Wastegate is laying off hundreds of employees, citing credit shortage???

[rickandcindy23]

We are in Orlando, and this was on the news last night.

I guess banks no longer want to finance loans for overpriced timeshares? :ignore:

I don't know what this means, exactly, but it sure is big news here.

 

[Bill4728]

Does anyone know how much of TS purchases are financed in house vs by banks? Because I would have guessed that most TS are financed by the developer and not independently thru a bank.

 

[timeos2]

Take down the King - Let him stay in an original villa

Oh - this is great! I feel for the poor slobs being laid off but anything that hurts the King is a plus! I'd be worried if I were buying into an incomplete development such as the Hollywood Tower of Terror in LV as this may bring things to a halt. If they never built another unit anywhere under the Wastegate banner it would be too many so lets hope this is a serious blow to the worst timeshare organization known. Almost anything can have a silver lining I guess!

 

[Talent312]

The banks finance the developments and the overhead that's needed to keep them looking spiffy... not individual TS's. Most TS resorts are built w-financing on "spec" -- speculation that the developer will quickly sell them to us, unsuspecting saps.

Apparently, banks are wising up to the fact that, given this economic mess, fools + their money will not be so easily parted... not 'cuz fools are any wiser, but bucuz their wallets have already been emptied by losses on wall-street and at the gas-pump.

 

[mj2vacation]

westgate cutting back

http://www.orlandosentinel.com/business/custom/tourism/orl-siegel2708sep27,0,7426566.story

 

[dioxide45]

This isn't really surprising. With the difficulty in obtaining credit, many TS companies will have trouble financing new resorts and ventures. With the slowing of sales also, they will slow on new resorts and the need to cut back becomes inevitable.

 

[somerville]

Does anyone know how much of TS purchases are financed in house vs by banks? Because I would have guessed that most TS are financed by the developer and not independently thru a bank.

Developers need to convert these loans into cash to pay for continuing operations and fund new development activities. Therefore, they usually have some sort of mechanism to move them off their books through various financial arrangements.

 

[derb]

Wait a minute---how will all this affect my presentation FreeBees????

 

[Talent312]

Wait a minute---how will all this affect my presentation FreeBees????

I suspect that the more desperate they get, the better the incentives will become.

 

[Timeshare Von]

I just hope that "real estate mortgages" that are for timeshare purchases are not going to be part of the gov't bailout!!!!!

 

[Kola]

I suspect that the more desperate they get, the better the incentives will become.

I am not sure about this at all. But I suspect that the more desperate they get, the higher a probability of higher 2009 maintenance fees and "special charges". Their creative minds will come up with some special assesments to be paid by millions of owners.

K.

 

[Laurie]

I just hope that "real estate mortgages" that are for timeshare purchases are not going to be part of the gov't bailout!!!!!

No kidding! Can you imagine all these TS mortgage-holders having to comply with bookkeeping regs that require them to reevaluate their assets based on current market value - where a $22,000 asset gets written down to $220 based on actual (ebay) resale value??

I wonder whether these notes were bundled and sold like other mortgages ...

Edited to add: I just read that article about Westgate - and YES, they were bundled and sold as securities!!

"The time-share business is cash-intensive, and companies keep that money flowing through lines of credit that are then paid off when they bundle and sell their mortgages as securities. All of the sudden, Siegel said, no one is buying those securities. About a week ago, everything looked fine, he said."

"It's kind of like you're healthy and suddenly you get a heart attack," he said. "But we're going to take our medicine and get healthy again."

Hmm, wonder what the *medicine* is - and who's paying for it!

 

[dioxide45]

No company capital intensive company like a TS developer can keep their money tied up in mortgage loans. It was and still is necessary for them to bundle and sell that paper in order to continue to fund their operations. If they didn't do this there wouldn't be very many resorts built.

The difference with TS is that they didn't experience the same drop in property values that homes did. TS by nature are worth less as soon as you sign the papers. Those loans are worth less as soon as they are closed. I don't know if holders of these loans have to mark to market them by brining them down to their true value. The big problem with the realestate mess is that mortgage holders have to write loans down and set aside reserves based on an estimated value. They loan may still be performing well and may payoff in full, but a loss has to be written down.

 

[Kola]

No company capital intensive company like a TS developer can keep their money tied up in mortgage loans. It was and still is necessary for them to bundle and sell that paper in order to continue to fund their operations. If they didn't do this there wouldn't be very many resorts built.

