LSE Caplease,

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 second quarter ended June 30, 2013. Net loss to common stockholders for the second quarter 2013 was $(2.8) million, and funds from operations, or FFO, as adjusted for comparability was $12.4 million.

Second Quarter 2013 Highlights:

• Merger Agreement with American Realty Capital Properties, Inc.
  • CapLease Common Stockholders to Receive $8.50 per Share in Cash
  • CapLease Preferred Stockholders to Receive $25.00 per Share in Cash

Paul McDowell, Chairman and Chief Executive Officer, stated, “The clear highlight for the second quarter is the announced merger transaction with American Realty Capital Properties, Inc. (“ARCP”). The transaction provides immediate, certain and compelling value for our common stockholders. The combination of CapLease’s primarily investment grade portfolio and team of experienced net lease experts with ARCP will create a stronger and more diversified company that will be well positioned to grow even further in the years ahead. As we move to complete this transaction, the CapLease team continues to be focused on pursuing acquisition opportunities in its deal pipeline.”

Second Quarter 2013 Results:

For the Three Months

Ended June 30,

(Amounts in thousands, except per share amounts) 2013   2012   Funds from operations $ 9,815   $ 18,566   Per Share $ 0.11   $ 0.28   Items that affect comparability (income) expense: Gain on derivatives (5 ) – Gain on extinguishment of debt, net – (9,000 ) Property acquisition costs 208 300 Merger related costs   2,421     –   Funds from operations, as adjusted for comparability $ 12,439   $ 9,866   Per Share $ 0.14   $ 0.15  

For the quarter ended June 30, 2013, the Company grew total revenues 14% to $45.1 million. The increase in total revenues reflects growth in the owned property portfolio. Rental revenue was up 11% for the 2013 period, reflecting the new properties acquired.

FFO adjusted for items that affect comparability was $12.4 million, or $0.14 per share, for the second 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 two warehouses 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 second quarter of 2013 was $(2.8) million, or $(0.03) per share, compared to net loss of $(8.9) million, or $(0.13) per share, in the comparable period in 2012. Second quarter 2012 net loss to common stockholders includes net non-recurring losses of $6.2 million, including the loss of $15.2 million on the sale of a property offset in part by $9.0 million of gain related to the repurchase of the certain mortgage debt at a discount.

Pending Merger:

During the second quarter, the Company entered into a definitive merger agreement with ARCP. Under the terms of the merger agreement, ARCP will acquire the Company, and common stockholders of the Company will receive $8.50 in cash for each share they own, plus any dividends declared by our Board through the merger closing date. The $8.50 per share price represents a premium to the recent trading price of the common stock, including a 19.7% premium over the closing price of $7.10 per share on May 24, 2013, the last trading day prior to the public announcement of the merger agreement, a 20.6% premium over the 30-day average trading price prior to May 24, 2013, and a 120.8% premium over the 52-week low trading price prior to May 24, 2013. The Company’s 40-day “go shop” period related to the merger concluded on July 7, 2013 without receipt of an alternative proposal to acquire the Company.

Preferred stockholders of the Company will receive the sum of $25.00 in cash plus an amount equal to any accrued and unpaid dividends up to but excluding the closing date, for each share they own. The merger transaction is expected to close during the third quarter of 2013, although closing is subject to various conditions, including the approval of the merger by the Company’s common stockholders.

A special meeting of the Company’s common stockholders will be held at 10:00 a.m., local time, on Tuesday, September 10, 2013, to consider and vote upon the merger and other related proposals. The close of business on July 12, 2013 has been fixed as the record date for determination of the Company’s common stockholders entitled to notice of, and to vote at, the special meeting of common stockholders.

New Property Investments:

During the second quarter, the Company closed on the acquisition of two previously announced real estate acquisitions for an aggregate purchase price exceeding $90 million. The Company purchased an approximately 188,000 square foot Class A office building located in Malvern, PA for a purchase price of $49.7 million. The property is leased entirely to Teva Pharmaceuticals U.S.A., Inc. as its corporate headquarters. The lease, which is scheduled to mature in October 2022, is guaranteed by the tenant’s Israeli parent company, Teva Pharmaceuticals Industries Limited, one of the top 10 pharmaceutical companies in the world. The Israeli parent company is rated A-/A3 by Standard & Poor’s/Moody’s.

