<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 DECEMBER 31,
                                                         ------------------------------------------------------------
                                                             2006          2005        2004        2003        2002
                                                         -----------   -----------   --------   ----------   --------
<S>                                                      <C>           <C>           <C>        <C>          <C>
OPERATING DATA:
Revenues from rental properties                          $ 72,405      $ 71,377      $ 66,331   $ 66,601     $ 67,157
Earnings before income taxes                               42,025        43,954        39,352     36,887       36,163
Income tax benefit                                            700(a)      1,494(a)         --         --           --
                                                         --------      --------      --------   --------     --------
Net earnings                                               42,725        45,448        39,352     36,887       36,163
Diluted earnings per common share                            1.73          1.84          1.59       1.49(b)      1.44
Diluted weighted-average common
   shares outstanding                                      24,759        24,729        24,721     23,082       21,446
Cash dividends declared per share:
   Common                                                   1.820         1.760         1.700      1.675        1.650
   Preferred                                                   --            --            --      1.159(c)     1.866
FUNDS FROM OPERATIONS (d):
Net earnings                                               42,725        45,448        39,352     36,887       36,163
Preferred stock dividends                                      --            --            --     (2,538)      (5,350)
                                                         --------      --------      --------   --------     --------
Net earnings applicable to common shareholders             42,725        45,448        39,352     34,349       30,813
Depreciation and amortization of real estate assets         7,883         8,113         7,490      8,411        9,016
Gains on dispositions of real estate                       (1,581)       (1,309)         (618)      (928)      (1,153)
Cumulative effect of accounting change                         --            --            --        550(e)        --
                                                         --------      --------      --------   --------     --------
Funds from operations available to common shareholders     49,027        52,252        46,224     42,382       38,676
Deferred rental revenue (straight-line rent)               (3,010)       (4,170)       (4,464)    (5,537)      (6,728)
Income tax benefit                                           (700)(a)    (1,494)(a)        --         --           --
                                                         --------      --------      --------   --------     --------
Adjusted funds from operations available to common
   shareholders                                            45,317        46,588        41,760     36,845       31,948
BALANCE SHEET DATA (AT END OF YEAR):
Real estate before accumulated depreciation and
   amortization                                           383,558       370,495       346,590    318,222      308,054
Total assets                                              309,283       299,981       290,728    272,003      282,491
Debt                                                       45,194        34,224        24,509        844          923
Shareholders' equity                                      225,575       227,883       225,503    228,025      233,426
                                                         ========      ========      ========   ========     ========
NUMBER OF PROPERTIES:
Owned                                                         836           814           795        772          739
Leased                                                        216           241           250        256          310
                                                         --------      --------      --------   --------     --------
Total properties                                            1,052         1,055         1,045      1,028        1,049
                                                         ========      ========      ========   ========     ========
</TABLE>

(a)  The years ended 2006 and 2005 include income tax benefits recognized due to
     the elimination of, or reduction in, amounts accrued for uncertain tax
     positions related to being taxed as a C-corp. prior to our election to be
     treated as a REIT under the federal income tax laws in 2001. Income taxes
     have not had a significant impact on our earnings since we first elected to
     be treated as a REIT.

(b)  Diluted earnings per common share of $1.51 before the impact of the
     cumulative effect of accounting change (see note (e) below).

(c)  In August 2003, we called for redemption of 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
     of $1.2 million.

(d)  In addition to measurements defined by generally accepted accounting
     principles ("GAAP"), our management also focuses on funds from operations
     available to common shareholders ("FFO") and adjusted funds from operations
     available to common shareholders ("AFFO") to measure our performance. FFO
     is generally considered to be an appropriate supplemental non-GAAP measure
     of the performance of real estate investment trusts ("REITs"). FFO is
     defined by the National Association of Real Estate Investment Trusts as net
     earnings before depreciation and amortization of real estate assets, gains
     or losses on dispositions of real estate, non-FFO items reported in
     discontinued operations, extraordinary items, and cumulative effect of
     accounting change. Other REITs may use definitions of FFO and/or AFFO that
     are different than ours and, accordingly, may not be comparable.

     We believe that FFO is helpful to investors in measuring our performance
     because FFO excludes various items included in GAAP net earnings that do
     not relate to, or are not indicative of, our fundamental operating
     performance such as gains or losses from property dispositions and
     depreciation and amortization of real estate assets. In our case, however,
     GAAP net earnings and FFO include the significant impact of deferred rental
     revenue (straight-line rental revenue) on our recognition of revenue from
     rental properties, which results primarily from fixed rental increases
     scheduled under certain leases with our tenants. In accordance with GAAP,
     the aggregate minimum rent due over the initial term of these leases is
     recognized on a straight-line basis rather than when due. GAAP net earnings
     and FFO also include income tax benefits recognized due to the elimination
     of, or reduction in, amounts accrued for uncertain tax positions related to
     being taxed as a C-corp. prior to 2001 (see note (a) above). As a result,
     management pays particular attention to AFFO, a supplemental non-GAAP
     performance measure that we define as FFO less straight-line rental revenue
     and income tax benefit. In management's view, AFFO provides a more accurate
     depiction than FFO of the impact of the scheduled rent increases under
     these leases and our election to be treated as a REIT under the federal
     income tax laws beginning in 2001. Neither FFO nor AFFO represent cash
     generated from operating activities calculated in accordance with generally
     accepted accounting principles and therefore should not be considered an
     alternative for GAAP net earnings or as a measure of liquidity.

(e)  In June 2001, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. ("SFAS") 143, "Accounting for Asset
     Retirement Obligations." SFAS 143 requires that legal obligations
     associated with the retirement of tangible long-lived assets be recognized
     at their fair value if the asset retirements obligations 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.

                                       7
<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                of Financial Condition and Results of Operations

RECENT DEVELOPMENTS

     On February 15, 2007, our Board of Directors (together with Getty
Properties Corp., our wholly-owned subsidiary) ratified a Contract for Sale and
Purchase dated as of February 6, 2007 (the "Agreement") entered into with
various subsidiaries of Trustreet Properties, Inc. ("Trustreet"). The Agreement
relates to the acquisition by us of sixty-eight convenience store and gas
station properties owned and leased by Trustreet. The total purchase price for
the properties will be approximately $86.6 million. Substantially all of the
properties are leased to retail tenants. We intend to fund the acquisition
utilizing our unsecured corporate revolving credit line (as we intend to
increase and modify in March 2007 to accommodate the acquisition).

     The consummation of the acquisition is subject to substantial contingencies
that, among other things, relate to our due diligence with regard to the
properties. The Agreement provides that we may elect in our sole discretion to
terminate the Agreement, and not close on the acquisition of the properties, if
the result of our due diligence (including environmental and other physical
inspections) with respect to the properties is unsatisfactory.

     The Agreement provides that the closing date for the acquisition will be as
of March 31, 2007, subject to the right of the sellers to extend for an
additional period of up to thirty days. In view of the contingencies discussed
above, there can be no assurance that the acquisition will be consummated within
this time frame, or at all.

GENERAL

     We are a real estate investment trust specializing in the ownership and
leasing of retail motor fuel and convenience store properties and petroleum
distribution terminals. We elected to be treated as a REIT under the federal
income tax laws beginning January 1, 2001. As a REIT, we are not subject to
federal corporate income tax on the taxable income we distribute to our
shareholders. In order to continue to qualify for taxation as a REIT, we are
required, among other things, to distribute at least ninety percent of our
taxable income to shareholders each year.

     We lease or sublet our properties primarily to distributors and retailers
engaged in the sale of gasoline and other motor fuel products, convenience store
products and automotive repair services. These tenants are responsible for the
payment of taxes, maintenance, repair, insurance and other operating expenses
and for managing the actual operations conducted at these properties. As of
December 31, 2006, we leased nine hundred nineteen of our one thousand fifty-two
properties on a long-term basis under a master lease (the "Master Lease") and a
coterminous supplemental lease for one property (collectively the "Marketing
Leases") to Getty Petroleum Marketing Inc. ("Marketing") which was spun-off to
our shareholders as a separate publicly held company in March 1997. In December
2000, Marketing was acquired by a subsidiary of OAO Lukoil ("Lukoil"), one of
Russia's largest integrated oil companies.

     A substantial portion of our revenues (87% for the year ended December 31,
2006), are derived from the Marketing Leases. Accordingly, our revenues are
dependent to a large degree on the economic performance of Marketing and of the
petroleum marketing industry and any factor that adversely affects Marketing or
our other lessees may have a material adverse effect on our financial condition
and results of operations. Marketing's financial results depend largely on
retail petroleum marketing margins and rental income from subtenants who operate
our properties. The petroleum marketing industry has been and continues to be
volatile and highly competitive. Factors that could adversely affect Marketing
or our other lessees include those described under "Part I, Item 1A. Risk
Factors." In the event that Marketing cannot or will not perform its monetary
obligations under the Marketing Leases with us, our financial condition and
results of operations would be materially adversely affected. Although Marketing
is wholly owned by a subsidiary of Lukoil, no assurance can be given that Lukoil
will cause Marketing to fulfill any of its monetary obligations under the
Marketing Leases.

     We periodically receive and review Marketing's financial statements and
other financial data. We receive this information from Marketing pursuant to the
terms of the Master Lease. Certain of this information is not publicly available
and the terms of the Master Lease prohibit us from including this financial
information in our Annual Reports on Form 10-K, our Quarterly Reports on Form
10-Q


                                        8

<PAGE>

or in our Annual Reports to Shareholders. The financial performance of Marketing
may deteriorate, and Marketing may ultimately default on its monetary
obligations to us before we receive financial information from Marketing that
would indicate the deterioration.

     Certain financial and other information concerning Marketing is available
from Dun & Bradstreet and may be accessed by their web site (www.dnb.com) upon
payment of their fee.

     Audited consolidated financial statements of Marketing for their fiscal
year-ended December 31, 2005 have been provided to us. Selected balance sheet
data of Marketing at December 31, 2005 is publicly available; however, selected
operating data of Marketing for the year ended December 31, 2005 is not publicly
available. The most recent selected financial data of Marketing which is
publicly available is provided below. Neither we, nor our auditors, were
involved in the preparation of this data and as a result can provide no
assurance thereon. Additionally, our auditors have not been engaged to review or
audit this data.

Selected Financial Data of Getty Petroleum Marketing Inc.

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                    ----------------------------------------------------------
                                                    2006       2005          2004         2003         2002
                                                    ----     --------     ----------   ----------   ----------
                                                                     (UNAUDITED, IN THOUSANDS)
<S>                                                 <C>      <C>          <C>          <C>          <C>
OPERATING DATA:
Total revenues                                       (a)        (a)       $2,696,102   $1,297,042   $1,029,926
Total expenses                                       (a)        (a)        2,670,282    1,290,439    1,038,385
                                                                          ----------   ----------   ----------
Earnings (loss) before provision for income taxes    (a)        (a)           25,820        6,603       (8,459)
Provision (credit) for income taxes                  (a)        (a)           10,784        3,157       (3,389)
                                                                          ----------   ----------   ----------
Net earnings (loss)                                  (a)        (a)       $   15,036   $    3,446   $   (5,070)
                                                                          ==========   ==========   ==========
BALANCE SHEET DATA (AT END OF YEAR):
ASSETS:
Cash and cash equivalents                            (a)     $103,815     $   76,485   $   44,210   $   18,678
Other current assets                                 (a)       81,983        161,901       68,971       62,448
                                                             --------     ----------   ----------   ----------
Total current assets                                 (a)      320,369        238,386      113,181       81,126
Non-current assets                                   (a)      409,393        421,745      138,748      144,815
                                                             --------     ----------   ----------   ----------
Total assets                                         (a)     $729,762     $  660,131   $  251,929   $  225,941
                                                             ========     ==========   ==========   ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Total current liabilities                            (a)        (a)       $  214,171   $  125,940   $  107,362
Long-term liabilities                                (a)        (a)          318,091       62,419       58,438
                                                                          ----------   ----------   ----------
Total liabilities                                    (a)     $617,780        532,262      188,359      165,800
Total stockholder's equity                           (a)      111,982        127,869       63,570       60,141
                                                             --------     ----------   ----------   ----------
Total liabilities and stockholder's equity           (a)     $729,762     $  660,131   $  251,929   $  225,941
                                                             ========     ==========   ==========   ==========
</TABLE>

(a)  This information is not publicly available.

