Starwood 2005 Annual Report Download - page 17

responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances,
or the failure to properly clean up such substances when present, could jeopardize our ability to develop, use,
sell or rent the real property or to borrow using the real property as collateral. If we arrange for the disposal or
treatment of hazardous or toxic wastes, we could be liable for the costs of removing or cleaning up wastes at
the disposal or treatment facility, even if we never owned or operated that facility. Other laws, ordinances and
regulations could require us to manage, abate or remove lead or asbestos containing materials. Similarly, the
operation and closure of storage tanks are often regulated by federal, state, local and foreign laws. Certain
laws, ordinances and regulations, particularly those governing the management or preservation of wetlands,
coastal zones and threatened or endangered species, could limit our ability to develop, use, sell or rent our real
property.
International Operations Are Subject to Special Political and Monetary Risks. We have signiÑcant
international operations which as of December 31, 2005 included 259 owned, managed or franchised
properties in Europe, Africa and the Middle East (including 27 properties with majority ownership); 55
owned, managed or franchised properties in Latin America (including 13 properties with majority ownership);
and 119 owned, managed or franchised properties in the Asia PaciÑc region (including 4 properties with
majority ownership). International operations generally are subject to various political, geopolitical, and other
risks that are not present in U.S. operations. These risks include the risk of war, terrorism, civil unrest,
expropriation and nationalization as well as the impact in cases in which there are inconsistencies between
U.S. law and the laws of an international jurisdiction. In addition, some international jurisdictions restrict the
repatriation of non-U.S. earnings. Various international jurisdictions also have laws limiting the ability of
non-U.S. entities to pay dividends and remit earnings to aÇliated companies unless speciÑed conditions have
been met. In addition, sales in international jurisdictions typically are made in local currencies, which subject
us to risks associated with currency Öuctuations. Currency devaluations and unfavorable changes in
international monetary and tax policies could have a material adverse eÅect on our proÑtability and Ñnancing
plans, as could other changes in the international regulatory climate and international economic conditions.
Other than Italy, where our risks are heightened due to the 12 properties we owned as of December 31, 2005,
our international properties are geographically diversiÑed and are not concentrated in any particular region.
Risks Relating to Operations in Syria
During Ñscal 2005, Starwood subsidiaries generated approximately $1 million of revenue from manage-
ment and other fees from hotels located in Syria, a country that the United States has identiÑed as a state
sponsor of terrorism. This amount constitutes signiÑcantly less than 1% of our worldwide annual revenues. The
United States does not prohibit U.S. investments in, or the exportation of services to, Syria, and our activities
in that country are in full compliance with U.S. and local law. However, the United States has imposed
limited sanctions as a result of Syria's support for terrorist groups and its interference with Lebanon's
sovereignty, including a prohibition on the exportation of U.S.-origin goods to Syria and the operation of
government-owned Syrian air carriers in the United States except in limited circumstances. However, the
United States may impose further sanctions against Syria at any time for foreign policy reasons. If so, our
activities in Syria may be adversely aÅected, depending on the nature of any further sanctions that might be
imposed. In addition, our activities in Syria may reduce demand for our stock among certain investors.
Debt Financing
As a result of our debt obligations, we are subject to: (i) the risk that cash Öow from operations will be
insuÇcient to meet required payments of principal and interest and (ii) interest rate risk. Although we
anticipate that we will be able to repay or reÑnance our existing indebtedness and any other indebtedness when
it matures, there can be no assurance that we will be able to do so or that the terms of such reÑnancings will be
favorable. Our leverage may have important consequences including the following: (i) our ability to obtain
additional Ñnancing for acquisitions, working capital, capital expenditures or other purposes, if necessary, may
be impaired or such Ñnancing may not be available on terms favorable to us; (ii) a substantial decrease in
operating cash Öow or a substantial increase in our expenses could make it diÇcult for us to meet our debt
service requirements and force us to sell assets and/or modify our operations; and (iii) our higher level of debt
13