The stifling debt market was a subject of much discussion at the NYU Real Estate Institute's annual industry conference last week.

What was clear from participants is that life insurance companies -- such as Prudential ( PRU) and Met Life ( MET) -- are still big funders of real estate debt (at least the more traditional kind, with 80% maximum loan to value.) These companies hold the loans on their balance sheets and are not required to sell them into securitizations, as Wall Street banks do.

However, even if portfolio lenders are still handing out money, they make up just 50% of the commercial real estate lending market, said Adam Raboy, managing director and co-head of origination with Credit Suisse, on a panel discussion.

"We're open for business at a spread and price that borrowers don't want to pay," Raboy says.

The shutdown of much of the credit markets means real estate valuations have fallen by some amount, industry experts agree. The question is how far.

One problem with determining valuations is that deal flow has fallen substantially. Sales of significant office properties fell 70% year-over-year to $4.4 billion in October, according to Real Capital Analytics.

One standard real estate valuation metric is a capitalization rate, or "cap rate." This is equivalent to an annual yield, which measures property income as a percentage of investment price.

Since August, the spread between cap rates and Treasuries is up 75 basis points for suburban office properties, but is up only slightly for central city office towers, according to Real Capital Analytics.

Market cap rates are used by investors to determine REIT net asset values, which roughly equate to the valuation of REITs' property portfolios in the private market.

Green Street Advisors, a prominent independent REIT research shop, says their NAV estimates for REITs have dropped 5% on average from August. The current cap rate Greenstreet applies averages 5.8% across all property sectors.

REIT stocks on average are now trading at a 20% discount to published NAV estimates from Green Street and other research shops, according to data from SNL Financial.

New York, New York

Of course, even if REITs are cheap, someone needs to step up their buying of the sector. In the past, private equity shops would come in to correct prices -- a phenomenon that has stopped short because of the problematic debt markets.

Lieber says his firm, which typically holds REITs in its portfolios, has been buying some stocks in the sector of late, but declined to give names because positions have not been established yet.

One area he is looking at is New York City office market, a segment that has seen its stocks beaten down hard. Among those with a heavy presence in the city are SL Green ( SLG), Vornado ( VNO), Boston Properties ( BXP) and Brookfield Properties ( BPO).

Lieber points to the old saying about New York City: "If you can make it there, you make it anywhere." He expects the downturn in the financial services industry and the large layoffs from Wall Street won't destroy the commercial real estate market in New York.

"This is one of the more interesting markets to look at right now," he says.

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