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NEW YORK CITY-Change is one constant in the net lease environment. That fact ran through a variety of presentations during RealShare Net Lease yesterday at the Marriott Marquis. More than 300 net lease industry heavy hitters discussed issues such as competitive forces, the increasing demand, cap rates, replacement costs and the economic climate. The RealShare Conference series is produced by Real Estate Media, parent of GlobeSt.com.

Real Capital Analytics president Robert White set the stage after being introduced by Real Estate Media president and CEO Jonathan A. Schein. Of the net lease market White said, “I truly believe there is a lot more steam in it.” His firm tracks deal more than $5 million in value, but he sees an increase in retail transactions below that level. “It’s only touching the tip of the iceberg.” He’s also seeing a “significant uptick” in sale-leasebacks.

Washington, DC and Los Angeles are two markets RCA has identified where the gap between pricing and replacement costs is closing. “There’s a lot of capital out there,” White said. Those with capital competing for product include pension funds, public and private REITs and private investors. “Net lease properties are key in acquisition criteria. It‘s a different marketplace. We keep seeing new buyers pop up. Capital continues to flow from all directions. We could lose investors if interest rates go up, but we have a deep well.”

In the town hall session on the state of the net lease market, panel members debated issues such as industry growth, pricing, residual risk and the commoditization of real estate. “I’m seeing deals that are blowing my mind,” said Ethan Nessen, principal of Cric Capital. “We’re in a real estate cycle that’s up, but ultimately real estate is not a fungible asset.”

WP Carey CEO and president Gordon DuGan noted that residual risk is a key concern. “I don’t see enough concern. Some of these properties are hard to retenant, tough to reposition.” He sees the market now as more efficient with a more sophisticated investor. Michael Houge, CEO/principal of Upland Real Estate Group, said that “private equity out there is unbelievable, but there’s not a lot of product. Everything they read about is good news. The flood will not abate for a long time.”

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