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 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.

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.