6-month ROFR Analysis

[dmunsil]

UPDATED: May numbers are now complete. There were a few more third-party sales, and only one extra ROFR, at the Wilderness Lodge. All Disney direct sales went up. There were no more gratuitous transfers or foreclosures.

OK, here's the results of my labors this weekend. I've arranged things in tables so it's more compact. I looked at December 2012 through May 2013.

As mentioned in the previous thread, it's pretty easy to see actual third-party transactions, gratuitous transfers (gifts and title name changes), and Disney's own sales. Those numbers are pretty solid. The rest of the transactions seem to be one of the following:

• ROFR
• Foreclosure
• Bankruptcy
• Buy-back or trade-in

I'm basically dividing those into ROFR and non-ROFR, since most of us here are concerned with the likelihood that Disney is going to exercise ROFR on a resale transaction. I believe I can see foreclosures well now; there are a variety of different deeds Disney uses for different situations, but they only seem to use one for ROFRs and buy-backs, and buy-backs seem to be very uncommon. I looked carefully at every transaction for the month of April, and the only two I found were for Animal Kingdom. I then looked at all the Animal Kingdom transactions for all six months and only found a couple more. So I think the numbers are unlikely to be off by much.

So here are the tables:

Third-party Sales

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	24	29	30	27	34	35
VWL	13	9	14	25	18	16
BWV	28	26	28	39	25	25
BCV	8	18	17	24	15	14
OKW	12	22	21	32	30	28
SSR	61	78	51	87	65	104
AKV	29	23	30	26	35	52
------------------------------------------------------
Total	175	205	191	260	222	274

ROFR

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	0	0	0	4	10	4
VWL	0	0	0	5	4	3
BWV	0	0	0	0	16	9
BCV	0	0	0	1	1	3
OKW	28	10	8	8	20	7
SSR	1	0	0	8	17	5
AKV	0	0	0	1	0	2
------------------------------------------------------
Total	57	10	8	27	68	33

Foreclosure/Bankruptcy/Buy-back

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	28	28	8	34	15	6
VWL	1	4	0	2	0	0
BWV	0	0	2	4	1	1
BCV	2	3	4	5	0	1
OKW	0	1	1	2	1	0
SSR	56	84	27	100	22	25
AKV	32	42	18	59	25	20
------------------------------------------------------
Total	119	162	60	206	64	53

ROFR rate

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	0%	0%	0%	13%	23%	10%
VWL	0%	0%	0%	17%	18%	16%
BWV	0%	0%	0%	0%	39%	26%
BCV	0%	0%	0%	4%	6%	18%
OKW	70%	31%	28%	20%	40%	20%
SSR	2%	0%	0%	8%	21%	5%
AKV	0%	0%	0%	4%	0%	4%
------------------------------------------------------
Overall	14%	5%	4%	9%	23%	11%

Gratuitous transfers

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	12	3	20	11	15	16
VWL	7	5	22	7	9	12
BWV	13	14	19	14	21	10
BCV	7	6	16	6	13	17
OKW	28	23	44	28	31	51
SSR	27	19	56	31	30	49
AKV	10	6	15	11	9	10
------------------------------------------------------
Total	104	76	192	108	128	165

Disney direct sales

	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13	May-13
BLT	115	223	170	144	153	58
VWL	19	45	42	15	32	11
BWV	38	76	143	155	53	26
BCV	31	46	26	11	17	10
OKW	47	48	42	58	36	53
SSR	170	188	113	112	89	117
AKV	443	627	421	452	916	804
------------------------------------------------------
Total	863	1253	957	947	1296	1079

Lots of interesting stuff in here. I would never have guessed that Old Key West has the highest likelihood of being ROFRed, but I suppose it has the lowest resale prices at WDW and probably gets the most lowball offers.

It's also interesting to see the sudden spikes and drops, where they'll completely lay off ROFR for several months and then grab a bunch of contracts.

Anyway, it's stuff to chew on. Enjoy!

 

[CarolMN]

Thanks for all your hard work. The results are quite interesting.

FWIW, I think a lot of the OKW ROFR activity might be related to the contract extensions. I'm assuming Disney is buying back mostly 2042 contracts so that they can sell 2057 contracts and "unload" the unsold extension points they own.

 

[iluvthsgam]

Great research, very well done. Thank you for the information.

 

[taaren]

Wow this is fantastic information compilation!

Really interesting stuff ... I wish the Wait Lists were open access so we could compare that to these numbers and see if that's perhaps one of the reasons they ROFR, or if its truly as random as it appears.

