ROFR for Starwood may increase

[feckman]

I hear you, but ROFR is definitely not market value -- it's artificial. If Starwood decided to stop exercising tomorrow, where would values likely go? And what does that mean for the "real" market value of any given interval? Not the most secure position to be in as an owner, especially those who purchased retail.

I'm admittedly very new to the timeshare game and have a LOT to learn, but you don't have to be a weather man to know which way the wind blows.

Regardless, WKORV is a spectacular property and I do hope that we're able to purchase a unit. That said, Maui is what we're really in love with, so we'll set a ceiling for WKORV and have a fallback plan if it doesn't pan out. We'd certainly NEVER buy points from Diamond -- most intervals at KBC are deeded weeks, so we'll go for that. After making it out of the timeshare presentation at KBC, you couldn't pay us to take DRI points!

 

[jarta]

Thanks, I appreciate it! I think we'll try one more time. The whole ROFR process rubs me the wrong way, but I think we'll give it another try at a slightly higher level and see what happens. If that fails, we'll likely fall back on something else.

I understand that ROFR can be beneficial to existing owners, but I don't like how it artificially inflates market value...or how it exploits both owners and unwitting retail buyers by allowing Starwood to cherry-pick intervals and resell them at huge profits.

The more I learn about how Starwood runs their resorts, the less inclined I am to purchase any of their properties. Although it sounds like most developers/management companies have their share of warts. That's what sent us to WKORV from KBC when we stayed there in January. We liked the KBC property and loved the location, but the timeshare presentation and all the slimy Diamond propaganda made me feel like I needed a shower.

How is the exercise of ROFR artificially inflating market value for Starwood's Maui resorts if there is a market where Starwood can resell the properties it ROFRs at huge profits? I don't understand how you consider that market value is determined.

If Starwood is doing such a horrible job of managing its Maui properties, why are people willing to pay the high MFs and additional multiple thousands of dollars to acquire the Starwood Maui properties on the open market while the DRI property resales on the open market are for much less money? It seems like that doesn't make sense at all. Maybe the Starwood Maui (WKORVN) properties and system are just considered superior to the DRI (Ka'anipali Beach Club) property and system by the timeshare market. Salty

http://www.ebay.com/csc/Timeshares-..._nkw=kaanapali+beach+club&LH_Complete=1&rt=nc

 

[Ken555]

I hear you, but ROFR is definitely not market value -- it's artificial. If Starwood decided to stop exercising tomorrow, where would values likely go? And what does that mean for the "real" market value of any given interval?

I'm sympathetic to your position, since you just lost a unit at a nice price. But, think about it from the owner's perspective and you might reach a different conclusion. I don't own WKORV but if I did I'd want the ROFR since it helps stabilize prices for a very expensive timeshare. Not many years ago these units were in the $30k's range and when prices fell there was seemingly no floor. Now that SVO is buying the prices have stabilized and even increased. That only hurts buyers not owners. And, since ROFR is part of the process for these properties it is the real market value...for obvious reasons. Prices change over time, regardless if there is ROFR or not.

 

[DavidnRobin]

I hear you, but ROFR is definitely not market value -- it's artificial. If Starwood decided to stop exercising tomorrow, where would values likely go?

But SVO does, because they can and it is profitable. SVO may be driving the market price, and therefore it becomes the market price. Afterall, people are making the bids at a price that SVO considers worth the ROFR. It's not like SVO is bidding up the price. This means people will need to bid/offer higher if they want WKORV/N until it is no longer profitable for SVO. This will drive up the price until it doesn't - based on supply/demand - which drives any market. SVO gets to play/influence both sides with minimal effort or risk (sweet deal for them).

 

[feckman]

How is the exercise of ROFR artificially inflating market value for Starwood's Maui resorts if there is a market where Starwood can resell the properties it ROFRs at huge profits? I don't understand how you consider that market value is determined.

Sorry, I thought given that we're on TUG the "market" I'm talking about would be understood as the "resale market." That's how I consider market value. To wit:

http://www.ebay.com/sch/i.html?_odk...m570.l1313&_nkw=Westin+Kaanapali&_sacat=15897

Obviously not one of these are likely to pass ROFR, and Starwood will have picked up countless additional inventory on the backs of existing owners who may not know any better.

