The San Clemente Inn has reached a point of dissolution. What happens when a timeshare reaches dissolution?

[skimble]

SCI changed management companies about 5 years ago. Costs have skyrocketed; delinquencies are at 53%. The state of California mandated an engineers report, and they found $2.2 million in repairs/maintenance. The roof has low spots from age/gravity/settling, and water intrusion/drainage issues.

The board sent a survey to owners offering a choice between a special assessment or dissolution.The preliminary verdict shows the vast majority are in favor of selling the property.

They said the process will take about 2 years. In an informational meeting, they cited a timeshare that was dissolved claiming owners got about $10k for each share.

Have any of you experienced dissolution? What is the reality?

 

[Fido Chuckwagon]

Have any of you experienced dissolution? What is the reality?

The reality is that if they find a buyer for the property, after all expenses are paid, owners will get a check for what’s left. It varies wildly based on the knockdown sale value of the property (based on your description of the building condition that’s what it sounds like we’re talking about here), but it’s certainly not unheard of for owners to get a few thousand dollars at the end of it in these types of situations.

Edit: Given that this is a SoCal property, near the water / walkable to the beach, with decent highway access, etc, I’ve got to imagine this property sells pretty easily.

 

[klpca]

Well it appears that timesharing is reaching a new phase - the phase where past underfunding of reserves has caused deferred maintenance, and maintenance fee defaults make it impossible for the resort to generate enough cash flow to continue in it's current form. We have started to see this with the Wyndham and the HVC closures (For the record, I am not a Wyndham or HVC owner so I may be off on the reason for the closures as I haven't followed it closely). Also, the fact that Lemonjuice Solutions has started to pop up on TUG with respect to restructuring and liquidating timeshares indicates that things are changing in the timeshare landscape. I agree that it will sell, but I would expect the price to reflect the costs to reflect the necessary repairs (duh). I recall user Larry M getting a check from a timeshare that shut down and sold the units, so maybe do a search on his posts to see what you can glean from his experience.

It's hard to decide if staying in the game is a good financial move or if it is throwing good money after bad. It seems like they are indicating that there may be funds leftover for owners or they probably wouldn't have dangled that carrot. Unfortunately, you may be a guinea pig here. Good luck with however this plays out. Keep us posted.

 

[TUGBrian]

deciding to ride it out entirely depends on what financial obligations you as an owner will be required to maintain until the sale is completed and finds are distributed.

paying 2+ years worth of maintenance fees on a property you cant use on a chance to get a check for "hopefully more than that" when its all said and done is a big ask!

there should be plenty of documentation and notification to owners sent out for this as it progresses...much of it will be required to be sent via regular us mail so be on the lookout!

 

[rickandcindy23]

This is interesting and probably the future of some Maui properties. I am seeing some changes happening, and of course Hono Koa just had a remodel that would greatly increase the value of the units. The bad debt has to be an issue at the Soleil-managed properties. It's old, owners are aging, and it's so bad that they are silent on the subject. $3,400 for a week at Hono Koa is a good indication that others aren't paying their fees.

 

[Luanne]

We are going through a dissolution with San Diego Country Estates currently. If the property sells we should see some money. We have been offered the option of moving to another GPX property (we don't want to acquire another timeshare at this point) or giving our unit back (which will cost us). To give the unit back we have to be current with the entire year maintenance fees, and then there is an administrative cost (I don't remember the amount). We have decided at this point to wait it out. We continue to pay maintenance fees, have use of the property and can bank our time.

 

[bnoble]

deciding to ride it out entirely depends on what financial obligations you as an owner will be required to maintain until the sale is completed and finds are distributed.

I'm an owner at a similarly situated resort (Kauai Beach Villas). If I end up riding it out, my strategy is to ignore any future bills and allow them to accrue. That's becuase (at least so far) the HOA has been saying that any proceeds will be paid out after subtracting any accrued debt. So if there is a positive balance, great! I will get something back. If there is not a positive balance, I am not taking the loss.

I think this might be what I would do in general. If debts did accrue in the interim, and the HOA wanted to foreclose on me, they would be welcome to do so.

It's worth noting that so far, I have not been asked to pay anything post-closure, so there have been no decisions to make so far.

 

[skimble]

The property has a value (in my estimation) of well over $20 million. There are 96 units, and four buildings spread out over about 5 acres of prime coastal California land.

Timeshare is built over the last 20 years build a condominium unit about 30 miles from the real destination and tell you that the land has prime value. The San Clemente Inn was built about 75 years ago, and it isn’t a great location very close to the coast. It has a large parking lot, a tennis court, pool, and a lot of space.

