After the 3-day long meeting, the 2 newly-elected board members included this in their letter:
"We learned a great deal about time share management, budget, and operations ..." (Page 1)
Concerning the refurbishing project and the 3-year "special asessment" (not really), here's what they said:
"The refurbishing project. In 2006-2007, before the recession or the loss of the Starwood contribution were foreseeable, it became evident that significant refurbishing of the interiors of the older buildings (32, 33, 34, 41, 42 and unit 4415) was necessary. These buildings had aging, dowdy furnishings and appliances, and much of the kitchen and bathroom cabinetry and equipment was also in bad shape. The furniture and fixtures long predated Starwood's acquisition of the property in 1998. Some of the applicances were inappropriate for the space; for example, some refrigerator doors could not be fully opened because they would bump into cabinets. Vacationing owners could not have a first-class experience, and when they saw sales presentations for Building 31 and for the much newer units being built at Bay Vista across the street, they began to insist on better interiors for their units as well. The Board conducted two votes on a special assessment, outside of the normal budget cycle, to fund an interior renovation. In both votes, the owners who voted supported the assessment (on the second vote, by a margin of 86% to 14%), but in neither vote was the participation level high enough to obtain the required support of 2/3 of all owners, not just those who voted.
The Board then faced the issue of whether to go ahead with the project anyway. Had there been sufficient reserve funding, it might have been paid for out of reserves. But Starwood's predecessors as owners of the development had neither budgeted for nor created more than minimal reserves for capital improvements. Starwood did voluntarily contribute $1.3 million to the Virgin Grand replacement account in 2001 to provide the association with the ability to perform normal replacements that were needed. SVO had not recommended building up reserves to levels higher than customary replacement schedules between 2000 and 2006. (The reason for this appears to have been a perhaps unrealistic industry standard that items such as cabinetry, counter tops, tubs and toilets have very long useful lives and were not planned to be completely removed and replaced). With the full support of our owner-chosen predecessors (Board members Walter DeCastro and Melissa Brookes, who were elected in the spring of 2007), and bouyed by the 86% margin of those who had voted on the question of refurbishment, the Board approved a budget containing a $1.3 million increase in the reserves to fund the project, to be paid by owners over a three-year period.
The $1.3 million wouldn't have been such a big pocketbook hit, and it would have been offset by high owner satisfaction. (In fact, we have heard nothing but praise by owners who have lived with both the "old" and the "new" interiors.) But then, in 2008, through a routine roof inspection, it was discovered that much of the siding was rotting and that the roofs were at the very end of their useful lives. Wood shingles never should have been used in this tropical climate; the wood was infested with termites and was peeling and falling apart in many places. Both the hotel and our time share development were faced with an emergency need to replace and improve the "outer envelope" of the buildings, a very expensive job (about $5.5 million for our time shares, and about $12 million for the hotel). In 2008, the Board therefore voted to fund the reserves to cover the necessary exterior renovations in addition to the already approved interior refurbishment. As you know, both sets of improvements together required an additional maintenance payment amounting to an average of $625 per unit for three years: 2009, 2010 and 2011. While this is an average figure, the dollar amount was much higher for the larger units, particularly the three-bedroom pool villas. (The 2010 maintenance fee for a pool villa, including $1038 for the reserve fund, is $3439.)
Changing the roofs and siding will preserve and protect the property, but in addition, some of the exterior improvements will save money in operating costs. For example, the windows and doors will be much better insutated, lowering electricity costs. Individual air conditioners and water heaters are being replaced by massive and much more efficient chillers, which also generate waste heat that will be used to heat the water for showers. Permanent gas lines will replace the expensive propane tanks for the three-bedroom units.
We will report in more detail in a later report on the improvements that have been made and those that are in progress. We'll just add here that the resort that we will all own in 2012 will be a lot better, and a lot more valuable, than the one that most of us bought into before 2008. In fact, one of the building managers noted that by 2013, except for pilings securing the buildings to the ground, there will be almost nothing left of the Virgin Grand Villas as they existed ten years earlier." (Pages 2-3)
It's OK to disagree with the two newly-elected board members (who had no connections to Starwood before being elected). But, those who disagree with what they have written should state specifically what they would have done to preserve value at the resort. ... eom
