15 Year Extension at OKW for $25 per point

[BWV Dreamin]

Part of the issue here, IMHO, is that Disney/DVC has a surplus of inventory for OKW. If people do not want to buy to stay there now, how is extending the deed to 2057 going to make people want to purchase? Its still about location, and I feel even if they never extend the other 2042 WDW resorts, they will still be in demand.

 

[kend58]

There are folks who want OKW and want till 2057 for that camp if the rumoured $15 discounted price comes through the decison is relatively simple.

The issue for others (who might sell or who would be just as happy at SSR or AKV or some yet to built DVC) the question is more complicated IMHO. For this group the question is best value for 2057 or later expiry date. I agree that for sellers the key issue is what value will the 15 year extension have in the future resale market (the best current indicator is less than $15 based on SSR and OKW current resales prices SSR only sells at about $7 to 8 premium over OKW so that 12 year advantage is valued at well under $1 per year more like $00.66 so the 15 years should come out to be valued at about $10. I don't see buying the extension as a money maker it might be a good value if you plan to use the future vacation years but it is not a good investment in terms of return on capital based on current market indications.

 

[dvcbrad]

Exactly. Let's say I want to sell in 2037 to avoid having to continue paying the maintenance fees. With five years left, my contract will be worth only a small proportion of what the contract would be worth with 20 years left. For example, the contract for five years left might be worth $20 per point while, reasonably, the one with twenty years left would be worth near fully inflated value (my guess is that will be around $300 per point at that time). All I said was that the contracts would go up in the short term by $15 per point. I did not say that that would be the difference between the two types of contracts. The market will determine that, but I am guessing that the difference will be many times that amount of money as we get closer and closer to 2042.

Your analysis does make some sense; however, there are too many what if's and assumptions built into that analysis for my taste. Personally, I still think it sounds like paying $15 now for no benefit at all until 2042. Overall, it kind of sounds like betting on the come to me, and I don't think i'm interested in doing that unless there's more of an immediate benefit to it as well.

 

[Dean]

If it does happen one can bet that it won't be the last time or last discount option that is available. And while it's likely this would create a difference between 2057 & 2042 contracts, I doubt it'll make up for the $15 pp upfront difference. Actually this will likely help the OKW prices long term for the 2042 contracts if DVC gives new members the chance to upgrade. This will likely soften the inevitable price decrease as the expiration date gets closer.

 

[Msteg]

This is my first post on this very interesting thread. Does anyone know approximately how many total OKW points that Disney has already sold to us DVC members? At $25 or even $15 per point, there is a whole lot of $$$ that Disney needs to safely invest in some way in 2008 to provide the future benefit for DVC members to use OKW 35 to 50 years from now.

It is one thing to buy points that have a current vacation use value. What assurance do we members have that when the time comes 35 years from now, the money we pay out in 2008 will really be there to maintain the quality facilities we have come to expect? Shouldn't there be some writtten guarantee or restriction on how this new income is used or invested by Disney?

Mike

 

[RobDoc]

This is my first post on this very interesting thread. Does anyone know approximately how many total OKW points that Disney has already sold to us DVC members? At $25 or even $15 per point, there is a whole lot of $$$ that Disney needs to safely invest in some way in 2008 to provide the future benefit for DVC members to use OKW 35 to 50 years from now.

It is one thing to buy points that have a current vacation use value. What assurance do we members have that when the time comes 35 years from now, the money we pay out in 2008 will really be there to maintain the quality facilities we have come to expect? Shouldn't there be some writtten guarantee or restriction on how this new income is used or invested by Disney?

Mike

All operating expenses, taxes and capital improvements are paid from our dues - so the income gained from selling additional contract years is mostly profit. There is no suggestion that this will be used for any improvements - nor should we expect that. This extension simply adds the right to use the property for an additional 15 years. I would expect that there is some consideration being "paid" to Disney by DVD in order to lease the land for the additional years and that is likely the only expense against the revenue gained. There is certainly no indication that members should anticipate any additional benefit beyond the ability to sustain their membership for an additional 15 years. Other "improvements" will still be covered by the annual fees.

 

[msdis]

Does anyone have any idea if they will be selling 2 expiration dates on resales in the future or if the OKW resales will all have the new date?

 

[pilferk]

I know most of the posts here are considering the extension from a financial standpoint, but let me interject a slightly different observation.

