Starwood 2008 Annual Report Download - page 134

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conversion dates, approximately 1 million Shares were included in the computation of diluted Shares for the year
ended December 31, 2006.
In connection with the Host Transaction, Starwood’s shareholders received 0.6122 Host shares and $0.503 in
cash for each of their Class B Shares. Holders of Starwood employee stock options did not receive this consideration
while the market price of the Company’s publicly traded shares was reduced to reflect the payment of this
consideration directly to the holders of the Class B Shares. In order to preserve the value of the Company’s options
immediately before and after the Host Transaction, in accordance with the stock option agreements, the Company
adjusted its stock options to reduce the strike price and increase the number of stock options using the intrinsic value
method based on the Company’s stock price immediately before and after the transaction. As a result of this
adjustment, the diluted stock options increased by approximately 1 million Corporation Shares effective as of the
closing of the Host Transaction. In accordance with SFAS No. 123(R), this adjustment did not result in any
incremental fair value, and as such, no additional compensation cost was recognized. Furthermore, in order to
preserve the value of the contingently convertible debt discussed above, the Company modified the conversion rate
of the contingently convertible debt in accordance with the indenture.
Note 4. Significant Acquisitions
Acquisition of the Sheraton Full Moon Maldives Resort and Spa
During the fourth quarter of 2008, the company entered into a joint venture that acquired the Sheraton Full
Moon Maldives Resort and Spa. The company invested approximately $28 million in this venture in exchange for a
45% ownership interest.
Acquisition of the Sheraton Steamboat Resort and Conference Center
During the second quarter of 2007, the Company purchased the Sheraton Steamboat Resort & Conference
Center for approximately $58 million in cash from a joint venture in which the Company held a 10% interest. The
sale resulted in the recognition of a gain by the joint venture, and the Company’s portion of the gain was
approximately $7 million, which was recorded as a reduction in the basis of the assets purchased by the Company.
Acquisition of an interest in a Joint Venture that Purchased the Sheraton Grande Tokyo Bay Hotel
During the first quarter of 2007, the Company entered into a joint venture that acquired the Sheraton Grande
Tokyo Bay Hotel. This hotel has been managed by the Company since its opening and will continue to be operated
by the Company under a long-term management agreement with the joint venture. The Company invested
approximately $19 million in this venture in exchange for a 25.1% ownership interest.
Acquisition of Certain Assets from Club Regina Resorts
In December 2006, the Company completed a transaction to, among other things, purchase certain 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 the Company previously held from an affiliate of CRR. Total consideration of approximately
$41 million was paid by Starwood for these items. The portion related to the legal settlement was expensed.
Development of Restaurant Concepts with Chef Jean-Georges Vongerichten
In May 2006, the Company 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
F-18
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)