 

[Timeflys4us]

Great research, very well done. Thank you for the information.

I agree - great job - is there any chance that your data could be formatted to include the use year; for example, Sales of BCV for October Use Year?

Thanks again.

 

[dmunsil]

I agree - great job - is there any chance that your data could be formatted to include the use year; for example, Sales of BCV for October Use Year?

Thanks again.

You're welcome! Use year is something I didn't consider. I assume that it's distributed roughly the same as use years are distributed for that resort. Somebody somewhere has built pie charts showing the distribution of use years. Since there are so few sales in a specific month, I wouldn't expect it to match the overall use year distribution exactly. So it would be a really noisy measure.

But the big reason is that the info isn't in the database. It's essentially only in the deeds themselves, and with some deeds it's really only in the original deed from Disney. So there's a lot of research for each deed to get that data.

Is there something specific you want to know about use year? Whether Disney is ROFRing one use year more than others?

 

[ELMC]

You're welcome! Use year is something I didn't consider. I assume that it's distributed roughly the same as use years are distributed for that resort. Somebody somewhere has built pie charts showing the distribution of use years. Since there are so few sales in a specific month, I wouldn't expect it to match the overall use year distribution exactly. So it would be a really noisy measure.

But the big reason is that the info isn't in the database. It's essentially only in the deeds themselves, and with some deeds it's really only in the original deed from Disney. So there's a lot of research for each deed to get that data.

Is there something specific you want to know about use year? Whether Disney is ROFRing one use year more than others?

That has been one of the theories bandied about...that ROFR is used to fill wait list requests and the wait lists differ for various UY at different resorts. So a DEC UY contract might be taken at a higher price than a MAR UY contract at the same resort because the possibility exists that nobody is on the wait list for MAR.

 

[iluvthsgam]

That has been one of the theories bandied about...that ROFR is used to fill wait list requests and the wait lists differ for various UY at different resorts. So a DEC UY contract might be taken at a higher price than a MAR UY contract at the same resort because the possibility exists that nobody is on the wait list for MAR.

You have to look at each and every deed to get UY information. But even if you did, would that really help? It is impossible to know what the waitlist information is. So even if you see a bunch of Dec UY ROFR and no March UY ROFR'd in a given time period, there is no way to know if that will continue because you don't know the waitlist data. Unless I am missing something?

 

[ELMC]

You have to look at each and every deed to get UY information. But even if you did, would that really help? It is impossible to know what the waitlist information is. So even if you see a bunch of Dec UY ROFR and no March UY ROFR'd in a given time period, there is no way to know if that will continue because you don't know the waitlist data. Unless I am missing something?

Nope, you're not missing a thing. ROFR remains a mystery, despite our best guesses.

 

[dmunsil]

Yeah, obviously if they can't change use years, they have to grab the use years they need right then. Of course, I'm not sure, legally, why they can't change use years. I've read (OK, skimmed) the legal description of the Boardwalk and Wilderness Lodge, and I can't see the part where they say the use year can't be changed at will by DVD. But maybe it's part of Florida timeshare laws? Or maybe I skimmed too fast.

I wonder if use years are associated with units? Like does one Unit have one use year? Or does each Unit have the same proportion of use years as the whole resort?

The fact that each resort has a different distribution of use years suggests to me that DVD has a lot of leeway in how they divide up the points. It could be that they only have multiple use years to make the guests happy, so they just create them ad hoc if people request a specific one. It could be that when points are returned to the pool, they can assign them to a different use year as long as they account for the difference in immediately available points some way.

It's not even clear to me whether Disney has to worry significantly about whether a contract is loaded or stripped when they get it. I mean, as it is between banking and borrowing they can have more points available for use in a specific year than they have actual units available for people to stay in. So why would it matter in the long run if they grab a stripped contract and resell it with new fresh points? It would seem more like an accounting issue, assuming they have enough slack to play with in terms of units available for cash reservations and so forth. They could "re-inflate" the contract with 200 points, say, and then hold back 200 points worth from the cash inventory to compensate.

 

[bookwormde]

Thanks so much,

great data

My first thoughts do those who post on the ROFR threads get ROFRed at a higher rate than those who do not.

I guess those who read the boards are more knowledgeable and therefor likely offer lower $/pt, so that would be a factor.

 

[dmunsil]

I have updated the original post with the complete May numbers.

 

[DougEMG]

Somehow I missed this threat. Very interesting. Thanks for putting it together.