But, think about it from the owner's perspective and you might reach a different conclusion. I don't own WKORV but if I did I'd want the ROFR since it helps stabilize prices for a very expensive timeshare.

I don't think I would reach a different conclusion. I understand that in this case, at this time, Starwood's aggressiveness at exercising ROFR can be seen as "protecting" owners, but I don't think that's their motivation. Rather, they're simply padding inventory so they can fleece buyers on the retail market. I'd rather know the "real" value of something I own and make my decisions on that basis.

In addition, I bristle at the thought of relying on the whims of a single corporate buyer to prop up the (resale) market value of something I own. The market value is the value determined on the open market, not what Starwood is willing to pay (or not pay) for any given interval at any given moment. The whole thing strikes me as a house of cards built on the back of a single buyer with an unfair advantage (ROFR) and ulterior motives (the ability to re-sell at retail for massive profit). If/when that buyer decides to leave the (resale) market, prices may very well plummet. I'm certainly not suggesting that this is likely to happen, I'm just saying that it could.

SVO gets to play/influence both sides with minimal effort or risk (sweet deal for them).

EXACTLY my point. The process exploits both buyers and sellers for the sole benefit of Starwood. Just look at the eBay values for WKORV/N properties. This is obviously closer to true (resale) market value, although even these values may be inflated by buyers willing to bid more in the dim hopes of passing Starwood's known ROFR. I'm sure SVO didn't do anything to pay those eBay owners a penny more than they had to.

All that said, I feel lucky to be able to consider and discuss all of this with the good and knowledgeable people here on TUG before buying anything at all. I am confident that this will help my family come with a solid strategy, viable alternatives and a reasonable price ceiling for owning a timeshare on Maui. I feel really bad for retail buyers who don't have the same opportunity and pay tens of thousands of dollars more than they could/should have. Even if our next offer passes ROFR, we will have done so by weighing the benefits of the property against some approximation of the "true" (resale) market value -- eyes wide open. This is a HUGE advantage and a luxury I am sincerely appreciative of.

--Jim.

 

[PamMo]

feckman, I definitely understand your feelings. It is SO disappointing! You had the opportunity and a signed contract to buy the exact unit you want, for a very good price - and then lost it when Starwood took it through ROFR. I bet you were already thinking about your first vacation there, weren't you? I know the feeling. It happened to me on an OF unit at WKORVN. If it's what you want, don't give up. Villas always come up for sale, and Starwood will not exercise ROFR on all of them. Good luck to you!

Added: Jim, you were posting when I was. Starwood has not always actively exercised ROFR. At the bottom of the recession, prices were half what they are now, and deals were going through with few exceptions. They are exercising it now because Hawaii tourism is booming again, and people are wanting to buy there. Prices have gone up at the Westin and Marriott timeshares on Maui as demand has increased. Other timeshares are cheaper to get into, but they do not have the same quality or provide the same level of guest experience as WKORV/WKORVN and new Marriott towers.

 

[feckman]

feckman, I definitely understand your feelings. It is SO disappointing! You had the opportunity and a signed contract to buy the exact unit you want, for a very good price - and then lost it when Starwood took it through ROFR. I bet you were already thinking about your first vacation there, weren't you? I know the feeling. It happened to me on an OF unit at WKORVN. If it's what you want, don't give up. Villas always come up for sale, and Starwood will not exercise ROFR on all of them. Good luck to you!

Thanks, PamMo! I'm not so much disappointed as annoyed by the way the process is rigged in Starwood's favor. I've never been able to pay no attention to the man behind the curtain.

I know we'll wind up with something we'll be happy with on Maui, so I'm not really worried about that. It's just a matter of figuring out what that will look like and what we're willing to pay given all the competing factors. It's complicated!

Added: Jim, you were posting when I was. Starwood has not always actively exercised ROFR. At the bottom of the recession, prices were half what they are now, and deals were going through with few exceptions. They are exercising it now because Hawaii tourism is booming again, and people are wanting to buy there. Prices have gone up at the Westin and Marriott timeshares on Maui as demand has increased. Other timeshares are cheaper to get into, but they do not have the same quality or provide the same level of guest experience as WKORV/WKORVN and new Marriott towers.

