CBRE Realty Finance (NYSE:CBF) shares dropped $1.21, or 19.48%, to $5.00 after the company announced disappointing second quarter results. The commercial real estate specialty finance company has been suffering amid the mortgage crisis, but appears to be substantially undervalued even given the risks that it faces.

CBRE announced that it was forced to write-down $7.8 million on one of two foreclosed assets but insists that the company is still trading more than 50% below its book value. The company's current assets include $211 million in CDOs, $75.8 million in Joint Venture Equity, $54.6 million in foreclosed assets, $72.9 million in warehouse lines, and $42.4 million in cash. If we subtract out $61.5 million in Trust Preferred Securities, we come up with a total net value of $395.7 million.

Based on the current market price, these assets are being priced a more than $205 million below their estimated book value. Even discounting the foreclosed assets division and some of the potentially-risky CDO's the company would still be undervalued! But in reality, the strong fundamentals in the commercial real estate market have many believing that the company is substantially undervalued. This makes CBF a stock worth watching!