The Company also purchased an approximately 196,000 square foot Class A office building located in Ann Arbor, MI for a purchase price of $43.9 million. The property is leased primarily to Con-Way Freight, Inc. as its corporate headquarters. The Con-Way lease is scheduled to mature in May 2023. Con-Way Freight, Inc. is a major subsidiary of Con-Way, Inc., an industry leading transportation, logistics and supply chain management company rated BBB-/Baa3 by Standard & Poor’s/Moody’s.

After substantially completing the Cimarex Energy Co. project in the first quarter, the Company continued to show strong momentum in its build-to-suit business during the second quarter. The Company entered into a new over $20 million project during the second quarter. The new 450,000 distribution warehouse will be located in Columbia, SC, and is being built for one of the largest private companies in the United States. The 10.5 year lease term will commence upon substantial completion of the building, which is scheduled for the first quarter of 2014.

Also during the second quarter, the Company substantially completed the previously announced Vitamin Shoppe build-to-suit project. The 312,000 square foot distribution facility located in Ashland, VA was substantially completed and the tenant commenced paying rent during June 2013. The lease with Vitamin Shoppe is for 15 years.

At June 30, 2013, the Company’s investment portfolio included $2.0 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 seven years.

The property portfolio comprises 13.1 million square feet and includes a variety of office, warehouse, retail and other property types. The Company owns 74 properties in 27 states with 44 different tenants. As of June 30, 2013, the occupancy rate across the owned property portfolio was 91.1%.

New Leases:

During the second quarter, we continued to make steady progress on the lease-up of vacancies in the portfolio, highlighted by the lease up of the Fort Wayne, IN property earlier this month.

The Company completed a new lease with The Procter & Gamble Manufacturing Company for the 764,177 distribution warehouse during August 2013. The lease is for one year commencing on November 1, 2013, and also includes a tenant option to extend the term for an additional five years. The annual rental rate during the one year term is $2.75 per square foot.

During July, the Company entered into a multi-year lease of 19,345 square feet at the multi-tenant office building at 1299 Farnam Street in Omaha, NE.

Financing Activity:

During the second quarter, the Company expanded the size of its revolving credit agreement in order to provide it with additional liquidity to continue to grow the portfolio pending the completion of the merger with ARCP. The Company increased the borrowing capacity under the revolver to $150 million. The additional $50 million in borrowing capacity will remain available for a period of six months until December 21, 2013, but may be extended for an additional six months upon payment of an extension fee by the Company and the satisfaction of certain other routine conditions. As of the date hereof, the Company has total available borrowing capacity of approximately $50 million under the revolving credit agreement, plus cash on hand of $17 million.

In connection with its acquisition of the Con-Way Freight property described above, the Company assumed approximately $30 million of non-recourse mortgage debt during the second quarter. The debt has a coupon of 4.0% and is scheduled to mature in September 2022.

Capital Activity:

During April 2013, the Company raised over $50 million of net proceeds through the sale of common stock. The proceeds were used to fund new portfolio acquisitions and repay maturing mortgage debt.

Six Month Results:

For the Six Months

Ended June 30,

(Amounts in thousands, except per share amounts) 2013   2012   Funds from operations $ 20,341   $ 31,140   Per Share $ 0.25   $ 0.47   Items that affect comparability (income) expense: Gain on derivatives (5 ) – Gain on investments other than real property, net – (709 ) Gain on extinguishment of debt, net – (11,012 ) Property acquisition costs 208 308 Merger related costs   2,421     –   Funds from operations, as adjusted for comparability $ 22,965   $ 19,727   Per Share $ 0.28   $ 0.30  

For the six months ended June 30, 2013, the Company reported total revenues of $88.5 million, compared to total revenues of $78.7 million in the comparable period of 2012. Rental revenue was up 9% for the 2013 period, reflecting the new properties acquired. FFO adjusted for items that affect comparability was $23.0 million, or $0.28 per share, compared to $19.7 million, or $0.30 per share, in the comparable period in 2012.

