Trouble - Marriott Grand Residence Tahoe [Management Agreement in Jeopardy?]

[VacationForever]

On the other hand, I have 3 HOAs for my current home and all are fully funded, range from 95% to 110%. My prior home was a condo with 3 HOAs as well, and reserves were also fully funded. These HOAs are in Nevada.

 

[dioxide45]

I own property at a California HOA which has never fully funded its reserve (the board and owners don’t care as long as there isn’t a special assessment). I don’t know any California property which does fully fund the reserve other than timeshares. It does make sense that timeshares should fully fund, based on their objective third party reserve studies. That said, in my (limited) experience it’s rare for a non-timeshare association to run into practical funding issues of reserve line items if it’s ~=>55% funded. I wonder if this 100% reserve fund influences the board (and management)’s desire to upgrade, improve, and/or replace items on a more frequent basis. I have noticed that HOAs which don’t have a fully funded reserve tend to be more creative, and/or defer, with their improvement projects out of necessity.

It would be interesting to see the reserve studies for a timeshare property based in California, which line items the board has added over the years, remaining expected lifespan of said items, etc.


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Do we know timeshares are fully funding in CA? If I compare the reserves for Florida and California timeshares, the reserve amounts are just about the same per unit and most Florida timeshares don't fully fund. While there are some issues that are unique to Florida, an Orlando and a Palm Desert timeshare should probably have similar reserve funding and they do but yet Orlando is waving fully funding on reserves each year.

 

[dioxide45]

I agree the only HOAs that I've seen actually fully fund their reserves are timeshares, and I live in CA and have a HOA for my home. I was looking at the detail on the reserve funding for the Newport "Timeshare Association" (there are three associations for Newport), and the amount billed for 2024 as reserve per unit for the "Timeshare" is $418.61. These reserves are primarily for replacement of the unit interiors. Of the Timeshare Assoc. estimated reserve replacement costs totaling $149,678,021, the amount of $134,274,498 is categorized as "unit interiors" [Note in prior year budgets there was only one category called "furniture and fixtures".]. The other associations, the "Master" association billed $82.54 for reserves (which covers the roads and common area amenities), has replacement costs estimated at $35.6MM, and the Condo association has estimated replacement costs of $81.5MM and billed $83.54 in reserves (the buildings, roof, external building maintenance and painting).

It seems that while Florida properties waive fully funding reserves, the reserves still seem to be sufficient to cover replacement of capital items as needed. in nearly 30 years there hasn't been a need for a special assessment and it would seem all items would have gone through a full refurbishment. I suspect even roofs would have been replaced with perhaps the roof material not been replaced. The 2024 reserve fee for Grande Vista is $450. There is no separate master association at Grande Vista, so that $450 has to cover all items interior and exterior items (villas, roads, roof, exterior amenties).

 

[Ken555]

Do we know timeshares are fully funding in CA? If I compare the reserves for Florida and California timeshares, the reserve amounts are just about the same per unit and most Florida timeshares don't fully fund. While there are some issues that are unique to Florida, an Orlando and a Palm Desert timeshare should probably have similar reserve funding and they do but yet Orlando is waving fully funding on reserves each year.

To know, owners should request copies of the mandatory reserve studies in order to see the details. Those documents include the % funded, as determined by the third party firm preparing the document.

Of course, since this is Marriott, I would expect them to refuse to distribute this information. It is my understanding that, at least in California, that HOAs distribute this information annually. One of my associations sends it to all owners as part of the annual disclosures and updates without request. I no longer own a timeshare in California so can’t verify - can you? What’s part of the disclosure they send these days?


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[Ken555]

I agree the only HOAs that I've seen actually fully fund their reserves are timeshares, and I live in CA and have a HOA for my home. I was looking at the detail on the reserve funding for the Newport "Timeshare Association" (there are three associations for Newport), and the amount billed for 2024 as reserve per unit for the "Timeshare" is $418.61. These reserves are primarily for replacement of the unit interiors. Of the Timeshare Assoc. estimated reserve replacement costs totaling $149,678,021, the amount of $134,274,498 is categorized as "unit interiors" [Note in prior year budgets there was only one category called "furniture and fixtures".]. The other associations, the "Master" association billed $82.54 for reserves (which covers the roads and common area amenities), has replacement costs estimated at $35.6MM, and the Condo association has estimated replacement costs of $81.5MM and billed $83.54 in reserves (the buildings, roof, external building maintenance and painting).

