Question about VCI Residual Value

[WLEE100919]

Do you know the residual value to be distributed to the owners of VCI at the end of 25 years?

Is it equal or greater than the original purchase price?

Will the process be the same for Royal Mayan in a few year?

thank you

 

[geoffb]

Refer to the recent discussion titled "VCI Residuals" for the most current information on this topic.

 

[WLEE100919]

VCI residual

are you referring to "VCI residual survey"? It does not have discussion about actual dollar amount that i can see.

 

[tsguru99]

It will almost certainly not be more than the residual amount. Without intervention by the Royals, owner might see half the residual amount. The Royals are still developing a strategy because they want owners to get the full residual amount. One option includes having the Royals redevelop the Resort and pay owners the full residual amount when the redeveloped unit sells to the new owner.

 

[KarenK]

The residual is to be paid out at the end of 30 years, not 25 as the OP mentioned.
Every owner has an individual contract which states the proposed residual value.

 

[Ellis2ca]

About VCI Residual Values

I am surprised that you think you will not get your full residual. If the
resort is sold for $100,000,000 or more, we will get our full residuals...
that is...

200 Villas x 50 weeks x $10,000 residual, if it is sold for $100,000,000
or more we get our full residuals. And it is worth that much EASILY.

Anyways... here is how it works... They are supposed to sell VCI to a
third party, such as Marriott or Hilton, etc. and to the highest bidder.

That money goes to the Fiduciary, which is Banco del Atlantico or
whoever is now in the place of Banco del Atlantico.

The fiduciary will FIRST pay us our guaranteed residual...

THEN the fiduciary will pay the developers an amount equal to our
guaranteed residual...

And finally, if there is any money left in the kitty, it is split fifty-fifty,
between us and the developers.

So... the question is : Is VCI worth at least $100,000,000 ?

The answer is: Definitely. It is worth more, but $100,000,000 is
enough to show that we all get our guaranteed residuals.

Let's look at the numbers:

As a Marriott or Hilton you get 200 Villas, each worth at least $1,500,000.
to you.

You also get a lot of empty and valuable land at VCI that you can still
develop something else on, like a restaurant or a theater or shopping mall,
etc...

So the answer is YES, it is worth at least $100,000,000 to Marriott or
Hilton... I'll bet they would pay more for it, if they could buy it.

Look at the numbers: Suppose 50% of the members renew for $20,000
and 50% take their residuals... .

Those that want to cash in their residual will leave a Villa that can be
sold for $40,000 on average.

200 Villas x $20,000 x 50 weeks x 50%=$100,000,000
and
200 Villas x $40,000 x 50 weeks x 50%=$200,000,000
minus
200 Villas x $10,000 x 50 weeks x 50%=$ 50,000,000

Again, VCI is worth plenty more than $100,000,000 so we will get
our full residuals.

How much would you pay for 200 Villas in Can Cun with tennis courts
and all the installations of VCI if you were Marriott or Hilton or whoever?
What do you think 10,000 meters (or how many meters is the property
built on?) in that section of Can Cun is worth? An architect friend of
mine told me that area is worth more per sq. meter than here where the
Mayan and Royal Sands etc are, because it is closer to Can Cun city and
is more commercial.

My C Villa in week 52, with a guaranteed residual of $14,500 sells for
$50,000 at Royal Sands and also at Royal Haciendas. So I think it should
sell for $50,000 here, too. This is not the VCI that I bought 30 years
ago... it now has Royal Sands, Royal Mayan, Royal Islander, Royal
Carribbean and Royal Haciendas as an extra privilege and extension.
This is A LOT more than I bought when I bought in 1977.

So again, it is worth more than $100,000,000 so we get our full residuals.

and we might get more...

