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Sunstone Hotel Investors Provides Update for February 2009;
Portfolio RevPAR was $99.62, Down 14.8% to Prior Year

Stock Price at $2.50 Down from 52 Week High of $21.11
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Repurchases $64.0 Million of Exchangeable Notes at 47.4% of Par
Retains Significant Liquidity with No Near-Term Debt Maturities 

SAN CLEMENTE, Calif., March 16, 2009 - Sunstone Hotel Investors, Inc. (the "Company") (NYSE: SHO) today is providing an interim update on its operations through February and its recent capital markets activity. The Company does not undertake to make updates for any subsequent developments in its business. 

Preliminary Operations Update

  • February total portfolio RevPAR was $99.62, down 14.8% to prior year.
  • Quarter to date through February 28, 2009, total portfolio RevPAR was $95.61, down 12.9% to prior year.
Arthur Buser, Chief Executive Officer, stated, "We remain focused on eliminating expenses, maximizing the cash flow of each hotel, enhancing our balance sheet and maintaining a strong liquidity position. So far during the quarter we continued to strengthen our balance sheet by repurchasing $64.0 million of our debt at an average price equivalent to 47.4% of par. With a recently renovated portfolio, a significant cash balance, and no near-term debt maturities, we continue to believe Sunstone is well positioned for the current phase of the cycle." 

Finance Update

Through the date of this release, the Company has repurchased $64.0 million of its Operating Partnership's 4.6% Exchangeable Senior Notes due 2027 (the "Notes") at an average price equivalent to 47.4% of par, for gross cash consideration of $30.4 million. The Company used available cash to repurchase the Notes through unsolicited open market purchases. 

Additionally, the Company has initiated negotiations with its bank group to restructure its credit facility. The Company is also in the process of soliciting bids for new mortgage debt on several of its unencumbered hotels. Given the challenges of the current financing market, the Company gives no assurances that either of these initiatives will be completed. 

Ken Cruse, Chief Financial Officer, stated, "We repurchased Notes at a significant discount to par after considering both our liquidity maximization and our leverage reduction goals. Our credit facility and secured debt initiatives are consistent with our objective of maximizing liquidity and, if completed, we believe these transactions will meaningfully enhance our financial flexibility. "

Business Update Call

The Company will host a conference call to discuss its operations update on March 16, 2009, at 2 p.m. PDT. A live web cast of the call will be available via the Investor Relations section of the Company's website at www.sunstonehotels.com. Alternatively, investors may dial 1-800-240-8621 (for domestic callers) or 303-262-2142 (for international callers). A replay of the web cast will also be archived on the website.
 
 
Sunstone Hotel Investors, Inc. 
Debt Summary  (Unaudited - dollars in thousands)


                                             Interest            February 28,
                                              Rate /    Maturity      2009
            Debt            Collateral        Spread      Date      Balance
            ----            ----------        ------      ----      -------

