<PAGE>

                                                                      EXHIBIT 13

                       GETTY REALTY CORP. AND SUBSIDIARIES

                             SELECTED FINANCIAL DATA
       (in thousands, except per share amounts and number of properties)

<TABLE>
<CAPTION>
                                                      For the years ended           For the eleven   For the year
                                                         December 31,                months ended       ended
                                             -----------------------------------      December 31,   January 31,
                                               2003         2002          2001          2000 (a)        2000
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>          <C>              <C>
OPERATING DATA:
Revenues from rental properties              $  66,601    $  67,157    $  68,322       $  53,916     $   58,889
Other income, net                                1,705        2,488        2,153             378          4,970
---------------------------------------------------------------------------------------------------------------
Total revenues                                  68,306       69,645       70,475          54,294         63,859
Earnings before income taxes                    36,887       36,163       32,083          18,950         26,105
(Benefit) provision for income taxes                --           --      (36,648)(b)       7,875         11,091
---------------------------------------------------------------------------------------------------------------
Net earnings                                    36,887       36,163       68,731          11,075         15,014
Diluted earnings per common share                 1.49         1.44         3.18             .47            .73
Diluted weighted average common
   shares outstanding                           23,082       21,446       16,244          12,818         13,565
Cash dividends declared per share:
   Preferred                                     1.159        1.866        5.975 (c)       1.775          1.775
   Common                                        1.675         1.65        5.275 (c)         .60            .40

FUNDS FROM OPERATIONS (d):
Earnings before income taxes                    36,887       36,163       32,083          18,950         26,105
Preferred stock dividends                       (2,538)      (5,350)      (5,088)(e)      (5,098)        (5,128)
---------------------------------------------------------------------------------------------------------------
Earnings before income taxes
   applicable to common shareholders            34,349       30,813       26,995          13,852         20,977
Depreciation and amortization                    8,411        9,016        9,281           9,196         10,425
Gains on sales of real estate                     (928)      (1,153)        (990)         (1,106)        (3,255)
Cumulative effect of accounting change             550           --           --              --             --
---------------------------------------------------------------------------------------------------------------
Funds from operations                           42,382       38,676       35,286          21,942         28,147
Straight-line rent                              (5,537)      (6,728)      (8,388)             --             --
---------------------------------------------------------------------------------------------------------------
Adjusted funds from operations                  36,845       31,948       26,898          21,942         28,147
BALANCE SHEET DATA
   (AT END OF PERIOD):
Real estate before accumulated
   depreciation                                318,222      308,054      311,352         313,037        316,002
Total assets                                   272,003      282,491      288,188         255,725        260,752
Total debt                                         844          923          997          49,969         43,993
Shareholders' equity                           228,025      233,426      237,773         128,099        141,811
===============================================================================================================
NUMBER OF PROPERTIES:
Owned                                              772          739          744             753            757
Leased                                             256          310          335             344            361
---------------------------------------------------------------------------------------------------------------
Total properties                                 1,028        1,049        1,079           1,097          1,118
</TABLE>

(a)      The Company's fiscal year end changed to December 31 from January 31,
         effective December 31, 2000.

(b)      Represents a tax benefit due to the reversal of previously accrued
         income taxes that the Company would no longer be required to pay as a
         REIT.

(c)      Includes $4.20 and $4.15 "earnings and profits" cash distribution paid
         on August 2, 2001 to preferred and common shareholders, respectively.

(d)      Funds from operations ("FFO") is generally considered to be an
         appropriate supplemental non-GAAP measure of the performance of real
         estate investment trusts. FFO is defined by the National Association of
         Real Estate Investment Trusts as net earnings applicable to common
         shareholders before depreciation and amortization, gains or losses on
         sales of real estate, discontinued operations, extraordinary items, and
         cumulative effect of accounting change. The provision (benefit) for
         income taxes has been excluded in calculating FFO prior to 2002 in
         order make the comparison to the earlier periods more meaningful.
         Adjusted funds from operations ("AFFO") is a supplemental non-GAAP
         measure that we define as FFO less straight-line rent. AFFO is a
         meaningful supplemental measure of our performance due to the
         significant impact of straight-line rent on our net earnings and FFO.
         Neither FFO nor AFFO represent cash generated from operating activities
         in accordance with generally accepted accounting principles and
         therefore should not be considered an alternative for net earnings or
         as a measure of liquidity.

(e)      Excludes $4.20 "earnings and profits" cash distribution paid on August
         2, 2001 to preferred shareholders.

                                        6

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

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 lease 958 of our 1,028 properties on a long-term net basis under a
master lease (the "Master Lease") 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. Our
financial results are materially dependent upon the ability of Marketing to meet
its obligations under the Master Lease. Marketing has made all required monthly
rental payments under the Master Lease when due.

         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 90% of our taxable income to shareholders each year.
Commencing with the dividend declared in September 2001, we increased our
quarterly common stock dividend from $0.15 to $0.4125 per share. In order to
initially qualify for REIT status, among other things, we paid a $64.1 million
distribution to shareholders in August 2001, representing our accumulated
earnings and profits from the years we operated as a taxable corporation. We
funded this distribution with a portion of the $131.5 million net proceeds of a
common stock offering of 8.9 million shares and used a part of the balance to
repay substantially all of our mortgage debt and outstanding lines of credit.
Also during 2001, we recorded a nonrecurring tax benefit of $36.6 million to
reverse previously accrued income tax liabilities that we were no longer
required to pay as a REIT.

         In August 2003, we called for redemption of all our outstanding
preferred stock. Prior to the September 24, 2003 redemption date, shareholders
with 98% of the preferred stock exercised their right to convert their shares of
preferred stock into 3.2 million shares of common stock. The remaining shares of
outstanding preferred stock were redeemed for an aggregate amount, including
accrued dividends through the call date, of approximately $1.2 million.

         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. In
addition to measurements defined by generally accepted accounting principles
("GAAP"), our management also focuses on funds from operations ("FFO") and
adjusted funds from operations ("AFFO") to measure our performance. FFO is
generally considered to be an appropriate supplemental non-GAAP measure of
performance of REITs. FFO is defined by the National Association of Real Estate
Investment Trusts as net earnings applicable to common shareholders before
depreciation and amortization, gains or losses on sales of real estate,
discontinued operations, extraordinary items and cumulative effect of accounting
change. The provision (benefit) for income taxes has been excluded in
calculating our FFO prior to 2002 in order to make comparisons to earlier
periods more meaningful. In our case, however, net earnings and FFO include the
significant impact of straight-line rent on our recognition of revenues from
rental properties, which largely results from 2% annual rental increases
scheduled under the Master Lease. As a result, management pays particular
attention to AFFO, a supplemental non-GAAP performance measure that we define as
FFO less straight-line rent. In our view, AFFO more accurately reflects the
economic impact of scheduled rent increases under the Master Lease, and
consequently is a significant factor in our analysis of our operating and
financial performance. Neither FFO nor AFFO represent cash generated from
operating activities in accordance with GAAP and therefore should not be
considered an alternative for net earnings or as a measure of liquidity.

RESULTS OF OPERATIONS

Year ended December 31, 2003 compared to year ended December 31, 2002

Revenues from rental properties for the year ended December 31, 2003 ("fiscal
2003") and 2002 ("fiscal 2002") were $66.6 million and $67.2 million,
respectively. Approximately $58.7 million and $58.1 million of these rentals
received in fiscal 2003 and fiscal 2002, respectively, were from properties
leased to Marketing under the Master Lease. The increase in rent received was
primarily due to rent escalations and was partially offset by the effect of
lease terminations and property dispositions. In addition, revenues from rental
properties include $5.5 million and $6.7 million of deferred rental revenue
recognized in fiscal 2003 and fiscal 2002, respectively, as required by GAAP,
related to the 2% future annual rent increases due from Marketing under the
terms of the Master Lease. The aggregate minimum rent due over the initial
15-year term of the Master Lease is recognized on a straight-line basis rather
than when due.

                                        7

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

         Other income was $1.7 million for fiscal 2003 as compared with $2.5
million for fiscal 2002. The $0.8 million decrease was due to lower gains on
dispositions of properties, investment income and other items.

         Rental property expenses, which are principally comprised of rent
expense and real estate and other state and local taxes, were $10.7 million for
fiscal 2003, a decrease of $1.3 million from fiscal 2002. The decrease was
primarily due to a reduction in rent expense of $1.1 million as a result of the
exercise of 43 lease purchase options, including the acquisition of 41 leased
properties in May 2003 for an aggregate purchase price of approximately $13.0
million.

         Environmental expenses for fiscal 2003 were $7.6 million, a decrease of
$1.1 million from fiscal 2002. Environmental expenses for fiscal 2003 include
$4.2 million for the net change in estimated environmental costs, as compared to
$6.7 million for the prior period. The decrease in the net change in estimated
environmental costs from fiscal 2002 to fiscal 2003 of $2.5 million was due to a
required change in the method used to account for estimated environmental costs
and estimated recoveries from underground storage tank funds beginning in fiscal
2003, partially offset by related accretion expense of $1.3 million recorded in
the current period. Effective January 1, 2003, environmental liabilities and
related recoveries are measured based on their expected future cash flows which
have been adjusted for inflation and discounted to present value (see
"Environmental Matters" and "New Accounting Pronouncements" below). The net
change in estimated environmental costs for fiscal 2003 of $4.2 million is
primarily due to reductions in recovery rates used to estimate recoveries from
underground storage tank remediation funds based on recent experience with the
funds, partially offset by reductions in estimated environmental expenses.

