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TEXT-S&P raises, affirms AEGON USA Realty Advisors servicer ranks

OVERVIEW

-- We raised our overall ranking to STRONG on AEGON USA Realty Advisors LLC as a commercial loan primary servicer and affirmed our ABOVE AVERAGE ranking on the company as a commercial loan special servicer. The outlook for both rankings remains stable.

-- We based our opinion of AEGON's primary servicing operation on the company's long, successful track record servicing multifamily/commercial real estate loans primarily originated for life insurance companies, experienced management team, good leverage of technology, and sound control environment.

-- We based our opinion of AEGON's special servicing operation on the company's proactive surveillance of subperforming multifamily/commercial real estate loans, experience resolving defaulted loans, and disposing of REO assets, as well as an experienced management team, good use of technology, and a sound control environment.

NEW YORK (Standard & Poor's) Oct. 3, 2012--Standard & Poor's Ratings Services today raised its ranking on AEGON USA Realty Advisors LLC (AEGON) as a commercial loan primary servicer to STRONG from ABOVE AVERAGE. We have also affirmed AEGON's ABOVE AVERAGE ranking as a commercial loan special servicer. Our outlook for the both overall servicer rankings remains stable.

Additionally, we raised our subrankings for management and organization to STRONG from ABOVE AVERAGE. We also raised the subranking for primary loan administration to STRONG and we affirmed our ABOVE AVERAGE subranking for special servicing loan administration.

The ranking actions reflect AEGON's highly experienced management team and solid audit and compliance framework. Additionally, since our last review, the company has made several enhancements to its training and development program and implemented a borrower and investor Web portal.

We based our rankings on our favorable assessment of AEGON's stable and experienced management team, efficient servicing and special servicing procedures, effective internal controls, and integrated systems. We also believe that AEGON's valuation, credit analysis, and research group, which also reports to the primary servicing manager, provides a strong, robust and well automated surveillance function that the servicing team may leverage to proactively manage the loan portfolio. The primary servicing group's target employee training requirement is lower than that of its ranked peers; however, we believe the high level of experience that exists in the group at least partially mitigates the training requirement and the group has indicated it plans to increase the training requirement over time in graduated levels.

KEY RANKING FACTORS Strengths:

-- Well-defined operations with effective use of technology systems.

-- Proactive portfolio surveillance and applied research team.

-- Good loan and real estate owned (REO) asset business plans and resolution times.

-- Stable and experienced management.

-- Comprehensive compliance and control environment.

Weakness:

-- Lower-than-average employee training hour requirement.

-- Longer-than-average disaster recovery times for investor reporting and other servicing functions.

The company has a sound operation and a very proactive and conservative policy for transferring loans to special servicing that involves active monitoring--even when loans are performing. The special servicing group is also responsible for certain credit-driven activities pertaining to performing loans, such as loan assumption and transfer requests, significant leasing activity, and partial collateral release requests. We also have favorable view of AEGON's loan and REO asset business plans, workout strategies, and resolution times.

AEGON is an indirect subsidiary of AEGON N.V., which is one of the world's largest life insurance and pension companies and a leading provider of investment products. AEGON N.V.'s revenue-generating investments totaled approximately $549.8 billion as of Dec. 31, 2011, and the company had approximately 25,000 employees worldwide. AEGON has been providing real estate investment services through its various groups for more than 25 years. It offers products across a wide spectrum of real estate asset classes including agricultural debt, private equity, real estate debt, and tax credit investing. AEGON's primary and special servicing operations are based in Cedar Rapids, Iowa.

As of June 30, 2012, the company was the primary servicer for a portfolio of approximately 3,000 loans, constituting a total unpaid principal balance of approximately $11.6 billion. Since our last review, AEGON has made a concerted effort to transition from a captive operations platform to a third-party provider of servicing and asset management. The company now provides primary servicing for multiple distinct clients. The primary servicing portfolio is geographically dispersed and contains all major collateral property types as well as a significant balance in agricultural loans and loans originated for life insurance company portfolios.

As of June 30, 2012, AEGON managed a special servicing portfolio of 135 loans totaling $1.5 billion and 74 REO assets totaling $557 million. AEGON is not named as a special servicer for any commercial mortgage-backed securities (CMBS) transaction. AEGON's special servicing portfolio includes assets originated primarily for life insurance company lending sources. However, the portfolio also includes complex loan structures and loans for all major collateral property types located throughout the country.

OUTLOOK

Our outlook for both rankings is stable. AEGON has a successful track record of servicing life insurance company mortgage loans, and the company has displayed a commitment to invest in the resources and technology required to administer its portfolio in accordance with governing servicing agreements and generally accepted servicing practices. AEGON also has good processes and controls and a successful track record managing and resolving distressed real estate assets. The company continues to maintain a talented and experienced team and has a sound business strategy to grow primary and special servicing loan volume.

RELATED RESEARCH AND CRITERIA

-- Standard & Poor's Comments On Potential Conflicts of Interest Within Commercial Special Servicing Market, March 9, 2012

-- Servicer Evaluation: AEGON USA Realty Advisors LLC - Primary Servicing, Aug. 9, 2010

-- Servicer Evaluation: AEGON USA Realty Advisors LLC - Special Servicing, Aug. 4, 2010

-- Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select Servicer List, April 16, 2009

-- Servicer Evaluation Ranking Criteria: U.S., Sept. 21, 2004

-- Select Servicer List (New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging: pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))