SC TO-I/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Amendment No. 3

To

SCHEDULE TO

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF

THE SECURITIES EXCHANGE ACT OF 1934.

SUNSTONE HOTEL INVESTORS, INC.

(Name of Subject Company (Issuer) and Filing Person (Issuer))

Common Stock, Par Value $0.01 Per Share

(Title of Class of Securities)

867892101

(CUSIP Number of Class of Securities)

Robert A. Alter

Executive Chairman and Interim Chief Executive Officer

Sunstone Hotel Investors, Inc.

903 Calle Amanecer, Suite 100

San Clemente, California 92673

(949) 369-4000

(Name, address, and telephone numbers of person authorized to

receive notices and communications on behalf of the persons filing statement)

Copies of all communications, including communications sent to agent for service, should be sent to:

Christopher M. Lal

Sunstone Hotel Investors, Inc.

Senior Vice President & General Counsel

903 Calle Amanecer, Suite 100

San Clemente, California 92673

Telephone: (949) 369-4000

With copies to:

Alison S. Ressler

Patrick S. Brown

Sullivan & Cromwell LLP

1888 Century Park East

Los Angeles, California 90067-1725

Telephone: (310) 712-6600

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$131,130,000	$5,153.41

* Calculated solely for the purpose of determining the amount of filing fee. This amount assumes the repurchase of 6,200,000 of Common Stock at the initial maximum tender offer price of $21.15 per share.

** The amount of the filing fee, calculated in accordance with Rule 0-11(b) of the Securities Exchange Act of 1934, as amended by Fee Rate Advisory No. 6 for Fiscal Year 2008, equals $39.30 per million dollars of the value of the transaction.

x Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	$5,153.41	Filing Party:	Sunstone Hotel Investors, Inc.
Form or Registration No.:	Schedule TO	Date Filed:	June 2, 2008

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

¨ third-party tender offer subject to Rule 14d-1.

x issuer tender offer subject to Rule 13e-4.

¨ going-private transaction subject to Rule 13e-3.

¨ amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: ¨

EXPLANATORY NOTE

This Amendment No. 3 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO originally filed with the Securities and Exchange Commission (the “SEC”) on June 2, 2008 (the “Schedule TO”), which, as previously amended and supplemented and as amended and supplemented by this Amendment, relates to the offer by Sunstone Hotel Investors, Inc., a Maryland corporation (“Sunstone” or the “Company”), pursuant to Rule 13e-4 under the Securities Exchange Act of 1934, as amended, to purchase for cash up to 6,200,000 shares of its common stock, par value $0.01 per share (the “Common Stock”). The Company’s offer is being made upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 2, 2008, as amended and supplemented by the Supplement to Offer to Purchase, dated June 16, 2008 (“Offer to Purchase”), and in the Amended Letter of Transmittal, which, together with any amendments or supplements to either, collectively constitute the “Offer”.

The information in the Offer, including all schedules and annexes thereto, previously filed with the Schedule TO is hereby expressly incorporated by reference into this Amendment, except that such information is hereby amended and supplemented to the extent specifically provided herein.

Item 11. Additional Information.

Item 11 of the Schedule TO is hereby amended and supplemented to add the following paragraph at the end thereof:

“On June 30, 2008, the Company issued a press release announcing the preliminary results of the Offer, which expired at 12:00 midnight, New York City time, on Friday, June 27, 2008. A copy of the Press Release is filed as exhibit (a)(5)(E) to this Amendment and is incorporated herein by reference.”

Item 12. Exhibits.

Item 12 of the Schedule TO is hereby amended and supplemented to add the following exhibit:

Exhibit Number	Description
(a)(5)(E)	Press Release issued by Sunstone Hotel Investors, Inc. on June 30, 2008.

SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

SUNSTONE HOTEL INVESTORS, INC.
By:	/s/ Kenneth E. Cruse
Name:	Kenneth E. Cruse
Title:	Chief Financial Officer

