SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): September 8, 2011
 
CAPLEASE, INC.
(Exact name of registrant as specified in its charter)
 
Maryland
1-32039
52-2414533
(State or other jurisdiction
(Commission
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)
 
1065 Avenue of the Americas, New York, NY
10018
(Address of principal executive offices)
(Zip Code)

 
Registrant’s telephone number, including area code:   (212) 217-6300
 
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
Item 2.01.
Completion of Acquisition or Disposition of Assets.
 
As of September 8, 2011, CapLease, Inc. (the “Company”) has completed the previously announced sale of its March 2005 collateralized debt obligation transaction (“CDO”).  The CDO sale, which generated total cash proceeds excluding accrued interest of approximately $30.2 million, primarily included the transfer of the assets and liabilities comprising the CDO transaction to an affiliate of NorthStar Realty Finance Corp.  It also included the prepayment of three cross-collateralized first mortgage loans by the borrower.
 
Item 9.01. 
Financial Statements and Exhibits.
 
The following pro forma financial information is filed as part of this report.
 
(b) Pro forma financial information
 
The unaudited pro forma financial statements set forth:
 
 
·
the Pro Forma Condensed Consolidated Balance Sheet (unaudited) as of June 30, 2011;
 
 
·
the Pro Forma Condensed Consolidated Statement of Operations (unaudited) for the year ended December 31, 2010;
 
 
·
the Pro Forma Condensed Consolidated Statement of Operations (unaudited) for the six months ended June 30, 2011; and
 
 
·
the notes to Pro Forma Condensed Consolidated Financial Statements (unaudited).
 
The unaudited pro forma condensed consolidated balance sheet of the Company as of June 30, 2011 assumes the sale of the Company’s March 2005 collateralized debt obligation (the “CDO”) was consummated on June 30, 2011.  The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2010 and the six months ended June 30, 2011 assume the sale of the CDO occurred on January 1, 2010.  The pro forma condensed consolidated financial statements do not purport to represent what the Company’s financial position or results of operations would have been if the sale had been consummated as of the dates indicated, nor do they purport to project the Company’s financial position or results of operations at any future date or for any future period.  These pro forma condensed consolidated financial statements should be read in conjunction with the Company’s 2010 historical financial statements as included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011.
 
The pro forma financial statements are based upon assumptions contained in the notes thereto and should be read in conjunction with such notes.
 
 
 

 
 
CapLease, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
June 30, 2011
(Unaudited, in thousands)
 
   
CapLease, Inc. Historical
   
Pro Forma Adjustments
     
CapLease, Inc. Pro Forma
 
Assets
                   
Real estate investments, net
  $ 1,408,133     $       $ 1,408,133  
Loans held for investment, net
    187,047       (151,317 ) a     35,730  
Commercial mortgage-backed securities
    102,369       (41,187 ) a     61,182  
Cash and cash equivalents
    67,452       29,791   a     97,243  
Other assets
    109,997       (32,780 ) a     77,217  
Total Assets
  $ 1,874,998     $ (195,493 )     $ 1,679,505  
Liabilities and Equity
                         
Mortgages on real estate investments
  $ 954,170     $ 31,331   a   $ 985,501  
Collateralized debt obligations
    232,511       (232,511 ) a      
Credit agreement
    80,388       (5,471 ) a     74,917  
Secured term loan
    94,428                 94,428  
Convertible senior notes
    34,217                 34,217  
Other long-term debt
    30,930                 30,930  
Total Debt Obligations
    1,426,644       (206,651 )       1,219,993  
Intangible liabilities on real estate investments
    36,312                 36,312  
Accounts payable and other liabilities
    21,118       (1,867 ) a     19,251  
Dividends and distributions payable
    6,061                 6,061  
Total Liabilities
    1,490,135       (208,518 )       1,281,617  
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, 3,204,900 shares issued and outstanding
    73,880                 73,880  
Common stock, $0.01 par value, 500,000,000 shares authorized, 68,055,665 shares issued and outstanding
    682                 682  
Additional paid in capital
    335,685       (2,371 ) a     333,314  
Accumulated other comprehensive loss
    (26,512 )     15,396   a     (11,116 )
Total Stockholders' Equity
    383,735       13,025         396,760  
Non-controlling interest in consolidated subsidiaries
    1,128                 1,128  
Total Equity
    384,863       13,025         397,888  
Total Liabilities and Equity
  $ 1,874,998     $ (195,493 )     $ 1,679,505  
 
 
 

 
 
CapLease, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2010
(Unaudited, in thousands, except per share data)
 
   
CapLease, Inc. Historical
   
Pro Forma Adjustments
   
CapLease, Inc.
Pro Forma
 
Revenues:
                 
Rental revenue
  $ 125,662     $     $ 125,662  
Interest income from loans and securities
    27,620       (17,185 )  b     10,435  
Tenant reimbursements
    12,159               12,159  
Other revenue
    974               974  
Total revenues
    166,415       (17,185 )     149,230  
Expenses:
                       
