# Starwood Exercises ROFR



## dgriffin7 (Apr 12, 2006)

I entered into a contract to purchase 2 Westin Mission Hills 2BR Platinum weeks from an individual and just received the news that Starwood will exercise its Right of First Refusal and purchase the weeks.

I had understood that this might happen given the really low price I was paying and was planning on reselling the weeks, but thought I would share the news with TUG since I had not previously seen any posts indicating Starwood had actively exercised this right. 

Dan


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## DavidnRobin (Apr 12, 2006)

dgriffin7 said:
			
		

> I entered into a contract to purchase 2 Westin Mission Hills 2BR Platinum weeks from an individual and just received the news that Starwood will exercise its Right of First Refusal and purchase the weeks.
> 
> I had understood that this might happen given the really low price I was paying and was planning on reselling the weeks, but thought I would share the news with TUG since I had not previously seen any posts indicating Starwood had actively exercised this right.
> 
> Dan


Interesting - that is the first post I have seen on SW excercising their ROFR.  Must have been too good of a price - and this is a subject for buyers to be aware of - that a killer deal would likely not go through becuase of this ROFR.

There is/was a TUG thread on ROFR in general where I argued (rightly or wrongly) that as a business - a TS company like SW has the ability (and the right) to control prices using the ROFR as not to be undercut by a very low resale price potentially leading to an overall decrease in the perceived value of the TS - or in this case - prevent others from flipping the weeks and thereby taking revenue that SW could make.

What the price of a ROFR for various SW resorts (season/unit type) would be interesting to know. It must be a certain percentage below the 'true' resale market value in order for it to be worth their while.


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## grgs (Apr 12, 2006)

dgriffin7 said:
			
		

> I had understood that this might happen given the really low price I was paying and was planning on reselling the weeks, but thought I would share the news with TUG since I had not previously seen any posts indicating Starwood had actively exercised this right.
> 
> Dan



Would you mind sharing what the price was at which ROFR was exercised?  

Thanks!

Glorian


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## vic714 (Apr 12, 2006)

Dan,
Sorry to hear about your deal falling through.
I am in the process of getting a WMH Plat EOY and the ROFR wasn't exercised. Sale went through for around $8k which I think is a pretty fair deal. When I bought my Gold EYO there from Starwood I paid close to $13k.
Victor


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## duke (Apr 12, 2006)

What do you think the ROFR price was????


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## dgriffin7 (Apr 13, 2006)

It was $15,500 for both Platinum weeks and was buying them only because of the price.  Nothing ventured, nothing gained.


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## duke (Apr 13, 2006)

dgriffin7 said:
			
		

> It was $15,500 for both Platinum weeks and was buying them only because of the price.  Nothing ventured, nothing gained.



How did you find these so cheep?


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## vic714 (Apr 13, 2006)

duke said:
			
		

> How did you find these so cheep?



The question should have been.

WOW How did Starwood get those so cheap 

Victor


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## RoverJohn (Apr 13, 2006)

All this goes to show that the ultimate winner here is Starwood, or any resort system that retains ROFR. They let an auction take its course, then step in to claim the market price aberration and profit for themselves. Any benefit to owners in general, but certainly not the seller in this case, is incidental. Uninformed owners/sellers, anyone who is not aware of the price point at which Starwood or any resort with the right of first refusal will step in, loses yet again. They probably bought from the developer at the developer's high price, then lose again when they desperately and hopelessly place their timeshare for sale. It is ugly and painful.


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## duke (Apr 13, 2006)

RoverJohn said:
			
		

> then lose again when they desperately and hopelessly place their timeshare for sale. It is ugly and painful.



Hey Rover:

It's really not that bad.  All we have to do is compile data and figure out where they draw the line.  So, we know that at $7,750 they act.....so maybe $10 or $12 or $15 will work.  These weeks were/are being sold for $33 by the developer.  If I knew that $10 or $12 or $15 would work....paying a few dollars more is still a great deal for a wonderful location.

Instead of being mad let's keep the data flowing so we can pinpoint where the ROFR line is.

Duke


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## Henry M. (Apr 13, 2006)

Also, I think the seller gets whatever the sale price was. It is only the buyer that can't get the good deal. ROFR just means that whatever price is agreed on, SVO has the right to "first refuse". They either purchase it at that price or refuse it and let the buyer have it.