         General and administrative expenses for fiscal 2003 were $4.1 million
compared to $3.7 million for fiscal 2002. The increase was primarily due to
increased insurance expense, net of credits recorded due to reductions in
insurance loss reserves. A credit of $0.9 million was recorded in fiscal 2002
and a lesser credit of $0.5 was recorded in fiscal 2003. The insurance loss
reserves were established under our self funded insurance program that was
terminated in 1997.

         Depreciation and amortization for fiscal 2003 was $8.4 million, a
decrease of $0.6 million from fiscal 2002, as a result of certain assets
becoming fully depreciated and dispositions of properties.

         The cumulative effect of accounting change recorded for fiscal 2003 is
due to the adoption of Statement of Financial Accounting Standards No. ("SFAS")
143 effective January 1, 2003. Accrued environmental remediation costs and the
related recoveries from state underground storage tank funds were adjusted to
their estimated fair value resulting in a one-time cumulative effect of change
in accounting charge of $0.6 million (see "Environmental Matters" and "New
Accounting Pronouncements" below).

         As a result, our net earnings were $36.9 million in fiscal 2003, an
increase of 2.0% over fiscal 2002, while FFO increased 9.6% to $42.4 million in
fiscal 2003 and AFFO (defined as FFO minus straight-line rent) increased 15.3%
to $36.8 million during the period. AFFO increased more than FFO on both a
dollar and percentage basis due to the $1.2 million reduction in deferred rental
revenues recorded in fiscal 2003 compared to fiscal 2002, which are included in
FFO but excluded from AFFO. The increases in FFO and AFFO were partially due to
the reduction in preferred stock dividends as a result of the conversion and
redemption of our outstanding preferred stock in the quarter ended September 30,
2003. Diluted earnings per share in fiscal 2003 increased 3.5% to $1.49 compared
to $1.44 in fiscal 2002, while FFO per share and AFFO per share increased 2.2%
and 5.3% to $1.82 and $1.59, respectively. The increases in net earnings, FFO
and AFFO per share were partly offset by an increase in the weighted number of
common shares outstanding in calculating per share amounts, principally due to
the conversion of preferred shares into 3.2 million common shares.

Year ended December 31, 2002 compared to year ended December 31, 2001

Revenues from rental properties for fiscal 2002 and the year ended December 31,
2001 ("fiscal 2001") were $67.2 million and $68.3 million, respectively.
Approximately $58.1 million and $57.5 million of these rentals received in
fiscal 2002 and in fiscal 2001, respectively, were from properties leased to
Marketing under the Master Lease. The increase in rent received was primarily
due to rent escalations and was partially offset by the effect of lease
terminations and property dispositions. In addition, revenues from rental
properties include $6.7 million and $8.4 million of deferred rental revenue
recognized in fiscal 2002 and fiscal 2001, respectively.

         Other income was $2.5 million for fiscal 2002 as compared with $2.2
million for fiscal 2001. The $0.3 million increase was due, in part, to higher
gains on dispositions of properties of $0.2 million.

                                        8

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

         Rental property expenses were $12.0 million for fiscal 2002, an
increase of $0.5 million from fiscal 2001. The increase was primarily due to
additional state and local taxes for certain states that do not conform to the
federal REIT provisions, partially offset by a decrease in rent expense due to a
reduction in the number of properties leased.

         Environmental expenses for fiscal 2002 were $8.7 million, a decrease of
$2.1 million from fiscal 2001. Fiscal 2002 environmental expenses include a net
change in estimated remediation costs of $6.6 million, a $2.5 million decrease
from the prior year. The decrease in the net change in estimated environmental
costs was principally due to lower changes in estimated remediation costs,
partially offset by a reduction in expected recoveries from underground storage
tank funds related to both past and future environmental spending. The decrease
in net change in estimated remediation costs was partially offset by an increase
of amounts accrued for environmental litigation of $0.6 million.

         General and administrative expenses for fiscal 2002 were $3.7 million,
a decrease of $1.3 million from fiscal 2001. The decrease was primarily due to a
$0.9 million net reduction in insurance loss reserves, partially offset by
acquisition related expenses recognized in fiscal 2002. The decrease in general
and administrative expenses was also attributable to nonrecurring expenses
relating to the amendment of our charter and debt repayment incurred in fiscal
2001. Increased employee related expenses incurred in fiscal 2002 were
substantially offset by reduced service fees paid to Marketing. Included in
general and administrative expenses for fiscal 2001 is $226,000 of net fees paid
to Marketing for certain administrative and technical services performed by
Marketing under a services agreement. Substantially all of these services were
discontinued as of April 1, 2001.

         Depreciation and amortization for fiscal 2002 was $9.0 million, a
decrease of $0.3 million from fiscal 2001, as a result of certain assets
becoming fully depreciated and dispositions of properties.

         Interest expense was $132,000 for fiscal 2002, a decrease of $1.8
million from fiscal 2001, due to the repayment of substantially all of our
mortgage debt and outstanding lines of credit during the third quarter of fiscal
2001.

         As a result, our net earnings before income taxes were $36.2 million in
fiscal 2002, an increase of 12.7% over fiscal 2001, while FFO increased 9.6% to
$38.7 million in fiscal 2002 and AFFO increased 18.8% to $31.9 million during
the period. AFFO increased more than FFO on both a dollar and percentage basis
due to the $1.7 million reduction in deferred rental revenues recorded in fiscal
2002 compared to fiscal 2001, which are included in FFO but excluded from AFFO.
Diluted earnings per share in fiscal 2002 decreased 54.7% to $1.44 compared to
$3.18 in fiscal 2001 principally due to the impact of the $36.6 million tax
benefit recorded in 2001, while FFO per share and AFFO per share decreased 14.0%
and 7.9% to $1.78 and $1.51, respectively, due to an increase in the weighted
number of common shares outstanding in calculating per share amounts resulting
from the August 2001 common stock offering of 8.9 million shares.

Year ended December 31, 2001 compared to year ended December 31, 2000

On December 12, 2000, our Board of Directors approved a change in our fiscal
year end to December 31 from January 31. The change resulted in an eleven-month
accounting period ending December 31, 2000. In order to make the following
discussion of our results of operations more meaningful, the results of
operations for fiscal 2001 have been compared to the recast results of
operations for the twelve months ended December 31, 2000 ("recast calendar
2000").

         Revenues from rental properties for fiscal 2001 and recast calendar
2000 were $68.3 million and $58.8 million, respectively. Approximately $57.5
million and $56.2 million of these rentals received in fiscal 2001 and recast
calendar 2000, respectively, were from properties leased to Marketing under the
Master Lease. In addition, revenues from rental properties included $8.4 million
of deferred rental revenue recognized in fiscal 2001.

         Other income was $2.2 million for fiscal 2001 as compared with $0.3
million for recast calendar 2000. The $1.9 million increase was due, in part, to
higher interest income of $0.4 million from short-term investments resulting
from investing the balance of the net proceeds of the common stock offering. The
increase was also due to a severance charge of $0.9 million and expenses related
to the amendment of the Master Lease of $0.6 million, both of which were
recorded in recast calendar 2000.

         Rental property expenses were $11.4 million in fiscal 2001, a decrease
of $0.6 million from recast calendar 2000 due to a reduction in the number of
properties leased and an increase in refunds received for contested real estate
taxes.

         Environmental expenses for fiscal 2001 were $10.8 million, an increase
of $1.6 million from recast calendar 2000. Fiscal 2001 environmental expenses
include a change in estimated remediation costs of $9.2 million, a $2.4 million
increase from recast calendar 2000. The change in estimated remediation costs
for fiscal 2001 was primarily due to the completion of assessment phases for a
substantial number of properties. In addition, certain states adopted more
stringent

                                        9

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

environmental regulations resulting in increased remediation costs. The fiscal
2001 increase in environmental expenses was also due to increased professional
fees of $0.8 million. These increases were partially offset by a decrease in
environmental litigation expenses of $1.6 million compared to recast calendar
2000.

         General and administrative expenses for fiscal 2001 were $4.9 million,
an increase of $1.3 million from recast calendar 2000. The increase is
attributable to nonrecurring expenses relating to the amendment of our charter
and debt repayment, as well as higher legal fees and increased employee related
expenses, partially offset by reduced service fees paid to Marketing. Included
in general and administrative expenses for fiscal 2001 and recast calendar 2000
are $226,000 and $635,000, respectively, of net fees paid to Marketing for
certain administrative and technical services performed by Marketing under a
services agreement. Substantially all of these services were discontinued as of
April 1, 2001.

         Depreciation and amortization for fiscal 2001 was $9.3 million, a
decrease of $0.8 million from recast calendar 2000, as a result of certain
assets becoming fully depreciated and dispositions of properties.

         Interest expense was $1.9 million for fiscal 2001, a decrease of $1.7
million from recast calendar 2000, due to lower average borrowings outstanding
and the repayment of substantially all of our mortgage debt and outstanding
lines of credit during the third quarter of fiscal 2001.

