Starwood 2006 Annual Report Download - page 21

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 intend to make acquisitions and investments that complement our business. There can be no assurance,
however, 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
economic recovery or could be sold at significant premiums. We are focused on restructuring and enhancing real
estate returns and monetizing investments and from time to time, may attempt to sell these identified properties and
assets. There can be no assurance, however, that we will be able to complete dispositions on commercially
reasonable terms or at all or that any anticipated benefits will actually be received.
We have developed and launched two new hotel brands, aloft and Element, and may develop and launch
additional brands in the future. There can be no assurance regarding the level of acceptance of these brands in the
development and consumer marketplaces, that the cost incurred in developing the brands will be recovered or that
the anticipated benefits from these new brands will be realized.
Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk
In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business
directly, we have from time to time invested, and expect to continue to invest, as a co-venturer. Joint venturers often
have shared control over the operation of the joint venture assets. Therefore, joint venture investments may involve
risks such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial
resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our
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