CapitalSource Completes Transaction to Deconsolidate $1.1 Billion Real Estate Trust

CHEVY CHASE, Md.  (  CapitalSource Inc. (NYSE: CSE) has announced an agreement delegating collateral management and special servicing rights in the CapitalSource Real Estate Loan Trust 2006-A (“2006-A Trust”) to an affiliate of NorthStar Realty Finance Corp (NYSE: NRF). In addition to the delegation, CapitalSource sold NorthStar its equity interest and certain other notes issued by the securitization trust. CapitalSource received total consideration of $7 million. The transaction will result in the deconsolidation of the 2006-A Trust and derecognition of Trust loans on the CapitalSource balance sheet.

As of March 31, 2010, the Trust held approximately $1.03 billion of gross loans, with third-party debt outstanding of $926 million and against which CapitalSource held $159 million of GAAP loan loss reserves.  Of the loans derecognized, $507 million were legacy commercial real estate loans. The Company will no longer be required to provide for expected losses on the derecognized loans or otherwise record the results of the derecognized loans and related debt. The Company will retain ownership of $124 million of 2006-A Trust bonds it previously repurchased.

“Moving this Trust off balance sheet eliminates the need to reserve for over $500 million of commercial real estate loans, reduces our non-recourse debt as of March 31, 2010 by $926 million and shrinks our Parent Company legacy assets,” said John K. Delaney, CapitalSource Executive Chairman.  “NorthStar has significant expertise in the management of the type of commercial real estate assets in the 2006-A Trust,” added Delaney.

“The deconsolidation of the 2006-A Trust further simplifies our Parent Company balance sheet and accelerates the shift in relative assets between CapitalSource Bank and the Parent, which are positive developments for our plan to ultimately seek bank holding company status,” added Steven A. Museles, CapitalSource Co-CEO.

About CapitalSource

CapitalSource Inc. (NYSE: CSE) is a commercial lender that provides financial products to middle market businesses and offers depository products and services in southern and central California through its wholly owned subsidiary CapitalSource Bank.  As of March 31, 2010, CapitalSource had total commercial assets of $8.7 billion and $4.6 billion in deposits.  The Company is headquartered in Chevy Chase, MD.  Visit for more information.  

About NorthStar Realty Finance Corp.

NorthStar Realty Finance Corp. is a finance REIT that primarily originates and invests in commercial real estate debt, real estate securities and net lease properties.  For more information about NorthStar Realty Finance Corp., please visit

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections and including statements about the intended accounting treatment of the transaction and our planned application for hank holding company status, which are subject to numerous conditions, requirements, adjustments, assumptions, risks, and uncertainties. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “expect,” “estimate,” “plan,” “goal,” “will,” “outlook,” “continue,” “look forward,” “should,” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and closings and their results) involve risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including without limitation: the proposed transaction may not be completed on the proposed terms and schedule or at all; potential unforeseen costs associated with the transactions; changes in economic or market conditions; continued or worsening recession in the overall economy or disruptions in credit and other markets; movements in interest rates and lending spreads; continued or worsening credit losses, charge-offs, reserves and delinquencies; our ability to successfully and cost effectively operate our business; competitive and other market pressures on product pricing and services; success and timing of our business strategies; the nature, extent, and timing of governmental actions and reforms; changes in tax laws or regulations affecting our business; and other factors described in CapitalSource’s 2009 Annual Report on Form 10-K and documents subsequently filed by CapitalSource with the Securities and Exchange Commission. All forward-looking statements included in this news release are based on information available at the time of the release. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.