         As a result, our net earnings before income taxes were $32.1 million in
fiscal 2001, an increase of 55.5% over recast fiscal 2000, while FFO increased
44.2% to $35.3 million in fiscal 2001 and AFFO increased 10.0% to $26.9 million
during the period. FFO increased more than AFFO on both a dollar and percentage
basis due to deferred rental revenues recorded beginning in fiscal 2001, which
are included in FFO but excluded from AFFO. Diluted earnings per share in fiscal
2001 increased 500.0% to $3.18 compared to $0.53 in recast fiscal 2000
principally due to the impact of the $36.6 million tax benefit recorded in
fiscal 2001. In fiscal 2001, FFO per share increased 12.5% and AFFO per share
decreased 10.9% to $2.07 and $1.64, respectively. Inclusion of the deferred
rental revenues caused FFO per share to increase in fiscal 2001 compared with
recast fiscal 2000 despite an increase in the weighted number of common shares
outstanding in calculating per share amounts due to the August 2001 common
stock offering of 8.9 million shares while AFFO (which does not include the
deferred rental revenues) decreased on a per share basis.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are available cash and equivalents, the cash
flows from our business and a short-term uncommitted line of credit with a bank.
Management believes that dividend payments and cash requirements for our
business, including environmental remediation expenditures, capital expenditures
and debt service, can be met by cash flows from operations, available cash and
equivalents and the credit line. As of December 31, 2003, we had a line of
credit amounting to $25.0 million, of which $0.3 million was utilized for
outstanding letters of credit. Borrowings under the line of credit are unsecured
and bear interest at the prime rate or, at our option, LIBOR plus 1.25%. The
line of credit is subject to annual renewal in June 2004 at the discretion of
the bank.

         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 90% 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. Dividends declared
for our common and preferred shareholders aggregated $41.2 million, $40.7
million and $90.7 million for 2003, 2002 and 2001, respectively.

         We presently intend to pay common stock dividends of $0.4250 per
quarter ($1.70 per share on an annual basis), and commenced doing so with the
quarterly dividend declared in the quarter ended September 30, 2003. We declared
common stock dividends of $0.4250 per share for the last two quarters of 2003.
Common stock dividends were $0.4125 per share for the first two quarters of
2003, for the four quarters of 2002 and for the last two quarters of 2001. For
the first two quarters of 2001, common stock dividends were $0.15 per share.

         In August 2003, we notified holders of Series A Participating
Convertible Redeemable Preferred Stock that the preferred stock would be
redeemed on September 24, 2003 for $25.00 per share plus a mandatory redemption
dividend of $0.27118 per share. Prior to the redemption date, shareholders with
98% of the preferred stock exercised their right to convert 2,816,919 shares of
preferred stock into 3,186,355 shares of common stock at the conversion rate of
1.1312 shares of common stock for each share of preferred stock so converted,
and received cash in lieu of fractional shares of common stock. The remaining
48,849 shares of the outstanding preferred stock were redeemed for

                                       10

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

approximately $1.2 million which included accrued dividends through the call
date. The preferred stock ceased accruing dividends and trading on the NYSE in
September 2003. In addition to the mandatory redemption dividend, we declared
quarterly cash preferred stock dividends of $0.44375 per share for the first two
quarters of 2003, for the first three quarters of 2002 and for the four quarters
of 2001. The preferred stock dividend for the fourth quarter of 2002 was
$0.53523 per share.

         In order to initially qualify for REIT status, we were required to make
a distribution to shareholders in an amount at least equal to our accumulated
earnings and profits from the years we operated as a taxable corporation. A
special one-time earnings and profits distribution was paid in August 2001 to
holders of Getty common stock and preferred stock. Common shareholders received
$4.15 per share and preferred shareholders received $4.20 per share.
Determination of accumulated earnings and profits for federal income tax
purposes is extremely complex. Should the Internal Revenue Service successfully
assert that our accumulated earnings and profits were greater than the amount
distributed in 2001, we may fail to qualify as a REIT; however, we may avoid
losing our REIT status by paying a deficiency dividend to eliminate any
remaining accumulated earnings and profits. We may have to borrow money or sell
assets to pay such a deficiency dividend.

         Capital expenditures, including acquisitions, for 2003, 2002 and 2001
amounted to $14.3 million, $2.8 million and $0.5 million, respectively. On May
1, 2003, we completed the acquisition of 41 retail motor fuel and convenience
store properties that we had been leasing for the past twelve years. The
aggregate purchase price for these properties was approximately $13.0 million in
cash, excluding transaction costs. Forty of the locations are subleased to
Marketing under the Master Lease through at least 2015. Annual rent expense of
approximately $1.3 million, and future rent escalations scheduled through 2056,
will be eliminated as a result of the acquisition. Since the seller has agreed
to indemnify us for historical environmental costs, and the seller's indemnity
is supported by an escrow fund established solely for that purpose, our exposure
to environmental remediation expenses should not change because of the
acquisition.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Our significant contractual obligations and commitments and our other commercial
commitments are comprised of long-term debt, operating lease payments due to
landlords and estimated environmental remediation expenditures, net of estimated
recoveries from state underground storage tank funds. In addition, as a REIT we
are required to pay dividends equal to at least 90% of our taxable income in
order to continue to qualify as a REIT. Our contractual obligations and
estimated commercial commitments are summarized below (in thousands):

<TABLE>
<CAPTION>
                                        Total       2004       2005        2006       2007      2008       2009   Thereafter
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>        <C>         <C>       <C>       <C>      <C>
Operating leases                      $ 39,103    $  9,144    $ 7,865    $  6,324    $ 4,771   $3,565    $  2,004   $ 5,430
Long-term debt                             844          74        285          30         30       35          37       353
---------------------------------------------------------------------------------------------------------------------------
Total contractual obligations         $ 39,947    $  9,218    $ 8,150    $  6,354    $ 4,801   $3,600    $  2,041   $ 5,783
===========================================================================================================================
Environmental remediation
   expenditures (a)                   $ 23,552    $  7,870    $ 4,272    $  3,200    $ 2,245   $1,327         867   $ 3,771
Recoveries from state underground
   storage tank funds (a)               (7,454)     (1,919)    (1,393)     (1,264)      (842)    (724)       (379)     (933)
---------------------------------------------------------------------------------------------------------------------------
Net environmental remediation
   expenditures (a)                   $ 16,098    $  5,951    $ 2,879    $  1,936    $ 1,403   $  603         488   $ 2,838
===========================================================================================================================
</TABLE>

(a)      Figures are adjusted to present value and for inflation.

         We lease substantially all of our properties on a long-term basis to
Marketing under the Master Lease. The Master Lease is a "triple-net" lease, with
Marketing directly responsible for the cost of all taxes, maintenance, repair,
insurance, environmental remediation and other operating expenses. We estimate
that Marketing makes annual real estate tax payments for properties leased under
the Master Lease of approximately $10.0 million and makes additional payments
for other operating expenses related to our properties, including environmental
remediation costs other than those liabilities that were retained by us. These
costs are not reflected in our consolidated financial statements. We have agreed
to reimburse Marketing for one-half of certain capital expenditures for work
required to comply with local zoning requirements up to a maximum amount
designated for each property and an aggregate maximum reimbursement of $875,000.
We expect to reimburse Marketing and capitalize these costs during 2004 and
2005.

                                       11

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accompanying 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. We have made our best estimates, judgments and assumptions relating
to certain amounts that are included in our financial statements, giving due
consideration to the accounting policies selected and materiality. 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. Application of these accounting policies, however, involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates, judgments and assumptions. Our
accounting policies are described in note 1 to the consolidated financial
statements. 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, depreciation, impairment of long-lived assets, litigation,
accrued expenses and income taxes. We believe the more critical of our
accounting policies are as follows:

         Revenue recognition--We earn revenue primarily from operating leases
with Marketing and other tenants. We recognize income under the Master Lease
with Marketing on the straight-line method, which effectively recognizes
contractual lease payments evenly over the initial fifteen-year term of the
lease. A critical assumption in applying this accounting method is that the
tenant will make all contractual lease payments during the initial lease term
and that the deferred rent receivable of $20.7 million recorded as of December
31, 2003 will be collected when due, in accordance with the 2% annual rent
escalations provided for in the Master Lease. Accordingly, we may be required to
reverse, or provide reserves for, a portion of the recorded deferred rent
receivable if it becomes apparent that a property may be disposed of before the
end of the initial lease term or if Marketing fails to make its contractual
lease payments.

         Impairment of long-lived assets--Real estate assets represent
"long-lived" assets for accounting purposes. We review the recorded value of
long-lived assets for impairment in value whenever any events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. We may become aware of indicators of potentially impaired assets
upon tenant or landlord lease renewals, upon receipt of notices of potential
governmental takings and zoning issues, or upon other events that occur in the
normal course of business that would cause us to review the operating results of
the property. We believe our real estate assets are not carried at amounts in
excess of their estimated net realizable fair value amounts.

         Income taxes--Our future financial results generally will not reflect
provisions for current or deferred federal income taxes since we elected to be
taxed as a REIT effective January 1, 2001. Our intention is to operate in a
manner that will allow us to continue to be taxed as a REIT and, as a result, we
do not expect to pay substantial corporate-level federal income taxes. Many of
the REIT requirements, however, are highly technical and complex. If we were to
fail to meet the requirements, we may be subject to federal income tax. Certain
states do not follow the federal REIT rules and we have included provisions for
these taxes in rental property expenses.

         Environmental costs and recoveries from state underground storage tank
funds--We provide for the estimated fair value of future environmental
remediation costs when it is probable that a liability has been incurred and a
reasonable estimate of fair value can be made (see "Environmental Matters"
below). Since environmental exposures are difficult to assess and estimate and
knowledge about these liabilities is not known upon the occurrence of a single
event, but rather is gained over a continuum of events, we believe that it is
appropriate that our accrual estimates are adjusted as the remediation treatment
progresses, as circumstances change and as environmental contingencies become
more clearly defined and reasonably estimable. Recoveries of environmental costs
from state underground storage tank remediation funds, with respect to past and
future spending, are accrued as income, net of allowance for collection risk,
based on estimated recovery rates developed from our experience with the funds
when such recoveries are considered probable. A critical assumption in accruing
for these recoveries is that the state underground storage tank fund programs
will be administered and funded in the future in a manner that is consistent
with past practices and that future environmental spending will be eligible for
reimbursement at historical rates under these programs. Effective January 1,
2003, environmental liabilities and related recoveries are measured based on
their expected future cash flows which have been adjusted for inflation and
discounted to present value.

