NEW YORK, Sept. 16, 2005 (PRIMEZONE) -- Fitch Ratings (Fitch) announced on September 14, 2005 its upgrade of five classes of notes and affirmation of four classes of notes issued by N-Star Real Estate CDO II, Ltd. and N-Star Real Estate CDO II Corp. (N-Star CDO II). NorthStar Realty Finance Corp. (NYSE:NRF) sponsored the securitization of N-Star CDO II in 2004 and owns the equity and the below investment grade notes. In addition, NorthStar selected the portfolio of securities and manages N-Star CDO II through its wholly-owned subsidiary, NS Advisors LLC (rated 'CAM2' by Fitch).
These rating actions are the result of Fitch's annual rating review process and are effective immediately. Details of the upgraded classes are as follows:
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Class Balance Previous Fitch Current Fitch
Rating Rating
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B-1 $ 12,000,000 A A+
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B-2 $ 14,000,000 A- A
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C-1 $ 24,000,000 BBB+ A-
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C-2A $ 6,000,000 BBB BBB+
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C-2B $ 16,000,000 BBB BBB+
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N-Star CDO II closed on July 1, 2004. The portfolio consists of 70.83% commercial mortgage backed securities, 24.02% real estate investment trust's unsecured debt, and 5.15% CDOs.
The upgrade of the class B-1, B-2, C-1, C-2A and C-2B notes is driven primarily by the improved credit quality and seasoning of the collateral portfolio. Since closing, approximately 17% of the portfolio has been upgraded by Fitch. The weighted average rating of the portfolio has improved to 'BBB/BBB-' from 'BBB-/BB+'. The portfolio has also benefited from a year of seasoning, as the weighted average life of the portfolio has decreased to 7.34 years from 8.1 years. There are currently no defaulted or distressed securities in the portfolio. To date, approximately $7.7 million of the class A-1 notes have been redeemed with approximately 96.7% of the original class A-1 note balance currently outstanding. Each of N-Star CDO II's four interest and principal coverage tests are currently in compliance.
"We are pleased with the performance of this portfolio. The significant improvement in the credit ratings of the underlying collateral in the short period (14 months) since this CDO was issued demonstrates our ability to source and underwrite strong real estate credits," said David T. Hamamoto, Chief Executive Officer of NorthStar Realty Finance Corp. He added, "These upgrades and the previous upgrades of certain classes of our first CDO (N-Star CDO I) validate NorthStar's philosophy of applying thorough real estate analysis in underwriting our investments."
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is an internally-managed REIT that makes fixed income, structured finance and net lease investments in commercial real estate assets. NorthStar Realty's business consists of three core business lines -- subordinate real estate debt, real estate securities and net lease properties. For more information about NorthStar Realty Finance Corp, please visit www.nrfc.com.
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. NorthStar Realty can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from NorthStar Realty's expectations include, but are not limited, to changes in economic conditions generally and the real estate and bond markets specifically, legislative or regulatory changes (including changes to laws governing the taxation of REITs), availability of capital, interest rates and interest rate spreads, policies and rules applicable to REITs, the continued service of key management personnel, the effect of competition in the real estate finance industry, the costs associated with compliance and corporate governance, including the Sarbanes-Oxley Act and related regulations and requirements, and other risks detailed from time to time in NorthStar Realty's SEC reports. Such forward-looking statements speak only as of the date of this press release. NorthStar Realty expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.