Sunstone Hotel Investors Sells Its Leasehold Interest In The 468-Room Doubletree Guest Suites Times Square For A Gross Sale Price Of $540 Million, Or $1.15 Million Per Room

Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone")

today announced that it has sold 100% of the membership interests in its wholly-owned subsidiary that is the indirect holder of the leasehold interest through which the 468-room Doubletree Guest Suites Times Square (the "Hotel") is operated (the "Sale"). The contractual gross sale price of $540.0 million (or approximately $1,154,000 per key) represents a 25.4x multiple on 2015 forecasted Hotel Adjusted EBITDA of $21.3 million, and a 3.4% capitalization rate on 2015 forecasted Hotel net operating income. Concurrent with the Sale, the Company repaid the remaining $175.0 million current balance of the mortgage secured by the Hotel. John Arabia, President and Chief Executive Officer, stated, "We are pleased to announce the completed sale of the Company's interests in the Doubletree Guest Suites Times Square. Consistent with our business plan to selectively dispose of assets, this transaction unlocks meaningful shareholder value by monetizing an asset with substantial long-term redevelopment opportunities at a price above our internal valuation. Furthermore, this transaction improves our near-term comparable property-level growth prospects, enhances our already strong balance sheet, provides meaningful liquidity, reduces our ground lease exposure, eliminates a near-term debt maturity, reduces our near-term renovation expenditures and renovation-related earnings disruption and results in a meaningful distribution to our common stockholders." Corporate Implications The Sale has the following implications to the Company: Comparable Hotel RevPAR Growth: Year-to-date third quarter 2015 Comparable Hotel RevPAR growth was 5.9%. Adjusting for the Sale, Pro Forma Comparable Hotel RevPAR growth year-to-date third quarter 2015 would have been 6.5%, or 60 basis points higher. Comparable Hotel Adjusted EBITDA Margin: Year-to-date third quarter 2015 Comparable Hotel Adjusted EBITDA Margin was 31.1%, representing a 100 basis point increase over the prior year comparable figure. Adjusting for the Sale, year-to-date third quarter 2015 Pro Forma Comparable Hotel Adjusted EBITDA Margin would have been 31.3%, representing a 130 basis point increase over the prior year comparable figure. Leverage: After adjusting for the Sale, the repayment of the loan secured by the Hilton North Houston (see the discussion below regarding the "Houston Loan Repayment") and the fourth quarter dividends to both common and preferred stockholders, the Company's ratio of net debt plus preferred stock to Adjusted EBITDA as of September 30, 2015 would have decreased by approximately 0.8 times to 2.7 times (1). Liquidity: After adjusting for the Sale, the Houston Loan Repayment and the fourth quarter dividends to both common and preferred stockholders, third quarter pro forma unrestricted cash would have been approximately $307 million as of September 30, 2015 (2). (1) Calculated by dividing the Company's total debt, less the non-controlling interest in the Hilton San Diego Bayfront and the Company's unrestricted cash, by the Company's Trailing 12-month Adjusted EBITDA, both as of September 30, 2015 as disclosed in the Company's Current Report on Form 8-K, furnished on October 29, 2015, which totaled $1.2 billion and $343.3 million, respectively, resulting in a net debt plus preferred stock to Adjusted EBITDA ratio of 3.5 times. After adjusting for the Sale and the Houston Loan Repayment, as of September 30, 2015, the Company's pro forma net debt plus preferred stock would have totaled approximately $900 million, and its Trailing 12-month Adjusted EBITDA would have been $321.2 million, resulting in a net debt plus preferred stock to Adjusted EBITDA of 2.7 times. (2) Calculated by adjusting the September 30, 2015 unrestricted cash balance of $176.2 million by the net proceeds from the Sale (adjusted for the $175.0 million loan repayment and transaction costs), the Houston Loan Repayment and the fourth quarter dividends to common stockholders (discussed below), along with the previously declared dividends to preferred stockholders. Recent Developments On December 11, 2015, the Company repaid $30.7 million of debt secured by Hilton North Houston, using proceeds received from its sale of BuyEfficient, along with cash on hand. On December 17, 2015, the Company entered into a term loan agreement, which provides the Company with a six month period within which the Company has the option to borrow up to $100.0 million. The Company expects to draw the available $100.0 million in January 2016, and to use the proceeds, combined with cash on hand, to repay the loan secured by the Boston Park Plaza, whose balance was approximately $115.0 million as of September 30, 2015. The Boston Park Plaza loan is scheduled to mature in February 2018, and can be repaid without penalty in February 2016. The $100.0 million unsecured term loan matures in January 2023, and bears interest based on a pricing grid with a range of 180 to 255 basis points over LIBOR, depending on the Company's leverage ratios. Additionally, the Company entered into a forward swap agreement that will fix the LIBOR rate at 1.85% for the duration of the $100.0 million term loan. Based on the Company's current leverage, the loan reflects a fixed rate of 3.65%. Following the Company's Houston Loan Repayment and the expected repayment of the loan secured by the Boston Park Plaza, the Company will have 21 unencumbered hotels. 2015 Outlook The sale of the Company's interests in the Doubletree Guest Suites Times Square is expected to reduce fourth quarter and full year 2015 Adjusted EBITDA by approximately $2.3 million, Adjusted FFO by approximately $2.0 million and net income by approximately $1.6 million. Full year Adjusted EBITDA, Adjusted FFO and net income impact excludes one-time closing costs, including debt repayment penalties, resulting from the Sale. Dividend Update On December 18, 2015, the board of directors declared a dividend of $1.26 per share of common stock, to be paid on or before January 29, 2016, to stockholders of record at the close of business on December 31, 2015. The fourth quarter dividend to common stockholders includes the distribution of the gain from the Sale. 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 $0.88 per share in cash; however, the Company will limit the amount of cash payable pursuant to the dividend to approximately $184 million (70% of the aggregate value of the dividend). If stockholders representing more than 70% 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 $1.26 dividend in shares of common stock. Stockholders who fail to submit an election form, or submit an election form after the election response deadline, will receive the dividend in cash subject to the same proration as if they elected to receive the dividend in cash.