     Based on our review of the recent financial statements and other financial
data Marketing has provided to us to date, we have observed a significant
decline in their financial results from the prior periods presented. Marketing
continues to pay timely its monetary obligations under the Marketing Leases, as
it has since the inception of the Master Lease in 1997, although there is no
assurance that they will continue to do so.

     As part of a periodic review by the Division of Corporation Finance of the
Securities and Exchange Commission ("SEC") of our Annual Report on Form 10-K for
the year ended December 31, 2003, we received and responded to a number of
comments. The only comment that remains unresolved pertains to the SEC's
position that we must include the financial statements and summarized financial
data of Marketing in our periodic filings. The SEC subsequently indicated that,
unless we file Marketing's financial statements and summarized financial data
with our periodic reports: (i) it will not consider our Annual Reports on Forms
10-K for the years beginning with 2000 to be compliant; (ii) it will not
consider us to be current in our reporting requirements; (iii) it will not be in
a position to declare effective any registration statements we may file for
public offerings of our securities; and (iv) we should consider how the SEC's
conclusion impacts our ability to make offers and sales of our securities under
existing registration statements and if we have a liability for such offers and
sales made pursuant to registration statements that did not contain the
financial statements of Marketing.


                                        9

<PAGE>

     We believe that the SEC's position is based on their interpretation of
certain provisions of their internal Accounting Disclosure Rules and Practices
Training Material, Staff Accounting Bulletin No. 71 and Rule 3-13 of Regulation
S-X. We do not believe that any of this guidance is clearly applicable to our
particular circumstances and that, even if it were, we believe that we should be
entitled to certain relief from compliance with such requirements. Marketing
subleases our properties to approximately nine hundred independent, individual
service station/convenience store operators (subtenants), most of whom were our
tenants when Marketing was spun-off to our shareholders. Consequently, we
believe that we, as the owner of these properties and the Getty brand, and our
prior experience with Marketing's tenants, could relet these properties to the
existing subtenants or others at market rents. Because of this particular aspect
of our landlord-tenant relationship with Marketing, we do not believe that the
inclusion of Marketing's financial statements in our filings is necessary to
evaluate our financial condition. Our position was included in a written
response to the SEC. To date, the SEC has not accepted our position regarding
the inclusion of Marketing's financial statements in our filings. We are
endeavoring to achieve a resolution of this issue that will be acceptable to the
SEC. We can not accurately predict the consequences if we are ultimately
unsuccessful in achieving an acceptable resolution.

     We do not believe that offers or sales of our securities made pursuant to
existing registration statements that did not or do not contain the financial
statements of Marketing constitute, by reason of such omission, a violation of
the Securities Act of 1933, as amended or the Exchange Act. Additionally, we
believe that, if there ultimately is a determination that such offers or sales,
by reason of such omission, resulted in a violation of those securities laws, we
would not have any material liability as a consequence of any such
determination.

     We manage our business to enhance the value of our real estate portfolio
and, as a REIT, place particular emphasis on minimizing risk and generating cash
sufficient to make required distributions to shareholders of at least ninety
percent of our taxable income each year. In addition to measurements defined by
generally accepted accounting principles ("GAAP"), our management also focuses
on funds from operations available to common shareholders ("FFO") and adjusted
funds from operations available to common shareholders ("AFFO") to measure our
performance. FFO is generally considered to be an appropriate supplemental
non-GAAP measure of the performance of REITs. FFO is defined by the National
Association of Real Estate Investment Trusts as net earnings before depreciation
and amortization of real estate assets, gains or losses on dispositions of real
estate, non-FFO items reported in discontinued operations, extraordinary items
and cumulative effect of accounting change. Other REITs may use definitions of
FFO and/or AFFO that are different than ours and, accordingly, may not be
comparable.

     We believe that FFO is helpful to investors in measuring our performance
because FFO excludes various items included in GAAP net earnings that do not
relate to, or are not indicative of, our fundamental operating performance such
as gains or losses from property dispositions and depreciation and amortization
of real estate assets. In our case, however, GAAP net earnings and FFO include
the significant impact of deferred rental revenue (straight-line rental revenue)
on our recognition of revenues from rental properties, which results primarily
from fixed rental increases scheduled under certain leases with our tenants. In
accordance with GAAP, the aggregate minimum rent due over the initial term of
these leases are recognized on a straight-line basis rather than when due. GAAP
net earnings and FFO also include income tax benefits recognized due to the
elimination of, or a net reduction in, amounts accrued for uncertain tax
positions related to being taxed as a C-corp., prior to 2001. As a result,
management pays particular attention to AFFO, a supplemental non-GAAP
performance measure that we define as FFO less straight-line rental revenue and
income tax benefit. In management's view, AFFO provides a more accurate
depiction than FFO of the impact of scheduled rent increases under these leases
and our election to be treated as a REIT under the federal income tax laws
beginning in 2001. Neither FFO nor AFFO represent cash generated from operating
activities calculated in accordance with generally accepted accounting
principles and therefore these measures should not be considered an alternative
for GAAP net earnings or as a measure of liquidity. FFO and AFFO are reconciled
to net earnings in Selected Financial Data on page 7.

RESULTS OF OPERATIONS

Year ended December 31, 2006 compared to year ended December 31, 2005

     Revenues from rental properties were $72.4 million for the year ended
December 31, 2006 compared to $71.4 million for 2005. We received approximately
$60.1 million for 2006 and $59.6 million for 2005 from properties leased to
Marketing under the Marketing Leases. We also received rent of $9.3 million for
2006 and $7.6 million for 2005 from other tenants. The increase in rent received
was primarily due to rent from properties acquired in February 2006 and March
2005, and rent escalations, partially offset by the effect of dispositions of
real estate. In addition, revenues from rental properties include deferred
rental revenue of $3.0 million for 2006 as compared to $4.2 million in 2005,
recorded as required by GAAP, related to fixed rent increases scheduled under
certain leases with tenants. The aggregate minimum rent due over the initial
term of these leases are recognized on a straight-line basis rather than when
due.


                                       10

<PAGE>

     Rental property expenses, which are primarily comprised of rent expense and
real estate and other state and local taxes, were $9.7 million for 2006, as
compared to $11.8 million for 2005. The decrease in rental property expenses is
principally due to an adjustment of $1.5 million recorded in the fourth quarter
of 2005 for a change in accounting for rent expense from a contractual to a
straight-line basis. The decrease in rent expense was also due to the reduction
in the number of leased locations compared to the prior year.

     Environmental expenses, net for 2006 were $5.5 million, as compared to $2.4
million for 2005. The increase was primarily due to a $1.2 million increase in
environmental related litigation expenses and legal fees as well as a $1.9
million increase in change in estimated environmental costs, net of estimated
recoveries, as compared to the prior year period. Environmental related
litigation expenses and legal fees were $1.4 million for 2006 compared to $0.2
million for 2005, which prior period includes a $0.6 million net reduction in
environmental related litigation loss reserve estimates. Change in estimated
environmental costs increased in 2006 as compared to 2005 partially due to
additional expenses resulting from the imposition by state regulators of more
stringent remediation requirements for projects in the states of Massachusetts
and New Jersey and an increase in rates paid for environmental remediation
services.

     General and administrative expenses for 2006 were $5.6 million as compared
to $4.9 million recorded for 2005. The increase in general and administrative
expenses is due to higher professional fees.

     Depreciation and amortization expense for 2006 was $7.9 million, as
compared to $8.1 million recorded for 2005.

     As a result, total operating expenses increased by approximately $1.5
million for 2006, as compared to 2005.

     Other income, net was $1.9 million for 2006, as compared to $1.6 million
for 2005. The increase was primarily due to $0.3 million of increased gains on
dispositions of real estate.

     Interest expense was $3.5 million for 2006 as compared to $1.8 million for
2005. The increase was primarily due to increased borrowings used to finance the
acquisition of properties in March 2005 and February 2006. Interest expense also
increased due to higher effective interest rates under our credit facilities
which averaged 6.5% for 2006 as compared to 4.7% for 2005.

     In April 2006 we entered into a $45.0 million LIBOR based interest rate
swap, effective May 1, 2006 through June 30, 2011. The interest rate swap is
intended to hedge our current exposure to market interest rate risk by
effectively fixing, at 5.44%, the LIBOR component of the interest rate
determined under our existing Credit Agreement or future exposure to variable
interest rate risk due to borrowing arrangements that may be entered into prior
to the expiration of the interest rate swap. Our borrowings under the Credit
Agreement bear interest at a rate equal to the sum of a base rate or a LIBOR
rate plus an applicable margin based on our leverage ratio ranging from 0.25% to
1.75%. Effective May 1, 2006, $45.0 million of our LIBOR based borrowings under
the Credit Agreement bear interest at an effective rate of 6.69%.

     Income tax benefit was $0.7 million for 2006 as compared to $1.5 million
for the prior year period. The tax benefit of $0.7 million recorded in 2006 was
recognized due to the elimination of the accrual for uncertain tax positions
since management believes that the uncertainties regarding these exposures have
been resolved or that it is no longer likely that the exposure will result in a
liability upon review. However, the ultimate resolution of these matters may
have a significant impact on the results of operations for any single fiscal
year or interim period.

     During the fourth quarter of 2005, we recorded a reduction in net earnings
of $0.7 million as a result of adjustments which should have been recorded in
prior years or earlier quarterly periods of 2005 and are included in the results
of operations for 2005 discussed herein. The adjustments consisted of: (a) $0.1
million of rental income for lease terminations that related to prior years and
$0.2 million related to earlier quarters of 2005; (b) $1.5 million of rent
expense for a change in accounting for rent expense from a contractual to a
straight-line basis, which is related to prior years; and (c) $0.5 million of
gains on dispositions of real estate resulting from a property taken by eminent
domain that should have been recorded in the second quarter of 2005. We believe
that these adjustments are not material to any previously issued financial
statements and that the impacts of recording these adjustments are not material,
individually or in the aggregate, to the quarter or year ended December 31,
2005.


                                       11

<PAGE>

     As a result, net earnings were $42.7 million for 2006, a decrease of 6.0%,
or $2.7 million, as compared to $45.4 million for the comparable prior year
period. For the same period, FFO decreased by 6.2%, or $3.2 million, to $49.0
million and AFFO decreased by 2.7%, or $1.2 million, to $45.3 million. The
decreases in FFO and AFFO were primarily due to the changes in net earnings
described above but exclude the aggregate improvement in earnings of $0.5
million due to lower depreciation expense and higher gains on dispositions of
properties. FFO decreased more then AFFO on both a dollar and percentage basis
due to a $2.0 million aggregate decrease in deferred rental revenue and income
tax benefit (which are included in net earnings and FFO but are excluded from
AFFO) recorded for 2006 as compared to 2005.

     Diluted earnings per share for 2006 was $1.73 per share a decrease of $0.11
per share, or 6.0%, as compared to 2005. Diluted FFO per share for 2006 was
$1.98 per share, a decrease of $0.13 per share, or 6.1%, as compared to 2005.
Diluted AFFO per share for 2006 was $1.83 per share, a decrease of $0.05 per
share, or 2.7%, as compared to 2005.