In 2042, OKW will be 50 years old.

Have you recently stayed in any hotel or resort that is 50 years old?

We just got back from one built in the early 80's and it was WAY out of date. No central a/c (had window units). Small bedroom. Small bed. No "built-in" microwave. Older appliances. Just tired.

That's a 25 year old resort. Now, imagine what a 50 year old resort might look like...

No a/c. REAL small rooms. Older electric. Out-of-date insulation (sound & weather). No room for newer, in-demand appliances (washer/dryer, dishwasher, microwave, etc). Out-of-date ammenities. Etc, etc, etc.

People's living habits change as technology changes. OKW is only 15 years old. How long have we been told we're getting DVD players? By they time they put them in, THEY'LL be out-of-date (for HD/Blue Ray players). How bad do the A/C units drip from the ceilings in every studio we've stayed in? How bad is the mildew in the bathrooms? What's it going to be like in 15 more years? How about 15 after that? Then, there will STILL be another 5 before the ORIGINAL contracts are up.

Vacation habits are going to change, too. I wouldn't think of staying in a 50 year old resort. Even if they kept up the maintenance (which I'm sure DVC will do). It would have to be COMPLETELY gutted and remodled (which I doubt DVC will be willing or have the funds to do).

50 years ago, you would be lucky to have your own bathroom. 20-30 years ago, you felt like royalty if you had a coffeemaker, free daily paper, and microwave. Now, we wouldn't even think of staying somewhere without A/C or a telephone. Many of us wouldn't stay somewhere without internet access.

In 10-15 years, we vacationers might expect flat-screen HDTV's, TV's in the bathroom, granite countertops, king-size select comfort beds, bidets, computers w/(free) internet access, cappuccino makers, and who knows what technologies that haven't been invented yet.

At that point, we might not be looking at OKW the same way we do now. And, so will people looking to buy into DVC through resale, especially if there is a new DVC resort offering the expected ammenities.

So, I doubt I'll be plucking down $25 or even $15 a point to use a 50 year old resort 35 years from now. I'll invest the money and hope that the inflationary cost of getting into a new DVC resort in 30 years will be roughly the same as I can get investing.

Two quick points:

1) The Contemp and the Poly are both "up there" in years....yet I'd say they're faring pretty well. Is that a sign that OKW will do the same? No. But it should at least enter into the consideration.

2) Who says you have to stay at OKW? The beauty of DVC points is that you could choose to stay elsewhere...say at AKV (since you KNOW that resort will be around in 2057). Now, yes....there will be LOTS of arguments that availability could be an issue if OKW and AKV are the last DVC resorts standing in 2057 and SOMEONE will be staying at OKW. It's a valid point. But only if you assume a) the other resorts won't get an extension too and b) there will be no new DVC resorts at WDW with later expirations.

Again, you certainly make a good point, but in considering it, there's some other things to think about too.

 

[pilferk]

Jim,

In Ten years, HOW much more resale value will an extended contract have vs. your current one? That is the question and that is the bet you are making. Obviously it has to resale at least $15 more to break even. Keep in mind that's not a real accruate analysis because those $15 per point today are worth more than $15 per point in ten years. however, do you think the price difference will be MORE that $20 per point in 10 years. I do not believe so, but that is just my "guess". Anyway, let's just say that the resale value on extended contracts is $20 more per point in ten years vs. non-extended ones. On a 200 point contract that means you will be able to sell your extended OKW contract for $4,000 more than you would have otherwise. do you think it is a smart move to invest $3,000 today to get $4,000 in ten years?

If looking at opportunity cost, assuming 7% rate of return, you'd want the points to sell for about 29.51 "more" than the 2042 OKW contracts do. That would outpace your rate of return.

Some "factoids":

$15 today, inflation projected, would be about $19.50 in 10 years.

$75 today (the avg resale price for OKW), inflation projected, would be about 97.50 in 10 years.

In 12 years-ish time, OKW has increased by 50% (about $25-ish) resale.

In 10 years, you'd actually have 5 MORE years on your contract than current resales going for $75 per point do (40 years) and 2042 OKW contracts would, obviously, have 10 years less (25 years). That's a 60% difference.


Now, my opinion: Will the resale price be 60% higher? I don't know (I doubt it though), but I can't see it not being a significant factor. Again, this is all strictly looking at the financials and speculating. Mtnman has some great, valid, points. It's all going to hinge on your perception of what will happen to the DVC market...in other words, you bent on the speculation.

