KBV: The Truth Please

[schreff]

So many questions without any proven specific, factual answers. Here are a few examples: 1. How could this laundry list of construction failures not have been detected and fully disclosed to management and owners prior to the 2020 catastrophe? 2. Have the Boards and Management throughout this time period met their full fiduciary responsibilities? 3. Why haven't audited financial statements and management notes been shared with the owners? 3. Who and where were the building inspectors, the Board, Management and what bonds and other risk management tools existed at the time of the so-called construction failures? Someone is responsible for these oversights at the time of construction and who is it? Why did it take all these years to reveal itself and what protection and disclosures did purchasers have throughout the years when sold the explained KBV "pig in a poke"?

All this seems fishy to an owner who has requested but never received full disclose from not only the elected Board but also the Management Company. This is surely in violation of legal fiduciary standards by even the simplest terms. .

 

[bnoble]

None of us know more than what has been shared with us, plus a lot of speculation by a lot of people who may or may not know what they are talking about.

Based on my recollection and understanding, we knew that there were problems with (some of) the reinforced concrete in the oceanfront buildings and the lanais prior to the flood, and there were (oft-delayed) plans to deal with that. Remediation of the flood required stripping the walls to the studs across the bottom few feet in the garden view buildings, and once that was opened up it became apparent there were other problems. It seems at least plausible to me that no one knew those other problems were there until they ripped out the walls, and there was no reason to rip out the walls prior to the flood. So, the simplest explanation seems to fit with what I've been told so far.

As to your other questions, we'd probably either need to be mind readers, own a time machine, or launch a lawsuit with lots of discovery and depositions to answer them. So, I'm practicing the Serenity Prayer until we know more, because there just isn't much that worrying or being angry will accomplish.

Having talked it over a bit more, and based on what we know so far: In a world in which the owners vote on what to do, our vote wouild be to dissolve and liquidate. We've enjoyed owning here, but this might be the end of it.

 

[schreff]

Thanks for the reply. I agree with some of your post but we don't need mind readers, a time machine or discovery to ask for and get audited financial statements, management notes, and full disclosure which maybe you have received but I have not. Also, when we pay a management company are they not responsible to manage and use prudent risk management techniques for catastrophic events? Has this been done?

In ending, I do agree with dissolve and liquidate but has this been an option? Bankruptcy? Who is the majority of owners, Wyndham Destinations? It has always bothered me that Wyndham management being on the Board is a cesspool for conflicts of interest. Certainly, the amount of Bad Debt that will occur is going to be overwhelming and putting folks through foreclosure would only make the Wyndham and/or other independent attorneys rich not help the resort. I have no idea who you refer to when using we, our and we've but also believe the beginning of the end is here today.

 

[magmue]

For those of us who are interested in the history. Please correct any substantial errors.

The original developer was David Walters - I found this 2009 overview/tribute to him at a charity website he supported. He died that year at age 65. "Walters began building homes on Kauai in 1974 when he was 31 and worked hard to apply sustainability techniques to his projects. He soon launched PAHIO Resorts, which developed into one of the island’s largest resort developers and operators, and also one of its major employers. Among PAHIO’s projects are Ka Eo Kai, The Shearwater, Bali Hai Villas and Kauai Beach Villas. “PAHIO believes that as builders, and as individuals, we must abide by the premise that the entire world is a single unified system,” Walters wrote. “We act locally, but we are compelled to think globally. We are very cognitive and respectful of the Hawaiian culture and customs.”

Walters sold Pahio to Wyndham in 2006. "The company will assume property management, sales and marketing for Bali Hai Villas, Ka Eo Kai, Kauai Beach Villas and Shearwater and Makai resorts, which collectively have 20,000 owners and more than 400 vacation ownership units." Wyndham may have had the management contract prior to that - I am not sure.

My understanding is that Wyndham did not take very good care of KBV between 2006 and 2017 (correct me if I have the date wrong), when the KBV board voted to take the management contract away from Wyndham and signed a 2 year contract with GPX (Grand Pacific). At that time, Wyndham owned about 20% of the interval weeks - as a result of defaults, I think - and was renting them out - there were questions raised in this forum, and elsewhere, about whether that conflicted with their original agreement with Pahio. I think about another 20% had been "converted" to Wyndham points, allowing deeded owners to use their points in the Wyndham system but retaining their rights and responsibilities.

In 2019, Wyndham executed a tricky maneuver during board elections, took control of the BOD, and got back the management contract.