So, just looking at the numbers, combined with the useful life used in the projections, it does seem as though the internal beautification of the units is a significant component of the reserves billed to MF. I don't know if the HOA BOD and/or management can be more creative or defer that aspect, given that the damages done to units varies based upon the user; and we all want the units to remain high quality and not shabby. As an owner, it's extremely frustrating to see such high dollar amounts required for replacement of unit interiors.

It's also frustrating to compare year over year changes to the reserve requirements. The 2023 budget referred to a 11/1/2019 reserve study projecting the furniture and fixtures (the only item for the Timeshare Assoc) replacement cost of $124MM, and the 2024 budget refers to an 8/3/2023 reserve study placing the replacement cost for what appears to be additional components not previously assigned to the Timeshare Assoc, which total almost $150MM (with unit interiors being $134MM of the total). So, in a one year span between operating budgets, the estimated replacement costs of the components assigned to the Timeshare Assoc increased from $124MM to almost $150MM. The overall year over year (2023 to 2024) increase in component estimated replacement cost for all three Newport Coast associations went from $227MM to $268MM. Ouch.

Did Marriott send you part of the actual reserve study, or simply include these details in a letter? Have you ever requested a copy of the reserve study? If not, could you? I’m curious if Marriott will distribute that information, and of course of what it states.

You’ve identified at least one item worthy of follow up. This is exactly why I believe it’s important to get the reserve studies for at least the previous three years and the minutes of all board meetings.


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[LeslieDet]

Did Marriott send you part of the actual reserve study, or simply include these details in a letter? Have you ever requested a copy of the reserve study? If not, could you? I’m curious if Marriott will distribute that information, and of course of what it states.

You’ve identified at least one item worthy of follow up. This is exactly why I believe it’s important to get the reserve studies for at least the previous three years and the minutes of all board meetings.


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The references to the reserve studies is on the detail for the budget for Newport Coast. I compared the 2022 and 2023 budgets to the 2024 budget and noted the date of the reserve studies used for their numbers. I have not seen the actual reserve studies, nor have I requested to see a copy. I just recently asked for the audited financial statements as well as more detailed accounting info for Newport Coast. I have not seen that info yet. Previously I've asked for and received detailed info relating to the Trust, so I am not anticipating any problem.

In CA, reserve studies are required every 3 years at a minimum. IDK if the pandemic allowed an extra year or not. I was surprised to see the prior one was from 2019. I do receive and review all minutes of each board meeting.

 

[LeslieDet]

Of course, since this is Marriott, I would expect them to refuse to distribute this information. It is my understanding that, at least in California, that HOAs distribute this information annually. One of my associations sends it to all owners as part of the annual disclosures and updates without request. I no longer own a timeshare in California so can’t verify - can you? What’s part of the disclosure they send these days?

California HOA/COA laws require the annual information statement sent to each owner. The statement issued by Newport Coast only includes the minimum detail, ie the "Assessment and Reserve Funding Disclosure Summary" (but oddly, only for the "master" and "condo" associations) as well as the other statutorily required information like contact info, insurance coverage, collection policies, rule changes (ie added e-cigarettes, vaporizers and alternative nicotine products to the no-smoking policy), and foreclosure policy/lien rights.

Under CA law, each owner is entitled to request and receive copies of the various financial documents and annual reports, including the reserve study. So, if an owner requests it, info more detailed than what is given in the annual disclosures is required to be provided.

 

[Ken555]

In CA, reserve studies are required every 3 years at a minimum. IDK if the pandemic allowed an extra year or not. I was surprised to see the prior one was from 2019. I do receive and review all minutes of each board meeting.

My experience with reserve studies and the firms which provide them all recommend an annual update, with a full study with onsite inspection every three years (which I believe meets the minimum requirements). The other years offer either a reserve study update with onsite inspection or a reserve study financial update. All of these options include the financial update based on information provided by the Board and management. I would be surprised to learn that the timeshare BOD does not perform an annual update of some kind.