Net loss to common stockholders for the six months ended June 30, 2013 was $(4.3) million, or $(0.05) per share, compared to net loss of $(8.4) million, or $(0.13) per share, in the comparable period in 2012.

Dividends:

During the second quarter of 2013, the Company declared a cash dividend on its common stock in the amount of $0.0775 per share. 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, $0.5234375 on its 8.375% Series B Cumulative Redeemable Preferred Stock, and $0.453125 on its 7.25% Series C Cumulative Redeemable Preferred Stock.

Under the merger agreement with ARCP, the Company is permitted to continue to pay dividends on its outstanding stock through the merger closing date, provided that the dividend on its common stock may not exceed an annual rate of $0.31 per share.

Guidance:

Given the pending merger transaction with ARCP, the Company will no longer provide 2013 earnings guidance.

Conference Call:

Given the pending merger transaction with ARCP, the Company will not be conducting an earnings call regarding today’s earnings announcement.

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 gain or loss on derivatives, gain or loss on debt extinguishment, property acquisition costs and merger related 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.

• the possibility that various conditions precedent to the consummation of the pending merger transaction with ARCP will not be satisfied or waived;
• the occurrence of any effect, event, development, change or other circumstances that could result in the termination of the merger agreement;
• the inability to complete the proposed merger due to the failure to obtain stockholder approval for the merger or the failure to satisfy other conditions to completion of the merger;
• risks related to disruption of management’s attention from the Company’s ongoing business operations due to the pending merger;
• risks that the proposed transaction disrupts the Company’s current plans and operations, including potential difficulties in employee retention;
• the effect of the announcement of the merger on the Company’s relationships with its customers, developers, employees, tenants and lenders, and on the Company’s operating results and business generally;
• the outcome of any legal proceedings that have been, or may be, instituted against us and others relating to the merger, the merger agreement or the transactions contemplated by the merger agreement;
• risks to consummation of the merger, including the risk that the merger will not be consummated within the expected time period or at all;
• unanticipated difficulties and/or expenditures relating to the merger or the failure of the merger to close for any other reason; and
• restrictions on our ability to operate the business, including to add new assets and raise capital, imposed by the merger agreement.

Developments in any of those areas could cause actual results to differ materially from results that have been or may be projected. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set forth in 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 Securities and Exchange Commission (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.

Additional Information about the Proposed Merger and Where to Find It

In connection with the proposed merger, the Company filed a definitive proxy statement on Schedule 14A with the SEC on July 31, 2013. THE COMPANY’S COMMON STOCKHOLDERS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THESE MATERIALS CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED MERGER AND RELATED MATTERS. The proxy statement and other relevant materials, and any and all documents filed by the Company with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, investors may obtain a free copy of the Company’s filings with the SEC from the Company’s website at www.caplease.com under Investors—SEC Filings—Filings or by directing a request to: CapLease, Inc., 1065 Avenue of the Americas, New York, New York 10018, Attn: Investor Relations, (212) 217-6300.

Participants in Solicitation

This press release is neither a solicitation of proxy, an offer to purchase nor a solicitation of an offer to sell shares of the Company. The Company, its executive officers and directors may be deemed to be participants in the solicitation of proxies from the common stockholders of the Company in connection with the proposed merger. Information about those executive officers and directors of the Company and their ownership of the Company’s common stock is set forth in the Company’s proxy statement for its 2013 annual meeting of stockholders, which was filed with the SEC on April 19, 2013, and its Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 21, 2013. These documents may be obtained free of charge at the SEC’s website at www.sec.gov, on the Company’s website at www.caplease.com under Investors—SEC Filings—Filings and from the Company by directing a request to: CapLease, Inc., 1065 Avenue of the Americas, New York, New York 10018, Attn: Investor Relations, (212) 217-6300. Additional information regarding the interests of participants in the solicitation of proxies in connection with the merger was included in the definitive proxy statement on Schedule 14A, which the Company filed with the SEC on July 31, 2013, and may be updated or supplemented in other documents that the Company intends to file with the SEC.