There have almost certainly been many more defaults during the pandemic, and this ongoing slow motion crisis can't be helping. It would be interesting to know what percentage of the interval weeks are owned by Wyndham at this point, and what Wyndham sees as in their best interests. @jacknsara , who was on the board during the GPX years mentioned a few weeks ago that he planned to look at the articles of incorporation to see if there is a Special Assessment level that would legally trigger an owner vote about whether to proceed or not. Hoping he might have had a chance to do that. and share it here?

 

[DeniseM]

@magmue - good synopsis!

Just one comment about how long management has been aware of construction problems: There have been some lanais closed for years - some sliding glass doors are actually bolted down so they cannot be moved.

We acquired our first OF 2 bdm. in 2014. At that time, the unit we stayed in had the sliding glass door facing the lagoon bolted down with a permanent notice on the door that it was closed for safety reasons. They were still bolted shut on subsequent visits. (The 2 bedrooms have lanais on both side: 1 facing the ocean and 1 facing the lagoon.)

So obviously, this has been a known problem for at least 8-9 years.

 

[magmue]

Wow. 8-9 years! They may have assumed at that time that the concrete spalling was "normal" due to the salt air as opposed original construction problems. Irregardless, once it starts, you have to deal with it or it accelerates.

We bought a week at Lawai Beach Resort in Poipu earlier this year, and attended an onsite owner's meeting a few weeks ago. They found first sign of spalling in 2007, and started repairs, going bit by bit since then, starting with the worst and trying to stay ahead, because small repairs are much less expensive than advanced repairs.. As of a year ago, they had spent $2.6 million on spalling repairs over time, with no special assessment. According to LWR, "concrete resorts built in the 80s throughout Hawaii are affected", and given the climate, it needs ongoing attention and maintenance. Which clearly did not happen at KBV.

 

[jacknsara]

Aloha

I started post https://tugbbs.com/forums/threads/new-board-letter-special-assessment-estimate.346323/post-2869597 with Ackoff’s definition of a mess for a reason. As I contemplate various scenarios for the KBV situation to play out I cannot conceive of a realistic solution that maintains ongoing operations (which is not to say that one does not exist). To the extent that I currently think about the KBV situation it is primarily focused on contingency planning related to future reservations. I do not anticipate near term KBV insolvency. I do wonder about arriving on island in February 2024 or 2025 or beyond to discover the AOAO and/or IOA have declared bankruptcy and shut the doors (i.e. laid off staff due to inability to make payroll) without advance notice.

I was going to attach an excel file I prepared when I was a board member. It is a searchable index that can be used in conjunction with the governance documents on https://kauaibeachvillasresort.com/owners-community/documents/ Since an excel file cannot be uploaded, I am attaching two pdfs of individual worksheets within the excel file. These are most useful in figuring out the most current language for any (sub) section since nowhere on the website is a is a version that consolidates all the amendments. Also, a spot check indicates that the file name dates in column headers do not exactly align with the files on the website. I spent a few minutes digging into it but really do not have the interest in running it to ground right now. Anyone wanting the excel file is welcome to PM me their email and I will send it as an attachment.

For the IOA process for dealing with condemned units, start with actual pdf page 40 of https://kauaibeachvillasresort.com/...laration-CC-R-Kauai-Beach-Kauai-Beach-IOA.pdf Password (same as years ago) for logging into the owners section was included in the current MF bills envelope.

Regarding audits: I just reviewed a few years of past ballots for board elections. For many years there was a box to check (both paper and online) if a copy of the audit was desired in addition to voting for candidates. The last year I see that “send me a copy of the audit box” was 2017. IOA audits would not address the building condition issues which are the responsibility of the AOAO. The audits did contain information on the number of units owned by Wyndham.

Jack Goodstein

 

[magmue]

@jacknsara your first link that was to go to governance documents - something got highjacked. It flickered a few times with the a url about “flirty buddies” and then opened into porn video.

 

[jacknsara]

@jacknsara your first link that was to go to governance documents - something got highjacked. It flickered a few times with the a url about “flirty buddies” and then opened into porn video.

They work correctly to KBV site for me, hmmmm
Perhaps try typing in site url listed in MF package and see what happens.

 

[magmue]

Thanks Jack. DH clicked on a phishing link in his iPad yesterday. I just tried your link again from my iPhone using cellular - worked fine. We’re going to need to check our network for malware. Ugh.

