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Grand Pacific Resorts... debt cycle and property value

skimble

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Until yesterday, I thought Grand Pacific Resorts was the most fiscally responsible of all the management companies. This is not the case anymore.
Grand Pacific Resorts has a formulary that they pride themselves on. It's part of their sales pitch to potential owners, potential management clients (to which they are actively seeking to broaden their network of resorts to manage-- internationally), and they reassure current owners that their fees are being handled responsibly. They have a computer program that sets a schedule for roof repairs, carpet replacement and other large anticipated repairs. Fees are broken into two parts-- Maintenance and Reserves. The reserves are set aside so we are never hit with a special assessment or debt. It's a proactive way of anticipating future costs and saving up to pay for them. And, it explains our high maintenance fees: Maintenance fees for a 1 bd unit at the Seapointe are between $1097 and $1355, depending on size.
Grand Pacific Seapointe has broken away from their principled fiscal management program and chosen to take on debt. The debt will be secured by future reserve funds. Resort management would have you believe that using today's dollars to pay for a complete refurbishment and going into debt is wiser than doing pieces at a time. Given inflation, there may be some truth to this, it does not negate the fact that we have a reserve fund. And, that reserve fund is there to anticipate these "needs."
"Need" is a subjective word that is open for interpretation. The Seapointe is officially 20 years old (and there were three phases built over about a 5 years span-- not all built at once.) While salt water and wind can be harsh on coastal properties, the kitchen and bathroom are inside the units, fairly protected. The countertops were changed to granite about 7 years ago. Appliances have been regularly maintained or changed accordingly, and this has all been done responsibly using reserve funds. Is a quartz countertop really a need in light of the fact that we already have granite?
The plan is to put in new cabinets, new flooring... essentially replace most of the kitchen and bathroom. It's a huge renovation, and a huge cost.
The Seapointe is nearly the highest rated resort in all of Carlsbad on Tripadvisor. All dis-aggregated scores on RCI are between 4 and 5. Unit satisfaction is at about 4.4 out of 5. Thus, people are not dissatisfied when they stay at the resort. As part of our presentation, they told owners yesterday that we were trending down in unit satisfaction. If you've ever been to the Seapointe, you know, the units are nicely decorated, the kitchens are functional, well apportioned and feel modern, and the rooms are clean. And, after 15-20 years in service, maybe there is a case to be made for replacing all the cabinets, flooring and countertops, but why is Grand Pacific choosing debt? Why aren't the reserves in place for this? And, if they leverage future reserves for this, what will happen in 10 years when the roof needs to be replaced?
How can this decision be attributed to Grand Pacific management and not the individual board of directors for the Seapointe in and of itself? The board has not changed in 20 years. The same members get elected every year, and those board members are the same members who occupy seats on most of the other boards within Grand Pacific (true for the coastal CA area.) The board is comprised of people who have strong connections to Grand Pacific. They are engaging in a debt cycle that will likely be perpetuated. And, they are neglecting the Grand Pacific principled approach of fiscal responsibility. If it happens at one Grand Pacific Resort, you better believe it can happen at any of them.
Resale property values, as evidenced by Ebay, TUG, and Redweek, at Grand Pacific Seapointe, Grand Pacific Palisades and even Marbrisa (where they have new sales and incomplete development) are low. People are giving away weeks on Ebay and TUG. This can only be attributed to the high maintenance fees. A debt cycle will only make things worse.

tag
Grand Pacific Resorts
Hilton Grand Pacific Seapointe
Hilton Grand Pacific MarBrisa
 

presley

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I think the reviews are down due to HGVC being able to stay there on points. The rooms are not up to HGVC standards. I have stayed in a few rooms that I would consider to be junky when comparing to HGVC units. For a beach resort across the street from the beach, the units are nice, but they are a HUGE disappointment for Hilton owners who book Seapointe on their points. As far I can tell, Seapointe had a choice of either dropping HGVC affiliation or going ahead and upping the ante.
 