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## Pedro (Apr 13, 2006)

RoverJohn said:
			
		

> Uninformed owners/sellers, anyone who is not aware of the price point at which Starwood or any resort with the right of first refusal will step in, loses yet again


I don't see what the big deal is for the seller. From the seller's point of view, they are getting the same amount of money whether it is from Starwood or not. It makes no difference to the seller whether ROFR is exercised or not. The only loser is the buyer who thought he/she could get a very good deal.


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## grgs (Apr 13, 2006)

I agree with Pedro.  I don't see how the seller loses.  They're guaranteed the sale at the agreed upon price--it just whether it comes from Starwood or the resale buyer.  The buyer on the under hand does lose: first they lost out on this specific deal; in the future, they'll probably feel compelled to pay a higher price to make sure it does pass ROFR.


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## DavidnRobin (Apr 13, 2006)

As I wrote before - I have no problem with the ROFR, and it is clearly part of the SVO contract. SVO has put this ROFR in the contract for reasons that is up to them as the resort developer (rightly or wrongly) - whether one agrees with it or not. 

This is why it should be part of the purchase contract - stating that you get all of your deposit money back if the ROFR is enacted (I did this as a buyer).

As a seller - since they have now discovered that they have substaintially undervalued their TS because the ROFR was enacted - I wonder if it is possible for the seller to put in the purchase contract that the offer is rescinded if the ROFR is enacted?  Allowing the seller to attempt to get more for it.  

Simply put - can a seller refuse to sell the property back to the developer if the ROFR is enacted?
(probably not, but curious what would happen if it were part of the purchase contract)


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## dgriffin7 (Apr 14, 2006)

I am neither surprised nor disappointed by the exercise and don't feel unfairly treated by the process.  

That said, I did waste a lot of time, energy and float on my money as part of this exercise, so as a practicing transactional lawyer, if I ever pass this way again, I have several strategies for protecting a negotiated low price while making the developer ROFR exercise unattractive (ie through additional stated consideration or personal services unique to the seller).  

As several have mentioned here and in the Marriott forum, the only party in a transaction benefitting from the ROFR is the developer, so I have no issue trying to circumvent that right or in making it more difficult to exercise.


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## seenett (Apr 14, 2006)

dgriffin7 said:
			
		

> ... if I ever pass this way again, I have several strategies for protecting a negotiated low price while making the developer ROFR exercise unattractive (ie through additional stated consideration or personal services unique to the seller)...



Sounds like a really good idea  Do you have any specific examples of what would work?

BTW, this is what David Letterman did to NBC in the early 1990's when he was trying to get a contract with CBS.  Letterman desperately wanted to host "The Tonight Show", but NBC had already installed Jay Leno.  When it came time for a new contract with Letterman, NBC had ROFR.  CBS offered Letterman a contract that NBC had the opportunity to match, and NBC did not want Letterman to compete with Leno.  NBC would have been happy to match CBS' compensation offer and keep Letterman at 12:30 (or even off the air completely).  CBS offered Letterman a contract with the additional caveat that if Letterman's show did not air by 11:35pm on weekdays, he would be entitled an additional $50 million.  Needeless to day, NBC chose not to excersize their ROFR.


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## dcdowden (Apr 14, 2006)

Don't you think that the ROFR from Starwood helps provide a floor price for Starwood resales and therefore helps owners as well?  We also own at Fairfield Royal Vista in Pompano Beach, and one of the big complaints of Fairfield owners is that Fairfield does nothing to support the resale of their units.  In their system, 'points are points' for reservations in their system beyond your home resort and the typical resale price per point is now about 20% of the retail price.  Since we bought resale, this worked to our advantage, but people buying from the developer can really take a big loss.  
Doug


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## duke (Apr 14, 2006)

dgriffin7 said:
			
		

> II have several strategies for protecting a negotiated low price while making the developer ROFR exercise unattractive (ie through additional stated consideration or personal services unique to the seller).



Seenett - dggriffin7:
Please, let's craft some terms that would, in effect, prevent the exercise of the ROFR.  How could we do that?
Duke


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## Pedro (Apr 14, 2006)

dcdowden said:
			
		

> Don't you think that the ROFR from Starwood helps provide a floor price for Starwood resales and therefore helps owners as well?
> Doug


 
ROFR doesn't really set a floor price - the market does.  Starwood, or any other developer for that matter, won't pay a cent more than what the buyer was willing to pay.  They will just match the price a snag a good deal when they see it.


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## spike (Apr 15, 2006)

duke said:
			
		

> Please, let's craft some terms that would, in effect, prevent the exercise of the ROFR.  How could we do that?


