The Lehman Brothers bankruptcy was not expected. Many people thought that even if there was not a government bailout a take-over or sale might be a solution. If they were not able to spin off assets, then they might be acquired by another bank. As it turned out, there were no suitors and they are now in bankruptcy protection without any hope for recovery.
The lack of faith in the bank could be seen in the steadily declining share price in the months leading up to the failure. It could also be seen in the price of Credit Default Swaps (CDS) issued on Lehman debt. CDSs are like insurance policies that are taken out on a companies ability to pay debt obligations. As the risk of default increases, the price of the coverage increases. Here is a nice chart I found on Bespoke's blog:
Lehman's share price falls and the cost of insuring the company's debt increase at the same rate.
Does this work for the CMBX index and real estate prices? To test this I have taken the spread for the CMBX index and overlaid the Dow Jones Composite REIT Index . We can see that the lines do appear to mirror each other. When equity goes up the price of CDSs goes down and vice versa. 
In terms of relative valuation then, derivatives and actual equity prices are telling the same story. What is really interesting here is the spread. On a basket of AAA rated real estate backed bonds, the CMBX spread is around 200 basis points over LIBOR. This is a BIG spread. Lehman CDS were in this range in July...
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