Maybe Oceanfront isn't so good after all

[timeos2]

A post offering for FREE a The Ocean Club on Smugglers Beach, Waterfront, Cape Cod.

I guess that the $2199 (!!) special assessment pending doesn't help - even if it ocean front. A sign of poor planning/management. Give me a better managed and more year round resort any day.

 

[Stevenh1]

Maybe I'm lucky, the 2 BR units will cost $2800. Would it be ok to post the letter to us owners on this forum? I would be happy to do this.

 

[Stevenh1]

Here is the letter posted on the spmresorts website. I hope the other owners are as pissed of as we are. B.O.H. I.C.A.



March 16, 2011

Dear Owner

As many of you are aware, we have been working hard these past few months to complete the refurbishment of our Resort. We are excited as we see the progress and believe you will be as well when you visit for your vacation. We want to take a moment of your time and update you on the progress.

We began construction the first week of January, with a planned completion date of April 15th. Our plan included contingencies for a certain level of unknowns, based on our experience with remodeling Unit 10. Unfortunately, as we progressed and dug deeper into the project, we found additional issues which needed to be addressed that we did not encounter with Unit 10. As we pulled down wallpaper in the units, we began to discover water damage in the drywall. This water damage was found in most every unit. Because of this, we had to remove the damaged drywall and replace it with new. With the additional remediation work identified, we were required to undergo another review with the Town Officials. Due to the removal of the dry wall, the Town Officials required us to bring the resort up to the current electrical code, which meant we needed to remove all of the existing electrical wiring in the units and replace with new. At the same time, the Fire Department required that we add a new fire suppression system and in-room alarms.

On top of all this, we discovered extensive structural damage under most of the bathrooms in the building. It appears back in 1986 when the Ocean Club was being converted, some shortcuts were taken to complete the project. In order for us to properly finish this project, these repairs must be made. By accomplishing both the required and desired improvements, The Ocean Club will not only be beautiful, but safe and modern as well.

As you can imagine, making these additional improvements and required safety upgrades adds additional cost to the project. The original budget that was approved by your Board of Trustees was $2.8 million, with $2.6 million being covered by a loan from Wells Fargo Bank. With the modifications to the plan demanded by the Town Officials, the cost is now $4 million, with anticipated completion of the project delayed until May 27th. As with our original loan and payback plan, we will still be able to collect the assessment over a three-year period; however, we will have to assess an amount greater than originally anticipated. Some owners have asked us if we had a contingency plan, and were we prepared for additional expense. The answer is yes, we did prepare, but as stated above we planned based on our experience with Unit 10. We did budget contingency funds, as the Board expected unplanned issues. What could not be planned for was a 42% increase in expense based on issues completely outside our control and required by the Town of Yarmouth.
Please note that your Board of Trustees understands that this payment will be difficult. We are first and foremost owners too, and it will not be easy for us either. We deliberated over this decision for many hours over several Saturdays of conference calls, and are convinced that this is the best decision to take for The Ocean Club to ensure a strong future and great vacation experience for us all.

The special assessment will be billed in April, and will be due June 1. It can be paid in one, two or three installments. Should you opt to pay in installments, you will share in the interest payments that will have to be made on the loan. Should you choose to pay in one lump sum; any interest that would be due will be deducted from your account, thus saving you money. We encourage each of you to attempt to make the one lump sum payment, thus saving you money and also helping the Association reduce the debt more quickly.

The special assessment billing amounts will be as follows:

One bedroom unit $2,199.45
Two bedroom unit $2,815.56

Payment options:

1 Payment 2 Payments 3 payments

One bedroom unit $1,967.00 $1,069.87 per year $733.15 per year
Two bedroom unit $2,518.00 $1,369.56 per year $938.52 per year

Now that the project is moving ahead again, we will begin putting pictures and updates on the SPM Resorts’ website for you to review (www.spmresorts.com). We are working to send a newsletter with pictures of some of the units, once we have a few that are completed. This way, you will be able to see what you are paying for.

We also want to take a moment to thank the owners displaced by the renovation work. Your understanding and willingness to switch weeks is allowing us to complete the job more promptly and properly. We do recognize this was an inconvenience, but feel you will agree that it was worth it once you stay at The Ocean Club upon completion.

