# Right of First Refusal



## ekinggill (Feb 18, 2011)

How does this work?  How long does the developer have to claim their ROFR?  Are their specific notification requirements?  Is their right all in the time between earnest money and closing or can they come back after the fact and claim the property, and undo a deal?


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## DeniseM (Feb 18, 2011)

I believe it's 30 days (Fred?)  In Starwood Owner Resources at the top of the forum, there is a list of the resorts that have ROFR - not all do.

The closing company has to send the info. to Starwood before the sale is made, and once Starwood passes on it (or ignores it long enough) the sale can go through and the deed be recorded in the new owner's name.  Once that's done, Starwood cannot exercise ROFR.


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## Fredm (Feb 18, 2011)

15 days.

More discussion here.


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## DavidnRobin (Feb 18, 2011)

Not all SVO Resorts have a ROFR - WKV and WSJ do not have a ROFR.


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## DeniseM (Feb 18, 2011)

Thank you, Fred!

Does Starwood always respond, or do you just proceed if you don't hear anything after 15 days?


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## PamMo (Feb 18, 2011)

Denise, in one of our purchases, Starwood did not respond at all, even though they were sent several copies of the sales contract. After a month, our lawyer wrote, saying we were moving forward with the sale citing Starwood rules regarding ROFR. In the end, there was no problem with recording or deed transfer, but it was a HUGE hassle.


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## Fredm (Feb 18, 2011)

Starwood responds sooner or later. Sometimes later. Sometimes they claim the request for waiver was not received.

The buyer cannot simply proceed without a waiver because Starwood will not update its records in the absence of one (assuming an ROFR applies to the resort being purchased).

I have had a couple of transactions exercised after the 15 day review period expired. It is necessary to formally challenge the exercise and get it reversed (which is possible if done correctly). 

If TI is being purchased the title company will not issue a policy without the waiver in hand.


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## PamMo (Feb 18, 2011)

Our experience was as Fred wrote. Make sure you jump through all the hoops for ROFR, follow-up, and keep good records. Having a good broker who really knows what they're doing certainly helps, too.


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## ekinggill (Feb 19, 2011)

Thanks.  All helpful info.


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## darius (Feb 19, 2011)

For what it's worth,  I was reading over the disclosures for WKORV-N, and it is stated, on page 17 (7.2.C - Right of first refusal to purchase) that Starwood has 10 business days to respond to the ROFR.   It further states if they do not respond within 10 business days, no further notice is needed to sell the property to a third party (As long as it occurs within 90 days of the notice).  

Based on the above, it does not appear that any formal notice is needed stating they will not exercise ROFR for title insurance purposes as long as the title company followed the correct procedures.


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## Fredm (Feb 19, 2011)

darius said:


> > For what it's worth,  I was reading over the disclosures for WKORV-N, and it is stated, on page 17 (7.2.C - Right of first refusal to purchase) that Starwood has 10 business days to respond to the ROFR.   It further states if they do not respond within 10 business days, no further notice is needed to sell the property to a third party (As long as it occurs within 90 days of the notice).
> 
> 
> 
> ...


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## gregb (Feb 19, 2011)

Good advice Fred.  Thanks for your clear discussion.

Greg


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## darius (Feb 19, 2011)

Thanks Fred, great information -- I hope Starwood responds quickly.


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## Fredm (Feb 19, 2011)

My pleasure, Greg.


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## tborr123 (Feb 20, 2011)

To anyone's knowledge has Starwood ever exercised its ROFR?


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## Fredm (Feb 20, 2011)

tborr123 said:


> To anyone's knowledge has Starwood ever exercised its ROFR?



Yes.........


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## jerseygirl (Feb 20, 2011)

LOL -- FredM is a man of few words!   

Just use the search feature to search for ROFR on the Starwood board.  You'll find lots of recent information.


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## Fredm (Feb 26, 2011)

ROFR exercised on a KOR 1 br eoy at $1,950.
No surprise about this one. Just fyi.


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## Garnet (Feb 27, 2011)

*And many others...*

The big ts cos aren't exercising ROFR like they used to...  but, like many of us, if a real bargain it to be had (particularly if they have a potential buyer, or want a little inventory for less than cost...) they will exercise.  Bargains are out there-for both us and developers.


