CapLease Announces First Quarter 2013 Results

  CapLease Announces First Quarter 2013 Results

Business Wire

NEW YORK -- May 08, 2013

CapLease, Inc. (NYSE: LSE), a real estate investment trust (REIT) focused on
owning and managing single-tenant commercial real estate properties, today
announced its results for the quarter ended March 31, 2013. Net loss to common
stockholders for the first quarter 2013 was $(1.5) million, and funds from
operations, or FFO, was $10.5 million.

First Quarter 2013 and Subsequent Event Highlights:

  *Revenue Grew 11% to Over $43 Million
  *FFO of $0.14 Per Share
  *Over $90 Million of Property Acquisitions Under Contract
  *Increased Financial Strength With $80 Million of Additional Common Equity
  *Common Dividend Increased Again; Up 19% Since Second Quarter of 2012

Paul McDowell, Chairman and Chief Executive Officer, stated, “We have had a
strong start to 2013, highlighted by solid FFO results, over $90 million of
pending property acquisitions, continued growth in our market capitalization
which now exceeds $600 million, and our third consecutive quarter of raising
the common stock dividend. We have a large and growing pipeline of potential
acquisitions and remain optimistic about the prospects for our business and
our ability to grow the portfolio significantly for the year.”

First Quarter 2013 Results:

                                                       For the Three Months
                                                  
                                                       Ended March 31,
(Amounts in thousands, except per share            2013       2012     
amounts)
Funds from operations                              $ 10,525   $ 12,575 
Per Share                                          $ 0.14     $ 0.19   
Items that affect comparability (income)                         
expense:
Gain on investments other than real property             –            (709   )
Gain on extinguishment of debt, net                      –            (2,012 )
Property acquisition costs                          –         9      
Funds from operations, as adjusted for             $ 10,525   $ 9,863  
comparability
Per Share                                          $ 0.14     $ 0.15   

For the quarter ended March 31, 2013, the Company grew total revenues 11% to
$43.3 million. The increase in total revenues reflects growth in the owned
property portfolio. Rental revenue was up 7% for the 2013 period, reflecting
the new properties acquired.

FFO adjusted for items that affect comparability was $10.5 million, or $0.14
per share, for the first quarter of 2013, compared to $9.9 million, or $0.15
per share, in the 2012 period. Strong growth in the owned property portfolio
largely offset the impact of rent roll-downs at the two warehouse properties
in Breinigsville, PA and Lathrop, CA and downtime and property expenses
associated with the Fort Wayne, IN property.

Net loss to common stockholders for the first quarter of 2013 was $(1.5)
million, or $(0.02) per share, compared to net income of $0.4 million, or
$0.02 per share, in the comparable period in 2012. First quarter 2012 net
income to common stockholders includes non-recurring gains of $2.7 million,
including $2.0 million of gain related to the refinancing of the mortgage debt
on one of the Company’s owned properties.

New Property Investments and Portfolio Management:

The Company has entered into binding contracts to acquire two Class A office
buildings for an aggregate purchase price exceeding $90 million. One property
is located in a major market in the Northeastern United States and is
scheduled to close later this week. The other property is located in a strong
Midwest market and is subject to in-place mortgage financing which the Company
will assume. It is scheduled to close within 60 days, subject to completion of
the Company’s due diligence. Both properties are leased entirely or
substantially to an investment grade tenant for an approximately 10 year
remaining lease term, and the Company’s average capitalization rate for both
properties will be in the 8% range.

The Company continued to make progress on existing build-to-suit projects
during the quarter. The 17-story office building in Tulsa, OK was
substantially completed during the quarter, and Cimarex Energy Co. is in
possession of their space subject to a 12 year lease. The Vitamin Shoppe
distribution facility in Richmond, VA is scheduled for completion later in the
second quarter. The Vitamin Shoppe lease is 15 years.

At March 31, 2013, 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 & 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 March 31,
2013, the occupancy rate across the owned property portfolio was 92.9%.

During the first quarter of 2013, the Company extended an aggregate of 115,000
square feet of leases scheduled to expire over the next 12 months, including a
five year extension with the existing tenant at an 88,420 square foot retail
property located in Randolph, MA.

The Company also obtained mortgage financing on the recently purchased office
building in San Antonio, TX leased primarily to Becton, Dickinson & Company.
The $10 million non-recourse mortgage note has a coupon of 3.95% and a
maturity date in April 2023. The Company also added the two recently purchased
office buildings in Englewood, CO (leased to Comcast Corporation and Pulte
Mortgage LLC) to the collateral pledged to its revolving credit agreement, and
prepaid mortgage debt at three office buildings scheduled to mature in May
2013.

The Company’s leverage on its owned property portfolio was approximately 58%
as of March 31, 2013. CapLease expects its leverage to continue to decrease
over time, primarily as a result of scheduled principal amortization on debt
which, net of principal collected on debt investments, averages about $30
million annually through 2014, and expected lower or no leverage on new asset
acquisitions.