Interest expense
    84,850       (12,015 )  b     72,835  
Property expenses
    24,715               24,715  
Loss on investments
    7,949               7,949  
General and administrative expenses
    10,659               10,659  
General and administrative expenses-stock based compensation
    2,541               2,541  
Depreciation and amortization expense on real property
    48,409               48,409  
Other expenses
    268       (181 )  b     87  
Total expenses
    179,391       (12,196 )     167,195  
Loss on extinguishment of debt
    (293 )             (293 )
Loss from continuing operations
    (13,269 )     (4,989 )     (18,258 )
Income from discontinued operations
    77               77  
Net loss before non-controlling interest in consolidated subsidiaries
    (13,192 )     (4,989 )     (18,181 )
Non-controlling interest in consolidated subsidiaries
    52               52  
Net loss
    (13,140 )     (4,989 )     (18,129 )
Dividends allocable to preferred shares
    (5,618 )             (5,618 )
Net loss allocable to common stockholders
  $ (18,758 )   $ (4,989 )   $ (23,747 )
Earnings per share:
                       
Net loss per common share, basic and diluted
  $ (0.33 )           $ (0.42 )
Weighted average number of common shares outstanding, basic and diluted
    56,189               56,189  
 
 
 

 
 
CapLease, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2011
(Unaudited, in thousands, except per share data)
 
   
CapLease, Inc. Historical
   
Pro Forma Adjustments
   
CapLease, Inc.
Pro Forma
 
Revenues:
                 
Rental revenue
  $ 64,952     $     $ 64,952  
Interest income from loans and securities
    12,613       (7,743 )  b     4,870  
Tenant reimbursements
    6,498               6,498  
Other revenue
    445               445  
Total revenues
    84,508       (7,743 )     76,765  
Expenses:
                       
Interest expense
    40,869       (5,803 )  b     35,066  
Property expenses
    13,330               13,330  
Loss on investments
    3,213               3,213  
General and administrative expenses
    5,505               5,505  
General and administrative expenses-stock based compensation
    1,468               1,468  
Depreciation and amortization expense on real property
    24,747               24,747  
Other expenses
    130       (87 )  b     43  
Total expenses
    89,262       (5,890 )     83,372  
Net loss before non-controlling interest in consolidated subsidiaries
    (4,754 )     (1,853 )     (6,607 )
Non-controlling interest in consolidated subsidiaries
    19               19  
Net loss
    (4,735 )     (1,853 )     (6,588 )
Dividends allocable to preferred shares
    (3,255 )             (3,255 )
Net loss allocable to common stockholders
  $ (7,990 )   $ (1,853 )   $ (9,843 )
Earnings per share:
                       
Net loss per common share, basic and diluted
  $ (0.13 )           $ (0.16 )
Weighted average number of common shares outstanding, basic and diluted
    62,521               62,521  
 
h. Adjustment for the reduction in interest income due to the sale of the related loans held for investment and commercial mortgage-backed securities.
 
i.  Adjustment to reflect the interest expense savings from the reduction of CDO related debt, net of the increase in interest expense from the debt on properties issued in connection with the sale of the CDO.
 
j.  Adjustment to reflect the reduction in servicer costs related to the assets disposed.
 
 
 

 
 
CapLease, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
 
1.      Basis of Presentation
 
The accompanying unaudited pro forma condensed consolidated financial statements are presented to reflect the sale of the Company’s March 2005 collateralized debt obligation, including the prepayment in a related transaction of three cross-collateralized first mortgage loans.
 
The accompanying unaudited pro forma condensed consolidated balance sheet presents the historical financial information of the Company as of June 30, 2011 as adjusted for the sale as if it had occurred on June 30, 2011.
 
The accompanying unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2010 and the six months ended June 30, 2011 presents the historical operations of the Company as adjusted for the sale as if it had occurred on January 1, 2010.
 
2.      Pro Forma Adjustments
 
The unaudited pro forma condensed consolidated financial statements reflect the following significant pro forma adjustments:
 
 
(a)
Adjustment to reflect the Company’s sale of the assets and associated liabilities comprising the Company’s March 2005 collateralized debt obligation transaction, including the prepayment in a related transaction of three cross-collateralized first mortgage loans.  Adjustments also include the cash repayment of $5,471 of borrowings on the Company’s credit agreement against an approximately 16% participation in one of the prepaid loans.  Adjustments also include a $31,331 increase to mortgages on owned property investments.  Because the property mortgages constitute part of the CDO collateral, they were previously eliminated in consolidation as intercompany debt.  Adjustments also include a $5,016 increase to commercial mortgage-backed securities for the fair value of Class A and Class B bonds in the CDO transaction which were previously purchased by the Company on the open market and were not included in the CDO sale.
 
 
(b)
Adjustment required for the removal of the interest income, interest expense and other expenses due to the sale of the assets and associated liabilities comprising the Company’s March 2005 collateralized debt obligation transaction, including the loan prepayment transaction described above.
 
 
 

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
CapLease, Inc.
 
       
 
By:
/s/ PAUL C. HUGHES  
    Paul C. Hughes  
   
Vice President, General Counsel &
Corporate Secretary
 
 
DATE: September 14, 2011