ROFR metric / Ongoing ROFR Activity

[TXTortoise]

Does anyone have any insight on the mechanics of ROFR with respect to a contract with two or more weeks in it, and different price for each week. Does Marriott have to take the whole contract or can they take one week within the contract? Just wondering if you had a high price week and low priced week, both with the same points value...whether they would/could take the low value week, or if they were averaged out in the contract might both pass...or fail, for that matter.

 

[csodjd]

I saw that, seemed to work out to right below $4/point..which would have been $29,900. I wonder how close that was.

It's the $54K 3BR Lahaina ROFR at $54K that is skewing the curve. Was it a 3BR that was the kicker for them, as that was just over $5/point, or is there a Maui factor built-in to their decision. Seems like it would be a pure points decision on Marriott's part, though I guess percent of a resort's weeks in the Trust must also play into it. Wish we had a recent Lahaina/Napili 2BR sale in the 30s to see what happened.

Well, I'll probably never help you find out. I decided that since I have an EOY,-odd already, the economics of buying an annual or an EOY-even didn't make sense. Better to just rent during the even years if we decide to go to Maui.

Assuming the $20,000 it costs to buy the 2-BR EOY-even instead earns 5%/year interest, that's $1,000/year, or $2,000 every 2 years (ignoring compounding) (I can buy $20k of AT&T and take the 6.8% dividend yield and do even better). The rental for the week is about $4500. The MF are $2500. That means I basically break even. No financial benefit to owning. It costs the same whether I spend $20k to buy or don't spend $20k and rent. And renting means I can come any day (lower airfare mid-week) and stay longer or shorter.

 

[GregT]

Does anyone have any insight on the mechanics of ROFR with respect to a contract with two or more weeks in it, and different price for each week. Does Marriott have to take the whole contract or can they take one week within the contract? Just wondering if you had a high price week and low priced week, both with the same points value...whether they would/could take the low value week, or if they were averaged out in the contract might both pass...or fail, for that matter.

When I bought my Week 23 and Week 24, they were bundled into a single purchase agreement, and I had a total price. I didn’t allocate values to the specific weeks because I was concerned they might exercise on the lower one. I’m not sure if they can, so it may have just been a precaution.

Best,

Greg

 

[TXTortoise]

A Maui broker had three MOC old building 2BR OF weeks bundled at $60K in one contract and lost them to ROFR. He didn't think they'd take them due to total price, while we now recognize that points value seems to be the key factor and $25,800 is the points value at $4/point....and $25K passed last week.

Would have been interesting to have had them priced at incrementally with same average value to see what happens.

 

[TXTortoise]

I've probably read this, but not sure what the final understanding is. To minimize the risk of ROFR does it make sense to have the closing costs, usually paid by the buyer, included in the selling price with seller paying the closing cost in the contract. Basically seller would pay out of pocket, but would be reimbursed with full purchase price.

For example, a 2BR OF Lahaina Tower was lost to ROFR at $29K as noted above. If bought at $31K, but it included $1K in closing cost, it would seem to be cheap insurance to clearing ROFR, i.e., $29.9K is about $4/point.

 

[taterhed]

As long as the contract is 'reasonable and customary,' you'll have no problems--bundle all the fees on the ROFR with the higher resulting sales price. Can't hurt, but is unlikely to have much effect on these high-value resales.

If you include a 'cow' or '3 magic beans' in the contract....you'll have more problems than Jack.

 

[TXTortoise]

I agree, at the $30k price point it’s really just managing around the edge.

 

[csodjd]

I've probably read this, but not sure what the final understanding is. To minimize the risk of ROFR does it make sense to have the closing costs, usually paid by the buyer, included in the selling price with seller paying the closing cost in the contract. Basically seller would pay out of pocket, but would be reimbursed with full purchase price.

For example, a 2BR OF Lahaina Tower was lost to ROFR at $29K as noted above. If bought at $31K, but it included $1K in closing cost, it would seem to be cheap insurance to clearing ROFR, i.e., $29.9K is about $4/point.

Truth be told, I did that in the unit that did not pass ROFR. I've used approximate numbers here. Total price paid was to be $29,100. That included seller paying $1,100 of the closing costs. Of course, I have no way to know what Marriott's analysis was, if they noticed that, if it didn't pass even if they didn't notice that, etc. But I was thinking the same thing as you state here... pay more and have seller pay closing costs to increase chances of passing ROFR.

 

[JIMinNC]

I've probably read this, but not sure what the final understanding is. To minimize the risk of ROFR does it make sense to have the closing costs, usually paid by the buyer, included in the selling price with seller paying the closing cost in the contract. Basically seller would pay out of pocket, but would be reimbursed with full purchase price.

