# The Crystal Shores Problem affects all of us



## kjd (Sep 29, 2011)

The problems at Crystal Shores on Marco Island are an example of the problems that the new spinco will inherit.  It's also a large problem for the owners of Crystal Shores units and ultimately for all Marriott timeshare owners.

Marriott purchased the Raddison hotel on Marco beach.  The idea was to renovate part of the Raddison, tear down part of it and build new buildings to be part of the timeshare project.  The retail prices were very high for a timeshare week regardless of the season.  A lot of promises were made.

The city of Marco Island granted the new zoning on the condition that Crystal Shores grant beach access to the general public.  That provision has been signed off and is in force today.  The public's beach access is through Crystal Shores parking lot, through the restaurant and on to the beach.  I'm not sure many CS owners were made aware of this.  Essentially, Crystal Shores is a public facility.  Recognizing that the beach is public I think CS owners assumed that there would still be some degree of privacy for the money they had to pay.

After spending about 43 million on the construction of 65 timeshare units and common areas the project was shut down by Marriott abruptly.  The city of Marco Island probably will conclude that the permits have expired.  In spite of the fact that these units were expensive, it would seem that the 65 unit sales will not cover the 43 million let alone the monthly O and M costs.

The spinco will have to really creative in order to extract itself from this mess.  Additionally, there is every reason for the city of Marco Island to play hardball.  There is an intense dislike of what these hotels have done to the beach on the part of many Marco residents.  The Marco Marriott is currently encountering stiff opposition trying to get approval to build a convention center on one of its' parking lots.  This will complicate any moves that the spinco will want to make.

Given the Crystal Shores situation you have to wonder how many other bad timeshare projects are in the Marriott portfolio before the spinoff.  What will be the effect of these projects on the heavily debt-burdened spinco?  Is the way out of this to sell points to existing owners?  Or is it creating future schemes that involve owners paying more for points to get access to better weeks?  Frankly, it's difficult to see how the spinco will help anyone except Marriott.

Crystal Shores owners may have some regrets about their purchase. However, all of us will be affected by the actions of the new spinco.  We may come to regret that as well.


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## tlwmkw (Sep 29, 2011)

What percent of the project was completed prior to shutting down?  It'll be interesting to see what happens there once the new company takes over.

tlwmkw


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## chunkygal (Sep 29, 2011)

what happened to all who bought there?


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## siberiavol (Sep 29, 2011)

I agree with you about Marriott sinking a lot of money that won't be recovered in Marco.


 I stayed there on an exchange in the high season and it felt quite private. If any locals were coming in and out it was not apparent. Perhaps there are other options that are easier for beach access.


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## ronparise (Sep 29, 2011)

Maybe Im mis interperting the tone here, but it sounds like some  see the Marco Island locals as something less than desirable, riff-raff, so to speak.

Marco is a fairly  exclusive area.  I would think the locals would prefer not to be seen with timeshare owners and hotel guests, rather than the other way around

On another topic Marriott has done this spin off thing before. They are not afraid of closing down a failing division, or spinning one off thats costing them too much money.  Years ago they closed the foundation of the business, the restaurant division in favor of hotels, (at least they waited for J Willard to die before the did it) Later they spun off the hotel operations from the ownership of of the hotels themselves. Marriott it seems to me doesnt want to own anything, that takes too much capital. They want the  operations

The timeshare business will either succeed of fail on its own. It doesnt matter if its a stand alone company or if it had stayed a division. If it isnt making money its history


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## dioxide45 (Sep 29, 2011)

Marriott already wrote off millions in losses at Marco Island. Given its written down value, my guess is that there really isn't a lot more to lose as long as they keep selling trust points.


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## gblotter (Sep 29, 2011)

In addition to Marco Island, Marriott took even greater losses on Kauai Lagoons (originally planned to be a Ritz Carlton project), and the Ritz Carlton Club Kapalua Bay on Maui.

Marriott is dumping the liabilities for all those bad decisions on Spinco.  And yes - it does present a problem for all of us.


