CapLease Announces Fourth Quarter and Full Year 2012 Results


For the quarter ended December 31, 2012, the Company grew total revenues
seven percent to $41.6 million. The increase in total revenues reflects
growth in the owned property portfolio. Rental revenue was up eight
percent for the 2012 period, reflecting the new properties acquired.

FFO adjusted for items that affect comparability was $10.7 million, or
$0.16 per share, for the fourth quarter of 2012, compared to $10.4
million, or $0.16 per share, in the 2011 period.

Net loss to common stockholders for the fourth quarter of 2012 was
$(2.0) million, or $(0.03) per share, compared to net income of $14.4
million, or $0.22 per share, in the comparable period in 2011. Fourth
quarter 2011 net income to common stockholders includes the net impact
of discontinued operations, or a net gain of $15.9 million, driven
primarily by gain on debt extinguishment on a property that was
transferred to the lender in full satisfaction of the related
non-recourse mortgage debt.

New Property Investments:

During the year, the Company acquired or committed to acquire
approximately $190 million of new property assets, including
approximately $80 million of properties added during December which will
begin to increase our revenue and earnings results during 2013. The
eight new properties added during 2012 including one build-to-suit
transaction comprise 1.2 million square feet. Our average capitalization
rate across the properties is about 8.5% and average spread to the
actual or anticipated cost of debt is about 450 basis points. During the
year, we added a number of very high credit quality tenants to the
portfolio, such as Becton, Dickinson amp; Company, Praxair, Inc., ATamp;T
Services, Inc. and Comcast Corporation. Lease maturities for the new
properties are all at or beyond our portfolio average of six years, and
the properties are all located in good markets with strong growth
prospects. For more details regarding these new acquisitions please see
our prior press releases describing each transaction and our Form 10-K
for the year ended December 31, 2012 which will include when filed a
summary table of all of our owned properties.

Portfolio Management:

During 2012, we extended 1.9 million square feet of leases, including
five year agreements through December 2017 on the warehouse properties
we own in Breinigsville, PA and Lathrop, CA. The Breinigsville, PA
property was extended with the existing tenant Nestlà Holdings, Inc.,
and the Lathrop, CA property was extended with the subtenant Del Monte
Corporation. Our lease with Nestlà at the Fort Wayne, IN property
expired on December 31, 2012, and the Company is continuing to actively
market the property for re-lease.

We also extended $125 million of maturing debt during 2012, including
the extension of the $106 million securitized first mortgage note on the
Breinigsville, PA, Lathrop, CA and Fort Wayne, IN warehouse properties
for up to five years. The Company also repurchased the $11 million
junior mortgage note on the same warehouse properties for a purchase
price including costs of $2 million.

At December 31, 2012, the Company’s investment portfolio included $1.9
billion of primarily single tenant commercial real estate properties.
The weighted average tenant credit rating across the owned property
portfolio is A- from Standard amp; Poor’s, and the average remaining lease
term is approximately six years.

The property portfolio comprises 12.1 million square feet and includes a
variety of office, warehouse, retail and other property types. The
Company owns 71 properties in 25 states with 43 different tenants. As of
December 31, 2012, the occupancy rate across the owned property
portfolio was 92.9%, with the vacant space comprised principally of the
approximately 765,000 square foot vacant warehouse in Fort Wayne, IN.

New $100 Million Revolving Credit Facility and $10 Million Term Loan:

During 2012, the Company strengthened its bank lending relationships
with the addition of two new borrowing facilities.

During June, the Company added a new $100 million secured revolving
credit agreement with Wells Fargo Bank, NA which is expected to be the
Company’s primary short–term borrowing facility for the foreseeable
future. This three year facility will provide the Company with
significant financing and refinancing flexibility as new properties are
added to the portfolio and mortgage debt on properties already owned
mature. The facility was initially collateralized with a pool of 16
otherwise unencumbered real properties. The Company is in the process of
adding two recent property acquisitions totaling $26.1 million in
purchase price to the borrowing base, and expects to add additional real
estate properties to the collateral pool and increase the facility size
over time. The Company’s borrowings under the facility will bear
interest at prevailing LIBOR rates plus 275 basis points.

The Company also obtained a three year $10 million secured term loan
from KeyBank National Association. Proceeds from the new term loan were
used to replace and terminate the Company’s borrowing facility with
Wells Fargo that was scheduled to mature in July 2013. The Company
expects to cultivate and grow the relationship with KeyBank over time as
it continues to refinance and extend maturing debt.

