2042 expiration - defaults?

[CarolynFH]

maybe DVC will stop offering mortgages on these sold out resorts well in advance, but it is possible that someone may still be paying on a mortgage for one of these resorts when the points expire. That was my point.

As above, it’s unlikely that a lender would finance a mortgage if the mortgage would outlive the property ownership. However, a mortgage on a piece of property is different from financial responsibility for operations and maintenance of that property, which is what I thought you were referring to.

 

[BaybeeYoda]

BWV is the only WDW resort expiring in 2041 that has Grand Villas, but Hilton Head has them and Vero Beach has them them under a different name, Three-Bedroon Beach Cottages.

Thx. I’ll be 69/70 in 2041. Young enough to enjoy and treat myself to a villa one last time (assuming I’m healthy and if I’m still around). Something to look forward to….

 

[muppets3d]

I wonder when they’ll stop selling these resorts altogether. I know some folks buy Vero direct, even with the high dues, because it’s the cheapest way to buy direct. But assuming they take out a 10 year note, that leaves less than 10 years on the other end if they keep the contract through expiration.

 

[CarolynFH]

I wonder when they’ll stop selling these resorts altogether. I know some folks buy Vero direct, even with the high dues, because it’s the cheapest way to buy direct. But assuming they take out a 10 year note, that leaves less than 10 years on the other end if they keep the contract through expiration.

Yes, it's up to the mortgage lender to decide whether to make that loan to the buyer. The shorter the life of the resort in question, the less likely a buyer is to be able to finance the purchase, I would think.

 

[drusba]

Even if nothing special is done, I do not suspect that in 2041, DVC is going to face more than what it historically has seen in unpaid dues, which is usually quite a few based on foreclosure proceedings begun by DVC, but those generally result from a member’s inability to keep paying dues rather than just a desire to escape them. Despite everything I have seen in the last several years relating to political matters and people involved in, and reporters reporting on, them, I am still one of those who believe DVC members are generally honest and honorable people who will not purposefully be doing something like refusing to pay dues and thus face the possible harmful credit impact such could have on them. More likely owners will still be reserving rooms to be occupied in 2041, and, if unable to get home resort, they will still be able to get other resorts at 7-months out such as SSR. Assuming the resorts are actually left to expire in Jan 2042, with DVC doing little to prevent that, I would guess one thing we would likely see is limitations placed on borrowing in the last few years.

We are all speculating as to what will happen come 2042, and yes, it is fun to do, so I thought I would provide some of my speculations on possibilities.

A. OKW

OKW does not expire until 2057. An unknown is what percentage of owners, come about 2040, will be owners with a 2042 expiration. It appears that when the extension was offered in 2007, only about 30% did the extension. However, the percentage of owners with the 2057 end date is likely already much higher, and will possibly even be as high as 90% or more, come 2040. That is because for all resales that have occurred since 2007, for which DVD exercised ROFR, the points became 2057 points for sales of such points by DVD to the public. The number of original purchasers of OKW with the 2042 end date, will, come 2040, likely be fairly small, if any are left. Ones left may instead be mostly resale purchasers of OKW 2042 contracts for which DVD did not exercise ROFR, or relatives of the original purchasers of OKW contracts from DVD who became members upon transfer from, or upon the death of, the original purchasers.

That would indicate that come the 2030’s, there may be a significant number of members young enough for which purchasing an extension of their 2042 contracts to 2057 may be an easier sell for DVD than when it made the attempt in 2007. DVD could start offering, possibly as early as 2035 or even before, extensions to 2057 to those holding any remaining 2042 contracts. The ultimate result could be that the percentage of those still left with 2042 contracts come Jan 2042 may be quite small, and DVD could thus avoid the problem of having a lot of points to sell from expiring contracts mostly to new purchasers who can purchase only a 15-year contract.

B. BRV

BRV is unique because of its relationship with CCV which has a 2068 end date, and they both have mostly the same point requirements per night for studios, 1BRs and 2BRs. The consideration becomes whether DVD will really want to shut down BRV, do a significant refurb, and then turn it into a new 50-year resort for which both the points needed per night and price per point will be significantly higher than CCV’s at the time, which could make BRV a difficult-to-sell resort because CCV will be cheaper in price per point and points needed per night.