         Litigation--We provide for litigation reserves, including certain
environmental litigation (see "Environmental Matters" below), when it is
probable that a liability has been incurred and a reasonable estimate of the
liability can be

                                       12

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

made. If the best estimate of the liability can only be identified as a range,
and no amount within the range is a better estimate than any other amount, the
minimum of the range is accrued for the liability. In certain environmental
matters, the effect on future financial results is not subject to reasonable
estimation because considerable uncertainty exists both in terms of the
probability of loss and the estimate of such loss. The ultimate liabilities
resulting from such lawsuits and claims, if any, may be material to our results
of operations in the period in which they are recognized.

ENVIRONMENTAL MATTERS

We are subject to numerous existing federal, state and local laws and
regulations, including matters relating to the protection of the environment. In
recent years, environmental expenses were principally attributable to
remediation, monitoring and governmental agency reporting incurred in connection
with contaminated properties. In prior periods, a larger portion of the expenses
also included soil disposal and the replacement or upgrading of underground
storage tank systems ("USTs") to meet federal, state and local environmental
standards.

         Under the Master Lease with Marketing, and in accordance with leases
with other tenants, we 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 have agreed
to pay all costs relating to, and to indemnify Marketing for, environmental
liabilities and obligations scheduled in the Master Lease. We will continue to
seek reimbursement from state UST remediation funds related to these
environmental liabilities where available.

         We have also agreed to provide limited environmental indemnification,
capped at $4.25 million and expiring in 2010, to Marketing for certain
pre-existing conditions at the six terminals owned by us. Under the
indemnification agreement, Marketing will pay the first $1.5 million of costs
and expenses incurred in connection with remediating any such pre-existing
conditions, Marketing will share equally with us the next $8.5 million of those
costs and expenses and Marketing will pay all additional costs and expenses over
$10.0 million. We have not accrued a liability in connection with this
indemnification agreement since it is uncertain that any significant amounts
will be required to be paid under the agreement.

         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. Recoveries of environmental costs from state
underground storage tank 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 our
experience with the funds when such recoveries are considered probable. The
accrued liability is the aggregate of the best estimate for the fair value of
cost for each component of the liability. Prior to the adoption of SFAS 143,
(see "New Accounting Pronouncements" below), effective January 1, 2003, if the
best estimate of cost for a component of the liability could only be identified
as a range, and no amount within the range was a better estimate than any other
amount, the minimum of the range was accrued for that cost component rather than
the estimated fair value currently required under SFAS 143.

         Environmental exposures are difficult to assess and estimate for
numerous reasons, including the extent of contamination, alternative treatment
methods that may be applied, location of the property which subjects it to
differing local laws and regulations and their interpretations, as well as the
time it takes to remediate contamination. In developing our liability for
probable and reasonably estimable environmental remediation costs, on a property
by property basis, we consider among other things, enacted laws and regulations,
assessments of contamination and surrounding geology, quality of information
available, currently available technologies for treatment, alternative methods
of remediation and prior experience. 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 December 31, 2003, we have remediation action plans
in place for 346 (91%) of the 380 properties for which we retained environmental
responsibility and the remaining 34 properties (9%) remain in the assessment
phase.

         As of December 31, 2003 and January 1, 2003, we had accrued $23.6
million and $29.4 million, respectively, as management's best estimate of the
fair value of reasonably estimable environmental remediation costs. As of
December 31, 2003 and January 1, 2003, we had also recorded $7.5 million and
$14.3 million, respectively, as management's best estimate for net recoveries
from state UST remediation funds, net of allowance, related to environmental
obligations

                                       13

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

and liabilities. The net environmental liability of $15.1 million as of January
1, 2003 was subsequently accreted for the change in present value due to the
passage of time, and accordingly, $1.3 million of accretion expense is included
in environmental expenses for 2003. Environmental expenditures and recoveries
from underground storage tank funds were $6.6 million and $2.1 million,
respectively, for 2003. The decrease in accrued environmental costs during 2003
was primarily due to expenditures made during the period, whereas the decrease
in net recoveries from UST funds was due to recoveries received during the
period and reductions in the estimated amount of recoveries expected to be
received from the funds. During 2004, we estimate that our net environmental
remediation spending will be approximately $6.0 million. Our business plan for
2004 reflects a net change in estimated remediation costs and accretion expense
of approximately $5.0 million.

         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 2003, 2002 and 2001, net environmental
expenses included in our consolidated statements of operations amounted to $7.6
million, $8.7 million and $10.8 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.

         In September 2003, we were notified by the State of New Jersey
Department of Environmental Protection that we are one of approximately 60
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.
Additionally, we believe that ChevronTexaco is obligated to indemnify us for
most of the conditions at the property identified by the New Jersey Department
of Environmental Protection. Accordingly, our ultimate legal and financial
liability, if any, cannot be estimated with any certainty at this time.

         From October 2003 through February 2004, we were notified that we were
made party to 36 cases in Connecticut, Florida, Massachusetts, New Hampshire,
New Jersey, New York, 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 50 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.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. ("SFAS") 141, "Business Combinations" and
SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141 requires the purchase
method of accounting to be used for all business combinations initiated after
June 30, 2001 and addresses the initial recognition and measurement of goodwill
and other intangible assets acquired. SFAS 142 requires that goodwill not be
amortized but instead be measured for impairment at least annually, or when
events indicate that there may be an impairment. We adopted SFAS 142 effective
January 1, 2002.

                                       14

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

         In June 2001, the FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations." SFAS 143 requires that obligations associated with the
retirement of tangible long-lived assets be recognized at their fair value if
the asset retirement obligation results from the normal operation of those
assets and a reasonable estimate of fair value can be made. Due to the adoption
of SFAS 143 effective January 1, 2003, accrued environmental remediation costs
and recoveries from state underground storage tank funds were adjusted to their
estimated fair value resulting in a one-time cumulative effect of change in
accounting charge of $550,000. Environmental liabilities and related assets are
currently measured based on their expected future cash flows which have been
adjusted for inflation and discounted to present value. Prior to the adoption of
SFAS 143 generally accepted accounting principles required that if the best
estimate of cost for a component of the liability could only be identified as a
range, and no amount within the range was a better estimate than any other
amount, the minimum of the range was accrued for that cost component.
Historically, such accruals were not adjusted for inflation or discounted to
present value.

         In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee regardless if the
guarantor receives separately identifiable consideration. We adopted FIN 45
effective December 31, 2002.

         In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of SFAS 123." SFAS 148
provides alternative transition methods for a voluntary change to the fair value
basis of accounting for stock-based employee compensation. SFAS 148 requires
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation, description of transition
method utilized and the effect of the method used on reported results. We
adopted SFAS 148 effective December 31, 2002. We voluntarily changed to the fair
value basis of accounting for stock-based employee compensation effective
January 1, 2003.

         In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 provides guidance on identifying entities for which
control is achieved through means other than through voting rights and how to
determine if the entity should be consolidated. In addition, FIN 46 requires all
enterprises with a significant interest in the entity to make additional
disclosures. We adopted FIN 46 effective December 31, 2002.

         The adoption of SFAS 141, SFAS 142, SFAS 148, FIN 45 and FIN 46 has not
had a significant effect, individually or in the aggregate, on our financial
position or results of operations.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual 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. These forward-looking statements 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. These
factors 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; competition for properties and tenants; risk of tenant non-renewal;
the effects of regulations; potential environmental-related litigation exposure;
our expectations as to the cost of completing environmental remediation; and the
impact of our electing to be taxed as a REIT, including subsequent failure to
qualify as a REIT and future dependence on external sources of capital.

         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 that reflect
future events or circumstances or reflect the occurrence of unanticipated
events.

                                       15

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                                         -------------------------------
                                                           2003        2002       2001
----------------------------------------------------------------------------------------
<S>                                                      <C>         <C>        <C>
Revenues:
   Revenues from rental properties                       $ 66,601    $ 67,157   $ 68,322
   Other income, net                                        1,705       2,488      2,153
----------------------------------------------------------------------------------------
     Total revenues                                        68,306      69,645     70,475
----------------------------------------------------------------------------------------
Expenses:
   Rental property expenses                                10,662      11,975     11,433
   Environmental expenses, net                              7,594       8,668     10,808
   General and administrative expenses                      4,074       3,691      4,944
   Depreciation expense                                     8,411       9,016      9,281
   Interest expense                                           128         132      1,926
----------------------------------------------------------------------------------------
     Total expenses                                        30,869      33,482     38,392
----------------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect
   of accounting change                                    37,437      36,163     32,083
(Benefit) provision for income taxes                           --          --    (36,648)
----------------------------------------------------------------------------------------
Earnings before cumulative effect of accounting change     37,437      36,163     68,731
Cumulative effect of accounting change                       (550)         --         --
----------------------------------------------------------------------------------------
Net earnings                                               36,887      36,163     68,731
Preferred stock dividends                                   2,538       5,350     17,124
----------------------------------------------------------------------------------------
Net earnings applicable to common shareholders           $ 34,349    $ 30,813   $ 51,607
========================================================================================
Net earnings per common share:
   Basic                                                 $   1.49    $   1.44   $   3.18
   Diluted                                               $   1.49    $   1.44   $   3.18
Weighted average common shares outstanding:
   Basic                                                   23,063      21,436     16,237
   Diluted                                                 23,082      21,446     16,244
Dividends declared per share:
   Common                                                $1.67500    $1.65000   $5.27500
   Preferred                                             $1.15868    $1.86648   $5.97475
</TABLE>

