Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Brad Cohen - IR

Paul McDowell - Chairman and CEO

Shawn Seale - CFO

Analysts

Ambika Goel - Citi

Jeff Donnelly - Wachovia

Brian Roman - Robeco Investment Management

David Fick - Stifel Nicolaus

CapLease Inc. (LSE) Q1 2008 Earnings Call May 9, 2008 11:00 AM ET

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the CapLease Funding, First Quarter 2008 Earnings Call. During today's presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded today, May 9th, 2008. I'd now like to turn the conference over to Mr. Brad Cohen. Please go ahead, sir.

Brad Cohen

Thank you very much operator. Today I would like to remind everyone that part of our discussion this morning will include guidance and other forward-looking statements. And that these statements do not guarantee the future performance and therefore undue reliance should not be placed on them.

We refer all of you to CapLease’s first quarter 2008 earnings release and filings with the Securities and Exchange Commission for a more detailed discussion of important factors that could cause actual results to differ materially from those contained in the company's forward-looking statements. The company disclaims any obligation to update its forward-looking statements. Also during the call today the company will be discussing funds from operations or FFO and cash available for distribution or CAD, which are non-GAAP financial measures. Please see the company’s press release for a reconciliation of FFO and CAD to net income to the most directly comparable GAAP measure.

It's now my pleasure to turn the call over to CapLease's Chairman and Chief Executive Officer, Mr. Paul McDowell. Paul?

Paul McDowell

Thank you very much Brad and good morning everyone. With me on the call today as usual is my partner Shawn Seale, who is our Chief Financial Officer. This morning CapLease announced its results for the first quarter 2008 and they show not only significant sequential growth as compared to the corresponding period a year ago. But also the continuing earning stability of our core portfolio even with the largely non-cash charge we reported for the quarter.

As expected the first quarter was a quite one on the acquisition front. But very busy on a variety of other initiatives as we continue to strengthen our balance sheet and adapt to current market conditions. Importantly for CapLease, we reported last week the successful closing of a new $250 million, three year term facility to replace our existing one year warehouse line that was due to roll in August.

This is a very significant transaction for us, as it removes nearly all of our mark-to-market risk due to changes in market credit spreads and alleviates risk relating to near term debt maturity. While retaining the flexibility to grow as we see opportunity.

In looking at what would be the best approach for financing the assets on our warehouse lines in light of current market conditions. We decided that putting the assets in a flexible term structure that we could prepay at any time without penalty was by far the better economic decision than putting in place locked out 10 year financing.

Given the very high credit quality and transparency of our assets we believe very strongly that we will be able to refinance these assets with long-term fixed rate debt, once market conditions improve on terms that will be materially better then we could obtain today.

While our operational metrics during the quarter were solid and bode well for us over the long-term. The turmoil in the financial markets got significantly worse in the first quarter than they were in the fourth quarter of 2007, which hardly seemed possible.

Recent events though including aggressive action by the Federal Reserve seemed to have eased the liquidity crisis that threatens to upend the financial system. However, the coast is not clear and although the liquidity crisis maybe starting to resolve themselves, the broader economy is under significant pressure and that will impact the operating environment for the foreseeable future.

Question we need to answer for you today as best we can, is what is the impact of these continued unprecedented market conditions on CapLease. The answer has three components: first, not much when analyzing our investment grade $2.1 billion portfolio, which is of high credit quality with mostly match funded debt and supports our dividend CAD and FFO expectations for 2008. Second, we expect asset growth will continue to be limited until market conditions stabilize further, probably late in the second half of the year or even as far out as next year.

Third, while it may feel like it now, current conditions won't last forever, and based on our more than 13 years in this business, we think over the inter-mediate to longer-term that the market is coming strongly in our direction, which will allow us to further profitably grow the portfolio.

Although the overall volume of transactions in the overall market is down significantly due to the credit crisis. We continue to see the great majority of transactions in the investment grade net lease marketplace and are working on a number of them.

While we have seen some modest up tick in cap rates for investment grade net leased assets, they have remained quite steady throughout the current crisis. This is in stark contrast to the rapid upward movement in cap rates for net lease assets, leased to below investment grade tenants. And most particularly for non-credit retail properties, restaurant properties and those industries largely dependent on discretionary consumer spending.

Credit quality matters more than ever and that impacts the price of the types of high quality assets we invest in. But even with some modest cap rate improvement, the opportunities we are seeing today while better priced than we saw in the third and the fourth quarters of 2007 continued to be difficult to buy because of the temporary lack of attractive long-term first mortgage financing.