A possible alternative, starting sometime in the 2030’s, is for DVD to extend BRV to 2068, with the same per point per night costs as before and a price per point equaling CCV’s at the time. That might result in a large number of extension sales to BRV owners, and new purchasers will get 26 and more years to expiration that will look like a bargain in relation to other near park resorts that will at the time likely have higher per night point costs for a purchase price more than BRV/CCV. (And the lower point per night cost at BWV and BCV will, absent an extension for them, not be something of interest to buy at the time.)

C. BWV and BCV

I doubt there will be extensions of BWV or BCV, because they are two resorts for which DVD likely believes it can make a lot of sales after a significant refurb at a high per point cost with higher per night per room point costs than currently exist for the two resorts, including making the boadwalk view rooms have a higher point cost per night than any like-sized rooms at both BWV and BCV. Thus, an extension offer is likely not on the agenda, although one cannot be completely ruled out.

A different concept that could help assure a large number of sales starting 2042, or sales starting even a few years before to take effect in 2042, is a bit more complex. DVD could turn to the trust form of timeshares like CFW. Using that form would allow it to set up a new timeshare resort for as little as 30-years and thus a 2072 expiration date. It could make BCV and BWV both part of the same trust and thus sell trust shares where purchasers would get the right to reserve both resorts at 11-months out. The price per point could be a little less than Poly and VGF at the time, while its per night point cost per room could also be a little less than VGF and Poly. The trust form of ownership for the two resorts giving purchasers an 11-month window for both BCV and BWV, a 2072 end date that would make it a resort with an end date several years later than VGF (2064) and Poly (2068), and the little lower per point purchase price and per night cost than VGF and Poly, could make the BWV/BCV trust ownership something in high demand.

D. Hilton Head and Vero Beach

I cannot guess as to what DVD may want to do with Hilton Head and Vero Beach. Possibly, DVD may not want to keep them and just sell them to some other company in 2042. There has been no addition of a non-park resort since Aulani in 2010, which resort is still not at the sold-out stage, and supposed plans to build other new resorts at non-park locations have disappeared. Both Hilton Head and Vero took a very long time to reach sell-out stage, and, at Vero, part of Disney’s land, which was supposed to be used for an addition to the resort, got sold. Both HH and VB cost less per point than most other resorts but have high dues, mainly as a result of being close to the ocean and thus subject to more severe wear and tear than other resorts and having a greater hurricane risk than other resorts.

That is not to say the resorts are inferior. I have not been to HH but I know the Hilton Head area is a good place for a vacation (was there twice before DVC HH came into existence) I have been twice to VB, and it is a really nice resort and, if you have a car, there are many interesting places to go in VB and other towns and cities nearby. But … neither is Disney World or Disneyland. Perhaps something could be done with the resorts using the trust program that could help purchasing demand, e.g., join one of them, such as Vero Beach, to a future trust with some CFW cabins. But I still feel there is a real risk that Disney may just sell the resorts.

 

[DonMacGregor]

A possible alternative, starting sometime in the 2030’s, is for DVD to extend BRV to 2068, with the same per point per night costs as before and a price per point equaling CCV’s at the time. That might result in a large number of extension sales to BRV owners, and new purchasers will get 26 and more years to expiration that will look like a bargain in relation to other near park resorts that will at the time likely have higher per night point costs for a purchase price more than BRV/CCV. (And the lower point per night cost at BWV and BCV will, absent an extension for them, not be something of interest to buy at the time.)

This has been one of the scenarios I've speculated on, despite the chorus of "look how much of a failure OKW was" naysayers.
OKW was a failure for a number of reasons, not the least of which being the timing. The resort still had, what, 35 years left, and DVC thought owners would jump at the prospect of adding years, decades in the future? I think there's a good chance BRV, BCV, or even (to a lesser degree) BWV could be extended for some number of years, either to match an existing adjacent resort (BRV), or simply to offset/stagger the expiry dates on the two Crescent Lake resorts. I will say though, a 26-year extension may be pushing it...