 

[4Reliefnow]

The conflict at Grand Residences should be viewed in the bigger context of MVC efforts to curtail rentals. A significant number of GR owners purchased fractions for the primary purpose of rentals. Many high demand ski weeks are rented directly. If you buy a GR fraction in the secondary market, you buy 5,000 Destination points ($60,000 - $70,000) to enroll your fraction in the point system. That allows many weeks to be converted to points which are rented out (Vacationpointexchange.com) or repeat customers.


MVC has taken steps to restrain rentals such as a 20,000 point annual transfer limit. The biggest source of points for rent is at Grand Residences. IMHO, MVC would love to push Grand Residences out of the Marriott and Destination Point systems. This is not about $500,000 budget dispute, MVC wants to crack down on rentals.

The GR owners who paid $60,000 to $70,000 ( bought 5,000 Destination Points) to enroll their fractions and rent out their points are getting screwed.

 

[Hindsite]

MVC has taken steps to restrain rentals such as a 20,000 point annual transfer limit.

This 20k points limit is a limit on people receiving points via transfer, not a limit on the number an owner can rent out. Those who bought to rent out can still do so, no problem.
The target for this is the brokers who have been receiving large volumes of points, booking prime inventory and then renting that out.

 

[igopogo]

The conflict at Grand Residences should be viewed in the bigger context of MVC efforts to curtail rentals. A significant number of GR owners purchased fractions for the primary purpose of rentals. Many high demand ski weeks are rented directly. If you buy a GR fraction in the secondary market, you buy 5,000 Destination points ($60,000 - $70,000) to enroll your fraction in the point system. That allows many weeks to be converted to points which are rented out (Vacationpointexchange.com) or repeat customers.


MVC has taken steps to restrain rentals such as a 20,000 point annual transfer limit. The biggest source of points for rent is at Grand Residences. IMHO, MVC would love to push Grand Residences out of the Marriott and Destination Point systems. This is not about $500,000 budget dispute, MVC wants to crack down on rentals.

The GR owners who paid $60,000 to $70,000 ( bought 5,000 Destination Points) to enroll their fractions and rent out their points are getting screwed.

In my opinion the evidence points to the contrary, or at least to a bit of institutional schizophrenia. MVC could have stopped enrolling weeks at Grand Residence, or they could impose the same dollar guidelines that they do to other resale weeks. Instead they make it relatively inexpensive (on a per week or per point basis) to enroll Grand Residence weeks. Relatively is the operative word here.

It could be that the sales department has different goals from those of whoever is trying to curtail rentals.

Note, direct rentals are explicitly allowed at Grand Residence (I realize you are talking about point rentals, though).

 

[TimGolobic]

In my opinion the evidence points to the contrary, or at least to a bit of institutional schizophrenia. MVC could have stopped enrolling weeks at Grand Residence, or they could impose the same dollar guidelines that they do to other resale weeks. Instead they make it relatively inexpensive (on a per week or per point basis) to enroll Grand Residence weeks. Relatively is the operative word here.

It could be that the sales department has different goals from those of whoever is trying to curtail rentals.

Note, direct rentals are explicitly allowed at Grand Residence (I realize you are talking about point rentals, though).

Yes, renting deeded weeks is allowed and always has been, even prior to GRC being added to the Points system around 2013.

 

[timsi]

I can tell you that at MKO resort laid off most hourly employees for at least 6 weeks and some longer than that as it was a recall of employees as guests returned. No cleaning, AC, lights, water, sewage etc for all units but the 2 or 3 units occupied for about 6 - 8 weeks. Budget for MKO 2023 was just a small increase. To me that did not seem right. I figure w saved at least 5% of the running costs but got an increase in MF instead.

How many hourly employees did the resorts have to make a real difference? Marriott referenced numerous HR and cost-reduction measures for corporate employees in their Q2 2020 Investor presentation. It appears that at the corporate level, where cost reductions directly impact the company's finances, Marriott implemented deeper measures than at the resort level, where owners bear those costs. This differential approach raises the question: why the disparity?

