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NAPA, CA-Sunstone Hotel Investors Inc. said Wednesday it was closing on the sale of a 274-room Marriott hotel here. The sale price is $36 million. Sunstone paid $21 million for the property in 1998.

The name of the buyer has not yet been made public. Sunstone says it would have had to invest $6 million or $22,000 per key in the asset in the near term in order to comply with Marriott’s brand standards.

Also on Wednesday Sunstone said it would sell about 20.7 million shares of common stock with which it hopes to generate $100 million to pay off credit lines and to fund a debt buyback. Taking into account the dilution, Sunstone’s stock price stood at $5.26 in late afternoon trading Thursday, down ($0.56) nearly 10% on the day. The share price is down about 70% over the past year.

Sunstone says the moves, including a recent tender offer for outstanding notes, are designed to help Sunstone weather the recession, which has lowered tourism and business travel spending. The stock sale proceeds will be used in part to repay any amounts drawn on the company’s credit facility and to cover costs related to its tender offer for $123.5 million [principal amount] of 4.60% Exchangeable Senior Notes due 2027, which expired this week. The repurchase will be consummated with $85 million in cash, the company said.

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