We look forward to hearing from each of you, as you begin to use The Ocean Club after the renovation is completed and have the opportunity to enjoy your vacation. In the meantime, should you have any questions, please contact your resort team at (508) 398-6955 or feel free to write to any of your Board Members using the resort address. These letters will be forwarded and we promise to respond to all of them.

Please look for our newsletter that should be sent sometime in April, and check out the websites for updates after March 15th. Again, thank you for your cooperation, patience and understanding as we work to improve The Ocean Club so that it may provide the best vacation experience possible for you, your family and your friends.

Sincerely,

Robert Kayer Ken Nordeen Mark Fishbon, Esq. Kathy Kittredge Doug Manning
Board Chairman Vice Chairman Trustee Trustee Trustee

 

[timeos2]

Hope for the best & move on

Thank you for posting the full letter/explanation. It helps to see what the Board there is struggling with.

It is all too common that, like an old home, when serious renovations are tackled far more problems than anticipated can be uncovered. Certainly it seems they tried to identify what was needed and for how much before they started the work on an old, converted timeshare.

Unfortunately they picked a unit that had fewer issues than others. And it appears that they have not been properly planning for even the minimum reserve needs as all but a tiny fraction of the costs are being done by loans and special assessment. The majority should be from reserves set aside over the years as the existing work was "used up".

Now it will be interesting to see if enough owners feel their ownership is worth a couple thousand to maintain. It may be a reasonable deal for the prime times but are off season weeks really a value for the required payments? I wish them the very best and hopefully this will result in a beautiful renovated resort that will have in place a financial plan for the future that will eliminate unexpected assessments for foreseeable work required.

 

[Carolinian]

A well managed resort at any location should have a professional Reserve Study and should budget their reserves based on that study. They should also buy the maximum in insurance that they can.

On the OBX, some resorts were done a favor by being severely damaged by Hurricane Isabel, as insurance money covered total refurbishment of some or all units. At least one resort was closed long enough, that they had to bring plumbing and electical up to the new code to reopen, had an insurance rider that covered that, and got all new wiring and plumbing also paid for by insurance. Another was about to have a major expense in replacing roofs, but thanks to the hurricane which destroyed the roof on one building and badly damaged the other, they got that expense covered by insurance money. And through good board negotiating skills, most did this with no special assessment for any overage.

I am sort of surprised at SPM not having reserves for matters such as this. They generally have a good reputation as a management company. I wonder how long they had been managing this resort?

 

[timeos2]

Having a disaster is not a good plan

On the OBX, some resorts were done a favor by being severely damaged by Hurricane Isabel, as insurance money covered total refurbishment of some or all units. At least one resort was closed long enough, that they had to bring plumbing and electical up to the new code to reopen, had an insurance rider that covered that, and got all new wiring and plumbing also paid for by insurance. Another was about to have a major expense in replacing roofs, but thanks to the hurricane which destroyed the roof on one building and badly damaged the other, they got that expense covered by insurance money. And through good board negotiating skills, most did this with no special assessment for any overage.

While it turned out to be a lucky break it certainly doesn't speak well to the foresight/planning of the resort Boards. If there hadn't been a natural disaster then they would have faced a serious special assessment. Just because they were saved by a fluke doesn't mean they did a good job. It means they got lucky once. Hardly a plan for most resorts or even for them in the future. I'd be worried about how they are running things. As they got paid for damage they should have huge surplus funds that they didn't need to use - instead they barely got by only thanks to an unplanned occurrence. Hopefully they learned a lesson and are now collecting correctly for future needs rather than hoping for another fortuitous calamity to bail them out.

 

[e.bram]

I would say that the very existence of the TS is precarious. If I were an off season owner , I would tell the powers that be to "pound Sand" or "chop water"

 

[stevedmatt]

Maybe I am being naive, but doesn't this equate to over $100,000 per unit? Is this because there are weeks that aren't owned? Is this resort open year round? If there are weeks that aren't owned, does the management company have the right to rent these weeks and does that money go to the management company or the general fund?