 

[eticketplease]

Even if nothing special is done, I do not suspect that in 2041, DVC is going to face more than what it historically has seen in unpaid dues, which is usually quite a few based on foreclosure proceedings begun by DVC, but those generally result from a member’s inability to keep paying dues rather than just a desire to escape them. Despite everything I have seen in the last several years relating to political matters and people involved in, and reporters reporting on, them, I am still one of those who believe DVC members are generally honest and honorable people who will not purposefully be doing something like refusing to pay dues and thus face the possible harmful credit impact such could have on them. More likely owners will still be reserving rooms to be occupied in 2041, and, if unable to get home resort, they will still be able to get other resorts at 7-months out such as SSR. Assuming the resorts are actually left to expire in Jan 2042, with DVC doing little to prevent that, I would guess one thing we would likely see is limitations placed on borrowing in the last few years.

We are all speculating as to what will happen come 2042, and yes, it is fun to do, so I thought I would provide some my speculations on possibilities.

A. OKW

OKW does not expire until 2057. An unknown is what percentage of owners, come about 2040, will be owners with a 2042 expiration. It appears that when that the extension was offered in 2007, only about 30% did the extension. However, the percentage of owners with the 2057 end date is likely already much higher, and will possibly even be as high as 90% or more, come 2040. That is because for all resales that have occurred since 2007, for which DVD exercised ROFR, the points became 2057 points for sales of such points by DVD to the public. The number of original purchasers of OKW with the 2042 end date, will, come 2040, likely be fairly small, if any are left. Ones left may instead be mostly be resale purchasers of OKW 2042 contracts for which DVD did not exercise ROFR, or relatives of the original purchasers of OKW contracts from DVD who became members upon transfer from, or upon the death of, the original purchasers.

That would indicate that come the 2030’s, there may be a significant number of members young enough for which purchasing an extension of their 2042 contracts to 2057 may be an easier sell for DVD than when it made the attempt in 2007. DVD could start offering, possibly as early as 2035 or even before, extensions to 2057 to those holding any remaining 2042 contracts. The ultimate result could be that the percentage of those still left with 2042 contracts come Jan 2042 may be quite small, and DVD could thus avoid the problem of having a lot of points to sell from expiring contracts mostly to new purchasers who can purchase only a 15-year contract.

B. BRV

BRV is unique because of its relationship with CCV which has a 2068 end date, and they both have mostly the same point requirements per night for studios, 1BRs and 2BRs. The consideration becomes whether DVD will really want to shut down BRV, do a significant refurb, and then turn it into a new 50-year resort for which both the points needed per night and price per point will be significantly higher than CCV’s at the time, which could make BRV a difficult-to-sell resort because CCV will be cheaper in price per point and points needed per night.

A possible alternative, starting sometime in the 2030’s, is for DVD to extend BRV to 2068, with the same per point per night costs as before and a price per point equaling CCV’s at the time. That might result in a large number of extension sales to BRV owners, and new purchasers will get 26 and more years to expiration that will look like a bargain in relation to other near park resorts that will at the time likely have higher per night point costs for a purchase price more than BRV/CCV. (And the lower point per night cost at BWV and BCV will, absent an extension for them, not be something of interest to buy at the time.)

C. BWV and BCV

I doubt there will be extensions of BWV or BCV, because they are two resorts for which DVD likely believes it can make a lot of sales after a significant refurb at a high per point cost with higher per night per room point costs than currently exist for the two resorts, including making the boadwalk view rooms have a higher point cost per night than any like-sized rooms at both BWV and BCV. Thus, an extension offer is likely not on the agenda, although one cannot be completely ruled out.

A different concept that could help assure a large number of sales starting 2042, or sales starting even a few years before to take effect in 2042, is a bit more complex. DVD could turn to the trust form of timeshares like CFW. Using that form would allow it to set up a new timeshare resort for as little as 30-years and thus a 2072 expiration date. It could make BCV and BWV both part of the same trust and thus sell trust shares where purchasers would get the right to reserve both resorts at 11-months out. The price per point could be a little less than Poly and VGF at the time, while its per night point cost per room could also be a little less than VGF and Poly. The trust form of ownership for the two resorts giving purchasers an 11-month widow for both BCV and BWV, a 2072 end date that would make it a resort with an end date several years later than VGF (2064) and Poly (2068), and the little lower per point purchase price and per night cost than VGF and Poly, could make the BWV/BCV trust ownership something in high demand.

