An interesting ROFR case

[dmunsil]

I'm doing a full record search on all the Boardwalk ROFRs for April, looking for things like the Animal Kingdom trade-ins that Nabas found. I gotta say, sometimes there's a whole family saga told in DVC filings.

A real example: A couple buys some DVC, takes out a mortgage, buys an add-on a couple years later, another mortgage. They fall behind in the payments and a lien is filed against both contracts, but they recover and pay off the mortgage 8 months later. Seven years later the husband dies and the wife sells the two contracts, both of which are ROFRed by Disney. I kind of get a tear in my eye reading some of these.

But the most interesting so far is the tale of a couple who bought four separate contracts (150 pts, 50, 100, 100) for Boardwalk and one for Animal Kingdom (150 pts) over the course of seven years, paying off each mortgage over time. Then in April of this year they sell all five in one fell swoop. Four are waived by Disney, and one is ROFRed, all within three days of each other. It's the perfect test case. Here are the numbers:

Waived:
BWV 50 @ 76/pt
BWV 100 @ 72/pt
BWV 100 @ 70/pt
AKV 150 @ 64/pt

ROFRed:
BWV 150 @ 68/pt

Disney had to be looking at all five of these simultaneously, and they chose just one to ROFR. As we've seen, they're pretty much not ROFRing AKV, so that's no surprise. But they did choose the cheapest of the BWV contracts to snag.

I wonder if they just look at the contracts that come in each week, look at their point inventory goals, and snag the cheapest ones in that set that meet their goals. If a low-price one sneaks through, it's because they're flush with inventory right then, or because it didn't happen to be the cheapest that week.

I also wonder if the size of the contract is a factor. There's a certain amount of cost to Disney just to ROFR a contract in terms of handling paperwork and filing fees and so forth. Maybe they prefer large contracts to small ones for efficiency.

 

[agie65]

I'm doing a full record search on all the Boardwalk ROFRs for April, looking for things like the Animal Kingdom trade-ins that Nabas found. I gotta say, sometimes there's a whole family saga told in DVC filings.

A real example: A couple buys some DVC, takes out a mortgage, buys an add-on a couple years later, another mortgage. They fall behind in the payments and a lien is filed against both contracts, but they recover and pay off the mortgage 8 months later. Seven years later the husband dies and the wife sells the two contracts, both of which are ROFRed by Disney. I kind of get a tear in my eye reading some of these.

But the most interesting so far is the tale of a couple who bought four separate contracts (150 pts, 50, 100, 100) for Boardwalk and one for Animal Kingdom (150 pts) over the course of seven years, paying off each mortgage over time. Then in April of this year they sell all five in one fell swoop. Four are waived by Disney, and one is ROFRed, all within three days of each other. It's the perfect test case. Here are the numbers:

Waived:
BWV 50 @ 76/pt
BWV 100 @ 72/pt
BWV 100 @ 70/pt
AKV 150 @ 64/pt

ROFRed:
BWV 150 @ 68/pt

Disney had to be looking at all five of these simultaneously, and they chose just one to ROFR. As we've seen, they're pretty much not ROFRing AKV, so that's no surprise. But they did choose the cheapest of the BWV contracts to snag.

I wonder if they just look at the contracts that come in each week, look at their point inventory goals, and snag the cheapest ones in that set that meet their goals. If a low-price one sneaks through, it's because they're flush with inventory right then, or because it didn't happen to be the cheapest that week.

I also wonder if the size of the contract is a factor. There's a certain amount of cost to Disney just to ROFR a contract in terms of handling paperwork and filing fees and so forth. Maybe they prefer large contracts to small ones for efficiency.

Not a true analysis just with low price. Couple weeks ago disney took high price BLT and let go low price BLT. One rule disney has to follow is, if they can sell the contract as a whole, or in even broken part they will take it. But they will not take one that can not be sold as a whole or even broken part. Because left over point can ONLY be combined with other contract IF they are coming from same unit. So, I don't think disney has that much time to follow if two same unit contracts are coming are not, they can easily fulfill their need by ROFRing easy ones. Yes price in this case was easy one, why would they pay more, since they have the ability to break, we don't.

