Sunstone Hotel Investors, Inc. Acquires the W San Diego Hotel

Based upon the hotel's 2006 forecast, the purchase price equates to approximately 12x 2006 EBITDA (reconciliation to net income below). Concurrent with the acquisition, the Company closed on a fixed-rate first mortgage loan totaling $65.0 million at a rate of 6.14%. The loan is interest only for 69 months and will mature in 2018. The balance of the purchase price was funded through a draw on the Company's revolving credit facility.

Robert A. Alter, Sunstone's Chief Executive Officer, stated, "We are excited to announce the acquisition of our first W Hotel and our first management relationship with Starwood Hotels & Resorts Worldwide, Inc. The W San Diego is a one-of-a-kind asset that leads the downtown market in both ADR and RevPAR. We believe that San Diego will continue to be one of the top performing U.S. hotel markets benefiting from a combination of strong business demand drivers, robust convention business and a healthy tourism industry."

About the W San Diego

W Hotels has merged modern sophistication with the time-honored traditions of service. The result? The W San Diego. A unique hotel designed to re-awaken your senses and redefine your notion of what travel can be. Located downtown within walking distance of the Gaslamp Quarter, Little Italy, the convention center and the Bay, W San Diego features 240 guestrooms, 14 cool corner rooms, and 5 urban suites -- all stocked with every comfort and convenience. Fluffy pillow-top beds. Spacious desks hooked up with the latest technology. Plus exclusive Bliss(R) Spa amenities and 24-hour gourmet room service. When it's time for a meeting, fully wired event rooms and complete business services are available to you.

Why not catnap by the pool? Or schedule an in-room massage. Who wants a drink? Head to the roof, where our Beach bar with heated sand floor will lift your spirits to new heights. Who's hungry? Experience the creations of RICE, our stylish restaurant featuring global contemporary cuisine, where fresh flavors from around the world combine for a mouthwatering mix. If you need advice on what to do next, just ask. We can arrange anything from a deep sea fishing excursion to a last minute board meeting.

Minutes from the beaches of San Diego and Coronado and the world-famous San Diego Zoo, W is where you want to be to enjoy everything San Diego has to offer. Get out and enjoy.

Sunstone Hotel Investors, Inc. is a Southern California-based lodging real estate investment trust (REIT). As a result of this acquisition, the Company now owns 63 hotels with an aggregate of 18,495 rooms primarily in the upper-upscale and upscale segments operated under franchises from nationally recognized brands such as Marriott, Hyatt, Hilton, InterContinental, Starwood and Fairmont.

This press release contains forward-looking statements within the meaning of federal securities laws and regulations, including references to forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which 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: national and local economic and business conditions, including the potential for additional terrorist attacks, that will 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 agreements; relationships with property managers; 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; the performance of the property to be acquired after it is acquired; necessary expenditures on the property to be acquired; and 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 SEC. 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 information in this release is as of June 26, 2006, 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.