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## dioxide45 (Sep 29, 2011)

gblotter said:


> In addition to Marco Island, Marriott took even greater losses on Kauai Lagoons (originally planned to be a Ritz Carlton project), and the Ritz Carlton Club Kapalua Bay on Maui.
> 
> Marriott is dumping the liabilities for all those bad decisions on Spinco.  And yes - it does present a problem for all of us.



Actually those losses were taken against Marriott International's balance sheet long before the Spinco was even announced.


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## gblotter (Sep 30, 2011)

dioxide45 said:


> Actually those losses were taken against Marriott International's balance sheet long before the Spinco was even announced.


From an accounting perspective you may be right.  But going forward it will be up to Spinco to find a way to turn these albatross properties into profitable ventures (not an easy task).  Thus the announcement of Spinco's intentions to sell off land (although not specific, I'm sure those liquidation plans include selling the still-undeveloped Kauai Lagoons land).


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## dmharris (Sep 30, 2011)

A few questions revealing my ignorance:

Is Spinco the real name or one you all use on Tug?

What's the likelihood that the Marriott timeshare properties will be sold off to another entity, non Marriott in the next five to ten years?  Is this a concern?


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## SueDonJ (Sep 30, 2011)

chunkygal said:


> what happened to all who bought there?



One building was completed along with the restaurant, two pools and other onsite amenities before the further construction was halted.  Even though the entire project isn't complete, owners have a beautiful resort that functions like any other.



dmharris said:


> A few questions revealing my ignorance:
> 
> Is Spinco the real name or one you all use on Tug?
> 
> What's the likelihood that the Marriott timeshare properties will be sold off to another entity, non Marriott in the next five to ten years?  Is this a concern?



"Spinco" is what TUGgers starting using when Marriott announced the impending spin-off; the company has since been named by Marriott as, "Marriott Vacations Worldwide Corporation."  Probably we'll settle into using MVWC after the spin-off actually occurs.

IMO, it's anybody's guess what happens in the future with Marriott timeshares because the current situation is more a result of the economy than Marriott's development/management of their timeshares.  I can't figure out why the introduction of MVWC (   ) makes the current situation any worse than it was before.  It isn't like Marriott Int'l. took money from the hotel side of the business and applied it to the timeshares to offset their losses.  The way I see it, the timeshares are in trouble if the economy doesn't recover regardless of whether they're under the Marriott, Int'l or MVWC umbrellas.  The umbrella won't matter at all if Marriott can't once again access credit lines for development, and if folks don't feel comfortable with spending discretionary income on this particular vacation lifestyle.


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## dioxide45 (Sep 30, 2011)

ronparise said:


> Maybe Im mis interperting the tone here, but it sounds like some  see the Marco Island locals as something less than desirable, riff-raff, so to speak.
> 
> Marco is a fairly  exclusive area.  I would think the locals would prefer not to be seen with timeshare owners and hotel guests, rather than the other way around



I would have to agree. I doubt that there are very many locals that would bother to come through the property to get to the beach or. There are plenty of public access areas. I am sure also that the public access isn't very well advertised, and guests at other hotels don't even know you can go on/through the property. I don't see this as a negative impact on the property.


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## LilMsFoodie (Oct 1, 2011)

*I'm at Crystal Shores right now for a weekend on points*

The public access to the beach might be problematic for a week or two of the year but otherwise, this section of beach is not desirable above others that have direct public access.  Marco is somewhat remote and not apt to get day trippers.  

Timeshare activity may go the way of the dodo.  Having disposable income and free time are limiting factors in today's economy.   I was happy to have points as we will use them for quick getaways locally.   

 Stilts is a public restaurant.  It has a highly desirable outlook and I believe locals do come there for drinks and sunset.  They have a dreadful entertainer this weekend (maybe he is here all the time for all I know) so we left right after he began.  We talked with a few people that had come for drinks at sunset and left as we did when the "entertainment" began.  They were residents of a condo nearby.  

