Starwood 2010 Annual Report Download - page 103

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Cash From Investing Activities
Gross capital spending during the full year ended December 31, 2010 was as follows (in millions):
Maintenance Capital Expenditures
(1)
:
Owned, Leased and Consolidated Joint Venture Hotels ............................ $106
Corporate and information technology ........................................ 42
Subtotal................................................................ 148
Vacation Ownership and Residential Capital Expenditures
(2)
:
Net capital expenditures for inventory (excluding St. Regis Bal Harbour) .............. (34)
Capital expenditures for inventory — St. Regis Bal Harbour ........................ 146
Subtotal................................................................ 112
Development Capital ..................................................... 117
Total Capital Expenditures ................................................. $377
(1) Maintenance capital expenditures include improvements, renewals and extraordinary repairs that extend the
useful life of the asset.
(2) Represents gross inventory capital expenditures of $168 less cost of sales of $56.
Gross capital spending during the year ended December 31, 2010 included approximately $148 million of
maintenance capital, and $117 million of development capital. Investment spending on gross vacation ownership
interest and residential inventory was $168 million, primarily in Bal Harbour, Florida. Our capital expenditure
program includes both offensive and defensive capital. Defensive spending is related to maintenance and reno-
vations that we believe are necessary to stay competitive in the markets we are in. Other than capital to address fire
and life safety issues, we consider defensive capital to be discretionary, although reductions to this capital program
could result in decreases to our cash flow from operations, as hotels in certain markets could become less desirable.
The offensive capital expenditures, which are primarily related to new projects that we expect will generate a return,
are also considered discretionary. We currently anticipate that our defensive capital expenditures for the full year
2011 (excluding vacation ownership and residential inventory) will be approximately $300 million for mainte-
nance, renovations, and technology capital. In addition, for the full year 2011, we currently expect to spend
approximately $150 million for investment projects.
During the year ended December 31, 2010, we made a $23 million investment into an unconsolidated joint
venture. Our partner in the joint venture contributed an equal amount and the funds were used to pay off a third-party
mortgage. Our interest in this unconsolidated joint venture was subsequently sold, and we received cash proceeds of
approximately $42 million. Additionally, we will continue to manage the hotel, formerly owned by the joint
venture, under a long-term management contract.
During the year ended December 31, 2010, we paid approximately $23 million to acquire a controlling interest
in a joint venture in which we had previously held a non-controlling interest (see Note 4).
In order to secure management or franchise agreements, we have made loans to third-party owners, made
minority investments in joint ventures and provided certain guarantees and indemnifications. See Note 26 of the
consolidated financial statements for discussion regarding the amount of loans we have outstanding with owners,
unfunded loan commitments, equity and other potential contributions, surety bonds outstanding, performance
guarantees and indemnifications we are obligated under, and investments in hotels and joint ventures.
We intend to finance the acquisition of additional hotel properties (including equity investments), construction
of the St. Regis Bal Harbour, 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, and from cash generated from operations.
35