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): October 1, 2007
CAPLEASE,
INC.
(Exact
name of registrant as specified in its charter)
|
Maryland
|
1-32039
|
52-2414533
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer 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
7.01. Regulation
FD Disclosure.
On
October 1, 2007, CapLease, Inc. issued a press release announcing a proposed
private placement of securities to qualified institutional buyers. A copy
of the
press release is attached as Exhibit 99.1 to this Current Report on Form
8-K.
In
connection with the proposed private placement, CapLease, Inc. has prepared
an
offering memorandum for distribution to potential purchasers. The securities
to
be issued in the private placement will not be registered under the Securities
Act of 1933, as amended, and will not be offered or sold absent registration
or
an applicable exemption from registration requirements. The sections entitled
“Our Structure” and “Recent Events” from the Offering Memorandum are set forth
below:
Our
Structure
The
following chart summarizes the corporate structure of CapLease, Inc. and
its
principal subsidiaries as of June 30, 2007:
| (1) |
CapLease,
Inc. is a guarantor under our repurchase agreement, a borrower
under our
July/August 2007 $30 million revolving credit agreement and has acted
as guarantor for recourse exceptions under four of our property
level
mortgages.
|
| (2) |
Caplease
Debt Funding, LP is a joint and several borrower under our repurchase
agreement.
|
| (3) |
Caplease
Services Corp. is a joint and several borrower under our repurchase
agreement.
|
| (4) |
Caplease,
LP is a joint and several borrower under our repurchase agreement,
has
issued $30.9 million principal amount of junior subordinated notes
and has acted as guarantor for recourse exceptions under one of
our
property level mortgages.
|
| (5) |
Caplease
Credit LLC has acted as guarantor for recourse exceptions under
most of
our property level mortgages.
|
2
Recent
Events
The
following is a summary of recent events affecting us and our business since
June 30, 2007:
Credit
Market Conditions
The
credit markets for commercial and residential mortgage products have recently
entered a period of significant uncertainty, driven in part by concerns about
sub-prime residential mortgage loans. Although we have no exposure to any type
of residential mortgage loan, this recent market disruption has impacted us
in a
variety of ways, including by:
| · |
making
it difficult for us to price and finance new investment opportunities
on
attractive terms. As a result, our investment pace has slowed
significantly in the third quarter, with assets added to the portfolio
of
approximately $3.8 million since July 1, 2007;
|
| · |
causing
our short-term borrowing rates to increase, primarily as a result
of
increases in August and September in the London Interbank Offered
Rate, or
LIBOR, the borrowing base under our repurchase agreement;
and
|
| · |
causing
a delay in the long-term financing of the mortgage assets intended
for our
next collateralized debt obligation, or
CDO.
|
If
this
disruption continues, the trends discussed above may continue and we may be
impacted in a variety of additional ways. For example, we may experience
challenges in raising additional capital, margin calls on our repurchase
agreement and impairment charges on our assets, particularly on our securities
investments. We may also seek to preserve liquidity until credit markets
normalize.
Valuation
of Securities
As
of
June 30, 2007, our investment portfolio included $212.5 million of
commercial mortgage-backed and other real estate securities. In accordance
with
Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting
for Certain Investments in Debt and Equity Securities,
we
classify these securities as available for sale and report them at fair value
on
our balance sheet, with unrealized gains and losses recorded as a component
of
equity on our balance sheet and other than temporary impairments included in
current earnings on our income statement.
As
a
result of the market disruption described above, our quarter-end valuations
of
these securities may reflect significant market value mark-downs. We believe
these mark-downs will be primarily a result of reduced trading activity for
the
securities and temporary credit spread widening among all asset classes, rather
than performance of the security classes or the collateral that supports these
classes. We do not expect to record a material impairment charge on any of
our
securities in the third quarter of 2007, as we do not currently expect a
decrease in cash flows from the securities we own or losses on any of the
underlying collateral and we intend to hold the securities for a sufficient
period of time to allow for a full recovery in value.
3
Liquidity
Position and Borrowing Activities
During
the third quarter of 2007, we took a number of steps to solidify our liquidity
position and add stability to our balance sheet. Much of this activity related
to financing and/or refinancing the assets included in the $364.4 million
portfolio we acquired in April 2007 (the “EntreCap Portfolio”).
| · |
On
July 2, 2007, we repaid in full the debt we assumed in connection
with the 11 Kroger properties included in the EntreCap Portfolio
with
borrowings under our repurchase
agreement.
|
| · |
On
July 16, 2007, we obtained long-term financing on the three Nestlé
properties included in the EntreCap Portfolio and repaid in full
our
remaining borrowings under the $211 million short-term bridge
borrowing facility we entered into with Wachovia Bank, N.A. in connection
with our acquisition of the EntreCap
Portfolio.
|
| · |
On
July 17, 2007 and August 24, 2007, we entered into a new
three-year revolving credit agreement with Wachovia Bank N.A., as
initial
lender and administrative agent (the “Revolver”). The Revolver provides
that we may borrow up to $30 million from time to time with borrowings
secured by a first mortgage on the Factory Mutual property included
in the
EntreCap Portfolio and an assignment of our interest in the lease
and
rents on the property. Borrowings under the Revolver may be used
for any
corporate purpose. We have not yet borrowed under the
Revolver.
|
| · |
On
August 24, 2007, we extended our short-term repurchase agreement with
Wachovia Bank, N.A. for another 364 days. Our core borrowing capacity
of
$250 million on the facility was extended until August 23, 2008
and our right to temporarily borrow up to $500 million on the
facility was extended until the closing of our next collateralized
debt
obligation, or CDO, issuance. We also agreed to repay approximately
$26.3
million of our borrowings under the repurchase agreement by the earlier
of
the closing of our next CDO issuance and February 24, 2008. As of
September 27, 2007, we had outstanding borrowings of
$386.5 million under the repurchase
agreement.
|
As
of
September 27, 2007, our short-term liquidity included cash on hand of
approximately $9.5 million, and availability under our Revolver of
$30 million.
Schedule
13D Filing
On
September 20, 2007, Inland American Real Estate Trust, Inc. and certain of
its
affiliates filed with the SEC a Schedule 13D related to its beneficial ownership
of more than five percent of our common stock. A copy of the filing can be
reviewed at http://www.sec.gov.
Item
9.01 Financial
Statements and Exhibits.
(d)
Exhibits.
|
Exhibit
|
Description
|
|
99.1
|
Press
Release dated October 1, 2007
|
4
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/ Shawn P. Seale | |
|
Shawn P. Seale |
||
| Senior Vice President, Chief Financial Officer and Treasurer | ||
Date:
October 2, 2007
5