Capital Activity:

During 2013, the Company has raised over $80 million of net proceeds through
the sale of common stock. The Company also designated a new 7.25% Series C
Cumulative Redeemable Preferred Stock, and raised approximately $40 million of
that new series. The proceeds from the sale of the Series C Preferred Stock
were utilized to redeem the same amount of its 8.125% Series A Cumulative
Redeemable Preferred Stock.

Dividends:

During the first quarter of 2013, the Company declared a cash dividend on its
common stock in the amount of $0.0775 per share, representing a 3% increase
from the fourth quarter of 2012, and a 19% increase from the second 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, a cash dividend of $0.5234375 on its
8.375% Series B Cumulative Redeemable Preferred Stock, and a cash dividend of
$0.4027778 on its 7.25% Series C Cumulative Redeemable Preferred Stock.

2013 Guidance:

CapLease is affirming its previously disclosed full year 2013 guidance range
of $0.55 to $0.60 per share of FFO as adjusted for comparability, and $(0.07)
to $(0.03) of earnings per share (EPS). The difference between FFO and EPS is
primarily depreciation and amortization expense on real property.

As a reminder, for a variety of reasons the Company does not forecast the
timing, quantity and returns relating to future acquisition activity, although
our guidance does include the new investment and equity activities described
in this press release. The guidance projections are based primarily on the
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 facilities, the level of property operating
expenses and general and administrative expenses.

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
first quarter 2013 results at 11:00 a.m. (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
www.caplease.com.

A replay of the conference call will be available on the Internet at
www.streetevents.com and the Company’s website for approximately fourteen days
following the call. A recording of the call also will be available beginning
after 2:00 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 412606.

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 period has
been adjusted to exclude non-recurring gains on investments and gain 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 manner;
  *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
www.caplease.com and on the SEC’s website at www.sec.gov. 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.

CapLease, Inc. and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 2013 and March 31, 2012

                                                     For the Three Months

                                                     Ended March 31,
(Amounts in thousands, except per share amounts)     2013        2012      
Revenues:                                                        
Rental revenue                                       $ 35,299      $ 32,982
Interest income from loans and securities              1,911         2,013
Tenant reimbursements                                  5,990         3,832
Other revenue                                         152        159     
Total revenues                                        43,352     38,986  
Expenses:
Interest expense                                       16,297        16,978
Property expenses                                      9,073         6,418
General and administrative expenses                    3,144         2,987
General and administrative expenses-stock based        775           704
compensation
Depreciation and amortization expense on real          12,026        11,814
property
Other expenses                                        –          16      
Total expenses                                        41,315     38,917  
Other gains:
Gain on investments                                    –             709
Gain on extinguishment of debt, net                   –          2,012   
Total other gains                                     –          2,721   
Income from continuing operations                      2,037         2,790
Loss from discontinued operations                     –          (732    )
Net income before non-controlling interest in          2,037         2,058
consolidated subsidiaries
Non-controlling interest in consolidated              3          (1      )
subsidiaries
Net income                                             2,040         2,057
Dividends allocable to preferred shares               (3,538  )   (1,627  )
Net (loss) income allocable to common stockholders   $ (1,498  )  $ 430     
                                                                   
Income (loss) per common share, basic:
Income (loss) from continuing operations             $ (0.02   )   $ 0.02
Discontinued operations                               –          (0.01   )
Net (loss) income per common share, basic            $ (0.02   )  $ 0.01    
Weighted average common shares outstanding, basic     76,182     66,313  
Income (loss) per common share, diluted:
Income (loss) from continuing operations             $ (0.02   )   $ 0.02
Discontinued operations                               –          (0.01   )
Net (loss) income per common share, diluted          $ (0.02   )  $ 0.01    
Weighted average common shares outstanding, diluted   76,440     66,313  
Dividends declared per common share                  $ 0.0775      $ 0.065
Dividends declared per preferred A share             $ 0.50781     $ 0.50781
Dividends declared per preferred B share             $ 0.52344     $ –
Dividends declared per preferred C share             $ 0.40278     $ –
                                                                             

CapLease, Inc. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2013 and December 31, 2012

                                               As Of             As Of
(Amounts in thousands, except share and per
share amounts)                                 March 31,       December 31,

