15 Year Extension at OKW for $25 per point

[bababear_50]

Will have to put this meeting on my schedule for the 24th - don't know what the others in the family will be doing but I am planning on a different type of Disney experience since I have never attended anything except one or the members weekly meetings at SSr and the Christmas party thing by EPCOT.

I will be 99 in 42 so really don't know what I will do- have one daughter who is a Disney fanatic who will be 70 and a granddaughter from another daughter who will be 56 so other than keeping the resale value up I don't see that I will be spending any more on this contract. The BCV one will go to the granddaughter and I don't see that one being sold so will have to see what happens. At first I was thinking I would find a way to do it but probably investing the $3300 would be a better choice. Now I just have to find the $3300.

Castleri---I was reading your post and something happened --I spotted little baby "Lennon" and the bottom of the page and well my heart melted
I have a grandaughter "Hannah" ---maybe I should re-think this.
Mel

 

[Doctor P]

We got our notice today. Having read it, I will make a few points: 1) this is nothing but a legal notice of their intent to do the special assessment; 2) the terms at which they will offer the extension are not in any way governed by the assessment, so the rumors of the lower price to extend may still come true but legally they need/want to set it up this way.

Okay, now here is the speculation on my part. I think that the intent is to have a special assessment at OKW to get the cash to either pay for planned improvements that are somehow underfunded, pick up the pace on the maintenance and replacement schedule of the resort's capital assets, or simply to offset some underfunding of reserves. Rather than doing this in a way that everyone's dues goes up by a drastic amount and such that they get the money over time, they came up with this as a means of raising cash with a carrot attached to the otherwise unpalatable proposal. It also can be a means by which to slow down the resale market by evening out the prices a little bit between resorts.

It will be interesting to see what the final outcome is.

 

[PBB]

I spoke to our DVC Representative this evening about what is happening. She attended a meeting today and was informed that the $ 25 per point will be discounted/subsidized by Disney for $ 10 per point. So, if we choose to accept the extension by the end of Feb 2008 it will be $ 15 per point. Disney will provide financing. 10 % down and the balance over 5 or 10 years with 10 % interest or half down and the balance in a year with no interest (I may be mistaken on the interest, I was fading out at this point)

She did say this was going to happen and it was going to pass on the 24th of Sept. The member are going to have a mailing sent on the 25th explaining all the details.

I personally was very disappointed on how this presented by DVC. I felt like it was a strong arm tactic on there part of take or leave it. I have to wonder if this will be the last such extension offered or assessed. It has only been 15 years and they have chosen to do this. I don't understand why we need to extend now and not closer to end of the contracts. What will happen in the next fifty ?? I hope this is not the start of decline of DVC..........

 

[Stevegriswold]

I just signed the contract on an OKW resale. It small, only 60 points at $75 a point. It is going through Disney ROFR right now so we should hear something soon.

So if this passes and closes, I figure that will take about 30 days max. Then I assume we may get this extention offer from Disney.

But I can't see paying $25 per point more to add 15 years. That would be $100 a point for an OKW resale contract. I am 38, I don't plan on going for 50 years so I was planning on going for maybe 20 years and then reselling the contract.

Right now on resale I can buy SSR (which is a newer resort) for $82 a point, and that is good until 2054, or pay $100 a point for OKW good until 2057. When you look at it that way, why would anyone extend?

Thoughts?

 

[gmboy95]

As I will be sipping oatmeal through a straw....my kids can take care of this bill when the time comes.....or they may need the money to kepp my old #&* in a proper "retirement community...hahahahahaahah!!!!!

 

[rigsby25]

boy at $25 a point that is $6,000 for me.

now $15 was fair - but this is just unreasonable.

Think I would rather use the money for a the CRV. at least DVC allows financing and tries to help you with a new purchase.

That's exactly how we see it. Rather spend the money on more points.

