Starwood 2010 Annual Report Download - page 88

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Vacation Ownership and Residential Business
We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many
cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their
interval for intervals at other Starwood vacation ownership resorts, for intervals at certain vacation ownership
resorts not otherwise sponsored by Starwood through an exchange company, or for hotel stays at Starwood
properties. From time to time, we securitize or sell the receivables generated from our sale of VOIs.
We have also entered into arrangements with several owners for mixed use hotel projects that will include a
residential component. We have entered into licensing agreements for the use of certain of our brands to allow the
owners to offer branded condominiums to prospective purchasers. In consideration, we typically receive a licensing
fee equal to a percentage of the gross sales revenue of the units sold. The licensing arrangement generally terminates
upon the earlier of sell-out of the units or a specified length of time.
At December 31, 2010, we had 23 residential and vacation ownership resorts and sites in our portfolio with 17
actively selling VOIs and residences including one unconsolidated joint venture. During 2010 and 2009 we invested
approximately $151 million and $145 million, respectively, for vacation ownership capital expenditures, including
VOI construction at the Westin Desert Willow Villas in Palm Desert, CA, the Westin Lagunamar Ocean Resort in
Cancun, as well as construction costs at the St. Regis Bal Harbour Resort in Miami Beach, FL.
Due to the global economic crisis and its impact on the long-term outlook for the timeshare industry, during the
fourth quarter of 2009, we completed a comprehensive review of our vacation ownership projects. No new projects
are being initiated and we have decided not to develop three vacation ownership sites and future phases of certain
existing projects. As a result, inventories, fixed assets and land values at certain projects were determined to be
impaired and were written down to their fair value, resulting in a primarily non-cash pre-tax impairment charge in
2009 of $255 million. Additionally, in connection with this review of the business, we made a decision to reduce the
pricing of certain inventory at existing projects, resulting in a pre-tax charge of $17 million. As a result of these
decisions and future plans for the vacation ownership business, we also recorded a $90 million non-cash charge for
the impairment of goodwill associated with the vacation ownership reporting unit.
Item 3. Legal Proceedings.
Incorporated by reference to the description of legal proceedings in Note 26. Commitments and Contingencies,
in the consolidated financial statements set forth in Item 8. Financial Statements and Supplementary Data.
20