For example, a 2BR OF Lahaina Tower was lost to ROFR at $29K as noted above. If bought at $31K, but it included $1K in closing cost, it would seem to be cheap insurance to clearing ROFR, i.e., $29.9K is about $4/point.

i've been talking to a broker over the last week or so about just this question. His opinion/understanding was that since the closing costs are spelled out in the Contract to Purchase, then Marriott would also use that number to calculate the amount due to Seller (netting it against the sale proceeds to the Seller, since the Contract specifies those costs are to be paid by the Seller). So his opinion was it shouldn't make a difference. I know others have offered the opposite opinion since Marriott may be able to close cheaper, so unless we know how Marriott actually looks at it, we're just guessing.

 

[TXTortoise]

i've been talking to a broker over the last week or so about just this question. His opinion/understanding was that since the closing costs are spelled out in the Contract to Purchase, then Marriott would also use that number to calculate the amount due to Seller (netting it against the sale proceeds to the Seller, since the Contract specifies those costs are to be paid by the Seller). So his opinion was it shouldn't make a difference. I know others have offered the opposite opinion since Marriott may be able to close cheaper, so unless we know how Marriott actually looks at it, we're just guessing.

I suppose on a $5-10K week, where closing on a Hawaii property could be $1000+/-, it might be a deciding factor, but the more I think about Maui prices at $16k OV, $25K OF, and $30K Lahaina OF, it's probably safer to just increase your offer a bit...or if lots of sellers, start low and work your way up from the last ROFR Fail number. And FWIW, once you start shopping a few brokers for high-value weeks, I've been surprised the number of offers they've come up with, that aren't currently listed on RedWeek or even their websites. Mostly fishing for 'what will you pay', but interesting, never the less.

 

[JIMinNC]

I suppose on a $5-10K week, where closing on a Hawaii property could be $1000+/-, it might be a deciding factor, but the more I think about Maui prices at $16k OV, $25K OF, and $30K Lahaina OF, it's probably safer to just increase your offer a bit...or if lots of sellers, start low and work your way up from the last ROFR Fail number.

Even on a smaller sale, it would seem to not make much difference, if what the broker told me is correct. The two major ways to structure a deal would be:

1) On a theoretical $4000 sale, with $1000 Hawaii closing costs paid by the Buyer, the Seller would get the contracted $4000 (before paying his broker) if Marriott waives ROFR. If MVC opts to exercise, they are doing their own closing, but could claim/show the same $1000 closing costs on their closing statement - since they are paying them anyway - but their "true" cost is only known to their CPA. We don't really know what it really "costs" an external closing company to close either, all we know is what they "charge", so MVC could also "charge" on paper whatever they want to since they are the Buyer and doing their own work of closing.

2) On that same theoretical $4,000 sale, it could alternatively be structured as a $5,000 sale, with the Seller paying the $1000 closing. So if MVC waives, the Seller gets $5,000 from the Buyer, but then pays closing out of their proceeds and nets the same $4000 as in option #1 above. If Marriott opts to exercise ROFR in this case, the closing statement would show them paying the Seller $5,000, but then perhaps just netting the same $1000 closing costs against their proceeds, so then their net cost is still the same $4,000 (plus their internal costs of closing which would have also been incurred in option #1).

If this is the way it works, which party pays closing shouldn't matter with ROFR. An exception might be on a points resale where the deal is structured with the Seller paying the $3/point Owner Activation Fee, something that Marriott would not have to pay if they exercised ROFR on a points resale, but by bundling it into the selling price for the points and having the Seller pay it, that might seem to present a more formidable "poison pill" depending on the technical legal wording in the contract of sale. There is no such significant fee of this type in a weeks resale.

Unless we could find an example of a ROFR-exercise closing statement on both types of resale week transactions above, we are still just making educated guesses.

 

[csodjd]

And FWIW, once you start shopping a few brokers for high-value weeks, I've been surprised the number of offers they've come up with, that aren't currently listed on RedWeek or even their websites. Mostly fishing for 'what will you pay', but interesting, never the less.

This is spot on. I have twice recently asked a broker (Syed) to let me know if anything came up (Marriott Maui Napili 2BR OF, Hilton Lagoon 2BR OF) where there was nothing advertised available, and within 1-2 days he had a unit for me. I decided against the Marriott and I'm waiting for ROFR on the Lagoon Tower. But the point is, the local brokers appear to have some "pocket listings" or inside track.

 

[dlpearson]

We just learned Marriott waived ROFR on our offer for a Maui Ocean Club (original) 2 bed/3bath oceanFRONT biannual (even year) for $8,500. We're happy!

 

[TXTortoise]

We just learned Marriott waived ROFR on our offer for a Maui Ocean Club (original) 2 bed/3bath oceanFRONT biannual (even year) for $8,500. We're happy!

