Extending other 2042 properties

[JWG]

Doesn't the property (land and physical buildings) revert back to Disney from DVD at the end of the 50 year agreement? So, couldn't they choose not to extend and allow the property to revert back for redevelopment?

Which could include, remodel and maintain as hotel units (unlikely), bulldoze and leave undeveloped, allow to rot (unlikely considering how many DVC locations share resort property (BCV, BWV, BLT, AKV - though you could demo Kidani I suppose) and WLV (though a stand alond building that could be shuttered)), extend or resell...

Either way, they'll have more than gotten their money out of the property in its first 50 years.

Oh well, time will tell.

 

[nukker7]

The question for me on this subject is, Will it help resale value if I were to extend? I plan on keeping my points and would be in my mid 70s when they expire. If I am still here, I would not need them so much (maybe), so the benefit for me would be minimal. I do realize the kid's kids can use them but, what if I NEED to sell them?

 

[RobDoc]

For OKW, the resale contracts that had purchased the extension have NOT sold for $15 more than those without the extension. Of course, as we get closer to 2042, that situation is likely to change and the additional years should add some value to the contracts.

It will depend on what you paid for the extension and how soon afterwards you are trying to sell.

 

[tjkraz]

For OKW, the resale contracts that had purchased the extension have NOT sold for $15 more than those without the extension. Of course, as we get closer to 2042, that situation is likely to change and the additional years should add some value to the contracts.

I agree that the extension will eventually be worth more than $15 per point. However, at that future date, $15 (per point) cash from 2009 would also be worth quite a bit more. $15, invested with just a 6% annual return, will be worth $91 per point in 32 years.

At the time of the offer, some folks with a finance background calculated the present value at $6-7 per point. IMO, anyone contemplating a contract extension would be better served to invest the money and buy a short term contract when 2042 arrives. Invest $15 PP at a modest return and in thirty years you'll have more than enough to buy an AKV contract with 15 years left, BLT contract with 18 years left or whatever other option suits the current circumstances.

 

[Dean]

I agree that the extension will eventually be worth more than $15 per point. However, at that future date, $15 (per point) cash from 2009 would also be worth quite a bit more. $15, invested with just a 6% annual return, will be worth $91 per point in 32 years.

At the time of the offer, some folks with a finance background calculated the present value at $6-7 per point. IMO, anyone contemplating a contract extension would be better served to invest the money and buy a short term contract when 2042 arrives. Invest $15 PP at a modest return and in thirty years you'll have more than enough to buy an AKV contract with 15 years left, BLT contract with 18 years left or whatever other option suits the current circumstances.

I doubt it'll ever be worth $15 a point, much less accounting for the time value of the up front cost.

 

[chalee94]

Going to be interesting when the 2042 date passes and there are much less DVC members. What are the dues going to do to the existing members? Are they going to go through the roof so to speak?

why would they go through the roof? for example, SSR dues are not based on VB or BCV expenses. if BCV closed tomorrow, SSR expenses would remain the same... where do you imagine that there is a connection?

at the rate DVC is trying to expand - SSR owners will be around till 2054 and that is the largest DVC resort - i'm not sure there will be fewer members in 2043 than there are right now.

 

[TisBit]

Others have opined that perhaps DVCs focus on BCV ROFR implies some future planning of selling extended contracts.

The only reason DVC still ROFRs at Beach Club because there is still add-on demand at about $115 per point. Nothing else worth reading into it.

I am one that threw out the BCV ROFR as being an interesting item and could lead me to believe it would be ripe for an extensions (especially after BLT sells out and before GFV's come online). When I looked at the numbers a few months ago, Disney was ROFR BCV at a much higher pace than they were actually selling it at.

I think they will do it differently than with OKW...I am sure there were some lessens learned there.

We just bought at HHI, on the secondary market - and would be interested in extending the life of our contract.

While I had head that HHI was not a good step for DVC - and that it was considered to be one of the biggest missteps of DVC, the fact that we bought points at HHI because we could never get a reservation there when we wanted to stay there booking at 7 months out says something different.

