Starwood 2003 Annual Report Download - page 108

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
predecessors by Starwood Capital or entities related to Mr. Sternlicht. With the approval in each case of the
Governance Committee of the Board of Directors of the Corporation and the Board of Trustees of the Trust,
from time to time the Company has waived the restrictions of the Starwood Capital Noncompete, in whole or
in part, (or passed on the opportunity in cases of the Corporate Opportunity Policy for non-U.S. opportuni-
ties) with respect to particular acquisition or investment opportunities in which the Company had no business
or strategic interest. Since 1995, Starwood Capital made four such investments.
In July 2003, the Company waived the Starwood Capital Noncompete in connection with the acquisition
of the Rennaisance Wailea Hotel in Hawaii by an aÇliate of Starwood Capital. The Company has signed a
letter of intent with the aÇliate to manage this property after it is extensively repositioned and renovated. The
Company is currently negotiating the management agreement. The Company's Governance Committee,
advised by separate independent legal and hospitality advisors, approved the waiver of the Starwood Capital
Noncompete and the terms of the proposed management agreement as being at or better than market terms.
In addition, the Company was provided the opportunity to make an equity investment in the transaction but
declined to do so.
In August 2003, the Company acquired from an aÇliate of Starwood Capital, its beneÑcial ownership
interest in 15 acres of land contiguous to the Westin Mission Hills Resort for a purchase price of $2.8 million.
The Company's Governance Committee approved the transaction, which was at a discount from the price less
determined by independent third party appraiser engaged by the Governance Committee.
Portfolio Investments. An aÇliate of Starwood Capital holds an approximately 31% co-controlling
interest in Troon Golf (""Troon''), a golf course management company that currently manages over 120 high-
end golf courses. Mr. Sternlicht's indirect interest in Troon held through such aÇliate is approximately 12%.
Troon is one of the largest third-party managers of golf courses in the United States. In January 2002, after
extensive review of alternatives and with the unanimous approval of the Governance Committee, the
Company entered into a Master Agreement with Troon covering the United States and Canada whereby the
Company has agreed to have Troon manage all golf courses in the United States and Canada that are owned
by the Company and to use reasonable eÅorts to have Troon manage golf courses at resorts that the Company
manages and franchises. The Company believes that the terms of the Troon agreement are at or better than
market terms. Mr. Sternlicht did not participate in the negotiations or the approval of the Troon Master
Agreement. During 2003, Troon managed 18 golf courses at resorts owned or managed by the Company. The
Company paid Troon a total $948,000 for management fees and payments for other services in 2003 for nine
golf courses at resorts owned or managed by the Company. During 2002 and 2001, the Company paid
$813,000 and $432,000, respectively, for management fees and payments for other services for the eight and
two golf courses at resorts owned or managed by the Company, respectively.
An entity in which Mr. Sternlicht has a 38% interest owned the common area of the Sheraton Tamarron
Resort, which the Company managed until December 2001. The Company had outstanding receivables of
approximately $314,000 at December 31, 2003, which arose as a result of the termination of the Tamarron
management agreement. These receivables were paid in full in January 2004. The Company believes that the
terms of the Tamarron agreement were at or better than market terms.
In addition, a subsidiary of Starwood Capital is a general partner of a limited partnership which owns
approximately 45% in an entity that manages over 40 health clubs, including one health club and spa space in
a hotel owned by the Company. The Company paid approximately $84,000 annually to the management
company for such management services in 2003, 2002 and 2001. The Company believes that the terms of the
management agreement were at or better than market terms. The management agreement terminated on
September 30, 2003 and the management company has been managing the health club and spa on a month-
to-month agreement. The Company and the management company have verbally agreed to continue this
arrangement until the Company closes the health club and spa for conversion to a Bliss spa.
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