Date: June 30, 2008

Exhibit Index

Exhibit Number	Description
(a)(1)(A)*	Offer to Purchase, dated June 2, 2008.
(a)(1)(B)*	Letter of Transmittal for Common Stock (including Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number of Substitute Form W-9).
(a)(1)(C)*	Notice of Guaranteed Delivery.
(a)(1)(D)*	Letter to Banks, Brokers, Dealers, Trust Companies and Other Nominees, dated June 2, 2008.
(a)(1)(E)*	Letter to Clients for use by Banks, Brokers, Dealers, Trust Companies and Other Nominees, dated June 2, 2008.
(a)(1)(F)**	Supplement to Offer to Purchase, dated June 16, 2008.
(a)(1)(G)**	Amended Letter of Transmittal for Common Stock (including Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number of Substitute Form W-9).
(a)(1)(H)**	Amended Notice of Guaranteed Delivery.
(a)(1)(I)**	Amended Letter to Banks, Brokers, Dealers, Trust Companies and Other Nominees, dated June 16, 2008.
(a)(1)(J)**	Amended Letter to Clients for use by Banks, Brokers, Dealers, Trust Companies and Other Nominees, dated June 16, 2008.
(a)(5)(A)*	Form of Summary Advertisement.
(a)(5)(B)*	Press Release issued by Sunstone Hotel Investors, Inc. on June 2, 2008.
(a)(5)(C)**	Press Release issued by Sunstone Hotel Investors, Inc. on June 16, 2008.
(a)(5)(D)	Press Release issued by Sunstone Hotel Investors, Inc. on June 19, 2008 (incorporated by reference to Exhibit 99.1 to Form 8-K, filed by the Company on June 20, 2008).
(a)(5)(E)****	Press Release issued by Sunstone Hotel Investors, Inc. on June 30, 2008.
(b)(1)	Revolving Credit Agreement, dated as of July 17, 2006, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc. the Subsidiary Guarantors named therein, the Initial Lenders, the Initial Issuing Bank, the Swing Line Bank, Citicorp North America, Inc., as Administrative Agent, Wachovia Capital Markets, LLC, as syndication agent, Calyon New York Branch as co-syndication agent, Keybank National Association, as documentation agent, and Citigroup Global Markets Inc. and Wachovia Capital Markets LLC, as joint lead managers and joint book running managers (incorporated by reference to Exhibit 99.1 to Form 8-K, filed by the Company on July 18, 2006).

(b)(2)	First Letter Amendment, dated as of August 14, 2006, to Revolving Credit Agreement dated as of July 17, 2006 among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc. the Subsidiary Guarantors named therein, the Initial Lenders, the Initial Issuing Bank, the Swing Line Bank, Citicorp North America, Inc., as Administrative Agent, Wachovia Capital Markets, LLC, as syndication agent, Calyon New York Branch as co-syndication agent, Keybank National Association, as documentation agent, and Citigroup Global Markets Inc. and Wachovia Capital Markets LLC, as joint lead managers and joint book running managers (incorporated by reference to Exhibit 10.3 to Form 10-Q, filed by the Company on November 1, 2006).
(b)(3)	Second Letter Amendment, dated as of May 23, 2007, to Revolving Credit Agreement dated as of July 17, 2006 among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc. the Subsidiary Guarantors named therein, the Initial Lenders, the Initial Issuing Bank, the Swing Line Bank, Citicorp North America, Inc., as Administrative Agent, Wachovia Capital Markets, LLC, as syndication agent, Calyon New York Branch as co-syndication agent, Keybank National Association, as documentation agent, and Citigroup Global Markets Inc. and Wachovia Capital Markets LLC, as joint lead managers and joint book running managers (incorporated by reference to Exhibit 10.3 to Form 10-Q, filed by the Company on August 8, 2007).
(d)(1)	Form of 2004 Long-Term Incentive Plan of Sunstone Hotel Investors, Inc. (incorporated by reference to the proxy statement on Schedule 14A, filed by the Company on March 26, 2007).
(d)(2)	Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on February 23, 2005).
(d)(3)	Form of Restricted Stock Award Certificate (Directors) (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on February 23, 2005).
(d)(4)	Form of Senior Management Incentive Plan of Sunstone Hotel Investors, Inc. (incorporated by reference to Exhibit 10.14 to the registration statement on Form S-11, filed by the Company on October 7, 2004).
(d)(5)	Form of Employment Agreement with Robert A. Alter (incorporated by reference to Exhibit 10.15 to the registration statement on Form S-11, filed by the Company on October 7, 2004).
(d)(6)	Amendment to Employment Arrangements, dated as of March 19, 2007, between Sunstone Hotel Investors, Inc. and Robert A. Alter (incorporated by reference to Exhibit 10.2 to Form 10-Q, filed by the Company on May 2, 2007).
(d)(7)	Change in Control Agreement, dated as of February 15, 2007, between Sunstone Hotel Investors, Inc. and Ken Cruse (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on August 8, 2007).
(d)(8)	Purchase Agreement among Security Capital Preferred Growth Incorporated, Sunstone Hotel Investors, Inc. and Sunstone Hotel Partnership, LLC, dated April 27, 2005 (incorporated by reference to Exhibit 10.5 to Form 8-K filed by the Company on May 3, 2005).
(d)(9)*	Amendment No. 1 to Series C Cumulative Convertible Redeemable Preferred Stock Purchase Agreement and Common Stock Purchase Agreement among Security Capital Preferred Growth Incorporated, Sunstone Hotel Investors, Inc. and Sunstone Hotel Partnership, LLC, dated as of June 24, 2005.
(d)(10)***	Employment Agreement with Arthur Buser.

