Murphy: They've always been in the market. They've been unhappy about the underwriting in the securitized deals and unhappy about the spreads in the marketplace. So they've widened their spreads as well, but not to the extent that the street has because they're portfolio lenders. They're not looking to sell the product the minute they put it on the books. In general, spreads on the life side are between 160 and 180. And they have definitely stepped in. They're all flush with cash today and looking to do more volume than they have in the past because the fundamentals are still very good on the commercial side. But they're never going to fill the entire void, because you're looking at a ratio of at least 7:1 and in some cases maybe as high as 10:1 in volume. Typically, they're a $30-billion player in the marketplace, and on an international level, securitization was headed north of $250 billion. Domestic was less, obviously, but still the lion's share of that. The life lenders do like credit, I'll say that. They do a lot of credit-tenant lease deals. In fact, probably some of the securitized deals wind up being bought by the bond side of the life insurance industry. And there is money out there for good credit today that's very competitively priced, if you combine the aspects of the real estate and an underlying credit rating.

NLf: We're seeing more differentiation between investment-grade and other credits, as well as other underwriting aspects. Do you agree?

Murphy: Yes. The days of 10-year IO are probably behind us for a while. There's still interest-only available in the three-to-five-year range, but it's going to be lower loan-to-value deals. You can't have the combination of an 80% or 85% loan and a 10-year IO anymore. Coverage is back to being important in deals, and the market is just more rational.

NLf: Specific to financing for single-tenant properties, is there anything else you would like borrowers to know?

Murphy: It would be a pleasant surprise to most credit borrowers to know that they're making a deal with a portfolio lender versus a Wall Street lender. That's because of the back-end servicing side of the business. It's much less complicated with a portfolio lender; they have a lot more flexibility. And until the [Real Estate Mortgage Investment Conduit] Remic laws are changed, there are a lot of things that can't be done once a deal is securitized. You can't expand the property; you can't have a change in tenancy. Even selling a property and getting your loan assumed is not that easy. But all those things are different with a portfolio lender, and the ease of dealing with someone who's holding a loan on portfolio is a plus for people in the credit business.

NLf: Do you work much with individual 1031 exchange buyers?

Murphy: We have some, but we don't do a lot. The TIC is a fairly new instrument out there, and we see a lot more TIC buyers. I'm still amazed at 1031 volume, frankly, because I never felt that 15% cap gains were a terrible thing. And when you look at the compression of cap rates that's gone on, you have to wonder whether the value is sustainable long term. In many cases, they'd rather take credit risk and real estate risk than pay the tax. I don't get it. But to make a political comment, if the Democrats get in, probably the cap gains tax is going up.

NLf: Any predictions of what the market will be like in 2008?

Murphy: Everyone was thinking 2008 was going to be a big-volume year because of the volume that was done in '98 in the securitized market. We did $65 billion. It was really the beginning of the ramp-up in CMBS. But, quite surprisingly to a lot of people, those loans have now been defeased or prepaid out, and the rollover volume is probably not going to be as great as everyone thought. And, because of the turmoil in the markets, at least in terms of financing volume, it could be off 15% or 20% next year. Not that there won't be money available, but certainly the pricing structure is going to change, and if the lion's share of the business gets done with life companies, they're much more picky about the quality of real estate they lend to. But I shouldn't complain--the past two years have been great.