In my case, I think I might get $14,500 or more for my 52 C, when it sells for
$50,000 or I can renew for $25,000... which is pretty good compared to
other week 52's in Can Cun that are R.T.U. and don't have the benefits
of being affiliated to the other Royals)

If you are Marriott, you are buying 1 dollar for 80 cents, since you
are guaranteed to sell each 50 week $1,000,000 Villa for $1,250,000 ...
aren't you? 25 x $20,000 plus 25 x $40,000 minus 25 x $10,000

If you are Marriott and you build a new resort, you have to find 10,000
new customers... Here you already have 10,000 old customers, about 5000
of which will stay with you, for $20,000 per week, on the average. plus,
you have 5000 maintainance fees, already...

So, somebody will surely buy it for at least $100,000,000 so we will
get our full residuals.

At $40,000 per week average, I'm sure it will sell out in 3 years at the
most because of the association with the other 5 Royal Resorts,
including one in Playa del Carmen. Which other timeshare on Planet
Earth gives so much, and has a proven track record as the best
timeshares on Planet Earth?

VCI may seem like the ugly duckling to you, but it is prime prime
property in the best area of Can Cun... It is like the Waldorf Astoria of
New York... it is old but it is sitting on the best prime property in the
city... It is much more valuable and expensive than the forests of
Playa del Carmen. It has 90% occupancy 365 days of the year. Like it
or not, CanCun is much more valuable and in demand than Playa
del Carmen, and VCI in CanCun has and will have far more demand than
Playa del Carmen, even if the Royal Haciendas is or will be ritzier and more
beautiful..

I [believe] that we will get our full residual value, or else
the developers won't get anything themselves... and they haven't been
maintaining these resorts like new for no reason.

In fact, I am so sure of it that I bought a week 52 two years ago, for
$6000 with residual rights, because it is like a sure winning lottery ticket
to me... I think it will be worth MORE than the residual value. I am betting
that my week 52 B unit Lagoon View (which is actually a very beautiful view)
will sell for, say $40,000, and that I will be given the option to receive
$6,000 or more, or renew a $40,000 villa for $20,000 (because I own
half of it) for 50 years this time, at the end of which we'll probably get
100% residuals.

And if I buy for $20,000 and then sell it to somebody else for $35,000
(which I can do, because they are selling for $40,000) I made a very nice
investment. Or I can rent the B Villa for about $2500 per week, which
is what I bet it will cost to rent after 2007.

I am guessing of course, but... that is how I placed my money.

So... what about the resales at Royal Mayan, Royal Caribbean, and
Royal Sands? My friends, this is the best part of it... If V.C.I. goes UP,
as it has to for us to get our full residuals, everything else goes UP with
it too. They'll all go up, as they should have a long time ago.

By the way... I wrote an article about this many years ago, in July 1997,
which is in the TUG Experts Advice section, and it says about the same as
I wrote here now...

(Residual Values at the Royal Resorts, Can Cun)
http://www.tug2.net/advice/vacintl.htm

Of course, I am only guessing, and my guess is not any better
than anybody else's, so it is just a guess... I believe we will get AT
LEAST our residual values...

- Ellis

 

[KarenK]

yes, Ellis, but...

I am sure you got the survey as well, with all the doom and gloom about how the property was not assessed as highly as they had thought.
I certainly hope and pray that you are right. Especially now after the two hurricanes this year, where VCI was virtually unscathed.
I love and adore VCI, and in fact sold my Sands week and bought a Caribbean week (they didn't have a Mayan week at my price), but there are a lot of people out there that think of VCI as the poor relation.
So many want the ocean with the crashing waves, and the ability to drown in the dangerous water. But if you have little kids, they can be in the water all day at VCI, can't they?
I love to eat downtown, and hardly ever have been in the Hotel Zone restaurants. It is a lot easier to get downtown from VCI.
I put in an II request, using the Royals Desk, and the person who took my request repeated my request for any Royal and did not include VCI. I asked her why she did not put VCI in the request and she told me it was not a Royal. And she is supposed to be knowledgeable about the Royals?

