Starwood 2003 Annual Report Download - page 54

third parties), is (i) a monthly payment of 1.25% of the lessor's total costs relating to the aircraft '
(approximately $123,000 at the beginning of the lease with this amount increasing as additional costs are
incurred by the lessor), plus (ii) $300 for each hour that the aircraft is in use. Payments to Star Flight LLC
were $1,865,000, $2,052,000 and $1,682,000 in 2003, 2002 and 2001, respectively. Starwood Capital has used
the GIII as well as the Gulfstream IV Aircraft (""GIV'') operated by the Company. For use of the GIII, Star
Flight LLC relieves the Company of lease payments for the days the plane is used and reimburses the
Company for costs of operating the aircraft. Lease relief and reimbursed operating costs were approximately
$52,000, $161,000 and $95,000 for Ñscal 2003, 2002 and 2001, respectively. For use of the GIV, Starwood
Capital pays a charter rate that the Company believes is no less favorable than that which the Company could
receive from an unaÇliated third party.
Other
The Company has on occasion made loans to employees, including executive oÇcers, principally in
connection with home purchases upon relocation. As of December 31, 2003, approximately $7 million in loans
to approximately 25 employees was outstanding of which approximately $5 million were non-interest bearing
home loans. Home loans are generally due Ñve years from the date of issuance or upon termination of
employment and are secured by a second mortgage on the employee's home. Executive oÇcers receiving
home loans in connection with relocation were Robert F. Cotter, President and Chief Operating OÇcer, in
June 2001 (original balance of $600,000), David K. Norton, Executive Vice President of Human Resources,
in July 2000 (original balance of $500,000), Theodore W. Darnall, President, Real Estate Group, in 1996 and
1998 (original balance of $750,000 ($150,000 bridge loan in 1996 and $600,000 home loan in 1998), of which
$600,000 was repaid in August 2003) and Steven M. Hankin, Chief Marketing OÇcer and President,
Starwood Technology and Revenue Systems in 2000 (original balance of $300,000 which was repaid January
2004). As a result of the acquisition of ITT Corporation in 1998, restricted stock awarded to
Messrs. Sternlicht and Darnall in 1996 vested at a price for tax purposes of $53 per Share. This amount was
taxable at ordinary income rates. By late 1998, the value of the stock had fallen below the amount of income
tax owed. In order to avoid a situation in which the executives could be required to sell all of the Shares
acquired by them to cover income taxes, in April 1999 the Company made interest-bearing loans at 5.67% to
Messrs. Sternlicht and Darnall of approximately $1,222,000 and $416,000 respectively, to cover the taxes
payable. Accrued interest on these loans at December 31, 2003 is approximately $327,000 and $111,000,
respectively. The notes and all associated accumulated interest become due on their tenth anniversary.
Richard Cotter held various positions with the Company from July 1998 through September 2003.
Mr. Cotter's salary and bonus were $354,885 for 2001, $345,404 for 2002, and $234,682 for 2003. Mr. Cotter
was granted 10,823 and 28,000 options to purchase Company shares in 2001 and 2002, respectively, and was
awarded 3,487 shares of restricted stock in 2001. In connection with his employment as general manager of
the St. Regis and other positions, Mr. Cotter was provided with the use of a Company-owned apartment in
New York City from September 1998 through August 2003, which the Company believes has a rental value of
$10,000 per month. Richard Cotter is the brother of Robert Cotter, who is the President and Chief Operating
OÇcer of the Company.
An entity in which Mr. Sternlicht has an indirect ownership interest held 259 limited partnership units in
Westin Hotels Limited Partnership (the owner of the Westin Michigan Avenue Hotel). The units were
acquired in 1995 and 1996. The entity tendered all of its units to the Company in connection with the
Company's tender oÅer. The Company purchased all shares tendered to it and the entity will receive
approximately $190,000 for its units.
In 2003, Starwood retained the law Ñrm Piper Rudnick, of which Senator George J. Mitchell, a Director
of the Corporation and Trustee of the Trust, is a partner. We expect that this Ñrm will continue to provide
services to the Company in 2004.
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