Michelle Napoli is the editor of GlobeSt.com's sister publication, NetLease Forum.
NEW YORK CITY-Capital Lease Funding LLC, based here, plans to go public as a REIT with a $230-million IPO and expand beyond its historical focus as a debt financier for credit-tenant leased properties. The new company, to be called Capital Lease Funding Inc. and traded on the New York Stock Exchange, will target all pieces of the capital structure and expand its fee-based financial advisory services.
"We intend to invest across the net-lease market through a variety of structures, including development, acquisition and ownership of net-lease properties, joint ventures to develop and acquire net-lease properties, first mortgage financing, junior and mezzanine financing for owners of net-lease properties and corporate credit notes, a proprietary 10-year credit-tenant loan product that we developed," the company says in its Securities and Exchange Commission filing.
"Historically, we have sold substantially all of the loans we originated," the filing further states. "Following this offering, we intend to retain ownership of a significant portion of our assets, and finance those assets primarily through long-term fixed-rate financing structures. Many of our net-lease assets and securities investments are expected to be term financed through the use of collateralized debt obligations, or CDOs. We may use long-term debt mortgage debt to finance our equity net-lease investments." Company representatives did not return calls by deadline.
Capital Lease Funding has originated, structured and closed more than $2.4 billion in net-lease transactions since 1996, including participating in four securitizations totaling $1.5 billion. It boasts no defaults or delinquencies in its past transactions. The company's portfolio had a total of $53.5 million of loans at the end of the third quarter, with many-fold more in the due diligence, pipeline or term sheet stages. Portfolio tenants include Albertson's Inc., CVS Corp., the US Postal Service and Walgreen Co.
Capital Lease Funding filed for an IPO back in 1998 with a very different business model that would have focused on originating loans and then securitizing them, essentially serving as a CMBS conduit. But after the debt market meltdown that fall, the plans were postponed.
The company is currently owned by senior management; Wachovia Investors Inc., an affiliate of Charlotte-based Wachovia Bank NA; its chairman, Lewis S. Ranieri; and Hyperion Partners II LP, one of a family of investment funds controlled by Ranieri with offices in New York City and Uniondale, NY. Ranieri is also chairman of Jenkintown, PA-based American Financial Realty Trust, which is focused on net-leased bank and financial institution properties. Ranieri was vice chairman of the former Salomon Brothers Inc. and is credited with a pioneering role in the securitized mortgage market.
The offering is being underwritten by Friedman Billings Ramsey Co. and Wachovia Securities. The number and price of shares have not yet been determined.
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