CapLease Announces Third Quarter 2009 Results

November 4, 2009 7:00 AM EST

NEW YORK--(BUSINESS WIRE)-- CapLease, Inc. (NYSE: LSE), a real estate investment trust (REIT) focused on single-tenant commercial real estate investments, today announced its results for the third quarter ended September 30, 2009. Net (loss) to common stockholders was $(4.1) million, and funds from operations, or FFO, was $8.5 million.

Third Quarter 2009 Highlights:

    --  FFO of $0.28 Per Share Before Items Affecting Comparability, or $0.17
        Per Share Including Such Items
    --  Raising 2009 Guidance
    --  Reduced Credit Facility Balance To $129 Million, Extended Maturity Date
        Until April 2011
    --  Stable Revenues of $45.1 Million
    --  Increased Financial Flexibility And Liquidity, With Cash of $41 Million
        at Quarter-End

Third Quarter 2009 Results:

                                                      For the Three Months

                                                      Ended September 30

(Amounts in thousands, except per share amounts)      2009        2008

Funds from operations                                 $ 8,499     $ 11,478

Per Share                                             $ 0.17      $ 0.25

Items that affect comparability (income) expense:

Gain on derivatives                                     -           (444   )

Loss on investments                                     5,912       1,025

Gain on extinguishment of debt                          (415   )    -

Funds from operations, as adjusted for comparability  $ 13,996    $ 12,059

Per Share                                             $ 0.28      $ 0.26

For the quarter ended September 30, 2009, the Company's total revenues were $45.1 million, compared to $45.5 million in the comparable period in 2008. Net (loss) to common stockholders for the third quarter of 2009 was $(4.1) million, or $(0.08) per share, compared to net (loss) of $(2.2) million, or $(0.05) per share in the 2008 period. FFO for the third quarter of 2009 was $8.5 million, or $0.17 per share, compared to $11.5 million, or $0.25 per share, in the 2008 period. Third quarter results included $5.9 million of loss on investments sold in connection with recourse debt reduction. FFO adjusted for items that affect comparability was $14.0 million, or $0.28 per share, compared to $12.1 million, or $0.26 per share, in the 2008 period.

Continued Debt Reduction:

During the quarter we lowered overall debt by an additional $37 million, for a total of $116 million since the beginning of 2009. As of September 30, 2009, the Company lowered borrowings on its recourse credit facility to $129 million, which allowed us to extend the maturity of the debt by an additional year, to April 2011. The Company is in continued discussions with the lender on a new facility that will extend the maturity further.

Paul McDowell, Chairman and Chief Executive Officer, stated, "We had a strong quarter. We continued to execute well on strengthening our balance sheet through debt reduction and continued delivery of stable and predictable cash flows from our portfolio of assets. We have reduced our total debt by $116 million in 2009, increased our cash on hand to $41 million at the end of the third quarter, and extended the maturity date of our credit facility until 2011."

Mr. McDowell continued, "The high credit quality of our portfolio of properties and debt investments along with our proactive approach to strengthening our balance sheet have allowed us to weather the intense storm of the past two years. Furthermore, they position us well to resume our growth as capital and activity flow back into the commercial real estate and net lease markets."

Investment Portfolio:

At September 30, 2009, the Company's portfolio before depreciation and amortization was approximately $2.0 billion, with 81% invested in owned properties. The weighted average underlying tenant credit rating on the Company's entire portfolio is A- from Standard & Poor's, with an average tenant rating on the owned property portfolio of A. Approximately 90% of the overall portfolio is invested in owned properties and loans on properties where the underlying tenant is rated investment grade and in investment grade rated real estate securities, with about 94% of the owned property portfolio leased to investment grade tenants. The weighted average remaining lease term on the Company's entire portfolio is approximately 9 years, including approximately 7 years on the owned property portfolio and approximately 17 years on the leases underlying the loan portfolio. Our loan portfolio is primarily comprised of seasoned fully amortizing first mortgage loans on properties leased to investment grade tenants.

Nine Month Results:

For the nine months ended September 30, 2009, the Company reported total revenues of $134.9 million, compared to total revenues of $137.2 million in the comparable period of 2008. Net (loss) to common stockholders for the nine months ended September 30, 2009 was $(2.8) million, or $(0.06) per share, compared to net (loss) of $(6.0) million, or $(0.13) per share, in the comparable period of 2008. FFO for the nine months 2009 was $36.6 million, or $0.75 per share, compared to FFO of $34.5 million, or $0.76 per share, in the comparable period of 2008. FFO adjusted for items that affect comparability was $40.5 million, or $0.83 per share, compared to $37.0 million, or $0.82 per share, in the 2008 period.