Ty1on

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Until yesterday, I thought Grand Pacific Resorts was the most fiscally responsible of all the management companies. This is not the case anymore.
Grand Pacific Resorts has a formulary that they pride themselves on. It's part of their sales pitch to potential owners, potential management clients (to which they are actively seeking to broaden their network of resorts to manage-- internationally), and they reassure current owners that their fees are being handled responsibly. They have a computer program that sets a schedule for roof repairs, carpet replacement and other large anticipated repairs. Fees are broken into two parts-- Maintenance and Reserves. The reserves are set aside so we are never hit with a special assessment or debt. It's a proactive way of anticipating future costs and saving up to pay for them. And, it explains our high maintenance fees: Maintenance fees for a 1 bd unit at the Seapointe are between $1097 and $1355, depending on size.
Grand Pacific Seapointe has broken away from their principled fiscal management program and chosen to take on debt. The debt will be secured by future reserve funds. Resort management would have you believe that using today's dollars to pay for a complete refurbishment and going into debt is wiser than doing pieces at a time. Given inflation, there may be some truth to this, it does not negate the fact that we have a reserve fund. And, that reserve fund is there to anticipate these "needs."
"Need" is a subjective word that is open for interpretation. The Seapointe is officially 20 years old (and there were three phases built over about a 5 years span-- not all built at once.) While salt water and wind can be harsh on coastal properties, the kitchen and bathroom are inside the units, fairly protected. The countertops were changed to granite about 7 years ago. Appliances have been regularly maintained or changed accordingly, and this has all been done responsibly using reserve funds. Is a quartz countertop really a need in light of the fact that we already have granite?
The plan is to put in new cabinets, new flooring... essentially replace most of the kitchen and bathroom. It's a huge renovation, and a huge cost.
The Seapointe is nearly the highest rated resort in all of Carlsbad on Tripadvisor. All dis-aggregated scores on RCI are between 4 and 5. Unit satisfaction is at about 4.4 out of 5. Thus, people are not dissatisfied when they stay at the resort. As part of our presentation, they told owners yesterday that we were trending down in unit satisfaction. If you've ever been to the Seapointe, you know, the units are nicely decorated, the kitchens are functional, well apportioned and feel modern, and the rooms are clean. And, after 15-20 years in service, maybe there is a case to be made for replacing all the cabinets, flooring and countertops, but why is Grand Pacific choosing debt? Why aren't the reserves in place for this? And, if they leverage future reserves for this, what will happen in 10 years when the roof needs to be replaced?
How can this decision be attributed to Grand Pacific management and not the individual board of directors for the Seapointe in and of itself? The board has not changed in 20 years. The same members get elected every year, and those board members are the same members who occupy seats on most of the other boards within Grand Pacific (true for the coastal CA area.) The board is comprised of people who have strong connections to Grand Pacific. They are engaging in a debt cycle that will likely be perpetuated. And, they are neglecting the Grand Pacific principled approach of fiscal responsibility. If it happens at one Grand Pacific Resort, you better believe it can happen at any of them.
Resale property values, as evidenced by Ebay, TUG, and Redweek, at Grand Pacific Seapointe, Grand Pacific Palisades and even Marbrisa (where they have new sales and incomplete development) are low. People are giving away weeks on Ebay and TUG. This can only be attributed to the high maintenance fees. A debt cycle will only make things worse.

tag
Grand Pacific Resorts
Hilton Grand Pacific Seapointe
Hilton Grand Pacific MarBrisa

They're leveraging future owner dues in favor of current sales. A shiny property with quartz countertops sells better, and if they can get the units in sellable condition, they have at their disposal a steady stream of owners who want out, as you point out.
 

rfc0001

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FWIW, renovations are currently planned, per booking tool:

Please be aware starting April 12, 2016 this resort will be renovating all rooms and suites. Varying levels of noise and dust are to be expected during the renovation period. Renovations will be suspended on May 26, 2016 for the summer but will commence following Labor Day and continue through the end of 2016.
 

SmithOp

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They're leveraging future owner dues in favor of current sales. A shiny property with quartz countertops sells better, and if they can get the units in sellable condition, they have at their disposal a steady stream of owners who want out, as you point out.

