Zacks Analyst Blog Highlights: Sunstone Hotel Investors, Starwood Hotels & Resorts, American International Group, Citigroup and Bank of America.

For Immediate Release

Chicago, IL – June 9, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Sunstone Hotel Investors (SHO - Snapshot Report), Starwood Hotels & Resorts (HOT - Analyst Report), American International Group (AIG - Snapshot Report), Citigroup (C - Analyst Report) and Bank of America (BAC - Analyst Report).

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Here are highlights from Monday’s Analyst Blog:

High-Profile Hotel Default

Last night, Sunstone Hotel Investors (SHO - Snapshot Report) announced that the company would turn over its W San Diego hotel property to its lenders, as opposed to making its June 1st debt service payment on the property’s mortgage. This move speaks volumes about the deterioration of the hotel operating environment in recent months, and in turn, the value of hotel properties.

Sunstone, a hotel REIT, acquired the W hotel in San Diego in 2006 for $96 million, or roughly $370,000 per room. At the time, the purchase price equated to a multiple of 12x projected 2006 EBITDA.

In conjunction with the purchase, the company closed on a $65 million first mortgage, bearing an interest rate of 6.14%.

The local hotel operating environment has weakened to the point that the company has decided to simply hand over the keys to the lender, as opposed to making another debt service payment, as management now believe that the property is worth “meaningfully below” the principal amount of the debt.

While there have been many hotel defaults in recent months, this is a high-profile transaction, involving a publicly held hotel REIT and a premium hotel brand. The W hotel brand is owned by Starwood Hotels & Resorts (HOT - Analyst Report), which also manages the W San Diego property. There are currently only 29 W hotels worldwide, although the company has an additional 22 W hotels in its pipeline.

Administration Wants to Cap Pay

Recently, the administration was suggesting that those firms that received two Trouble-Asset Relief Program (TARP) infusions, such as American International Group (AIG - Snapshot Report) would have its compensation limitations placed on them. While we have some problems with this concept, it must be accepted that the government as a major shareholder does have the right to dictate terms of the employees at its investment.

However, from smoke signals in Washington it would now appear that President Obama may want to expand the curtailment of compensation to all financial services firms. This is not the area that the government should be meddling in. Raise oversight, increase regulation, make mandates on the type of mortgages a financial institution can make, what type of investment can be in the portfolio -- this is where the government should focus its attention.

Congressional oversight is one thing, micro-sight is another. Government should focus on the arena where the financial markets and investors operate, not what a trader, investment banker or stockbroker is paid.

Clearly, many of the managements of institutions such as but not limited to Citigroup (C - Analyst Report), Bank of America (BAC - Analyst Report) and General Motors were asleep at the switch for a couple of years earlier in the decade. However, employee pay is a discussion to be picked up by the board of directors and the shareholders of the companies in question.

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