Sunstone Q3 RevPAR Up 8.6%

Comparable Hotel EBITDA increased 12.2% to $56.4 million.

Announces Changes in Corporate Governance:
Robert Alter Announces Retirement,
Keith Locker Named Independent Chairman of the Board,
Douglas Pasquale and Andrew Batinovich Named as Additional Independent Directors
Sunstone Hotel Investors, Inc. (NYSE: SHO) announced results for the third quarter ended September 30, 2011.
Third Quarter 2011 Operational Results (as compared to Third Quarter 2010)(1):

• Comparable Hotel RevPAR increased 8.6% to $129.07.
• Comparable Hotel EBITDA increased 12.2% to $56.4 million.
• Comparable Hotel EBITDA Margins increased by 150 basis points to 27.2%.
• Adjusted EBITDA increased by 32.9% to $52.4 million.
• Adjusted FFO available to common stockholders increased by 67.6% to $23.7 million.
• Adjusted FFO available to common stockholders per diluted share increased by 33.3% to $0.20.
• Loss attributable to common stockholders was $24.0 million (vs. income available to common stockholders of $18.3 million in the third quarter 2010).
• Loss attributable to common stockholders per diluted share was $0.20 (vs. income available to common stockholders of $0.19 in the third quarter 2010).

Ken Cruse, President and Chief Executive Officer, stated, “We are pleased to report another strong quarter.  Our portfolio’s year-over-year RevPAR growth accelerated to 8.6%, while our continued focus on operational efficiency led to 150 basis points of Comparable Hotel EBITDA Margin expansion.  As a result, our Adjusted EBITDA and Adjusted FFO per share both grew by 33% and exceeded expectations despite the turbulent economic environment.  Subsequent to quarter end, we reduced our overall indebtedness and bolstered our liquidity by refinancing our Doubletree Times Square and monetizing the Royal Palm mortgage.  With ample liquidity and limited near-term debt maturities, we remain focused on maximizing shareholder value by continuing to drive operational excellence, methodically improving our balance sheet and selectively allocating capital to our most attractive investment opportunities.”

(1)	Comparable Hotel RevPAR, Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin information presented reflect the Company's Comparable 32 Hotel Portfolio, which includes all hotels held for investment by the Company as of September 30, 2011, excluding the Valley River Inn which has been classified as held for sale as of September 30, 2011 and included in discontinued operations for all periods presented due to its sale in October 2011. The Comparable 32 Hotel Portfolio also includes prior ownership results for the Doubletree Guest Suites Times Square acquired by the Company in January 2011, the JW Marriott New Orleans acquired by the Company in February 2011, and the Hilton San Diego Bayfront acquired by the Company in April 2011, for all periods presented. The Comparable 32 Hotel Portfolio for the nine months ended September 30, 2010 also includes results for the Renaissance Westchester during the period it was held in receivership prior to the Company's reacquisition of the hotel in June 2010.

SELECTED FINANCIAL DATA
($ in millions, except RevPAR and per share amounts)
(unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2011	2010	% Change		2011	2010	% Change
Total Revenue	$  212.3	$  152.5	39.2%		$  589.6	$  447.7	31.7%
Comparable Hotel RevPAR	$  129.07	$  118.81	8.6%		$  124.21	$  115.12	7.9%
Comparable Hotel EBITDA Margin	27.2%	25.7%	150 bps		27.5%	26.0%	150 bps
Income available (loss attributable) to common stockholders	$  (24.0)	$  18.3			$  53.0	$  (12.6)
Income available (loss attributable) to common stockholders per diluted share	$  (0.20)	$  0.19			$  0.45	$  (0.13)
EBITDA	$  38.6	$  70.7			$  229.0	$  148.0
Adjusted EBITDA	$  52.4	$  39.4			$  148.5	$  114.0
FFO available to common stockholders	$  9.6	$  44.3			$  134.1	$  63.2
Adjusted FFO available to common stockholders	$  23.7	$  14.2			$  67.6	$  36.3
FFO available to common stockholders per diluted share (1)	$  0.08	$  0.45			$  1.14	$  0.65
Adjusted FFO available to common stockholders per diluted share (1)	$  0.20	$  0.15			$  0.58	$  0.37

(1)	Reflects the Series C convertible preferred stock on a "non-converted" basis. On an "as-converted" basis, FFO available to common stockholders per diluted share is $0.09 and $0.45, respectively, for the three months ended September 30, 2011 and 2010, and $1.14 and $0.67, respectively, for the nine months ended September 30, 2011 and 2010. On an "as-converted" basis, Adjusted FFO available to common stockholders per diluted share is $0.21 and $0.15, respectively, for the three months ended September 30, 2011 and 2010, and $0.59 and $0.40, respectively, for the nine months ended September 30, 2011 and 2010.