 

[geoffb]

are you referring to "VCI residual survey"? It does not have discussion about actual dollar amount that i can see.

No, the topic titled "VCI Residuals" -- that has an extensive discussion of this topic.

http://www.tugbbs.com/forums/showthread.php?t=9487

 

[geoffb]

So... the question is : Is VCI worth at least $100,000,000 ? The answer is: Definitely. It is worth more, but $100,000,000 is enough to show that we all get our guaranteed residuals.

So your assertion is that the developer's statement that the property was valued at only $40,500,000 in March 2005 is not true?

 

[Ellis2ca]

About VCI Residual Values

Listen guys... $40,500,000 for V.C.I. is ridiculous. When you sell a going business, you have to add a concept called "Goodwill."

There are ALREADY 10,000 persons who have paid money to own at V.C.I. as a timeshare, and who are paying maintainance fees of about $600 each... that is $6,000,000 PER YEAR of maintainance fees, plus profits in the restaurants and business center and supermarket, etc. If they want to sell VCI for $41,5 million, let's buy it for 42 million and offer it to the 10,000 members... We'll sell half of the timeshare in three months, with which we'll pay the 42 million cash, and we'll still have money left over, and another half of the inventory left to sell.

Do you see that it can't be worth only 41.5 million if you include "Goodwill"?

I don't know who is the jackass at ISCO who made up that figure to write a gloomy report, but ISCO is not the Royal Resorts. Don't pay any attention to the gloom and doom sayers... Let them take surveys let them do whatever they want to, when it comes time to sell the property, they are not going to give it away, and they are not going to tear it down, I'll bet it will continue to be a Royal Resort, I'll bet it will be resold as timeshares again (who cares if many villas only have 1 bathroom? We have lived with it for 29 years, and we can live with it for another 30 years...) and I'll bet we'll get our residual values. It is very possible that the land will be used to build more buildings, but it doesn't make sense to knock down buildings that are perfectly good as they are.

And I don't care how many people dislike V.C.I. or the beach at V.C.I., or think it is not a Royal Resort.. I only care about how many people would buy at V.C.I....

It has received more prizes than any of the other Royal Resorts, and more good comments for customer satisfaction at Interval International, and for more years, than any other timeshare in the world. It is an institution by itself, and there are many thousands of persons who love it, as I do too.

- Ellis

P.S. No, I did not get the survey. ISCO sent it? I will call them and ask them to send me one.

I made a mistake in my post above...

As a Marriott or Hilton you get 200 Villas, each worth at least $1,500,000.
to you.

should say:

As a Marriott or Hilton you get 200 Villas, each worth at least $1,250,000.
to you.

 

[KarenK]

My impression all along has been that they intend to tear the complex down, which seems foolish to me. Yet, my salesman told me more than once that the buyer was already in place.

If not another timeshare complex, there are lots of people, I think, who would buy the units outright if the price were right. My friends who own at Villas Marlin often get long-term rentals from non-Cancun residents who are there to work.

 

[Lloydwa1]

Ellis/Optimist

I hope you are right but reading your post reminds me of some of the timeshare presentations I have attended. I read your link in the advice section and feel that if things don't go well, you would be a good candidate to form an owners group and purchase the VCI. I think, like you, that the VCI is worth more than the $42,000,000 and have watched all the improvements that have been ongoing. There must have been some kind of plan for such expenditures to be made so close to the sale time.
Good Luck, Lloyd

 

[Jim in Cancun]

Residuals

Hotels in Cancun go for an average of $100,000 usd per unit. If there are 200 units then the hotel would sell for around $20 million dollars. Since this is an average it may vary slightly--but not much.

 

[KarenK]

Jim, wouldn't the value of a timeshare unit be more than the value of a hotel room?