                                               2013              2012
Assets                                                        
Real estate investments, net                   $ 1,541,969       $ 1,541,416
Loans held for investment, net                   25,334            26,972
Commercial mortgage-backed securities            59,929            62,318
Cash and cash equivalents                        71,869            30,177
Other assets                                    85,155        89,560    
Total Assets                                   $ 1,784,256    $ 1,750,443 
Liabilities and Equity
Mortgages on real estate investments           $ 1,020,207       $ 1,012,075
Credit agreements                                57,009            67,655
Secured term loan                                66,485            72,417
Convertible senior notes                         19,210            19,210
Other long-term debt                            30,930        30,930    
Total Debt Obligations                          1,193,841     1,202,287 
Intangible liabilities on real estate            32,486            33,032
investments
Accounts payable and other liabilities           25,294            27,926
Dividends and distributions payable             9,683         8,826     
Total Liabilities                               1,261,304     1,272,071 
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 100,000,000
shares authorized:
Series A cumulative redeemable preferred,
liquidation preference $25.00 per share,         59,743            79,776
2,647,000 and 3,447,182 shares issued and
outstanding, respectively
Series B cumulative redeemable preferred,
liquidation preference $25.00 per share,         71,665            71,665
2,941,073 shares issued and outstanding
Series C cumulative redeemable preferred,
liquidation preference $25.00 per share,         39,702            –
1,700,000 and 0 shares issued and outstanding,
respectively
Common stock, $0.01 par value, 500,000,000
shares authorized, 79,454,301 and 73,658,045     795               737
shares issued and outstanding, respectively
Additional paid in capital                       350,425           325,824
Accumulated other comprehensive loss            (399      )    (666      )
Total Stockholders' Equity                      521,931       477,336   
Non-controlling interest in consolidated        1,021         1,036     
subsidiaries
Total Equity                                    522,952       478,372   
Total Liabilities and Equity                   $ 1,784,256    $ 1,750,443 

CapLease, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) to Funds from Operations and Cash
Available for Distribution (unaudited)
For the three months ended March 31, 2013 and March 31, 2012

                                                       For the Three Months

                                                       Ended March 31,
(Amounts in thousands, except per share amounts)       2013       2012     
Net income (loss) allocable to common stockholders     $ (1,498 )  $ 430
Add (deduct):
Non-controlling interest in consolidated subsidiaries    (3     )     1
Depreciation and amortization expense on real property   12,026       11,814
Depreciation and amortization expense on discontinued   –         330    
operations
Funds from operations                                   10,525    12,575 
Add (deduct):
Straight-lining of rents                                 3,121        13,097
General and administrative expenses-stock based          775          704
compensation
Amortization of above and below market leases            (469   )     (186   )
Non-cash interest income and expenses                    (45    )     301
Routine capital expenditures on real estate              (272   )     (421   )
investments
Gain on investments other than real property             –            (709   )
Gain on extinguishment of debt, net                     –         (2,012 )
Cash available for distribution                        $ 13,635   $ 23,349 
                                                                    
Weighted average number of common shares outstanding,    76,440       66,313
diluted
Weighted average number of OP units outstanding         156       156    
Weighted average number of common shares and OP units   76,596    66,469 
outstanding, diluted
Net (loss) income per common share, basic and diluted  $ (0.02  )   $ 0.01
Funds from operations per share                        $ 0.14       $ 0.19
Cash available for distribution per share              $ 0.18       $ 0.35

CapLease, Inc. and Subsidiaries
Overall Company Leverage (unaudited)
As of March 31, 2013 and December 31, 2012

                                          Mar 31, 2013    Dec 31, 2012
Debt                                           Unaudited      
  Mortgages on real estate investments         $ 1,020,207       $ 1,012,075
  Credit agreements                              57,009            67,655
  Secured term loan                              66,485            72,417
  Convertible senior notes                       19,210            19,210
 Other long-term debt                      30,930        30,930    
Total Debt                                     $ 1,193,841    $ 1,202,287 
                                                                 
Assets
  Total assets                                 $ 1,784,256       $ 1,750,443
  Accumulated depreciation and                   309,073           297,675
  amortization on owned properties
  Intangible liabilities on real                 (32,486   )       (33,032   )
  estate investments
  Prepaid expenses and deposits                  (1,566    )       (1,798    )
  Accrued rental income                          (32,023   )       (35,144   )
  Debt issuance costs, net                       (5,408    )       (5,775    )
 Other                                     (661      )    (398      )
Total Assets, as adjusted                      $ 2,021,185    $ 1,971,971 
                                                                 
Leverage (Total Debt/Total Assets, as            59        %       61        %
adjusted)

CapLease, Inc. and Subsidiaries
Leverage by Asset Type (unaudited)
As of March 31, 2013

(in             Mortgage         Secured       Credit                        Investment
thousands)    Debt           Term Loan   Agreement   Total Debt    (1)           Leverage
                                 Debt          Debt
Owned           $ 1,020,207      $ 14,932      $ 53,692      $ 1,088,831     $ 1,866,464     58%
Properties
Debt              –                51,553        3,317         54,870          85,823        64%
Investments

(1) Represents our carry value for financial reporting purposes before
depreciation and amortization on owned properties. The carry value of our debt
investments has been adjusted to exclude a $500 general loss reserve.

Contact:

Investor Relations/Media Contact:
ICR, LLC
Brad Cohen, 212-217-6393
bcohen@icrinc.com
 
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