In a several year period that ended during the summer of 2007, assets were hard to come by at reasonable risk adjusted return levels, while debt and equity capital was abundant and cheap. Although assets were hard to find, our reputation and market franchise allowed us to build a very high quality $2.1 billion investment portfolio that is attractively financed and produced a strong long-term returns.

Today capital, particularly long-term mortgage capital is very hard to find at reasonable terms and that is now starting to drive price adjustments for assets, which are consequently getting easier to find as a result of fewer buyers in the market. These market dynamics are on-going. And in our view the current shortage of mortgage debt capital reflects a severe over reaction by lenders, particularly for investment grade, net leased to commercial real estate. Where sound credit quality and long-term fundamentals stand in contrast to the residential markets and other less credit worthy sectors of the commercial real estate market.

This financing volatility has begun to settle down over the past month as we have seen secondary CMBS and real estate investment trust credit default spreads tighten significantly, leading to an overall better tone to the market. The volatility like we have seen over the past several days remains.

As credit markets continues to stabilize, capital will be attracted to business platforms like ours that have long-term demonstrated franchise value, ability to acquire assets, strong relationships and product expertise. We have been approached by and are working with a variety of institutional investors on several joint ventures, for both the debt and equity components of our business and while we have nothing definitive to announce today, we are optimistic on completing one or more of these initiatives.

Before I turn the call over to Shawn, I want to comment briefly on our property in Rhode Island leased to FM Global. This property investment represents about 2.6% of our current portfolio. When we purchased the property as part of the larger $364 million [contra] cap transaction last year. We carefully considered and underwrote the risk that the tenant may not renew past the initial lease term expiration date of July 31st, 2009.

Given that the renewal rate is about 40% of what the tenant is paying now and is below current market and well below replacement cost. We believe when we bought the property that there was a significant likelihood that FM Global would send us a notice of lease renewal by the end of May 2008 as required under the lease.

While that date has not yet passed, and despite the very strong economic incentive to renew, the tenant has begun the process of building a new office building on land they own immediately adjacent to our building in Johnston. We were obviously aware when we bought the property that FM Global has the right to renew or not renew the lease on the building we own as the see fit. As it is a one way option to their benefit.

Whether or not they renew we have a significant investment in Johnston. Our recent legal actions are meant to protect our valuable investment there. And we are simply insisting through the course that the town of Johnston comply with their own planning and zoning ordinances that affected constituents in Johnston be given the time and the opportunity to examine and comment upon the development plans. And the major issues of traffic and storm water runoff be carefully considered and mitigated as necessary before any building is built.

Our goal is not to prevent FM Global from building a new office building, but rather to ensure that the extensive development they are proposing does not have a negative impact either on our property or on the property or quality of life of our Johnston neighbors. Since FM Global will continue to occupy the building under the existing lease for at least another 14 months, it is very early in the process and there remain a range of possible outcomes that can satisfy both CapLease and FM Global. We will continue to press our concerns vigorously within the confines of the established law and procedure of Rhode Island. I'll now turn the call over to Shawn.

Shawn Seale

Thank you, Paul. Today we reported FFO for the 2008 first quarter $11.1 million, which was up 37% compared to the $8.2 million we reported in the comparable period in 2007. On a per share basis FFO was $0.25 including a charge of $0.05 per share relating to hedge accounting. Without the charge FFO per share would have been $0.30 or a penny ahead of the high end of our first quarter guidance. The net loss to common shareholders was $2.3 million or $0.05 per share. Total revenues for the quarter were $46.5 million up 32% from $35.2 million in the first quarter of 2007.

It is worth a few words on the unusual charge we took this quarter relating to our hedge activity. Even though the hedge is performing operationally as expected hedge accounting is rather complex and heavily rules driven. Therefore accounting rules dictate when we report value changes on the hedge as a component of equity and when we take either a charge or income and earnings.

We always report that leakage is a separate line item in our P&L and when it occurs in a material way either positively or negatively were highlighted in our comments as we are doing today.

Last quarter due largely to the delays we have experienced in putting place long-term fixed rate financing as a result of the extreme credit market dislocations. A Portion of our hedge activity was deemed ineffective under hedge accounting rules and as a result $2.1 million or $0.05 per share of our hedge losses were recorded currently to the P&L rather than deferred on our balance sheet.

