Starwood 2007 Annual Report Download - page 100

accompanying consolidated balance sheet at both December 31, 2007 and 2006, respectively. We do not anticipate
losing a significant number of management or franchise contracts in 2008.
In November 2005, we completed the Le Méridien Acquisition for a purchase price of approximately
$252 million. The purchase price was funded from available cash and the return of funds from our original purchase
of an interest in Le Méridien debt in late 2003. In connection with the Le Méridien Acquisition, we were
indemnified for certain of Le Méridien’s historical liabilities by the entity that bought Le Méridien’s owned and
leased hotel portfolio. The indemnity is limited to the financial resources of that entity. However, at this time, we
believe that it is unlikely that we will have to fund any of these liabilities.
In connection with the sale of 33 hotels to Host in 2006, we agreed to indemnify Host for certain liabilities,
including operations and tax liabilities. At this time, we believe that we will not have to make any material payments
under such indemnities.
During the second quarter of 2007, we purchased the Sheraton Steamboat Resort & Conference Center for
approximately $58 million in cash from a joint venture in which we held a 10% interest.
During the first quarter of 2007, we entered into a joint venture that acquired the Sheraton Grande Tokyo Bay
Hotel. This hotel has been managed by us since its opening and will continue to be operated by us under a long-term
management agreement with the joint venture. We invested approximately $19 million in this venture in exchange
for a 25.1% ownership interest.
In December 2006, we completed a transaction to, among other things, purchase real assets from Club Regina
Resorts (“CRR”) in Mexico. These assets included land and fixed assets adjacent to The Westin Resort & Spa in Los
Cabos, Mexico and terminated CRR’s rights to solicit guests at three Westin properties in Mexico. In addition to the
purchase of these assets, the transaction included the settlement of all pending and threatened legal claims between
the parties and the exchange of a new issue of CRR notes with a lower principal amount for notes we previously held
from an affiliate of CRR. Total consideration of approximately $41 million was paid by us for these items. The
portion related to the legal settlement was expensed.
In May 2006, we partnered with Chef Jean-Georges Vongerichten and a private equity firm to create a joint
venture that will develop, own, operate, manage and license world-class restaurant concepts created by Jean-
Georges Vongerichten, including operating the existing Spice Market restaurant located in New York City. The
concepts owned by the venture will be available for Starwood’s upper-upscale and luxury hotel brands including W,
Westin, Le Méridien and St. Regis. Additionally, the venture may own and operate freestanding restaurants outside
of Starwood’s hotels. We invested approximately $22 million in this venture for a 32.7% equity interest.
We intend to finance the acquisition of additional hotel properties (including equity investments), hotel
renovations, VOI and residential construction, capital improvements, technology spend and other core and ancillary
business acquisitions and investments and provide for general corporate purposes (including dividend payments and
share repurchases) through our credit facilities described below, through the net proceeds from dispositions, through
the assumption of debt, through the issuance of additional equity or debt securities and from cash generated from
operations.
We periodically review our business to identify properties or other assets that we believe either are non-core
(including hotels where the return on invested capital is not adequate), no longer complement our business, are in
markets which may not benefit us as much as other markets during an economic recovery or could be sold at
significant premiums. We are focused on enhancing real estate returns and monetizing investments. In the second
quarter of 2006, in connection with the Host Transaction, we completed the sale of 33 hotels and the stock of certain
controlled subsidiaries to Host for consideration valued at $4.1 billion which consisted of approximately $2.8 billion
in the form of Host common stock and cash paid directly to our shareholders and $1.3 billion of consideration paid
to Starwood, including $1.2 billion in cash, $77 million in debt assumption and $61 million in Host common stock.
During the year ended December 31, 2006, we sold ten additional owned hotels and interests in nine unconsolidated
joint ventures for gross proceeds of approximately $588 million in cash. During the year ended December 31, 2007,
we sold eight additional owned hotels and interests in four unconsolidated joint ventures for gross proceeds of
approximately $209 million in cash. There can be no assurance, however, that we will be able to complete future
dispositions on commercially reasonable terms or at all.
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