Capital Activity:

During 2012, the Company raised approximately $110 million of net
proceeds through the sale of common stock and preferred stock. Other
than the sale of 2,000,000 shares of 8.375% Series B Cumulative
Redeemable Preferred Stock during April, all of the sales were executed
through the Company’s “at-the-market” offering program. The Company
raised net proceeds of (i) $32.2 million through the issuance of
6,891,080 shares of common stock at an average price of $4.76 per share
and (ii) $77.8 million through the issuance of 242,282 shares of 8.125%
Series A Cumulative Redeemable Preferred Stock and 2,941,073 shares of
8.375% Series B Cumulative Redeemable Preferred Stock. The Company has
fully utilized the proceeds from equity issuances during 2012, with
$98.9 million used to fund purchases of or improvements to owned
properties and the balance utilized to reduce indebtedness.

Balance Sheet:

At December 31, 2012, the Company’s assets included $1.9 billion in
owned real property investments before depreciation and amortization,
$27 million in loan investments, and $62 million in commercial
mortgage-backed securities. The Company continues to have strong
liquidity with about $53 million of cash on hand currently, and $14
million of additional borrowing capacity under its revolving credit
agreement which will grow to about $30 million of capacity once the
recent property acquisitions discussed above are added to the borrowing

The Company’s leverage on its owned property portfolio was approximately
59% as of December 31, 2012. CapLease expects its leverage to continue
to decrease over time, primarily as a result of scheduled principal
amortization on our debt which, net of principal collected on our debt
investments, averages about $30 million annually through 2014, and
expected lower or no leverage on new asset acquisitions.


During the fourth quarter of 2012, the Company declared a cash dividend
on its common stock in the amount of $0.075 per share, representing a
15% total increase for 2012, and a 7% increase from the third quarter of
2012. The level of CapLease’s common dividend is determined by the
Company’s operating results, economic conditions, capital requirements,
and other operating trends.

The Company also declared a cash dividend of $0.5078125 on its 8.125%
Series A Cumulative Redeemable Preferred Stock, and a cash dividend of
$0.5234375 on its 8.375% Series B Cumulative Redeemable Preferred Stock.

2013 Guidance:

CapLease expects full year 2013 FFO to be in the range of $0.55 to $0.60
per share, and earnings per share (EPS) to be in the range of $(0.07) to
$(0.03). The difference between FFO and EPS is primarily depreciation
and amortization expense on real property.

The expected decline in our year-over-year per share FFO reflects rent
roll-downs at the two warehouses properties in Breinigsville, PA and
Lathrop, CA under their new leases, and expected downtime and property
expenses associated with the Fort Wayne, IN and other 2013 expected
property vacancies. New property investments from 2012, the completion
of our two existing build-to-suit projects, and expected new investments
for 2013 will offset the decline to a large degree, but not completely
during 2013. As we re-lease the properties that have lease terminations
this year, those new leases will add to earnings in future years.

We expect to continue our acquisition momentum in 2013. For a variety of
reasons we do not forecast the timing, quantity and returns relating to
that acquisition activity. Our guidance projections are based primarily
on our existing portfolio. The Company’s guidance estimates also assume
no disposition activity and no gains or losses associated with asset
sales or debt extinguishment, no share repurchase activity, no portfolio
impairments or losses, and no other gains or charges that may occur
during the year. The guidance also includes our current estimates with
respect to additional capital needs, the timing and terms of re-leasing
maturing leases, interest rate levels on our floating rate facility, the
level of property operating expenses and general and administrative

The factors described in the Forward-Looking and Cautionary Statements
section of this release could cause actual results to differ materially
from our guidance.

Conference Call:

CapLease will hold a conference call and webcast to discuss the
Company’s fourth quarter and full year 2012 results at 10:00 am
(Eastern Time) today. Hosting the call will be Paul H. McDowell,
Chairman and Chief Executive Officer, and Shawn P. Seale, Senior Vice
President and Chief Financial Officer.

Interested parties may listen to the conference call by dialing (877)
407-3982 or (201) 493-6780 for international participants. A
simultaneous webcast of the conference call may be accessed by logging
onto the Company’s website at

A replay of the conference call will be available on the Internet at
and the Company’s website for approximately fourteen days following the
call. A recording of the call also will be available beginning after
1:00 pm (Eastern Time) today by dialing (877) 870-5176 or (858) 384-5517
for international participants. To access the telephonic replay, please
enter conference ID 408365.