Of that number $1.5 million is non-cash. For the most part the cash portion largely reflects the monthly payments we made on our interest rate swap, where we pay a fixed rate and receive a floating rate. While this is a current charge to earnings, we expect it will have a long-term positive impact by lowering our effective interest rate on the expected [permanent] financing.

Turning briefly to our portfolio at quarter end our overall portfolio was $2.1 billion in investment assets about 78% of which are owned properties. Our diverse own property portfolio includes 62 properties across 26 states leased to 33 different tenants and exceeds 10 million square feet. Weighted average underlying Standard & Poor's tenant credit rating on our entire portfolio is single A minus and on our owned portfolio is single A.

Our two largest tenant exposures are the US government and Nestle Holdings. These tenants are rated AAA and AA respectively and comprise about 10.3% and 9.3% respectively of our portfolio. Our top 10 tenant exposures aggregating about 50% of the total portfolio, are all rated investment grade with an average credit rating of single A plus.

Let me provide some additional insight on the new $250 million revolving term facility. This new borrowing facility consolidates under one agreement. CapLease's warehouse facility and revolver. The financing for existing assets inline is initially priced at 200 basis points over one month LIBOR, which is a good level in today's environment and the facility is not subject to mark-to-market due to changes in market credit spreads for all the collateral other than the CMBS securities.

In connection with entering into the facility, we reduced outstandings from Wachovia by $14.6 million putting the current outstanding balance under the facility at approximately $210 million. The initial term of the facility is for two years and maybe extended in our option for an additional year, provided we meet certain conditions. We may prepay the facility at any time without penalty or premium.

As is typical under these types of facilities, the bank may request additional collateral in the event that there is a credit impairment to a specific asset as opposed to a general change in the markets with the exception of CMBS, which may be marked due to changes in the broader markets. However, CapLease's borrowings against CMBS securities on the new facility are very modest $15.6 million and on a conservative average advance rate of about 35% of their prior balances.

All of the CMBS in the facility backed by net leases, as opposed to generic CMBS and the securities are performing well. Overall our portfolio leverage stood at approximately 80% at March 31, which reflects the very high credit quality of our assets. We note that the leverage we employ on our own properties includes significant components of principle amortization that is scheduled to decline to slightly above 60% by the end of the financing term.

On March 31, we had $1.5 billion in net lease real estate investments, $292 million in loan investments, and $168 million in various net lease securities including CMBS. Overall total assets were $2.1 billion. As of today, we have approximately $22.5 million of cash and cash equivalents, $500,000 of cash in CDO pending reinvestment, and roughly $40 million available on due to new term facility.

In the first quarter we continued to report declines in the value of our securities portfolio, due to changes in market credit spreads. We have not experienced and do not currently expect any change in the cash flows from the securities we own or losses on the underlying collateral. And we intend to hold the securities for sufficient time to allow for full recovery and value.

Our guidance for the second quarter is for FFO to be in the range of $0.26 to $0.27 per share, and earnings per share to be in the range of minus $0.04 to $0.03 per share. As Paul mentioned earlier, in light of current market conditions, we expect that any new asset activity for 2008 will likely occur in the second half of the year with minimal impact on the 2008 results. As a result our guidance figures reflect maintaining the current portfolio level through the end of 2008. Our guidance figures also reflect variety of other assumptions discussed in today's press release.

As a reminder we compute FFO based on the NAREIT definition, differences between FFO and earnings per share are add backs to depreciation and amortization on our real estate properties and minority interest on our operating partnership units. FFO includes a deduction for stock-based compensation expense which was $0.04 per share in 2007 and is estimated to be roughly $0.05 per share in 2008. However, in analyzing the earnings power of the company we believe that it is appropriate to adjust FFO to add back stock-based compensation. Since it impacts reported FFO by both lowering FFO and increasing the share count.

For the second quarter of 2008, we expect stock-based compensation expense to be approximately $1.50 per share. As straight line rent adjustment for the first quarter was a positive $15.3 million as we received large rent payments in the first quarter from a number of the EntreCap properties. The total straight line rent adjustment is expected to be about negative $10.2 million for the second quarter of 2008 and negative $6.1 million in total for all of 2008.

I'll turn the call back over to Paul now for some final comments, before we open it up for questions.

Paul McDowell

Thanks, Shawn. Just a final thought or two. The first quarter was very solid and actually we slightly outperformed our expectations despite the unprecedented market turmoil. Our $2.1 billion investment grade portfolio continues to perform flawlessly and that is evident in the very strong operational results we announced today and our covered dividend whether or not FM Global renews.