Disclosure regarding the non-GAAP financial measures in this release is included on pages 5 and 6. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 9 through 12 of this release.
Disposition Update
On October 26, 2011, the Company closed on the previously announced sale of the 257-room Valley River Inn located inEugene, Oregon. The gross sales price of $16.4 million includes the assumption of the existing mortgage secured by the hotel which totaled $11.5 million on the date of the sale.
Balance Sheet/Liquidity Update
As of September 30, 2011, the Company had approximately $223.7 million of cash and cash equivalents, including restricted cash of $63.8 million, total assets of $3.2 billion, including $2.8 billion of net investments in hotel properties, total consolidated debt of $1.7 billion and stockholders' equity of $1.3 billion.
As previously announced on October 10, 2011, the Company refinanced a $270.0 million loan secured by interests in its 460-room Doubletree Guest Suites Times Square (the “Hotel”). The Hotel was refinanced with a new $180.0 million seven-year, non-recourse mortgage. The new mortgage, which bears a floating interest rate of 3-month LIBOR plus 325 basis points, requires payments of interest only for the first 24 months of the term. The Company funded the remainder of the repayment of the prior loan with approximately $90.0 million of its unrestricted cash. In addition, on October 10, 2011 the Company also announced the sale of the first mortgage note held in conjunction with its sale of the Royal Palm hotel in April 2011 for net proceeds of approximately $79.2 million. In anticipation of this sale, the Company recorded an impairment loss of $10.9 million in September 2011.  Adjusting its September 30, 2011 cash and debt balances for these two transactions and the sale of the Valley River Inn, the Company has approximately $218.5 million of cash and cash equivalents, including restricted cash of $63.8 million, and total consolidated debt of $1.6 billion.
John Arabia, Chief Financial Officer, stated, “Our adjusted unrestricted cash balance of over $150 million materially exceeds the$95 million of debt that matures through early 2015. Sunstone’s large unrestricted cash balance, our undrawn credit facility and limited near-term debt maturities not only provide the Company with significant downside protection in the event of an unanticipated decline in operating fundamentals, but also give us several years to gradually and thoughtfully reduce financial leverage in a manner that is additive to shareholder value.”
Corporate Governance Structure Update
Today the Board of Directors announced certain changes to its corporate governance structure, effective as of November 7, 2011:

• Robert (Bob) Alter has been named Chairman Emeritus and Founder and will no longer serve as the Company's Executive Chairman of the Board.  Mr. Alter will remain a Director until the Company's May 2012 Annual Meeting, at which time Mr. Alter will not stand for re-election to the Company's Board of Directors.
• Lew Wolff will no longer serve as the Company's Co-Chairman of the Board.  Mr. Wolff will remain a Director.
• Keith Locker, a member of the Board since May 2, 2006 and Chair of the Strategic Planning and Capital Markets Committee, has been named the Company’s independent Chairman of the Board.  Mr. Locker will continue to serve as Chair of the Strategic Planning and Capital Markets Committee.
• Douglas Pasquale has been appointed to the Company’s Board of Directors. Mr. Pasquale is a Senior Advisor and Director of Ventas, Inc., and is the former Chairman, President and CEO of Nationwide Health Properties, Inc., a NYSE-listed healthcare REIT that was sold to Ventas in July 2011.  Mr. Pasquale has also held executive-level positions at various hotel and health care ownership and management companies, including Atria Senior Living Group, ARV Assisted Living, Inc., Richfield Hospitality Services and Regal Hotels International-North America.
• Andrew Batinovich has been appointed to the Company’s Board of Directors.  Mr. Batinovich is President and CEO of Glenborough LLC, a private real estate investment and management company specializing in office properties.  Mr. Batinovich was also a co-founder of Glenborough LLC’s predecessor, Glenborough Realty Trust, a NYSE-listed REIT which was sold to an affiliate of Morgan Stanley in 2006.
• Keith Russell, a member of the Board since the Company's initial public offering in October 2004, has succeeded Keith Locker as Chair of the Audit Committee.
• Jamie Behar, a member of the Board since the Company's initial public offering in October 2004, has succeeded Keith Russell as Chair of the Nominating and Corporate Governance Committee.    