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

                                       17

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                 ----------------------
                                                                                   2003         2002
-------------------------------------------------------------------------------------------------------
<S>                                                                              <C>          <C>
ASSETS:
Real Estate:
   Land                                                                          $ 142,724    $ 135,372
   Buildings and improvements                                                      175,498      172,682
-------------------------------------------------------------------------------------------------------
                                                                                   318,222      308,054
   Less--accumulated depreciation                                                 (100,488)     (93,986)
-------------------------------------------------------------------------------------------------------
     Real estate, net                                                              217,734      214,068
Cash and equivalents                                                                19,905       33,726
Deferred rent receivable                                                            20,653       15,116
Recoveries from state underground storage tank funds, net                            7,454       13,396
Mortgages and accounts receivable, net                                               5,565        5,193
Prepaid expenses and other assets                                                      692          992
-------------------------------------------------------------------------------------------------------
        Total assets                                                             $ 272,003    $ 282,491
=======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Environmental remediation costs                                                  $  23,551    $  27,924
Dividends payable                                                                   10,483       10,379
Accounts payable and accrued expenses                                                9,100        9,839
Mortgages payable                                                                      844          923
-------------------------------------------------------------------------------------------------------
        Total liabilities                                                           43,978       49,065
-------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 4, 5 and 7)
Shareholders' equity:
   Preferred stock, par value $.01 per share; authorized 20,000,000 shares for
     issuance in series, of which 3,000,000 shares are classified as Series A
     Participating Convertible Redeemable Preferred; issued 2,865,768 at
     December 31, 2002                                                                  --       71,644
   Common stock, par value $.01 per share; authorized 50,000,000 shares;
    issued 24,664,384 at December 31, 2003 and 21,442,299 at December 31, 2002         247          214
Paid-in capital                                                                    257,206      186,664
Dividends paid in excess of earnings                                               (29,428)     (25,096)
-------------------------------------------------------------------------------------------------------
        Total shareholders' equity                                                 228,025      233,426
-------------------------------------------------------------------------------------------------------
        Total liabilities and shareholders' equity                               $ 272,003    $ 282,491
=======================================================================================================
</TABLE>

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

                                       18

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                     -----------------------------------
                                                                       2003         2002         2001
--------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                                         $  36,887    $  36,163    $  68,731
Adjustments to reconcile net earnings to net cash
   provided by operating activities:
   Depreciation expense                                                  8,411        9,016        9,281
   Deferred income taxes                                                    --           --      (36,479)
   Deferred rental revenue                                              (5,537)      (6,728)      (8,388)
   Gain on dispositions of real estate                                    (928)      (1,153)        (990)
   Accretion expense                                                     1,284           --           --
   Cumulative effect of accounting change                                  550           --           --
Changes in assets and liabilities:
   Recoveries from state underground storage tank funds, net             7,559          880       (2,319)
   Mortgages and accounts receivable, net                               (1,528)        (663)        (344)
   Prepaid expenses and other assets                                       300           80        4,435
   Environmental remediation costs                                      (7,824)         632        3,921
   Accounts payable and accrued expenses                                  (739)      (2,179)      (2,611)
--------------------------------------------------------------------------------------------------------
     Net cash provided by operating activities                          38,435       36,048       35,237
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Collection of mortgages receivable, net                               1,156          289          997
   Property acquisitions and capital expenditures                      (14,266)      (2,821)        (536)
   Proceeds from dispositions of real estate                             3,117        3,000        2,201
--------------------------------------------------------------------------------------------------------
     Net cash provided by (used in) investing activities                (9,993)         468        2,662
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash dividends paid                                                 (41,115)     (40,451)     (83,757)
   Repayment of mortgages payable                                          (79)         (74)     (21,972)
   Borrowings (repayments) under credit lines, net                          --           --      (27,000)
   Net proceeds from common stock offering                                  --           --      131,522
   Preferred stock redemption and conversion                            (1,224)          --           --
   Stock options and treasury stock, net                                   155          212          108
--------------------------------------------------------------------------------------------------------
     Net cash used in financing activities                             (42,263)     (40,313)      (1,099)
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents                        (13,821)      (3,797)      36,800
Cash and equivalents at beginning of period                             33,726       37,523          723
--------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period                                $  19,905    $  33,726    $  37,523
========================================================================================================
Supplemental disclosures of cash flow information
   Cash paid (refunded) during the period for:
     Interest                                                        $     127    $     132    $   2,102
     Income taxes, net                                                     949          662       (3,632)
     Recoveries from state underground storage tank funds               (2,135)      (3,431)      (5,171)
     Environmental remediation costs                                     6,642        8,545       12,730
</TABLE>

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

                                       19

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation: 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
inter-company accounts and transactions have been eliminated.

         Use of Estimates, Judgments and Assumptions: 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,
depreciation, impairment of long-lived assets, litigation, accrued expenses and
income taxes.

         Real Estate: Real estate assets are stated at cost less accumulated
depreciation and amortization. When real estate assets are sold or retired, the
cost and related accumulated depreciation and amortization is eliminated from
the respective accounts and any gain or loss is credited or charged to income.
Expenditures for maintenance and repairs are charged to income when incurred.

         Depreciation: Depreciation of real estate is computed on the
straight-line method based upon the estimated useful lives of the assets, which
generally range from 16 to 25 years for buildings and improvements.

         Cash and Equivalents: The Company considers highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.

         Deferred Rent Receivable and Revenue Recognition: The Company earns
rental income under operating leases with tenants. Minimum lease rentals are
recognized on a straight-line basis over the term of the leases. The cumulative
difference between lease revenue recognized under this method and the
contractual lease payment terms is recorded as deferred rent receivable on the
consolidated balance sheet.

         Environmental Remediation Costs and Recoveries from State Underground
Storage Tank Funds, Net: 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 underground storage tank ("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. Prior to the adoption of Statement of
Financial Accounting Standards No. ("SFAS") 143, effective January 1, 2003 (see
New Accounting Pronouncements), if the best estimate of cost for a component of
the liability could only be identified as a range, and no amount within the
range was a better estimate than any other amount, the minimum of the range had
been accrued for that cost component rather than the estimated fair value
currently required under SFAS 143.

         Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of: Assets are written down to fair value when events and circumstances indicate
that the assets might be impaired and the projected undiscounted cash flows
estimated to be generated by those assets are less than the carrying amount of
those assets. Assets held for disposal are written down to fair value less
disposition costs.

         Litigation: The Company provides for litigation reserves, including
certain litigation related to environmental matters, when it is probable that a
liability has been incurred and a reasonable estimate of the liability can be
made. If the best estimate of the liability can only be identified as a range,
and no amount within the range is a better estimate than any other amount, the
minimum of the range is accrued for the liability.

                                       20

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

         Income Taxes: The Company and its subsidiaries file a consolidated
federal income tax return. Effective January 1, 2001, the Company elected to
qualify, and believes it is operating so as to qualify, as a REIT for federal
income tax purposes. Accordingly, the Company generally will not be subject to
federal income tax, provided that distributions to its shareholders equal at
least the amount of its REIT taxable income as defined under the Internal
Revenue Code. If the Company sells any property within ten years after its REIT
election that is not exchanged for a like-kind property, it will be taxed on the
built-in gain realized from such sale at the highest corporate rate. This
ten-year built-in gain tax period will end in 2011. Deferred income taxes were
provided for the effect of items which are reported for income tax purposes in
years different from that in which they are recorded for financial statement
purposes when the Company was taxed as a C-corp.

         In order to initially qualify for REIT status, the Company was
required, among other items, to make a distribution to shareholders in an amount
at least equal to its accumulated "earnings and profits" (as defined in the
Internal Revenue Code) from the years it operated as a taxable corporation. On
August 1, 2001, the Company paid the earnings and profits distribution to its
shareholders with a portion of the net proceeds of its 8.9 million share common
stock offering (see note 3), in an amount that the Company estimated was
required in order for it to qualify as a REIT (see note 5). Accordingly, in the
third quarter of 2001, the Company recorded a nonrecurring tax benefit to
reverse previously accrued income tax liabilities that it would no longer be
required to pay as a REIT.

         Earnings per Common Share: Basic earnings per common share is computed
by dividing net earnings less preferred dividends by the weighted average number
of common shares outstanding during the year. The weighted average number of
shares outstanding for the year ended December 31, 2003 gives effect to the
conversion of Series A Participating Convertible Redeemable Preferred Stock into
3,186,000 shares of common stock as if the conversion had occurred at the
beginning of the period (see note 9). For the years ended December 31, 2002 and
2001, conversion of the preferred shares utilizing the two class method would
have been antidilutive and therefore conversion was not assumed for purposes of
computing either basic or diluted earnings per common share. Diluted earnings
per common share also gives effect to the potential dilution from the exercise
of stock options in the amounts of 19,000 shares, 10,000 shares and 7,000 shares
for the years ended December 31, 2003, 2002 and 2001, respectively.

