Recent ROFR activity

GregT · Aug 11, 2013

All,

I've heard from different brokers that Marriott has significantly increased its ROFR activity. Dioxide's database has 31 entries since June 1, 2013, and 13 of them are failed transactions. 2013 in general has a much higher ROFR pace than previous years (which is not unexpected) but I thought almost 50% failed transactions was higher than I expected.

Interesting -- I'm still in limbo at the moment on my Trust Points transaction because the BK Trustee is slow, and Marriott hasn't provided the estoppel information yet so I can confirm the Trust Points are free and clear. I'm very curious to proceed with this transaction, but continue to assess the landscape in case this package is not free and clear and I have to try again.

Will keep TUGgers apprised.

Best,

Greg

GregT · Aug 11, 2013

A little more data:

Activity from:

June 1, 2013 to August 10, 2013: 31 transactions reported, 13 ROFR'd -- (42% failure rate)

January 1, 2013 to May 31, 2013: 32 transactions reported, 9 ROFR'd -- (28% failure rate)

January 1, 2012 to Dec 31, 2012: 63 transactions reported, 9 ROFR'd -- (14% failure rate)

Three years 2009, 2010 and 2011: 262 transactions reported, 6 ROFR'd -- (2% failure rate)

Interesting stuff...

Best,

Greg

GregT · Aug 11, 2013

Woo Hoo! I have my own thread!

Looking back at the hot days of 2006/2007/2008 (pre September 2008 when world changed), Marriott ROFR'd approx. 24% of the sales (49 out of 205).

Interesting that 2013's ROFR activity is higher than has previously been recorded in Dioxide's database - and recent activity is much higher.

Best,

Greg

GaryDouglas · Aug 11, 2013

What's your source of data, besides Dioxide's DB...?

sb2313 · Aug 11, 2013

Sorry to interrupt!

While reworking my Marriott holdings 3/3 of my annual weeks I sold were excersised on. Marriott did pass on the eoy year one along with the eoy week I bought, and the eoy my coworker purchased. So there seems to be a trend, especially since Marriott doesn't make buyback offers on eoys as far as I know.

GregT · Aug 11, 2013

GaryDouglas said:
What's your source of data, besides Dioxide's DB...?

The only data I have is what is reported on Dioxides database. Thx

mjm1 · Aug 11, 2013

Greg, thanks for the analysis. It is interesting to see the uptick, which we assumed would happen as Marriott would likely want to expand it's holdings at properties where trust inventory is not as robust. As another person mentioned, I noticed that Marriott is passing on EOY, which is what we have in process. Like you we are waiting on the entire process to be completed. The trustee in our BK case has been out of the country on vacation, so that has slowed things down. It will be interesting to see how Marriott moves regarding ROFR going forward. Selectively I am sure.

Mike

dioxide45 · Aug 11, 2013

GregT said:
Woo Hoo! I have my own thread!

Looking back at the hot days of 2006/2007/2008 (pre September 2008 when world changed), Marriott ROFR'd approx. 24% of the sales (49 out of 205).

Interesting that 2013's ROFR activity is higher than has previously been recorded in Dioxide's database - and recent activity is much higher.

Best,

Greg

Greg, This is rather interesting. It seems that MVCI has a renewed interest in ROFR and now is definitely different than pre 2008. I think they are rather constrained still with growth of organic inventory. They are working on tower 3 at Grand Chateau but really have no other active projects at the moment to add new inventory to the trust. They do expect to begin construction on a number of their other unfinished projects; Crystal Shores, Lakeshore Reserve, but I think they are trying to acquire weeks to ensure they don't run out of inventory to sell before they can get these new weeks in to the trust.

Pre 2008 things looked great, they had plans for a number of resorts to be built so weren't heavily relying on ROFR and buyback.

GregT · Aug 12, 2013

All,

I suspect we will be seeing more ROFRs in the coming days. A few other observations -- again focusing on the last two months. Note that this is a very small sample size (31 reported transactions), but interesting.

One of the things that we've discussed on TUG before is a metric to predict what a week might be ROFR'd at. From the Points Values spreadsheet (linked below), we know how many Trust Points Marriott gets (basically the same as our skimmed points). We know they can sell those points for $10 each -- so is there a pattern of what does/does not get ROFR'd?

