ROCHESTER, Minn. - Oct. 15, 1997-Sunstone Hotel Investors Inc. (NYSE:SSI), a real estate investment trust, Wednesday announced that it had completed acquisition of Kahler Realty Corp., based in Rochester. Included in the purchase are four well-known local hotels -- the 194-room Kahler Plaza Hotel, the venerable 699-room Kahler Hotel, the 266-room Kahler Inn Suites, and the 170-room Holiday Inn Downtown.

Sunstone Hotel Properties Inc., the lessee and operating company for Sunstone Hotel Investors, also Wednesday assumed management of the four hotels, and announced plans for more than $9 million in renovations and upgrades over the next year.

The company also said it would rebrand the Kahler Plaza Hotel in downtown Rochester with the Marriott flag. The four hotels are connected to the Mayo Clinic, the internationally renowned private health care provider, through underground walkways and skyways. More than 85 percent of Mayo Clinic patients are treated on an outpatient basis and require extended overnight stays.

The Kahler Plaza Hotel, which was built in 1989, is a premier AAA four-diamond hotel in Rochester. It will be renovated and become a Marriott. Features include a seven-story atrium with indoor pool, spa and sauna; fitness facilities; restaurants, a lobby lounge and gourmet coffee shop.

"Renovation plans for the hotels include improvements to guest rooms, public areas, banquet and meeting facilities and restaurants," according to Robert Alter, chairman and chief executive officer of Sunstone Hotel Investors. "We are excited to become a part of the Rochester community and to provide these extensive renovations that will result in first-class hotels -- ones in which the entire community can take pride and enjoy," he said.

The four Rochester properties are among 17 hotels acquired by Sunstone Hotel Investors with the purchase of Kahler Realty Corp. from affiliates of Westbrook Partners, L.L.C., a real estate investment firm, in an agreement valued at $322 million. The transaction closed on Oct. 15.

With the Kahler acquisition, Sunstone owns 51 hotels with 9,545 rooms, primarily located in the Western United States in strong growth markets. A leading hotel REIT, Sunstone focuses on acquiring mid-price and upscale, full-service hotels. Sunstone Hotel Properties recently received approval from Marriott International Inc., as a qualified operator of full-service Marriott Hotels after an extensive review of its operating culture, management track record and hotel-level operations. Sunstone has become the fourth largest franchisee of Marriott full-service hotels in the United States.

Contact:

Sunstone Hotel Investors Inc. Robert A. Alter, 714/361-3900 or Sunstone Hotel Properties Inc. Randy Hulce, 714/361-3900