         Stock-Based Compensation: In December 2002, the Financial Accounting
Standards Board ("FASB") issued SFAS 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of SFAS 123." SFAS 148
provides alternative transition methods for a voluntary change to the fair value
basis of accounting for stock-based employee compensation. SFAS 148 requires
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation, a description of the
transition method utilized and the effect of the method used on reported
results. The Company adopted SFAS 148 effective December 31, 2002. The Company
voluntarily changed to the fair value basis of accounting for stock-based
employee compensation for options granted subsequent to January 1, 2003 under
its stock option plan. The Company will continue to account for options granted
under its stock option plan prior to January 1, 2003 using the intrinsic value
method (see note 10). Had compensation cost for the Company's stock option plan
been accounted for using the fair value method for all grants, the Company's
total stock-based employee compensation expense using the fair value method,
pro-forma net earnings and pro-forma net earnings per share on a basic and
diluted basis would have been as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                                                               Year ended December 31,
                                                                                         ---------------------------------
                                                                                          2003          2002        2001
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>          <C>          <C>
Net earnings, as reported                                                                $36,887      $36,163      $68,731
Add: Stock-based employee compensation expense included in reported net earnings              --(*)        --          122
Deduct: Total stock-based employee compensation expense using the fair value method          133          124          356
--------------------------------------------------------------------------------------------------------------------------
Pro-forma net earnings                                                                   $36,754      $36,039      $68,497
==========================================================================================================================
Net earnings per common share:
   As reported                                                                           $  1.49      $  1.44      $  3.18
   Pro-forma                                                                             $  1.48      $  1.43      $  3.16
</TABLE>

(*) There were no stock options granted during the year ended December 31, 2003.

                                       21

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The fair value of the options granted during the years ended December
31, 2002 and 2001 were estimated as $0.56 and $1.79 per share, respectively, on
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:

<TABLE>
<CAPTION>
                                            Year ended December 31,
                                            -----------------------
                                            2002               2001
--------------------------------------------------------------------
<S>                                         <C>                <C>
Expected Dividend Yield                     9.0%               10.2%
Expected volatility                          18%                 35%
Risk-free interest rate                     3.6%                4.5%
Expected life of options (years)              7                   7
</TABLE>

         New Accounting Pronouncements: In July 2001, the FASB issued SFAS 141,
"Business Combinations" and SFAS 142, "Goodwill and Other Intangible Assets."
SFAS 141 requires the purchase method of accounting to be used for all business
combinations initiated after June 30, 2001 and addresses the initial recognition
and measurement of goodwill and other intangible assets acquired. SFAS 142
requires that goodwill not be amortized but instead be measured for impairment
at least annually, or when events indicate that there may be an impairment. The
Company adopted SFAS 142 effective January 1, 2002.

         In June 2001, the FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations." SFAS 143 requires that obligations associated with the
retirement of tangible long-lived assets be recognized at their fair value if
the asset retirement obligation results from the normal operation of those
assets and a reasonable estimate of fair value can be made. Due to the adoption
of SFAS 143 effective January 1, 2003, accrued environmental remediation costs
and recoveries from state underground storage tank funds were adjusted to their
estimated fair value resulting in a one-time cumulative effect of change in
accounting charge of $550,000. Environmental liabilities and related assets are
currently measured based on their expected future cash flows which have been
adjusted for inflation and discounted to present value. Prior to the adoption of
SFAS 143 generally accepted accounting principles required that if the best
estimate of cost for a component of the liability could only be identified as a
range, and no amount within the range was a better estimate than any other
amount, the minimum of the range was accrued for that cost component.
Historically, such accruals were not adjusted for inflation or discounted to
present value.

         In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee regardless if the
guarantor receives separately identifiable consideration. The Company adopted
FIN 45 effective December 31, 2002.

         In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 provides guidance on identifying entities for which
control is achieved through means other than through voting rights and how to
determine if the entity should be consolidated. In addition, FIN 46 requires all
enterprises with a significant interest in the entity to make additional
disclosures. The Company adopted FIN 46 effective December 31, 2002.

         The adoption of SFAS 141, SFAS 142, FIN 45 and FIN 46 has not had a
significant effect, individually or in the aggregate, on the Company's financial
position or results of operations.

                                       22

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

2. SPIN-OFF

The Company leases substantially all of its properties on a long-term net basis
to Getty Petroleum Marketing Inc. ("Marketing"), which was spun-off to the
Company's shareholders as a separate publicly held company in March 1997. In
December 2000, Marketing was acquired by a subsidiary of OAO Lukoil, one of
Russia's largest oil companies.

         As part of the separation of the petroleum marketing business from the
real estate business, the Company and Marketing entered into various agreements
which addressed the allocation of assets and liabilities between them and govern
future relationships. These agreements include a Reorganization and Distribution
Agreement, Master Lease Agreement, Tax Sharing Agreement, Services Agreement and
Trademark License Agreement.

         Under the Services Agreement, Marketing provided certain administrative
and technical services to the Company and the Company provided certain limited
services to Marketing. Substantially all of the services provided pursuant to
the Services Agreement were discontinued as of April 1, 2001. The net fees paid
by the Company to Marketing for services performed (after deducting the fees
paid by Marketing to the Company for services provided by the Company) were
$226,000 for the year ended December 31, 2001 and are included in general and
administrative expenses in the consolidated statements of operations.

3. STOCK OFFERING

On August 1, 2001, the Company closed a public offering of 8,855,000 shares of
its common stock (including exercise of the underwriters' over-allotment option)
at a price of $16.00 per share. A portion of the $131,522,000 net proceeds of
the offering was used to pay a $64,162,000 special one-time "earnings and
profits" cash distribution to shareholders. The special distribution of $4.15
per common share and $4.20 per Series A preferred share was paid on August 2,
2001. Purchasers of Getty common stock in the public offering did not receive
any portion of the special distribution on any of the shares of common stock
they purchased. The Company used $17,512,000 of the net proceeds from the
offering to repay all amounts then outstanding under its lines of credit and
$19,837,000 to retire a mortgage loan.

4. LEASES

The Company and Marketing are parties to an amended and restated Master Lease
Agreement (the "Master Lease"), which became effective on December 9, 2000. As
of December 31, 2003, the Master Lease included 949 retail motor fuel and
convenience store properties and nine distribution terminals and bulk plants,
245 of which are leased by the Company from third parties. The Master Lease has
an initial term of fifteen years commencing December 9, 2000, and generally
provides Marketing with options for three renewal terms of ten years each and a
final renewal option of three years and ten months extending to 2049 (or such
shorter initial or renewal term as the underlying lease may provide). The Master
Lease includes provisions for 2% annual rent escalations. The Master Lease is a
unitary lease and, accordingly, Marketing's exercise of renewal options must be
on an "all or nothing" basis.

         The Master Lease is a "triple-net" lease, with Marketing directly
responsible for the cost of all taxes, maintenance, repair, insurance,
environmental remediation and other operating expenses. In general, Marketing
remains responsible for any violations of non-environmental laws. The Company
agreed to indemnify Marketing for certain violations, which indemnification
obligation expired in December 2002. The Company has agreed to reimburse
Marketing for one-half of certain capital expenditures for work required to
comply with local zoning requirements up to a maximum amount designated for each
property and an aggregate maximum reimbursement of $875,000. The Company expects
to reimburse Marketing and capitalize these costs during 2004 and 2005.

         Under the Master Lease, the Company continues to have additional
ongoing environmental remediation obligations for 288 scheduled properties (see
note 7). The Company has also agreed to provide limited environmental
indemnification, capped at $4.25 million and expiring in 2010, to Marketing for
certain pre-existing conditions at the six terminals which are owned by the
Company. Under the agreement, Marketing will pay the first $1.5 million of costs
and expenses incurred in connection with remediating any such pre-existing
conditions, Marketing and the Company will share equally the next $8.5 million
of those costs and expenses and Marketing will pay all additional costs and
expenses over $10.0 million. The Company has not accrued a liability in
connection with this indemnification agreement since it is uncertain that any
significant amounts will be required to be paid under the agreements.

                                       23

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Company estimates that Marketing makes annual real estate tax
payments for properties leased under the Master Lease of approximately $10.0
million and makes additional payments for other operating expenses related to
these properties, including environmental remediation costs other than those
liabilities that were retained by the Company. These costs, which have been
assumed by Marketing under the terms of the Master Lease, are not reflected in
the consolidated financial statements.

         The Company and Marketing entered into revised trademark license
agreements in December 2000, providing for an exclusive license to Marketing for
use of certain of the Company's trademarks, service marks and trade names
(including the name "Getty") used in connection with Marketing's business within
Marketing's current marketing territory and a non-exclusive license in the
remaining United States subject to a gallonage-based royalty. The trademark
agreements have the same termination date as the Master Lease.

         Revenues from rental properties for the years ended December 31, 2003,
2002 and 2001 were $66,601,000, $67,157,000 and $68,322,000, respectively, of
which $58,722,000, $58,104,000 and $57,649,000, respectively, were received from
Marketing under the Master Lease. In addition, revenues from rental properties
for the years ended December 31, 2003, 2002 and 2001 includes $5,537,000,
$6,728,000 and $8,388,000, respectively, of deferred rental revenue accrued due
to recognition of rental revenue under the Master Lease on a straight-line
basis.

         Future minimum annual rentals receivable from Marketing under the
Master Lease and from other tenants, which have terms in excess of one year as
of December 31, 2003, are as follows (in thousands):

<TABLE>
<CAPTION>
                                              Other
Year ending December 31,        Marketing    Tenants      Total
----------------------------------------------------------------
<S>                             <C>         <C>        <C>
2004                            $  58,922   $ 2,274    $  61,196
2005                               59,564     2,119       61,683
2006                               60,160     2,000       62,160
2007                               59,981     1,631       61,612
2008                               60,574     1,383       61,957
Thereafter                        425,117     5,697      430,814
----------------------------------------------------------------
                                $ 724,318   $15,104    $ 739,422
================================================================
</TABLE>

         Rent expense, substantially all of which consists of minimum rentals on
non-cancelable operating leases, amounted to $9,704,000, $10,805,000 and
$11,036,000 for the years ended December 31, 2003, 2002 and 2001, respectively,
and is included in rental property expenses. Rent received under subleases for
the years ended December 31, 2003, 2002 and 2001 was $17,305,000, $17,373,000
and $18,034,000, respectively.