 

[jacknsara]

Aloha

I started post https://tugbbs.com/forums/threads/new-board-letter-special-assessment-estimate.346323/post-2869597 with Ackoff’s definition of a mess for a reason. As I contemplate various scenarios for the KBV situation to play out I cannot conceive of a realistic solution that maintains ongoing operations (which is not to say that one does not exist). To the extent that I currently think about the KBV situation it is primarily focused on contingency planning related to future reservations. I do not anticipate near term KBV insolvency. I do wonder about arriving on island in February 2024 or 2025 or beyond to discover the AOAO and/or IOA have declared bankruptcy and shut the doors (i.e. laid off staff due to inability to make payroll) without advance notice.

I was going to attach an excel file I prepared when I was a board member. It is a searchable index that can be used in conjunction with the governance documents on https://kauaibeachvillasresort.com/owners-community/documents/ Since an excel file cannot be uploaded, I am attaching two pdfs of individual worksheets within the excel file. These are most useful in figuring out the most current language for any (sub) section since nowhere on the website is a is a version that consolidates all the amendments. Also, a spot check indicates that the file name dates in column headers do not exactly align with the files on the website. I spent a few minutes digging into it but really do not have the interest in running it to ground right now. Anyone wanting the excel file is welcome to PM me their email and I will send it as an attachment.

For the IOA process for dealing with condemned units, start with actual pdf page 40 of https://kauaibeachvillasresort.com/...laration-CC-R-Kauai-Beach-Kauai-Beach-IOA.pdf Password (same as years ago) for logging into the owners section was included in the current MF bills envelope.

Regarding audits: I just reviewed a few years of past ballots for board elections. For many years there was a box to check (both paper and online) if a copy of the audit was desired in addition to voting for candidates. The last year I see that “send me a copy of the audit box” was 2017. IOA audits would not address the building condition issues which are the responsibility of the AOAO. The audits did contain information on the number of units owned by Wyndham.

Jack Goodstein

Aloha,
I found a Word document from my time on the BOD in which I endeavored to incorporate all CCR amendments. I've selected only Article VI to share at this time in order to keep the file short. I've added some font changes to draw attention to relevant special assessment limitations that the IOA BOD can impose without a vote of the IOA owners (like us).
Jack

 

[magmue]

Thank you, Jack. Keeping your bolding,
"special assessments against Interval Owners may not be imposed without the vote or written assent of a majority of the voting power of the Association residing in Owners other than the Developer.
The Board of Directors may impose special assessments without the vote or written assent of the Association as follows:
(A) Special assessments against all Interval Owners in the Project, other than a special assessment to restore or rebuild because of damage or destruction to a dwelling unit, which in the aggregate in any fiscal year do not exceed 5 percent of the budgeted gross expenses of the Association for that fiscal year.
(B) A special assessment for the repair or rebuilding of a dwelling unit(s) which does not exceed 10 percent of the budgeted gross expenses of the Association for the fiscal year in which the assessment is levied."

 

[magmue]

Just doing the math here: from the board's November newsletter: "....Hawaii-based lenders and one is willing to loan the association $10 million. Assuming the required ownership approval is obtained for such a loan, this leaves $46 million to be financed with a special assessment of all owners".

So estimated total of 56 million dollars.

The 2023 "total maintenance fee budget" budget that came with the MF bill (for 5,355 intervals) = $8,795,205.

So if I am understanding correctly, the proposed special assessment = approximately 900% of the budgeted gross expenses for 2023.

And that should mean that they will need to get a majority vote of owners. It's hard to imagine that many owners of weeks will vote Yes. On the other hand, IMO full time owners are more likely to vote yes, and one of their votes = 52 interval votes. And what percentage of KBV is owned by Wyndham at this point?

 

[jacknsara]

<snip> So if I am understanding correctly, the proposed special assessment = approximately 900% of the budgeted gross expenses for 2023. <end snip>

Aloha,
I just skimmed through the KBV IOA Newsletter Volume 3 2022. The remediation budget is for the AOAO. Pahio timeshares (IOA) is 70% of the AOAO. So the calculation is off a bit but the intent of the message is correct. And keep in mind that the building remediation does not cover the unit interior restoration.
Either Wyndham owns more or less than 50% of the IOA. They have previously documented that they claim to NOT have the developer role identified in the CCR. Consider the consequences if they own over 50% and vote to approve the special assessment. What will they and the KBV IOA BOD do if/when many/most all other owners refuse to pay? Wyndham owns a substantial portion even if less than 50%. What will they do if/when a vote of the owners fails to approve?
I believe a group of the whole owners (the 30% of the AOAO who own almost 50% of the ocean front buildings) are suing the AOAO BOD and Wyndham but I do not know the details. I expect that lawsuit to take years unless Wyndham decides to settle substantially on the whole owners' terms. Otherwise, why would the whole owners vote to approve Wyndham's plan? Further, it is not clear to me that all of those whole owners have the funds to pay even if they wanted to pay. Keep in mind that up until the G & H buildings were locked out/closed, these owners were realizing substantial revenue and now have zero but are still on the hook for AOAO fees.
This is just one aspect mentioned (but not addressed in detail) in my post https://tugbbs.com/forums/threads/new-board-letter-special-assessment-estimate.346323/post-2869597
I imagine that Wyndham has lawyers (other than the IOA lawyer) deeply involved in assessing Wyndham's options with Wyndham's well being their primary if not only consideration.
Will the KBV apartments become the Coco Palms south? What will the KBR condotel owners association do then and on whose pockets are they most likely to focus?
We've barely scratched the surface of the issues in our discussion here and it already looks like a mess to me.
Jack