 

[pilferk]

YES - this is my concern. I was thinking that since I have a $50 point contract at OKW it may still move if I were to sell within the next 10 - 15 years. Would the buyer have the option of adding on the 15 years??? It didn't sound like it to me based on the letter sent. It sounds like it's a one time option... although rules can change in time.

If you deed the "extra" years to DVD, I THINK they'd have the option of making a similar offer to a new owner. Since they "own" those years, they'd have the option of redeeding them back to any new owner.

Now, whether they do or not, I don't know. I'd think they would, because, lets face it, it makes good fiscal sense for them to do so. What else are they going to do with all those "extra" years? Granted, they can hold them and either resell them seperately (as 15 year contracts) or have CRO use them...but that's an AWFUL long wait to make money on those years.

 

[pilferk]

remember, my comments are only addressing the specific scenario of PLANNING to sell in about 20 years and wanting maximum resell value.

As such, i see the possible range to be somewhere from "Made a few thousand when I sold" to "this is a rip off". If one buys the contract extention in hopes of making a killing when they resell, I don't see that happening when you factor in the time value of money, etc....

In this scenario, YOU ARE NOT GETING THE VACATIONS by extending!!! You already have those. You are selling before the original contract date anyway. So the only potential benefit is the speculation on the additional resell value. People in this scenario who buy the extention are wagering that the extended contract will maintain a much higher resell value than they would have had originally in 20 years. No doubt that it will. The only problem is how much and whether that is worth spending your money 20 YEARS before you get the benefit.

Correct, but the way it's structured...your deed is being extended whether you pay for it or not. Thus, you're simply increasing the cost of your CURRENT contract. That's what I meant by saying "you're still getting vacations in the interim". Meaning your extended contract will continue to function as normal, you can use the services currently offered, etc. By DOING THAT you reduce the risk because whatever changes occur aren't going to happen overnight....and you'll see them during your use of the services.

That make more sense?

 

[pilferk]

By my calculations, investing $3,000 today to get $4,000 in 10 years is about a 5.3% return on your money. Extending that 5.3% return for 35 years you get about $18,300 or $91 per point. So, even if you were considering using OKW until 2057 you will be able to buy a resale in 2042 and start all over. In addition if the resort is not holding up, (looks outdated, is in need of major rehab, etc.) you can walk away and stay somewhere else.

Just remember, that 3000 to 4000 is a complete and total guesstimate. It may do considerably better...or worse.

I think the chances of you finding a resale in 2042 at $91 per point might be slim. Again, you never know given THOSE contracts will only have 15 years left (the 2057 contracts). But looking at inflation rates, etc.....I'd say that the odds would not be in your favor.

 

[pilferk]

I think betting on time share is a poor investment choice. It could go either way.... But being we do have something to compare OKW to now which is SSR and the difference is not 15 much less 25 a point on the resale market I highly doubt OKW will command 15-25 more than it does now.

The question is not "will it command a $15 premium over OKW resale currently on the market", it's "will it command a $15 premium OVER the 2042 OKW points" and "will it command a greater than $15 premium over 2042 OKW points in the future".

Comparing it to SSR just isn't really valid.

 

[pilferk]

Part of the issue here, IMHO, is that Disney/DVC has a surplus of inventory for OKW. If people do not want to buy to stay there now, how is extending the deed to 2057 going to make people want to purchase? Its still about location, and I feel even if they never extend the other 2042 WDW resorts, they will still be in demand.

It's not always about location. Or not entirely.

One of the very frequent reasons I've seen to buy SSR is/was the longer contract.

I've seen people selling some of their 2042 resorts to buy AKV for the same reason. Adding on to AKV for the same reason.

There's certainly enough anecdotal evidence around to at least look at the fact that contract length DOES enter into the picture when making a decision.

AND if people are right and SSR inventory is low, and AKV inventory is stalled while Kidani is built....OKW may be one of the few options available to "new" buyers. So you'd want that option to be as current as possible (longer contract length).

