If it ain't broke don't fix it! I'm voting Diamond!
Dear Polynesian Isles I Owner:
PLEASE READ THIS IMPORTANT NOTICE. FAILURE TO DO SO COULD COST YOU MORE THAN $600 THIS YEAR AND PUT YOU AT RISK OF A SPECIAL ASSESSMENT.
Your Board of Directors has called a Special Meeting of the Owners and is asking you to terminate your management agreement with Diamond Resorts Management, Inc. The mailing your Board sent you includes a great deal of inaccurate information and omits other important facts we think you need to make an informed decision.
This letter from Diamond is intended to clarify the situation at Polynesian Isles so you can make the right choice and oppose the cancellation of our management contract. We ask that you vote against terminating the management agreement with Diamond to put an end to this process that could cost you hundreds of dollars a year in increased fees.
Your Board states that you should terminate your management contract with Diamond due to “Rising Costs of Diamond Resorts.” This could not be further from the truth. The facts are that Diamond has not increased fees in over seven years and has agreed to keep its management fees at the same amount for at least the next three years. Furthermore, in 2007 Diamond did not charge you any management fees for a year and a half, saving you more than $150,000 or $61 per week. Your Board has already made a decision and voted to retain the services of SPM Resorts, Inc. to replace Diamond as your manager. They have done this without any input from you, and we think that is wrong. Based on the information available to us, we believe the contract with SPM could increase your management fees by MORE THAN $100,000 A YEAR or MORE THAN $40 PER WEEK IMMEDIATELY. We understand that this new contract allows SPM to charge you between 6.5% and 10% of all of the money that is deposited into your bank accounts. We think it will be almost impossible to properly budget for a variable charge like this. This could put you at risk of ending up in a deficit situation, which could result in a special assessment. Diamond understands how tough these economic times are, and we are committed to keeping our management fees flat over the next 3 ½ years.
Your Board of Directors claims that Diamond is somehow responsible for “rising delinquencies, no collection efforts.” Again, this is absolutely false. Obviously, Diamond has no control over whether owners fall behind in their payments in these difficult times, but Diamond has a program in place to pay 100% of the bad debt your Association incurs as a result. Through the Diamond program, your Association recovers 100% of these delinquent amounts each year. This is a HUGE benefit to your Association and to you as an owner. We are told that SPM has no similar program. The estimated bad debt for your Association in 2009 alone is projected to be in excess of $400,000. This is ALMOST HALF A MILLION DOLLARS or $163 DOLLARS PER WEEK PER YEAR that each paying owner will be required to pay if the Diamond management agreement is terminated. As a result, your Association will likely incur additional delinquencies and may be forced to adopt a special assessment to cover any shortfalls.
Diamond also pays all of the collection costs for these delinquent accounts, including all of the foreclosure costs. Based on the information we have, the management agreement your Board proposes to enter with SPM does not require SPM to perform any of these functions for you. Instead, as we understand it, the SPM contract actually requires the Association to hire a law firm and pay attorneys’ fees for these services. Your Board of Directors has already signed a contract with a law firm to handle these collections. Please keep in mind that Diamond does not charge you anything for this service, but for some reason your Board is willing to spend your money on attorneys’ fees to perform the same functions you are currently receiving for free. This law firm will be charging you $175 an hour to perform these services, plus $150 for each demand letter, plus $350 to file a lien, plus an additional $500 for other legal services. This means that you may be paying more than $1,000 on delinquent accounts before they even go to foreclosure. Your Board has also agreed to pay this law firm an additional fee of approximately $2,000 per foreclosure to process foreclosures. Again, Diamond is paying all of these costs for you; you pay nothing. Right now your Association has more than 648 delinquent weeks. If you allow your Board to move forward with the termination of the Diamond management agreement and to allow this law firm to handle your collections, you and your fellow owners could be looking at paying more than ONE MILLION DOLLARS or MORE THAN $400 PER WEEK for the exact same services that you are currently receiving from Diamond for free.
$40 per week + $163 per week + $400 per week = $603 per week extra to have SPM as your management company. WHAT IS YOUR BOARD THINKING?
Your Board made several other false statements in its mailing, including: 1) “A majority of the owners have voiced their discontent with Diamond Resorts.” In fact, the great majority of the owners are 100% satisfied with the services provided by Diamond and have no desire to discontinue our relationship. 2) Diamond is somehow responsible for the decrease in RCI scores. In fact, this decrease was actually primarily the fault of the previous resort manager and Board members, who chose not to take Diamond’s advice on the RCI requirements. Diamond brought in a new resort manager. As a result your current RCI scores are well above Gold Crown benchmark. Your Board seems not to care about continuing with refurbishments to keep your Gold Crown rating, but rest assured that Diamond does. 3) Diamond does not care about the owners. This is ridiculous. Diamond cares about each and every one of you and wants to ensure that your hard-earned money is protected along with the quality of your future vacations.
You need to be aware that your Board has also been spending thousands of dollars of your money on unnecessary legal fees. This is an unbudgeted expense that may well result in a special assessment. Your Board is spending this unbudgeted money without your approval, and we think that is wrong.
SPM is now managing another Association within Polynesian Isles. Despite our best efforts to assist SPM, the transition has been neither smooth nor professional, and Poly IV guests are suffering due to SPM’s lack of preparation for this task. SPM actually refused to check guests in this past week, causing severe hardship on these families and damaging their vacation experience. Is SPM the management company you want to care for your vacation? We don’t think so.
You should receive written materials within a few days and you will need to respond immediately. In order to ensure that your vote counts, we need to receive your proxy on or before April 4, 2009. In the meantime, if you have any questions, or would like to speak with someone at Diamond about this situation or this solicitation, or would like to receive your proxy by email or by fax, please feel free to contact Marilyn Windsor at 702.823.7340 or at
Marilyn.Windsor@diamondresorts.com, or Leanne Morrill at 702.823.7309 or at
Leanne.Morrill@diamondresorts.com.