    Fixed Rate Debt
    ---------------
    Secured Mortgage    Hilton Times
     Debt                Square                 5.92% 12/1/2010       $81,000
    Secured Mortgage
     Debt (2)           11 Hotels               5.95%  5/1/2011       248,164
                        Courtyard by
    Secured Mortgage     Marriott Los
     Debt (2)            Angeles
                        Courtyard by
    Secured Mortgage     Marriott San
     Debt (2)            Diego
    Secured Mortgage
     Debt (2)           Hilton Huntington
                        Holiday Inn
    Secured Mortgage     Express San
     Debt (2)            Diego (Old Town)
                        Holiday Inn San
    Secured Mortgage     Diego
     Debt (2)            (Harborview)
    Secured Mortgage
     Debt (2)           Marriott Provo
    Secured Mortgage
     Debt (2)           Marriott Rochester
    Secured Mortgage    Marriott Salt
     Debt (2)            Lake City
    Secured Mortgage    Renaissance
     Debt (2)            Concourse
                        Residence Inn by
    Secured Mortgage     Marriott
     Debt (2)            Manhattan Beach
    Secured Mortgage    Rochester Inn &
     Debt (2)            Suites
    Secured Mortgage    Renaissance
     Debt                Long Beach             4.98%  7/1/2012        34,606
    Secured Mortgage    Renaissance
     Debt                Westchester            4.98%  7/1/2012        29,663
    Secured Mortgage    Rochester laundry
     Debt                facility               9.88%  6/1/2013         3,985
    Secured Mortgage    Doubletree
     Debt                Minneapolis            5.34%  5/1/2015        18,359
    Secured Mortgage
     Debt               Hilton Del Mar          5.34%  5/1/2015        26,625
    Secured Mortgage
     Debt               Marriott Houston        5.34%  5/1/2015        24,440
    Secured Mortgage
     Debt               Marriott Ontario        5.34%  5/1/2015        25,871
    Secured Mortgage
     Debt               Marriott Park City      5.34%  5/1/2015        15,933
    Secured Mortgage    Marriott
     Debt                Philadelphia           5.34%  5/1/2015        28,868
    Secured Mortgage
     Debt               Marriott Troy           5.34%  5/1/2015        37,376
    Secured Mortgage    Marriott Tysons
     Debt                Corner                 5.34%  5/1/2015        47,691
    Secured Mortgage
     Debt               The Kahler Grand        5.34%  5/1/2015        29,400
    Secured Mortgage
     Debt               Valley River Inn        5.34%  5/1/2015        12,268
    Secured Mortgage    Renaissance
     Debt                Harborplace            5.13%  1/1/2016       106,599
    Secured Mortgage
     Debt               Marriott Del Mar        5.69% 1/11/2016        48,000
    Secured Mortgage
     Debt               Hilton Houston          5.66% 3/11/2016        34,000
                        Renaissance
    Secured Mortgage     Orlando Resort at
     Debt                Sea World              5.52%  7/1/2016        87,098
    Secured Mortgage    Embassy Suites
     Debt                Chicago                5.58%  3/1/2017        75,000
    Secured Mortgage    Marriott Boston
     Debt                Long Wharf             5.58% 4/11/2017       176,000
    Secured Mortgage
     Debt               W Hotel San Diego       6.14%  1/1/2018        65,000
    Secured Mortgage    Embassy Suites
     Debt                La Jolla               6.60%  6/1/2019        70,000
    Secured Mortgage    Renaissance
     Debt                Washington D.C.        5.95%  5/1/2021       135,000
    Exchangeable Senior
     Notes              Guaranty                4.60%  1/1/2027       237,000
                                                                      -------
    Total Fixed Rate
     Debt                                                           1,697,946

                                          L + 0.90% -
    Credit Facility          Unsecured          1.50%      2011             -
                                                                          ---

    TOTAL DEBT                                                     $1,697,946
                                                                   ==========

    Preferred Stock
    ---------------
      Series A
       cumulative
       redeemable
       preferred                                8.00% perpetual      $176,250
                                                                     ========
       Series C
        cumulative
        convertible
        redeemable
        preferred                               6.29% perpetual      $100,000
                                                                     ========

    Debt Statistics
    ---------------
    % Fixed Rate Debt                                                   100.0%
    % Floating
     Rate Debt                                                            0.0%
    Average
     Interest Rate                                                       5.53%
    Weighted
     Average
     Maturity of
     Debt
     (includes
     amounts
     outstanding
     on the Credit
     Facility) (3)                                                  8.1 years
 
 
 

                                                           March 16,
                                                 Recent       2009
              Debt              Collateral     Events (1)    Balance
              ----              ----------     ----------    -------

