ecwinch
TUG Member
- Joined
- Jun 6, 2005
- Messages
- 3,737
- Reaction score
- 1,125
- Location
- San Antonio
- Resorts Owned
- Marriott Harbour Point (HP), Kauai Beach Villas, Riverside Suites, WorldMark Pts (WM), Wyndham Pts
I'm a professional engineer, and I have done building reserve fund studies. I know how they work.
It is my considered (but not professional) opinion that worldmark does not have sufficient reserves in place to cover the costs they will face in the future.
I cite a couple pieces of evidence for that.
The first is that the auditors report says their goal is 40% funding of reserves, and that they intend to increase reserve payments to get there. That implies the current level of the reserve fund is insufficient, although not enough information is provided in the auditors report to judge that with certainty.
The second is the fact they have been out spending reserves the last two years. So the reserve fund balance is actually declining. That is concerning to me (as a WM owner). The existing resorts are getting older by definition. Expensive structural repairs (4 month new elevator in San Francisco in 2019) are going to get more frequent. Plus, they add new resorts every year, and the reserves have to cover them as well.
So every year the appropriate size of the reserve fund is getting larger, while the actual fund gets smaller. That is not sustainable. I'm young enough that a special assessment will be within my lifetime.
I absolutely agree with you. We have an aging physical plant, and many of the resorts with classic credit values are not generating enough dues revenue and are essentially being subsidized by the credit valuations on new resorts. So fewer and fewer resorts actually contributing to the reserve fund, and more drawing it down.
And unfortunately - with the dues increases capped at 5% - the BoD has few viable options for increasing revenues.
When we do get hit with our first special assessment - it will either be a sizable amount OR become a regular occurrence. WM has always been a great value (relative to other systems), and as the saying goes "everything returns to the mean".