                                                      For the Nine Months

                                                      Ended September 30

(Amounts in thousands, except per share amounts)      2009        2008

Funds from operations                                 $ 36,601    $ 34,535

Per Share                                             $ 0.75      $ 0.76

Items that affect comparability (income) expense:

Loss on derivatives                                     -           1,418

Loss on investments                                     13,739      1,025

Gain on extinguishment of debt                          (9,829 )    -

Funds from operations, as adjusted for comparability  $ 40,511    $ 36,978

Per Share                                             $ 0.83      $ 0.82

Balance Sheet:

At September 30, 2009, the Company's assets included $1.6 billion in owned real property investments before depreciation and amortization, $224 million in loan investments, and $152 million in commercial mortgage-backed securities. Most of the Company's debt is long-term amortizing non-recourse fixed rate debt. Only 12% of the Company's debt is recourse and must be refinanced through 2012. That debt is comprised of the term credit facility with $129 million currently outstanding maturing in April 2011 and the Company's convertible senior notes with $52 million currently outstanding maturing in October 2012.

Dividends:

In the third quarter of 2009, the Company declared a cash dividend on its common stock in the amount of $0.05 per share. The level of CapLease's common dividend will continue to be determined by the operating results of each quarter, 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.

2009 Guidance:

CapLease is raising its full year 2009 guidance range to $0.99 to $1.01 of FFO per share, from $0.91 to $0.96 per share, and $(0.08) to $(0.06) of earnings per share (EPS), from $(0.16) to $(0.11) per share. CapLease is also raising its full year 2009 guidance range to $1.03 to $1.05 of cash available for distribution (CAD) per share, from $0.96 to $1.01 per share.

The Company's guidance estimates exclude the gain on debt extinguishment in the first nine months of 2009, other than approximately $0.06 of gain on the convertible debt the Company repurchased in January of 2009, and assume no gains or losses associated with debt extinguishment for the remainder of 2009. In addition, guidance estimates exclude the loss on investments in the first nine months of 2009 and assume no asset investment or disposition activity in 2009. Our guidance estimates also exclude tenant holdover rents and assume no capital raising activities, no portfolio impairments or losses, and no other gains or charges that may occur during the remainder of the year, and include assumptions with respect to interest rate levels on our floating rate facility, the level of property operating expenses and general and administrative expenses.

The difference between FFO and EPS is primarily depreciation and amortization expense on real property.

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 third quarter 2009 results at 10:00 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) 407-0789 or (201) 689-8562 for international participants. A simultaneous webcast of the conference call may be accessed by logging onto the Company's website at www.caplease.com under the Investor section.

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 1:00 p.m. (Eastern Time) today by dialing (877) 660-6853 or (201) 612-7415 for international participants. To access the telephonic replay, please enter account number 3055 along with conference ID 334639.

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, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

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, in 2008 and 2009, CAD has been adjusted to exclude the non-cash gains on debt extinguishment.

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. This adjusted FFO measure 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.

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.

    --  payment defaults on one or more of our asset investments;
    --  the impact to earnings associated with potential asset dispositions and
        debt repayments;
    --  the impact of any refinancing of or other amendment to our bank term
        credit facility;
    --  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 invests primarily in single tenant commercial real estate assets subject to long-term leases to high credit quality tenants.

CapLease, Inc. and Subsidiaries

Consolidated Statements of Operations

For the three and nine months ended September 30, 2009 and September 30, 2008

(Unaudited)

                                For the Three Months    For the Nine Months

                                Ended September 30      Ended September 30

(Amounts in thousands, except   2009        2008        2009         2008
per share amounts)

Revenues:

Rental revenue                  $ 34,592    $ 33,850    $ 102,342    $ 101,602

Interest income from loans and    7,621       8,662       23,592       26,519
securities

Property expense recoveries       2,700       2,827       8,416        8,430

Other revenue                     161         197         524          603

Total revenues                    45,074      45,536      134,874      137,154

Expenses:

Interest expense                  22,386      24,734      68,120       73,657

Property expenses                 4,759       4,845       14,903       14,341

(Gain) loss on derivatives        -           (444   )    -            1,418

Loss on investments               5,912       1,025       13,739       1,025

General and administrative        2,596       2,776       7,750        9,018
expenses

General and administrative
expenses-stock based              550         621         1,570        1,682
compensation

Depreciation and amortization     12,596      13,539      39,233       40,110
expense on real property

Loan processing expenses          76          80          232          207

Total expenses                    48,875      47,176      145,547      141,458

Gain on extinguishment of debt    415         -           9,829        -

Loss from continuing              (3,386 )    (1,640 )    (844    )    (4,304  )
operations

Income from discontinued          -           141         196          415
operations