 

[magmue]

I believe a group of the whole owners (the 30% of the AOAO who own almost 50% of the ocean front buildings) are suing the AOAO BOD and Wyndham.....I expect that lawsuit to take years unless Wyndham decides to settle substantially on the whole owners' terms. Otherwise, why would the whole owners vote to approve Wyndham's plan?

If/when Wyndham settles with the whole owners, one of the bargaining chips could be the whole owners' Yes votes. Wyndham could offer them enough of a settlement to cover their assessment in return for their approval. If the whole owners add their votes to Wyndham's owned week votes, I believe they will have their majority vote, and weeks owners will be opted in to the special assessment even if 100% of us vote No.

 

[bnoble]

Further, it is not clear to me that all of those whole owners have the funds to pay even if they wanted to pay. Keep in mind that up until the G & H buildings were locked out/closed, these owners were realizing substantial revenue and now have zero but are still on the hook for AOAO fees.

Many of them likely also have mortgage payments to make.

Wyndham could offer them enough of a settlement to cover their assessment in return for their approval.

Those are low-to-mid six figures. Each.

I'm not sure Wyndham would vote its shares for renovation, to be honest. It's an expensive proposition for what will end up being modest gains. Even if they end up getting a good chunk of inventory back to re-sell, that inventory will cost real money--certainly more than it costs to obtain inventory either via Certified Exit or on the open resale market. I don't see the value in recycling that into the CWA sales pool vs. just cutting losses and liquidating. The more I think about it, the better that option seems to be for all concerned.

 

[tango]

Sounds like the start of another Coco Palms.

 

[schreff]

Thanks for the many informative posts. It appears that this is the only source of true information about KBV debacle. Again, I am an KBV owner and also a Wyndham Founder (over 2 million Wyndham points) who is concerned about the treatment KBV owners are receiving and the veil of secrecy by Wyndham management and the present Board. KBV Board Members have fiduciary responsibilities and must act beyond the scope of a prudent person, so it is inconceivable that after over a dozen requests for audited financial statements and other legal and common sense financial related questions I have received nothing. These requests were made not only to the Board but to Wyndham KBV Management and third parties as well. I have always felt that there was never a sufficient legal wall erected when Wyndham plays multiple roles as owners, sales representatives and managers. Specifically with KBV, this veil of secrecy benefits Wyndham in that any owner who cannot afford the proposed special assessment certainly will not wait thus not paying the 2023 maintenance fees. This would have to materially increase the bad debt projections on the useless budget we were given and increase Wyndham's ownership stake in KBV. Wyndham will certainly buy up these defaulted mortgages for pennies on the dollar. Time is on Wyndham's side not we, the owners. This opens the door to blatant conflicts of interest including but not limited to more control of the BOD, more voting power for only what is in the best interest of Wyndham and more conflicted maneuvers like foreclosures games. I was considering their buyback option but they suddenly ceased to offer it. Why now, when they can get it cheaper later? Wyndham has always refused to communicate in writing but instead prefers to either have you call them or have them call you.

 

[magmue]

Wyndham will certainly buy up these defaulted mortgages for pennies on the dollar..... I was considering their buyback option but they suddenly ceased to offer it.

These two statements are contradictory. If it was about acquiring more deeded weeks for the least amount of $ spent, seems like they would continue offering the exit program, which requires the owner to stay current on MF while the process is wending its way through their system. We went ahead and paid our 2023 MF, but I agree that KBV is likely to have an increase in delinquencies.

What is the long game for Wyndham regarding KBV? I would love to know. But it has occurred to me that perhaps Wyndham stopped accepting KBV Ovations deedbacks after acquiring enough weeks to give them the 50% ownership required to ram through the Special Assessment, which requires a majority owner vote. Then the delinquencies will go through the roof. Will Wyndham pursue delinquent owners for unpaid assessments?