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## mcernik (Mar 3, 2011)

Well crap.  Starwood just excercised ROFR on the EOY, WKORV I snapped up on Ebay for $985...


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## PamMo (Mar 3, 2011)

mcernik said:


> Well crap.  Starwood just excercised ROFR on the EOY, WKORV I snapped up on Ebay for $985...



Sorry you lost out, but I think Starwood exercising ROFR was to be expected - you practically "stole" that one! That was a unbelievable price.

With all the timeshares Starwood is picking up using ROFR at Ka'anapali (and there seem to be many), I wonder how sales are going at the resort?


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## DeniseM (Mar 3, 2011)

They are not in active sales at the resort, because both North and South have been sold out for some time, but they do have a small amount of inventory from ROFR, requalifying, foreclosures, etc.


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## PamMo (Mar 3, 2011)

Denise, when we've stayed there, we're always invited to attend an owner update (AKA sales presentation). We don't go as we'd never buy retail, and just don't want to waste our time on vacation. We met other guests who bought weeks at WKORV or WKORVN after hearing the sales pitch, so I suspected they were selling units that were foreclosed on or picked up with ROFR. I'm curious with the uptick in ROFR's being exercised, how large their inventory is (and how they're selling) at the resort? Otherwise, are they selling Desert Willow or Lagunamar, and telling people they can trade into WKORV?


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## DeniseM (Mar 3, 2011)

Yes - they are selling the new resorts and WPORV at WKORV.


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## MommaBear (Mar 3, 2011)

Starwood just exercised ROFR on me after 6 weeks- WMH 2 br l/o eey Gold, $1 on ebay.


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## mcernik (Mar 3, 2011)

Yeah kinda stinks.  I was all excited that I got a great deal, and then nothing.... Bummer.


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## DavidnRobin (Mar 3, 2011)

A few thoughts - some that may be tangent...

During Owner Updates - I had always challenged the salesperson about SVO 'paper' prices for 'sold-out' resorts (like WKORV) and the difference in resale prices for the same VOI.  For example - how they could list an WKORV OFD for ~$100K (on paper) and the resale value be much (much) lower, and therefore not be using their ROFR (at the time) and then reselling at a nice profit.

I had always thought that since they had active sales going on at WKORV (but not for WKORV) - that they had the infrastructure to make a nice profit on picking up the resale WKORV VOIs (or others) and then reselling.  It appears that someone at SVO finally got wise.  Of course, the claim may be that they have finally dropped low enough for them to consider, but I still feel that they could have been doing this for a while at a reasonable profit (as a profit is still a profit...).

On that note - I know someone on TUG (can't recall name, but not a SVO Tugger) that rails on about how the ROFR ruins the resort and is akin to the devil.  However, I actually see SVO utilizing their ROFR as a benefit to Owners in 2 ways - 1) it keeps some of the resale prices up, and 2) SVO can take over the VOI to prevent default and therefore the MFs can be paid to the HOA.

Am I missing something?


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## Fredm (Mar 3, 2011)

Westin Kaanapali (KOR), annual 2 bedroom OV, ROFR just exercised at $15,500.


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## Fredm (Mar 3, 2011)

DavidnRobin said:


> However, I actually see SVO utilizing their ROFR as a benefit to Owners in 2 ways - 1) it keeps some of the resale prices up, and 2) SVO can take over the VOI to prevent default and therefore the MFs can be paid to the HOA.
> 
> Am I missing something?



Not missing anything. At least not in the current economic situation.
Although, ROFR would not prevent default. The owner sold it. A buyer bought it. 
Starwood just replaced the buyer.


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## mcernik (Mar 3, 2011)

Wow rofr on 15,500.  Guess I'm not getting starwood any time soon. LOL


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## mstoyanov (Mar 3, 2011)

DavidnRobin,

as Fredm noted ROFR does not prevent defaults - since ROFR can not be exercised without negotiated sale. As for whether ROFR helps seller (by higher prices) it can do but only when exercised frequently. When not exercised it is actually a hindrance for a seller (higher fees and slower sale). In fact when discussing ROFR many people discuss it as binary event - ROFR exist/not exist but in reality there are 4 very distinctive scenarios:
1st -  Resort has no ROFR and developer is not buying from secondary market (Wyndham)
2nd - Resort has  ROFR but it is never exercised by developer and developer is not buying from secondary market (Westgate)
3rd - Resort  has ROFR and developer is regularly exercising it (Hilton)
4th - Resort has no ROFR and developer is buying directly from secondary market (Diamond or Suntera I think did at some point).

