# Dri ipo



## RuralEngineer (Jun 15, 2013)

http://www.cnbc.com/id/100815802

Thoughts?

Stephen


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## team2win (Jun 15, 2013)

*LOL*

does this mean maintenance fees will come down since there will be outside funding... roflmao..


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## dwojo (Jun 15, 2013)

RuralEngineer said:


> http://www.cnbc.com/id/100815802
> 
> Thoughts?
> 
> Stephen


  Fast way to make money and pay down debt.


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## pedro47 (Jun 15, 2013)

I wonder who will be the majority stock holder after the initial offering of shares to the general public?


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## singlemalt_18 (Jun 15, 2013)

*Curiouser and Curiouser?*



pedro47 said:


> I wonder who will be the majority stock holder after the initial offering of shares to the general public?



I'm not sure what the total strategy is?  A $200 million IPO is teeny tiny... it will be a micro-cap and something for investors who will be pro-money people.  (The general public is not going to be lining up as if a Groupon or Facebook.)

The public shareholders certainly be a minority stake... if it were any more, they could be subject to a quick loss of control and takeover in that price range?  I'd love to get a look at the red herring.


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## RuralEngineer (Jun 16, 2013)

*8K*

you can see the structure at the SEC filings.  mgmt retains control with 56% ownership.  I thought companies could achieve more with private money without all of the additional reporting burdens that being public entails.


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## GregT (Jun 16, 2013)

Interesting.   Perhaps the management team (and investors) like seeing what has happened with Marriott's spin-off.  This also provides a public stock currency to acquire other timeshare systems, if they so choose.

They don't have the benefit of Marriott's brand, but being public has certainly been good for both Marriott and Wyndham.

It will be interesting to see how it trades.

Best,

Greg


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## Rent_Share (Jun 16, 2013)

Wyndham pulled The Hotel Group, RCI and Wyndham Vacation Ownership out of Cendant as a separate public Entity encompassing all three operating divisions


Marriott spun off the timeshare division into it's own separate entity {VAC} in order to remove the timeshare operating results from the Hotel and Hospitality companies which remain their core business


The DRI offer is most comparable to VAC not WYN


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## ccwu (Jun 17, 2013)

This means that the owner of DRI timeshare may pay more maintenance fee.  In stock market, a company's value is 'profitability' and 'growth of profit'.  You look at earning per share, price-earning ratio, future growth and book value.  In order to make money, for timeshare or hotel, means more revenues than expenses.  How DRI can be more profitable?  They are not like Marriott, Westin and Hilton having hotel business.  All they have is timeshare owners' paying maintenance fee to stay there.  Or they have to increase the developer's initial sale to the owners.  But their most reliable revenues are maintenance fees from timeshare owners.  They have to charge the MF more or more fees in services to increase their profitability.  I think it is not a good new for us.


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## singlemalt_18 (Jun 17, 2013)

ccwu said:


> This means that the owner of DRI timeshare may pay more maintenance fee...  All they have is timeshare owners' paying maintenance fee to stay there... But their most reliable revenues are maintenance fees from timeshare owners.  *They have to charge the MF more or more fees in services to increase their profitability.*



Absolutely incorrect.  MF's are NOT a profit driver; they provide the operating revenues for the maintenance and ongoing operation of the properties.  Profits are driven by sales... *$40,000 lump sum versus $2,000/year.*

Why do you think they try so hard to line everybody up for owner updates and TS presentations?  It ain't for the annual MF's.


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## timeos2 (Jun 17, 2013)

singlemalt_18 said:


> Absolutely incorrect.  MF's are NOT a profit driver; they provide the operating revenues for the maintenance and ongoing operation of the properties.  Profits are driven by sales... *$40,000 lump sum versus $2,000/year.*
> 
> Why do you think they try so hard to line everybody up for owner updates and TS presentations?  It ain't for the annual MF's.



Saying that it is incorrect is itself incorrect. While of course the one time shot of a sale is a huge potential revenue it is at best sporadic. The maintenance fees are a cash spigot that can be accurately projected. Plus if they hold effective control of the resort HOA the fees can be raised nearly at will. Plus the sale requires some sort of (usually) expensive capital cost while the ongoing maintenance fees are made up of little more than labor. Very little capital required. And the return can be fixed. If they desire 15% then it's cost + 15% on every dollar. What investments return even 3-4% today? 

Most developers now fight hard to keep the management arm of the resorts they build or acquire in house. That is because it represents a steady stream of income far more reliable than any sales operation could ever be.


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## Rent_Share (Jun 17, 2013)

ccwu said:


> How DRI can be more profitable? They are not like Marriott, Westin and Hilton having hotel business. All they have is timeshare owners' paying maintenance fee to stay there. Or they have to increase the developer's initial sale to the owners. But their most reliable revenues are maintenance fees from timeshare owners. They have to charge the MF more or more fees in services to increase their profitability. .