Understood, and I agree. The guest experience will certainly be different at different resorts. The questions then become how much different, how valuable are those differences and at what cost? Obviously, these valuations happen on a family-by-family basis. For us, the valuable things are pretty parochial. Things like access to a washer and dryer, the ability to cook in the unit, a comfortable bed. In the end, our family tends to be very active, spending little time in the unit or at the resort anyway. I'm sure that'll change as the years pass, though!

Thanks again for all the input and discussion!

 

[jarta]

feckman ...

Obviously not one of these are likely to pass ROFR, and Starwood will have picked up countless additional inventory on the backs of existing owners who may not know any better. ... The market value is the value determined on the open market, not what Starwood is willing to pay (or not pay) for any given interval at any given moment.

eBay sales (even assuming they are taken to deed) are not examples of market value, IMO. Market value is defined as:

"The most probable price that the specified property interest should sell for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming neither is under duress."

http://www.appraisalinstitute.org/ppc/downloads/2011_guidenote_11.pdf

eBay auctions are missing a few elements - like sellers without duress, reasonable periods of exposure time, prudent sellers acting for self-interest and binding contracts to sell.

Just as there is nothing wrong with you buying a nice timeshare from a distressed owner for $1 (or whatever it might sell for on eBay), there is nothing wrong with Starwood reselling ROFRed weeks for a huge profit. Both you and Starwood should be able to take advantage of supply and demand in the market.

eBay is a great place to pick up a timeshare week from a seller under duress who offers it for a week or a post card company who was paid to take the week from an owner under duress or a seller who inherited a timeshare and has no interest, much less a self-interest, in recouping any money from a sale after exposure for a reasonable period of time.

I know eBay has the absolute lowest timeshare prices available. I have bought timeshare weeks on eBay myself. But I never kidded myself about paying market value when I paid the absolute lowest price for a timeshare from a desperate seller. Salty

 

[feckman]

Both you and Starwood should be able to take advantage of supply and demand in the market.

Ah, but there's the fundamental flaw in your argument, at least as it pertains to the RESALE market: Starwood is not taking advantage of supply and demand in the market, they are taking advantage of their unilateral access to ROFR.

There's no way to know whether any given eBay sale involves a seller under duress, but they can certainly include "reasonable" exposure time and binding contracts to sell. Textbook definitions and semantics aside, I think eBay is much closer to a "real" (resale) market value than Starwood setting an arbitrary value below which exercising ROFR is sufficiently profitable for them.

Given that fact, the "protection" that owners feel from ROFR is not much more than smoke and mirrors, IMO.

Again, ROFR may be the reality for many properties, but I think that healthy discussions about the "benefits" of ROFR (and those who actually reap the rewards) are important for those of is in the resale market to have and consider. And if my family does end up with a WKORV unit, I at least will feel better having thought about all this without unrealistic expectations about what my interval is *actually* worth. (see: 2008 Housing Crisis)

 

[DavidnRobin]

Oh well - I tried... guess I am misguided/misinformed.

Good luck in your search - if you buy WKORV - I would strongly suggest OF (IMO, IMO, IMO etc) - of course, the ROFR have caused these to increase as well. Otherwise, exchange via SVN or II into WKORV/N unless you need hard to get weeks (relatively few for weeks1-50).

 

[SMHarman]

<snip>
Just as there is nothing wrong with you buying a nice timeshare from a distressed owner for $1 (or whatever it might sell for on eBay), there is nothing wrong with Starwood reselling ROFRed weeks for a huge profit. Both you and Starwood should be able to take advantage of supply and demand in the market.<snip> Salty

On the flip side, Starwood has assessed what it believes MV is and that could be calculated as ROFR price + cost to carry (MF-rental income) + sales commission / incentive costs + profit margin = current list price for retail at the resort.

 

[feckman]

Oh well - I tried... guess I am misguided/misinformed.