Non-GAAP Financial Measures:

Funds from operations (FFO) and cash available for distribution (CAD)
are non-GAAP financial measures. The Company believes FFO and CAD are
useful additional measures of the Company’s financial performance, as
these measures are commonly used by the investment community in
evaluating the performance of an equity REIT. The Company also believes
that these measures are useful because they adjust for a variety of
non-cash items (like depreciation and amortization, in the case of FFO,
and depreciation and amortization, stock-based compensation and
straight-line rent adjustments, in the case of CAD). FFO and CAD should
not be considered as alternatives to net income or earnings per share
determined in accordance with GAAP as an indicator of the Company’s
operating performance or as an alternative to cash flow as a measure of
liquidity. Since all companies and analysts do not calculate FFO and CAD
in a similar fashion, the Company’s calculation of FFO and CAD may not
be comparable to similarly titled measures reported by other companies.

The Company calculates FFO consistent with the NAREIT definition, or net
income (computed in accordance with GAAP), excluding gains (or losses)
from sales of property and impairment losses on depreciable real estate,
plus real estate-related depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Real
estate-related depreciation includes amortization of capitalized leasing
expenses, tenant allowances or improvements, and excludes amortization
of deferred financing costs.

The Company calculates CAD by further adjusting FFO to exclude
straight-line rent adjustments, stock-based compensation, above or below
market rent amortization and non-cash interest income and expense, and
to include routine capital expenditures on investments in real property
and capitalized interest expense (if any). The Company will also adjust
its CAD computations to exclude certain non-cash or unusual items. For
example, CAD for the 2012 and 2011 periods have been adjusted to exclude
non-recurring gains or losses on investments and any gain or loss on
extinguishment of debt.

The Company also discloses FFO as adjusted for items that affect
comparability, as it believes this measure is a useful proxy for
existing portfolio performance and, therefore, provides a meaningful
presentation of operating performance. Items that affect comparability
currently include gains or losses on the Company’s debt investments
which, unlike gains or losses on owned properties, are not excluded from
FFO under the NAREIT definition, gain or loss on debt extinguishment,
debt modification costs and property acquisition costs. FFO as adjusted
for items that affect comparability should not be considered as an
alternative to net income or earnings per share determined in accordance
with GAAP as an indicator of our operating performance or as an
alternative to cash flow as a measure of liquidity. It also differs from
the NAREIT’s definition of FFO and may not be comparable to similarly
titled measures reported by other companies.

The Company’s leverage ratios, which are among the financial metrics
used by management to review and analyze CapLease’s debt, are also
non-GAAP financial measures. Leverage ratios are a widely used financial
measure by the real estate investment community, especially for REITs.
We measure our leverage ratios by dividing total debt by total assets,
as adjusted. We measure total assets, as adjusted, at historical cost
before depreciation and amortization on owned properties. Therefore, our
leverage ratios do not account for any fluctuations in value, up or
down, that may have occurred since we acquired our owned properties.
Other companies including other REITs may compute leverage ratios in a
different manner and, therefore, our leverage ratios may not be
comparable to similarly titled measures reported by other companies.

Forward-Looking and Cautionary Statements:

This press release contains projections of future results and other
forward-looking statements that involve a number of trends, risks and
uncertainties and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The following
important factors could cause actual results to differ materially from
those projected in such forward-looking statements.

  • our ability to re-let vacant space on favorable terms in a timely
  • our ability to refinance or extend maturing debt obligations on
    favorable terms or at all;
  • payment defaults on one or more of our asset investments;
  • the impact to earnings associated with potential asset dispositions
    and debt repayments;
  • increases in our financing costs (including as a result of LIBOR rate
    increases), our general and administrative costs and/or our property
    expenses; and
  • our failure to comply with our debt obligations.

Developments in any of those areas could cause actual results to differ
materially from results that have been or may be projected. For a more
detailed discussion of the trends, risks and uncertainties that may
affect our operating and financial results and our ability to achieve
the financial objectives discussed in this press release, readers should
review the Company’s most recent Annual Report on Form 10-K, including
the section entitled “Risk Factors,” and the Company’s other periodic
filings with the SEC. Copies of these documents are available on our web
site at
and on the SEC’s website at
We caution that the foregoing list of important factors is not complete
and we do not undertake to update any forward-looking statement.

About the Company:

CapLease, Inc. is a real estate investment trust, or REIT, that
primarily owns and manages a diversified portfolio of single tenant
commercial real estate properties subject to long-term leases to high
credit quality tenants.

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