TEXT-Fitch cuts 3 below-investment-grade classes of N-Star VIII

Aug 7 - Fitch Ratings has downgraded three and affirmed 12 classes of N-Star
REL CDO VIII, Ltd./LLC (N-Star VIII) reflecting Fitch's base case loss
expectation of 47.4%. Fitch's performance expectation incorporates prospective
views regarding commercial real estate market value and cash flow declines. A
detailed list of rating actions follows at the end of this release.

The transaction exited its reinvestment period in February 2012. Since the last
rating action, six assets were no longer in the pool. One asset was repaid in
full, while five others were removed with total realized losses of approximately
$48 million. Eleven new assets were added to the pool with total built par of
approximately $37 million.

Since the last rating action, total paydown to classes A-1 and A-R was $4.4
million. As of the July 2012 trustee report, all overcollateralization and
interest coverage tests were in compliance.

The commercial real estate loan portion of the collateral pool is made up of
54.3% whole loans/A-notes, 24.1% mezzanine debt, 7.7% preferred equity, and 2.5%
B-notes. The rated securities portion of the collateral pool comprises 7.8%
commercial real estate collateralized debt obligations (CRE CDO) and 2.6%
commercial mortgage-backed securities (CMBS). The rated securities have a
weighted average Fitch-derived rating of 'CCC+/CCC' compared to 'CCC/CCC-' at
the last rating action.

Defaulted assets make up 3% of the pool and include one CMBS bond (2.4%) and one
CRE CDO bond (0.7%). An additional 14 loans (39.4%) were identified as Loans of
Concern and include eight whole loans/A-notes (29.5%), two B-notes (2%), and
four mezzanine loans (7.9%). Fitch modeled significant to full losses on the
defaulted assets and Loans of Concern.

Under Fitch's surveillance methodology, approximately 86.8% of the portfolio is
modeled to default in the base case stress scenario, defined as the 'B' stress.
In this scenario, the modeled average cash flow decline is 7.4% from, generally,
year-end 2011 or trailing 12-month first quarter 2012). Fitch estimates that
average recoveries will be moderate at 45.3%.

The largest component of Fitch's base case loss expectation is the modeled loss
on the rated securities portion of the collateral (10.4% of the pool).

The next largest component of Fitch's base case loss expectation is a mezzanine
loan (6.2%) secured by interests in a 2.2 million square foot office complex
located in Chicago, Illinois. Although current occupancy is greater than 90% and
performance has been relatively stable, the property cash flow does not support
debt service on a stressed basis. Fitch modeled a term default with a full loss
under the base case stress scenario.

The third largest component of Fitch's base case loss expectation is a mezzanine
loan (4.2%) secured by interests in a portfolio of 12 retail properties located
in Phoenix, Arizona. Fitch modeled a term default with a full loss under its
base case scenario due to the loan's high leverage under Fitch's base case
stress scenario.

This transaction was analyzed according to the 'Surveillance Criteria for U.S.
CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies
stresses to property cash flows and debt service coverage ratio tests to project
future default levels for the underlying portfolio. Recoveries are based on
stressed cash flows and Fitch's long-term capitalization rates. The default
levels were then compared to the breakeven levels generated by Fitch's cash flow
model of the CDO under the various default timing and interest rate stress
scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in
CDOs'. Based on this analysis, the breakeven rates for classes A-1, A-R, A-2,
and B are generally consistent with the ratings assigned below.

The Negative Outlook on classes A-1, A-R, A-2, and B reflects the expectation
for further potential negative credit migration of the underlying collateral.

The 'CCC' and below ratings for classes C through N are based on a deterministic
analysis that considers Fitch's base case loss expectation for the pool and the
current percentage of defaulted assets and Fitch Loans of Concern factoring in
anticipated recoveries relative to each class' credit enhancement.

N-Star VIII was initially issued as a $900 million CRE CDO managed by NS
Advisors, LLC. The transaction has a five-year reinvestment period during which
principal proceeds may be used to invest in substitute collateral. The
reinvestment period ends in February 2012. In November 2009, $31.1 million of
notes were surrendered to the trustee for cancellation.

Fitch has downgraded the following classes as indicated:

--$60,300,000 class B to 'Bsf' from 'BBsf'; Outlook Negative;
--$24,300,000 class C to 'CCCsf' from 'Bsf'; RE 0%;
--$17,100,000 class D to 'CCCsf' from 'Bsf'; RE 0%;

In addition, Fitch has affirmed the following classes as indicated:

--$98,778,422 class A-1 at 'BBBsf'; Outlook Negative;
--$256,823,897 class A-R at 'BBBsf'; Outlook Negative;
--$103,050,000 class A-2 at 'BBsf'; Outlook Negative;
--$22,050,000 class E at 'CCCsf'; RE 0%;
--$25,200,000 class F at 'CCCsf'; RE 0%;
--$9,100,000 class G at 'CCCsf'; RE 0%;
--$20,700,000 class H at 'CCCsf'; RE 0%;
--$12,000,000 class J at 'CCCsf'; RE 0%;
--$18,900,000 class K at 'CCCsf'; RE 0%;
--$22,050,000 class L at 'CCCsf'; RE 0%;
--$14,850,000 class M at 'CCCsf'; RE 0%;
--$22,500,000 class N at 'CCCsf'; RE 0%.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions' (Dec. 1, 2011);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 6, 2011);
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 15, 2011).

Applicable Criteria and Related Research:
Global Criteria for Cash Flow Analysis in CDOs
Global Rating Criteria for Structured Finance CDOs
Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions
Global Structured Finance Rating Criteria