AYGOREN: Where do you see the cap rates and prices now for the properties that you're going after?

DuGan: The business is very scalable and there are more assets available when pricing becomes more attractive. So as valuations have gone up, transaction volumes have also gone up because there are more willing sellers at this point in the cycle. If we go back to '09, there was no capital available, but there were no willing sellers, either, and there was very little sales volume. At this point it's still at an attractive place as an investor. There's a lot of competition, but there are a lot of assets on the market, too.

AYGOREN: What types of sellers are the most active? Are you seeing a lot of sale-leaseback opportunities or other property owners selling their assets?

DuGan: We see more property owners selling their assets. They bought something, it may have appreciated and certainly, if they're managing institutional money, they have a finite time frame for holding the property. So now is a good time for them to sell. We see a decent amount of activity there. Surprisingly, there's been a low level of sale-leaseback activity the past few years. Pre-crisis, where companies like Spirit bought the big Shopco portfolio, there were quite a few more sale-leaseback opportunities. That could change, though.

AYGOREN: What's the hardest sector to play in right now, as an investor?

DuGan: Single-tenant standalone retail properties. Not only are there so many investors focused on it that are public or managing non-traded REITs, but you also have individuals that have come back in the marketplace as competitive players. I heard a statistic that there are four dollar stores being built daily. I take it to be a good number. How many dollar stores do we need in the country?

AYGOREN: So, then, what sector is offering the greatest deals?

DuGan: If there's one area that concerns me, it's the organizations that have typically been focused on single-tenant net-leased retail spilling over into office and industrial and underwriting things that just don't make any sense. That's because the view on the single-tenant retail side is, nobody looks at the market rent for a Walgreens in Brewton, AL—there is no market rent for a Walgreens in Brewton, AL. But you have a 20-year lease term, so you may not care. If it's up and running and it's profitable, you have site-level coverage of the rent. But if you take that same attitude toward office or industrial, maybe with a 20-year lease you will be okay, but those are few and far between in office and industrial. So the underwriting has to change. It's no longer an asset-aggregation game but something you have to be thoughtfully in underwriting each and every deal. And I've seen a few things that have made me scratch my head.

AYGOREN: How do you differentiate yourselves in a market that's so fragmented?

DuGan: It wouldn't surprise me if, as net lease companies get larger, some become more focused, others stay more diversified. One size does not fit all. We're focused on office and industrial, but we'll also buy other things opportunistically. Some of it is to try to appeal a little bit to our niche—we're smaller, less established, so we need to be more understanding.