We have moved aggressively to protect the balance sheet which is reflected in the term loan we announced last week. Being able to obtain such attractive financing in this market is a strong testament to our asset quality, underwriting expertise, and strong banking relationships. We now have no material debt maturities beyond scheduled amortization over next several years, which should remove concerns of near term refinancing risk.

Finally, we see some signs and conditions are beginning to improve and when they do we expect there will be a prolong period where there will be very favorable investment opportunities in our sector and we are working hard now on a number of initiatives to take advantage of those opportunities when they arise.

I will now open it up to questions. Operator can you please open the phone lines.

Question-and-Answer Session

Operator

Yes sir. Thank you (Operator Instructions) Our first question comes from the line of Ambika Goel with Citi. Please go ahead.

Ambika Goel - Citi

Hi this is Ambika Goel with Michael Bilerman. Could you go through just the underwriting process of the FM Global location and why you decided to move forward knowing that FM Global owned the land parcel next adjacent to its existing location?

Paul McDowell

Sure Ambika. I think first its important to remember back the FM Global property was a component of a larger portfolio of assets that we brought in the EntreCap transaction. That portfolio as a whole was enormously favorable property also from an investment purpose. That was a $364 million transaction.

When we looked at the FM Global property itself we underwrote carefully and when we went on the road discussing this transaction we talked with Hallmark participants that we met with. About the fact that this was a shorter than normal weak term for us. We were comfortable with the assets then and are comfortable now for a variety of reasons. One is the renewable rent that FM Global had once below market.

So we had a point of view that if in fact FM Global decided not to renew, then we would be able to reposition the asset and to retenant it in at a higher rent than FM Global's renewal rent anticipated. So we expected that they would have the economic incentive to renew but are comfortable that if they don't renew that we have in place a very valuable asset and just a little data point, maybe worthwhile mentioning.

A property quite near our facility in Rhode Island that had been built for Brooks Drugs a 238,000 square foot property was recently sold empty with no tenant in place for $126 per square foot. So we are very comfortable with that asset, with our asset in Johnston and to the extent that we need to retenant it. We are comfortable that we will be able to do so and we've got quite a bit of time to consider all those options.

Ambika Goel - Citi

Okay. Great. And then I think question traveler with the other two assets that also had near term maturities in the next five years. Can you talk about any expectations for those properties to also come back to you?

Paul McDowell

The, we shall comment very briefly, because the travelers property in Hartford, we own that property for the equivalent amount of a non-recourse debt. And we are continuing to work with that property to try to bring additional value out of that, and that debt of course amortizes quite steeply by the rent payments for the in place kind of. With respect to the properties in Omaha, Nebraska leased to Quest. Those properties are for the most part, sub-tenanted. So to the extent that Quest does not renew the leases of those properties, we would expect that cash flows will continue or perhaps even increase in both of those facilities.

Ambika Goel - Citi

Okay, great. And then can you just touch a little bit about potential acquisitions longer term. How do you think about your leverage longer term given that it could be difficult to finance your transactions that the leverage that you had previously?

Paul McDowell

Ambika it’s a good question. Obviously across the market sector, not necessarily related to CapLease at all, or even REITs at all. Leverage has now been under increasing focus. Whether it is a financial institution, a REIT, an investment bank so on and so forth. I would expect on a going forward basis and we are thinking about it on a going forward basis, that it is likely that properties that we buy in the future, we will probably utilize somewhat less leverage. That's not so much as a result of a concern about the cash flows to the assets, because we have a 13-14 year history where we see enormously stable cash flows. But will just simply reflect the new market reality and the pricing for financing. So I would say that when we look at assets going forward you will see we will probably be purchasing them at somewhat lower leverage than we had in the past.

Ambika Goel - Citi

Okay, great. And then on your tenant profile. Has there been any credit downgrades within your exposure either in your mortgage portfolio or in your property portfolio?

Paul McDowell

Nothing particular we have a very small exposure to Bank of America and they were downgraded from AA plus, I think to AA flat of something like that. But for the most part we had very stable credit migration within the portfolio so far. Expectation is that during a recessionary period, you might see some modest credit rating declines in the portfolio particularly if the recession is extensive. But its typically one to two notches which when you have a solid investment grade portfolio like ours, obviously does not impact the ability of those tenants to pay their obligations as they come to. Investment grade tenants have largely been pretty steady in their credit ratings.

Ambika Goel - Citi

Okay, great. So could we assume then that or could you provide your guidance then for any anticipated vacancies or bankruptcies in your portfolio?