Year ended December 31, 2005 compared to year ended December 31, 2004

     Revenues from rental properties were $71.4 million for the year ended
December 31, 2005, compared to $66.3 million for 2004. We received rent of
approximately $59.6 million for 2005 and $58.9 million for 2004 from properties
leased to Marketing under the Marketing Leases. We also received rent of $7.6
million for 2005 and $2.9 million for 2004 from other tenants. The increase in
rent received was primarily due to rent from properties acquired in November
2004 and March 2005, and rent escalations, partially offset by the effect of
lease terminations and property dispositions. In addition, revenues from rental
properties include deferred rental revenue of $4.2 million in 2005 and $4.5
million in 2004.

     Rental property expenses were $11.8 million for 2005, as compared to $9.8
million for 2004. Rental property expenses include an adjustment of $1.5 million
recorded in the fourth quarter of 2005 for a change in accounting for rent
expense from a contractual to a straight-line basis. The increase in rental
property expenses was also due to rent expense on properties acquired in
November 2004 of $0.4 million partially offset by property dispositions.

     Environmental expenses, net for 2005 were $2.4 million as compared to $6.0
million for 2004. The decrease was primarily due to a $1.6 million reduction in
environmental related litigation expenses as compared to the prior year period
and a $1.9 million reduction in change in estimated environmental costs, net of
estimated recoveries as compared to the prior year period. Environmental related
litigation expenses and legal fees were $0.2 million for 2005 compared to $1.9
million for 2004, which prior period expenses include a $0.9 million net
increase in environmental related litigation loss reserve estimates.

     General and administrative expenses for 2005 were $4.9 million, as compared
to $5.0 million recorded for 2004.

     Depreciation and amortization expense for 2005 was $8.1 million as compared
to $7.5 million recorded for 2004. The increase was primarily due to
depreciation and amortization of properties acquired in November 2004 and March
2005 partially offset by property dispositions.

     As a result total operating expenses decreased by approximately $1.1
million for 2005 as compared to 2004.

     Other income, net was $1.6 million for 2005, as compared to $1.5 million
for 2004. Other income, net for 2005 includes $1.3 million of gains on
dispositions of properties, which includes $1.1 million recorded in the fourth
quarter resulting from properties taken by eminent domain related to road
improvement projects, as compared to $0.6 million of gains for 2004. The $0.7
million increase in gains on dispositions of properties was offset by a $0.3
million reduction in interest income from mortgages notes receivable and
short-term investments and a $0.3 million reduction in other items. Other items
for 2004 include $0.4 million of income due to the elimination of reserves for
late paying mortgage note receivable accounts and late fees recognized related
to mortgage notes that were renegotiated in 2004.

     Interest expense, principally related to borrowings used to finance the
acquisition of properties in November 2004 and March 2005 was $1.8 million for
2005 and was insignificant for 2004.

     The income tax benefit of $1.5 million recorded in 2005 was recognized due
to a net reduction in the amount accrued for uncertain tax positions to the
extent that the uncertain tax positions have been resolved.


                                       12

<PAGE>

     During the fourth quarter of 2005, we recorded a reduction in net earnings
of $0.7 million as a result of adjustments which should have been recorded in
prior years or earlier quarterly periods of 2005 and are included in the results
of operations for 2005 discussed above. The adjustments consisted of: (a) $0.1
million of rental income for lease terminations that related to prior years and
$0.2 million related to earlier quarters of 2005; (b) $1.5 million of rent
expense for a change in accounting for rent expense from a contractual to a
straight-line basis, which is related to prior years; and (c) $0.5 million of
gains on dispositions of real estate resulting from a property taken by eminent
domain that should have been recorded in the second quarter of 2005. We believe
that these adjustments are not material to any previously issued financial
statements and that the impacts of recording these adjustments are not material,
individually or in the aggregate, to the quarter or year ended December 31,
2005.

     As a result, net earnings were $45.4 million for 2005, an increase of
15.2%, or $6.0 million, as compared to $39.4 million for the comparable prior
year period. For the same period, FFO increased 13.0%, or $6.0 million, to $52.3
million or slightly less than the increase in net earnings since the increase in
gains on dispositions of real estate of $0.7 million were almost entirely offset
by the increased depreciation and amortization of real estate assets of $0.6
million (both of which are included in net earnings but are excluded from FFO
and AFFO). AFFO increased 11.6%, or $4.8 million to $46.6 million. FFO increased
more than AFFO on both a dollar and percentage basis due to the $1.5 million
income tax benefit recorded in 2005 which was partially offset by a $0.3 million
decrease in deferred rental revenue (both of which are included in net earnings
and FFO but are excluded from AFFO) recorded for 2005 as compared to 2004.

     Diluted earnings per common share in 2005 was $1.84 per share, an increase
of $0.25 per share, or 15.7%, as compared to 2004. Diluted FFO per share for
2005 was $2.11 per share, an increase of $0.24 per share, or 12.8%, as compared
to 2004. Diluted AFFO per share for 2005 was $1.88 per share, an increase of
$0.19 per share, or 11.2%, as compared to 2004.

LIQUIDITY AND CAPITAL RESOURCES

     Our principal sources of liquidity are the cash flows from our business,
funds available under a revolving credit agreement that expires in 2008 and
available cash and cash equivalents. Management believes that dividend payments
and cash requirements for our business for the next twelve months, including
environmental remediation expenditures, capital expenditures and debt service,
can be met by cash flows from operations, borrowings under the credit agreement
and available cash and cash equivalents.

     On June 30, 2005, we entered into an unsecured three-year senior revolving
$100.0 million credit agreement ("Credit Agreement") with a group of six
domestic commercial banks. Subject to the terms of the Credit Agreement, we have
the right to increase the Credit Agreement by $25.0 million and to extend the
term of the Credit Agreement for one additional year. Borrowings under the
Credit Agreement bear interest at a rate equal to the sum of a base rate or a
LIBOR rate plus an applicable margin based on our leverage ratio and ranging
from 0.25% to 1.75%. The annual commitment fee on the unused Credit Agreement
ranges from 0.10% to 0.20% based on the amount of borrowings. The Credit
Agreement includes customary terms and conditions, including financial covenants
such as leverage and coverage ratios and other customary covenants, including
limitations on our ability to incur debt and pay dividends and maintenance of
tangible net worth, and events of default, including a change of control and
failure to maintain REIT status. We do not believe that these covenants will
limit our current business practices.

     In April 2006 we entered into a $45.0 million LIBOR based interest rate
swap, effective May 1, 2006 through June 30, 2011. The interest rate swap is
intended to hedge our current exposure to market interest rate risk by
effectively fixing, at 5.44%, the LIBOR component of the interest rate
determined under our existing credit agreement or future exposure to variable
interest rate risk due to borrowing arrangements that may be entered into prior
to the expiration of the interest rate swap. Effective May 1, 2006, $45.0
million of our LIBOR based borrowings under the Credit Agreement bear interest
at an effective rate of 6.69%.

     Total borrowings outstanding under the Credit Agreement at December 31,
2006 were $45.0 million, bearing interest at an average effective rate of 6.69%
per annum. Total borrowings increased to $46.5 million as of March 1, 2007
principally due to additional borrowings used to pay $11.3 million of dividends
that were accrued as of December 31, 2006 and paid in January 2007 net of
repayments from positive cash flows provided by rental operations. Accordingly,
we had $53.5 million available under the terms of the Credit Agreement as of
March 1, 2007 or $78.5 million available assuming exercise of our right to
increase the credit agreement by $25.0 million. The increases in our borrowings
outstanding during 2004, 2005 and 2006 relate primarily to borrowings used to
fund acquisitions.


                                       13

<PAGE>
     Since we generally lease our properties on a triple-net basis and we do not
capitalize environmental remediation equipment, we do not incur significant
capital expenditures other than those related to acquisitions. Capital
expenditures, including acquisitions, for 2006, 2005 and 2004 amounted to $15.5
million, $29.6 million and $30.6 million, respectively.

     As part of our overall growth strategy, we regularly review opportunities
to acquire additional properties and we expect to continue to pursue
acquisitions that we believe will benefit our financial performance. To the
extent that our current sources of liquidity are not sufficient to fund such
acquisitions we will require other sources of capital, which may or may not be
available on favorable terms or at all. Our current sources of liquidity are not
sufficient to fund the acquisition of the Truststreet properties. We intend to
increase and modify our Credit Agreement in March 2007 to accommodate the
acquisition.


     We elected to be treated as a REIT under the federal income tax laws with
the year beginning January 1, 2001. As a REIT, we are required, among other
things, to distribute at least ninety percent of our taxable income to
shareholders each year. Payment of dividends is subject to market conditions,
our financial condition and other factors, and therefore cannot be assured. In
particular, our Credit Agreement prohibits the payment of dividends during
certain events of default. Dividends paid to our shareholders aggregated $44.8
million, $43.0 million and $42.0 million for 2006, 2005 and 2004, respectively,
and were paid on a quarterly basis during each of those years. We presently
intend to pay common stock dividends of $0.455 per share each quarter ($1.82 per
share, or $45.1 million, on an annual basis), and commenced doing so with the
quarterly dividend declared in February 2006.

CONTRACTUAL OBLIGATIONS

     Our significant contractual obligations and commitments are comprised of
borrowings under the Credit Agreement, 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 ninety percent of our
taxable income in order to continue to qualify as a REIT. Our contractual
obligations and commitments as of December 31, 2006 are summarized below (in
thousands):

<TABLE>
<CAPTION>
                                                                                            ONE TO    THREE TO   MORE THAN
                                                                               LESS THAN     THREE      FIVE        FIVE
                                                                      TOTAL     ONE YEAR     YEARS      YEARS      YEARS
                                                                     -------   ---------   --------   --------   ---------
<S>                                                                  <C>       <C>         <C>        <C>        <C>
Operating leases                                                     $32,211    $ 8,162     $12,576    $6,401      $5,072
Borrowing under the Credit Agreement (a)                              45,000                 45,000
Long-term debt (a)                                                       194         31          60        43          60
Estimated environmental remediation expenditures (b)                  17,201      6,394       6,609     1,884       2,314
Estimated recoveries from state underground storage tank funds (b)    (3,845)    (1,046)     (1,674)     (782)       (343)
                                                                     -------    -------     -------    ------      ------
Estimated net environmental remediation expenditures (b)              13,356      5,348       4,935     1,102       1,971
                                                                     -------    -------     -------    ------      ------
Total                                                                $90,761    $13,541     $62,571    $7,546      $7,103
                                                                     =======    =======     =======    ======      ======
</TABLE>

(a)  Excludes related interest payments. See "Liquidity and Capital Resources"
     above and "Disclosures About Market Risk" below.

(b)  Estimated environmental remediation expenditures and estimated recoveries
     from state underground storage tank funds have been adjusted for inflation
     and discounted to present value.

     Generally, the leases with our tenants are "triple-net" leases, with the
tenant responsible for the payment of taxes, maintenance, repair, insurance,
environmental remediation and other operating expenses. We estimate that
Marketing makes annual real estate tax payments for properties leased under the
Marketing Leases of approximately $12.1 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 no significant contractual obligations not fully recorded on our
consolidated balance sheets or fully disclosed in the notes to our consolidated
financial statements. We have no off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934,
as amended.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The consolidated financial statements included in this Annual Report
include the accounts of Getty Realty Corp. and our wholly-owned subsidiaries.
The preparation of financial statements in accordance with GAAP requires
management to make estimates, judgments and assumptions that affect amounts
reported in its financial statements. Although we have made our best estimates,
judgments and assumptions regarding future uncertainties relating to the
information included in our financial statements, giving due consideration to
the accounting policies selected and materiality, actual results could differ
from these estimates, judgments and


                                       14

<PAGE>

assumptions. We do not believe that there is a great likelihood that materially
different amounts would be reported related to the application of the accounting
policies described below.

