LIMITED WAIVER AND AMENDMENT

Exhibit 10.3

LIMITED WAIVER AND AMENDMENT

Dated as of March 3, 2006

Citicorp North America, Inc.,

as Administrative Agent and Collateral Agent

Two Penns Way, Suite 200

New Castle, Delaware 19720

Ladies and Gentlemen:

Reference is made to that certain Revolving Credit Agreement dated as of October 26, 2004, as amended, among Sunstone Hotel Partnership, LLC (“ Borrower ”); Sunstone Hotel Investors, Inc. (“ Parent ”) and the subsidiaries of the Borrower listed therein as subsidiary guarantors, as guarantors; Citicorp North America, Inc. (“ CNAI ”), as administrative agent and collateral agent (“ Agent ”); the financial institutions identified therein as lenders (the “ Lenders ”) or lender parties (the “ Lender Parties ”); Calyon New York Branch and Deutsche Bank Securities Inc., as co-documentation agents, and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint book running managers (as amended prior to the date hereof, the “ Credit Agreement ”). Capitalized terms not otherwise defined herein shall have their respective meanings set forth in the Credit Agreement.

Borrower desires to cause the Holiday Inn Hotel located at 2005 Highland Avenue, Hollywood, California (the “ Hollywood Asset ”) to be released as a Borrowing Base Asset pursuant to Section 5.02(d)(ii)(C) of the Credit Agreement. Section 5.04(b)(iv) of the Credit Agreement prohibits any Borrowing Base Asset other than the Marriott Hotel located at 3425 Solano Avenue, Napa, California (the “ Napa Asset ”) to account for greater than 25% of the aggregate Adjusted Net Operating Income for all Borrowing Base Assets unless approved by the Required Lenders. Following the release of the Hollywood Asset, the Napa Asset and the Hyatt Regency Hotel located at 1107 Jamboree Road, Newport Beach, California (the “ Newport Beach Asset ”) will each account for greater than 25% of the aggregate Adjusted Net Operating Income of all Borrowing Base Assets. Accordingly, Borrower and Parent have requested that Agent and the Lenders waive compliance with the terms of Section 5.04(b)(iv) of the Credit Agreement solely to the extent necessary to permit (i) the Napa Asset to account for not greater than 30% of the aggregate Adjusted Net Operating Income of all Borrowing Base Assets, and (ii) the Newport Beach Asset to account for not greater than 30% of the aggregate Adjusted Net Operating Income of all Borrowing Base Assets. Subject to the terms and conditions of this Limited Waiver and Amendment (this “ Agreement ”), Agent and the Lenders are willing to agree to waive such compliance to such extent.

In addition, on or about December 22, 2005, SHP Ogden, LLC (the “ Ogden Subsidiary ”) ceased to be bound by its applicable Excluded Subsidiary Agreement. Borrower desires that the Ogden Subsidiary continue to be an Excluded Subsidiary for all purposes under the Credit Agreement and the other Loan Documents, such that the Ogden Subsidiary shall not be required to execute and deliver a Guaranty Supplement or otherwise become a Guarantor, whether or not the Ogden Subsidiary incurs Non-Recourse Debt not prohibited by the Credit Agreement within the 90 day period set forth in Section 5.01(j)(i) of the Credit Agreement. Subject to the terms and conditions of this Agreement, Agent and the Lenders are willing to waive such compliance to such extent.

Furthermore, Borrower desires that the schedule amendment and document delivery requirements set forth in the last clause of Section 5.01(j)(i) and in the proviso of Section 5.01(j)(ii) be modified, effective as of October 26, 2004, such that (i) to the extent necessary to make such Schedule 4.01(y) to the Credit Agreement accurate and complete, Borrower shall provide an amended Schedule 4.01(y) to the Administrative Agent within 15 Business Days after the end of each calendar quarter, beginning with the calendar quarter ending March 31, 2006 and (ii) Borrower shall provide copies of any new agreements in respect of Non-Recourse Debt identified in such amended Schedule 4.01(y) to the Administrative Agent promptly following any request by the Administrative Agent therefor. Subject to the terms and conditions of this Agreement, Agent and the Lenders are willing to agree to the foregoing.

At the request of Borrower, and in consideration of the mutual undertakings herein expressed, Agent and the Lenders hereby waive (a) Parent’s compliance with the provisions of Section 5.04(b)(iv) of the Credit Agreement solely to the extent necessary to permit (i) the Napa Asset to account for not greater than 30% of the aggregate Adjusted Net Operating Income of all Borrowing Base Assets, and (ii) the Newport Beach Asset to account for not greater than 30% of the aggregate Adjusted Net Operating Income of all Borrowing Base Asset, and (b) any Default or Event of Default that would occur under the Credit Agreement in the absence of the waiver set forth in clause (a) above. Also at the request of Borrower, and in consideration of the mutual undertakings herein expressed, Agent and the Lenders hereby (x) agree that the Ogden Subsidiary shall continue to be an Excluded Subsidiary for all purposes under the Credit Agreement and the other Loan Documents, such that, among other things, the Ogden Subsidiary shall not be required to execute and deliver a Guaranty Supplement or otherwise become a Guarantor, whether or not the Ogden Subsidiary incurs Non-Recourse Debt not prohibited by the Credit Agreement within the 90 day period set forth in Section 5.01(j)(i) of the Credit Agreement; provided, however, that if the Ogden Subsidiary does not incur Non-Recourse Debt not prohibited by the Credit Agreement by December 31, 2006, the Ogden Subsidiary shall cease to be an Excluded Subsidiary on January 1, 2007 and shall be required to comply with the provisions of Section 5.01(j)(i) (without reference to the provisions of this Agreement) within ten (10) Business Days thereafter, and (y) waive (i) compliance with all contrary provisions of the Credit Agreement solely to the extent necessary to effect the agreement set forth in clause (x) above, and (ii) any Default or Event of Default that would occur under the Credit Agreement in the absence of the amendment set forth in clause (x) above and the waiver set forth in clause (y)(i) above.

Agent and the Lenders also hereby (a) agree that the Schedule amendment and document delivery requirements set forth in the last clause of Section 5.01(j)(i) and in the proviso of Section 5.01(j)(ii) are hereby modified, effective as of October 26, 2004, such that (i)