Will it sell for top dollar? Obviously not. But it does have decent value? The land alone is worth millions.

 

[TheTimeTraveler]

The property has a value (in my estimation) of well over $20 million. There are 96 units, and four buildings spread out over about 5 acres of prime coastal California land.

Timeshare is built over the last 20 years build a condominium unit about 30 miles from the real destination and tell you that the land has prime value. The San Clemente Inn was built about 75 years ago, and it isn’t a great location very close to the coast. It has a large parking lot, a tennis court, pool, and a lot of space.

Will it sell for top dollar? Obviously not. But it does have decent value? The land alone is worth millions.

Not only is the land only worth millions but the grandfathered zoning has a tremendous unknown value......

It will be interesting to see what this is sold for, how much the current timeshare owners are compensated for it, and what eventually will take its place!

Someone is going to capitalize on this and it likely won't be the existing timeshare owners!












.

 

[T_R_Oglodyte]

Of course, each situation will be unique. There will be situations such as this, where the underlying land has a lot of value. Where, just on basic economic principles, the highest and best use of the land is not as a timeshare operation. As these facilities age and require repair, redevelopment of the property will happen; the unrealized economic potential will just become too great.

Timeshare properties will probably last longer in that situation, just because of the difficulties involved in getting all owners on board with a sale. So it will happen when a crisis state is reached, such as what might happen here.

Circumstances will be quite different with resorts where the land doesn't have the same value. This might by typical of resorts that were built in areas that have a relatively short high demand period (summer at a lake, for example), but the rest of the season is flat and there isn't pent up demand to for more accommodations. I suspect that most of those resorts will likely totally fail, and become abandoned at some point.

 

[aandmrun]

SCI changed management companies about 5 years ago. Costs have skyrocketed; delinquencies are at 53%. The state of California mandated an engineers report, and they found $2.2 million in repairs/maintenance. The roof has low spots from age/gravity/settling, and water intrusion/drainage issues.

The board sent a survey to owners offering a choice between a special assessment or dissolution.The preliminary verdict shows the vast majority are in favor of selling the property.

They said the process will take about 2 years. In an informational meeting, they cited a timeshare that was dissolved claiming owners got about $10k for each share.

Have any of you experienced dissolution? What is the reality?

We have had personal experience in a timeshare property being dissolved. It is much easier said than done. All the property deeds need to be cleared before any sales can take place. Our process has taken from 2019 to now. This was a small timeshare within a condo community with a 9-hole golf course and a fishing pond, Innsbrook Village in Ruidoso, NM. We loved going there in the spring. It is right across the street from the National Forest and Ruidoso is a very quaint small community. Even with just six units within this community, finding all the owners and dissolving all the deeds legally has taken over five years. We are not concerned because we had many happy vacations there and know that we will eventually get some of the proceeds of the sale.

 

[Miner49er]

Circumstances will be quite different with resorts where the land doesn't have the same value.

Exactly. I wonder what will happen with resorts in Hawaii - I assume many of them are on leased land. The land ownership goes all the way back to the last Queen of Hawaii, who willed much of her property to a nonprofit school for native children. The school trust still owns much of Waikiki, although I don't know the situation for any of the timeshares.

I assume the TS salespeople never mention this in their sales pitches!

 

[Dannmark]

Based on what you’ve described, the association appears to have been underfunded for years. California law requires HOAs to conduct reserve studies and identify major components, such as roofs and drainage systems, that need repair or replacement. When reserves are inadequate, boards often face difficult choices, including large special assessments or exploring termination of the association.

A 53% delinquency rate is extremely high and makes it even harder to finance $2.2 million in needed repairs. Deferred maintenance, water intrusion, and an aging roof can significantly impact both the marketability and insurability of a property. In situations like this, some communities determine that selling the property and dissolving the association is financially preferable to asking owners to fund major repairs.

That said, owners should understand that proceeds from a dissolution vary widely from one property to another. The example of another timeshare owners receiving about $10,000 per share should be viewed only as an illustration, not an indication of what SCI owners would receive. Any payout depends on the eventual sale price, outstanding debts, legal and closing costs, taxes, and the association’s liabilities at the time of dissolution. The estimated two-year timeline is also reasonable, as dissolving a California HOA requires member approval, a formal dissolution plan, settlement of debts, and state filings before any remaining assets can be distributed.


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[Patri]

If a ts goes under, owners should consider themselves lucky.