From sellers prospective the preferred order is this 4, 3, 1, 2 (since this is the order of highest to lowest resulting prices on the market)
From buyer prospective the preferred order 1, 2, 3, 4 
Neither seller nor buyer prefer scenario 2 as top choice since even though it results in a lowest prices (slightly lower than 1) as it creates hassle for both buyer and seller and the surplus is consumed by the developer (i.e. the difference between prices in scenario 1 and 2 are usually ROFR fees that goes in developer pocket).
Again neither seller nor buyer has 3 as a top choice either but when scenario 4 is not available 3 is still better for the seller than 1. 

What I never understood is why companies like Wyndham never put ROFR in the past in their contracts - even if they choose not to exercise it they can line their pockets by the ROFR waiver fees. I can see why it may make sense to have ROFR and not exercised it (like how Marriott was overburdened with unsold inventory when the crisis hit) but not to have it as a part of the original declaration is beyond my understanding.


DavidnRobin said:


> A few thoughts - some that may be tangent...
> 
> During Owner Updates - I had always challenged the salesperson about SVO 'paper' prices for 'sold-out' resorts (like WKORV) and the difference in resale prices for the same VOI.  For example - how they could list an WKORV OFD for ~$100K (on paper) and the resale value be much (much) lower, and therefore not be using their ROFR (at the time) and then reselling at a nice profit.
> 
> ...


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## mstoyanov (Mar 3, 2011)

mcernik,

I would not be discouraged by such high levels. You never know when your deal may slip trough the cracks. 


mcernik said:


> Wow rofr on 15,500.  Guess I'm not getting starwood any time soon. LOL


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## mcernik (Mar 3, 2011)

Yeah, I'll just keep trying... doesn't hurt to buy and get it rofr'd


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## susan6103 (Mar 3, 2011)

*ROFR exercised*



Fredm said:


> Westin Kaanapali (KOR), annual 2 bedroom OV, ROFR just exercised at $15,500.



Starwood just exercised at $8950 2 bedroom, IV, annual.

i guess it did sound too good to be true.


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## DavidnRobin (Mar 3, 2011)

Fredm said:


> Not missing anything. At least not in the current economic situation.
> Although, ROFR would not prevent default. The owner sold it. A buyer bought it.
> Starwood just replaced the buyer.


When responding - I saw my logic flaw... so only one potential benefit - never mind.


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## Fredm (Mar 4, 2011)

DavidnRobin said:


> When responding - I saw my logic flaw...* so only one potential benefit *- never mind.



Yes, but you are absolutely right about the potential benefit of firming prices. 

FN is on hold. The economy is improving. Travel to Hawaii is on the upswing. 
It is clear to me that Starwood is actively selling KOR. They have concluded they can buy inventory at or below replacement cost. *If* this keeps up it will not take long for market prices to adjust accordingly.


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## darius (Mar 4, 2011)

I'm thinking that the reason Starwood is ROFR'ing so many units would be perhaps to "test" the market?   See how they can resell them, and if they resell easy perhaps begin rebuilding?  Thoughts?


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## susan6103 (Mar 4, 2011)

darius said:


> I'm thinking that the reason Starwood is ROFR'ing so many units would be perhaps to "test" the market?   See how they can resell them, and if they resell easy perhaps begin rebuilding?  Thoughts?



Starwood can test the market till the cows come home.
Perhaps it was a blessing in disguise that they decided to ROFR on my bid.  
I am now considering a Mariott instead.  The price upfront is higher but the fees are lower.


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## krmlaw (Mar 4, 2011)

oh no ...  just saw this!

i just got an SDO on ebay for $224 .... am i out of luck?


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## Fredm (Mar 4, 2011)

krmlaw said:


> oh no ...  just saw this!
> 
> i just got an SDO on ebay for $224 .... am i out of luck?



I have not heard of any SDO ROFR's. 
Just Maui and Mission Hills.

Good luck.


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## krmlaw (Mar 4, 2011)

wheww.... thanks!