 

[bluslag]

I would like to see a much longer time frame for this decision to be made. I think every contract should have a one time opportunity to extend without a deadline. Not everyone wants to extend while they own the contract,others cannot afford it at this time and others just are not ready. I don't plan on extending mine because it will be of no use for me and I'm not sure my kids want it for that long either because they like to travel all over. I would like to be able to sell my contract with the understanding that the new owners would have a chance to extend the contract at some time. I would hate to see the $15.00 chance to change because as we lose years $25.00 will not look very attractive. Just my thoughts. I still feel like DVC is putting the squeeze to us.

 

[dianeschlicht]

Well, our letter finally came yesterday, and we discussed a bit what we will do. I really doubt we will spend the $25/point to extend, since that would be close to $10,000. I'd much rather add points than do that! Now, if the price per point was half that or even $15, we MIGHT consider it if it meant a better resale value down the road.

So my question to the gurus is: Do you think the added years will keep OKW resale prices where there are, or will it make them better and higher? What about as more time passes? I'm thinking it would be a big detriment to have a contract that is less 15-20 years at resale than another contract that has the extra 15 years on it.

 

[Michael623]

I'll pass. I plan to own a retirement home in Cental Florida by then. I'll be 69 in 2042.

 

[Doctor P]

Well, our letter finally came yesterday, and we discussed a bit what we will do. I really doubt we will spend the $25/point to extend, since that would be close to $10,000. I'd much rather add points than do that! Now, if the price per point was half that or even $15, we MIGHT consider it if it meant a better resale value down the road.

So my question to the gurus is: Do you think the added years will keep OKW resale prices where there are, or will it make them better and higher? What about as more time passes? I'm thinking it would be a big detriment to have a contract that is less 15-20 years at resale than another contract that has the extra 15 years on it.

When you combine low maintenance fees, low point requirements, and the longest term till the end (except for AKL), there is no question in my mind that this will inflate resale prices. My guess is an immediate $10 bump in OKW for the 2057 contracts, with the final bump being pretty close to the full $15. In general, I believe OKW contracts will sell for prices above SSR contracts as resales, and I think this is actually an intended outcome.

BTW, I DON'T think this offer will be extended to the other resorts for some time. In fact, I'm going to go out on a limb and suggest that it is possible that it will never be extended to the other resorts. Believe it or not, my guess is that if and when the offer is extended, the offer will first be extended at VB and then at HH. With the on-site resorts other than SSR, the resorts are tied to existing resorts and could easily be incorporated into those resorts. IMHO, Disney has less of an incentive to extend VWL, BCV, and BWV because those resorts have a strong resale market and are not cutting into sales of SSR and AKL as much as a result.

We'll see how it all shakes out. It will be interesting, and, of course, the way OKW goes will help determine future decisions.

 

[bwvBound]

I really doubt we will spend the $25/point to extend, since that would be close to $10,000.

Ouch! This gives us another good reason to purchase small'ish DVC contracts: the flexibility to extend some points but not the entire holding.

 

[RobDoc]

Well, our letter finally came yesterday, and we discussed a bit what we will do. I really doubt we will spend the $25/point to extend, since that would be close to $10,000. I'd much rather add points than do that! Now, if the price per point was half that or even $15, we MIGHT consider it if it meant a better resale value down the road.

So my question to the gurus is: Do you think the added years will keep OKW resale prices where there are, or will it make them better and higher? What about as more time passes? I'm thinking it would be a big detriment to have a contract that is less 15-20 years at resale than another contract that has the extra 15 years on it.

One way to look at this is to compare the up-front cost with what that amount would be worth in 2042.

Because of the reports that the net cost will be $15 per point extended I'll use that figure in this example.

If you owned 1,000 points (to keep the math simpler for me), the cost would be $15,000 by February 29. If you invested that same amount at 5.25% it would grow to $94,000 by 2042. At 8% it would grow to $244,000 by 2042. So, the question here is could you buy a 1,000 point contract in 2042 (it will only have 15 remaining years at that time) for $94 per point - how about $244 per point?

If you feel the resale value in 35 years will be greater than either of those amounts, then the $15 cost would be well worth it. If your sense suggests that the resale value will be less than $94 per point, then just invest the money and buy the extra years thru resale on 2042.

I realize this is a very simplified example and has many variables built into the equation, but the principle is worth some consideration.

 

[Doctor P]

One way to look at this is to compare the up-front cost with what that amount would be worth in 2042.

