"I think today the crisis we've been through is more than a blip," W.P. Carey & Co. president and CEO Gordon DuGan said during last month's RealShare Net Lease conference. "People are going to have to make a living the old-fashioned way: underwriting right."

"This is a period of great opportunity, and we have to be patient. People who are patient today will be rewarded," added DuGan, who was one of two featured speakers during a "Net Lease Market Fact or Fiction" presentation during the conference, held on April 29 at the Marriott Marquis in New York City and produced by Real Estate Media, publisher of NET LEASE forum. "Now's a wonderful time to keep your powder dry."

"The market that exists today is just the beginning of the movement to come" in terms of cap rates and pricing, said fellow "Fact or Fiction" speaker and U.S. Realty Advisors chairman Richard Ader. "We're not seeing the end of what's to come. Pricing is going to move down."

Among other speakers during the day-long conference who concurred was Boulder Net Lease Funds president Randy Blankstein. "I find it very hard to call this the bottom," he said, speaking on the conference's "Town Hall Meeting: State of the Net Lease Market" panel. "There's too much confidence for this to be the bottom."

One sign that the market may not have hit bottom yet is that there is little sign of distressed sellers at this point in the cycle. "The sellers are not a distressed bunch out there," said another "Town Hall Meeting" speaker, First Industrial Realty Trust SVP and national head of net lease investments Robert Micera. "They will pull deals out of the market."

But workouts are likely to rear their ugly head at some point. "It's absolutely guaranteed that you'll have workouts," said DuGan. "We expect to see more corporate defaults in the future." Ader agreed. "If you're not looking at your assets carefully, you could be in for a big surprise," he said. "You never know what the next bankruptcy is."

While there are still buyers in the market, and some deals getting done, competition on properties in the net lease market has waned considerably. Whereas a year ago a deal might have 40 bidders, today the number is more likely to be 10, said Micera. And transaction volume is clearly off considerably from past years. "I'm shocked at how few transactions seem to get done," said Gerald Levin, Mesirow Financial senior managing director of sale-leaseback capital and moderator of the conference's "Capital Markets in Today's Environment" discussion.

"The difference between now and a year ago: I think a lot of the stupidity may have been wrung out of the market finally," said "Capital Markets" panelist W. Kyle Gore, managing director of the real estate net lease group at RBS Global Banking & Markets. The current market, he added, is the kind where match funding "is what it's going to be about."

The impact of the stalled debt markets was, as might be expected, a common theme underscoring many discussions during the RealShare Net Lease conference. "Clearly from a debt perspective we've seen a huge challenge," said Andrew Kroll, director of debt capital markets at SunTrust Robinson Humphrey and a "Town Hall Meeting" panelist. "With the credit crunch, we've seen CTL spreads also balloon," he said. "We're seeing a little bit of stress on the CTL market," which he noted is a thin market and not as big as the CMBS market had been.

Where is debt coming from right now? CapLease CEO Paul McDowell noted a recent financing his REIT did with a foreign lender. American Realty Capital EVP and chief investment officer Peter Budko reported having success with smaller commercial banks, which he said "do have money to put out at good spreads." And Lexington Realty Trust VP Larissa Belova stated that life companies are "really the only debt players on the debt side right now."

Mesirow's Levin conjectured that the real estate debt market may never look the same again. "I'm of the opinion that the conduit market may never come back," he said.

But others did not agree. U.S. Realty Advisors SVP Brett Kaplan, for one, said he believes the CMBS market will indeed come back, saying that he believes it is fundamentally a good system for distributing risk. "Ultimately people have to be comfortable taking credit risk, and until that happens," he said, "I don't see the market moving. But I do believe it will one day."

Gore of RBS agreed that the conduit business will come back, though he did suggest it may not look exactly the same. The CMBS market of the future, he said, may be such that as a lender "We have to maintain risk, we need to keep skin in the game."

Barring another big blowup in the mortgage and financial industry, Micera said he had reason to think that the market will start to improve soon. He reported meeting recently with three large conduit lenders, who said their traders "are starting to see some light at the end of the tunnel."

"I think we're a lot closer to the end of the debt crisis than we are to the beginning of the debt crisis," concluded McDowell.