D. Hilton Head and Vero Beach

I cannot guess as to what DVD may want to do with Hilton Head and Vero Beach. Possibly, DVD may not want to keep them and just sell them to some other company in 2042. There has been no addition of a non-park resort since Aulani in 2010, which resort is still not at the sold-out stage, and supposed plans to build other new resorts at non-park locations have disappeared. Both Hilton Head and Vero took a very long time to reach sell-out stage, and, at Vero, part of Disney’s land, which was supposed to be used for an addition to the resort, got sold. Both HH and VB cost less per point than most other resorts but have high dues, mainly as a result of being close to the ocean and thus subject to more severe wear and tear than other resorts and having a greater hurricane risk than other resorts.

That is not to say the resorts are inferior. I have not been to HH but I know the Hilton Head area is a good place for a vacation (was there twice before DVC HH came into existence) I have been twice to VB, and it is a really nice resort and, if you have a car, there are many interesting places to go in VB and other towns and cities nearby. But … neither is Disney World or Disneyland. Perhaps something could be done with the resorts using the trust program that could help purchasing demand, e.g., join one of them, such as Vero Beach, to a future trust with some CFW cabins. But I still feel there is a real risk that Disney mayl just sell the resorts.

Not a BRV owner but I’m certainly onboard with”B”.

It certainly makes sense to me. It also would be easier to do in my eyes as it is a smaller resort and a good location.

 

[BeachClub2014]

This has been one of the scenarios I've speculated on, despite the chorus of "look how much of a failure OKW was" naysayers.
OKW was a failure for a number of reasons, not the least of which being the timing. The resort still had, what, 35 years left, and DVC thought owners would jump at the prospect of adding years, decades in the future? I think there's a good chance BRV, BCV, or even (to a lesser degree) BWV could be extended for some number of years, either to match an existing adjacent resort (BRV), or simply to offset/stagger the expiry dates on the two Crescent Lake resorts. I will say though, a 26-year extension may be pushing it...

I agree that extensions at other resorts aren't necessarily off the table, especially in a scenario like BRV. I would throw out there that perhaps one of the most compelling reasons the new Poly tower was put into the same association as the legacy Poly was to avoid staggered expiration dates in the future. If that is/was one of the prevailing thoughts for DVC, then it certainly isn't out of the realm of possibility for a BRV extension to align with CCV.

I would also add that the OKW extension debacle taught DVC how NOT to do it, and if they apply those lessons learned moving forward, an extension at other resorts seems possible.

 

[zavandor]

But how an extension at BRV to align it with CCV would work?
As per Florida law, a new association must have 40 years remaining, so that is ruled out.
The extension of the lease was a big failure for OKW, so rule that out too.
Maybe they could just declare the BRV units into the CCV association. When declaring new units, do they need to have 40 years left? I think not, but not sure.
Maybe they can add BRV units to the CFW/(?)Reflection(?) Trust, but that would mean adding units with a shorter expiration to the trust.

 

[drusba]

But how an extension at BRV to align it with CCV would work?
As per Florida law, a new association must have 40 years remaining, so that is ruled out.
The extension of the lease was a big failure for OKW, so rule that out too.
Maybe they could just declare the BRV units into the CCV association. When declaring new units, do they need to have 40 years left? I think not, but not sure.
Maybe they can add BRV units to the CFW/(?)Reflection(?) Trust, but that would mean adding units with a shorter expiration to the trust.

All the existing units in a condominium resort can be extended for essentially any amount of time. The original extension for OKW was only 15 years. Since OKW already has the 2057 end date, DVC can just renew offering the existing owners in the 2030's the ability to purchase an extension if they have the 2042 end date. If DVC were adding lots of new units to the BRV resort not contained in the BRV building, that would be subject to the required minimum number of years. For the addition of both the VGF and Poly buildings, the time left was more than 40 years. CCV could not be added to BRV when it was completed because the time left for BRV was only 25 years.

