Participants were industry veterans, including: Richard Ader of U.S. Realty Advisors, Peter Budko of American Realty Capital Gordan DuGan of W.P. Carey & Co., Kyle Gore of RBS Global Banking & Markets, and Glen Kunofsky of Marcus & Millichap. The discussion surveyed the market at a high level, and ranged widely.

The panelists agreed that debt has dried up and CMBS debt has evaporated. But Ader sees opportunity as corporations will recognize that real estate is a bad asset and seek to monetize it. Dugan agreed: “In ‘05-’07, everyone complained there was too much capital out there so the pricing wasn’t right. Today is the time we’ve been waiting for,” but acknowledged that the challenge, now, is getting capital.

MacDonald probed further on pricing. “Are we seeing the bottom?” Budko felt we were near, but felt that different markets will have different bottoms. But Dugan observed that no distressed asset investor he sees has actually bought anything yet, claiming that until you see that happen, you wont know we’re at the bottom. Ader agreed and doesn’t see it coming for a while still, and hasn’t seen an uptick yet.

“So what’s the biggest risk now?“ MacDonald posed. Without missing a beat, Gore responded: “Capital.” But he observed that in the last few years the corporate bond market has had “one of the most prolific periods in history” and has shown real improvement.

Kunofsky disagreed, taking the position that the biggest concern today was about real estate fundamentals, beyond corporate credit. “It’s less about Moody’s rating a company AAA and their banks giving financing (because) everyone’s questioning corporate credit. Banks lending today are lending based on the real estate.”

Nonrecourse debt seems to be disappearing and “more recourse provisions are creeping in,” interjected Dugan. He also anticipated more loans being given back to the lenders. Gore agreed that recourse debt might become more the norm, but observed that this would help the credit tenant lease business as it would fuel the search for capital.

Ader added the risk of inflation as possibly the most important risk to watch, predicting it could creep into the teens by the beginning of Obama’s second term.

Back to pricing. Given all the risks, asked MacDonald, “whats the correct pricing in today’s market?” Gore: We have moved into an inefficient market which presents opportunity. Dugan supported, claiming that for large transactions, “I don’t think anyone has a clear idea of the right pricing.” Kunofsky added that there is ambiguity about what exactly constitutes a credit tenant net lease deal, saying a ten year lease doesn’t make it one.

Gore recalled the motto on a T-shirt at a CMBS event which read: “Take it down. We’ll figure it out later,” a reflection of the wildly competitive and opportunistic lending field in times past. He offered the analogy of a “tale of two markets”: describing real estate based financing and credit based financing with the key question for the former: “What’s my exit?”

On the rate of sale leasebacks, Ader and Gore agreed they would increase in the next months and felt that corporations were starting to see the value of the strategy. But Budko felt that many corporations had missed the opportunity only to find their credits floundering now. Dugan agreed that there would be increasing demand for sale leasebacks, but saw capital as a possible constraint, predicting new sources of capital coming in.