Starwood 2005 Annual Report Download - page 19

We periodically review our business to identify properties or other assets that we believe either are non-
core, no longer complement our business, are in markets which may not beneÑt us as much as other markets
during an economic recovery or could be sold at signiÑcant premiums. We are focused on restructuring and
enhancing real estate returns and monetizing investments and from time to time, may attempt to sell these
identiÑed properties and assets. There can be no assurance, however, that we will be able to complete
dispositions on commercially reasonable terms or at all. On November 14, 2005, we entered into an agreement
under which Host Marriott Corporation will acquire 38 properties from us in a stock and cash transaction
valued at approximately $4.1 billion (based on the closing price of Host Marriott common stock immediately
prior to the November 14, 2005 announcement date). As part of the agreement, we will generally continue to
manage the properties under their current brands for up to 40 years. If the Host Marriott transaction or other
dispositions are made, there can be no assurance that any anticipated beneÑts will actually be realized.
Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk
In addition to acquiring or developing hotels and resorts directly, we have from time to time invested, and
expect to continue to invest, as a co-venturer. Joint venturers often have shared control over the operation of
the joint venture assets. Therefore, joint venture investments may involve risks such as the possibility that the
co-venturer in an investment might become bankrupt or not have the Ñnancial resources to meet its
obligations, or have economic or business interests or goals that are inconsistent with our business interests or
goals, or be in a position to take action contrary to our instructions or requests or contrary to our policies or
objectives. Consequently, actions by a co-venturer might subject hotels and resorts owned by the joint venture
to additional risk. Although we generally seek to maintain suÇcient control of any joint venture, we may be
unable to take action without the approval of our joint venture partners. Alternatively, our joint venture
partners could take actions binding on the joint venture without our consent. Additionally, should a joint
venture partner become bankrupt, we could become liable for our partner's share of joint venture liabilities.
Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default
We market and sell VOIs, which typically entitle the buyer to ownership of a fully-furnished resort unit
for a one-week period (or in the case of fractional ownership interests, generally for three or more weeks) on
either an annual or an alternate-year basis. We also acquire, develop and operate vacation ownership resorts,
and provide Ñnancing to purchasers of VOIs as well as market and sell residential units. These activities are all
subject to extensive regulation by the federal government and the states in which vacation ownership resorts
are located and in which VOIs are marketed and sold including regulation of our telemarketing activities
under state and federal ""Do Not Call'' laws. In addition, the laws of most states in which we sell VOIs grant
the purchaser the right to rescind the purchase contract at any time within a statutory rescission period.
Although we believe that we are in material compliance with all applicable federal, state, local and foreign
laws and regulations to which vacation ownership marketing, sales and operations are currently subject,
changes in these requirements or a determination by a regulatory authority that we were not in compliance,
could adversely aÅect us. In particular, increased regulations of telemarketing activities could adversely
impact the marketing of our VOIs.
We bear the risk of defaults under purchaser mortgages on VOIs. If a VOI purchaser defaults on the
mortgage during the early part of the loan amortization period, we will not have recovered the marketing,
selling (other than commissions in certain events), and general and administrative costs associated with such
VOI, and such costs will be incurred again in connection with the resale of the repossessed VOI. Accordingly,
there is no assurance that the sales price will be fully or partially recovered from a defaulting purchaser or, in
the event of such defaults, that our allowance for losses will be adequate.
Recent Privacy Initiatives
We collect information relating to our guests for various business purposes, including marketing and
promotional purposes. The collection and use of personal data are governed by privacy laws and regulations
enacted in the United States and other jurisdictions around the world. Privacy regulations continue to evolve
and on occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy
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