A main reason for the failure of the OKW extension was probably the fact that most of the existing owners at the time doubted they would be around to really use any or much of the extension years. The situation would be different and likely far more successful if DVC started allowing those with 2042 end dates at OKW to purchase an extension in the mid-2030's. Most of those potential buyers would likely be owners who were resale purchasers and buying an extension in the 1930's would also make them, upon the purchase, able to use all the member benefits. Likewise, doing an extension for BRV at the same time could result in many purchasing the extension and becoming eligible for the member benefits. And BRV, when it expires in 2042, cannot be added to CCV because only 26 years would remain on the CCV resort. Thus, a BRV extension would be the option to make the two resorts have the same expiration date. An extension does not change the applicable association.

Adding BRV to a Fort Wilderness trust resort In 2042 is an outside possibility. It would likely not be an addition to the existing CFW trust. The current CFW POS indicates that DVD will apparently be creating different trusts that may include future cabins and another resort, such as Reflections. In other words, the existing trust appears designed for the existing cabins and maybe some more in the future, but leaves DVD the option to have a separate trust for some new cabins and another resort in the future. The length of those trusts do not have to be more than 30 years and thus BRV could be added as long as at least 30 years in the particular trust still remained. One might perceive if Reflections shows up in 1930, Reflections could be in a new trust with a 50-year expiration date, to which a new BRV could be easily added in 2042, but it could not be added until then, and thus DVD will still have the problem of a completely unsold resort that now has to be sold beginning 2042.

 

[DonMacGregor]

All the existing units in a condominium resort can be extended for essentially any amount of time. The original extension for OKW was only 15 years. Since OKW already has the 2057 end date, DVC can just renew offering the existing owners in the 2030's the ability to purchase an extension if they have the 2042 end date. If DVC were adding lots of new units to the BRV resort not contained in the BRV building, that would be subject to the required minimum number of years. For the addition of both the VGF and Poly buildings, the time left was more than 40 years. CCV could not be added to BRV when it was completed because the time left for BRV was only 25 years.

A main reason for the failure of the OKW extension was probably the fact that most of the existing owners at the time doubted they would be around to really use any or much of the extension years. The situation would be different and likely far more successful if DVC started allowing those with 2042 end dates at OKW to purchase an extension in the mid-to late 2030's. Most of those would likely be owners who were resale purchasers and buying an extension in the 1930's would also make them, upon the purchase able to use all the member benefits. Likewise, doing an extension for BRV at the same time could result in many purchasing the extension and becoming eligible for the member benefits. And BRV, when it expires in 2042, cannot be added to CCV because only 26 years would remain on the CCV resort. Thus, a BRV extension would be the option to make the two resorts have the same expiration date. An extension does not change the applicable association.

Adding BRV to a Fort Wilderness trust resort In 2042 is an outside possibility. It would likely not be an addition to the existing CFW trust. The current CFW POS indicates that DVD will apparently be creating different trusts that may include future cabins and another resort, such as Reflections. In other words, the existing trust appears designed for the existing cabins and maybe some more in the future, but leaves DVD the option to have a separate trust for some new cabins and another resort in the future. The length of those trusts do not have to be more than 30 years and thus BRV could be added as long as at least 30 years in the particular trust still remained. One might perceive if Reflections shows up in 1930, Reflections could be in a new trust with a 50-year expiration date, to which a new BRV could be easily added in 2042, but it could not be added until then, and thus DVD will still have the problem of a completely unsold resort that now has to be sold beginning 2042.

Thanks. Finally someone who gets what I've been trying to say, particularly regarding the OKW extension failure. Extending a 2042 resort when it's down to 10 years remaining is a FAR cry from trying to extend the resort when it still has over 3 decades left before expiration.

 

[juliebee]

The situation would be different and likely far more successful if DVC started allowing those with 2042 end dates at OKW to purchase an extension in the mid-2030's. Most of those potential buyers would likely be owners who were resale purchasers and buying an extension in the 1930's would also make them, upon the purchase, able to use all the member benefits. Likewise, doing an extension for BRV at the same time could result in many purchasing the extension and becoming eligible for the member benefits.

I like this idea. Hope they are listening!