 


> Again Marriott's timeshare's are now a stand alone public company with just the timeshare assets. http://finance.yahoo.com/q/pr?s=VAC+Profile " As of November 21, 2011, Marriott Vacations Worldwide Corporation operates independently of Marriott International, Inc."


 
I own Worldmark, whose by-laws include a cap on annual maintenance fees of 5 %, (CPI numbers have been under 2% through the recession) Wyndham Employees who control the HOA Board of directors budget an annual increase right up to the limit to insure a healthy management fee to to meet the wall street analysts expectations of real year over year earnings growth.

As to DRI failure to meet analyst expectations could result in a collapse of market value, if the cash generated from the IPO was used to reduce debt, the balance sheet is already shored up, if operating results do not meet lender covenants then the availability of cash can dry up.


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## artringwald (Jun 17, 2013)

DRI makes money by charging the HOAs what some would call excess fees for managing the resorts. They buy up deeded weeks to add to the trust collections, which makes it easier for them to control the HOA and then they can authorize the HOA to pay whatever they want for management fees.


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## singlemalt_18 (Jun 17, 2013)

timeos2 said:


> Saying that it is incorrect is itself incorrect. While of course the one time shot of a sale is a huge potential revenue it is at best sporadic. The maintenance fees are a cash spigot that can be accurately projected.



Good points and duly noted.  My emphasis is that the MF fees are not the primary source of profit, and simply going public is no precursor to ever higher MF fees.  They do have their administrative overrides and fees built in, of course.

However, Club dues, transaction and service fees, and sales of other services are all much higher margin.  I would also argue that the sales operations are both formidable and robust, contributing significantly more than sporadic additions to the bottom line; they know exactly how many presentations they need to set in order to close any given number of sales... and I'm sure they do.  If they have any concerns about meeting growth projections, those sales are where the egg-laying goose is nesting.


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## T_R_Oglodyte (Jun 17, 2013)

My thoughts - speculation only - are:

1. there are some equity holders (which certainly could include DRI itself) who need to have an equity market valuation for their holdings for either accounting or finance purposes.

2. there are some key players with stock options who want to cash out and the creation of an equity market will enable them to do so.

3. This is a prelude to a bigger refinancing or recapitalization yet to come.  

4. In a similar vein, being publicly listed will make it easier to another stock offering in the future (i.e., increasing their financing flexibility).  By being publicly listed, if an opportunity should present itself (e.g., another BlueGreen type of acquisition opportunity) by being publicly listed they can respond to the situation much more quickly. For example, had they been publicly listed at the time they tried to acquire BlueGreen they could have done that deal as a stock exchange instead of needing to do the deal by taking on debt. Had they been able to do it via stock exchange, the acquisition probably wouldn't have cratered when the capital markets went south.

Any of those can be good reasons.  They do it now because this might be an opportune time.  Just like the best time to negotiate for a line of credit is when you don't need one.


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## T_R_Oglodyte (Jun 17, 2013)

ccwu said:


> This means that the owner of DRI timeshare may pay more maintenance fee.  In stock market, a company's value is 'profitability' and 'growth of profit'.  You look at earning per share, price-earning ratio, future growth and book value.  In order to make money, for timeshare or hotel, means more revenues than expenses.  How DRI can be more profitable?  They are not like Marriott, Westin and Hilton having hotel business.  All they have is timeshare owners' paying maintenance fee to stay there.  Or they have to increase the developer's initial sale to the owners.  But their most reliable revenues are maintenance fees from timeshare owners.  They have to charge the MF more or more fees in services to increase their profitability.  I think it is not a good new for us.



As long as management owns a solid majority, they retain direct control and don't need to manage the company to meet quarterly expectations.  That's been Warren Buffett's approach, for example, when he has taken positions in companies.


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## pgnewarkboy (Jun 18, 2013)

It appears that Diamond is determined to expand. Stock offerings is one way to attract large amounts of capital. This IPO is consistent with everything that Kloobeck has been saying about his goal to be the biggest and best in the industry. Perhaps he intends to buy hotel chains or  build hotels.  I don't pretend to know his plans but expansion appears to be behind this move.


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## singlemalt_18 (Jun 18, 2013)

T_R_Oglodyte said:


> As long as management owns a solid majority, they retain direct control and don't need to manage the company to meet quarterly expectations.  That's been Warren Buffett's approach, for example, when he has taken positions in companies.



Not to mention that analysts and money managers often punish companies who try to be too clever when releasing results; meeting the bottom-line without beating on the top-line won't get you very far.



T_R_Oglodyte said:


> My thoughts - speculation only - are:
> 
> 1. there are some equity holders (which certainly could include DRI itself) who need to have an equity market valuation for their holdings for either accounting or finance purposes.
> 
> 2. there are some key players with stock options who want to cash out and the creation of an equity market will enable them to do so.



I agree and also thought that it would provide more flexibility and liquidity for executive compensation strategies.

*Overall, I think this is ultimately a positive development for Diamond and its owners... ?  Certainly not a cause for alarm by any measure.*


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