         The Company has obligations to lessors under non-cancelable operating
leases which have terms (excluding renewal term options) in excess of one year,
principally for gasoline stations and convenience stores. Substantially all of
these leases contain renewal options and rent escalation clauses. The leased
properties have a remaining lease term averaging over 13 years, including
renewal options. Future minimum annual rentals payable under such leases,
excluding renewal options, are as follows (in thousands):

<TABLE>
<CAPTION>
Year ending December 31,
------------------------------------------------
<S>                                     <C>
2004                                    $  9,144
2005                                       7,865
2006                                       6,324
2007                                       4,771
2008                                       3,565
Thereafter                                 7,434
------------------------------------------------
                                        $ 39,103
================================================
</TABLE>

                                       24

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

5. COMMITMENTS AND CONTINGENCIES

In order to qualify as a REIT, among other items, the Company paid a $64,162,000
special one-time "earnings and profits" (as defined in the Internal Revenue
Code) cash distribution to shareholders in August 2001. Determination of
accumulated earnings and profits for federal income tax purposes is extremely
complex. Should the Internal Revenue Service successfully assert that the
Company's accumulated earnings and profits were greater than the amount
distributed, the Company may fail to qualify as a REIT; however, the Company may
avoid losing its REIT status by paying a deficiency dividend to eliminate any
remaining accumulated earnings and profits. The Company may have to borrow money
or sell assets to pay such a deficiency dividend.

         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 are held in an
institutional money market fund and federal agency discount notes.

         The Company leases substantially all of its properties on a long-term
net basis to Marketing under a Master Lease (see note 4). 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. In December 2000, Marketing was acquired by a subsidiary of OAO
Lukoil, one of Russia's largest 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 Master Lease. 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 Master Lease when due.

         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 all pre-spin-off legal proceedings and claims
relating to the petroleum marketing business. These matters are 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
60 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.
Additionally, the Company believes that ChevronTexaco is obligated to indemnify
the Company for most of the conditions at the property identified by the New
Jersey Department of Environmental Protection. Accordingly, the ultimate legal
and financial liability of the Company, if any, cannot be estimated with any
certainty at this time.

         From October 2003 through February 2004, the Company was notified that
the Company was made party to 36 cases in Connecticut, Florida, Massachusetts,
New Hampshire, New Jersey, New York, 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 50 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.

                                       25

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Prior to the spin-off, the Company was self-insured for workers'
compensation, general liability and vehicle liability up to predetermined
amounts above which third-party insurance applies. As of December 31, 2003 and
2002, the Company's consolidated balance sheets included, in accounts payable
and accrued expenses, $833,000 and $1,602,000, respectively, relating to
insurance obligations that may be deemed to have arisen prior to the spin-off of
the Marketing business. The Company's consolidated statements of operations for
the years ended December 31, 2003, 2002 and 2001 included, in general and
administrative expenses, charges (credits) of $(500,000), $(873,000) and
$225,000, respectively, for self-insurance. Since the spin-off, the Company has
maintained insurance coverage subject to certain deductibles.

6. DEBT

Mortgages payable consists of $844,000 of real estate mortgages, bearing
interest at a weighted average interest rate of 7.41%, due in varying amounts
through May 1, 2015. Aggregate principal payments in subsequent years for real
estate mortgages are as follows: 2004--$74,000; 2005--$285,000; 2006--$30,000;
2007--$30,000; 2008--$35,000 and $390,000 thereafter. These mortgages payable
are collateralized by real estate having an aggregate net book value of
approximately $1,068,000 as of December 31, 2003.

         As of December 31, 2003, the Company had an uncommitted line of credit
with a bank in the amount of $25,000,000, of which $268,000 was utilized in the
form of outstanding letters of credit relating to insurance obligations.
Borrowings under the line of credit are unsecured and bear interest at the
bank's prime rate or, at the Company's option, LIBOR plus 1.25%. The line of
credit is subject to annual renewal in June 2004 at the discretion of the bank.

7. ENVIRONMENTAL REMEDIATION COSTS

The Company is subject to numerous existing federal, state and local laws and
regulations, including matters relating to the protection of the environment. In
recent years, environmental expenses were principally attributable to
remediation, monitoring, and governmental agency reporting incurred in
connection with contaminated properties. In prior periods a larger portion of
the expenses also included soil disposal and the replacement or upgrading of
USTs to meet federal, state and local environmental standards. For the years
ended December 31, 2003, 2002 and 2001, net environmental expenses included in
the Company's consolidated statements of operations were $7,594,000, $8,668,000
and $10,808,000, respectively, which amounts were net of estimated recoveries
from state UST remediation funds.

         Under the Master Lease with Marketing, and in accordance with our
leases with our other tenants, the Company 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 our
tenants. The Company has agreed to pay all costs relating to, and to indemnify
Marketing for, environmental liabilities and obligations 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. Prior to the adoption of SFAS 143, effective January 1,
2003, if the best estimate of cost for a component of the liability could only
be identified as a range, and no amount within the range was a better estimate
than any other amount, the minimum of the range had been accrued for that cost
component rather than the estimated fair value currently required under SFAS
143.

                                       26

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                    continued

         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
December 31, 2003, the Company has remediation action plans in place for 346
(91%) of the 380 properties for which it retained environmental responsibility
and the remaining 34 properties (9%) remain in the assessment phase.

         As of December 31, 2003 and January 1, 2003, the Company had accrued
$23,551,000 and $29,426,000, respectively, as management's best estimate of the
fair value of reasonably estimable environmental remediation costs. As of
December 31, 2003 and January 1, 2003, the Company had also recorded $7,454,000
and $14,348,000, respectively, as management's best estimate for recoveries from
state UST remediation funds, net of allowance, related to environmental
obligations and liabilities. The net environmental liability of $15,078,000 as
of January 1, 2003 was subsequently accreted for the change in present value due
to the passage of time and, accordingly, $1,284,000 of accretion expense is
included in environmental expenses for the year ended December 31, 2003.
Environmental expenditures were $6,642,000 and recoveries from underground
storage tank funds were $2,135,000 for the year ended December 31, 2003.

         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. INCOME TAXES

In the third quarter of 2001, the Company elected to be taxed as a REIT
effective January 1, 2001, and recorded a nonrecurring tax benefit of
approximately $36.6 million to reverse accrued income tax liabilities that it
would no longer be required to pay as a REIT. Deferred income taxes were
provided for the effect of items which are reported for income tax purposes in
years different from that in which they are recorded for financial statement
purposes when the Company was taxed as a C-corp.

         Net cash paid (refunded) for income taxes for the years ended December
31, 2003, 2002 and 2001 of $949,000, $662,000 and ($3,632,000), respectively,
includes amounts related to state and local income taxes for jurisdictions that
do not follow the federal tax rules, which are provided for in rental property
expenses in 2003 and 2002. Net cash paid for income taxes also includes audit
settlements for periods when the Company was taxed as a C-corp.

                                       27

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. SHAREHOLDERS' EQUITY

A summary of the changes in shareholders' equity for the years ended December
31, 2003, 2002 and 2001 is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                      Preferred Stock       Common Stock                Dividends Paid
                                     -----------------    ----------------     Paid-in    in Excess
                                     Shares    Amount     Shares    Amount     Capital   of Earnings
--------------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>         <C>       <C>       <C>       <C>
BALANCE, DECEMBER 31, 2000           2,889    $ 72,220    13,567    $  136    $ 67,036    $  1,419
Net earnings                                                                                68,731
Cash dividends:
   Common--$5.275 per share                                                                (73,563)
   Preferred--$5.975 per share                                                             (17,124)
Issuance of treasury stock                                                           1
Stock offering, net of costs                               8,855        88     131,434
Stock options                                                 19                   104
--------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001           2,889      72,220    22,441       224     198,575     (20,537)
Net earnings                                                                                36,163
Cash dividends:
   Common--$1.65 per share                                                                 (35,372)
   Preferred--$1.8665 per share                                                             (5,350)
Issuance of treasury stock                                                           1
Cancellation of treasury stock         (23)       (576)   (1,019)      (10)    (12,120)
Stock options                                                 20                   208
--------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002           2,866      71,644    21,442       214     186,664     (25,096)
--------------------------------------------------------------------------------------------------------
Net earnings                                                                                36,887
Cash dividends:
   Common--$1.675 per share                                                                (38,681)
   Preferred--$1.15868 per share                                                            (2,538)
Preferred stock redemption
   and conversion                   (2,866)    (71,644)    3,186        32      70,388
Stock options                                                 36         1         154
--------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003              --    $     --    24,664    $  247    $257,206    $(29,428)(a)
========================================================================================================

<CAPTION>
                                     Preferred Stock       Common Stock
                                     Held in Treasury,    Held in Treasury,
                                         at Cost              at Cost
                                    -----------------   -------------------
                                    Share     Amount    Shares      Amount       Total
-----------------------------------------------------------------------------------------------
<S>                                 <C>       <C>       <C>       <C>          <C>
BALANCE, DECEMBER 31, 2000           (23)     $ (430)   (1,019)   $ (12,282)   $ 128,099
Net earnings                                                                      68,731
Cash dividends:
   Common--$5.275 per share                                                      (73,563)
   Preferred--$5.975 per share                                                   (17,124)
Issuance of treasury stock                                                3            4
Stock offering, net of costs                                                     131,522
Stock options                                                                        104
-----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001           (23)       (430)   (1,019)     (12,279)     237,773
Net earnings                                                                      36,163
Cash dividends:
   Common--$1.65 per share                                                       (35,372)
   Preferred--$1.8665 per share                                                   (5,350)
Issuance of treasury stock                                                3            4
Cancellation of treasury stock        23         430     1,019       12,276           --
Stock options                                                                        208
-----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002            --          --        --           --      233,426
-----------------------------------------------------------------------------------------------
Net earnings                                                                      36,887
Cash dividends:
   Common--$1.675 per share                                                      (38,681)
   Preferred--$1.15868 per share                                                  (2,538)
Preferred stock redemption
   and conversion                                                                 (1,224)
Stock options                                                                        155
-----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003            --      $   --        --    $      --$     228,025
===============================================================================================
</TABLE>

(a)  Net of $103,803 transferred from retained earnings to common stock and
     paid-in capital as a result of accumulated stock dividends.