Interesting. Assuming there are such terms (there must be), wouldn't placing them in the offer alert most sellers that they are underpricing their timeshare? Or are we assuming that the new terms are boilerplate that no one reads and or pays attention to?


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## topdog (Apr 15, 2006)

Slightly off topic, but I'm thinking of searching for a resale at Vistana Villages.  Any idea what a good price would be for 67,000 or 81,000 staroptions there?


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## seenett (Apr 15, 2006)

topdog said:
			
		

> Slightly off topic, but I'm thinking of searching for a resale at Vistana Villages.  Any idea what a good price would be for 67,000 or 81,000 staroptions there?



There is a 67,000 unit on Redweek for $7K (last year there was one on ebay that closed at $3K).  $7K is a good price; 10.5 cents per option.


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## MOXJO7282 (Apr 17, 2006)

I seriously doubt you could outsmart Marriott legally when it comes to the legal aspect of the ROFR. I don't know this for a fact, but I'm sure they must has language somewhere that would prevent such an occurance.

Regards.
Joe


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## dgriffin7 (Apr 18, 2006)

While I would be reluctant to develop stock language and distribute it publically, it seems to me that there are several ways one can circumvent a ROFR, based upon the terms of the applicable restriction.  

Seenett pointed out a good analogy with respect to David Letterman and you see NFL teams frequently load terms into an offer sheet for a restricted player that the offering team can accept (or that otherwise mean little to the offering team) that would be unacceptable to the player's current team.

I will need to track down the applicable FOFR and it depends on how cooperative a seller is in contorting the structure of an offer, but I would expect in the timeshare context for possible workarounds to include:

- a stated personal services component on the part of the buyer that is unique to that buyer.
-a poison pill trigger that accelerates the price if ROFR exercised
-recite multiple points of consideration and a blended price that does not break out separate valuation
-dual contracts (analagous to cooked books - Note that I do not recommend this)

I believe MOXJO's point is slightly off, in that one can craft an acceptable workaround and be technically and literally correct, but your remedy for enforcing it in the event the ROFR holder enforces an alternate interpretation is to sue Marriott/Starwood, which given the dollars involved is no real remedy at all.


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## mjs (Apr 18, 2006)

What happens if you do a permanent exchange of timeshares?  I do not thnk they would be able to do ROFR in this case.

I think if you include some other item or service with the cash, the developer would not be willing to persue ROFR. 

If you give your timeshare to somebody, can the developer take it for free?
Mark


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## duke (Apr 18, 2006)

dgriffin7 said:
			
		

> - a stated personal services component on the part of the buyer that is unique to that buyer.
> -a poison pill trigger that accelerates the price if ROFR exercised
> -recite multiple points of consideration and a blended price that does not break out separate valuation
> -dual contracts (analagous to cooked books - Note that I do not recommend this)



DGgriffin7:

Not a lawyer, but I don't understand your suggestions....  Please explain.

Thanks,
Duke


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## Nicole D. (Apr 29, 2006)

I'm just wondering if they exercised ROFR because inventory at Mission Hills is low to almost gone?


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## Potential Buyer Scott (Apr 29, 2006)

Sellers do lose.  They lose because the ROFR causes illiquidity in the market.  This is because people who would ordinarily bid on this type of low priced unit, are less interested in making a market price because they know Westin will step in and take it for the low price.  This causes interested buyers to need to pay a higher price for units which is a benefit to current owners, but it also causes there units to be more difficult to sell which is a detractor.


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## mj2vacation (Apr 29, 2006)

Potential Buyer Scott said:
			
		

> Sellers do lose.  They lose because the ROFR causes illiquidity in the market.  QUOTE]
> 
> DVC and Marriott both have them and use them extensively, and I don't think that there is a lack of liquidity in the resale market for these developers...
> 
> ...


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## dcdowden (Apr 30, 2006)

I believe that having the developer take in active interest in the resale market is a big advantage to buying with DVC, Marriott, Starwood, etc. if you are interested in preserving the value of your investment.  We also own at Fairfield Royal Vista in Florida where the going resale price is about 20-25% of the retail price - fortunately we bought resale.  From the Marriott forum, it sounds like Marriott will generally exercise ROFR if the resale price drops below 60% of retail.  We just purchased a resale at Westin Kierland for about 65% of current retail pricing and Starwood did not exercise ROFR.  So, I definitely believe that ROFR helps support the value of your timeshare - which is particularly important if you are buying direct from the developer in the first place.  It is also an easy way for the developer to add to their inventory.
Doug
Naperville, Illinois


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