Starwood 2004 Annual Report Download - page 108

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
opportunities to purchase hotel assets, even those outside of the United States, that Starwood Capital may
pursue are Ñrst presented to the Company. The Starwood Capital Noncompete continues until no oÇcer,
director, general partner or employee of Starwood Capital is on either the Board of Directors of the
Corporation or the Board of Trustees of the Trust (subject to exceptions for certain restructurings, mergers or
other combination transactions with unaÇliated parties). Several properties owned or managed by the
Company, including the Westin Innisbrook Resort (the ""Innisbrook Resort''), the Westin Mission Hills
Resort and the Westin Turnberry Resort, were opportunities brought to the Company or its 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. opportunities) with
respect to particular acquisition or investment opportunities in which it has no business or strategic interest. In
each instance, members of management not having an interest in the transaction review and analyze the
proposed transaction and may seek the advice of independent advisors. Following its review and analysis,
management makes a recommendation to the Governance Committee. Upon receiving such recommendation
and analysis, the Governance Committee will consider the recommendations and advice of management and
may, depending on the transaction involved, retain independent Ñnancial and legal advisors in determining
whether or not to pursue an opportunity or waive the Starwood Capital Noncompete.
Miscellaneous. In July 2003, the Company waived the Starwood Capital Noncompete in connection
with the acquisition of the Renaissance Wailea hotel in Hawaii by an aÇliate of Starwood Capital. The
Company 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 Govern-
ance 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. The Company also declined the opportunity to purchase the asset because the expected
after tax return on investment as determined by management based on its experience in the industry and
concurred to by the Governance Committee was less than the Company's minimum threshold and because the
acquisition was not consistent with the Company's strategic priorities.
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
determined by an independent third party appraiser engaged by the Governance Committee.
In November 2004, the Company waived the Starwood Capital Noncompete in connection with the
potential acquisition of two hotels in Florida which are currently franchised under a Starwood brand. Pursuant
to the waiver, the Company permitted Starwood Capital to enter into a contract to acquire the assets on the
condition that it enters into a management agreement for the Company to manage the assets for up to three
years. The management agreement would provide for a management fee of 5% of gross operating revenues in
exchange for the Company loaning Starwood Capital up to $2 million to facilitate capital improvements on the
properties. The loan would be repayable upon expiration of the management contracts unless Starwood
Capital enters into long term contracts with the Company. If Starwood Capital determines to operate the
properties as hotels, time shares, fractional interests, branded residential or any type of transient lodging
facility, Starwood Capital would be required to negotiate a ""market'' management agreement with the
Company. The Governance Committee approved the waiver of the Starwood Capital Noncompete and the
proposed management fee as being at or better than market rates based on management's recommendation. In
addition, the Company was provided an opportunity to acquire the assets but declined to do so because the
expected after tax return on investment as determined by management based on its experience in the industry
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