31 weeks reported on Dioxide's database.

Of these 31 weeks, 13 were ROFR'd.

All 13 weeks were Annual weeks, with a ROFR metric of 23% or lower (computed as ROFR price divided by the Trust Points-equivalent value that Marriott can sell that week for). The average ROFR-metric for these 13 weeks was 14%, but were as low as 1% and as high as 23%. Three Gold, 10 Platinum.

That's interesting. But what about the 18 weeks that did not get ROFR'd? Any patterns?

7 of the 18 weeks were EOY. Not a single EOY week was ROFR'd (even with low ROFR metrics, as low as 3%.)

1 of the 18 weeks was a Custom House, which is not yet present in the Trust (ROFR metric of 7%)

2 of the 18 weeks were Aruba weeks, which is not yet present in the Trust (one below 23%, and one above 23%)

1 of the 18 weeks was a Phuket week, which is not yet present in the Trust (No ROFR metric)

1 of the 18 weeks is a Bronze week, which is likely not considered a prime week. (ROFR metric of 6%)

2 of the 18 weeks were Grande Vista Gold. The Trust is deep in GV Gold (~1,000 GV Golds in there) -- but even so, these Annuals had low ROFR-metrics of 3%.

2 of the 18 weeks were Prime weeks, and premium priced at 28% and 32% ROFR-metric

1 of the 18 weeks was Doral, and I don't have the data to compute the ROFR metric

1 of the 18 weeks was a Newport Coast Platinum Plus, which was right on 23% ROFR metric. But, there are 150 Week 26's already in the Trust.

There aren't any conclusions here because the dataset is so small, but this is what appears to have been ROFR'd:

1) Annual (high-quality) weeks
2) ROFR-metric of 23% or lower
3) Weeks where the Trust isn't tremendously deep (hard to define)
4) U.S. weeks without RTU (not Aruba/Phuket/Custom House)

I just think this is very interesting. We've all speculated that the period of cheapo Golds/Platinums may be coming to an end, and I'm starting to feel it. I don't understand why they didn't ROFR EOYs, because there were some cheap EOYs that made it through, and there are clearly EOYs in the Trust.

Question for the group: has anyone had an EOY purchase that failed ROFR recently?

Please do keep updating Dioxide's database, so we can try to figure out what Marriott is doing. Thanks very much!

Best,

Greg

benyu2010 · Aug 12, 2013

Dataset is indeed small and likely causes large margin of error. However, I think you are in the right direction.

sjsharkie · Aug 12, 2013

GregT said:
Interesting -- I'm still in limbo at the moment on my Trust Points transaction because the BK Trustee is slow, and Marriott hasn't provided the estoppel information yet so I can confirm the Trust Points are free and clear. I'm very curious to proceed with this transaction, but continue to assess the landscape in case this package is not free and clear and I have to try again.

Best,

Greg

Greg--

Just curious here -- does the bankruptcy trustee state that the transaction needs to pass ROFR? There is cloudy precedence that these ROFR clauses can be an unenforceable restriction on a contract as it tends to discourage other bidders from bidding -- therefore lowering the price of what could be obtained from the asset. It is murky -- there is no clear precedence and it seems to be determined on a case by case basis.

Since you are going through a transaction, I thought I'd ask if the trustee has disclosed the ROFR clause and intent to enforce it in their sale.

Thanks,
Ryan

jont · Aug 12, 2013

GregT said:
All,

I suspect we will be seeing more ROFRs in the coming days. A few other observations -- again focusing on the last two months. Note that this is a very small sample size (31 reported transactions), but interesting.

One of the things that we've discussed on TUG before is a metric to predict what a week might be ROFR'd at. From the Points Values spreadsheet (linked below), we know how many Trust Points Marriott gets (basically the same as our skimmed points). We know they can sell those points for $10 each -- so is there a pattern of what does/does not get ROFR'd?

31 weeks reported on Dioxide's database.

Of these 31 weeks, 13 were ROFR'd.