The difference with TS is that they didn't experience the same drop in property values that homes did. TS by nature are worth less as soon as you sign the papers. Those loans are worth less as soon as they are closed. ...

I have some difficulty following your statement. On the one hand you said, as we all know, "those loans are worth less as soon as they are closed", but at the same time you seem to believe that TS "didn't experience the same drop in property values that homes did" . Isn't this a contradiction ? Please elaborate.


K.

 

[dougp26364]

From Streettalkblog it looks as if DRI may be in the same reduction mode

http://streettalkblog.com/?p=2915#comments

 

[tombo]

http://streettalkblog.com/?p=2915#comments

Wow, if the blog is right, Diamond resorts shut and couldn't pay employees in Gatlinburg. The blog also said that Westgate canned almost everyone in the Houston office. So much for the myth that Timeshare sales are recession proof.

 

[JeffW]

I am not sure about this at all. But I suspect that the more desperate they get, the higher a probability of higher 2009 maintenance fees and "special charges". Their creative minds will come up with some special assesments to be paid by millions of owners.

K.

I'd be surprised of they can do this. At best, if it's a resort still in development, the developer could prematurely reduce their subsidy, resulting in higher payments. However a resort that has a HOA, short of direct fees (labor, expenses) going up, I'm not sure they can raise the fee to make up for shortfalls in the parent organization.

Jeff

 

[vacationhopeful]

Remember all those sales offices and bull pens which is inhabited by the sales weasals - they pay rent/MFs to the HOA. And who owns that space? Do you think the resort managers could deny them occupancy of those units? It would most likely be a foreclosure action on each and every unit, then an eviction, and then a remodeling back to condo units - if there isn't a nice bankrupty along the way. The HOA would be paying more $$$$ for the utilities, taxes, lawyers, filing fees - for years.

 

[timeos2]

Just because it's in the footprint don't assume it's the Associations property

Remember all those sales offices and bull pens which is inhabited by the sales weasals - they pay rent/MFs to the HOA. And who owns that space? Do you think the resort managers could deny them occupancy of those units? It would most likely be a foreclosure action on each and every unit, then an eviction, and then a remodeling back to condo units - if there isn't a nice bankrupty along the way. The HOA would be paying more $$$$ for the utilities, taxes, lawyers, filing fees - for years.

Don't assume those areas belong to the Association(s). In many cases the Developer held on to either ownership or rights - they may not even pay rent. Look at Polo Towers in LV or Bluetree in Orlando to see what a bad set of documents can do to a resort/Association. Those resorts have no rights to areas of the resort and in at least one case (Bluetree) had to build another building when the bullies from Wastegate threw them out of the original check in area and other buildings. Never underestimate how a developer will set thigs up to favor themselves/sales.

 

[Kola]

I'd be surprised of they can do this. At best, if it's a resort still in development, the developer could prematurely reduce their subsidy, resulting in higher payments. However a resort that has a HOA, short of direct fees (labor, expenses) going up, I'm not sure they can raise the fee to make up for shortfalls in the parent organization.

Jeff

I had in mind primarily a huge proportion of resorts that continue to be run by the original developers or by their management subsidiaries. In some cases resorts have been split into sections or phases with the developers retaining ownership and/or control of common facilities and amenities. It's not very difficult to make a case in favour of renovating swimming pools, exercise facilities, improving resort security or rebuilding a reception area. The management company takes a cut based on a percentage of the overall annual budget. The actual work may not be done untill economic improvement takes roots.

K.

 

[ctyatty]

management fees: all "costs" plus 15% of the gross mf

I often wondered about this bizarre incentive to spend but not save money at a resort that I own at. Is this type of agreement common?

 

[timeos2]

Doesn't make sense, does it?

I often wondered about this bizarre incentive to spend but not save money at a resort that I own at. Is this type of agreement common?

VERY common with Developer management. Not so much when an independent management is hired by an Owner controlled HOA.

 

[mishugana]

I wonder if these layoffs will make the weasels more aggressive?

 

[itchyfeet]

TS developers are not the only companies that wil be affected by "tight" credit. This tightening of credit and loss of jobs was predicted by many financial analysts--Westgate is only the tip of the iceberg if something isn't done to resolve this financial mess. All businesses, large & smalll have to borrow to keep a business going, and if a business wants to expand, it particularly needs money. No money- no job creation and usually loss of jobs.

 

[cancun dish]

well put itchy feet!

Bill Heard (one of the largest auto dealers in the country) recently shut their doors and one of the main reasons cited was lack of available financing.