Starwood 2005 Annual Report Download - page 18

and resulting interest expense may place us at a competitive disadvantage with respect to certain competitors
with lower amounts of indebtedness and/or higher credit ratings.
Risks Relating to So-Called Acts of God, Terrorist Activity and War
Our Ñnancial and operating performance may be adversely aÅected by so-called acts of God, such as
natural disasters, in locations where we own and/or operate signiÑcant properties and areas of the world from
which we draw a large number of customers. Similarly, wars (including the potential for war), terrorist activity
(including threats of terrorist activity), political unrest and other forms of civil strife and geopolitical
uncertainty have caused in the past, and may cause in the future, our results to diÅer materially from
anticipated results.
Some Potential Losses are Not Covered by Insurance
We carry insurance coverage for general liability, property, business interruption and other risks with
respect to our owned and leased properties and we make available insurance programs for owners of properties
we manage and franchise. These policies oÅer coverage features and insured limits that we believe are usual
and customary for our industry. Generally, our ""all-risk'' property policies provide that coverage is available on
a per occurrence basis and that, for each occurrence, there is a limit as well as various sub-limits on the
amount of insurance proceeds we can receive. In addition, there may be overall limits under the policies.
Sub-limits exist for certain types of claims such as service interruption, debris removal, expediting costs or
landscaping replacement, and the dollar amounts of these sub-limits are signiÑcantly lower than the dollar
amounts of the overall coverage limit. Our property policies also provide that for the coverage of critical
earthquake (California and Mexico) and Öood, all of the claims from each of our properties resulting from a
particular insurable event must be combined together for purposes of evaluating whether the annual aggregate
limits and sub-limits contained in our policies have been exceeded and any such claims will also be combined
with the claims of owners of managed hotels that participate in our insurance program for the same purpose.
Therefore, if insurable events occur that aÅect more than one of our owned hotels and/or managed hotels
owned by third parties that participate in our insurance program, the claims from each aÅected hotel will be
added together to determine whether the per occurrence limit, annual aggregate limit or sub-limits, depending
on the type of claim, have been reached and if the limits or sub-limits are exceeded each aÅected hotel will
only receive a proportional share of the amount of insurance proceeds provided for under the policy. In
addition, under those circumstances, claims by third party owners will reduce the coverage available for our
owned and leased properties.
In addition, there are also other risks including but not limited to war, certain forms of terrorism such as
nuclear, biological or chemical terrorism, political risks, some environmental hazards and/or acts of God that
may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or
may be too expensive to justify insuring against.
We may also encounter challenges with an insurance provider regarding whether it will pay a particular
claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of insured
limits occur, we could lose all or a portion of the capital we have invested in a hotel or resort, as well as the
anticipated future revenue from the hotel or resort. In that event, we might nevertheless remain obligated for
any mortgage debt or other Ñnancial obligations related to the property.
Acquisitions/Dispositions
We intend to make acquisitions that complement our business. There can be no assurance, however, that
we will be able to identify acquisition candidates or complete acquisitions on commercially reasonable terms
or at all. If acquisitions are made, there can be no assurance that any anticipated beneÑts will actually be
realized. Similarly, there can be no assurance that we will be able to obtain additional Ñnancing for
acquisitions, or that the ability to obtain such Ñnancing will not be restricted by the terms of our debt
agreements.
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