Am I missing something?

It seems like it is a very popular resort, or so it seems.

I don't think HHI is the biggest mistake DVC made....but its timing may have been. VB and HHI have always been the redheaded step children of DVC because they were off site. But, with Hawaii coming online and the real possibility of expanding it out to other popular off site locations, HHI and VB may come into their own...as DVC begins marketing to people that don't necessarily want to go to WDW every year or even every other year!

 

[tjkraz]

I am one that threw out the BCV ROFR as being an interesting item and could lead me to believe it would be ripe for an extensions (especially after BLT sells out and before GFV's come online). When I looked at the numbers a few months ago, Disney was ROFR BCV at a much higher pace than they were actually selling it at.

I think they will do it differently than with OKW...I am sure there were some lessens learned there.

I see where you are going but I'm still skeptical.

Part of the justification for the OKW extension was to give DVC active inventory to sell. The OKW extension came during a period of about 9-12 months where the only thing DVC had available were pre-sales for resorts that were still under construction (Kidani, BLT.) Despite the appeal of those locations, it's hard to convince many buyers to spend $20,000 on something they cannot use for a year or more.

DVC was sitting on a cache of OKW points from its ROFR activities. The 15-year extension gave them the ability to immediately market those points as 50-year contracts to new members.

DVC wouldn't have that option with BCV since there is no surplus.

I do agree that a BCV extension would be more popular with current members than the OKW extension was. But when it comes time to write that check (or sign the financing papers), many would still have second thoughts about spending thousands of dollars on an asset that they cannot use for 30+ years.

Additionally, DVC itself would stand to make a lot MORE money if they sit tight for another 30 years and sell "brand new" 50-year contracts at BWV, VWL and BCV at whatever price point is established come 2041/2042. Even with compounding interest, I suspect that selling for $200+ per point in 2041 is more beneficial than a short term extension for $15+ per point today.

Waiting until the current agreements expire would also give them the ability to make radical changes to the point charts. I could see all of BCV going up 10-15% just to squeeze a few thousand more points out of the building.

I wouldn't rule it out altogether but extensions do strike me as moves which sacrifice long-term rewards for moderate short-term gains.

 

[chalee94]

Additionally, DVC itself would stand to make a lot MORE money if they sit tight for another 30 years and sell "brand new" 50-year contracts at BWV, VWL and BCV at whatever price point is established come 2041/2042. Even with compounding interest, I suspect that selling for $200+ per point in 2041 is more beneficial than a short term extension for $15+ per point today.

i would have to agree with you. i would be very surprised if DVC announced a BCV extension...

But, with Hawaii coming online and the real possibility of expanding it out to other popular off site locations, HHI and VB may come into their own...as DVC begins marketing to people that don't necessarily want to go to WDW every year or even every other year!

alternatively, higher fuel costs, higher taxes imposed by the hawaiian government and a devastated japanese economy could crush demand and turn aulani into a significant failure that results in DVC spinning off all the off-site resorts.

the critical thing about aulani is that people not only need to want to visit oahu, they have to be willing to pay a premium to buy in and own there (as opposed to buying other DVC resorts for occasional access or buying the cheaper marriott resales next door). i'm not optimistic but maybe the world economies will turn around faster than i think they will...

 

[tjkraz]

alternatively, higher fuel costs, higher taxes imposed by the hawaiian government and a devastated japanese economy could crush demand and turn aulani into a significant failure that results in DVC spinning off all the off-site resorts.

My sense is that the only way in which Aulani could "fail" is in terms of its expected sales pace. Say DVC projected an 8-year sales window and it takes 12-15 years, that would definitely stand as a failure. Of if DVC has to sell at prices significantly lower than it had originally estimated. Either outcome would discourage future investments in off-site properties.

But the Aulani villas will eventually sell out and Disney will make a profit on it. And the 200 or so cash rooms they built aren't a tremendous number to have to fill on a nightly basis.

