Fitch Affirms N-Star REL CDO VI, Ltd./LLC

Business Wire, Nov 1, 2007

NEW YORK -- Fitch affirms all classes of N-Star REL CDO VI Ltd./LLC (N-Star VI) notes as follows:

--$174,800,000 class A-1 floating-rate notes affirmed at 'AAA';

--$70,000,000 class A-R revolving floating-rate notes affirmed at 'AAA';

--$27,225,000 class A-2 floating-rate notes affirmed at 'AAA';

--$ 21,825,000 class B floating-rate notes affirmed at 'AA';

--$ 12,825,000 class C floating-rate deferrable interest notes affirmed at 'A ';

--$ 13,950,000 class D floating-rate deferrable interest notes affirmed at 'A-';

--$ 10,125,000 class E floating-rate deferrable interest notes affirmed at 'BBB ';

--$ 7,650,000 class F floating-rate deferrable interest notes affirmed at 'BBB';

--$ 9,900,000 class G floating-rate deferrable interest notes affirmed at 'BBB-'.

Deal Summary:

N-Star VI, a wholly owned subsidiary of NorthStar Realty Finance Corp. (NYSE: NRF) (NorthStar), is a $450,000,000 revolving commercial real estate (CRE) cash flow collateralized debt obligation (CDO) that closed on March 17, 2006. As of the September 28, 2007 trustee report and based on Fitch categorization, the CDO was substantially invested as follows: commercial mortgage whole loans and A-notes (77.1%), B-notes (4.2%), commercial real estate mezzanine loans (10.3%), commercial real estate collateralized debt obligations (7.2%) and cash (1.2%). The CDO is also permitted to invest in real estate-related corporate and bank debt and commercial mortgage-backed securities (CMBS). As of the September 2007 trustee report, $29,200,032 has been drawn from the A-R class and $40,799,968 remains outstanding.

The portfolio is selected and monitored by NS Advisors, LLC (N-Star). N-Star VI has a five-year reinvestment period during which, if all reinvestment criteria are satisfied, principal proceeds may be used to invest in substitute collateral. The reinvestment period ends March 2011.

Asset Manager:

NS Advisors, LLC, rated 'CAM 2' by Fitch, is a wholly owned subsidiary of NorthStar, an internally-managed real estate finance company operating as a REIT. NorthStar has three primary business lines: real estate debt, real estate security purchasing, and net lease property ownership. The Real Estate Debt business originates, acquires, and structures senior and subordinate debt investments secured primarily by commercial real estate properties. The Real Estate Securities business invests in commercial real estate debt securities, including CMBS, CDOs, REIT unsecured debt, and credit tenant lease loans. The Net Lease Properties business concentrates on the acquisition of real estate properties primarily net leased to corporate tenants. As of June 30, 2007, NS Advisors, LLC had approximately $4.8 billion in assets under management, consisting of real estate securities and real estate debt positions financed through nine issued CDOs.

For more details, refer to Derivative Fitch's Asset Manager Profile on NS Advisors, LLC, available on the Derivative Fitch web site at www.derivativefitch.com.

Performance Summary:

N-Star VI became effective on Dec. 12, 2006. Since the effective date and as of the Sept. 28, 2007 trustee report, the as-is poolwide expected loss (PEL) has increased to 34.500% from 27.250%. The CDO has average reinvestment flexibility with 9.625% of cushion.

Since the last review, ten loans ($130.9 million) have been paid off in full and seven loans ($133.0 million) have been added to the pool. The pool continues to migrate toward more whole loans and A notes (to 77.1% from 52.2%) while reducing exposure to B notes and mezzanine debt (to 14.5% from 32.4%). Although in general, whole loans tend to have less risk than subordinate debt, many of the newly contributed whole loans are transitional in nature and are working towards stabilization. On average, the loans added to the pool have a higher expected loss than those that paid off.

The weighted average spread (WAS) has decreased since the effective date to 3.46% from 3.97% and the weighted average coupon (WAC) has decreased to 7.38% from 8.26%. The decrease in WAS and WAC is due to the recent addition of whole loans, which generally carry a lower spread than subordinate debt. The weighted average life (WAL) has increased slightly to 2.2 years from two years at the effective date, still implying that the loans will fully turnover during the reinvestment period.

The overcollateralization (OC) ratios and interest coverage (IC) ratios of all classes have remained above their covenants, as of the September 2007 trustee report.

Collateral Analysis:

Since the effective date and based on Fitch categorization, the largest percentage of non-traditional assets consist of land that comprises 12.9% of the pool. Office properties remain the largest percentage at 35.4% of the pool. The two largest state concentrations are California (26.3%) and New York (24.0%). Both the property type compositions and the geographic concentrations are in compliance with the covenants.

The Fitch Loan Diversity Index (LDI) is 429 compared to 400 at last review; however it remains below the covenant of 455. The current LDI represents a concentrated pool relative to other recently Fitch rated CRE CDOs.