Starwood 2006 Annual Report Download - page 80

In August 2005 the Company completed the sale of the St. Regis hotel in Washington D.C. for approximately
$47 million in cash. The Company continues to manage the hotel subject to a long-term management contract.
Accordingly, the gain on the sale of approximately $32 million was deferred and is being recognized in earnings
over the 15-year life of the management contract.
In April 2005, the Company completed the sale of the Sheraton Lisboa Hotel and Towers in Lisbon, Portugal
for approximately $31 million in cash. The Company continues to manage the hotel subject to a long-term
management contract. Accordingly, the gain on the sale of approximately $6 million was deferred and is being
recognized in earnings over the 20-year life of the management contract.
The Company recorded an impairment charge of approximately $17 million in 2005 associated with the
Sheraton Cancun that is being demolished to build vacation ownership units. The Company also recorded an
impairment charge of approximately $32 million in accordance with SFAS No. 144 in order to write down one hotel
to its fair market value.
During 2004, the Company sold two hotels for approximately $56 million in cash. The Company recorded a
net loss of $33 million primarily related to the sale of these hotels, the impairment of one hotel sold in January 2005,
and three investments deemed impaired in 2004.
The hotels sold in 2006, 2005 and 2004 were generally encumbered by long-term management or franchise
contracts, and therefore, their operations prior to the sale date are not classified as discontinued operations.
Note 6. Assets and Debt Held for Sale
In October 2006, Starwood closed on the sale of land near the Montreal Airport to a developer who plans to
build two Starwood branded hotels on the site. The purchase agreement contains a provision that may allow, but not
obligate, Starwood to repurchase the land for the purchase price it received less a non-refundable amount if the
hotels are not built. As a result of this provision, Starwood has not treated this transaction as a sale. In accordance
with SFAS No. 144, the Company classified this asset as held for sale at December 31, 2006. As discussed in Note 5,
the Company also recorded an impairment charge of approximately $5 million in 2006 related to this land.
In December 2005, the Company entered into a purchase and sale agreement for the sale of three hotels for
$146 million and received a significant non-refundable deposit from the buyer. In accordance with SFAS No. 144,
the Company classified these assets and the estimated goodwill to be allocated to the sale as held for sale and ceased
depreciating them. As the hotels were sold subject to franchise agreements, the operations of the hotels are not
classified as discontinued operations. The sale was completed in January 2006.
In addition, as discussed earlier, the Company entered into a definitive agreement in November 2005 in
connection with the Host Transaction. As such, in accordance with SFAS No. 144, at December 31, 2005, the
Company classified these hotels, estimated goodwill of $462 million to be allocated to the sale and the debt to be
assumed by Host as held for sale. The Company also ceased depreciating these assets at that time. During 2006, five
hotels were removed from the Host Transaction, and they were retained by the Company. Accordingly, these hotels
and the associated debt that was going to be assumed by Host are no longer included in assets and debt held for sale
at December 31, 2006 or December 31, 2005, and the assets are being depreciated.
F-19
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)