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 and six months ended June 30, 2013 and June 30, 2012

For the Three Months

Ended June 30,

  For the Six Months

Ended June 30,

(Amounts in thousands, except per share amounts)

2013   2012     2013   2012   Revenues: Rental revenue $ 37,237 $ 33,697 $ 72,536 $ 66,678 Interest income from loans and securities 1,481 2,091 3,392 4,106 Tenant reimbursements 6,249 3,556 12,239 7,387 Other revenue   159     352       311     511   Total revenues   45,126     39,696       88,478     78,682   Expenses: Interest expense 16,210 16,965 32,507 33,943 Property expenses 9,266 6,615 18,340 13,032 Gain on derivatives (5 ) – (5 ) – General and administrative expenses 3,170 2,863 6,313 5,851 General and administrative expenses-stock based compensation 995 907 1,770 1,611 Merger-related costs 2,421 – 2,421 – Depreciation and amortization expense on real property 12,607 11,898 24,633 23,712 Other expenses   –     16       –     32   Total expenses   44,664     39,264       85,979     78,181   Other gains: Gain on investment – – – 709 Gain on extinguishment of debt, net   –     9,000       –     11,012   Total other gains   –     9,000       –     11,721   Income from continuing operations 462 9,432 2,499 12,222 Discontinued operations: Loss from discontinued operations – (634 ) – (1,366 ) Loss on investment   –     (15,229 )     –     (15,229 ) Total discontinued operations   –     (15,863 )     –     (16,595 ) Net income (loss) before non-controlling interest in consolidated subsidiaries 462 (6,431 ) 2,499 (4,373 ) Non-controlling interest in consolidated subsidiaries   5     18       8     17   Net income (loss) 467 (6,413 ) 2,507 (4,356 ) Dividends allocable to preferred shares   (3,254 )   (2,453 )     (6,791 )   (4,081 ) Net loss allocable to common stockholders $ (2,787 ) $ (8,866 )   $ (4,284 ) $ (8,437 )   Income (loss) per common share, basic: Income (loss) from continuing operations $ (0.03 ) $ 0.11 $ (0.05 ) $ 0.12 Loss from discontinued operations   –     (0.24 )     –     (0.25 ) Net loss per common share, basic $ (0.03 ) $ (0.13 )   $ (0.05 ) $ (0.13 ) Weighted average common shares outstanding, basic   87,975     66,767       82,111     66,540   Income (loss) per common share, diluted: Income (loss) from continuing operations $ (0.03 ) $ 0.11 $ (0.05 ) $ 0.12 Loss from discontinued operations   –     (0.24 )     –     (0.25 ) Net loss per common share, diluted $ (0.03 ) $ (0.13 )   $ (0.05 ) $ (0.13 ) Weighted average common shares outstanding, diluted   88,104     66,767       82,240     66,540   Dividends declared per common share $ 0.0775 $ 0.065 $ 0.155 $ 0.130 Dividends declared per preferred A share $ 0.50781 $ 0.50781 $ 1.01563 $ 1.01563 Dividends declared per preferred B share $ 0.52344 $ 0.50017 $ 1.04688 $ 0.50017 Dividends declared per preferred C share $ 0.45313 $ – $ 0.85590 $ –

CapLease, Inc. and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2013 and December 31, 2012

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

June 30,

2013

As Of

December 31,

2012

Assets Real estate investments, net $ 1,628,482 $ 1,541,416 Loans held for investment, net 24,061 26,972 Commercial mortgage-backed securities 58,859 62,318 Cash and cash equivalents 24,618 30,177 Other assets   86,000     89,560   Total Assets $ 1,822,020   $ 1,750,443   Liabilities and Equity Mortgages on real estate investments $ 991,483 $ 1,012,075 Credit agreements 99,457 67,655 Secured term loan 63,045 72,417 Convertible senior notes 19,210 19,210 Other long-term debt   30,930     30,930   Total Debt Obligations   1,204,125     1,202,287   Intangible liabilities on real estate investments 32,887 33,032 Accounts payable and other liabilities 27,113 27,926 Dividends and distributions payable   10,138     8,826   Total Liabilities   1,274,263     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, 1,832,000 and 3,447,182 shares issued and outstanding, respectively