     Estimates, judgments and assumptions underlying the accompanying
consolidated financial statements include, but are not limited to, deferred rent
receivable, recoveries from state underground storage tank funds, environmental
remediation costs, real estate, depreciation and amortization, impairment of
long-lived assets, litigation, accrued expenses, income taxes and exposure to
uncertain tax positions. The information included in our financial statements
that is based on estimates, judgments and assumptions is subject to significant
change and is adjusted as circumstances change and as the uncertainties become
more clearly defined. Our accounting policies are described in note 1 to the
audited consolidated financial statements. We believe the following are our
critical accounting policies:

     Revenue recognition -- We earn revenue primarily from operating leases with
Marketing and other tenants. We recognize income under the Master Lease with
Marketing, and with other tenants, on the straight-line method, which
effectively recognizes contractual lease payments evenly over the initial term
of the leases. 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 $32.3 million recorded as of
December 31, 2006 will be collected when due, in accordance with the annual rent
escalations provided for in the leases. Historically our tenants have generally
made rent payments when due. However, we may be required to reverse, or provide
reserves for, 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 the tenant fails to make its contractual lease payments when due.

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

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

     Environmental costs and recoveries from state 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). Environmental liabilities and related recoveries are measured based on
their expected future cash flows which have been adjusted for inflation and
discounted to present value. Since environmental exposures are difficult to
assess and estimate and knowledge about these liabilities is not known upon the
occurrence of a single event, but rather is gained over a continuum of events,
we believe that it is appropriate that our accrual estimates are adjusted as the
remediation treatment progresses, as circumstances change and as environmental
contingencies become more clearly defined and reasonably estimable. A critical
assumption in accruing for these liabilities is that the state environmental
laws and regulations will be administered and enforced in the future in a manner
that is consistent with past practices. Recoveries of environmental costs from
state 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.

     Litigation -- Legal fees related to litigation is expensed as legal
services are performed. 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 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


                                       15
<PAGE>

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
such as the remediation of known contamination and the retirement and
decommissioning or removal of long-lived assets including buildings containing
hazardous materials, USTs and other equipment. In accordance with the leases
with certain of our tenants, we have agreed to bring the leased properties with
known environmental contamination to within applicable standards and to
regulatory or contractual closure ("Closure") in an efficient and economical
manner. Generally, upon achieving Closure at an individual property, our
environmental liability under the lease for that property will be satisfied and
future remediation obligations will be the responsibility of our tenant. We will
continue to seek reimbursement from state UST remediation funds related to these
environmental liabilities where available. Generally, the liability for the
retirement and decommissioning or removal of USTs and other equipment is the
responsibility of our tenants. We are contingently liable for these obligations
in the event that our tenants do not satisfy their responsibilities. A liability
has not been accrued for obligations that are the responsibility of our tenants.

     We have also agreed to provide limited environmental indemnification to
Marketing, capped at $4.25 million and expiring in 2010, for certain
pre-existing conditions at six of the 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 accrued $0.3 million as of December 31, 2006 and 2005 in
connection with this indemnification 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. Environmental liabilities and
related recoveries are measured based on their expected future cash flows which
have been adjusted for inflation and discounted to present value. The
environmental remediation liability is estimated based on the level and impact
of contamination at each property and other factors described herein. The
accrued liability is the aggregate of the best estimate for the fair value of
cost for each component of the liability. Recoveries of environmental costs from
state 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.

     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, 2006, we have remediation action plans
in place for two hundred seventy-three (93%) of the two hundred ninety-two
properties for which we retain remediation responsibility and have not received
a "no further action" letter and the remaining nineteen properties (7%) were in
the assessment phase.

     As of December 31, 2006 we had accrued $17.2 million as management's best
estimate of the fair value of reasonably estimable environmental remediation
costs and $3.9 million as management's best estimate for net recoveries from
state UST remediation funds, net of allowance, related to environmental
obligations and liabilities. Environmental expenditures, net of recoveries from
underground storage tank funds, were $3.0 million, $3.5 million and $4.4
million, respectively, for 2006, 2005 and 2004. For 2006, 2005 and 2004, the net
change in estimated remediation cost and accretion expense included in our
consolidated statements of operations amounted to $3.3 million, $1.4 million and
$3.3 million, respectively, which amounts were net of probable recoveries from
state UST remediation funds.


                                       16

<PAGE>

     Environmental liabilities and related assets are currently measured at fair
value based on their expected future cash flows which have been adjusted for
inflation and discounted to present value. We also use probability weighted
alternative cash flow forecasts to determine fair value. We assumed a 50%
probability factor that the actual environmental expenses will exceed
engineering estimates for an amount assumed to equal one year of net expenses
aggregating $5.8 million. Accordingly, the environmental accrual as of December
31, 2006 was increased by $2.3 million, net of assumed recoveries and before
inflation and present value discount adjustments. The resulting net
environmental accrual as of December 31, 2006 was then further increased by $1.0
million for the assumed impact of inflation using an inflation rate of 2.75%.
Assuming a credit-adjusted risk-free discount rate of 7.0%, we then reduced the
net environmental accrual, as previously adjusted, by a $2.2 million discount to
present value. Had we assumed an inflation rate that was 0.5% higher and a
discount rate that was 0.5% lower, net environmental liabilities as of December
31, 2006 would have increased by $0.2 million and $0.1 million, respectively,
for an aggregate increase in the net environmental accrual of $0.3 million.
However, the aggregate net change in environmental estimates expense recorded
during the year ended December 31, 2006 would not have changed significantly if
these changes in the assumptions were made effective December 31, 2005.

     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. 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 (the "NJDEP") that we are one of approximately sixty
potentially responsible parties for natural resource damages resulting from
discharges of hazardous substances into the Lower Passaic River. The definitive
list of potentially responsible parties and their actual responsibility for the
alleged damages, the aggregate cost to remediate the Lower Passaic River, the
amount of natural resource damages and the method of allocating such amounts
among the potentially responsible parties have not been determined. In September
2004, we received a General Notice Letter from the United States Environmental
Protection Agency (the "EPA")(the "EPA Notice"), advising us that we may be a
potentially responsible party for costs of remediating certain conditions
resulting from discharges of hazardous substances into the Lower Passaic River.
ChevronTexaco received the same EPA Notice regarding those same conditions.
Additionally, we believe that ChevronTexaco is contractually obligated to
indemnify us, pursuant to an indemnification agreement for most of the
conditions at the property identified by the NJDEP and the EPA, accordingly, our
ultimate legal and financial liability, if any, cannot be estimated with any
certainty at this time.

     From October 2003 through December 2006 we were notified that we were made
party to forty-one cases in Connecticut, Florida, Massachusetts, New Hampshire,
New Jersey, New York, Pennsylvania, Vermont, Virginia and West Virginia brought
by local water providers or governmental agencies. These cases allege various
theories of liability due to contamination of groundwater with MTBE as the basis
for claims seeking compensatory and punitive damages. Each case names as
defendants approximately fifty petroleum refiners, manufacturers, distributors
and retailers of MTBE, or gasoline containing MTBE. The accuracy of the
allegations as they relate to 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.


                                       17

<PAGE>

DISCLOSURES ABOUT MARKET RISK

     Prior to April 2006, we had not used derivative financial or commodity
instruments for trading, speculative or any other purpose, and had not entered
into any instruments to hedge our exposure to interest rate risk. We do not have
any foreign operations, and are therefore not exposed to foreign currency
exchange rate risks.

     We are exposed to interest rate risk, primarily as a result of our $100.0
million Credit Agreement. Our Credit Agreement, which expires in June 2008,
bears interest at a rate equal to the sum of a base rate or a LIBOR rate plus an
applicable margin based on our leverage ratio ranging from 0.25% to 1.75%. At
December 31, 2006, we had borrowings outstanding of $45.0 million under our
Credit Agreement bearing interest at an effective rate of 6.69% per annum. We
use borrowings under the Credit Agreement to finance acquisitions and for
general corporate purposes.

     We manage our exposure to interest rate risk by minimizing, to the extent
feasible, our overall borrowing and monitoring available financing alternatives.
Our interest rate risk as of December 31, 2006 increased due to increased
borrowings under the Credit Agreement as compared to December 31, 2005. Due to
the increased exposure, in April 2006 we entered into a $45.0 million LIBOR
based interest rate swap, effective May 1, 2006 through June 30, 2011, to manage
a portion of our interest rate risk. The interest rate swap is intended to hedge
our current exposure to variable interest rate risk by effectively fixing, at
5.44%, the LIBOR component of the interest rate determined under our existing
Credit Agreement or future exposure to variable interest rate risk due to
borrowing arrangements that may be entered into prior to the expiration of the
interest rate swap. Effective May 1, 2006, $45.0 million of our LIBOR based
borrowings under the Credit Agreement bear interest at an effective rate of
6.69%. As a result, we will be exposed to interest rate risk to the extent that
our borrowings exceed the $45.0 million notional amount of the interest rate
swap. As of December 31, 2006, our borrowings equaled the notional amount of the
interest rate swap. For the quarter ended December 31, 2006, our
weighted-average borrowings exceeded the notional amount of the interest rate
swap by $3.2 million. We expect that our exposure to interest rate risk will
increase significantly, as a result of increased borrowings, if we are
successful in acquiring the Truststreet properties. However, we do not foresee
any significant changes in how we manage our interest rate risk in the near
future.


     We entered into the $45.0 million notional five year interest rate swap
agreement with a major financial institution designated and qualifying as a cash
flow hedge to reduce our exposure to the variability in future cash flows
attributable to changes in the LIBOR rate. Our primary objective when
undertaking hedging transactions and derivative positions is to reduce our
variable interest rate risk by effectively fixing a portion of the interest rate
for existing debt and anticipated refinancing transactions. This in turn,
reduces the risks that the variability of cash flows imposes on variable rate
debt. Our strategy protects us against future increases in interest rates. While
this agreement is intended to lessen the impact of rising interest rates, it
also exposes us to the risk that the other party to the agreement will not
perform, the agreement will be unenforceable and the underlying transactions
will fail to qualify as a highly-effective cash flow hedge for accounting
purposes.

     In the event that we were to settle the interest rate swap prior to its
maturity, if the corresponding LIBOR swap rate for the remaining term of the
agreement is below the 5.44% fixed strike rate at the time we settle the swap,
we would be required to make a payment to the swap counter-party; if the
corresponding LIBOR swap rate is above the fixed strike rate at the time we
settle the swap, we would receive a payment from the swap counter-party. The
amount that we would either pay or receive would equal the present value of the
basis point differential between the fixed strike rate and the corresponding
LIBOR swap rate at the time we settle the swap.

     Based on our average outstanding borrowings under the Credit Agreement
projected for 2007, if market interest rates for 2007 increase by an average of
0.5% more than the weighted-average interest rate of 6.62% for the quarter ended
December 31, 2006 (exclusive of the impact of the interest rate swap), the
additional annualized interest expense would decrease 2007 net income and cash
flows by $16,000. This amount was determined by calculating the effect of a
hypothetical interest rate change on our Credit Agreement borrowings that is not
covered by our $45.0 million interest rate swap and assumes that the $48.2
million average outstanding borrowings during the fourth quarter of 2006 is
indicative of our future average borrowings for 2007 before considering
additional borrowings required for future acquisitions. The calculation also
assumes that there are no other changes in our financial structure or the terms
of our borrowings. Management believes that the fair value of the debt equals
its carrying value at December 31, 2006 and 2005. Our exposure to fluctuations
in interest rates will increase or decrease in the future with increases or
decreases in the outstanding amount under our Credit Agreement.


                                       18

<PAGE>

     In order to minimize our exposure to credit risk associated with financial
instruments, we place our temporary cash investments with high-credit-quality
institutions. Temporary cash investments, if any, are held in an institutional
money market fund and short-term federal agency discount notes.