 

[Jim in Cancun]

Cancun

I said "average" and that there are differences, however the difference is minimal. While a timeshare hotel may have more space and amenities in the "room," they spend more on the average in public areas, pools, shops, etc. Take a look at some of the new Riu hotels--luxury is the byword in new hotels as opposed to "nice and functional" for timeshare hotels.
And a timeshare hotel is not as good a "business" from the standpoint of "rooms" since you could get 2 or 3 rooms out of one timeshare unit and therefore make more money.

They may be able to sell the 30-year-old hotel for more than $100,000 usd per unit but when I saw prices upwards of $100 million for the hotel, I thought it was time to get out feet back on the ground. It's like our own houses--what we put into them both in material and sentimental terms--is hard to get out of them when we sell. We always think the ole homestead is worth more than the market thinks it is worth.

 

[Ellis2ca]

RE: VCI Residual Value

Hotels in Cancun go for an average of $100,000 usd per unit. If there are 200 units then the hotel would sell for around $20 million dollars. Since this is an average it may vary slightly--but not much.

Jim, I take it that you are familiar with Cancun property values. what are the odds in your opinion that we will receive 100% residuals, given what you have read on this thread and other threads about VCI residual values?

Let me define what I mean by "we will receive 100% residuals" In my words:

1. If you want your residuals, you will receive a total of 100% or more soon after your Villa is resold to another member. Even $1 less than 100%, including sales expenses or any other expense, means I lose. If it is sold cash, you will receive cash. If it is sold on a financed plan, you will receive your money as it is received.

2. If you want to renew your membership, you will have the full residual value applied to the price of the specific Villa and period that you choose. The price of the Villa will not be inflated, it must be the same or less than list price to the public. The new contract will have a residual value of 1/10251 of the value of all the Villas at VCI.

Ellis

 

[Jim in Cancun]

Ellis et al:

1.- I have lived in Cancun for over 18 years and have worked in timeshare hotel administration for over 12 of those years. I consider my guesstimate semantically to be down-to-earth as opposed to "gloomy" and do believe that the Royals will--for a variety of reasons and perhaps in a variety of ways fulfill the expectations of the VCI owners.

2.- They may offer the residual towards the purchase of a new membership in the same VCI or other newer products--perhaps even offering the "new" ownership in perpetuity as an incentive to "reinvest" your residuals, therebye avoiding actual cash outlays.

3.- Besides the 10,000 + members of Vacation Club International (NOT owners) there are probably more than 10 times that other Royal members and many many thousand of others all over the world who are just watching and waiting to see what happens in 2007. If they fulfill the expectations (not an easy thing to do)of the people who originally bought a 30-year membership at VCI with the expectation of residuals at the end of the term, then this will help even more not only their reputation in the timeshare world but also their sales of the established properties, the new Haciendas in Playa and perhaps the resale of the VCI.

4.- Only time will tell but if their track record over the last 30 years is any indication, they will do what is best for both the client and the business--and in this case IMHO that would be--one way or the other to pay the residuals to those of us who have memberships there.

 

[JEFF H]

Listen guys... $40,500,000 for V.C.I. is ridiculous. When you sell a going business, you have to add a concept called "Goodwill."
QUOTE]


You really need to get a copy of the letter that the Royal Resorts mailed to VCI members.
ISCO is nothing more than a contract employee of the Royal Resorts to handle adminstrative membership related Tasks.

40.5 million is the figure Royal Resorts has determined the resort is worth based on Cancun market conditions and what other properties have sold for in Cancun recently.
Taxes,marketing costs and other fees will first be deducted from sales proceeds befor residual payouts are figured.
The Royals claim there is no way a straight sale will allow the residual values to be payed.
The Royals have floated the Idea in the letter that the only way to get VCI members there Residual value is if the Royals re-sell the resort as Timeshare.
You will get your full residual value if you reinvest it in a VCI unit or you can wait untill your week has been resold and then you will receive a check for your residual value.
The survey was to poll VCI owners and see how many would be interested in using there residual value to buy back into VCI and how many wanted to cash out.
They feel they need the bulk of the owners to re-invest for this plan to work.
If this is the plan the Royals follow then yes you would get your full residual value if and when the individual weeks of timehare are actually sold.