         In August 2003, the Company notified holders of Series A Participating
Convertible Redeemable Preferred Stock that the preferred stock would be
redeemed on September 24, 2003 for $25.00 per share plus a mandatory redemption
dividend of $0.27118 per share. Prior to the redemption date, shareholders with
98% of the preferred stock exercised their right to convert 2,816,919 shares of
preferred stock into 3,186,355 shares of common stock at the conversion rate of
1.1312 shares of common stock for each share of preferred stock so converted,
and received cash in lieu of fractional shares of common stock. The remaining
48,849 shares of the outstanding preferred stock were redeemed for an aggregate
amount, including accrued dividends through the call date, of approximately
$1,234,000. The preferred stock ceased accruing dividends and trading on the
NYSE in September 2003.

         Each share of preferred stock had voting rights equivalent to, and was
convertible into, 1.1312 shares of common stock of the Company and paid stated
cumulative dividends of $1.775 per annum, or if greater on an "as converted
basis," the cash dividends declared per share of common stock for the calendar
year. In the event of liquidation, dissolution or winding up of the Company,
holders of the preferred stock had the right to a liquidation preference in the
amount of $25.00 per share, plus accumulated, accrued and unpaid dividends,
before any payment to holders of the Company's common stock.

                                       28

<PAGE>

                      GETTY REALTY CORP. AND SUBSIDIARIES

                                   continued

10. EMPLOYEE BENEFIT PLANS

The Company has a retirement and profit sharing plan with deferred 401(k)
savings plan provisions (the "Retirement Plan") for employees meeting certain
service requirements and a supplemental plan for executives (the "Supplemental
Plan"). Under the terms of these plans, the annual discretionary contributions
to the plans are determined by the Board of Directors. Also, under the
Retirement Plan, employees may make voluntary contributions and the Company has
elected to match an amount equal to 50% of such contributions but in no event
more than 3% of the employee's eligible compensation. Under the Supplemental
Plan, a participating executive may receive an amount equal to 10% of eligible
compensation, reduced by the amount of any contributions allocated to such
executive under the Retirement Plan. Contributions, net of forfeitures, under
the plans approximated $125,000, $118,000 and $94,000 for the years ended
December 31, 2003, 2002 and 2001, respectively. These amounts are included in
the accompanying consolidated statements of operations.

         The Company has a stock option plan (the "Stock Option Plan") which
authorizes the Company to grant options to purchase shares of the Company's
common stock (see note 1). The aggregate number of shares of the Company's
common stock which may be made the subject of options under the Stock Option
Plan may not exceed 1,100,000 shares, subject to further adjustment for stock
dividends and stock splits. The Stock Option Plan provides that options are
exercisable starting one year from the date of grant, on a cumulative basis at
the annual rate of 25 percent of the total number of shares covered by the
option.

         The following is a schedule of stock option prices and activity
relating to the Stock Option Plan:

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
---------------------------------------------------------------------------------------------------------------------------
                                                 2003                         2002                          2001
                                       ------------------------    --------------------------    --------------------------
                                                     Weighted                      Weighted                      Weighted
                                                      Average                       Average                       Average
                                         Number      Exercise        Number        Exercise         Number       Exercise
                                       of Shares       Price        of Shares        Price        of Shares        Price
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>             <C>           <C>             <C>           <C>
Outstanding at beginning of year         358,773    $     19.12        352,324    $     19.51        404,740    $     20.24
Granted                                       --             --         69,500          18.30         69,500          16.15
Exercised                               (153,412)         19.10        (46,055)         15.78        (64,250)         14.29
Cancelled                                (32,276)         24.06        (16,996)         23.36        (57,666)         23.95
---------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year               173,085    $     18.19        358,773    $     19.12        352,324    $     19.51
---------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year                91,023    $     18.63        214,711    $     20.72        239,137    $     21.66
===========================================================================================================================
Available for grant at end of year       660,881                       628,605                       681,109
===========================================================================================================================
</TABLE>

The following table summarizes information concerning options outstanding and
exercisable at December 31, 2003:

<TABLE>
<CAPTION>
                   Options Outstanding                                  Options Exercisable
--------------------------------------------------------------   -------------------------------
                              Weighted Average
                                 Remaining
   Range of         Number      Contractual   Weighted Average     Number       Weighted Average
Exercise Prices  Outstanding    Life (Years)   Exercise Price    Exercisable     Exercise Price
------------------------------------------------------------------------------------------------
<S>               <C>         <C>             <C>                <C>            <C>
$11.125-$14.50     36,188            7           $   13.17          27,751           $ 12.77
 16.15 - 18.30     99,875            8               17.38          26,250             17.16
     24.06         37,022            3               24.06          37,022             24.06
------------------------------------------------------------------------------------------------
                   173,085                                          91,023
================================================================================================
</TABLE>

                                       29

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. QUARTERLY FINANCIAL DATA

The following is a summary of the quarterly results of operations for the years
ended December 31, 2003 and 2002 (unaudited as to quarterly information) (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                              Three months ended              Year ended
                                                            ------------------------------------------------  -----------
         Year Ended December 31, 2003                       March 31     June 30   September 30  December 31  December 31
-------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>       <C>           <C>          <C>
Revenues from rental properties                             $16,677      $16,672      $16,676      $16,576      $66,601
Earnings before cumulative effect of accounting change        9,107        9,431        9,467        9,432       37,437
Net earnings                                                  8,557        9,431        9,467        9,432       36,887
Diluted earnings per common share (a)                           .34          .38          .38          .38         1.49
</TABLE>

<TABLE>
<CAPTION>
                                                                              Three months ended              Year ended
                                                            ------------------------------------------------  -----------
Year Ended December 31, 2002                                March 31     June 30   September 30  December 31  December 31
-------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>       <C>           <C>          <C>
Revenues from rental properties                             $16,877      $16,802      $16,746      $16,732      $67,157
Net earnings                                                  9,258        9,306        8,973        8,626       36,163
Diluted earnings per common share (a)                           .37          .37          .36          .33         1.44
</TABLE>

(a)      After giving effect to quarterly preferred stock dividends aggregating
         $2,538 and $5,350 for the years ended December 31, 2003 and 2002,
         respectively.

12. PROPERTY ACQUISITION

On May 1, 2003, the Company completed the acquisition of 41 retail motor fuel
and convenience store properties that it had been leasing for the past twelve
years. The aggregate purchase price for these properties was approximately $13.0
million in cash, excluding transaction costs. Forty of the locations are
subleased to Marketing under the Master Lease through at least 2015. Annual rent
expense of approximately $1.3 million, and future rent escalations scheduled
through 2056, will be eliminated as a result of the acquisition. Since the
seller has agreed to indemnify the Company for historical environmental costs,
and the seller's indemnity is supported by an escrow fund established solely for
that purpose, the Company's exposure to environmental remediation expenses
should not change because of the acquisition.

                                       30

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
and Shareholders of Getty Realty Corp.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and cash flows present fairly, in all
material respects, the financial position of Getty Realty Corp. and Subsidiaries
(the "Company") at December 31, 2003 and 2002 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 25, 2004

                                       31

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES

                                  CAPITAL STOCK

Our common stock is traded on the New York Stock Exchange (symbol: "GTY"). At
December 31, 2003, there were approximately 10,900 holders of record of our
common stock. The price range of our common stock and cash dividends declared
with respect to each share of common stock during the years ended December 31,
2003 and 2002 was as follows:

<TABLE>
<CAPTION>
                         Price Range
                     ------------------ Cash Dividends
 Period Ending        High        Low     Per Share
------------------------------------------------------
<S>                  <C>        <C>     <C>
December 31, 2003    $ 27.35    $ 23.95    $.42500
September 30, 2003     25.25      22.41     .42500
June 30, 2003          23.42      18.78     .41250
March 31, 2003         19.49      17.90     .41250

December 31, 2002    $ 19.47    $ 19.10    $.41250
September 30, 2002     19.10      18.60     .41250
June 30, 2002          18.53      18.19     .41250
March 31, 2002         18.69      18.33     .41250
</TABLE>

Our Series A preferred stock traded on the New York Stock Exchange (symbol: "GTY
PrA") through the redemption date of September 24, 2003. The price range of our
Series A preferred stock and cash dividends declared with respect to each share
of preferred stock during the years ended December 31, 2003 and 2002 was as
follows:

<TABLE>
<CAPTION>
                         Price Range
                     ------------------ Cash Dividends
 Period Ending        High        Low     Per Share
------------------------------------------------------
<S>                  <C>        <C>     <C>
September 24, 2003   $ 28.51    $ 26.90    $.27118
June 30, 2003          27.50      25.00     .44375
March 31, 2003         25.75      25.00     .44375

December 31, 2002    $ 25.50    $ 25.45    $.53523
September 30, 2002     23.65      23.57     .44375
June 30, 2002          23.21      23.13     .44375
March 31, 2002         23.23      23.18     .44375
</TABLE>

                                       32