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. Examples of forward-looking statements include statements regarding
our intention to increase and modify our Credit Agreement to accommodate the
acquisition of the Truststreet properties; our expectations regarding future
payments from Marketing, including $60.0 million in lease rental payments in
2007; the expected effect of regulations on our long-term performance; our
expected ability to maintain compliance with applicable regulations; our ability
to renew expired leases; the adequacy of our current and anticipated cash flows;
our belief that we do not have a material liability for offers and sales of our
securities made pursuant to registration statements that did not contain the
financial statements or summarized financial data of Marketing; our expectations
regarding future acquisitions; the impact of the covenants included in the
Credit Agreement on our current business practices; our ability to maintain our
REIT status; the probable outcome of litigation or regulatory actions; our
expected recoveries from underground storage tank funds; our exposure to
environmental remediation expenses; our estimates regarding remediation costs;
our expectations as to the long-term effect of environmental liabilities on our
financial condition; our exposure to interest rate fluctuations and the manner
in which we expect to manage this exposure; the expected reduction in
interest-rate risk resulting from our interest-rate swap agreement and our
expectation that we will not settle the interest-rate swap prior to its
maturity; the expectation that the Credit Agreement will be refinanced with
variable interest-rate debt at its maturity; our expectations regarding
corporate level federal income taxes; the indemnification obligations of the
Company and others; our intention to consummate future acquisitions; our
assessment of the likelihood of future competition; assumptions regarding the
future applicability of accounting estimates, assumptions and policies; our
intention to pay future dividends and the amount thereof; and our beliefs about
the reasonableness of our accounting estimates, judgments and assumptions.

     These forward-looking statements are based on our current beliefs and
assumptions and information currently available to us and involve known and
unknown risks (including the risks described herein and other risks that we
describe from time to time in our filings with the Securities and Exchange
Commission), 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; our unresolved SEC comment; competition for properties and
tenants; risk of tenant non-renewal; the effects of taxation and other
regulations; potential litigation exposure; costs of completing environmental
remediation and of compliance with environmental regulations; the risk of loss
of our management team; the impact of our electing to be treated as a REIT under
the federal income tax laws, including subsequent failure to qualify as a REIT;
risks associated with owning real estate concentrated in one region of the
United States; risks associated with potential future acquisitions; losses not
covered by insurance; future dependence on external sources of capital; the risk
that our business operations may not generate sufficient cash for distributions
or debt service; our potential inability to pay dividends and terrorist attacks
and other acts of violence and war.

     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.


                                       19

<PAGE>

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                                       20

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

     We have completed integrated audits of Getty Realty Corp.'s consolidated
financial statements and of its internal control over financial reporting as of
December 31, 2006 in accordance with standards of the Public Company Accounting
Oversight Board (United States). Our opinions, based on our audits, are
presented below:

Consolidated financial statements

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, comprehensive income and cash
flows present fairly, in all material respects, the financial position of Getty
Realty Corp. and its subsidiaries at December 31, 2006 and 2005, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2006, 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of
financial statements 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.

Internal control over financial reporting

     Also, in our opinion, management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that the
Company maintained effective internal control over financial reporting as of
December 31, 2006 based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2006, based on criteria established in Internal Control - Integrated Framework
issued by the COSO. The Company's management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on management's assessment and on the
effectiveness of the Company's internal control over financial reporting based
on our audit. We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management's assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other
procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.


/s/ PricewaterhouseCoopers LLP
New York, New York
March 15, 2007


                                       21

<PAGE>
                       GETTY REALTY CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                              ---------------------------
                                                2006      2005      2004
                                              -------   -------   -------
<S>                                           <C>       <C>       <C>
Revenues from rental properties               $72,405   $71,377   $66,331
Operating expenses:
   Rental property expenses                     9,732    11,770     9,814
   Environmental expenses, net                  5,490     2,428     6,027
   General and administrative expenses          5,607     4,925     5,006
   Depreciation and amortization expense        7,883     8,113     7,490
                                              -------   -------   -------
      Total operating expenses                 28,712    27,236    28,337
                                              -------   -------   -------
Operating income                               43,693    44,141    37,994
   Other income, net                            1,859     1,578     1,485
   Interest expense                            (3,527)   (1,765)     (127)
                                              -------   -------   -------
Net earnings before income taxes               42,025    43,954    39,352
Income tax benefit                                700     1,494        --
                                              -------   -------   -------
Net earnings                                  $42,725   $45,448   $39,352
                                              =======   =======   =======
Net earnings per common share:
   Basic                                      $  1.73   $  1.84   $  1.59
   Diluted                                    $  1.73   $  1.84   $  1.59
Weighted-average shares outstanding:
   Basic                                       24,735    24,711    24,679
   Stock options and restricted stock units        24        18        42
                                              -------   -------   -------
   Diluted                                     24,759    24,729    24,721
                                              =======   =======   =======
Dividends declared per share                  $  1.82   $  1.76   $  1.70
</TABLE>


                       GETTY REALTY CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)


<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                              ---------------------------
                                                2006      2005      2004
                                              -------   -------   -------
<S>                                           <C>       <C>       <C>
Net earnings                                  $42,725   $45,448   $39,352
Other comprehensive loss:
  Net unrealized loss on interest rate swap      (821)       --        --
                                              -------   -------   -------
Comprehensive Income                          $41,904   $45,448   $39,352
                                              =======   =======   =======
</TABLE>


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


                                       22

<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                               ---------------------
                                                                  2006        2005
                                                               ---------   ---------
<S>                                                            <C>         <C>
ASSETS:
Real Estate:
   Land                                                        $ 180,409   $ 171,839
   Buildings and improvements                                    203,149     198,656
                                                               ---------   ---------
                                                                 383,558     370,495
   Less -- accumulated depreciation and amortization            (116,089)   (109,800)
                                                               ---------   ---------
      Real estate, net                                           267,469     260,695
Deferred rent receivable                                          32,297      29,287
Cash and cash equivalents                                          1,195       1,247
Recoveries from state underground storage tank funds, net          3,845       4,264
Mortgages and accounts receivable, net                             3,440       3,129
Prepaid expenses and other assets                                  1,037       1,359
                                                               ---------   ---------
      Total assets                                             $ 309,283   $ 299,981
                                                               =========   =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Debt                                                           $  45,194   $  34,224
Environmental remediation costs                                   17,201      17,350
Dividends payable                                                 11,284      11,009
Accounts payable and accrued expenses                             10,029       9,515
                                                               ---------   ---------
      Total liabilities                                           83,708      72,098
                                                               ---------   ---------
Commitments and contingencies (notes 2, 3, 5 and 6)
Shareholders' equity:
   Common stock, par value $.01 per share; authorized
      50,000,000 shares; issued 24,764,765 at December
      31, 2006 and 24,716,614 at December 31, 2005                   248         247
Paid-in capital                                                  258,647     257,766
Dividends paid in excess of earnings                             (32,499)    (30,130)
Accumulated other comprehensive loss                                (821)         --
                                                               ---------   ---------
      Total shareholders' equity                                 225,575     227,883
                                                               ---------   ---------
      Total liabilities and shareholders' equity               $ 309,283   $ 299,981
                                                               =========   =========
</TABLE>

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


                                       23
<PAGE>

                       GETTY REALTY CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                               ------------------------------
                                                 2006       2005       2004
                                               --------   --------   --------
<S>                                            <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                   $ 42,725   $ 45,448   $ 39,352
Adjustments to reconcile net earnings
   to net cash flow provided by operating
   activities:
   Depreciation and amortization expense          7,883      8,113      7,490
   Deferred rental revenue                       (3,010)    (4,170)    (4,464)
   Gain on dispositions of real estate           (1,581)    (1,309)      (618)
   Accretion expense                                923        925      1,054
   Stock-based employee compensation
      expense                                       186        134         25
Changes in assets and liabilities:
   Recoveries from state underground
      storage tank funds, net                       772      1,557      2,512
   Mortgages and accounts receivable, net          (637)       497        238
   Prepaid expenses and other assets                322       (973)       306
   Environmental remediation costs               (1,425)    (4,585)    (4,474)
   Accounts payable and accrued expenses            393      1,414        495
   Accrued income taxes                            (700)    (1,494)        --
                                               --------   --------   --------
      Net cash flow provided by operating
         activities                              45,851     45,557     41,916
                                               --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Property acquisitions and capital
      expenditures                              (15,538)   (29,573)   (30,568)
   Collection of mortgages receivable, net          326        335      1,366
   Proceeds from dispositions of real
      estate                                      2,462      2,201      1,303
                                               --------   --------   --------
      Net cash flow used in investing
         activities                             (12,750)   (27,037)   (27,899)
                                               --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash dividends paid                          (44,819)   (43,025)   (41,951)
   Borrowings under credit agreement, net        11,000     10,000     24,000
   Repayment of mortgages payable, net              (30)      (285)      (335)
   Proceeds from stock options exercised            696        337         64
                                               --------   --------   --------
      Net cash flow used in financing
         activities                             (33,153)   (32,973)   (18,222)
                                               --------   --------   --------
Net decrease in cash and cash equivalents           (52)   (14,453)    (4,205)
Cash and cash equivalents at beginning of
   period                                         1,247     15,700     19,905
                                               --------   --------   --------
Cash and cash equivalents at end of period     $  1,195   $  1,247   $ 15,700
                                               ========   ========   ========
Supplemental disclosures of cash flow
   information
   Cash paid (refunded) during the year for:
   Interest                                    $  2,638   $  1,464   $    114
   Income taxes, net                                576        582        571
   Recoveries from state underground storage
      tank funds                                 (2,128)    (2,304)    (2,362)
   Environmental remediation costs                5,132      5,822      6,776
</TABLE>

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


                                       24

<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, real
estate, depreciation and amortization, impairment of long-lived assets,
litigation, accrued expenses, income taxes and exposure to uncertain tax
positions.

     Out of Period Adjustments: During the fourth quarter of 2005, the Company
recorded a reduction in net earnings of $693,000 as a result of adjustments
which should have been recorded in prior years or earlier quarterly periods of
2005. The adjustments consisted of: (a) $115,000 of rental income for lease
terminations that related to prior years and $185,000 related to earlier
quarters of 2005; (b) $1,534,000 of rent expense for a change in accounting for
rent expense from a contractual to a straight-line basis, which is related to
prior years, and; (c) $541,000 of gains on dispositions of real estate resulting
from a property taken by eminent domain that should have been recorded in the
second quarter of 2005. Management believes that these adjustments are not
material to any previously issued financial statements and that the impacts of
recording these adjustments are not material, individually or in the aggregate,
to the quarter or year ended December 31, 2005.

     Real Estate: Real estate assets are stated at cost less accumulated
depreciation and amortization. Upon acquisition of real estate operating
properties and leasehold interests, the Company estimates the fair value of
acquired tangible assets (consisting of land, buildings and improvements) "as if
vacant" and identified intangible assets and liabilities (consisting of
leasehold interests, above-market and below-market leases, in-place leases and
tenant relationships) and assumed debt. Based on these estimates, the Company
allocates the purchase price to the applicable assets and liabilities. When real
estate assets are sold or retired, the cost and related accumulated depreciation
and amortization is eliminated from the respective accounts and any gain or loss
is credited or charged to income. Expenditures for maintenance and repairs are
charged to income when incurred.

     Depreciation and amortization: Depreciation of real estate is computed on
the straight-line method based upon the estimated useful lives of the assets,
which generally range from sixteen to twenty-five years for buildings and
improvements, or the term of the lease if shorter. Leasehold interests,
capitalized above-market and below-market leases, in-place leases and tenant
relationships are amortized over the remaining term of the underlying lease.

     Cash and Cash 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 and lease
termination payments 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. Lease termination fees are
recognized as rental income when earned upon the termination of a tenant's lease
and relinquishment of space in which the Company has no further obligation to
the tenant.