It should help owners that want to rent also.
 

buzglyd

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Polishing up the units will make sales more attractive as Seapointe is the "drop" from Marbrisa.

If someone doesn't buy HGVC from Marbrisa they are offered a Seapointe unit.

New owners at the resort are vital and will keep the HOA healthy.

The alternative is to slowly manage the decline which happens at dozens of resorts as the owners age.
 

rfc0001

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I personally like that HGVC invests in renovations on a regular basis to maintain the quality of resorts, which is why I bought into HGVC (not at Seapointe). I just booked Seapointe today for this fall due to the high ratings on TripAdvisor (only 5% negative reviews). We are looking forward to it!
 

booklvr

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We just got back from a week at the Seapointe. We were at the same meeting as the OP.

The Seapointe is very much in need of a reno. The furniture, kitchen and bathrooms are battered and run down and can't compare to a Hilton or Sheraton. These renos will add value to the property, making it more desirable to purchase and rent.

The location of the resort is excellent and the views amazing. The upgrade will bring the resort into this millenium for decor. We were happy with our unit layout. The 1 bedrooms are done spaciously.

Also the bed and pillows are amazing!! So comfortable. I'm going to find out where to buy the pillows.
 

SmithOp

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Also the bed and pillows are amazing!! So comfortable. I'm going to find out where to buy the pillows.


There was a booth next to the meeting room where they were selling items, I picked up a shower head. You can order them online here:


http://www.mygrandopportunity.com/


Sent from my iPad Mini 4 using Tapatalk
 

ronparise

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One of the underlying assumptions in your argument is wrong. That your resort has a computer program to forecast the remaining life of the various building components and schedule renovations and set the amount required to be added to the reserve fund each year is not something thats unique to this one company. Thats something every hoa of every condo association has to do

Your maintenance fees are crazy high but its not the reserve fund that makes it that way If it was then every hoa would be just as high, because every hoa should have a reserve fund

I am going to guess that the reserve fund is set up to provide for replacements and whats proposed are improvements. Im also going to guess most owners want those improvements and they dont want an increase in fees or a special assessment. Borrowing allows them to get what they want. Whether you agree that the improvements are needed or not is not relevant, You have a board to make those decisions for you. At least your board is borrowing the money instead of funding these "un necessary" improvements with a special assessment,
 

skimble

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One of the underlying assumptions in your argument is wrong. That your resort has a computer program to forecast the remaining life of the various building components and schedule renovations and set the amount required to be added to the reserve fund each year is not something thats unique to this one company. Thats something every hoa of every condo association has to do

Your maintenance fees are crazy high but its not the reserve fund that makes it that way If it was then every hoa would be just as high, because every hoa should have a reserve fund

I am going to guess that the reserve fund is set up to provide for replacements and whats proposed are improvements. Im also going to guess most owners want those improvements and they dont want an increase in fees or a special assessment. Borrowing allows them to get what they want. Whether you agree that the improvements are needed or not is not relevant, You have a board to make those decisions for you. At least your board is borrowing the money instead of funding these "un necessary" improvements with a special assessment,

The board did not query owners, and they would not. The board is comprised of current and former GPR employees. Seats have not changed on the board since inception 20 years ago.
I've been going to the annual owner's meeting for many years. Management at all GPRs touts their program for anticipating costs as the rationale for reserves... they sell people on the idea that it amounts to responsible management.
 

davidvel

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This seems strange. California has very strict rules for HOAs re: reserves vs. borrowing for maintenance, etc. Does the management company make $ off expenditures? Many do.
 

skimble

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We just got back from a week at the Seapointe. We were at the same meeting as the OP.

The Seapointe is very much in need of a reno. The furniture, kitchen and bathrooms are battered and run down and can't compare to a Hilton or Sheraton. These renos will add value to the property, making it more desirable to purchase and rent.

The location of the resort is excellent and the views amazing. The upgrade will bring the resort into this millenium for decor. We were happy with our unit layout. The 1 bedrooms are done spaciously.