All 13 weeks were Annual weeks, with a ROFR metric of 23% or lower (computed as ROFR price divided by the Trust Points-equivalent value that Marriott can sell that week for). The average ROFR-metric for these 13 weeks was 14%, but were as low as 1% and as high as 23%. Three Gold, 10 Platinum.

That's interesting. But what about the 18 weeks that did not get ROFR'd? Any patterns?

7 of the 18 weeks were EOY. Not a single EOY week was ROFR'd (even with low ROFR metrics, as low as 3%.)

1 of the 18 weeks was a Custom House, which is not yet present in the Trust (ROFR metric of 7%)

2 of the 18 weeks were Aruba weeks, which is not yet present in the Trust (one below 23%, and one above 23%)

1 of the 18 weeks was a Phuket week, which is not yet present in the Trust (No ROFR metric)

1 of the 18 weeks is a Bronze week, which is likely not considered a prime week. (ROFR metric of 6%)

2 of the 18 weeks were Grande Vista Gold. The Trust is deep in GV Gold (~1,000 GV Golds in there) -- but even so, these Annuals had low ROFR-metrics of 3%.

2 of the 18 weeks were Prime weeks, and premium priced at 28% and 32% ROFR-metric

1 of the 18 weeks was Doral, and I don't have the data to compute the ROFR metric

1 of the 18 weeks was a Newport Coast Platinum Plus, which was right on 23% ROFR metric. But, there are 150 Week 26's already in the Trust.

There aren't any conclusions here because the dataset is so small, but this is what appears to have been ROFR'd:

1) Annual (high-quality) weeks
2) ROFR-metric of 23% or lower
3) Weeks where the Trust isn't tremendously deep (hard to define)
4) U.S. weeks without RTU (not Aruba/Phuket/Custom House)

I just think this is very interesting. We've all speculated that the period of cheapo Golds/Platinums may be coming to an end, and I'm starting to feel it. I don't understand why they didn't ROFR EOYs, because there were some cheap EOYs that made it through, and there are clearly EOYs in the Trust.

Question for the group: has anyone had an EOY purchase that failed ROFR recently?

Please do keep updating Dioxide's database, so we can try to figure out what Marriott is doing. Thanks very much!

Best,

Greg

Great work Greg
you would make detective Colombo proud.

GregT · Aug 12, 2013

sjsharkie said:
Greg--

Just curious here -- does the bankruptcy trustee state that the transaction needs to pass ROFR? There is cloudy precedence that these ROFR clauses can be an unenforceable restriction on a contract as it tends to discourage other bidders from bidding -- therefore lowering the price of what could be obtained from the asset. It is murky -- there is no clear precedence and it seems to be determined on a case by case basis.

Since you are going through a transaction, I thought I'd ask if the trustee has disclosed the ROFR clause and intent to enforce it in their sale.

Thanks,
Ryan

Ryan,

Interesting question -- I know that my broker intends to submit for ROFR (at least that's what he told me).... I'll pose the question though...

Thanks to others for the comments -- and interesting that mjm, sb and Ben have also noticed the successful passage of EOY weeks....

Best,

Greg

billymach4 · Aug 12, 2013

BK?

What is BK trustee?

hypnotiq · Aug 12, 2013

BK == Bankruptcy

Fasttr · Aug 12, 2013

billymach4 said:
What is BK trustee?

Bankruptcy....he is purchasing resale points through a bankruptcy proceeding.

sjsharkie · Aug 12, 2013

GregT said:
Ryan,

Interesting question -- I know that my broker intends to submit for ROFR (at least that's what he told me).... I'll pose the question though...

Thanks to others for the comments -- and interesting that mjm, sb and Ben have also noticed the successful passage of EOY weeks....

Best,

Greg

It would be up to the BK trustee -- the trustee determines how to dispose of the assets including whether or not to submit for ROFR.

Obviously, if the trustee is not requiring it, I would not submit for ROFR on your own -- I'm not sure whether or not the broker represents just you, or is representing both parties.

I'm not an attorney, but I've been through this for something else. Contact me if you want more details.