Because of the reports that the net cost will be $15 per point extended I'll use that figure in this example.

If you owned 1,000 points (to keep the math simpler for me), the cost would be $15,000 by February 29. If you invested that same amount at 5.25% it would grow to $94,000 by 2042. At 8% it would grow to $244,000 by 2042. So, the question here is could you buy a 1,000 point contract in 2042 (it will only have 15 remaining years at that time) for $94 per point - how about $244 per point?

If you feel the resale value in 35 years will be greater than either of those amounts, then the $15 cost would be well worth it. If your sense suggests that the resale value will be less than $94 per point, then just invest the money and buy the extra years thru resale on 2042.

I realize this is a very simplified example and has many variables built into the equation, but the principle is worth some consideration.

Let's look at it this way. At 4% per year increase, the cost per point for a "full contract" in 2042 (assuming they keep building resorts) would be $416 per point. At a 2% rate of increase, the cost per point for a contract would be $208. These rates of increase are low based on past history. Thus, the prices for the last 15 years, a substantial period of time for most people IMHO, could easily be over $100 per point. I think the bigger question is whether DVC will still be around in 35 years. People's tastes and preferences change, as does the economy. Will WDW still be a viable entity in 50 years? I would like to think so--DL made it this long--but one can never be sure.

 

[Mtnman44]

I'm trying to understand this...You're not losing anything by not extending, you're just not spending more to get more. Sure an OKW contract that expires in 2057 will have a higher resale value than one that expires in 2042. So What? That higher resale value contract cost another $15 per point to the owner! So, while it may sell for a higher price, it won't net any more than yours, (probably less).

There is no reason to extend the contract unless you love staying at OKW and plan to do so beyond 35 years from now. Period. If that is the case, the extention for $15 is probably a bargain. But that is betting a lot on your vacation habits 35 years from now. I think that for 95% of people, this extention is a complete waste and rip off. The resale value argument is flawed. Just my opinion of course.

So my question to the gurus is: Do you think the added years will keep OKW resale prices where there are, or will it make them better and higher? What about as more time passes? I'm thinking it would be a big detriment to have a contract that is less 15-20 years at resale than another contract that has the extra 15 years on it.

 

[dianeschlicht]

While the resale arguement might be flawed, it WOULD make a difference for those of us who are likely not going to outlive the original ending date, much less the new one. The difference being the expected value at the time we would choose to sell. I expect that to be sometime in the next 20 years, and a resale with 30 years left on the contract should be worth a lot more than one with only 15 years left.

 

[Mtnman44]

Yea, in 20 years the resale value difference between extended and non-extended OKW contracts will probably exceed $15 per point, but who knows for sure. however, the lost opportunity to invest that money has to be also considered. At a simple 7%, the money it would cost to extend a 200pt contract could instead be invested at be worth almost 11,000 in twenty years. Between the extra $15 per point it costs to "buy" the higher resale value and the lost investment income, I just don't see the contract extention as a good way to make more money when you decide to sell OKW. I think it is far preferrable to invest the cash now, and sell OKW in 20 years for whatever it is currently getting on the market. Sure, with only 15 years left if will be sell for much less than new resorts or extended OKW contracts, but you'll still get a good chunk for it (maybe even more per point than you paid when you bought it!) plus you'll have $11k cash or more sitting in the bank!

 

[pilferk]

There is no reason to extend the contract unless you love staying at OKW and plan to do so beyond 35 years from now. Period. If that is the case, the extention for $15 is probably a bargain. But that is betting a lot on your vacation habits 35 years from now. I think that for 95% of people, this extention is a complete waste and rip off. The resale value argument is flawed. Just my opinion of course.

I don't think you can assert the "resale arguement is flawed" without knowing exactly what the effect will be on the resale market when it comes to 2042 vs 2057.

You might SUPPOSE the difference won't be "enough", but largely that's going to be a factor of how long you hold your contract (the closer to 2042 you get, the more difference it's going to make) and what happens in the resale market AFTER the "value difference" actually appears. Granted, you're going to have to make the decision, probably, based on speculation because of the limited time frame Disney is going to offer for the discount/extension.