Mr. Alter stated, "I am excited and pleased to announce my retirement from Sunstone's Board of Directors in May after serving both as CEO and Chairman since I founded this Company 16 years ago.  Founding Sunstone Hotel Investors has been the most enjoyable and satisfying accomplishment of my long career in the hotel industry. I am very proud of the organization I have built over the years and the growth of the Company into an outstanding owner of one of the best hotel portfolios in major U.S. markets. I am pleased with the corporate direction, business plan and the new team that senior management and I have assembled to lead Sunstone for many years. I am also honored to announce important changes to Sunstone's corporate governance structure.  Keith Locker, who has served as a director for over five years, will serve the Company well as Sunstone's new independent Chairman of the Board.  Sunstone's two new independent directors, Doug Pasquale and Andy Batinovich, both having extensive industry experience, will bring new dimensions of leadership to the Board."
Mr. Cruse stated, "The entire Sunstone team thanks Bob for his exceptional support, teamwork and mentorship during his 16 years with the Company.  Through Bob's vision and leadership, Sunstone has grown into an outstanding organization, with an exceptional portfolio of hotels and a very solid business plan.  It is our privilege and honor to have had the opportunity to work with, and learn from, an industry legend like Bob."  
Capital Improvements
During the third quarter of 2011, the Company invested $17.7 million in capital improvements into its portfolio.  Year-to-date through the end of the third quarter of 2011, the Company invested $82.4 million in capital improvements into its portfolio.
2011 Outlook
The Company is providing guidance at this time but does not undertake to make updates for any developments in its business or changes in the operating environment.  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 has provided guidance for the full year 2011.  The Company's guidance does not take into account any additional hotel acquisitions, dispositions or financings during 2011.  Prior 2011 guidance included $4.0 million of partial-year interest income from the Royal Palm mortgage, which was sold in October 2011.  EBITDA for the Royal Palm mortgage was expected to have been $1.4 million for the fourth quarter.
For the full year 2011, the Company expects:

Metric	Prior Guidance (1)	Adjusted Prior Guidance (2)	Current Guidance	Change to Adjusted Prior Midpoint
Comparable Hotel RevPAR (3)	+6% - 8%	+6% - 8%	+6% - 8%	-
Net Loss (4)	($14) - ($3)	($17) - ($6)	($15) - ($10)	-$1.0
Adjusted EBITDA ($ millions)	$203 - $214	$201 - $212	$204 - $209	-
Adjusted FFO ($ millions)	$91 - $102	$89 - $100	$93 - $98	+$1.0
Adjusted FFO per diluted share	$0.77 - $0.87	$0.76 - $0.86	$0.79 - $0.84	+$0.005

(1)	Reflects guidance presented on 08/08/2011.
(2)	Prior guidance has been adjusted down by $1.4 million to reflect the sale of the mortgage note secured by the Royal Palm Hotel.
(3)	Includes  32 comparable hotels.
(4)	Net loss reflects loss attributable to common stockholders plus preferred stock dividends. Guidance for the full  year 2011 includes the Company's ownership results for all acquisitions and dispositions, and includes the Company's 75% ownership results for the Hilton San Diego Bayfront.

Mr. Cruse stated, "Our portfolio continues to deliver meaningful RevPAR and EBITDA gains as business transient travel remains strong.  While there is a risk that unchecked macroeconomic uncertainty may ultimately lead to moderation of business travel and group demand in certain of our hotels, we believe our aggressive approach to asset management, continued strength in group production and ramp up from our recently renovated hotels are likely to drive continued growth in 2012."
Dividend Update
On November 4, 2011, the Company's Board of Directors declared a cash dividend of $0.50 per share payable to its Series A and Series D cumulative redeemable preferred stockholders and a cash dividend of $0.393 per share payable to its Series C cumulative convertible redeemable preferred stockholders. The dividends will be paid on or before January 15, 2012 to stockholders of record on December 31, 2011.  No dividend was declared on the Company's common stock.
Subject to certain limitations, the Company intends to make dividends on its stock in amounts equivalent to 100% of its annual taxable income, which may be reduced through the application of negative operating losses. The level of any future dividends will be determined by the Company's Board of Directors after considering taxable income projections, expected capital requirements, and risks affecting the Company's business.  Common stock dividends may be made in the form of cash or a combination of cash and stock consistent with Internal Revenue Service guidelines.