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## Seattlenerd (Mar 21, 2011)

SVO has just exercised its ROFR on our WKORV IV, annual, two-bedroom lockoff, at $11,000.

The paperwork looks straightforward (and I know we'll have to pay the broker commissions no matter what), but a couple of things caught my eye:

- The original "Offer to Buy" from our original buyer is not referenced in SVO's ROFR half-page Purchase & Sale Agreement, and it seems it should be. It *is *referenced in the cover letter to the paperwork. (This is important, as we're selling effective with the 2012 use year and that was explicit in the original "Offer to Buy," since we've already paid 2011 maintenance fees and converted that use year to Starpoints).

- SVO includes a rather severe General Release which exempts SVO from, well, everything in the future. It's something we'd prefer not to sign because it doesn't specify this transaction/property, and we own other SVO weeks elsewhere.

Anyone ever had any luck getting these kinds of modifications to ROFR paperwork? 

And even if so, is it worth requesting the above modifications?


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## MommaBear (Mar 22, 2011)

susan6103 said:


> Starwood can test the market till the cows come home.
> Perhaps it was a blessing in disguise that they decided to ROFR on my bid.
> I am now considering a Mariott instead.  The price upfront is higher but the fees are lower.


Same here!


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## Fredm (Mar 22, 2011)

Seattlenerd said:


> SVO has just exercised its ROFR on our WKORV IV, annual, two-bedroom lockoff, at $11,000.
> 
> The paperwork looks straightforward (and I know we'll have to pay the broker commissions no matter what), but a couple of things caught my eye:
> 
> ...



You are paying your broker a commission on the sale. Ask them. They represent you.


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## Seattlenerd (Mar 22, 2011)

Fredm said:


> You are paying your broker a commission on the sale. Ask them. They represent you.



Shall do, thanks (the first thing I did after getting the SVO paperwork was send an email to the broker). 

But I'm also curious if anyone on this board has had a similar situation and how they dealt with it. We're TUG members (the TUG log-in is my wife's). I've done some searching, but nothing came up about the specifics of ROFR paperwork and if it can be modified on request.


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## Fredm (Mar 22, 2011)

darius said:


> I'm thinking that the reason Starwood is ROFR'ing so many units would be perhaps to "test" the market?   See how they can resell them, and if they resell easy perhaps begin rebuilding?  Thoughts?



Starwood is not "testing" anything. They know exactly what their market is. They live it every day.

In the current economic climate they are reluctant to commit capital to construction and expand their marketing investment to sell it. It's not the current market they are worried about. It's the future. No one wants to be left holding a bag of unsold inventory.
Especially when they can acquire inventory via ROFR and foreclosures at a lower cost, without the capital commitment.

Unit expansion will not occur unless/until Starwood believes it is a productive and safe use of capital and debt. 
Same reason why profitable businesses everywhere are hoarding cash and not investing in new capacity. 

Meanwhile, a right-sized sales infrastructure is maintained at locations where expansion entitlements exist, and ROFR is permitted in the governing docs (Maui and Palm Desert). 

My guess is that ROFR activity will become more aggressive in the coming months, if the economy holds on.


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## Fredm (Mar 24, 2011)

PamMo said:


> With all the timeshares Starwood is picking up using ROFR at Ka'anapali (and there seem to be many), I wonder how sales are going at the resort?



Sales at KOR/N have ramped up considerably. Far beyond the  sales attributed to a handful of foreclosures and occasional ROFR's.
Inventory acquisition has become quite aggressive.


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## PamMo (Mar 24, 2011)

Thanks so much for keeping us updated on sales, Fred. It's good to know that sales are steady. How else are they getting units besides foreclosures, ROFR, and owner upgrades/changing home resorts? Is Starwood buying units directly from owners wanting to sell now?

People must be feeling a lot better about the economy. It seems a lot of folks want to put vacations back into their budgets. I'm in Cabo right now, and I'm seeing a lot of sales activity at the new resort where we're staying (Grand Solmar). I cringe every time someone tells me they are so excited about their new purchase! We run into at least one person every day who just bought from the developer.


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## Fredm (Mar 25, 2011)

PamMo said:


> Is Starwood buying units directly from owners wanting to sell now?



Not that I know of.


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