 

[mrpickle]

Wow That is expensive!

As you can imagine, making these additional improvements and required safety upgrades adds additional cost to the project. The original budget that was approved by your Board of Trustees was $2.8 million, with $2.6 million being covered by a loan from Wells Fargo Bank. With the modifications to the plan demanded by the Town Officials, the cost is now $4 million, with anticipated completion of the project delayed until May 27th.

$100,000 per unit they only need $1,500,000 (the 4 million - 2.6)
Does that mean they only have 15 units or is there something I'm missing?

 

[e.bram]

What has "oceanfront" have to do with poor maintenance and planning. Being oceanfront means that the value of the land would exceed the aggregate value of the TSes. Not so with inland TSes(like the Ocean Cove(not near the ocean but implying it in it's name)).
,and if oceanfront is so bad , why do the Kennedys own oceanfront? On the Cape, in Florida and other places.

 

[bilfbr245]

It seems to me that an SA of this magnitude should be accompanied by a ballot offering dissolution as an alternative. The owners might be better off keeping the $2000+ and possibly getting some value out of the ocean front land to distribute among them. It sounds like there was mold to clean up, and that can be expensive, so possibly there would not be anything left. But mold remediation would probably be cheaper for a tear down, and the ocean front land on Cape Cod should have considerable value.

 

[timeos2]

It's location, costs and prime time. Two up one down for ocean side

What has "oceanfront" have to do with poor maintenance and planning. Being oceanfront means that the value of the land would exceed the aggregate value of the TSes. Not so with inland TSes(like the Ocean Cove(not near the ocean but implying it in it's name)).
,and if oceanfront is so bad , why do the Kennedys own oceanfront? On the Cape, in Florida and other places.

Oceanfront means higher maintenance costs as the beating from weather/surf/moisture presents an extraordinary toll on buildings and equipment. Plus it severely limits the use season, thus creating massive amounts of off season time that simply isn't a value for the fees required. There is nothing "wrong" with oceanfront but being that doesn't automatically mean better value - in fact, except for a few prime weeks, it may be the reverse. And it comes at a much higher than average cost. If you are a Kennedy and can afford it and the costs for the long, off season periods then great - most timeshare owners aren't that wealthy or they would be buying full ownerships not one week slivers of time. When they start having to pay what may seem like full time owner costs it can be a big problem.

 

[Stevenh1]

I would say that the very existence of the TS is precarious. If I were an off season owner , I would tell the powers that be to "pound Sand" or "chop water"

This our sentiment exactly. We don't plan on paying one red cent!!!

 

[rickandcindy23]

This our sentiment exactly. We don't plan on paying one red cent!!!

Seriously? You bought off-season Cape Cod and will refuse to pay this assessment, which apparently was necessary? That means you are expecting everyone else to pay, but you won't.

Glad I am not on a sinking boat with you. That's what an older timeshare is, a sinking boat, and the only way to salvage it is to keep it fresh and new. There is no value to a timeshare, except what you are willing to pay in maintenance fees to use it each year.

This letter is reminiscent of the one Twin Rivers sent a few years back, and I understood why owners were upset, but mold is intolerable, and could make everyone sick, so we opted to fix it, right down to the tearing down of the drywall. I hated being on the board, with unhappy owners calling me, but at least I knew we were doing the right thing. The same people who complained were also the same ones who refused to sell the timeshare units as wholly owned. We could do so much better, selling the full units, and we could get our money back, too. People just want to complain and offer zero solutions.

Hope you unload your week.

 

[Stevenh1]

Seriously? You bought off-season Cape Cod and will refuse to pay this assessment, which apparently was necessary? That means you are expecting everyone else to pay, but you won't.

I'll try to work with the Trustees to get rid of it of course and hopefully we can work something out. Maybe they should sell it wholly (if you were on our board and suggested that option I would have backed you 100%). I think that is a great idea!