 

[Harry]

Sad. We were original owners. Purchased while construction from hotel to timeshare was going on, the same year we joined TUG. We spent many great summers there..Although debt and expense is high the property should sell rapidly and it would surprise me if owners would not receive a pretty good residual.

 

[Kenfuchs]

We just went through a similar situation at Cape Cod Holiday Estates in Massachusetts. The timeshare consisted of around 30 free standing buildings and the cost to maintain and update them became prohibitive so the HOA decided to sell. It took about 3 years to clear up the deeds and get the land court to approve. It only took about 1 year to find a buyer who waited an additional 2 years to finally take over the property a few months ago. The whole process was handled by Capital Vacations who did a really good job of cleaning up the mess. In the end, each owner received around $8.5K after all the legal expenses and expenses associated with keeping the property in good order until the sale went through.
Bottom line, if you want to own a timeshare it's a good idea to also look at the value of the property in case of liquidation.

 

[skimble]

If a ts goes under, owners should consider themselves lucky.

Unless you really like the timeshare, and you use it annually.

 

[skimble]

We just went through a similar situation at Cape Cod Holiday Estates in Massachusetts. The timeshare consisted of around 30 free standing buildings and the cost to maintain and update them became prohibitive so the HOA decided to sell. It took about 3 years to clear up the deeds and get the land court to approve. It only took about 1 year to find a buyer who waited an additional 2 years to finally take over the property a few months ago. The whole process was handled by Capital Vacations who did a really good job of cleaning up the mess. In the end, each owner received around $8.5K after all the legal expenses and expenses associated with keeping the property in good order until the sale went through.
Bottom line, if you want to own a timeshare it's a good idea to also look at the value of the property in case of liquidation.

That is solid advice. It is something that I have always considered. The San Clemente Inn has no value on timeshare resale. However, anyone who knows the real estate market in the area could tell you that one unit in that complex would be worth a conservative estimate over $500k even in the condition that it is in. And in the pool, the restaurant, the extra real estate and the amenities, and each unit is probably worth about 200K more. Divide that by 50, and you have a value of about $7000 per unit.
I’m actually really sad to see this dissolution. It is has been the most cost-effective coastal California Resort.

 

[Alindoo]

Bluebeard's Castle Villas 1, USVI, was dissolved a few years ago. Hurricanes blew the roofs off and left it in bad shape. Owners decided not to rebuild, sold the buildings for $400k, took the insurance money and from what I heard they ended up with about $15,000 per week. Many of them thought they should have gotten more.

 

[b2bailey]

That is solid advice. It is something that I have always considered. The San Clemente Inn has no value on timeshare resale. However, anyone who knows the real estate market in the area could tell you that one unit in that complex would be worth a conservative estimate over $500k even in the condition that it is in. And in the pool, the restaurant, the extra real estate and the amenities, and each unit is probably worth about 200K more. Divide that by 50, and you have a value of about $7000 per unit.
I’m actually really sad to see this dissolution. It is has been the most cost-effective coastal California Resort.

I'm confused about your "cost effective" claim.

 

[skimble]

I'm confused about your "cost effective" claim.

If each unit has a value of about $700,000 after adding the value of the unit and the additional parts of the total property like the restaurant, and you divide that by 50 units, each owner should get about $7000.

 

[T_R_Oglodyte]

If each unit has a value of about $700,000 after adding the value of the unit and the additional parts of the total property like the restaurant, and you divide that by 50 units, each owner should get about $7000.

Curious - if that's the case, then why are you trying to give away your unit away in the free marketplace instead of keeping and collecting $7k. Something isn't making sense.

 

[TUGBrian]

if the resort is in this poor a shape financially, there are going to be tons of people in line to collect off the top of the sales price before owners see a dime.

 

[Luanne]

Curious - if that's the case, then why are you trying to give away your unit away in the free marketplace instead of keeping and collecting $7k. Something isn't making sense.

Maybe to avoid paying maintenance fees and taxes in the interim?

As I explained with our timeshare if we want to keep it and get the payout (if there is one) we need to keep paying maintenance fees and taxes. I doubt anyone would want to take it, even for free. For us to just "give it back" would require being current on the entire year's maintenance fee and then paying an additional amount for the transfer.

 

[b2bailey]

If each unit has a value of about $700,000 after adding the value of the unit and the additional parts of the total property like the restaurant, and you divide that by 50 units, each owner should get about $7000.

If there are 50 units, wouldn't that be x 52 weeks = # of owners?