Fitch Ratings Upgrades N-Star Real Estate CDO II Ltd.

NEW YORK -- Fitch Ratings upgrades five classes and affirms four classes of the notes issued by N-Star Real Estate CDO II Ltd, (N-Star II) as follows:

-- $216,992,130 class A-1 notes affirmed at 'AAA';

-- $42,000,000 class A-2A notes affirmed at 'AAA';

-- $15,000,000 class A-2B notes affirmed at 'AAA';

-- $12,000,000 class B-1 notes upgraded to 'AA+' from 'A+';

-- $14,500,000 class B-2 notes upgraded to 'AA-' from 'A';

-- $24,000,000 class C-1 notes upgraded to 'A+' from 'A-';

-- $6,000,000 class C-2A notes upgraded to 'A-' from 'BBB+';

-- $16,000,000 class C-2B notes upgraded to 'A-' from 'BBB+';

-- $15,000,000 class D notes affirmed at 'BB'.

N-Star II is a collateralized debt obligation, which closed July 1, 2004, supported by a static pool of commercial mortgage-backed securities (CMBS: 70.52%), senior unsecured real estate investment trust (REIT: 24.71%) securities, collateralized debt obligations (CDO: 4.25%), and commercial real estate loans (CREL: 0.52%). NS Advisors, LLC (rated 'CAM2' by Fitch) selected the initial collateral and serves as the collateral administrator.

The upgrades are driven primarily by the improved credit quality, seasoning of the collateral, and deleveraging of the transaction. Since Fitch's last review, the collateral has shown positive rating migration, as evidenced by the improvement in the weighted average rating factor to 5.94, as of July 2006 trustee report, from 6.98 at last review. All overcollateralization (OC) and interest coverage ratios have remained stable since inception. There are currently no defaulted assets in the portfolio.

The ratings of the classes A-1, A-2A, and A-2B notes address the likelihood that investors will receive timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the June 2039 maturity date. The ratings of the classes B-1, B-2, the C-1, C-2A, C-2B, and D notes address the likelihood that investors will receive ultimate interest payments, as per the governing documents, as well as the aggregate principal amount by the June 2039 maturity date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at 'www.fitchratings.com'. For more information on the Fitch VECTOR model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, also available at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.