 

 

39,363 79,776

  Series B cumulative redeemable preferred, liquidation preference $25.00 per share, 2,941,073 shares issued and outstanding

71,665 71,665

  Series C cumulative redeemable preferred, liquidation preference $25.00 per share, 1,700,000 and 0 shares issued and outstanding, respectively

39,689 – Common stock, $0.01 par value, 500,000,000 shares authorized, 88,845,604 and 73,658,045 shares issued and outstanding, respectively 888 737 Additional paid in capital 395,445 325,824 Accumulated other comprehensive loss   (297 )   (666 ) Total Stockholders' Equity   546,753     477,336   Non-controlling interest in consolidated subsidiaries   1,004     1,036   Total Equity   547,757     478,372   Total Liabilities and Equity $ 1,822,020   $ 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 and six months ended June 30, 2013 and June 30, 2012

  For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

(Amounts in thousands, except per share amounts) 2013   2012     2013   2012   Net income (loss) allocable to common stockholders $ (2,787 ) $ (8,866 ) $ (4,284 ) $ (8,437 ) Add (deduct): Non-controlling interest in consolidated subsidiaries (5 ) (18 ) (8 ) (17 ) Depreciation and amortization expense on real property 12,607 11,898 24,633 23,712 Depreciation and amortization expense on discontinued operations – 323 – 653 Loss on property sale on discontinued operations   –     15,229       –     15,229   Funds from operations   9,815     18,566       20,341     31,140   Add (deduct): Straight-lining of rents (1,383 ) (5,046 ) 1,738 8,051 General and administrative expenses-stock based compensation 995 907 1,770 1,611 Amortization of above and below market leases (434 ) (199 ) (903 ) (385 ) Non-cash interest income and expenses 298 419 253 721 Routine capital expenditures on real estate investments (296 ) (109 ) (567 ) (530 ) Gain on investments other than real property – – – (709 ) Gain on extinguishment of debt, net   –     (9,000 )     –     (11,012 ) Cash available for distribution $ 8,995   $ 5,538     $ 22,632   $ 28,887    

Weighted average number of common shares outstanding, diluted

88,104 66,767 82,240 66,540 Weighted average number of OP units outstanding   156     156       156     156   Weighted average number of common shares and OP units outstanding, diluted   88,260     66,923       82,396     66,696   Net loss per common share, basic and diluted $ (0.03 ) $ (0.13 ) $ (0.05 ) $ (0.13 ) Funds from operations per share $ 0.11 $ 0.28 $ 0.25 $ 0.47 Cash available for distribution per share $ 0.10 $ 0.08 $ 0.27 $ 0.43

CapLease, Inc. and Subsidiaries

Overall Company Leverage (unaudited)

As of June 30, 2013 and December 31, 2012

  Jun 30, 2013   Dec 31, 2012 Debt Unaudited   Mortgages on real estate investments $ 991,483 $ 1,012,075 Credit agreements 99,457 67,655 Secured term loan 63,045 72,417 Convertible senior notes 19,210 19,210   Other long-term debt   30,930       30,930   Total Debt $ 1,204,125     $ 1,202,287     Assets Total assets $ 1,822,020 $ 1,750,443 Accumulated depreciation and amortization on owned properties 322,983 297,675 Intangible liabilities on real estate investments (32,887 ) (33,032 ) Prepaid expenses and deposits (1,418 ) (1,798 ) Accrued rental income (33,405 ) (35,144 ) Debt issuance costs, net (5,474 ) (5,775 )   Other   (787 )     (398 ) Total Assets, as adjusted $ 2,071,033     $ 1,971,971     Leverage (Total Debt/Total Assets, as adjusted) 58 % 61 %

CapLease, Inc. and Subsidiaries

Leverage by Asset Type (unaudited)

As of June 30, 2013

              (in thousands)

MortgageDebt

Secured TermLoan Debt

Credit AgreementDebt

Total Debt Investment (1) Leverage Owned Properties $ 991,483 $ 12,899 $ 96,277 $ 1,100,659 $ 1,965,462 56 % Debt Investments – 50,146 3,180 53,326 83,477 64 %         (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.