 

[CO skier]

What is the long game for Wyndham regarding KBV? I would love to know. But it has occurred to me that perhaps Wyndham stopped accepting KBV Ovations deedbacks after acquiring enough weeks to give them the 50% ownership required to ram through the Special Assessment, which requires a majority owner vote.

You must have missed reading this erudite post:

I'm not sure Wyndham would vote its shares for renovation, to be honest. It's an expensive proposition for what will end up being modest gains. Even if they end up getting a good chunk of inventory back to re-sell, that inventory will cost real money--certainly more than it costs to obtain inventory either via Certified Exit or on the open resale market. I don't see the value in recycling that into the CWA sales pool vs. just cutting losses and liquidating. The more I think about it, the better that option seems to be for all concerned.

Just curious how you or any other KBV owner thinks the resort can continue operating without the repairs being made. How can the repairs be made without a Special Assessment?

 

[DeniseM]

Please note that CO Skier is not an owner at this resort, and is unaware of the long history of poor Wyndham management and deception that the resort has suffered through. Apparently, he is inserting himself into this discussion because he's a Wyndham supporter.

Instead of arguing with him, I request that we consider his posts to be off-topic, and focus on the issues that concern us as owners.

 

[geist1223]

I am not a Wyndham or KBV Owner. I was wondering a couple things: 1. What % Votes is needed to dissolve KBV? 2. Is the manager/Developer allowed to participate in this Vote? 3. Is the Land underneath the Resort owned by the Resort or is it a long term lease?

Please note that CO Skier is not an owner at this resort, and is unaware of the long history of poor Wyndham management and deception that the resort has suffered through. Apparently, he is inserting himself into this discussion because he's a Wyndham supporter.

Instead of arguing with him, I request that we consider his posts to be off-topic, and focus on the issues that concern us

 

[CO skier]

Please note that CO Skier is not an owner at this resort, and is unaware of the long history of poor Wyndham management and deception that the resort has suffered through. Apparently, he is inserting himself into this discussion because he's a Wyndham supporter.

Instead of arguing with him, I request that we consider his posts to be off-topic, and focus on the issues that concern us as owners.

I just do not buy into the Wyndham conspiracy theories.

"How can the repairs be made without a Special Assessment?" is an entirely legitimate and relevant question. If I were an owner at KBV and a Special Assessment came up for a vote, I would want to know the answer to that question before voting Yes or No.

 

[bnoble]

Just curious how you or any other KBV owner thinks the resort can continue operating without the repairs being made. How can the repairs be made without a Special Assessment?

If that's a question for me, I don't. And, that's what I was trying to say in my earlier comment, that it might not be worth it to anyone, be they individual owners or Wyndham, to undertake repairs on the resort. The more prudent course of action might just be to liquidate by selling the plot as-is to another developer to raze the existing buildings and start over. If it comes to a vote of owners, that's how we'll be voting based on what I know today. These weeks were being given away in "adoptions" before the flood---even for the oceanfront buildings. Rather than spend many thousands of dollars to keep the ones I have, I'd rather go looking for something else to adopt and let these fall by the wayside.

For what it's worth, I also don't think this is some great conspiracy so much as (a) the original contractors took some bad shortcuts and (b) no one other than those contractors knew the extent of it until (c) the flood remediation brought it all to light. Wyndham has definitely played hardball with the management contract, but they aren't all by themselves on that score, and it seems to me to be orthogonal to the current issues we're facing.

 

[The Colorado Kid]

If that's a question for me, I don't. And, that's what I was trying to say in my earlier comment, that it might not be worth it to anyone, be they individual owners or Wyndham, to undertake repairs on the resort. The more prudent course of action might just be to liquidate by selling the plot as-is to another developer to raze the existing buildings and start over. If it comes to a vote of owners, that's how we'll be voting based on what I know today. These weeks were being given away in "adoptions" before the flood---even for the oceanfront buildings. Rather than spend many thousands of dollars to keep the ones I have, I'd rather go looking for something else to adopt and let these fall by the wayside.

For what it's worth, I also don't think this is some great conspiracy so much as (a) the original contractors took some bad shortcuts and (b) no one other than those contractors knew the extent of it until (c) the flood remediation brought it all to light. Wyndham has definitely played hardball with the management contract, but they aren't all by themselves on that score, and it seems to me to be orthogonal to the current issues we're facing.

@bnoble Thanks for expanding my vocab! "orthogonal to the current issues we're facing."