Also the bed and pillows are amazing!! So comfortable. I'm going to find out where to buy the pillows.


In economics there's an old theory about how money is spent.
1. I have my money and I decide how to spend it.
2. I decide how your money is spent.
3. I decide how a group's money is spent.
4. A group decides how a group's money is spent.

It goes something like that...

The most responsible spender is #1. The least responsible spender is #4. It explains the debt spiral of government.
It boils down to diffused responsibility.
 

skimble

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They're leveraging future owner dues in favor of current sales. A shiny property with quartz countertops sells better, and if they can get the units in sellable condition, they have at their disposal a steady stream of owners who want out, as you point out.

In truth, the developers on the hill are calling the shots on this one. HGVC wants the renn. And, these are the reasons.

My beef is... it's on Seapointe owners' dime; it's a want not a need; and in the end, it benefits the developers most.

"sellable condition"... exactly.

And, fees are so high right now at both Grand Pacific Palisades and Seapointe that people are letting them go.
Sad for those owners, but a bonus for Grand Pacific.
 

booklvr

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In truth, the developers on the hill are calling the shots on this one. HGVC wants the renn. And, these are the reasons.

My beef is... it's on Seapointe owners' dime; it's a want not a need; and in the end, it benefits the developers most.

"sellable condition"... exactly.

And, fees are so high right now at both Grand Pacific Palisades and Seapointe that people are letting them go.
Sad for those owners, but a bonus for Grand Pacific.

What do you think would be more reasonable for maintenance fees at Seapointe? I agree that they currently seem high.
 

klpca

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And, it explains our high maintenance fees: Maintenance fees for a 1 bd unit at the Seapointe are between $1097 and $1355, depending on size.

I meant to ask about this the other day. My maintenance fees for a B unit (largest 1 bed, I thought ) are just over $1.000 per year. I have an EOY and I believe that the fees last year were $535. Is it the two bedrooms that are paying $1,355?

The kitchens absolutely needed to be redone. The cabinets were horrible. I would rather see it done right this time - the last refurbishment looked like it was done on the cheap. People's expectations have gone way up in the last 20 years. No way will people be satisfied with formica and low end white appliances. Hard surface counters and stainless steel appliances are the norm.
 

presley

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I meant to ask about this the other day. My maintenance fees for a B unit (largest 1 bed, I thought ) are just over $1.000 per year. I have an EOY and I believe that the fees last year were $535. Is it the two bedrooms that are paying $1,355?

I have an EOY 2 bedroom. I paid $598.64 for my 2016 statement which is half of the total. I pay my $150. club dues with my Marbrisa. I suppose if I paid that with my Seapointe instead, I'd be at $1347.28
 

buzglyd

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I meant to ask about this the other day. My maintenance fees for a B unit (largest 1 bed, I thought ) are just over $1.000 per year. I have an EOY and I believe that the fees last year were $535. Is it the two bedrooms that are paying $1,355?

The kitchens absolutely needed to be redone. The cabinets were horrible. I would rather see it done right this time - the last refurbishment looked like it was done on the cheap. People's expectations have gone way up in the last 20 years. No way will people be satisfied with formica and low end white appliances. Hard surface counters and stainless steel appliances are the norm.

Exactly. The old way is penny wise and pound foolish. With the HGVC program available, new, young owners can be brought into the fold and the resort stays healthy.

One can see the average age of the owners at the meeting and realize that delinquencies will continue to rise as owners age out. Having on site sales is huge compared to resorts that going into the slow, death spiral.
 

skimble

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Exactly. The old way is penny wise and pound foolish. With the HGVC program available, new, young owners can be brought into the fold and the resort stays healthy.

One can see the average age of the owners at the meeting and realize that delinquencies will continue to rise as owners age out. Having on site sales is huge compared to resorts that going into the slow, death spiral.

I totally get your logic, and I agree. There was an aging population at the meeting. And, I am totally in favor of keeping up with maintenance.