I appreciate it! I understand that many here are owners and I'm not looking to pee in anyone's pool, but my perspective as a non-owner with critical distance and no vested interest (yet) is that, while a developer exercising ROFR may protect owners in practice, it's neither resale market value nor is it a reliable protection for the owner. I may *appreciate* it if we become WKORV owners, but unless I'm missing something it's not going to change my fundamental opinion on the practice.

Good luck in your search - if you buy WKORV - I would strongly suggest OF (IMO, IMO, IMO etc) - of course, the ROFR have caused these to increase as well. Otherwise, exchange via SVN or II into WKORV/N unless you need hard to get weeks (relatively few for weeks1-50).

Thanks for that advice as well. We considered OF, but it's quite a heavy financial lift for what is effectively an indulgence. Also, some of the more recent threads on the difficulty of booking OF (and the potential for even more difficulty in the future with StarOptions banking, etc.) have scared us away from shooting the lock off the wallet and just going for OF.

 

[SMHarman]

Ah, but there's the fundamental flaw in your argument, at least as it pertains to the RESALE market: Starwood is not taking advantage of supply and demand in the market, they are taking advantage of their unilateral access to ROFR.

There's no way to know whether any given eBay sale involves a seller under duress, but they can certainly include "reasonable" exposure time and binding contracts to sell. Textbook definitions and semantics aside, I think eBay is much closer to a "real" (resale) market value than Starwood setting an arbitrary value below which exercising ROFR is sufficiently profitable for them.

Given that fact, the "protection" that owners feel from ROFR is not much more than smoke and mirrors, IMO.

Again, ROFR may be the reality for many properties, but I think that healthy discussions about the "benefits" of ROFR (and those who actually reap the rewards) are important for those of is in the resale market to have and consider. And if my family does end up with a WKORV unit, I at least will feel better having thought about all this without unrealistic expectations about what my interval is *actually* worth. (see: 2008 Housing Crisis)

But *Woods ROFR is not a right to reposess so it can resell. It is a right to replace the buyer you found in an open market transaction with themselves, no other aspects of the contract change, you as a seller still get a check for the same $ just from *wood, not from the person who you thought you were getting it from.

The ROFR does not even provide a floor price for the seller. If the ebay buyer managed to squeak through a sale at $1 then *wood would ROFR and pay the seller $1.

From a seller perspective not much changes the frustration is on the buyer side where you keep being bought out of contracts the time and effort and probably tied up cash in escrow while that goes on.

 

[Ken555]

while a developer exercising ROFR may protect owners in practice, it's neither resale market value nor is it a reliable protection for the owner. I may *appreciate* it if we become WKORV owners, but unless I'm missing something it's not going to change my fundamental opinion on the practice.

There has been countless threads on this topic over the years on TUG. Opinions vary, but many seem to believe that when a resort has a ROFR there is at least some ability to predict, at times, what a deed would sell for on the open market. Many have benefited by receiving higher prices for their timeshares than would otherwise be the case, and many others wish their own resort had it.

Based on the historical prices of WKORV, I think you'll discover that it was once a very expensive resort (resale). Only in the last five years has it lost significant value on the resale market, yet Starwood seems to have no difficulty selling at retail...even today. So, if you want to own WKORV now I think you know what the prices should be. When I bought my WKV platinum week I worked with a broker, and I'd suggest the same to you for your purchase. I've only bought inexpensive weeks on eBay and I tend to doubt I'd spend ~$15-20k+ on an eBay sale (I'd also want title insurance for such a large purchase, as well).

 

[feckman]

When I bought my WKV platinum week I worked with a broker, and I'd suggest the same to you for your purchase. I've only bought inexpensive weeks on eBay and I tend to doubt I'd spend ~$15-20k+ on an eBay sale (I'd also want title insurance for such a large purchase, as well).

Agreed. We're working with a broker on this purchase as well as one at Grand Timber Lodge in Breckenridge and a Marriott Custom House in Boston. He's been good to deal with so far.

 

[Ken555]

Agreed. We're working with a broker on this purchase as well as one at Grand Timber Lodge in Breckenridge and a Marriott Custom House in Boston. He's been good to deal with so far.

