With its net lease investment portfolio increasing by 144 percent to $1.2 billion, 2005 was a good year for New York, N.Y.-based Capital Lease Funding, Inc. (CapLease). The firm, whose revenue increased by 248 percent in 2005 to $73 million, added $148 million in net lease assets – including $95 million in property purchases – during the fourth quarter of 2005 alone.
   "The word is out that we are a reliable buyer, we are competitive on price, and we are willing to commit to close all cash so the certainty of execution is there. In addition, we are a long-term holder and companies entering into sale/leasebacks are looking for long-term landlords," explains Mike Heneghan, senior vice president-investments at Capital Lease Funding.
   Apparently Tiffany heard the word. In September 2005, CapLease acquired the main operational facility for Tiffany & Co.'s worldwide enterprise from Tiffany for $75 million in a sale/leaseback transaction. The acquisition was financed with a $58.4million, 10-year mortgage note at a 5.33-percent coupon rate. CapLease also issued an approximately $4.6-million, 10-year 5.33-percent coupon rate inter-company note on the property that can be used as collateral for future long-term financing structures. Upon closing, CapLease entered into a 20-year triple net lease with Tiffany.
   "Tiffany is a stellar company and they felt it was a good time to take the asset off the books and get operating lease treatment. They now can put the capital back into their business," notes Heneghan. "This is a core building for Tiffany, and they did not want someone to come in, buy the property, and flip it back out to 1031 buyers. Tiffany wanted a long-term landlord and that is our model – we buy properties and we hold them."
   According to Heneghan, the Tiffany acquisition puts CapLease's net lease portfolio at over $1.0 billion.
   "We look forward to continuing to build our net lease portfolio with high credit quality, long-term assets," concludes Heneghan.