 

[dbs1228]

Not a true analysis just with low price. Couple weeks ago disney took high price BLT and let go low price BLT. One rule disney has to follow is, if they can sell the contract as a whole, or in even broken part they will take it. But they will not take one that can not be sold as a whole or even broken part. Because left over point can ONLY be combined with other contract IF they are coming from same unit. So, I don't think disney has that much time to follow if two same unit contracts are coming are not, they can easily fulfill their need by ROFRing easy ones. Yes price in this case was easy one, why would they pay more, since they have the ability to break, we don't.

I know people have been saying that but I find it strange that I had a 222 point contract taken- its an odd number and I have a hard time believing that contract was on the WL or broken into smaller amounts that equaled exactly 222. I can understand the 200 point contract taken most are looking for 25, 50 ect..... when adding on I do not see many asking for a 52 point add on.

 

[ELMC]

Not a true analysis just with low price. Couple weeks ago disney took high price BLT and let go low price BLT. One rule disney has to follow is, if they can sell the contract as a whole, or in even broken part they will take it. But they will not take one that can not be sold as a whole or even broken part. Because left over point can ONLY be combined with other contract IF they are coming from same unit. So, I don't think disney has that much time to follow if two same unit contracts are coming are not, they can easily fulfill their need by ROFRing easy ones. Yes price in this case was easy one, why would they pay more, since they have the ability to break, we don't.

I would be interested to hear where you are getting this information from, given that Disney's ROFR policy is so secretive.

 

[dmunsil]

One rule disney has to follow is, if they can sell the contract as a whole, or in even broken part they will take it. But they will not take one that can not be sold as a whole or even broken part. Because left over point can ONLY be combined with other contract IF they are coming from same unit.

I think you're on to something here. Every DVC contract is expressed as an undivided interest in a "Unit" of the resort. A Unit is typically a few rooms, like 2 two bedrooms and 2 lockoffs, or 1 grand villa. I do think they can't just mix and match points from different units. But I would guess that all of their units have a few points left; some more than others. But they would probably prefer to have at least a few units with a large chunk of points so they can sell large contracts.

I analyzed the size of some of the units in Wilderness Lodge and they ranged from ~28,000 to ~40,000. They can only sell 98% of the points in the resort, and I would guess they try to keep that distributed among the various units relatively evenly.

So yes, I'm sure Unit factors into their calculations, but if we assume that each of the units averages 2% slack even when they're "sold out", that means each unit would average 600-800 points, so they would be able to buy a 52-point contract and turn around and sell a 60-point contract by combining it with 8 points from its unit that they have lying around.

So maybe if a unit starts to fall below a certain threshold, like 100 points, or 1%, or something like that, they will go out of their way to ROFR a contract involving that unit so it will still be useful to them.

 

[agie65]

I would be interested to hear where you are getting this information from, given that Disney's ROFR policy is so secretive.

Based on original deeds filed at orange county comptroller's office. Also dmunsil has interesting twist on the info above, makes a sense.

 

[agie65]

But I would guess that all of their units have a few points left; some more than others.

I analyzed the size of some of the units in Wilderness Lodge and they ranged from ~28,000 to ~40,000. They can only sell 98% of the points in the resort, and I would guess they try to keep that distributed among the various units relatively evenly.

So yes, I'm sure Unit factors into their calculations, but if we assume that each of the units averages 2% slack even when they're "sold out", that means each unit would average 600-800 points, so they would be able to buy a 52-point contract and turn around and sell a 60-point contract by combining it with 8 points from its unit that they have lying around.

So maybe if a unit starts to fall below a certain threshold, like 100 points, or 1%, or something like that, they will go out of their way to ROFR a contract involving that unit so it will still be useful to them.

I do agree what you saying, it is possible Disney plays with slack they may have and we keep guessing what/if.