2008 Dues Notices are out! (Post #1 updated - All complete!)

[JimC]

Is the VB subsidy transferable? If you buy a resale contract from an early VB owner, does their subsidy transfer to the purchaser? Or does Disney take it back?

 

[diznyfanatic]

Is the VB subsidy transferable? If you buy a resale contract from an early VB owner, does their subsidy transfer to the purchaser? Or does Disney take it back?

From what I've read here as well as a post from Tom at TSS, the VB subsidy is not transferable when the contract is sold.

Can anyone tell me why BWV is always more than say, BCV with SAB?

 

[CarolMN]

From what I've read here as well as a post from Tom at TSS, the VB subsidy is not transferable when the contract is sold.

Can anyone tell me why BWV is always more than say, BCV with SAB?

BWV shares operating expenses with BWI. BCV shares with BC and YC.

I think that the BWV is a larger % of the total BWI/BWV resort than the BCV are of the total BC/YC BCV resort. So essentially, the BWV owners pick up more of the fixed costs than do BCV owners.

 

[diznyfanatic]

BWV shares operating expenses with BWI. BCV shares with BC and YC.

I think that the BWV is a larger % of the total BWI/BWV resort than the BCV are of the total BC/YC BCV resort. So essentially, the BWV owners pick up more of the fixed costs than do BCV owners.

That makes sense Carol. Thanks very much for the helpful information.

 

[RobDoc]

Is the VB subsidy transferable? If you buy a resale contract from an early VB owner, does their subsidy transfer to the purchaser? Or does Disney take it back?

I believe it is like an un-assumable mortgage - DVD will honor the subsidy for the persons who made the original purchase, but the subsidy does not transfer with the contract.

If it did transfer, it would be a great incentive to find those VB(subs) resales.

 

[Caskbill]

Can anyone help me calculate Compound Average Growth Rate using Excel? I keep a DVC Dues History here:

http://personalpages.tds.net/~rb/DIS/DVC/DVCDuesHistory.htm

and I would like to include the CAGR.

Thanks!

I don't know if Excel has a special function or not, but you can probably just plug in the formula:

I wouldn't mess with trying to have Excel count the years for each resort, but just enter the number manually. You could use the cell number references though for the start/stop values.

Let's say you want CAGR for a resort after 12 years, your forumula might look something like this:

CAGR=((Cell# of End/Cell # of Start)^(1/12))-1

It's be easiest to just modify it every year, change the cell reference number for the Ending Value, and change the exponent's denominator value by making it one year longer.

I haven't tested this but it should work.

Hope this helps.

 

[LisaS]

I don't know if Excel has a special function or not, but you can probably just plug in the formula:

I wouldn't mess with trying to have Excel count the years for each resort, but just enter the number manually. You could use the cell number references though for the start/stop values.

Let's say you want CAGR for a resort after 12 years, your formula might look something like this:

CAGR=((Cell# of End/Cell # of Start)^(1/12))-1

Excel's help suggests using Excel's XIRR or IRR function but a Google search turned up this approach which seems easier to use than the functions Excel suggested:

=RATE(NumYears, 0, -DuesFirst, DuesCurrent)

NumYears: number of years, which is one less than the number
of dues values you have (ex: 17 for OKW, 12 for BWV)

DuesFirst: First year's dues (as a negative number)

DuesCurrent: 2008 dues

I coded them up both ways (the CAGR formula and using the RATE function) and got the same results.


To get the number of years, I used Excel's COUNT function which counts the number of cells within a range that have values in them. That way I could use the same range for each column in the spreadsheet. You will need to subtract 1 from the result of the count function since you want the number of elapsed years which is one less than the number of Dues values you have.

ETA: My knowledge of Excel is about one notch above "completely clueless" so please bear that in mind when deciding whether or not to follow my advice!

