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CapLease Signs Build-to-Suit Deal

Zacks Equity Research

CapLease, Inc. (LSE), a real estate investment trust (:REIT), has recently entered into a build-to-suit arrangement with Vitamin Shoppe, Inc. (VSI) that operates as a specialty retailer and direct marketer of vitamins, minerals, herbs, supplements, sports nutrition, and other health and wellness products in the U.S. CapLease will construct a Class A distribution warehouse spanning 311,730 square feet in Ashland, Virginia. On completion, the property will be leased to Vitamin Shoppe for a term of 15 years.
The site measures approximately 43 acres with the option of expanding the proposed building by an additional 250,000 square feet. The company entered into a development agreement with a large developer based in the Southeast and construction is expected to be completed during the second quarter of 2013.

CapLease’s investment in the project, including construction, is expected to be around $20 million with an average capitalization rate of approximately 8% covering the 15-year lease term.

This project is in line with CapLease’s ongoing expansion of its build-to-suit business. In addition, the location of the distribution facility in the strong Richmond industrial market makes it a premium asset for the company.

Earlier in the second quarter of 2012, CapLease also funded the construction of  a 324,000 square foot Class A build-to-suit office project in Tulsa, Oklahoma.

CapLease is focused on financing and investing in commercial real estate that is net leased primarily to single tenants with investment grade or near investment grade credit ratings. It provides private and corporate owners of net lease real estate with equity, debt, and mezzanine financing option.

CapLease currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Lexington Realty Trust (LXP) holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.

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