-ryan

BocaBoy · Aug 12, 2013

I recently inquired of Marriott Resales whether they would be interested in buying back an EOY week. They said no, that they will only give buyback offers on annual weeks. I would imagine that same logic is being employed in making their ROFR decisions.

benyu2010 · Aug 13, 2013

IMHO, EOY should be worth much less than the half price of equivalent annual week. ROFR and buyback are strong support of price which EOY weeks lack of. Also, closing cost and transfer/waiver is the same for EOY, annual or even two in one deed. One gets four times of usage for same transaction cost from two in one deed than EOY. EOY w/ non-usage year next is a hard-sell.

EOY is basically a mutated form of deed week that lacks liquidity and buyers

PassionForTravel · Aug 13, 2013

Ben,

Have to disagree with you on the EOY, Marriott might not be interested in them, but there sure are a lot of others who are, me for one and all the other people who were bidding against me. The reason is simple if I have limited time off and want to play with a bunch of systems, or have home resort advantage in more than one location then EOY works great. Yes there are two closing costs and transfer fees but that's minimal compared to MF over the years, which in most systems are 1/2 of annual.

For Marriott it probably complicates their system to have a unit available one year and not the next and its probably not very efficient use of there time. They get twice the bang for a ROFL with an annual.

When I was actively bidding on new contracts earlier this year EOY was going for 40-60% of annual. Yes Marriott may not be ROFR them but if people can't get an annual because Marriott is ROFR them, then the next place they will look is to the EOY. So the effect is the same a restriction of supply. I do agree that a unit without current year or next year usage is much less desirable.

Ian

benyu2010 · Aug 13, 2013

Ian,

I missed the last line I wrote before. The difference of price is likely marginal. Lol

We looks at EOY from slight different perspectives. I'm more focus on marketability and you are more owner orientated. However, I need to emphasize the exit mechanism is very important in timeshare, and lack of an 'official' and guaranteed exit is a pretty serious downside.

Best,

Ben

m61376 · Aug 13, 2013

benyu2010 said:
IMHO, EOY should be worth much less than the half price of equivalent annual week. ROFR and buyback are strong support of price which EOY weeks lack of. Also, closing cost and transfer/waiver is the same for EOY, annual or even two in one deed. One gets four times of usage for same transaction cost from two in one deed than EOY. EOY w/ non-usage year next is a hard-sell.

EOY is basically a mutated form of deed week that lacks liquidity and buyers

At their hey day, Marriott sold EOY weeks, unless 2 were bought within a year of each other, at 60%. As posted above, it is a great way to minimize MF's ESP. If the objective is to visit every other year. Despite the higher closing costs when amortized, the MF's, which add up, more than compensate. Great especially for units that have high MF's and would otherwise be traded frequently, or for those with limited funds and/ or vacation time. It's also a good entryway into timeshares, to test the waters so to speak and see if it fits your lifestyle.

BJRSanDiego · Oct 23, 2013

This might be the first EOY fail

In Sept I entered into a sales agreement to buy a resale EOY Marriott DSV2. Price was probably recent market price and not a steal. But, It failed. So, either Marriott screwed up thinking that it was an annual or they had a buyer to make a quick sale or they are starting to exercise on EOY units too.

dioxide45 · Oct 23, 2013

BJRSanDiego said:
In Sept I entered into a sales agreement to buy a resale EOY Marriott DSV2. Price was probably recent market price and not a steal. But, It failed. So, either Marriott screwed up thinking that it was an annual or they had a buyer to make a quick sale or they are starting to exercise on EOY units too.

There is one other one in the database. Though it was a $10.50 Legends Edge. 1965 also reported an exercise on a EOY, but I think they came back and said it wasn't.

thinze3 · Oct 24, 2013

BocaBoy said:
I recently inquired of Marriott Resales whether they would be interested in buying back an EOY week. They said no, that they will only give buyback offers on annual weeks. I would imagine that same logic is being employed in making their ROFR decisions.

Not a buyback offer, but Marriott sent me another resale offer today for my EOY Waiohai. This is the second time in a year they have done this. If a ROFR opportunity came along today for a similar EOY unit, they would probably snatch it up.

Recent ROFR activity

GregT

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