 

[JimC]

CAGR=((F19/F$2)^(1/(COUNT($F$2:$F19)-1))-1)

Here is the formula for CAGR for OKW for excel where F2 is 1991 dues and F19 is 2008 dues. By locking in the 1992 cell reference you can calculate the CAGR for any point in the resort's history.

 

[LisaS]

CAGR=((F19/F$2)^(1/(COUNT($F$2:$F19)-1))-1)

Here is the formula for CAGR for OKW for excel where F2 is 1992 dues and F19 is 2008 dues. By locking in the 1992 cell reference you can calculate the CAGR for any point in the resort's history.

Just curious: why do you use OKW's 1992 dues as the starting value instead of the 1991 dues?

 

[JimC]

Just curious: why do you use OKW's 1992 dues as the starting value instead of the 1991 dues?

Typo, thanks for catching that Lisa. I will correct my original post.

 

[BobH]

I am an OKW owner still trying to understand all the details contained in the annual estimated budget document. I realize we have given up our rights to vote to the DVC management company, but I would like to gain a better understanding of what is going on with our ownership interest. Could someone answer a question regarding Total revenues vs total capital reserves. Since I am an OKW owner I will use it for an example but I am sure that this will apply to all DVC owners.In the case of OKW the total revenues for 2008 are $24,383,448. The total capital reserves are $5,016,946 which equals 20% of the the total budget. Then I read that the total estimated replacement cost of replacing the whole of OKW is 38,495,441 so the reserves equal 13% of this figure. Can someone assume that these numbers and percentages conform to some generally accepted standards in the condominium or time share industry. In other words how can one analyze these budgets and conclude that DVC is charging us "reasonable" amounts for the operating budget? I know that judging what goes into the total operating budget is probably too difficult for any of us to judge whether it is a reasonsable budget, but I feel sure that the amount of reserves kept on hand vs the total budget probably should conform to some standard. Does anyone know? Any discussion on this subject from people more knowledgeable would be greatly appreciated. I hope I have phrased the questions clearly.

 

[drusba]

I am an OKW owner still trying to understand all the details contained in the annual estimated budget document. I realize we have given up our rights to vote to the DVC management company, but I would like to gain a better understanding of what is going on with our ownership interest. Could someone answer a question regarding Total revenues vs total capital reserves. Since I am an OKW owner I will use it for an example but I am sure that this will apply to all DVC owners.In the case of OKW the total revenues for 2008 are $24,383,448. The total capital reserves are $5,016,946 which equals 20% of the the total budget. Then I read that the total estimated replacement cost of replacing the whole of OKW is 38,495,441 so the reserves equal 13% of this figure. Can someone assume that these numbers and percentages conform to some generally accepted standards in the condominium or time share industry. In other words how can one analyze these budgets and conclude that DVC is charging us "reasonable" amounts for the operating budget? I know that judging what goes into the total operating budget is probably too difficult for any of us to judge whether it is a reasonsable budget, but I feel sure that the amount of reserves kept on hand vs the total budget probably should conform to some standard. Does anyone know? Any discussion on this subject from people more knowledgeable would be greatly appreciated. I hope I have phrased the questions clearly.

There is as far as I am aware no magic formula. By law they must set reasonable and adequate reserves for long term anticipated large cost projects, such as roof replacement. The amount is not determined by replacement cost of entire resort (if you have to replace the entire resort then something has happened to destroy it and that is likely something you buy insurance for), and it is not determined of some percentage of operating costs. However, it is determined by estimated replacement costs of component parts of the resort, e.g., those roofs. I am aware there are a few accepted methods for doing reserves such as a component cost method or a cash flow method but I am not that familiar with what actually occurs using a particular method but they all involve estimating amounts, using construction industry standards, that need to be collected each year plus a factor for inflation to have the total needed when the job is estimated to occur. Note that if you actually have the major project come up, such as complete roof replacement, you can potentially see your total reserves drop from one year to the next after which they begin anew to collect for the next possible roof replacement.

