The missing link to these multiple moving parts is the private equity waiting on the sidelines. That money was a common theme in a panel discussion Wednesday afternoon on capital market trends at the International Council of Shopping Centers' Mid-Atlantic Idea Exchange, held in DC's Convention Center Feb. 18th and 19th.

There is some $900 billion in private equity money that has accumulated in recent years but yet to be deployed, Charles Hewlett, managing director in the DC office of advisory firm Robert Charles Lesser & Co., and moderator of the panel. How and where and when it gets deployed will be key in getting credit moving again.

Indeed the role of private equity has become even more crucial to a CRE recovery now that the Treasury Department has unveiled its latest initiative. Part of the new plan includes an expanded TALF facility in which AAA-rated CMBS can be purchased. The few guidelines that have been released include LTVs that range from 30% to 50% -- a wide gap that is expected to be filed by private equity money, observed Walter Whitt, market manager for US Bank, who oversees the DC and New York markets.

Conventional thinking has been that these funds are waiting for a clear bottom, and certainly that is part of why this capital has yet to make its way into the markets. But there are other issues that are also keeping private equity at bay, Leslie Ludwig, executive vice president of Corporate Finance for JBG Cos., told the standing room only crowd.

Pricing is a big issue, she said, and until it is resolved private equity will not venture into the market. She points to a $56 million hotel loan JBG secured in 2007: at 75% LTV, non-recourse and underwriting that was based on the 12 previous months' NOI, it clearly would never get made today. Not surprisingly the lender has been unable to securitize it and offered it back to JBG – at a 30% discount. JBG recently resized its value at $250 million, even though the hotel's performance hasn't declined. More participation from the debt markets, she concluded, "will not pull us into equilibrium. Prices will have to come down much more."

What is clear is that lenders will be approaching the market in the most cautious manner possible when they do enter, according to Peter Korda, partner in Seyforth Shaw. "Transparency, for instance, is the new maxim," he told the crowd. "I think the data was always there, but people weren't paying attention. They are now, of course." He thinks we will see a return to such practices as "B piece pick outs" when B piece buyers would look over the assets in their tranches and toss out the loans that didn't meet their criteria.

More rigor on the part of rating agencies and new regulations from the SEC will also be an entrenched part of the new capital markets landscape, he also said.

Indeed many of these themes are already manifest as debt cautiously begins to make its way back into the market -- and it is coming back after three or four months of little or no activity, Whitt said. "Lenders are starting to get more comfortable, at least with the more conservative underwriting standards. Sooner or later equity will catch up."