The Carlsbad Inn is older than the Seapointe. It was built about 30 years ago. I think you own there too. Maintenance fees are about $865, and the units have been maintained nicely. The grounds are amazing-- with flora that changes with seasons. They operate under the GPR management philosophy, and they have kept up with maintenance. They have undergone regular renovations... it's well managed.
CBI has maintained a reasonable balance between proper maintenance and upkeep, resort appeal, and resale value.
Maintenance fees at Seapointe are in junk bond territory. The property is 10+ years younger than CBI, and fees are MUCH higher. I can rationalize a little bit of a fee difference based on some of the extra amenities.
The money should be there for the ren.
I will be finding out more about the source of money for the loan and the rationale, and I'll let you know what I find out.
Don't get me wrong... I'm all for improvements and maintenance. I'm against debt and maintenance fees that devalue the property.
 

VegasBella

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I own at CBI rather than Seapointe and the reason is mainly location. But I agree that the Seapoint MF are higher than they should be for the resort. But buy-in is lower (for prime weeks) so I guess it might even out.

I agree that they should not replace existing granite countertops if they're in good condition, that's just wasteful. But it sounds like the cabinets and other amenities could use updates. Not sure about the best way to pay for it.

They definitely should have considered owners' opinions. That said, I was extremely happy about the improvements made to CBI but older owners who have owned since the beginning are not as happy about it. They complain that they liked the old colors better and that the interiors didn't need a remodel, etc. I spoke at length with one owner and he was extremely grumpy about it all whereas I couldn't have been more pleased with the improvements. So I'm not really sure it would have made much difference if they'd considered owners' opinions or not... newer, younger owners are simply more likely to like things that older owners dislike.
 

skimble

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I own at CBI rather than Seapointe and the reason is mainly location. But I agree that the Seapoint MF are higher than they should be for the resort. But buy-in is lower (for prime weeks) so I guess it might even out.

I agree that they should not replace existing granite countertops if they're in good condition, that's just wasteful. But it sounds like the cabinets and other amenities could use updates. Not sure about the best way to pay for it.

They definitely should have considered owners' opinions. That said, I was extremely happy about the improvements made to CBI but older owners who have owned since the beginning are not as happy about it. They complain that they liked the old colors better and that the interiors didn't need a remodel, etc. I spoke at length with one owner and he was extremely grumpy about it all whereas I couldn't have been more pleased with the improvements. So I'm not really sure it would have made much difference if they'd considered owners' opinions or not... newer, younger owners are simply more likely to like things that older owners dislike.

It's impossible to please everybody. But, replacing items on a schedule makes sense... and paying for it ahead of time also makes sense. CBI does this.
When I owned at SCBC, people complained because they replaced the old chair. "The new one is too firm. We don't like the color" The chairs were scheduled for replacement. The size worked with the desired style and color, and everything was built to be heavy duty. Everything in a timeshare gets used far more than in your household.
I've been happy with the fees at CBI. Amenities have improved-- there's the new landscape features-- fire pits and concrete. They're trying to conserve water and cutting out some grass. The view to the ocean is improved with the plexiglass, and the interior refurb is amazing... it opened up the rooms immensely.
As far as Seapointe being less desirable, in some ways this is true. But, some people like the pools and tennis, and the higher ceilings. As an owner, I'm glad I have a summer week. But, I wouldn't trade it-- I do not get my maintenance fees worth of trade value. I would only use or rent.
Both CBI and CSR are coastal resorts with the same desire for quality. Yet, the fees are not in alignment.
 

1Kflyerguy

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My guess is that most people expect their vacation rentals to be as nice or nicer than their primary residence.. Around my neighborhood many but not all of the older residents have kept their homes in original condition, but often when new, younger families buy the homes they update and remodel the home.

If I have granite counters and stainless steel at home, chances are i won't be happy with Formica or tile counters and older appliances..
 

buzglyd

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The maintenance fees aren't that much different.

Seapointe includes the property tax in the amount.

Carlsbad Inn it is paid directly to the county.

Carlsbad Inn is a high demand location and resale values are still good because people want that location.

I use Seapointe more for day use but stay at Carlsbad Inn more often.
 
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