We really cannot tell from info we receive if amounts are reasonable and adequate. We now have historical knowledge (OKW has been around a long time) that makes it appear reserves have been adequate since there has not been a major issue in all that time concerning their adequacy, i.e., anticipated capital projects have occurred and been paid for.

 

[tjkraz]

I know that judging what goes into the total operating budget is probably too difficult for any of us to judge whether it is a reasonsable budget, but I feel sure that the amount of reserves kept on hand vs the total budget probably should conform to some standard.

I'm not sure you can even draw that conclusion. It's likely that each year there will be SOME draw on reserves to fund a project. It could be a one-time replacement like upgraded sofabeds or mattresses, or in the future flat panel TVs. Or it could be something dictated by maintenance schedules like re-roofing or painting specific buildings that have come due.

Without knowing exactly which projects are on the slate for the near future, that percentage alone appears to be entirely meaningless. That 13% as of the end of '07 could rise to (hypothetical) 16% and then 20% over the next two years. But part of that increase may well be stockpiling funds for a project due to commence in 2010. By the end of '10 the expenditures may then take the reserves percentage down to 10%.

Again, it's all guesswork. Unless DVC is willing to open its books to you (you could always ask), we're at the mercy of Florida timeshare laws and appointed regulators to protect our interests.

 

[RobDoc]

In addition to the remarks above by drusba there is a recent example of these estimated Capital Reserve Budget funds from the HH report.

Last year, the HH dues saw a significant increase. Rather than implement an assessment to owners at the HH resort, the Member's Association accepted a loan from DVD to cover repairs (for water intrusion to the facade of the resort) above what was available in the Capital Reserve fund. These repairs had been anticipated, but were found to be necessary prior to the expected timeframe. Delaying the repairs could have resulted in more damage to the buildings. The repairs were completed last spring. The Association will make payments totalling $181,757 during 2008 towards this debt.

DVD made a loan of $930,000 to the resort at a rate of 5.39% to be repaid over the next 6 years from annual fees.

 

[JimC]

Florida has specific regulations regarding replacement reserves. There are options to funding methods. I suspect most operations get periodic engineering reports to guide them on setting reserves. Other states may have specific requirements as well.

The HH loan is a great example why owning in a well financed operation is desirable. The resort is maintained, funding is available and the owners are able to avoid a drastic special assessment.

 

[tubtruck]

What is the interest rate on the HH loan? and doesnt this complicate the resale market as dues must surley now be highr to repay this?

 

[BobH]

From the comments posted here it seems that management of a condominium or timeshare unit is more of an art than a science with the exception of the existence of possible state laws or regulations as mentioned by JimC. Since making the post I have been doing some reading and found one source that said an older development would be well advised to build up a reserve of at least $1000 per living unit and annual contributions that equal 20% of the operating budget. These figures were just rules of thumb however, and the author of them gave no legal or other reason for his statements. As Drusba mentions there does not seem to be any magical formula and the reserves and budget can fluctuate depending on the need to repair specific items within a resort. JimC stated that "owning in a well financed operation is desirable" which is why I bet on DVC in the first place, making the assumption that they would be solvent for many years. Thanks to all of you for your replies. I am going to try to find further information on the regulations of the state of Florida to see if there are any consumer protection information on purchasing timeshares and analyzing how they are run.

 

[JimC]

What is the interest rate on the HH loan? and doesnt this complicate the resale market as dues must surley now be highr to repay this?

Doc reported that the interest rate is 5.39%. Dues will need to be higher to service the debt. However, that is generally easier on the owners than a single special assessment. I do not believe that the dues being higher as a result of the debt service will materially alter the marketability of the resort. Owners of water/beach front property in resort areas are well conditioned after the past few years to the costs of such ownership.

 

[JimC]

Division of Florida Land Sales, Condominiums and Mobile Homes is a good place to start to review the regulations for Florida.

 

[BobH]

Thanks for the website Jim. Reading that information should keep me busy for awhile.