2006.





-
          16 -




As
      a
      result, net earnings were $10.4 million for the three months ended March 31,
      2007, which was comparable to the $10.5 million for the prior year period.
      For
      the same period, FFO decreased to $12.3 million as compared to $12.4 million
      for
      prior year period and AFFO increased by $0.2 million, to $11.8 million. The
      increase in AFFO for the quarter was primarily due to the changes in net
      earnings described above but exclude the $0.3 million decrease in deferred
      rental revenue (which is included in net earnings and FFO but is excluded from
      AFFO) recorded for the three months ended March 31, 2007 as compared to the
      three months ended March 31, 2006.




Diluted
      earnings per share for the three months ended March 31, 2007 was $0.42 per
      share, a decrease of $0.01 per share as compared to the three months ended
      March
      31, 2006. Diluted FFO per share for the three months ended March 31, 2007
      was$0.49 per share, a
      decrease of $0.01 per share, as compared to the three months ended March 31,
      2006. Diluted AFFO per share for the three months ended March 31, 2007 was
      $0.48
      per share, an increase of $0.01 per share as compared to the three months ended
      March 31, 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 ranging from 0.0%
      to
      0.25% or a LIBOR rate plus a margin ranging from 1.0% to 1.5%. The applicable
      margin is based on our leverage ratio, as defined in the Credit Agreement.





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.





-
          17 -


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 March 31, 2007, $45.0 million
      of our LIBOR based borrowings under the Credit Agreement bear interest at an
      effective rate of 6.44%.





On
      March
      31, 2007, we acquired fifty-nine convenience store and retail motor fuel
      properties in ten states for approximately $79.3 million from GE-FF for cash
      with funds drawn under our Credit Agreement. Total borrowings outstanding under
      the Credit Agreement at March 31, 2007 were $126.5 million, bearing interest
      at
      an average effective rate of 6.40% per annum. Total borrowings increased to
      $132.5 million as of May 1, 2007 primarily due to additional borrowings used
      to
      pay $11.2 million of dividends that were accrued as of March 31, 2007 and paid
      in April 2007 and $5.2 million to acquire five additional properties in April
      2007, net of repayments from positive cash flows provided by rental operations.
      Accordingly, we had $42.5 million available under the terms of the Credit
      Agreement as of May 1, 2007 or $167.5 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 taxed 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 $11.3 million for the three months ended
      March 31, 2007 and $11.0 million for the prior year period. We presently intend
      to pay common stock dividends of $0.455 per share each quarter ($1.82 per share
      on an annual basis), and commenced doing so with the quarterly dividend declared
      in February 2006.





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.





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.





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          18 -


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 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,
      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. 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
      March 31, 2007, we had remediation action plans in place for two hundred
      seventy-eight (92%) of the three hundred one properties for which we retained
      environmental responsibility and the remaining twenty-three properties (8%)
      remain in the assessment phase. As of March 31, 2007, we had accrued $17.0
      million as management’s best estimate of the fair value of reasonably estimable
      environmental remediation costs. As of March 31, 2007 we had also recorded
      $3.9
      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 $1.4 million and $0.5 million, respectively, for the three
      month
      period ended March 31, 2007.





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          19 -


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 $6.0 million.
      Accordingly, the environmental accrual as of March 31, 2007 was increased by
      $2.3 million, net of assumed recoveries and before inflation and present value
      discount adjustments. The resulting net environmental accrual as of March 31,
      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 $2.2 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 March 31, 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 three months ended March 31, 2007
      would not have changed significantly if these changes in the assumptions were
      made effective December 31, 2006.





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 three months ended March 31, 2007 and 2006, the
      aggregate of the net change in estimated remediation costs included in our
      consolidated statement of operations amounted to $0.4 million and $0.3 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.





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          20 -


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” 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 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 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 GE-FF during the later portion
      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 GE-FF.





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,
      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;
      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 taxed 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 GE-FF 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.





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          21 -


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 ranging from 0.0% to 0.25% or a LIBOR rate plus a margin ranging from
      1.0% to 1.5%. The applicable margin is based on our leverage ratio, as defined
      in the Credit Agreement. At March 31, 2007, we had borrowings outstanding of
      $126.5 million under our Credit Agreement bearing interest at an average rate
      of
      6.375% per annum (or an average effective rate of 6.4% 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 March 31, 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 March 31, 2007, $45.0 million of our LIBOR based borrowings
      under the Credit Agreement bear interest at an effective rate of 6.44%. 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 March 31, 2007, our borrowings exceeded the notional amount of the
      interest rate swap by $81.5 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.





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          22 -


We
      entered
      into the $45.0 million notional five year interest rate swap agreement
      designated and qualifying as a cash flow hedge to reduce our exposure to the
      variability in future cash flows attributable to changes in the LIBOR rate.
      Our
      primary objective when undertaking hedging transactions and derivative positions
      is to reduce our variable interest rate risk by effectively fixing a portion
      of
      the interest rate for existing debt and anticipated refinancing transactions.
      This in turn, reduces the risks that the variability of cash flows imposes
      on
      variable rate debt. Our strategy protects us against future increases in
      interest rates. 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 March 31, 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 $407,500. This amount
      is the effect of a hypothetical interest rate change on the portion of our
      average outstanding borrowings of $81.5 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 March 31, 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 an
      institutional money market fund and short-term federal agency discount
      notes.


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          23 -


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.




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 March 31,
      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.


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          24 -


PART
      II. OTHER INFORMATION





Item
      1.
      Legal Proceedings





From
      January 2007 through May 2007 we have been made party to thirteen
      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.
      Accordingly, our ultimate legal and financial liability, if any, cannot be
      estimated with any certainty at this time.




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.


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          25 -


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. There has been no material change
      in such factors since December 31, 2006.





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.











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          26 -


S IGNATURES








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:
              May 10, 2007
            
            BY: /s/
              Thomas J. Stirnweis(Signature)THOMAS
                J. STIRNWEISVice
                President, Treasurer andChief
                Financial OfficerDated:
              May 10, 2007
            
            BY: /s/
              Leo Liebowitz(Signature)LEO
                LIEBOWITZChairman
                and Chief ExecutiveOfficer