 

[CarolynFH]

@drusba, I thought one of the issues raised with the OKW extension was that if Disney extended the ground lease for the condo association, it automatically extended ownership for everyone? Is that not the case or is that an issue that would have to be decided in court? I thought that was the reason that Disney now requires a quit claim deed before allowing resale of existing 2042 OKW contracts.

And I think I also saw something about that action requiring a vote of the owners, not just the board? My memory is vague on that point.

 

[AdamsMum]

Say it’s 2038… 2039… I can’t imagine 2042 resorts will have any resale value. For people who don’t have intentions of staying with a DVC past 2042, do you think people will just start defaulting in dues and let Disney take the contract back instead of paying the $4-5k annual dues it will be by then? Assuming 5% increase per year, dues will be approx double what they are now.

Not a chance, they'll have to pry my BWV points from my cold dead hands.

 

[Sandisw]

@drusba, I thought one of the issues raised with the OKW extension was that if Disney extended the ground lease for the condo association, it automatically extended ownership for everyone? Is that not the case or is that an issue that would have to be decided in court? I thought that was the reason that Disney now requires a quit claim deed before allowing resale of existing 2042 OKW contracts.

And I think I also saw something about that action requiring a vote of the owners, not just the board? My memory is vague on that point.

That is my understanding. They could do it with a vote but not unilaterally like they did.

The other reason I just don’t see them doing it for BWV and BCV are the point charts. I think would be more likely to move those units under the trust, change the point charts and call it a day.

 

[drusba]

@drusba, I thought one of the issues raised with the OKW extension was that if Disney extended the ground lease for the condo association, it automatically extended ownership for everyone? Is that not the case or is that an issue that would have to be decided in court? I thought that was the reason that Disney now requires a quit claim deed before allowing resale of existing 2042 OKW contracts.

And I think I also saw something about that action requiring a vote of the owners, not just the board? My memory is vague on that point.

The lease that exists is between the Disney company that owns and controls the land (the main company at WDW, which was named Worldco when the 1942 leases were done) and DVD. The main documents that relate to the lease are the lease itslelf, the summary of it in the POS, and the "Master Declaration of Covenants, Conditions and Restrictions" which relates to the land, its uses. and upkeep. As stated in the Master Declarations, the member/owners have a right to vote on changes to those documents only if the changes would materially effect the ownership rights they already have. None subject to the January 31,1942 end date have any right to own or use the condominiums after January 31, 2042. If the extension agreement actually required the owners to agree to the extension and pay the money required to keep their interest until the end of the extension period, that would require a vote. The lease extension that was made at OKW, and could be made elsewhere, requires no approval from anyone other than DVD and the lead Disney company at WDW that owns the land.

There is nothing in the law or the POS I am aware of that says an extension means all member/owners automatically get the extension. As long as the extension is provided with the caveat that existing owners will be entitled to It only if they purchase the extended time for their ownership interests, there should not be an issue. Note, if the actual lessee of the leased land were the association controlled by the members, that could create a different issue, requiring member approval, but that is not the DVC situation.

When the OKW extension was done, DVD kept insisting that owners who did not want to extend had to sign a quit-claim deed which showed they had declined to extend and that the end date for their ownership interest was 2042. Many did not sign it, but it has been a regular document required for resales of 2042 ownership interests at OKW. Many have construed that activity to mean that DVD must have recognized that there was a serious issue that members who did not agree to extend could later possibly claim that they were entitled to the extension regardless of not purchasing an extension. Maybe that is one possible conclusion the lawyers discussed as an outside possibility with DVD and Disney co. at the time of doing the extension, but my sense is the likely reason for the quit-claim deeds was to prevent fraudulent transfers and then have resale purchasers claiming their belief that the contract they bought resale had the 2057 end date. The original deeds themselves do not provide an end date. And if you did only a quick internet check you might find that 2057 is the lease end date. The seller may say nothing about the actual applicable end date. In other words, a risk existed that resale purchasers might incorrectly believe the end date was 2057 -- and then sue DVD itself later for failure to make it clear that 2042 was the end date. The filing of quit claim deeds would provide that clarity.

 

[CarolynFH]

@drusba, thank you. I appreciate your explanations very much!