Unless you go during school holidays, II has been great for me at obtaining weeks at Grand Timber Lodge. We had a 3-bed in Dec, tho early skiing, and I've successfully visited several times over the last five or so years.

 

[Fredm]

ROFR is definitely not market value -- it's artificial. If Starwood decided to stop exercising tomorrow, where would values likely go? And what does that mean for the "real" market value of any given interval? Not the most secure position to be in as an owner, especially those who purchased retail.

We can all agree that Starwood is the beneficiary of their reserved preemption right.

You are right about ROFR not being market value.
Whether it affects price at all (one way or the other) is a discussion that will never be resolved here. IMO, it has little to do with it.

I transact a fair number of timeshares subject to a ROFR, and have been doing so for quite some time.
FWIW, the dynamic that by far influences resale demand (hence price) is the developer's marketing investment.
The primary source of secondary market buyers are families that attended a developer timeshare presentation, liked it, but did not buy from the developer. I suspect you are among them.
Firming resale prices are a result of more prospects produced by more timeshare tours.

The absence of ROFR unto itself will not soften prices. In fact, resale prices at WKORV were strongest when there was no ROFR being exercised. Prior to 2008 Starwood was marketing the tail off the resort, and resale prices were relatively high because their presentations created resale buyers (sorry for the repetition).

We tend to view the past few years as how it has always been, or how it will always be. The low point was 2007-2010. Lots of financially strapped sellers, and low developer marketing investment.

It is not the presence or absence of ROFR you should be concerned about.
Worry about market value if Starwood decides to not sell it with vigor any more. Then, the remaining demand will be largely from existing owners (the second highest source of natural demand).
In that case, it is predictable that supply will exceed demand. It always has.

 

[feckman]

We tend to view the past few years as how it has always been, or how it will always be. The low point was 2007-2010. Lots of financially strapped sellers, and low developer marketing investment.

It is not the presence or absence of ROFR you should be concerned about.
Worry about market value if Starwood decides to not sell it with vigor any more. Then, the remaining demand will be largely from existing owners (the second highest source of natural demand).
In that case, it is predictable that supply will exceed demand. It always has.

Very fair points and I appreciate your perspective. And you're exactly right -- we attended a timeshare presentation (at the Ka'anapali Beach Club) which is where our timeshare journey started. TUG has since fueled the fire and provided us with a welcome (and ongoing) education.

 

[gdonnersc1]

Fredm says:

It is not the presence or absence of ROFR you should be concerned about.
Worry about market value if Starwood decides to not sell it with vigor any more. Then, the remaining demand will be largely from existing owners (the second highest source of natural demand).
In that case, it is predictable that supply will exceed demand. It always has.

You can see the same thing in housing developments. When the developer turns over the community, sells their final properties and stops spending money on marketing, demand inevitably softens, prices go down and inventories go up. Good for buyers and bad for sellers. But there could be another dynamic--if Starwood did not have the incentive to maximize profits on the sales side, it might not do as good a job managing a community which would lower the quality of the experience for everyone. Has anyone seen this happen in real life at a timeshare community when the developer was the manager as well and stops marketing?

In any case, I believe that owners benefit from the ROFR process as it adds buyers and keeps the developer interested.

 

[Fredm]

WKORV IV Deluxe eoy even exercised at $8,500. Buyer pays 2013 fees.

 

[PamMo]

Thanks again for adding to the ROFR database, Fred. It's interesting Starwood exercised at that price for an eoy 2BR deluxe IV - generally regarded as the least desirable units at WKORV. Starwood's recent activity seems to indicate some growing strength in sales.

I'm curious? Have you and Syed seen a big jump in interest/sales of Hawaiian timeshares this year? There's been a lot of buzz in the TUG boards about buying there.

The Maui News had a couple of interesting articles about increased condo sales and tourism (see below).

Maui sales of condos strongest in 5 years
March 16, 2013
Condominium sales on Maui hit a five-year high for February, reflecting a generally brightening real estate market, according to a report by the Realtors Association of Maui. A total of 100 condos were sold last month, compared to 62 in January and 83 the same month last year, the report out this week showed. This year's February sales are the best for the month in the last five years, topping the 98 sales in 2011. The median price, with half the prices higher and half lower, rose 27 percent year over year in February to $364,950 and was 25 percent higher than January's $292,000. That price was still lower than the five-year high of $692,500 in 2009.