    Fixed Rate Debt
    ---------------
    Secured                 Hilton Times
     Mortgage Debt           Square                           $81,000
    Secured Mortgage
     Debt (2)               11 Hotels                         248,164
                            Courtyard by
    Secured Mortgage         Marriott Los
     Debt (2)                Angeles
                            Courtyard by
    Secured Mortgage         Marriott San
     Debt (2)                Diego
    Secured Mortgage
     Debt (2)               Hilton Huntington
                            Holiday Inn
    Secured Mortgage         Express San
     Debt (2)                Diego (Old Town)
                            Holiday Inn San
    Secured Mortgage         Diego
     Debt (2)                (Harborview)
    Secured Mortgage
     Debt (2)               Marriott Provo
    Secured Mortgage
     Debt (2)               Marriott Rochester
    Secured Mortgage        Marriott Salt
     Debt (2)                Lake City
    Secured Mortgage        Renaissance
     Debt (2)                Concourse
                            Residence Inn by
    Secured Mortgage         Marriott
     Debt (2)                Manhattan Beach
    Secured Mortgage        Rochester Inn &
     Debt (2)                Suites
    Secured                 Renaissance
     Mortgage Debt           Long Beach                        34,606
    Secured                 Renaissance
     Mortgage Debt           Westchester                       29,663
    Secured                 Rochester laundry
     Mortgage Debt           facility                           3,985
    Secured                 Doubletree
     Mortgage Debt           Minneapolis                       18,359
    Secured
     Mortgage Debt          Hilton Del Mar                     26,625
    Secured
     Mortgage Debt          Marriott Houston                   24,440
    Secured
     Mortgage Debt          Marriott Ontario                   25,871
    Secured
     Mortgage Debt          Marriott Park City                 15,933
    Secured                 Marriott
     Mortgage Debt           Philadelphia                      28,868
    Secured
     Mortgage Debt          Marriott Troy                      37,376
    Secured                 Marriott Tysons
     Mortgage Debt           Corner                            47,691
    Secured
     Mortgage Debt          The Kahler Grand                   29,400
    Secured
     Mortgage Debt          Valley River Inn                   12,268
    Secured                 Renaissance
     Mortgage Debt           Harborplace                      106,599
    Secured
     Mortgage Debt          Marriott Del Mar                   48,000
    Secured
     Mortgage Debt          Hilton Houston                     34,000
                            Renaissance
    Secured                  Orlando Resort at
     Mortgage Debt           Sea World                         87,098
    Secured                 Embassy Suites
     Mortgage Debt           Chicago                           75,000
    Secured                 Marriott Boston
     Mortgage Debt           Long Wharf                       176,000
    Secured
     Mortgage Debt          W Hotel San Diego                  65,000
    Secured                 Embassy Suites
     Mortgage Debt           La Jolla                          70,000
    Secured                 Renaissance
     Mortgage Debt           Washington D.C.                  135,000
    Exchangeable
     Senior Notes           Guaranty              (50,988)    186,012
                                                  -------     -------
    Total Fixed
     Rate Debt                                    (50,988)  1,646,958

    Credit Facility              Unsecured                          -
                                                                    -

    TOTAL DEBT                                   $(50,988) $1,646,958
                                                 ========  ==========

    Preferred Stock
    ---------------
      Series A
       cumulative
       redeemable
       preferred                                        -    $176,250
                                                      ===    ========
      Series C cumulative
       convertible
       redeemable preferred                             -    $100,000
                                                      ===    ========

    Debt Statistics
    ---------------
    % Fixed Rate Debt                                           100.0%
    % Floating
     Rate Debt                                                    0.0%
    Average
     Interest Rate                                               5.56%
    Weighted Average
     Maturity of Debt
     (includes amounts
     outstanding on the
     Credit Facility) (3)                                   7.8 years

    (1) Reflects repurchases of our Operating Partnership's 4.6% Exchangeable
        Senior Notes.
    (2) Cross-collateralized loan with life insurance company.
    (3) Assumes the exchangeable senior notes remain outstanding to maturity.
        If the exchangeable senior notes were redeemed upon the first call
        date, the weighted average maturity would be approximately 6 years.

About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that, as of the date hereof, has interests in 44 hotels comprised of 15,029 rooms primarily in the upper-upscale segment operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Starwood. For further information, please visit the Company's website at www.sunstonehotels.com. 

Forward-Looking Statements 
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: volatility in the debt or equity markets affecting our ability to acquire or sell hotel assets; national and local economic and business conditions, including the current U.S. recession which may be prolonged; the ability to maintain sufficient liquidity and our access to capital markets; potential terrorist attacks, which would affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt and equity agreements; relationships with property managers and franchisors; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations, which influence or determine wages, prices, construction procedures and costs; our ability to identify, successfully compete for and complete acquisitions; the performance of hotels after they are acquired; necessary capital expenditures and our ability to fund them and complete them with minimum disruption; our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All forward-looking information in this release is as of March 16, 2009, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

  

.
Contact:

Bryan Giglia
Vice President - Corporate Finance
Sunstone Hotel Investors, Inc.
(949) 369-4236
 

.
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Also See: Sunstone Hotel Investors Appoints Arthur L. Buser as President, Will Transition to Replace Company Founder Bob Alter and to Become CEO by July 2009 / June 2008
For the Full Year 2007 Strategic Hotels & Resorts Net Income Fell 59% to $39.1 million from $95.6 million in the Previous Year; Not Expecting to Acquire Any Hotels in 2008 / February 2008
.

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