 

[tonyg]

Too high Expectations

There has always been irrational exuberance by Royals owners about the payment of residuals. I somewtimes wonder if it was the salesman or the owners that put the word "guaranteed" with the residual discussion. I've always felt that the Royals would try to pay back the residual, but would find it difficult to do so. I hoped that some of the developer units and the few units with no residuals would help towards fulfilling the full residual, but couldn't convince myself it would ever be 100% and never considered it being more. So far, it looks like the Royals are trying to come up with a plan that will satisfy owners. As for "Goodwill", I think that would be minimal with a timeshare and relate more to a retail/wholesale type company. Goodwill is after all the amount paid in excess of actual value for an intangible advantage. Should someone buy and tear down VCI and rebuild, there would be no such advantage and if someone should buy it and run it as a hotel, goodwill would be somewhat limited. The basic problem here is that timeshares sell by the developers for 2-5 times their real value and even 30 years appreciation can't get real value up to original pricing sometimes. I expect a similar problem to occur with the Royal Mayan, but I believe the Royals will try to resell the resort as timeshare to keep those three Royals together and full residuals will be paid to those who do not repurchase.

 

[KyRoamer]

Ellis is an optimistic owner. As a Royal Mayan owner, I hope he is right. But is VCI where the action is?

I stayed there once and enjoyed it. Lovely pools, quiet, etc. Restaurant was so so although outdoor Palapa was very nice.

But neighborhood left much to be desired. Not a wide choice of restaurants. The Cove is definately not of the quality of Captain's Cove. The major shopping center seem far away to us. The beach was so so compared to the other Royals. Where closer to town than the others, town is a bus or taxi ride. We walked once on a very hot day and will never do that again!

I would not consider paying $40,000 for a unit there. my guess is that if they can avarage $20,000 it would be doing well. Now that is $1,000,000 but after you deduct renovation costs and selling expenses and a profit for the new owner, my guess is that $250,000 x 200 or $50,000,000 is as much as it will go for.

The Mayan is a better deal. It has the advantage of having the Caribbean and Islander to augment its facilities. You can walk to the Sands although it is a healthy walk. Captain's Cove is across the street with both restaurant and marina. It has a great beach. All the units sleep 6 and have 2 baths. I believe it will sell for much more than VCI when its time comes.

We can all hope that the Royals will work a deal to protect the owners. I'd love to see them redo the units and offer present owners an option of full residuals or full residuals plus a bit as a trade on a redone unit. Whether that will work for VCI is a question in my mind, but I'd bet on it as a winner at the Royal Mayan.

Anyhow, here's hoping that I am wrong and Ellis is right!

 

[caribbeansun]

I fail to see where in your figures goodwill exists. Goodwill would be the difference between the discounted future net after-tax cash flow from sales and profit from the concessions less the cost to refurbish and the market value of the real estate.

The mf's are a net of zero since they typically zero budget mf's and any positive cash flow goes into reserves to be spent later on - your example seems to suggest that mf's are a positive cash flow for the new buyer - I would disagree.

If any goodwill exists it's due to the fact that reselling the units to existing members might cost less from a marketing persepective which might make it more lucrative for a buyer. I don't think $40k is realistic for a retail price of the resort - I suspect it would be closer to $20k with a huge investment to refurbish those units.

Do you see that it can't be worth only 41.5 million if you include "Goodwill"?

 

[geoffb]

I don't think 'goodwill' translates into any value if the management company changes. The current brand value will go away with the staff and the Royal Resorts name.

If an attempt is made to roll over the property and keep it in the resort group then I think there might be some value there.

 

[Dave M]

In my capacity as a BBS Administrator...

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