Revenue per room reaches new high for Maui
March 13, 2013
Maui hit a new high for the month of January with an average daily room rate of $289.98, which was in keeping with a record-setting month statewide, Hospitality Advisors and Smith Travel Research reported. The daily room rate was up 6.3 percent from the previous January, part of a strong start of the year buoyed by a 1.2 percentage point growth in occupancy to 78.7 percent for Maui. Maui also benefitted from a 6.5 percent increase in visitor arrivals, which included travelers from the U.S. West, up 9 per-cent; U.S. East, up 2.7 percent; Japan, up 27 percent; and Canada, up 12 percent. The Valley Isle's revenue per available room, or RevPAR, jumped 8 percent from last January to $228.21.​

 

[Fredm]

I'm curious? Have you and Syed seen a big jump in interest/sales of Hawaiian timeshares this year? There's been a lot of buzz in the TUG boards about buying there.

Increase in # of sales. Sale prices have also increased.

Importantly, the trend appears to be up. The trend begets itself.
When prices are going down, buyers wait for them to sink further creating yet more softness in the market.
Now, buyers are more willing to pull the trigger for fear that prices will be higher if they do not.
Too early to tell if this attitude will be sustained. Too much depends on general confidence in the economy. But, it does appear that the downturn is over. At least the huge overhang of unsold inventory has shrunk, and the really low priced stuff has been absorbed.

An example: I just posted an ROFR of an IV deluxe eoy at $8,500. I now have buyers looking to purchase at 9k, but don't have the inventory to sell them. A couple of years ago I could not sell them at 4k.

 

[jarta]

Increase in # of sales. Sale prices have also increased.

Importantly, the trend appears to be up. The trend begets itself.
When prices are going down, buyers wait for them to sink further creating yet more softness in the market.
Now, buyers are more willing to pull the trigger for fear that prices will be higher if they do not.
Too early to tell if this attitude will be sustained. Too much depends on general confidence in the economy. But, it does appear that the downturn is over. At least the huge overhang of unsold inventory has shrunk, and the really low priced stuff has been absorbed.

An example: I just posted an ROFR of an IV deluxe eoy at $8,500. I now have buyers looking to purchase at 9k, but don't have the inventory to sell them. A couple of years ago I could not sell them at 4k.

You are correct. If the economy continues to improve (more vacationing) and the unsold inventory continues to shrink (no timeshares being built) and if demand for a week in Maui remains the same (despite high, but possibly dropping, MFs and horribly high expense to travel to HI), demand eventually will overtake supply and resale prices will be even higher than today.

And, if (when?) the Maui resale weeks become too expensive for most resale buyers, the resale price of II trader resorts likely will go up, too, as their supply falls. But, by the time that happens, I predict the Maui weeks deposited in II will dry up even further and be deposited, much more often than now, as 2-br units.

Fred did it ever occur to you that publishing/advertising the ROFR prices here, by itself, would fan the flames of self-sustaining price increases? You sly old fox! lol! Salty

 

[Fredm]

Fred did it ever occur to you that publishing/advertising the ROFR prices here, by itself, would fan the flames of self-sustaining price increases? You sly old fox! lol! Salty

lol! I wish I had the power to move the market!

Actually, my ROFR posts are intended to provide some insight to what buyers can expect, so as to not lead to their frustration and disappointment.
My contribution to this community.

Sellers must still compete with other owners who are motivated to sell at lower prices. Most buyers gravitate to the lowest priced listing by a credible seller. Such is the reality of the resale marketplace.

 

[PamMo]

lol! I wish I had the power to move the market!

Actually, my ROFR posts are intended to provide some insight to what buyers can expect, so as to not lead to their frustration and disappointment.
My contribution to this community.

And we thank you for your contributions to the collective knowledge in this forum!

Posting ROFR updates can be helpful to buyers and sellers. Starwood seems to be picking off all the low hanging fruit anyway, whether the sales price is posted or not. Knowing what price point is being bought through ROFR helps a buyer to make an offer which might stick.