                                       25

<PAGE>

     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, including legal obligations associated with the retirement of
tangible long-lived assets if the asset retirement obligation results from the
normal operation of those assets and a reasonable estimate of fair value can be
made. The environmental remediation liability is estimated based on the level
and impact of contamination at each property. The accrued liability is the
aggregate of the best estimate of the fair value of cost for each component of
the liability. Recoveries of environmental costs from state 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.
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.

     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: Legal fees related to litigation are expensed as legal services
are performed. The Company provides for litigation reserves, including certain
litigation related to environmental matters, when it is probable that a
liability has been incurred and a reasonable estimate of the liability can be
made. If the 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.

     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. In June 2006 the Financial Accounting
Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48")
"Accounting for Uncertainty in Income Taxes." FIN 48 addresses the recognition
and measurement of tax positions taken or expected to be taken in a tax return.
We do not believe that the adoption of FIN 48 in January 2007 will have a
material impact on our financial position or results of operation.

     Interest Expense and Interest Rate Swap Agreement: The Company entered into
an interest rate swap agreement with a major financial institution, designated
and qualifying as a cash flow hedge, to reduce its variable interest rate risk
by effectively fixing a portion of the interest rate for existing debt and
anticipated refinancing transactions. The Company has not entered into financial
instruments for trading or speculative purposes. The fair value of the
derivative is reflected on the consolidated balance sheet and will be
reclassified as a component of interest expense over the remaining term of the
interest rate swap agreement since the Company does not expect to settle the
interest rate swap prior to its maturity. The fair value of the interest rate
swap obligation is based upon the estimated amounts the Company would receive or
pay to terminate the contract and is determined using an interest rate market
pricing model. Changes in the fair value of the agreement would be recorded in
the consolidated statements of operations if the agreement was not an effective
cash flow hedge for accounting purposes.

     Earnings per Common Share: Basic earnings per common share is computed by
dividing net earnings by the weighted-average number of common shares
outstanding during the year. Diluted earnings per common share also gives effect
to the potential dilution from the exercise of stock options and the issuance of
common shares in settlement of restricted stock units.


                                       26

<PAGE>

     Stock-Based Compensation: Compensation cost for the Company's stock-based
compensation plans using the fair value method was $186,000, $134,000 and
$25,000 for the years ended 2006, 2005 and 2004, respectively and is included in
general and administrative expense. In 2004, stock options granted prior to 2003
were accounted for using the intrinsic value method. Historically, the exercise
price of options granted by the Company was the same as the market price at the
grant date and stock-based compensation expense was not included in reported net
earnings. Had compensation cost for the Company's stock options granted prior to
2003 been accounted for in 2004 using the fair value method rather than the
intrinsic value method, the Company's total stock-based employee compensation
expense would have increased by $93,000 to $118,000; pro-forma net earnings
would have decreased to $39,259,000, as compared to reported net earnings of
$39,352,000; and net earnings of $1.59 per common share would have remained the
same. The impact of the accounting for stock-based compensation is, and is
expected to be, immaterial to the Company's financial position and results of
operations.

     New Accounting Pronouncement: In September 2006, the staff of the
Securities and Exchange Commission (the "Staff") released Staff Accounting
Bulletin No. 108 ("SAB 108"), "Considering the Effects of Prior Year
Misstatements When Quantifying Misstatements in Current Year Financial
Statements." In SAB 108, the Staff established an approach that requires
quantification of financial statement misstatements based on the effects of the
misstatements on each of the company's financial statements and the related
financial statement disclosures. This model is commonly referred to as the "dual
approach" because it requires quantification of errors under both the iron
curtain and the roll-over methods. The roll-over method focuses primarily on the
impact of a misstatement on the income statement--including the reversing effect
of prior year misstatements--but its use can lead to the accumulation of
misstatements in the balance sheet. The iron-curtain method focuses primarily on
the effect of correcting the period-end balance sheet with less emphasis on the
reversing effects of prior year errors on the income statement.

     There currently are no financial statement misstatements that have been
identified by the Company for which correcting adjustments have not been made.
Historically the Company has used the dual approach for quantifying identified
financial statement misstatements. The adoption of the provisions of SAB 108 in
2006 did not have any impact on the Company's financial position or results of
operation.

2. LEASES

     The Company leases or sublets its properties primarily to distributors and
retailers engaged in the sale of gasoline and other motor fuel products,
convenience store products and automotive repair services who are responsible
for the payment of taxes, maintenance, repair, insurance and other operating
expenses and for managing the actual operations conducted at these properties.
The Company's properties are primarily located in the Northeast and Mid-Atlantic
regions of the United States.

     The Company and Getty Petroleum Marketing Inc. ("Marketing"), are parties
to an amended and restated Master Lease Agreement (the "Master Lease"), which
became effective on December 9, 2000, and a coterminous supplemental lease for a
single property (collectively the "Marketing Leases"). As of December 31, 2006,
the Marketing Leases included nine hundred nine retail motor fuel and
convenience store properties and ten distribution terminals, one hundred
ninety-four 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 Marketing Leases include 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 Company estimates that Marketing makes annual real estate tax payments
for properties leased under the Marketing Leases of approximately $12.1 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 Marketing Leases, are not reflected
in the consolidated financial statements.

     Revenues from rental properties for the years ended December 31, 2006, 2005
and 2004 were $72,405,000, $71,377,000 and $66,331,000, respectively, of which
$60,103,000, $59,590,000 and $58,938,000, respectively, were received from
Marketing under the Marketing Leases. In addition, revenues from rental
properties for the years ended December 31, 2006, 2005 and 2004 includes
$3,010,000, $4,170,000 and $4,464,000, respectively, of deferred rental revenue
accrued due to recognition of rental revenue on a straight-line basis.


                                       27

<PAGE>

     Future minimum annual rentals receivable from Marketing under the Marketing
Leases and from other tenants, which have terms in excess of one year as of
December 31, 2006, are as follows (in thousands):

<TABLE>
<CAPTION>
                                        OTHER
YEAR ENDING DECEMBER 31,   MARKETING   TENANTS   TOTAL (A)
------------------------   ---------   -------   ---------
<S>                        <C>         <C>       <C>
   2007                     $ 60,030   $ 9,424    $ 69,454
   2008                       60,627     9,364      69,991
   2009                       60,932     9,084      70,016
   2010                       60,966     8,898      69,864
   2011                       61,007     9,048      70,055
Thereafter                   242,925    82,550     325,475
</TABLE>

(a)  Includes $107,203 of future minimum annual rentals receivable under
     subleases.

     Rent expense, substantially all of which consists of minimum rentals on
non-cancelable operating leases, amounted to $8,685,000, $10,765,000 and
$8,928,000 for the years ended December 31, 2006, 2005 and 2004, respectively,
and is included in rental property expenses using the straight-line method for
2006 and 2005 and when contractually due for 2004, which approximated the
straight-line method. Rent expense of $10,765,000 for the year ended December
31, 2005 includes an adjustment of $1,534,000 recorded in the fourth quarter of
2005 for a change in accounting for rent expense to a straight-line basis (see
footnote 1). Rent received under subleases for the years ended December 31,
2006, 2005 and 2004 was $14,646,000, $15,240,000 and $14,943,000, 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 ten years, including
renewal options. Future minimum annual rentals payable under such leases,
excluding renewal options, are as follows: 2007 -- $8,162,000, 2008 --
$7,124,000, 2009 -- $5,452,000, 2010 -- $3,886,000, 2011 -- $2,515,000 and
$5,072,000 thereafter.

3. COMMITMENTS AND CONTINGENCIES

     In order to minimize the Company's exposure to credit risk associated with
financial instruments, the Company places its temporary cash investments with
high credit quality institutions. Temporary cash investments, if any, are held
in an institutional money market fund and federal agency discount notes.

     As of December 31, 2006, the Company leased nine hundred nineteen of its
one thousand fifty-two properties on a long-term net basis to Getty Petroleum
Marketing Inc. ("Marketing") under a master lease ("Master Lease") (see note 2).
Marketing operated substantially all of the Company's petroleum marketing
businesses when it was spun-off to the Company's shareholders as a separate
publicly held company in March 1997 (the "Spin-Off"). In December 2000,
Marketing was acquired by a subsidiary of OAO Lukoil, one of Russia's largest
integrated oil companies. The Company's financial results depend largely on
rental income from Marketing, and to a lesser extent on rental income from other
tenants, and are therefore materially dependent upon the ability of Marketing to
meet its obligations under the Marketing Leases. A substantial portion of the
deferred rental revenue, $31,079,000 of the $32,297,000 recorded as of December
31, 2006, is due to recognition of rental revenue on a straight-line basis under
the Marketing Leases. Marketing's financial results depend largely on retail
petroleum marketing margins and rental income from its dealers. The petroleum
marketing industry has been and continues to be volatile and highly competitive.
Marketing has made all required monthly rental payments under the Marketing
Leases when due.

     Under the Master Lease, the Company has also agreed to provide limited
environmental indemnification to Marketing, capped at $4,250,000 and expiring in
2010, for certain pre-existing conditions at six of the terminals which are
owned by the Company. Under the agreement, Marketing will pay the first
$1,500,000 of costs and expenses incurred in connection with remediating any
such pre-existing conditions, Marketing and the Company will share equally the
next $8,500,000 of those costs and expenses and Marketing will pay all
additional costs and expenses over $10,000,000. The Company has accrued $300,000
as of December 31, 2006 and 2005 in connection with this indemnification
agreement.


                                       28

<PAGE>

     The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In addition, the Company has retained
responsibility for certain legal proceedings and claims relating to the
petroleum marketing business that were identified at the time of the spin-off.
As of December 31, 2006 and 2005 the Company had accrued $2,872,000 and
$2,667,000, respectively, for certain of these matters which it believes were
appropriate based on information then currently available. The ultimate
resolution of these matters is not expected to have a material adverse effect on
the Company's financial condition or results of operations.

     In September 2003, the Company was notified by the State of New Jersey
Department of Environmental Protection that the Company is one of approximately
sixty potentially responsible parties for natural resource damages resulting
from discharges of hazardous substances into the Lower Passaic River. The
definitive list of potentially responsible parties and their actual
responsibility for the alleged damages, the aggregate cost to remediate the
Lower Passaic River, the amount of natural resource damages and the method of
allocating such amounts among the potentially responsible parties have not been
determined. In September 2004, the Company received a General Notice Letter from
the United States Environmental Protection Agency (the "EPA") (the "EPA
Notice"), advising the Company that it may be a potentially responsible party
for costs of remediating certain conditions resulting from discharges of
hazardous substances into the Lower Passaic River. ChevronTexaco received the
same EPA Notice regarding those same conditions. Additionally, the Company
believes that ChevronTexaco is contractually obligated to indemnify the Company,
pursuant to an indemnification agreement, for most of the conditions at the
property identified by the New Jersey Department of Environmental Protection and
the EPA. Accordingly, the ultimate legal and financial liability of the Company,
if any, cannot be estimated with any certainty at this time.

     From October 2003 through December 2006 the Company was notified that the
Company was made party to forty-one cases, in Connecticut, Florida,
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Vermont,
Virginia and West Virginia brought by local water providers or governmental
agencies. These cases allege various theories of liability due to contamination
of groundwater with MTBE as the basis for claims seeking compensatory and
punitive damages. Each case names as defendants approximately fifty petroleum
refiners, manufacturers, distributors and retailers of MTBE, or gasoline
containing MTBE. The accuracy of the allegations as they relate to the Company,
its defenses to such claims, the aggregate amount of damages, the definitive
list of defendants and the method of allocating such amounts among the
defendants have not been determined. Accordingly, the ultimate legal and
financial liability of the Company, if any, cannot be estimated with any
certainty at this time.