 

[Hunclemarco]

Thank You for your work... Interesting numbers.

 

[wdrl]

Can you recheck your data on BLT ROFR transactions for December 2012? I did not see any ROFRs for BLT in that month. I only captured 22 foreclosures for BLT in December '12, 13 Certificates of Title and 9 Warranty Deeds in Lieu of Foreclosure.

Regarding Use Years: Once a Use Year is assigned to a Unit, all points allotted to that Unit carry that Use Year for the life of the lease. I can't say if Florida Law or Regulations bar DVD from changing the Use Year of a Unit, but DVD has never commingled Use Years within a Unit. Its virtually impossible for DVD to change a Unit's Use Year after points have been issued because it would have to take back every issued deed and reissue the deeds with a different Use Year.

If DVD reacquires a stripped deed, it is limited with what it can do with those points. DVD will very infrequently sell a deed where points are not available until some future date (new startup resorts, such as VGF, are a different story). Lets say that someone wants buy today a 100-point deed with a February Use Year. DVD reacquires a stripped 100-point deed that doesn't have any points until the February 2014 UY. DVD cannot (does not?) sell that deed until February 1, 2014, when it can offer a full complement of current year points to the buyer.

There are a couple of workarounds that DVD has in its arsenal to get around this problem. Lets say DVD already has 100 points with a February 2013 Use Year in its inventory, but those points are funding a cash reservation. If the cash guest cancels the reservation, it frees up the 100 points. DVD might be able to sell a 100-point deed here in the February 2013 UY. I say "might" because the points all have to come from the very same Unit. DVD cannot sell a real estate interest in two Units on one deed.

The other workaround involves DVD mandatory 2% holding. DVD must retain at least 2% of the total points at each resort. There is no requirement, however, that it hold 2% of the points in each Use Year. If DVD reacquires a stripped deed, those points count toward the 2%. If DVD now exceeds the 2%, it can sell any or all the points it has over that limit, assuming those excess points are fully funded.

 

[dmunsil]

Can you recheck your data on BLT ROFR transactions for December 2012? I did not see any ROFRs for BLT in that month. I only captured 22 foreclosures for BLT in December '12, 13 Certificates of Title and 9 Warranty Deeds in Lieu of Foreclosure.

You're right - apparently a copy-paste error, where I pasted the foreclosure number into the wrong place. Thanks for catching that!

I rechecked and I see 28 foreclosures, and I'd like to know what my extra 6 represent. I'm sure I'm missing something. My foreclosure search is first, to get the judicial foreclosures with no payment, I look for Grantee=DISNEY V and Deed Doc Tax End=1, with Legal Remarks="BAY LAKE TOWER". I don't look at those deeds, generally, I just assume they're foreclosures. I see 16 of those.

Then I change the Deed Doc Tax to begin at 1 (thus seeing deeds involving payment of some kind), and download all of them and review them. If they say "Warranty Deed In Lieu of Foreclosure" I count them as a foreclosure and move on. If it says "Warranty Deed" I look to see if there's the clause about the parties agreeing that this satisfies the debt, and if so treat it as a foreclosure. I see 12: 10 of the first type and 2 of the second type in that set.

There's also a standard Warranty Deed that Disney uses for all of its ROFR exercises, and I sometimes just count those, since they're easy to spot. Sometimes that's used for buy-backs, but those are few and far between. If I'm calculating sale price, they'll stand out because the per-point price will be way out of line.

 

[wdrl]

I use a slightly different method to find reacquired DVC deeds. I search the OCC database for Grantee=Disney and record type=Deed. I then read each deed to collect the type of transaction and number of points. Since I always read every deed, I pay no attention to the legal description on the header page. I don't capture prices on the OCC deeds, so I don't track tax amounts.

 

[dmunsil]

I use a slightly different method to find reacquired DVC deeds. I search the OCC database for Grantee=Disney and record type=Deed. I then read each deed to collect the type of transaction and number of points. Since I always read every deed, I pay no attention to the legal description on the header page. I don't capture prices on the OCC deeds, so I don't track tax amounts.

Hmmm... I'm sure that's more accurate. For the purposes of these numerical comparisons, using the search features of the OCC web site is probably good enough. Plus, if different people using different strategies come up with very similar numbers, that's a great cross-check to make sure no one's made any big errors... like the one I made for BLT.

When I do the detailed price analysis like I did in May, I do read every deed and kick out or reclassify the ones that are misfiled. I might miss one or two that don't come up in my searches, though.