I love the layout of the Crystal condo but it isn't as luxurious as I would have expected given the pricing of the resort.  This was hatched during the height of the real estate madness and obviously had to be scaled back.  Right now they have construction crews doing rehab on leaks in the sales area.  Hard to make a presentation while this is going on.  They have done a good job keeping this as unobtrusive as possible and the resort is busy, even at this dead time of year.  

I did interior design work for 40 years and was part of the original design team for the Marco Island resort that became the Marriott.  Only in the past few years did they change my original concept.The original hotel space including the dramatic entrance is over 40 years old.  Marco is consistently one of the better managed Marriotts.  

The next few years will tell us if we have something worth keeping or if we should stop throwing good money after bad into a 20th century concept.  

LMF


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## BocaBoy (Oct 1, 2011)

dmharris said:


> What's the likelihood that the Marriott timeshare properties will be sold off to another entity, non Marriott in the next five to ten years?  Is this a concern?


They can't sell off something they do not own.  The owners own the resorts, not Marriott (except for the individual units that Marriott still owns).  Marriott manages the resorts but does not own them.


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## windje2000 (Oct 2, 2011)

dmharris said:


> A few questions revealing my ignorance:
> 
> Is Spinco the real name or one you all use on Tug?
> 
> What's the likelihood that the Marriott timeshare properties will be sold off to another entity, non Marriott in the next five to ten years?  Is this a concern?



This LINK will provide access to the public (SEC) filings and press releases for 'Spinco.' 

The name 'Spinco' (shorthand for timeshare company to be spun off) probably will endure for a while here on TUG

EDITED TO ADD:  MAR has published the draft information statement for VAC (the prospective NYSE stock symbol for Spinco) which explains the transaction in plain English.

LINK


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## timeos2 (Oct 2, 2011)

BocaBoy said:


> They can't sell off something they do not own.  The owners own the resorts, not Marriott (except for the individual units that Marriott still owns).  Marriott manages the resorts but does not own them.



However they, like virtually all developers, likely do own the undeveloped portions of land much of which may appear to be part of the resort.  In some cases, MC, Blue Tree, many others, they also hold title to some or all of the common areas & allow use by the owners through lease backs or other methods. In those cases it is extremely hard to ever get them out as they hold rights to key portions of what should be the Association owned common areas.  

In some cases, one I know of personally, the Developer is more reasonable and perhaps even wrote the documents so that the true owners inherit the amenities and common areas.  In one case they have even agreed to sell the land that was to be part of the development, but that section never got constructed.  Rather than fight to build on that land they deeded it to the owners (which they were under no requirement to do) with the understanding it would be used to create additional common area to benefit all owners and at Association expense.  That owner friendly move allowed the final completion of the resort to include those areas that would have been completely out of place if developed in other ways.  The difference between a developer determined to keep control anyway they can vs one that actually has the best for the resort & ownership in mind.  

Battles with those that have control as their main goal can get extremely messy and in the end help no one except possibly the Developer.  Unfortunately it appears that over the years Marriott has become a "control at all costs" type.


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## gblotter (Oct 2, 2011)

dioxide45 said:


> Actually those losses were taken against Marriott International's balance sheet long before the Spinco was even announced.


Apparently not all the losses have been previously recorded.  According to their recent SEC filing, Spinco will take a charge of between $275-$325 million for Luxury inventory (Ritz Carlton Club) write-downs.

"Because we expect that proceeds from our planned land sales and their estimated fair value will be less than their carrying values, and because the fair value of this built Luxury inventory is less than its current carrying value, we expect to record a non-cash charge of between $275 million and $325 million in our third quarter 2011 financial statements to write-down the value of these assets."

I'm pretty sure that "planned land sales" mostly refers to Kauai Lagoons.  That failed project has proven to be a terribly expensive mistake.

More discussion on this topic here: http://tugbbs.com/forums/showthread.php?t=156373


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## flyboy0681 (Oct 4, 2011)

ronparise said:


> On another topic Marriott has done this spin off thing before. They are not afraid of closing down a failing division, or spinning one off thats costing them too much money.  Years ago they closed the foundation of the business, the restaurant division in favor of hotels, (at least they waited for J Willard to die before the did it) Later they spun off the hotel operations from the ownership of of the hotels themselves. Marriott it seems to me doesnt want to own anything, that takes too much capital. They want the  operations



I also seem to recall that they temporarily got into retirement homes/assisted care facilities about 10 years ago but abruptly exited that as well.