I didn't buy it, it was aquired when I entered a relationship. I'm just trying to get rid of it. The person who bought it is an original owner, who probably like most people, listened to the sales pitch and jumped in. The MF have been paid faithfully for 24 years. We've been trying to sell it for just as long too. I would like to do a deedback, but have not got a response from any of the trustees. I'm trying to give it away and you can see how well that is going. Back in the early 90's when the resort was in financial trouble due to the savings and loan scandle, I offered the unit to the Trustees at that time (offering to keep all payments up to date until they sold it) they wouldn't touch it.

 

[timeos2]

I'll try to work with the Trustees to get rid of it of course and hopefully we can work something out. Maybe they should sell it wholly (if you were on our board and suggested that option I would have backed you 100%). I think that is a great idea!

I didn't buy it, it was aquired when I entered a relationship. I'm just trying to get rid of it. The person who bought it is an original owner, who probably like most people, listened to the sales pitch and jumped in. The MF have been paid faithfully for 24 years. We've been trying to sell it it for just as long too. I would like to do a deedback, but have not got a response from any of the trustees. I'm trying to give it away and you can see how well that is going. Back in the early 90's when the resort was in financial trouble due to the savings and loan scandle, I offered the unit to the Trustees at that time (offering to keep all payments up to date until they sold it) they wouldn't touch it.

There is no requirement that the resort/trustee's take the week - and given the current situation they would be extremely foolish to do that as a resale right now is most likely nearly impossible. Every week they own needs to be funded by the other owners - meaning a higher SA and allowance for bad debt required. They cannot afford to take that on.

You need to find someone willing to take over the future obligations. You may have to pay 1/2 to all of the SA then give the week away to make it attractive to a new owner. That way they get a nice, renovated resort they can justify the future fees for. Splitting the SA 50/50 may be the best you can expect and you may not even get that. Good luck. Hope it works out for you and the resort in the long run.

 

[Stevenh1]

I am trying to donate it. If the cost to get out of it is less than the SA then this will probably be the route we'll take. Thanks for the advice

 

[Carolinian]

Actually, both of the resorts involved that I am most familiar with were in no danger of a special assessment. One had a professional reserve study some years back and m/f's had been based on that reserve study. The windfall from the insurance just put them in a stronger financial position. The other was still holding a large sum that was part of the settlement when they kicked the developer out and had added to it. They had plenty of funds on hand for the needed work, and again were just put in a stronger financial position from the insurance money.

While it turned out to be a lucky break it certainly doesn't speak well to the foresight/planning of the resort Boards. If there hadn't been a natural disaster then they would have faced a serious special assessment. Just because they were saved by a fluke doesn't mean they did a good job. It means they got lucky once. Hardly a plan for most resorts or even for them in the future. I'd be worried about how they are running things. As they got paid for damage they should have huge surplus funds that they didn't need to use - instead they barely got by only thanks to an unplanned occurrence. Hopefully they learned a lesson and are now collecting correctly for future needs rather than hoping for another fortuitous calamity to bail them out.

 

[bilfbr245]

I think that Stevenh makes a good point that bears on the hard line that many of you take about the responsibility of all owners to pay up no matter what. Many owners have acquired their timeshare through inheritance, or means other than purchase. They never made make a purchase decision that should ever hold their feet to the fire. They just got stuck. And what it insidious about some such commitments is that there will never be an escape, just one more payment after another. Its very nice, of course, to wish him good luck, but it is unlikely that he will have good luck given the parameters in the marketplace. When enough people refuse to pay, and by necessity some timeshare resorts are dissolved and liquidated, there may finally be a solution to the mess the industry is in.

 

[Mel]

Owners of the weeks during the refurbishment have been offered use of other weeks - which makes it sound like perhaps a large percentage of units are owned by the HOA. That must factor into the cost of the Assessment - every week owned by the HOA means a larger payment for the other owners (You pay your share plus a fair share of the fees attributable to weeks owned by the HOA).

We had to pay a similar SA several years back for our unit at Tropical Breeze, but for very different reasons. In our situation the HOA ended up owning about 30% of the units. Consider yourselves lucky the HOA was able to obtain financing - I doubt what the HOA owns is enough to provide security for a loan of that amount.