I've said this in the poll thread: I can see the point that the extension might not provide YOU with good value, or give you anything you think will be of value. But I just can't see the "global" assertion that this is a "rip off" or a "waste" for everyone.

 

[dvcbrad]

When you combine low maintenance fees, low point requirements, and the longest term till the end (except for AKL), there is no question in my mind that this will inflate resale prices. My guess is an immediate $10 bump in OKW for the 2057 contracts, with the final bump being pretty close to the full $15.

Just curious ... why would one want to spend $15 now in hopes of being able to achieve $10 or $15 in the future? The present value / future value comparison certainly doesn't make any financial sense to do so. If someone wants to extend to pass on to children, that makes sense, but there is definitely NO current benefit of extending.

 

[pilferk]

Yea, in 20 years the resale value difference between extended and non-extended OKW contracts will probably exceed $15 per point, but who knows for sure. however, the lost opportunity to invest that money has to be also considered. At a simple 7%, the money it would cost to extend a 200pt contract could instead be invested at be worth almost 11,000 in twenty years. Between the extra $15 per point it costs to "buy" the higher resale value and the lost investment income, I just don't see the contract extention as a good way to make more money when you decide to sell OKW. I think it is far preferrable to invest the cash now, and sell OKW in 20 years for whatever it is currently getting on the market. Sure, with only 15 years left if will be sell for much less than new resorts or extended OKW contracts, but you'll still get a good chunk for it (maybe even more per point than you paid when you bought it!) plus you'll have $11k cash or more sitting in the bank!

See, you're not following through your thought to it's logical conclusion.

Now, take the 11k in cash you have + the proceeds for a contract with only 15 years remaining....do you think you'll be able to buy a 200 pt AKV contract for what you have left? With 11k, that would cover approximately $55 per point. Do you think the proceeds of your OKW contract with only 15 years of use would cover the difference?

Here's the scenario I came up with in the "poll" thread:

Let me break down what I get for the number you use, above (ed note: which was that he'd have 4500 to invest if he didn't "buy in" to the OKW extension). I'm assuming you're using the $15 per point break down, for 300 points. If you're assuming $25 per point for 180 points...the numbers will be different, obviously.

You invest 4500. In 2042, assuming a conservative rate of return of 7%, you'd have about 48044.62 (I'm compounding annually, not daily or monthly, so compounding daily or monthly will have some positive effect on that number). To replace your 300 points with points that expire in 2057 (which, really, right now are AKV points) for 160.14 per point to "break even". Less and you show a profit, more and you take a loss. That's only $56 above current retail price (without incentive). In comparison, OKW has seen an approximate 50% increase in 10 years...about $25...on the resale side. Granted, there's no telling what will happen over the next 35 years, or as it approaches expiration.

Obviously, varying your rate of return will change that number greatly.

Comparing to room rates, instead:

Using the above example, your 48044 would get you 3202 per year (assuming 15 years) of vacation money. 300 points gets you, approximatetly, 2 weeks in a studio-ish. So lets go further and say you'd get about 1602 per week to spend on accomodations, or 228.85 per night. That's lower than what people pay NOW for many rooms at WDW.

If you leave the money invested, and simply draw off the vacation expense, you could start off at about $4300 per year, in 2042 Assuming a 3% room rate increase, over the next 15 years, and you'd be left with 430.21. Again, if we break down the $4300 over 14 nights, you'd be looking at 307.14 per night for 2042, going up by the 3% per year I mentioned.

Again, I can certainly see scenarios where the extension makes sense, depending on what you plan to do with your contract and how you plan to use it.

 

[pilferk]

Just curious ... why would one want to spend $15 now in hopes of being able to achieve $10 or $15 in the future? The present value / future value comparison certainly doesn't make any financial sense to do so. If someone wants to extend to pass on to children, that makes sense, but there is definitely NO current benefit of extending.

The supposition is that the difference in resale value will be "more" than $15 per point. If not immediately (something we don't know), then within, say, 10 years time...as the 2042 contracts get closer to expiration.

That's what the "current" benefit would be: commanding a higher price at resale.