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## dioxide45 (Oct 4, 2011)

gblotter said:


> Apparently not all the losses have been previously recorded.  According to their recent SEC filing, Spinco will take a charge of between $275-$325 million for Luxury inventory (Ritz Carlton Club) write-downs.



True, but the discussion surrounded the Marco property, though it is possible that values there have diminished further and additional write downs are necessary. Though it seems the new charges are related to the luxury brand.


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## bogey21 (Oct 4, 2011)

The bottom line is that Marriott is really screwed up.  

George


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## dioxide45 (Oct 5, 2011)

bogey21 said:


> The bottom line is that Marriott is really screwed up.
> 
> George



Marriott was very aggressive with expansion. Snapping up properties all over the place. When the bottom fell out of the market, they were not in very good shape to weather the storm.


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## LilMsFoodie (Oct 5, 2011)

*Recession devolving into depression*



bogey21 said:


> The bottom line is that Marriott is really screwed up.
> 
> George



The state of timeshares, a concept whose time may have passed, is a problem only for those who own them and those who overbuilt them.  Marriott is trying to evolve an old concept to meet new economic needs.   I think the new DC will be very successful once the economy starts moving again. 

Marriott develops and manages properties, they do not own them.  They are willing to try new concepts and if they do not work out, they move on.  

Crystal Shores needs many more units to be economic.  Marco Island doesn't want any more timeshares. There is that stigma attendant to them still. 
Marco residents are also opposing the Marriott resort building a new convention center near their property.


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## flyboy0681 (Oct 6, 2011)

LilMsFoodie said:


> The state of timeshares, a concept whose time may have passed, is a problem only for those who own them and those who overbuilt them.



Other than owners and developers, who else is there?


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## timeos2 (Oct 6, 2011)

flyboy0681 said:


> Other than owners and developers, who else is there?



Non-owners & defaulters?


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## 4Reliefnow (Nov 13, 2011)

BocaBoy said:


> They can't sell off something they do not own.  The owners own the resorts, not Marriott (except for the individual units that Marriott still owns).  Marriott manages the resorts but does not own them.





Good idea never to use the term never.  Here is a way that Marriott could sell of Crystal Shores if they decide that is the best route to take:

Buy weeks for next to nothing on the secondary market so they own more than 51% of the voting rights.  Make a fair offer to convert all Crystal Shores weeks (remember most were sold as DC points) into DC points.  A fair offer would be to convert at a high number of points and no fee to exchange.  Someone will sue (always somebody)  then Marriott settles the suit for $5,000 worth of bonus DC points.  Marriott has the control of voting power, and hey, if you own points you own at all the Marriott resorts.  Getting the bonus points without a fee to convert is a great deal.  Next thing you know, the project is sold to Starwood or somebody else.


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## dioxide45 (Nov 13, 2011)

4Reliefnow said:


> Good idea never to use the term never.  Here is a way that Marriott could sell of Crystal Shores if they decide that is the best route to take:
> 
> Buy weeks for next to nothing on the secondary market so they own more than 51% of the voting rights.  Make a fair offer to convert all Crystal Shores weeks (remember most were sold as DC points) into DC points.  A fair offer would be to convert at a high number of points and no fee to exchange.  Someone will sue (always somebody)  then Marriott settles the suit for $5,000 worth of bonus DC points.  Marriott has the control of voting power, and hey, if you own points you own at all the Marriott resorts.  Getting the bonus points without a fee to convert is a great deal.  Next thing you know, the project is sold to Starwood or somebody else.



I think it takes more than just 51% of ownership to make this kind of move. Usually a super majority is required to dissolve the resort or force all owners to sell. My bet however is that VAC already has this super majority given how poor sales were at Marco.


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