 

[castleri]

Trying to keep all this straight: Every contract will be extended
1. If I want the extension I have to pay the $25/$15(whichever it turns out to be) and then I officially have a contract that ends in 1057.
2. If I don't want the extension I can sign a deed and let DVD have the addtional 15 years and still have a contract that ends in 2042. I can not sign anything they can put a lien on my contract for $25 a point. I can use the contract until 2042 and then they get the last 15 years as payment of the lien they have on it. If I don't sign the deed and later decide to sell I am thinking that DVC gets $25 a point of my selling price.
3. If I don't sign the deed and they put the lien on the contract and I later want the extension I will have to pay whatever the lien is at that time.

Are there other scenarios that anyone can think of? I know we won't have all the definite answers until after the meeting on the 24th but am really trying to get my mind around as many possibilities as there may be so I can decide what to do when the time comes. Having paid $62.75 a point to start with would bring my cost to $77.75/$87.75 a point. If I should decide to sell the contract when I reach 80 in 16 years will that extra money be there in the resale price? I know I should not really expect to get any of it (original cost or additional cost) back but would like to think there will be something still there at that time if I need to sell. I really hope to be sitting on a balcony at OKW in 2042 but am realistic in that I will be 99 and it may not happen.
My other scenario is to use that money to buy an add on at AKV which will automatically have the extended dates - of course it will only be 30 some points.
I think all the DVC sales of OKW will have the 2057 date after the meeting of the 24th and will be interested to see what price they put on it since they are currently at $92 if I remember correctly. This could be the interesting aspect of the whole thing. Those who recently bought at that price would now be looking at an additional $15/$25 which makes it more than AKV.

Sorry for the rambling but it helps to put things down and then see what others say that could change the whole thought process. Thanks

 

[RobDoc]

Trying to keep all this straight: Every contract will be extended
1. If I want the extension I have to pay the $25/$15(whichever it turns out to be) and then I officially have a contract that ends in 1057.
2. If I don't want the extension I can sign a deed and let DVD have the addtional 15 years and still have a contract that ends in 2042. I can not sign anything they can put a lien on my contract for $25 a point. I can use the contract until 2042 and then they get the last 15 years as payment of the lien they have on it. If I don't sign the deed and later decide to sell I am thinking that DVC gets $25 a point of my selling price.
3. If I don't sign the deed and they put the lien on the contract and I later want the extension I will have to pay whatever the lien is at that time.

Are there other scenarios that anyone can think of? ...

4. If you don't sign the deed or pay the additional cost, they will put a lien on your contract and could prohibit you from making reservations until the lien is satisfied.

There are provisions in the POS for that exact scenario, although it remains to be seen whether they (DVC) would restrict the use of the membership in this situation. (But I won't be the test case.)

 

[mickeys papi]

this question might have already been answered but here goes

what is everyone's opinion of this

if you own okw the thought is if you take the extenison you point value will go up

my question is what if you don't take the extension will the point value go down or stay the same as now

 

[tor]

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.

Something about setting it up this way is not right. It doesnt make sense to force an extension and then sign it over if you dont want it. I say they found a flaw in the original deed an now they are trying to fix it so they dont lose their rights.

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.

Didnt we all take a gamble on our vacation habits when we bought in for fifty years? I may not be sure of the place but I am sure of the vacations and you can swap out like any time share.

 

[debbiepump]

Hi all-
Just read these posts, and I for one will not extend-I'll be pushing daisies by then. IF this affects our resale value but not extending, sadly, I'll be forced to sell now. Disney put a 'lien' on it? Does this affect our credit?? Is this 'lien' on our credit report? The money due end of Feb 2008? Geez, my dues are due then too!!!! With the increased prices at WDW, they're outpricing themselves for me.

 

[Doctor P]

All operating expenses, taxes and capital improvements are paid from our dues - so the income gained from selling additional contract years is mostly profit. There is no suggestion that this will be used for any improvements - nor should we expect that. This extension simply adds the right to use the property for an additional 15 years. I would expect that there is some consideration being "paid" to Disney by DVD in order to lease the land for the additional years and that is likely the only expense against the revenue gained. There is certainly no indication that members should anticipate any additional benefit beyond the ability to sustain their membership for an additional 15 years. Other "improvements" will still be covered by the annual fees.

I don't disagree that everything you have said is correct. However, my gut feeling still tells me that this is about a special assessment that they needed and that they are doing it this way rather than putting in a $15-25 assessment that would likely cause a mass exodus of owner and a further glut of OKW points either on the resale mkt. or in Disney's coffers. I don't think we will ever know, but I do think that if enough owners do not bite on this there WILL be a large special assessment.