Just goes to show anything is possible. A 2BR OF Annual failed at $20K (actually a contract for $60, with three weeks in it). Be sure and add to ROFR.net

 

[JIMinNC]

We just learned Marriott waived ROFR on our offer for a Maui Ocean Club (original) 2 bed/3bath oceanFRONT biannual (even year) for $8,500. We're happy!

Wow. That's at least $3000 to $4000 less than I've seen any OF biennial sell for. Was there anything unique about the transaction? Like, for example, was it from an eBay seller who may have charged the selling owner a large upfront fee that was included in their ROFR submittal price to Marriott?

 

[dlpearson]

Wow. That's at least $3000 to $4000 less than I've seen any OF biennial sell for. Was there anything unique about the transaction? Like, for example, was it from an eBay seller who may have charged the selling owner a large upfront fee that was included in their ROFR submittal price to Marriott?

Nothing unusual or creative with the deal; just great luck. Using reputable broker and title company. I was mentally prepared for Marriott to take it, but so glad they didn't!! I've added it to ROFR.net

 

[DEScottzz]

I just heard that MVC waived ROFR on our offer of $2.67 per point for 1500 points, which will bring us to Presidential level. (There was a bit of funny business with the closing costs and other fees, so the number on the contract was higher.)

 

[TXTortoise]

Just another data point on Maui 2BR OF ROFR from a broker I queried.

“In the last 90 days I have sold several OF units ranging from 21K - 25500. They exercised all the way up to $24K. I would suggest at least 24500-25K to get passed the ROFR.”

In the past I’ve read where Marriott/MVCI hasn’t been as aggressive on EOY units. Any thoughts on why, if true? Seems like a Week is a week. That 2BR OF EOY at $8500 was a steal.

 

[JIMinNC]

In the past I’ve read where Marriott/MVCI hasn’t been as aggressive on EOY units. Any thoughts on why, if true? Seems like a Week is a week. That 2BR OF EOY at $8500 was a steal.

Only thing I can think of is it costs the same to close an EOY as an EY, but they only get half the usage. That's the only thing I can think might explain it if they are indeed less aggressive.

 

[Vacation fun]

Does anyone have an insight as to what criteria Marriott looks at when determining ROFR ? That is do they only look at price or do they look at what you own already by third party? Also when they do exercise ROFR do they then make them into destination points ?

 

[TXTortoise]

Most musings within the last year are that ROFR is managed around the points value of the week and sale price, but that metric can vary widely by resort and demand... and the inconsistency of the process. No apparent relation to the sellers status, just value to Marriott.

Maui weeks have been taken when the sale price divided by the points value of the week has exceeded $4-4.50 per point, but as high has $5+/point. Conversely an EOY Maui 2BR OF week passed at $8500.

Budget availability may play into it as we seem to have seen a slow down in late 2018, while it’s been pretty active in 2019.

I mostly track Maui, so others may speak up on other resorts.

And yes, weeks go into the trust for points reservations.

 

[JIMinNC]

Conversely an EOY Maui 2BR OF week passed at $8500.

Budget availability may play into it as we seem to have seen a slow down in late 2018, while it’s been pretty active in 2019.

I wonder if that one slipped through because we are nearing the end of first quarter? Maybe they have a ROFR budget per quarter?

 

[TXTortoise]

Always wondered if they were monthly, quarterly or annually constrained. Just from my corporate days I’d guess quarterly.

Any idea if their fiscal year is standard calendar based.

 

[JIMinNC]

Always wondered if they were monthly, quarterly or annually constrained. Just from my corporate days I’d guess quarterly.

Any idea if their fiscal year is standard calendar based.

As I recall its standard Jan1-Dec 31. Used to be slightly different, but a year or so ago they realigned with the calendar as I recall.

 

[taffy19]

Most musings within the last year are that ROFR is managed around the points value of the week and sale price, but that metric can vary widely by resort and demand... and the inconsistency of the process. No apparent relation to the sellers status, just value to Marriott.

Maui weeks have been taken when the sale price divided by the points value of the week has exceeded $4-4.50 per point, but as high has $5+/point. Conversely an EOY Maui 2BR OF week passed at $8500.

Budget availability may play into it as we seem to have seen a slow down in late 2018, while it’s been pretty active in 2019.

I mostly track Maui, so others may speak up on other resorts.

And yes, weeks go into the trust for points reservations.

I found out yesterday that 23% of the fixed week/units in Maui are in the trust already.

The sales person also said that 73% of all the Legacy weeks are in the trust already.

He also showed how the trust points have gone up in price since the beginning.

Here is the chart.

There is now speculation that Marriott is looking to buy the Hyatt hotel brand next because Marriott was looking at a certain amount of rooms and that seems to be coinciding with the same number of rooms that the Hyatt Hotel brand has at the moment. He made sure that I understood that it was speculation and not fact.