Sunstone Enters Agrees to Sell the 284-Room Marriott Del Mar for $66 Million

Completes Acquisition and Re-Branding of the 417-room Hyatt Chicago Magnificent Mile

. June 07, 2012

ALISO VIEJO, CA - June 7, 2012 - Sunstone Hotel Investors, Inc. (the "Company") (NYSE: SHO) announced today that it has entered into a purchase and sale agreement to sell the 284-room Marriott Del Mar for a contractual purchase price of $66 million ($232,000/key). The contractual sale price represents a 13.7x multiple on 2012 forecasted hotel EBITDA of $4.8 million and a 5.9% capitalization rate on 2012 forecasted hotel net operating income. The transaction, subject to customary closing conditions, including the assumption of the existing $47.2 million mortgage, is expected to close on or around June 30, 2012. During the Company's anticipated 2012 ownership period, the Marriott Del Mar is expected to generate approximately $2.1 million of hotel EBITDA. Upon completion of the sale and assumption of the mortgage debt by the buyer, the Company expects to receive net proceeds, before customary transaction costs and credits, of approximately $19 million.

Completed Acquisition

On June 4, 2012, the Company completed the previously announced acquisition of the 417-room Wyndham Chicago and has rebranded the hotel the Hyatt Chicago Magnificent Mile. Concurrent with the closing of the $88.4 million acquisition, the Company issued 5,454,164 shares of common stock to the seller, The Blackstone Group, valued at $58.4 million ($10.71/share) at the time the transaction was announced. The Company registered the 5,454,164 shares issued to The Blackstone Group through an automatic shelf registration statement filed with the Securities and Exchange Commission on June 4, 2012. The balance of the acquisition was funded with cash on hand.

Ken Cruse, President and Chief Executive Officer, stated, "We are pleased to announce the pending sale of the Marriott Del Mar and the closing of our previously announced purchase of the Hyatt Chicago Magnificent Mile. Consistent with our stated business plan, by divesting of a highly-levered, sub-market hotel and acquiring an unencumbered, high-quality central business district hotel, we have improved our portfolio quality and growth profile while deleveraging our balance sheet. We may look to opportunistically sell additional non-core assets in transactions that help advance our portfolio quality and balance sheet objectives. In accordance with our corporate practice, we will announce any future dispositions after receiving a non-refundable deposit from the buyer and when we believe the probability of closing is high."

Corporate Impact
The pending sale of the Marriott Del Mar, assuming a June 30, 2012 closing date, is expected to reduce full-year 2012 Adjusted EBITDA by approximately $2.7 million, Adjusted FFO by approximately $1.4 million and net income by approximately $0.3 million, in each case as provided on May 2, 2012. The sale of the Marriott Del Mar reduces the Company's total debt by $47.2 million, resulting in total debt reduction, in addition to contractual amortization, of $185.4 million since 2011. Full-year Adjusted EBITDA, Adjusted FFO and net income impact excludes one-time closing costs resulting from the transaction.

The acquisition of the Hyatt Chicago Magnificent Mile is expected to increase second-quarter 2012 Adjusted EBITDA by $0.9 million, Adjusted FFO by $0.9 million and net income by $0.6 million, in each case as provided on May 2, 2012. The acquisition of the Hyatt Chicago Magnificent Mile is expected to increase full-year 2012 Adjusted EBITDA by $4.1 million, Adjusted FFO by $4.1 million and net income by $2.2 million, in each case as provided on May 2, 2012. Second-quarter and full-year Adjusted EBITDA, Adjusted FFO, and net income impact excludes one-time closing and brand/manager transition costs resulting from the transaction.

The Company has updated its forecasted weighted average share count to reflect the issuance of 5,454,164 shares of common stock on June 4, 2012.

Weighted Average Share Count (in millions) About Sunstone Hotel Investors:
Sunstone Hotel Investors, Inc. ("Sunstone") is a lodging real estate investment trust ("REIT") that, as of herein, has interests in 32 hotels comprised of 13,341 rooms. Sunstone's hotels are primarily in the upper upscale segment and are generally operated under nationally recognized brands, such as Marriott, Hilton, Fairmont, Hyatt and Sheraton. For further information, please visit Sunstone's website at www.sunstonehotels.com.

Sunstone's mission is to create meaningful value for our stockholders by becoming the premier hotel owner. Our values include transparency, trust, ethical conduct, communication and discipline. We seek to employ a balanced, cycle-appropriate corporate strategy that encompasses the following:

Proactive portfolio management;
Intensive asset management;
Disciplined external growth; and
Measured balance sheet improvement.

"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 likelihood of a prolonged U.S. recession; 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 June 6, 2012, 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."

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