Starwood 2007 Annual Report Download - page 78

substantial increase in our expenses could make it difficult for us to meet our debt service requirements and force us
to sell assets and/or modify our operations.
Risks Relating to So-Called Acts of God, Terrorist Activity and War
Our financial and operating performance may be adversely affected by so-called acts of God, such as natural
disasters, in locations where we own and/or operate significant 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 differ 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.
These policies offer coverage terms and conditions 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 will receive in
excess of applicable deductibles. 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 significantly 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),
hurricane and flood, 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 affect
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 affected 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 affected 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 financial obligations related to the property.
Acquisitions/Dispositions and New Brands
We will consider corporate as well as property acquisitions and investments that complement our business. In
many cases, we will be competing for these opportunities with third parties who may have substantially greater
financial resources or different or lower acceptable financial metrics then we do. There can be no assurance that we
will be able to identify acquisition or investment candidates or complete transactions on commercially reasonable
terms or at all. If transactions are consummated, there can be no assurance that any anticipated benefits will actually
be realized. Similarly, there can be no assurance that we will be able to obtain additional financing for acquisitions
or investments, or that the ability to obtain such financing will not be restricted by the terms of our debt agreements.
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 benefit us as much as other markets during an
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