     Prior to the spin-off, the Company was self-insured for workers'
compensation, general liability and vehicle liability up to predetermined
amounts above which third-party insurance applies. As of December 31, 2006 and
2005, the Company's consolidated balance sheets included, in accounts payable
and accrued expenses, $332,000 and $291,000, respectively, relating to
self-insurance obligations. The Company estimates its loss reserves for claims,
including claims incurred but not reported, by utilizing actuarial valuations
provided annually by its insurance carriers. The Company is required to deposit
funds for substantially all of these loss reserves with its insurance carriers,
and may be entitled to refunds of amounts previously funded, as the claims are
evaluated on an annual basis. Although loss reserve adjustments may have a
significant impact on results of operations for any single fiscal year or
interim period, the Company currently believes that such adjustments will not
have a material adverse effect on the Company's long-term financial position.
The Company's consolidated statements of operations for the years ended December
31, 2006, 2005 and 2004 included, in general and administrative expenses,
credits of $301,000, $150,000 and $312,000, respectively, for self-insurance
loss reserve adjustments. Since the spin-off, the Company has maintained
insurance coverage subject to certain deductibles.

4. DEBT

     As of December 31, 2006, debt consists of $45,000,000 in borrowings under
the Credit Agreement, described below, and $194,000 of real estate mortgages,
bearing interest at a weighted-average interest rate of 4.3% per annum, due in
varying amounts through May 1, 2015. Aggregate principal payments in subsequent
years for real estate mortgages are as follows: 2007 -- $31,000, 2008 --
$33,000, 2009 -- $27,000, 2010 -- $21,000, 2011 -- $22,000 and $60,000
thereafter. These mortgages payable are collateralized by real estate having an
aggregate net book value of approximately $1,288,000 as of December 31, 2006.


                                       29

<PAGE>

     On June 30, 2005, the Company entered into an unsecured three-year senior
revolving $100,000,000 Credit Agreement ("Credit Agreement") with a group of six
domestic commercial banks which replaced the Company's outstanding $50,000,000
uncommitted line of credit with one bank. The Credit Agreement expires on June
30, 2008 and does not provide for scheduled reductions in the principal balance
prior to its maturity. Subject to the terms of the Credit Agreement, the Company
has the right to increase the Credit Agreement by $25,000,000 and to extend the
term of the Credit Agreement for one additional year.

     The annual commitment fee on the unused Credit Agreement ranges from 0.10%
to 0.20% based on the amount of borrowings. The Credit Agreement includes
customary terms and conditions, including financial covenants such as leverage
and coverage ratios and other customary covenants, including limitations on the
Company's ability to incur debt and pay dividends and maintenance of tangible
net worth and events of default, including a change of control and failure to
maintain REIT status. The Company does not believe that these covenants will
limit its current business practices.

     Borrowings under the Credit Agreement bear interest at a rate equal to the
sum of a base rate or a LIBOR rate plus an applicable margin based on the
Company's leverage ratio and ranging from 0.25% to 1.75%. In April 2006, the
Company entered into a $45,000,000 LIBOR based interest rate swap, effective May
1, 2006 through June 30, 2011. The interest rate swap is intended to effectively
fix, at 5.44%, the LIBOR component of the interest rate determined under the
credit agreement. Effective May 1, 2006, $45,000,000 of the Company's LIBOR
based borrowings under the credit agreement bear interest at an effective rate
of 6.69%.

     The Company entered into the interest rate swap agreement with a major
financial institution, designated and qualifying as a cash flow hedge, to reduce
its exposure to the variability in future cash flows attributable to changes in
the LIBOR rate. The Company's primary objective when undertaking the hedging
transaction and derivative position was to reduce its variable interest rate
risk by effectively fixing a portion of the interest rate for existing debt and
anticipated refinancing transactions. The Company determined, as of both the
hedging instrument's inception and as of December 31, 2006, that the derivative
used in the hedging transaction is highly effective in offsetting changes in
cash flows associated with the hedged item and that no gain or loss was required
to be recognized in earnings during the year representing the hedge's
ineffectiveness. At December 31, 2006, the Company's consolidated balance sheets
include, in accounts payable and accrued expenses, an obligation for the fair
value of the derivative of $821,000. For the year ended December 31, 2006, the
Company has recorded the loss in fair value of the swap contract related to the
effective portion of the interest rate contract totaling $821,000 in accumulated
other comprehensive loss in the Company's consolidated balance sheet. The
accumulated comprehensive loss will be reclassified as an increase in interest
expense over the remaining term of the interest rate swap agreement, (of which
approximately $89,000 is expected to be reclassified within the next twelve
months), since it is expected that the Credit Agreement will be refinanced with
variable interest rate debt at its maturity.

5. ENVIRONMENTAL EXPENSES

     The Company is subject to numerous existing federal, state and local laws
and regulations, including matters relating to the protection of the environment
such as the remediation of known contamination and the retirement and
decommissioning or removal of long-lived assets including buildings containing
hazardous materials, USTs and other equipment. Environmental expenses are
principally attributable to remediation costs which include installing,
operating, maintaining and decommissioning remediation systems, monitoring
contamination, and governmental agency reporting incurred in connection with
contaminated properties. Environmental remediation liabilities and related
assets are measured at fair value based on their expected future cash flows
which have been adjusted for inflation and discounted to present value. The net
change in estimated remediation cost and accretion expense included in
environmental expenses in the Company's consolidated statements of operations
aggregated $3,274,000, $1,415,000 and $3,346,000 for 2006, 2005 and 2004,
respectively, which amounts were net of changes in estimated recoveries from
state underground storage tank ("UST") remediation funds. Environmental expenses
also include project management fees, legal fees and provisions for
environmental litigation loss reserves.


                                       30

<PAGE>


     In accordance with the leases with certain tenants, the Company has agreed
to bring the leased properties with known environmental contamination to within
applicable standards and to regulatory or contractual closure ("Closure") in an
efficient and economical manner. Generally, upon achieving Closure at each
individual property, the Company's environmental liability under the lease for
that property will be satisfied and future remediation obligations will be the
responsibility of the Company's tenant. Generally the liability for the
retirement and decommissioning or removal of USTs and other equipment is the
responsibility of the Company's tenants. The Company is contingently liable for
these obligations in the event that the tenants do not satisfy their
responsibilities. A liability has not been accrued for obligations that are the
responsibility of the Company's tenants.

     Of the nine hundred nineteen properties leased to Marketing as of December
31, 2006, the Company has agreed to pay all costs relating to, and to indemnify
Marketing for, certain environmental liabilities and obligations for the
remaining two hundred nine properties that are scheduled in the Master Lease and
have not achieved Closure. The Company will continue to seek reimbursement from
state UST remediation funds related to these environmental expenditures where
available.

     The estimated future costs for known environmental remediation requirements
are accrued when it is probable that a liability has been incurred and a
reasonable estimate of fair value can be made. The environmental remediation
liability is estimated based on the level and impact of contamination at each
property. The accrued liability is the aggregate of the best estimate of the
fair value of cost for each component of the liability. Recoveries of
environmental costs from state UST remediation funds, with respect to both past
and future environmental spending, are accrued at fair value as income, net of
allowance for collection risk, based on estimated recovery rates developed from
prior experience with the funds when such recoveries are considered probable.

     Environmental exposures are difficult to assess and estimate for numerous
reasons, including the extent of contamination, alternative treatment methods
that may be applied, location of the property which subjects it to differing
local laws and regulations and their interpretations, as well as the time it
takes to remediate contamination. In developing the Company's liability for
probable and reasonably estimable environmental remediation costs, on a property
by property basis, the Company considers among other things, enacted laws and
regulations, assessments of contamination and surrounding geology, quality of
information available, currently available technologies for treatment,
alternative methods of remediation and prior experience. These accrual estimates
are subject to significant change, and are adjusted as the remediation treatment
progresses, as circumstances change and as these contingencies become more
clearly defined and reasonably estimable. As of December 31, 2006, the Company
had remediation action plans in place for two hundred seventy-three (93%) of the
two hundred ninety-two properties for which it retained environmental
responsibility and has not received a "no further action" letter and the
remaining nineteen properties (7%) remain in the assessment phase.

     As of December 31, 2006, 2005, 2004 and 2003, the Company had accrued
$17,201,000, $17,350,000, $20,626,000 and $23,551,000 respectively, as
management's best estimate of the fair value of reasonably estimable
environmental remediation costs. As of December 31, 2006, 2005, 2004 and 2003,
the Company had also recorded $3,845,000, $4,264,000, $5,437,000 and $7,454,000,
respectively, as management's best estimate for recoveries from state UST
remediation funds, net of allowance, related to environmental obligations and
liabilities. The net environmental liabilities of $13,086,000, $15,189,000 and
$16,097,000 as of December 31, 2005, 2004 and 2003, respectively, were
subsequently accreted for the change in present value due to the passage of time
and, accordingly, $923,000, $925,000 and $1,054,000 of net accretion expense is
included in environmental expenses for the years ended December 31, 2006, 2005
and 2004, respectively.

     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.

6. INCOME TAXES

     Net cash paid for income taxes for the years ended December 31, 2006, 2005
and 2004 of $576,000, $582,000 and $571,000, respectively, includes amounts
related to state and local income taxes for jurisdictions that do not follow the
federal tax rules, which are provided for in rental property expenses in the
Company's consolidated statements of operations.


                                       31

<PAGE>

     Earnings and profits (as defined in the Internal Revenue Code) is used to
determine the tax attributes of dividends paid to stockholders and will differ
from income reported for financial statement purposes due to the effect of items
which are reported for income tax purposes in years different from that in which
they are recorded for financial statement purposes. Earnings and profits were
$39,094,000, $38,200,000 and $31,900,000 for the years ended December 31, 2006,
2005 and 2004, respectively. The federal tax attributes of the common dividends
for the years ended December 31, 2006, 2005 and 2004 were: ordinary income of
88.0%, 88.8% and 75.3%; capital gains distributions of 0.2%, 0.04% and 0.8% and
non-taxable distributions of 11.8%, 11.2% and 23.9%, respectively.

     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. As of December 31, 2005 and
2004 the Company had accrued $700,000 and $2,194,000, respectively, for this and
certain other tax matters which it believes were appropriate based on
information then currently available. The accrual for uncertain tax positions is
adjusted as circumstances change and as the uncertainties become more clearly
defined, such as when audits are settled or exposures expire. Accordingly, an
income tax benefit of $700,000 and $1,494,000 was recorded in the third quarters
of 2006 and 2005, respectively, due to the elimination of, or net reduction in,
the amount accrued for uncertain tax positions since the Company believes that
the uncertainties regarding these exposures have been resolved or that it is no
longer likely that the exposure will result in a liability upon review. However,
the ultimate resolution of these matters may have a significant impact on the
results of operations for any single fiscal year or interim period.

7. SHAREHOLDERS' EQUITY

     A summary of the changes in shareholders' equity for the years ended
December 31, 2006, 2005, and 2004 is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                                   DIVIDENDS      ACCUMULATED
                                        COMMON STOCK                PAID IN          OTHER
                                      ---------------    PAID-IN   EXCESS OF     COMPREHENSIVE
                                      SHARES   AMOUNT    CAPITAL    EARNINGS          LOSS         TOTAL
                                      ------   ------   --------   ---------     -------------   --------
<S>                                   <C>      <C>      <C>        <C>           <C>             <C>
BALANCE, DECEMBER 31, 2003            24,664    $247    $257,206   $(29,428)         $  --       $228,025
Net earnings                                                         39,352                        39,352
Dividends -- $1.70 per common share                                 (41,963)                      (41,963)
Stock-based compensation                                      25                                       25
Stock options exercised                   30      --          64                                       64
                                      ------    ----    --------   --------          -----       --------
BALANCE, DECEMBER 31, 2004            24,694     247     257,295    (32,039)            --        225,503
                                      ------    ----    --------   --------          -----       --------
Net earnings                                                         45,448                        45,448
Dividends -- $1.76 per common share                                 (43,539)                      (43,539)
Stock-based compensation                                     134                                      134
Stock options exercised                   23      --         337                                      337
                                      ------    ----    --------   --------          -----       --------
BALANCE, DECEMBER 31, 2005            24,717     247     257,766    (30,130)            --        227,883
                                      ------    ----    --------   --------          -----       --------
Net earnings                                                         42,725                        42,725
Dividends -- $1.82 per common share                                 (45,094)                      (45,094)
Stock-based compensation                                     186                                      186
Net unrealized loss on interest
   rate swap                                                                          (821)          (821)
Stock options exercised                   48       1         695                                      696
                                      ------    ----    --------   --------          -----       --------
BALANCE, DECEMBER 31, 2006            24,765    $248    $258,647   $(32,499)(a)      $(821)      $225,575
                                      ======    ====    ========   ========          =====       ========
</TABLE>

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

     The Company is authorized to issue 20,000,000 shares of preferred stock,
par value $.01 per share, for issuance in series, of which none were issued as
of December 31, 2006, 2005, 2004 and 2003.


