Doesn't Disney exercising ROFR hurt Existing DVC Members?

[Williamjdisney]

our family is considering saving to purchase a resale DVC contract for either OKW or AKL. If Disney exercises ROFR and does not sell those acquired points, then the cost of MF surely increase for existing DVC Members? Am I wrong?

 

[k3chantal]

our family is considering saving to purchase a resale DVC contract for either OKW or AKL. If Disney exercises ROFR and does not sell those acquired points, then the cost of MF surely increase for existing DVC Members? Am I wrong?

Disney will sell those points themselves. They obviously believe they can get more money from them than what is being offered. I don't think MF's rising is necessarily linked with unsold points. But someone more knowledgable than I will respond soon I am sure.

 

[Dean]

our family is considering saving to purchase a resale DVC contract for either OKW or AKL. If Disney exercises ROFR and does not sell those acquired points, then the cost of MF surely increase for existing DVC Members? Am I wrong?

No, Disney will pay the fees until the points are sold plus it's a small %. There are some potential damages that ROFR can cause to those trying to sell in some situations but it's pretty minimal damage and likely no damage when the spread so large as it currently is.

 

[Williamjdisney]

I am really surprised that Disney would pay the fees on points acquired from an ROFR that are not yet resold. if true, then my question is answered.

Thx.

 

[disneynutz]

I am really surprised that Disney would pay the fees on points acquired from an ROFR that are not yet resold. if true, then my question is answered.

Thx.

They have to pay by law, they bought the points, they pay. Same with declared new construction, they pay the dues until the points are sold.

They will rent the point rooms for cash to recover their costs.

I wonder if they keep the dues low because they do have to pay. Maybe that's why they don't hire additional Mousekeepers?

Bill

 

[Lynne M]

I am really surprised that Disney would pay the fees on points acquired from an ROFR that are not yet resold. if true, then my question is answered.

Thx.

Well, sure, they would have to. When they exercise ROFR, they're buying the points. The requirement to pay MFs on those points is there regardless of who owns them.

 

[erionm]

I am really surprised that Disney would pay the fees on points acquired from an ROFR that are not yet resold. if true, then my question is answered.

Thx.

They own the points, they pay the MFs. No different than any other owner.

 

[paults]

And since they bought them resale they should be sold as resale points ,Right! Meaning they can't be use for cruise and other things. Unless disney changed something. Is this right?

 

[cz4ever]

And since they bought them resale they should be sold as resale points ,Right! Meaning they can't be use for cruise and other things. Unless disney changed something. Is this right?

I assume you're kidding, but, no, once Disney buys them, they revert to being developer points. They can also repackage them into larger or smaller contracts as they see fit.

To OP's point, by law when Disney owns points, they are subject to most of the same rules and expenses as non-Disney owners, including paying annual maintenance fees. No need to worry, they more than make it up via rentals until such time as they resell.

 

[marynvince]

Disney Exercising ROFR actually helps members.It inflates the value of resales because there is a built in bottom.

 

[drusba]

Need to correct some assumptions made above. If DVD purchases points via ROFR, it might pay dues but it will pay only those for the current year that it is required to pay as part of the deal with the seller, e.g., if the deal requires the buyer to pay some dues for the current calendar year, Disney will pay those as part of the deal because it must exactly match the offer made.

However, if DVD still has those points come next calendar year it will not actually pay dues on them. DVD as the owner/developer of the timeshare that owns any portion of the timeshare has two options: (a) it can pay the estimated annual dues per point that every member pays; or (b) it can instead annually guarantee to the members that there will be no special assessments for the calendar year, except possibly for property taxes and an assessment needed after a disaster that destroys property, in which case it does not pay any of the estimated annual dues for points it owns. DVD has annually always chosen the second option.

Whether that means your dues are higher as a result is something that is not easy to determine. Because of the guarantee, DVD must cover any operational costs that are normally subject to dues that exceed the total dues collected. And you don't just need costs to actually come in higher than estimated for DVD to start absorbing costs. Even if they come in as estimated, DVD will be absorbing the portion attached to any uncollected dues during the year -- there always seems to be a large number of members who have liens placed on their interests by Disney for failure to pay dues. Moreover Disney does not exercise ROFR to get points it can keep forever. What it does is put them back in the hopper for direct sales where it can make a profit on them.

 

[twoj]

Disney pays dues even before they initially sell. Your maintenance dues include an operating and capital portion and these always need to be funded. I have audited timeshare owners' associations... That's how they work... The only thing a developer can do is make an absurdly low budget the first few years but normally once there are owners they tend to go up... Works the same way as a ground up condo building.

 

[Dean]

Need to correct some assumptions made above. If DVD purchases points via ROFR, it might pay dues but it will pay only those for the current year that it is required to pay as part of the deal with the seller, e.g., if the deal requires the buyer to pay some dues for the current calendar year, Disney will pay those as part of the deal because it must exactly match the offer made.

However, if DVD still has those points come next calendar year it will not actually pay dues on them. DVD as the owner/developer of the timeshare that owns any portion of the timeshare has two options: (a) it can pay the estimated annual dues per point that every member pays; or (b) it can instead annually guarantee to the members that there will be no special assessments for the calendar year, except possibly for property taxes and an assessment needed after a disaster that destroys property, in which case it does not pay any of the estimated annual dues for points it owns. DVD has annually always chosen the second option.

Whether that means your dues are higher as a result is something that is not easy to determine. Because of the guarantee, DVD must cover any operational costs that are normally subject to dues that exceed the total dues collected. And you don't just need costs to actually come in higher than estimated for DVD to start absorbing costs. Even if they come in as estimated, DVD will be absorbing the portion attached to any uncollected dues during the year -- there always seems to be a large number of members who have liens placed on their interests by Disney for failure to pay dues. Moreover Disney does not exercise ROFR to get points it can keep forever. What it does is put them back in the hopper for direct sales where it can make a profit on them.