* Previously filed with the Company’s Tender Offer Statement on Schedule TO on June 2, 2008.

** Previously filed with the Company’s Amendment No. 1 to Tender Offer Statement on Schedule TO on June 16, 2008.

*** Previously filed with the Company’s Amendment No. 2 to Tender Offer Statement on Schedule TO on June 23, 2008.

**** Filed herewith.

EX-99.(A)(5)(E)

Exhibit 99.(a)(5)(E)

For Additional Information:

Bryan Giglia

Vice President – Corporate Finance

Sunstone Hotel Investors, Inc.

(949) 369-4236

SUNSTONE HOTEL INVESTORS, INC. ANNOUNCES PRELIMINARY

RESULTS OF ITS MODIFIED “DUTCH AUCTION” TENDER OFFER

San Clemente, CA – June 30, 2008 – Sunstone Hotel Investors, Inc. (NYSE: SHO) announced today the preliminary results of its previously announced modified “Dutch Auction” tender offer (the “Offer”), which expired at 12:00 midnight, New York City time, on June 27, 2008.

In accordance with the terms and conditions of the Offer and based on the preliminary count by American Stock Transfer & Trust Company, the depositary for the Offer (the “Depositary”), the Company expects to purchase approximately 7.4 million shares of its common stock (“Common Stock”) through the Offer. The total shares being purchased include 6.2 million shares initially offered to be purchased by the Company, and an additional 1.2 million shares, the maximum increase permitted without extending the Offer. The shares are being purchased at a price of $17.50 per share, for a total cost of approximately $129 million (excluding fees and costs of the Offer).

Because more than 7.4 million shares of Common Stock have been validly tendered and not validly withdrawn, the Offer is oversubscribed and the Company expects to only accept for purchase, on a pro rata basis, approximately 93.8% of the shares validly tendered at or below $17.50 (assuming all shares tendered through guaranteed delivery procedures are delivered under the terms of the Offer), based on the total number of shares reported to be tendered at or below $17.50 and not withdrawn prior to the expiration of the Offer and subject to “odd lot” priority and conditional tender provisions of the Offer. This preliminary proration factor is subject to change based on, among other things, the number of tendered shares which satisfy the guaranteed delivery procedures. Stockholders who tendered their shares by delivering a notice of guaranteed delivery prior to the expiration of the Offer must deliver the related shares and required documents to the Depositary within three New York Stock Exchange trading days of their execution of the notice of guaranteed delivery. Stockholders who own fewer than 100 shares of Common Stock, or an “odd-lot”, and who have validly tendered all of their shares will not be subject to proration in accordance with the terms of the Offer.

The number of shares the Company expects to purchase in the Offer represents approximately 13% of its common stock outstanding as of May 30, 2008, the last full trading day prior to the commencement of the Offer. As a result of the consummation of the Offer, the Company expects that approximately 51.3 million shares of Common Stock will be outstanding immediately following payment for the shares purchased in the Offer.

The number of shares to be purchased, the proration factor and the price per share under the Offer are preliminary. Final results will be determined following the expiration of the guaranteed delivery period subject to confirmation by the Depositary of the proper delivery of the shares validly tendered and not validly withdrawn. The actual number of shares to be purchased, the proration factor and the price per share will be announced following the completion of the confirmation process. Payment for the shares accepted for purchase will commence promptly thereafter. Any shares validly tendered and not purchased due to proration or conditional tenders or shares tendered at a price higher than $17.50 per share will be returned at the Company’s expense promptly to the tendering stockholder.

Questions and requests for information about the Offer should be directed to the information agent of the Offer, D.F. King & Co., Inc., at (800) 735-3107 or (212) 269-5550 (for banks and brokers), or the dealer manager of the Offer, J.P. Morgan Securities Inc., at (877) 371-5947.

This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any shares of Sunstone common stock. The solicitation of offers to buy shares of the Common Stock is only made pursuant to the offer to purchase, the letter of transmittal and related documents that the Company filed with the Securities and Exchange Commission on June 2, June 16 and June 23, 2008. Stockholders should read those materials carefully because they contain important information, including the various terms of, and conditions to, the Offer. Stockholders may obtain the offer to purchase, the letter of transmittal and related documents without charge from the Securities and Exchange Commission’s website at www.sec.gov; and from the information agent, D.F. King & Co., Inc., at (212) 269-5550 (banks and brokers) or (800) 735-3107 (all others).

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”) that, as of the date hereof, has interests in 45 hotels comprised of 15,354 rooms primarily in the upper-upscale segment operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Starwood. For further information, please visit the Company’s website at www.sunstonehotels.com.

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 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: 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 possibility of a U.S. recession; 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 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 acquired properties 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 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 forward-looking information in this release is as of June 30, 2008, 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.