Starwood 2011 Annual Report Download - page 107

Gross capital spending during the year ended December 31, 2011 included approximately $253 million of
maintenance capital, and $209 million of development capital. Investment spending on gross vacation ownership
interest and residential inventory was $165 million, primarily related to the construction of our hotel and
residential project in Bal Harbour, Florida. Our capital expenditure program includes both offensive and
defensive capital. Defensive spending is related to maintenance and renovations 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 2012
(excluding vacation ownership and residential inventory) will be approximately $200 million for maintenance,
renovations, and technology capital. In addition, for the full year 2012, we currently expect to spend
approximately $375 million for investment projects, various joint ventures and other investments.
In order to secure management or franchise agreements, we have made loans to third-party owners, minority
investments in joint ventures and provided certain guarantees and indemnifications related thereto. See Note 25
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), 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 facility described below, the net proceeds from dispositions,
the assumption of debt, 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.
Since 2006, we have sold 65 hotels realizing proceeds of approximately $5.6 billion in numerous
transactions (see Note 5 of the consolidated financial statements). There can be no assurance, however, that we
will be able to complete future dispositions on commercially reasonable terms or at all. During the year ended
December 31, 2011 asset sales resulted in gross cash proceeds from investing activities of approximately $280
million.
In late 2011, we received certificates of occupancy for our St. Regis Bal Harbour project. As a result, we
began closings of units that had previously been sold and, in the fourth quarter of 2011, $74 million of cash was
released from escrow accounts related to these closings.
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