"Deal volume is deal volume--it's lumpy," said W.P. Carey & Co. president and CEO Gordon DuGan during the town hall meeting session. While he acknowledged that the market is still very competitive, DuGan also said the market has "seen a bottoming of this cap rate compression. That I think bodes well for us for volume this year."

Another Town Hall Meeting panelist, Bruce MacDonald, president of Net Lease Capital Advisors, observed, "What we felt so good about last year, from an acquisition standpoint, is that for the first time it wasn't a pedal-to-the-metal sellers' market."

Aside from the general optimism that prevailed, it was clear from speakers throughout the day that the net lease market is still awash with ample capital, though that too may be subsiding. One strategy some investors are using as a result of the increased competition is to focus on less than investment grade tenant deals, a less crowded space that can result in better yields but also requires more expertise in credit, said Gordon Whiting, managing director of Angelo, Gordon & Co., which recently launched its first net lease property fund.

"Because there's so much capital out there, people are paying these ridiculous prices," said Whiting. "That said, there are definitely fewer people than there were a year ago."

In addition to Whiting, a fellow panelist Stephen Olsen, managing director of Prescott GNLP Capital LLC, said, "The world is awash with capital, and people are trying to place it as best they can." He added his view that the net lease property investment market is moving back to fundamentals; fundamentals which are only going to get better. "The fundamentals are strong. What's going to drive cap rates and drive volume? It's not about fundamentals, it's about capital."

The 1031 exchange and the pool of buyers that that represents were also a key topic throughout RealShare Net Lease. For the past several years, said Jeffrey Thomas, first VP of CB Richard Ellis's net lease property group, the main part of the buyer base he has worked with has been a California multifamily owner who has sold to a condo converter and exchanging into a passive ownership property with stable income.

Sitting beside him on the Numbers Behind the Trends panel, Jeff Rothbart, principal of Boulder Net Lease Funds, agreed that that is a significant demographic driving net lease property acquisitions, adding that it has a significant impact on pricing, too, given the high prices and low cap rates California property owners sell for.

"I have this theory, that as California goes, for the 1031 exchange, so does the rest of the country. I think it's that big of a driver," said the discussion's moderator, CRIC Capital LLC president and CEO Ethan Nessen, to the agreement of both Thomas and Rothbart. "I think it's an indicator of demand."

The fifth annual RealShare Net Lease was held at the Marriott Marquis in New York City. The event also included a keynote address by Hans Nordby, director of US market research and forecasting for Property & Portfolio Research. RealShare New Lease, along with other RealShare events nationwide, is produced by Real Estate Media, publishers of GlobeSt.com, GlobeSt.RETAIL, Real Estate Forum magazine and other print and online publications devoted to commercial real estate.

Instant Insights /

Speakers See Brighter Future, Better Opportunities

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