In their presentation they mentioned “Aggressive Cost Reduction Measures”:
Furloughed nearly 40% of associates
Reduced wages for 16% of remaining associates
Deferred 2020 merit increases
Deferred 2019 401(k) company match contributions
Curtailed discretionary spending
Actively renegotiating vendor agreements and payment terms

 

[frank808]

Almost all employees that were non management were furloughed.

Only the salaried employees were kept on. The managers were working front desk. Only the managerial groundskeepers were around. The only non managerial people I saw were security folks. No valets, porters, engineering, etc.

 

[igopogo]

I was anticipating some update or at least a response to my personal email requesting information from the BOD. Having heard nothing we will send this letter tomorrow AM. Thank you to those who offered edits. Please DM me with your full name if you want to be added, and include your ownership if you are comfortable doing so. I will add names and ownership before sending the letter, I won't share them publicly.

 

[joybeckerley1]

I think Marriott would like to have this property..........it is a very desirable location and they charge much more for rent than we owners charge!

 

[igopogo]

I'm putting myself on a T-9 minute hold as I try to delve into the financials. One thing I have noticed is that while there is mention of selected line-item budget deficits and surpluses in the BOD minutes, I can't find a summary of actual annual expenses by line item anywhere. Does this exist?

A few of interesting things I noticed on this year's budget:
- Activities is budgeted down 85% (maybe this goes to brand standards)
- Landscaping / Grounds is budgeted down by about 2/3
- Park Ave Development is budgeted up by about 50%
- Gas is budgeted down.
All of these comparisons are to last year's budget, since there are no actuals I can find. If would be nice to have some discussion about these significant changes.

I wonder how much we would save if the fire pit, which rarely has a soul nearby, were turned off.

I am on site and have confirmed that there will be no activities at Grand Residence after 12/29.

The activities really were not well attended, and were usually hosted at TimberLodge anyway, so I don't see this as a big loss. TimberLodge will continue to have activities (good news for our hosts, Bingo Brian and Juan-derful). I wonder, though, if on-site activities are part of the brand standard. This may be one of the sticking points. Are there other MVC sites that do not have activities?

 

[davidvel]

I am on site and have confirmed that there will be no activities at Grand Residence after 12/29.

The activities really were not well attended, and were usually hosted at TimberLodge anyway, so I don't see this as a big loss. TimberLodge will continue to have activities (good news for our hosts, Bingo Brian and Juan-derful). I wonder, though, if on-site activities are part of the brand standard. This may be one of the sticking points. Are there other MVC sites that do not have activities?

What do these scrapped activities cost as a percentage of annual budget?

 

[dioxide45]

So this means that GR guests can't use any of the activities at Timber Lodge?

 

[davidvel]

So this means that GR guests can't use any of the activities at Timber Lodge?

I don't know specific to this situation, but with a few exceptions, in the past guests from TL could participate in GR activities (which were listed on TL calendars), and vice versa.

 

[igopogo]

So this means that GR guests can't use any of the activities at Timber Lodge?

I talked an employee that I know there, and they said that question is not yet answered internally.

 

[igopogo]

What do these scrapped activities cost as a percentage of annual budget?

I don’t have the numbers in front of me, but I want to say that it went from about $150k down to about $25k. I think that savings is somewhere in the neighborhood of 1%+ of the overall budget. And for perspective, 1% is about 10% of the problem.

 

[SueDonJ]

I don’t have the numbers in front of me, but I want to say that it went from about $150k down to about $25k. I think that savings is somewhere in the neighborhood of 1%+ of the overall budget. And for perspective, 1% is about 10% of the problem.

So much math! I'm just going with the universal answer, 42.

 

[SueDonJ]

I can't even imagine a Marriott timeshare resort without activities! This whole situation is just sad to read about, although it must be infuriating for owners.

 

[travelhacker]

I can't even imagine a Marriott timeshare resort without activities! This whole situation is just sad to read about, although it must be infuriating for owners.

You can count me in the infuriated group. The board just seems completely unrealistic, and I'm personally hoping we can make a change there soon before it's too late.