Sunstone Hotel Investors Provides Intra-Quarter Update

Sunstone Hotel Investors, Inc. (the "Company") (NYSE:SHO) today announced an intra-quarter operations update. The Company does not undertake to make updates for any subsequent developments in its business.

Quarter-to-Date Operations Update

• November total portfolio RevPAR was $117.61, down 12.2% to prior year.

• November comparable portfolio RevPAR was $116.32, down 11.8% to prior year.

• Quarter-to-date (through November 30, 2008) total portfolio RevPAR was $122.71, down 9.5% to prior year.

• Quarter-to-date (through November 30, 2008) comparable portfolio RevPAR was $122.76, down 8.7% to prior year.

• Year-to-date (through November 30, 2008) total portfolio RevPAR was $123.97, down 0.7% to prior year.

• Year-to-date (through November 30, 2008) comparable portfolio RevPAR was $123.29, down 1.1% to prior year.

Robert A. Alter, Chief Executive Officer and Executive Chairman, stated, "We are making today's intra-quarter update on the performance of our portfolio and developments in our business in an effort to provide better clarity during this time of economic uncertainty. While we believe recent signs of strength in the equity markets may prove to be a harbinger of broader economic stabilization, lodging demand is currently showing cyclical weakness consistent with the trends we are seeing in the overall U.S. economy. Our comparable portfolio RevPAR has declined 8.7% quarter-to-date through November as compared to the same period in 2007. For perspective, on a year-to-date basis through November, our portfolio has generated less than a 1% decline in RevPAR as compared with the same period in 2007 -- the strongest year ever for the U.S. lodging industry. With a recently renovated portfolio, a significant cash balance, and no near-term debt maturities, we believe Sunstone is well positioned for the current phase of the cycle."

Full Year 2008 Outlook

The Company reaffirms its prior full-year 2008 guidance presented on November 5, 2008. Achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company's filings with the Securities and Exchange Commission. The Company's guidance does not take into account any additional hotel acquisitions, dispositions, stock repurchases or financings during 2008.

For the full year 2008, the Company expects total portfolio RevPAR to range from a decrease of approximately 1.0% to a decrease of approximately 4.0% compared to the full year 2007. Additionally, for the full year 2008:

• Income available to common stockholders is expected to be approximately $60.6 million to $70.6 million,

• Adjusted EBITDA is expected to be approximately $275.0 million to $285.0 million,

• Adjusted FFO available to common stockholders is expected to be approximately $149.5 million to $159.5 million, and

• Adjusted FFO available to common stockholders per diluted share is expected to be approximately $2.58 to $2.75.

Arthur Buser, President, stated "While we are seeing softness in both transient and group trends, we are reaffirming the guidance we provided during our third-quarter call earlier this fall. We continue to work closely with our managers to drive top-line growth and to improve our operating efficiencies to minimize margin erosion in this challenging operating environment."

Acquisitions, Dispositions, Investments and Financings

On December 10, 2008, the Company sold the Crowne Plaza Hotel in Grand Rapids, Michigan for a sale price plus projected 2009 capital expenditures of approximately $8 million, or 9.0x 2008 forecasted EBITDA (reconciliation of EBITDA to net income provided below).

The Company also announced today that its board of directors has authorized the Company to repurchase shares of its Common Stock, Series A Preferred Stock, Series C Preferred Stock and Sunstone Hotel Partnership, LLC's Exchangeable Notes or repay secured debt of the Company and/or its subsidiaries for an aggregate purchase price and/or payment, as applicable, of up to $200 million (excluding fees, commissions and all other ancillary expenses). The Company intends to fund any repurchases or repayments with proceeds from the sale of non-core hotels and/or proceeds from new long-term mortgage debt. Other than on a temporary basis, the Company does not intend to use its existing cash to fund any repurchases or repayments. Repurchases of securities under this program will be made through the open market, or in privately negotiated transactions, from time to time, and in accordance with applicable laws and regulations. The manner, timing and amount of repurchases and repayments, if any, will be determined by the Company's management and will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements. The repurchase and repayment program will expire on December 31, 2009 and may be modified or discontinued at any time. This authorization replaces the Company's prior repurchase program, which was authorized in 2008, and against which, the Company purchased approximately $183 million of common stock.

Ken Cruse, Chief Financial Officer, said "While retaining significant liquidity during these uncertain economic times remains our principal focus, selectively repurchasing our securities at a discount to face value using capital sourced through non-core asset sales or new secured debt would be consistent with our cycle-driven strategy. We believe any such repurchases of our capital at current pricing levels would create significant value for our stockholders without diminishing the Company's strong liquidity position."

Dividend Update

On December 11, 2008, the board of directors declared a dividend of $0.75 per share of common stock, to be paid on January 15, 2009, to stockholders of record at the close of business on December 19, 2008. The dividend includes the Company's distribution of 2008 taxable income and taxable gains arising from property dispositions in 2008.

The dividend will be payable in cash and/or shares of common stock at the election of the stockholder and subject to a cash limit described below. Stockholders who elect to receive the dividend in cash may receive up to $0.75 per share in cash, however, the Company will limit the amount of cash payable pursuant to the dividend to 20% of the aggregate value of the dividend, or approximately $7.3 million. If stockholders representing more than 20% of the outstanding shares elect to receive cash, each stockholder making the cash election will receive a prorated distribution of the available cash, and will receive the remainder of the $0.75 dividend in shares of common stock. Stockholders who do not elect to receive the dividend in cash will receive the dividend in shares of common stock.

The number of shares issued pursuant to the dividend will be calculated based on the average closing price per share of the Company's common stock during a two-day period in January, 2009. The additional shares to be issued in connection with the dividend are not reflected in the Company's 2008 earnings guidance.

A letter and an election form will be mailed to common stockholders promptly after December 19, 2008, and will describe in more detail the terms of the dividend. The election must be received by the Company's transfer agent prior to 5:00 p.m. Eastern time on January 7, 2009.

The Company generally expects the dividend to be treated for federal income tax purposes as a taxable distribution whether it is received in cash or shares.

Ken Cruse, Chief Financial Officer, said "By paying out a portion of the dividend in stock, the Company will retain significant liquidity and a larger equity base without diluting the ownership of existing stockholders. We believe this structure is particularly advantageous during uncertain economic times."

The Company also declared a dividend of $0.50 per share payable to its Series A cumulative redeemable preferred stockholders and a dividend of $0.393 per share payable to its Series C cumulative redeemable preferred stockholders. The Series A dividend will be paid on January 15, 2009 to stockholders of record on December 19, 2008. The Series C dividend will be paid on January 15, 2009 to stockholders of record on December 31, 2008.

The level of any future quarterly dividends will be determined by the Company's board of directors after considering long-term operating projections, expected capital requirements, and risks affecting the Company's business. The Company currently intends to maintain a dividend level that approximates 100% of its taxable income, which may result in a reduction in its dividends going forward.

Logos, product and company names mentioned are the property of their respective owners.

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