I don't buy the excuse that many owners didn't purchase the weeks. If they inherited them, they had the option at the time to not accept the inheritance. They accepted it, and have undoubtedly enjoyed use of the timeshare, so now they are having to pay to bring things up to date. The HOA has 2 main options at this point (with a few other options that might also work, with some tweaking).

Option 1: Fix what needs fixing, and move on.
Option 2: Sell the underly property. If they do this, the property still might require remediation.

Some intermediate options might include selling the HOA inventory to a developer group (making sure to amend the bylaws to prevent that developer from gaining control of the HOA); Reassigning some units to different units in the same week to provide the HOA with whole owned units which could be sold off as full ownership units; onsolidating in a similar fashion, and only remediating enough units to cover usage (demolishing or selling off the other units). Since the repairs are well underway, it sounds like perhaps the last idea isn't really an option.

Unfortunately this could cause a death spiral - a percentage of owners choose not to pay, which increases the cost to the other owners, causing more owners to be hesitant to pay.

 

[timeos2]

I think that Stevenh makes a good point that bears on the hard line that many of you take about the responsibility of all owners to pay up no matter what. Many owners have acquired their timeshare through inheritance, or means other than purchase. They never made make a purchase decision that should ever hold their feet to the fire. They just got stuck. And what it insidious about some such commitments is that there will never be an escape, just one more payment after another. Its very nice, of course, to wish him good luck, but it is unlikely that he will have good luck given the parameters in the marketplace. When enough people refuse to pay, and by necessity some timeshare resorts and dissolved and liquidated, there may finally be a solution to the mess the industry is in.

No one can be forced to take over a timeshare. If they have accepted the obligation either through purchase, accepted gift or inheritance they willingly took on the responsibility. It is up to them - not the other owners - to make sure the obligations are met and if they want out find a taker. It isn't that hard to understand and can be done in every case but not always cheaply. That's part of what they accepted when they took possession. Given the dispersed nature and large number of owners for even small timeshares it is very unusual for any resort to get to the point that the only answer is shutting the doors/liquidation. It can/has happened but you can count on three hands how many times in the whole history of timeshares.

The owners need to figure this out for themselves not try to make it the problem of the many other owners who are living up to their agreement.

 

[Stevenh1]

For the record, getting married was how I got involved with the timeshare

I do appreciate everyones input and have learned much from the posts.

I don't know how the other owners will feel as I stumbled onto the SA letter online the day it was posted. None of us have been sent the hard copy in the mail. It is due to be sent on Aprill 1st

 

[bilfbr245]

Mel, I believe that the death spiral you refer to is essential to allow the timeshare market to hit bottom and start to restore itself, and in particular to bring supply and demand into a better relationship.

Also, I wonder, would it make a difference to you if the owners of an inherited timeshare had not actually been using it happily for years? Also, what are heirs supposed to do when there are timeshares in the estate? If they refuse to accept them, and the estate is unable to otherwise dispose of them, things are stuck.

I want the best for the timeshare market, but the truth is that there are way more timeshare units than there are people who want them. Liquidation of some resorts is the only answer I see. Putting off the inevitable only makes it worse. Moments when there are substantial SA's are in this respect moments of opportunity, in that they can encourage a vote for liquidation and dissolution.

And John, yes there have only been a few liquidations to date, but how else is the vast oversupply to be rectified?

 

[Stevenh1]

I just got the hardcopy so That means the other owners are starting to recieve theirs also.

 

[timeos2]

And John, yes there have only been a few liquidations to date, but how else is the vast oversupply to be rectified?

The problem is creating value for the majority of (usually) off season times that plague so many resorts. Either by reducing fees for those times (meaning higher fees for the prime times) and/or improving on site features so thee is a reason and value to use/visit in what otherwise is undesirable time periods. Not easy and maybe not cheap but the only other answer would be to sell it off - nearly impossible to achieve consensus to do that even in the best circumstances. There is no easy answer.

I fully agree there are simply too many timeshares out there for the number of willing user/buyers. Yet they continue to sell more (fortunately not too many new ones are in the pipeline - now most sales are more focused on the "club" type systems that are often recycling old inventory for new sales dollars).

Some resorts will fail or close. But I'll bet far more will struggle through and still be around a decade from now.