Net loss before
non-controlling interest in       (3,386 )    (1,499 )    (648    )    (3,889  )
consolidated subsidiaries

Non-controlling interest in       13          11          9            29
consolidated subsidiaries

Net loss                          (3,373 )    (1,488 )    (639    )    (3,860  )

Dividends allocable to            (711   )    (711   )    (2,133  )    (2,133  )
preferred shares

Net loss allocable to common    $ (4,084 )  $ (2,199 )  $ (2,772  )  $ (5,993  )
stockholders

Earnings per share:

Net loss per common share,      $ (0.08  )  $ (0.05  )  $ (0.06   )  $ (0.13   )
basic and diluted

Weighted average number of
common shares outstanding,        50,179      45,555      48,539       44,902
basic and diluted

Dividends declared per common   $ 0.05      $ 0.20      $ 0.15       $ 0.60
share

Dividends declared per          $ 0.51      $ 0.51      $ 1.52       $ 1.52
preferred share

CapLease, Inc. and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2009 (unaudited) and December 31, 2008

                                                   As Of          As Of
(Amounts in thousands, except share and per share
amounts)                                           September 30,  December 31,

                                                   2009           2008

Assets

Real estate investments, net                       $ 1,446,555    $ 1,510,413

Loans held for investment, net                       223,841        285,779

Commercial mortgage-backed securities                152,180        161,842

Cash and cash equivalents                            41,231         8,439

Structuring fees receivable                          1,291          1,863

Other assets                                         75,488         77,189

Total Assets                                       $ 1,940,586    $ 2,045,525

Liabilities and Equity

Mortgages on real estate investments               $ 947,732      $ 972,324

Collateralized debt obligations                      263,300        268,265

Credit facility                                      129,188        189,262

Secured term loan                                    116,697        123,719

Convertible senior notes                             49,216         66,239

Other long-term debt                                 30,930         30,930

Total Debt Obligations                               1,537,063      1,650,739

Intangible liabilities on real estate investments    47,375         49,277

Accounts payable, accrued expenses and other         23,866         19,879
liabilities

Dividends and distributions payable                  3,296          711

Total Liabilities                                    1,611,600      1,720,606

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, 1,400,000 shares issued and outstanding       33,657         33,657

Common stock, $0.01 par value, 500,000,000 shares
authorized,

51,537,811 and 47,391,790 shares issued and          515            474
outstanding, respectively

Additional paid in capital                           319,197        317,565

Accumulated other comprehensive (loss)               (25,692   )    (28,118   )

Total Stockholders' Equity                           327,677        323,578

Non-controlling interest in consolidated             1,309          1,341
subsidiaries

Total Equity                                         328,986        324,919

Total Liabilities and Equity                       $ 1,940,586    $ 2,045,525

CapLease, Inc. and Subsidiaries

Reconciliation of Net Loss to Funds from Operations and Cash Available for
Distribution

(unaudited)

For the three and nine months ended September 30, 2009 and September 30, 2008

                                  For the Three Months    For the Nine Months

                                  Ended September 30      Ended September 30

(Amounts in thousands, except     2009        2008        2009        2008
per share amounts)

Net loss allocable to common      $ (4,084 )  $ (2,199 )  $ (2,772 )  $ (5,993 )
stockholders

Add (deduct):

Non-controlling interest in         (13    )    (11    )    (9     )    (29    )
consolidated subsidiaries

Depreciation and amortization       12,596      13,539      39,233      40,110
expense on real property

Depreciation and amortization
expense on discontinued             -           149         149         447
operations

Funds from operations               8,499       11,478      36,601      34,535

Add (deduct):

Straight-lining of rents            4,431       (1,290 )    5,825       3,775

General and administrative
expenses-stock based                550         621         1,570       1,682
compensation

Amortization of above and below     328         359         1,016       1,077
market leases

Non-cash interest income and        729         799         2,316       1,819
expenses

Routine capital expenditures on     (140   )    (78    )    (170   )    (94    )
real estate investments

Gain on extinguishment of debt      (415   )    -           (9,829 )    -

Cash available for distribution   $ 13,982    $ 11,889    $ 37,329    $ 42,794

Weighted average number of
common shares outstanding, basic    50,179      45,555      48,539      44,902
and diluted

Weighted average number of OP       156         239         156         255
units outstanding

Weighted average number of
common shares and OP units          50,335      45,794      48,695      45,157
outstanding, diluted

Net loss per common share, basic  $ (0.08  )  $ (0.05  )  $ (0.06  )  $ (0.13  )
and diluted

Funds from operations per share   $ 0.17      $ 0.25      $ 0.75      $ 0.76

Cash available for distribution   $ 0.28      $ 0.26      $ 0.77      $ 0.95
per share

    Source: CapLease, Inc.

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