                                       32

<PAGE>

8. 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 Compensation Committee of the Board of
Directors. Also, under the Retirement Plan, employees may make voluntary
contributions and the Company has elected to match an amount equal to fifty
percent of such contributions but in no event more than three percent of the
employee's eligible compensation. Under the Supplemental Plan, a participating
executive may receive an amount equal to ten percent of eligible compensation,
reduced by the amount of any contributions allocated to such executive under the
Retirement Plan. Contributions, net of forfeitures, under the retirement plans
approximated $139,000, $141,000 and $139,000 for the years ended December 31,
2006, 2005 and 2004, respectively. These amounts are included in the
accompanying consolidated statements of operations.

     The Getty Realty Corp. 2004 Omnibus Incentive Compensation Plan (the "2004
Plan") provides for the grant of restricted stock, restricted stock units,
performance awards, dividend equivalents, stock payments and stock awards to all
employees and members of the Board of Directors. The 2004 Plan authorizes the
Company to grant awards with respect to an aggregate of 1,000,000 shares of
common stock through 2014. The aggregate maximum number of shares of common
stock that may be subject to awards granted under the 2004 Plan during any
calendar year is 80,000.

     In 2006, 2005 and 2004, the Company awarded 12,550, 12,550 and 10,800
restricted stock units ("RSUs") and dividend equivalents to employees,
respectively. All of the 35,900 RSUs awarded were outstanding as of December 31,
2006. The RSUs are settled subsequent to the termination of employment with the
Company. On the settlement date each RSU will have a value equal to one share of
common stock and may be settled, in the sole discretion of the Compensation
Committee, in cash or by the issuance of one share of common stock. The RSUs do
not provide voting or other shareholder rights unless and until the RSU is
settled for a share of common stock. Presently, 25,400 of the RSUs vest starting
one year from the date of grant, on a cumulative basis at the annual rate of
twenty percent of the total number of RSUs covered by the award, and 10,500 of
the RSUs vest on the fifth anniversary of their grant. The dividend equivalents
represent the value of the dividend paid per common share multiplied by the
number of RSUs covered by the award. The dividend equivalents awarded in 2004
initially vested over a five year period but the awards were subsequently
modified to be fully vested in 2005.

     The fair values of the RSUs were determined based on the closing market
price of the Company's stock on the date of grant. The fair value of the 2004
award was initially discounted for the value of the dividends that would not
have been paid during the vesting period of the dividend equivalents. The fair
values of the RSUs granted in 2006, 2005 and 2004 were estimated at $28.80,
$26.95 and $19.91 per unit on the date of grant with an aggregate fair value
estimated at $361,000, $338,000 and $215,000, respectively. The fair value of
the grants is recognized as compensation expense ratably over the five year
vesting period of the RSUs. The modification to the 2004 award increased its
fair value by $3.02 per unit or $33,000. The fair value of the modification is
recognized as compensation expense ratably over the then remaining fifty-one
month vesting period of the 2004 award. As of December 31, 2006, there was
$638,000 of total unrecognized compensation cost related to RSUs granted under
the 2004 Plan.

     The fair value of the 3,320 and 1,560 RSUs which vested during the years
ended December 31, 2006 and 2005 was $83,000 and $36,000, respectively. The
aggregate intrinsic value of the 35,900 outstanding and the 4,880 vested RSUs as
of December 31, 2006 were $1,109,000 and $151,000, respectively. For the years
ended December 31, 2006, 2005 and 2004, dividend equivalents aggregating
approximately $65,000, $41,000 and $1,000, respectively, were charged against
retained earnings when common stock dividends were declared.

     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 within ten years of the grant date. The Company has not granted
options since 2002. 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. As of December 31, 2006, all outstanding options were vested,
therefore there was no unrecognized compensation cost related to non-vested
options granted under the Stock Option Plan. The total fair value of the options
vested during the years ended December 31, 2006, 2005 and 2004 was $8,000,
$35,000 and $91,000, respectively. As of December 31, 2006 there were 1,750 and
11,000 options outstanding which were exercisable at prices of $16.15 and $18.30
with a remaining contractual life of 5 and 6 years, respectively.


                                       33
<PAGE>

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

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                 ----------------------------------------------------------------------------------------------------
                                          2006                                   2005                    2004
                 ----------------------------------------------------   ---------------------   ---------------------
                                          WEIGHTED-
                             WEIGHTED-     AVERAGE        AGGREGATE                 WEIGHTED-               WEIGHTED-
                              AVERAGE     REMAINING       INTRINSIC                  AVERAGE                 AVERAGE
                   NUMBER    EXERCISE    CONTRACTUAL        VALUE         NUMBER    EXERCISE      NUMBER    EXERCISE
                 OF SHARES     PRICE        TERM       (IN THOUSANDS)   OF SHARES     PRICE     OF SHARES     PRICE
                 ---------   ---------   -----------   --------------   ---------   ---------   ---------   ---------
<S>              <C>         <C>         <C>           <C>              <C>         <C>         <C>         <C>
Outstanding at
   beginning
   of year         84,378      $19.48                                    110,549      $18.64     173,085      $18.19
Exercised (a)     (71,628)      19.74                                    (23,374)      15.50     (60,344)      16.40
Cancelled              --          --                                     (2,797)      19.94      (2,192)      24.06
                  -------      ------                                    -------      ------     -------      ------
Outstanding
   at end of
   year            12,750      $18.00        5.9            $164          84,378      $19.48     110,549      $18.64
                  =======      ======        ===            ====         =======      ======     =======      ======
Exercisable
   at end of
   year (b)        12,750      $18.00        5.9            $164          69,503      $19.73      66,299      $18.63
                  =======      ======        ===            ====         =======      ======     =======      ======
Available for
   grant at
   end of year    665,870                                                665,870                 663,073
                  =======                                                =======                 =======
</TABLE>

(a)  The total intrinsic value of the options exercised during the years ended
     December 31, 2006, 2005 and 2004 was $704,000, $276,000 and $676,000,
     respectively.

(b)  Of the 44,250 non-vested options outstanding as of December 31, 2004,
     29,375 vested in 2005 and the remaining 14,875 vested in 2006.

9. QUARTERLY FINANCIAL DATA

     The following is a summary of the quarterly results of operations for the
years ended December 31, 2006 and 2005 (unaudited as to quarterly information)
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                         ---------------------------------------------------    YEAR ENDED
YEAR ENDED DECEMBER 31, 2006             MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
----------------------------             ---------   --------   -------------   ------------   ------------
<S>                                      <C>         <C>        <C>             <C>            <C>
Revenues from rental properties           $18,067     $18,180      $18,087         $18,071       $72,405
Net earnings before income tax benefit     10,531      11,112       10,576           9,806        42,025
Net earnings                               10,531      11,112       11,276           9,806        43,025
Diluted earnings per common share             .43         .45          .46             .40          1.73
</TABLE>

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                         ---------------------------------------------------    YEAR ENDED
YEAR ENDED DECEMBER 31, 2005             MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
----------------------------             ---------   --------   -------------   ------------   ------------
<S>                                      <C>         <C>        <C>             <C>            <C>
Revenues from rental properties           $17,396    $17,872       $17,768       $18,341         $71,377
Net earnings before income tax benefit     11,436     10,214(a)     11,272        11,032(a)       43,954
Net earnings                               11,436     10,214(a)     12,766        11,032(a)       45,448
Diluted earnings per common share             .46        .41           .52           .45            1.84
</TABLE>

(a)  The quarter ended December 31, 2005 includes adjustments (see footnote 1)
     which reduced net earnings by $693 comprised of: (a) a charge of $1,534 for
     rent expense related to prior years (see footnote 2); offset by income
     aggregating $300 for: (b) lease terminations of $115 related to prior years
     and $185 related to earlier quarters in 2005, and; (c) $541 of gains on
     sales of real estate resulting from a property taken by eminent domain
     related to the quarter ended June 30, 2005.


                                       34

<PAGE>

10. PROPERTY ACQUISITIONS

     On February 28, 2006, the Company completed the acquisition of eighteen
retail motor fuel and convenience store properties located in Western New York
for approximately $13,389,000. Simultaneous with the closing on the acquisition,
the Company entered into a triple-net lease with a single tenant for all of the
properties. The lease provides for annual rentals at a competitive rate and
provides for escalations thereafter. The lease has an initial term of fifteen
years and provides the tenant options for three renewal terms of five years
each. The lease also provides that the tenant is responsible for all existing
and future environmental conditions at the properties.

     On March 25, 2005, the Company acquired twenty-three convenience store and
retail motor fuel properties in Virginia for approximately $29,000,000. All of
the properties are triple-net-leased to a single tenant who previously leased
the properties from the seller and operates the locations under its proprietary
convenience store brand in its network of over 200 locations. The lease provides
for annual rentals at a competitive rate and provides for escalations
thereafter. The lease has an initial term of fifteen years and provides the
tenant options for three renewal terms of five years each. The lease also
provides that the tenant is responsible for all existing and future
environmental conditions at the properties.

     On November 1, 2004, the Company acquired thirty-six convenience store and
retail motor fuel properties located in Connecticut and Rhode Island for
approximately $25.7 million. Simultaneously with the closing on the acquisition,
the Company entered into a triple-net lease with a single tenant for all of the
properties. The lease provides for annual rentals at a competitive rate and
provides for escalations thereafter. The lease has an initial term of fifteen
years and provides the tenant options for three renewal terms of five years
each. The lease also provides that the tenant is responsible for all existing
and future environmental conditions at the properties, including those
properties where remediation activities are ongoing.



                                       35

<PAGE>

            CAPITAL STOCK, STOCK PERFORMANCE GRAPH AND CERTIFICATIONS

CAPITAL STOCK

     Our common stock is traded on the New York Stock Exchange (symbol: "GTY").
There were approximately 14,200 shareholders of our common stock as of March 15,
2007, of which approximately 1,300 were holders of record. The price range of
our common stock and cash dividends declared with respect to each share of
common stock during the years ended December 31, 2006 and 2005 was as follows:

<TABLE>
<CAPTION>
                                           PRICE RANGE       CASH
                                         ---------------   DIVIDENDS
PERIOD ENDED                              HIGH      LOW    PER SHARE
------------                             ------   ------   ---------
<S>                                      <C>      <C>      <C>
December 31, 2006                        $33.85   $28.84     $.4550
September 30, 2006                        30.43    27.16      .4550
June 30, 2006                             29.10    25.42      .4550
March 31, 2006                            29.99    26.12      .4550

December 31, 2005                        $28.94   $25.25     $.4450
September 30, 2005                        30.70    27.01      .4450
June 30, 2005                             29.35    24.81      .4350
March 31, 2005                            28.78    24.75      .4350
</TABLE>

     Please refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" for a
discussion of potential limitations on our ability to pay future dividends.



                                       36