DVC upper management has assured me that they pay the fees on all points they own. FL law does give the the option on developer points to offer a guarantee in lieu of paying fees on developer points. I don't think that applies to repurchased points even if they can sell them as retail.

 

[disneynutz]

DVC upper management has assured me that they pay the fees on all points they own. FL law does give the the option on developer points to offer a guarantee in lieu of paying fees on developer points. I don't think that applies to repurchased points even if they can sell them as retail.

That's what I have been told as well and it explains why they keep ROFR take backs to a minimum. Foreclosures and defaults would add to their dues bill as well.

Do you think that they work to keep the dues low to keep Disney's cost low? Why else wouldn't they spend the money that they need to make DVC resorts truly a deluxe resort experience?

Bill

 

[Dean]

That's what I have been told as well and it explains why they keep ROFR take backs to a minimum. Foreclosures and defaults would add to their dues bill as well.

Do you think that they work to keep the dues low to keep Disney's cost low? Why else wouldn't they spend the money that they need to make DVC resorts truly a deluxe resort experience?

Bill

I doubt the ROFR or unsold points will have any real affect on maint fees no matter how they handle this issue. IMO, fees are still an area where DVC falls short. They're roughly 30% higher than comparable options yet their services lag other comparable options IMO. Some is related to the fact that those on property services cost money and some is due to the flexible points option and things like midweek cleaning and likely some in Disney proper holding the system hostage. I believe that DVC should do more pay to play by allowing those that use a given service to cover it rather than averaging those costs among all owners. My view has always been the following. There are options/services inherent to a top resort and these should be shared by all owners. These include pools, exercise, 24 hr front desk and the like but certainly not free valet parking. There are also services where there's a significant economy of scale, wireless internet comes under this heading. However, there are situations and types of owner situations that have inherent and predictable costs. Obviously there's a balance between pay to play and simplicity and nickel and dime situations. The simplest is to carve out a club fee so that every owner pays a set amount raising the costs for those very small points owners. Most points systems do this in one way or another.

 

[chalee94]

Disney Exercising ROFR actually helps members.It inflates the value of resales because there is a built in bottom.

not really.

for one, you have to find a buyer first, if only one guy comes by offering $30 per pt, you can either take that or keep paying dues on the contract. if it's a great deal for DVC, they can jump in and take it from the buyer but that doesn't change the fact that you as the seller still get $30 per pt at best. disney won't step in and bid $35 per pt.

also, if something happens to cause demand for trips to wdw to collapse (maybe gas at $7 per gallon), DVC has the right to drop ROFR altogether...and there goes your "built in bottom." when the economy was cratering in 2008 or so, DVC largely dropped out of the ROFR business for a couple of years.

ROFR helps disney by giving them options based on their internal calculation of the value of DVC pts (and the risk of ROFR might drive a few buyers to purchase direct). maybe there are situations where ROFR means that a buyer offers you $76 per pt rather than $74 per pt to try to avoid ROFR, but it can just as easily cause potential buyers to drop out rather than offer more than they think the contract is really worth...the only thing that really protects the value of DVC contracts is the overall demand for onsite stays relative to the annual dues paid on pts.

 

[Dean]

not really.

for one, you have to find a buyer first, if only one guy comes by offering $30 per pt, you can either take that or keep paying dues on the contract. if it's a great deal for DVC, they can jump in and take it from the buyer but that doesn't change the fact that you as the seller still get $30 per pt at best. disney won't step in and bid $35 per pt.

also, if something happens to cause demand for trips to wdw to collapse (maybe gas at $7 per gallon), DVC has the right to drop ROFR altogether...and there goes your "built in bottom." when the economy was cratering in 2008 or so, DVC largely dropped out of the ROFR business for a couple of years.

ROFR helps disney by giving them options based on their internal calculation of the value of DVC pts. maybe there are situations where ROFR means that a buyer offers you $76 per pt rather than $74 per pt to try to avoid ROFR, but it can just as easily cause potential buyers to drop out rather than offer more than they think the contract is really worth...the only thing that really protects the value of DVC contracts is the overall demand for onsite stays relative to the annual dues paid on pts.

But it doesn't hurt either UNLESS they are able to direct new buyers to retail because of ROFR, which is it's main goal anyway. When the spread was relatively small, this was an effective tool because he price difference wasn't make or break and many didn't want the hassles of resale, but now that reales are roughly half, I don't think ROFR has much affect either way.

 

[BestDadEver]

I would say that the ROFR process protects the value of direct points . That way people cant start selling points for $5 , witch will devalue there product .

 

[Dean]

I would say that the ROFR process protects the value of direct points . That way people cant start selling points for $5 , witch will devalue there product .

Only to DVD. Resale prices and loss of retail benefits are the same if you sell no matter how you obtained the points. There is no potential value with a resale other than how you can use it and what you can get if you sell it. If you go to resell points bought retail, you have all the same limitations as anyone else. ROFR, exercised routinely, does offer somewhat of a floor but only if it's used routinely which hasn't been true in some time. IF there is a situation where ROFR is routine and the price difference relatively small, many simple buy resale rather than take the chance on ROFR. It reduces the pool of resale buyers. What the qualified vs non qualified issue could do is to minimize the point increases of the cash type exchange costs but it'll require a big shift toward less retail and more resale points.

 

[chalee94]

But it doesn't hurt either UNLESS they are able to direct new buyers to retail because of ROFR, which is it's main goal anyway.

what was the lowest you remember OKW pts selling for during 2008-2009? i could have sworn a contract got through for $25-30 per pt...i just remember it sounded ridiculous...