Paul McDowell

Let me be crystal clear, Ambika. We do not anticipate any vacancies or bankruptcies within the portfolio. The only vacancies that we expect may occur would be as a result of a scheduled lease expiration date.

Ambika Goel - Citi

Okay, great. Thank you.

Paul McDowell

Yeah.

Operator

Thank you. Our next question is from the line of Jeff Donnelly with Wachovia. Please go ahead.

Jeff Donnelly - Wachovia

Hey, good morning guys. I'm not sure this is something you guys want to get into on the call, but I was curious do you have a sense what the break even analysis where at FM Global on exercising that five year option at a below market versus paying whole of a rent. I am guessing it's probably about 12 months. I guess thinking they stay in your building longer than 12 months beyond expiration they are probably better off exercising the renewal option?

Paul McDowell

Yeah, I'll just comment briefly Jeff. As is typical under lease transactions typically if tenants hold over past a schedule expiration date of the lease. Their renewal their holdover rent is generally 1.5 to 2.25 times existing rent. So the renewal rent, the existing rents for FM Global is $9.6 million per year and the renewal rent is $4 million per year. So we can all do the math of which it's probably close to a push.

Jeff Donnelly - Wachovia

Okay that’s helpful and have guys done this might be pre-mature too, but have guys done any work I wanted might be in tails from a cost perspective in retrofitting that building as expected. A single tenant facility obviously and I am guessing to reuse you might have to move it towards multi tenants?

Paul McDowell

Yeah, we actually have looked at that -- we looked at that Jeff quiet a bit even before we purchased the property. The property itself FM Global for a while had, did have a sub tenant in the property that occupied a component of it. It is a headquarters building with reasonably large floor place and so as a result it’s not necessarily amenable to converting it and we wouldn't expect to convert it from one tenant to forty tenants. It's quiet likely to the extent that we do multi-tenants a building it would be to two or three reasonable large users.

We are not sure exactly where we are going to end up with FM Global and then if we in fact do retenant the building we are not exactly sure who that new tenant. As it was hard to judge exactly how much TI will need to put into the building, but we are considering that, we are working on that now.

Jeff Donnelly - Wachovia

That’s great. And just last one question and I guess sticking in the category of premature questions. Just wanted to ask about investment opportunities, because we are now seeing signs, or early signs of improving in pockets of the financing market and you guys have certainly done a bit of work to reduce risk on your balance sheet. I know while I see stock is down over the past year, but you got many specialty finance companies down 40%, 50%, 60% even 80% that are certainly in better shape. Are there any interesting public-to-public combinations out there where you could maybe pick up assets cheap or diversify your asset base, spread your G&A and I guess maybe have some upside from turning things around for somebody else?

Paul McDowell

That’s a good question. And I'll say Jeff its cold comfort that someone else is down more than us. But yes, the answer there is a significant amount and it’s a reasonably short window of time I'm not sure how long it is. But there is a, there is a period where we're in today where you may find a distressed seller or some public-to-public transaction to that might make sense. In a current dislocated market that wouldn’t make sense when things were moving, were operating smoothly. So we are looking at a variety of opportunities across the market that may or may not include exactly what you are saying.

Jeff Donnelly - Wachovia

So like bankers, out there floating those types of ideas or is it still too early for that?

Paul McDowell

As you can imagine Jeff, we are constantly treated to a steady flow of visits from investment bankers and they come to our office and we discuss a variety of things from time-to-time and look at various opportunities in the marketplace.

Jeff Donnelly - Wachovia

Thanks guys.

Paul McDowell

Thank you.

Operator

Thank you. And our next question is from the line of [Brian Roman] with Robeco Investment Management. Please go ahead.

Brian Roman - Robeco Investment Management

Good morning. The bank line that you refinanced, that’s what you refer to as a repurchase agreement obligation?

Shawn Seale

Yes, that's correct.

Brian Roman - Robeco Investment Management

Okay, that's just terminologies, different then what I am using to see. Now, you are saying that you are not interested in taking on new assets at least until the second half of this year. I am not trying to pin you down to exact date, I am just trying to understand the logic. Yeah, you are talking about spreads improving and prices improving. Which is the cart, who is driving the horse here? Is it your expectation that prices are going to come down, and spreads widen on new investments or is it the liability side where you still don’t feel you have access to funding the way you'd like it. And I appreciate, there is a circularity to the whole discussion.

