Fitch Upgrades N-Star Real Estate CDO I, LTD.

CHICAGO -- Fitch upgrades three classes of notes issued by N-Star Real Estate CDO I, Ltd. (N-Star) as follows:

--$10,000,000 class B-2 upgraded to 'AAA' from 'AA+';

--$5,000,000 class C-1A upgraded to 'AA' from 'A+';

--$5,000,000 class C-1B upgraded to 'AA' from 'A+';

In addition, Fitch affirms the following classes:

--$180,850,864 class A-1 affirmed at 'AAA';

--$45,000,000 class A-2A affirmed at 'AAA';

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

--$15,000,000 class B-1 affirmed at 'AAA';

--$24,000,000 class C-2 affirmed at 'A';

--$10,000,000 class D-1A affirmed at 'BBB';

--$4,000,000 class D-1B affirmed at 'BBB'.

N-Star is a static arbitrage cash flow collateralized debt obligation (CDO), which closed Aug. 21, 2003. N-Star is supported by a pool of commercial mortgage-backed securities (63.5%), senior unsecured real estate investment trust securities (31.1%) and CDOs (5.4%). NS Advisors LLC, a subsidiary of NorthStar Realty Finance Corp. (NYSE: NRF), selected the initial collateral and serves as the collateral administrator. The collateral administrator is limited to sales of credit-impaired, credit risk and defaulted securities.

The upgrades are driven primarily by the improved credit quality of the portfolio, the seasoning of the collateral and deleveraging of the capital structure. Since Fitch's last rating action on July 6, 2006, 38.7% of the portfolio has been upgraded by a weighted average of 2.5 notches. In addition, the class A-1 notes have deleveraged by 8.3% since Fitch's last rating action. All overcollateralization and interest coverage ratios have remained stable and continue to pass their covenants. There are currently no defaulted assets in the portfolio. All of the CMBS assets in the portfolio were issued prior to 2004. The highest single vintage concentration is 2002 (30.1%). Due to defeasance and amortization, Fitch believes that the vintage of the underlying CMBS collateral is a positive factor in this transaction.

The ratings on the class A-1, A-2A, A-2B and B-1 notes address the likelihood that investors will receive timely payment of interest and ultimate payment of principal by the stated maturity date. The ratings on the class B-2, C-1A, C-1B, C-2, D-1A and D-1B notes address the ultimate payment of interest and ultimate repayment of principal.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Oct. 4, 2006 and also available on Fitch's web site at www.derivativefitch.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.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. Fitch means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.