Shawn Seale

There is indeed a circularity to it. And it is mostly the latter component of your question. We are starting to see some investment opportunities that from a historic perspective, that is a spread, Cap rate spread versus the 10 year treasury, which are from historic perspective, quite attractive. But right now, we are not exactly sure where the long-term liability for that prices or if we do know where prices it seems to be not particularly attractive, a type of financing you would get today and regret tomorrow.

Brian Roman - Robeco Investment Management

And you feel you can't, you don’t want to put that short-term on the repurchase line.

Shawn Seale

Well, we could. And we do have some ability to do so, but it would need to be quite a very, very strong transaction where we would be willing to take the risk that for financing that asset on a later date, which we need some visibility on, we are hoping for some visibility on long-term financing. We are an extremely conservative investor. So we would rather have a defined and sort of some momentum to improvement in the market than trying to pick the bottom, which is where we feel like we maybe today.

Brian Roman - Robeco Investment Management

So its interesting, its just an academic discussion, but I guess I don't we have so many times with people, but so what a difference a year makes a year ago when capital market conditions where better you might have put it on the short-term line expecting to term it out and at this point you don't want to do that. Is that a correct assessment?

Shawn Seale

I think 100% correct

Brian Roman - Robeco Investment Management

Sure.

Shawn Seale

The world today is very different than it was a year ago and so that obviously colors our judgment with respect to investment decisions and investment pay.

Brian Roman - Robeco Investment Management

And if I don't know what sort of leverage you were previously using but you go $2.1 billion in assets divided by about $330 million in equity. So the whole balance sheet is leveraged ballpark 6/1. What sort of, you are using that as a proxy for discussion, what sort of lower leverage would you anticipate doing deals at in the future?

Shawn Seale

Our leverage today is actually about 80% rather than six to one. You are made to look at the un-depreciated book there.

Brian Roman - Robeco Investment Management

Okay.

Shawn Seale

But the historical level has been a little north of 80% from an initial leverage at the property level. I would expect that today we would close to 70% if we wish to do new transactions. So it's meaningfully lower but not dramatically lower I guess is a way to think about it.

Brian Roman - Robeco Investment Management

Okay. I don't have any more questions, now that's about it thank you very much, sure.

Shawn Seale

Sure.

Operator

Thank you and our next question from the line of David Fick of Stifel Nicolaus. Please go ahead.

David Fick - Stifel Nicolaus

Good morning. Most of my questions have actually been answered. General question effective LIBOR moves on you. Can you just comment on that?

Shawn Seale

Yeah, David. We've had some pick up in interest rate savings, obviously with LIBOR been lower. The interest rates swap that we have in place largely mitigates that from an economic standpoint. So we have some incremental pickup and that is largely why you will see that for our second quarter guidance is where it is versus the first quarter numbers as a result of moving out from the lower base or lower interest rate warehouse line to a new facility with Wachovia.

David Fick - Stifel Nicolaus

Okay. Then one final question back to Rhode Island, while you are on your quest to save the environment and your neighbors interest there. Just wondering what if anything you could say about the political environment with respect to that development and your building?

Paul McDowell

It's hard to comment on David. The political environment in Rhode Island in someway speaks for itself, so we are pursuing appropriate remedies in someway beyond the political environment.

David Fick - Stifel Nicolaus

Great thank you.

Paul McDowell

Okay.

Operator

(Operator Instructions) We have a follow up question from the line of Ambika Goel with Citi. Please go ahead.

Ambika Goel - Citi

Hi just a quick question on the new facility. Is there a plan to lock in that interest rate or are you going to leave it floating at this point?

Paul McDowell

We will leave it floating because we effectively had an economic hedge in place against that already with the swap that we have in place. So there is nothing else I can really do to lock that and our insulators from it.

Ambika Goel - Citi

Okay, and then just some on the hedge. I guess, is there anyway that we can get color on like the specific hedges and what rates they're at?

Paul McDowell

No. We only have a single swap open right now. The details of that are in our last filing and will be in our 10-Q file either today or on Monday.

Ambika Goel - Citi

Okay.

Paul McDowell

In terms of the specific cash flows and so on we don’t publish that.

Ambika Goel - Citi

Okay, thank you.

Operator

Thank you and at this time we have no further questions. Please continue with any closing remarks.

Paul McDowell

Thank you all very much for joining us this morning and we look forward to updating you on our next second quarter conference call in a few months time.

Operator

Thank you, Ladies and Gentlemen, this does conclude the CapLease Funding, first quarter 2008 earnings conference call. Thank you for your participation. And you may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: CapLease Inc. Q1 2008 Earnings Call Transcript
This Transcript
All Transcripts