I can't see any value in DVC actually selling-off those resorts. Even if future resorts are largely limited to Walt Disney World and Disneyland, I'm sure it's much easier to market a program WITH off-site destinations than it is to market DVC WITHOUT those destinations.

 

[TisBit]

My sense is that the only way in which Aulani could "fail" is in terms of its expected sales pace. Say DVC projected an 8-year sales window and it takes 12-15 years, that would definitely stand as a failure. Of if DVC has to sell at prices significantly lower than it had originally estimated. Either outcome would discourage future investments in off-site properties.

But the Aulani villas will eventually sell out and Disney will make a profit on it. And the 200 or so cash rooms they built aren't a tremendous number to have to fill on a nightly basis.

I can't see any value in DVC actually selling-off those resorts. Even if future resorts are largely limited to Walt Disney World and Disneyland, I'm sure it's much easier to market a program WITH off-site destinations than it is to market DVC WITHOUT those destinations.

I agree, it is the sales that could hurt Aulani and I am not sure that they have been impacted in a significant way at this point. There are enough DVC members that are willing take a vacation to Hawaii on points....they bulk owning in Florida means you only need a small percentage each year to make that trek out ot Hawaii.

 

[Paging Tom Morrow]

I suspect that selling for $200+ per point in 2041 is more beneficial than a short term extension for $15+ per point today.

While this is true, none of the executives employed by DVD will be judged on potential future profits in 2041, but how they perform in 2011. While it may seem short-sighted, executives fighting for larger bonuses (or even their jobs) are more likely to sell the proverbial bird in the hand rather than wait for the two in the bush....

 

[dizfan]

I suspect the non-WDW sales are vital for DVD sales going forward.

In 20 years, we have seen 7 WDW DVC properties (AKV, BCV, BLT, BWV, OKW, SSR, and VWL).

How would everyone feel if there were 10 more WDW DVC properties in 2042?
If they needed to reach 2060, that would be a pace of 17 more WDW destinations.

Plenty of land, but supply/demand may make it difficult to sell WDW DVC locations.

 

[csharpwv]

I have said here on the DIS many times that the property that Disney now owns in Prince George's County Maryland is a goldmine!

The location, the situation, the destination - it's all there.

The resort has to have a capacity of at least 400 rooms - and has to have an anchor that will pull people to the resort even if they aren't staying there.

My idea - an indoor water park.

The Great Wolf Lodge properties are taking off.

Disney needs to develop a model of their own for an indoor water park resort and spa. It has to have something for every demographic - from fantastic rooms, to entertainment, to dining, to recreation.

The property they own isn't HUGE - but it is large enough to build a small - midsize resort that will be a destination all its own.

With the urban population in and around the DC metro area, the population is there to support it year round - the number of people in the DC metro area that go to the eastern shore beaches and DE beaches is HUGE.

I'm sure there would be a small DVC component - but the hotel side of the house would have to be pretty big to support convention and holiday activity in the area. I can imagine a huge population that would buy there to spend long weekends and holidays there.

Disney does water parks like no one else - just imagine the Disney magic that could be sprinkled into the DC area with a beast like there!

There are no others - come on Disney.....

If I can dream it.....

YOU CAN DO IT!!!!!!

 

[Dean]

I don't think HHI is the biggest mistake DVC made....but its timing may have been. VB and HHI have always been the redheaded step children of DVC because they were off site. But, with Hawaii coming online and the real possibility of expanding it out to other popular off site locations, HHI and VB may come into their own...as DVC begins marketing to people that don't necessarily want to go to WDW every year or even every other year!

Both VB and HH are great resorts in their own right, however, they were big DVC mistakes for many reasons. My view is that DVC assumed they would be just as successful selling them as they had OKW and BWV (early sales). DVC found themselves with a poor model for those sales and poorly equipped to compete with the Marriott's and other more aggressive timeshares sales systems. I'm convinced they could have easily sold them had them been more aggressive in scheduling and running the sales presentations. IMO, their better option from a sales standpoint would have been a trust system without a home resort, that way they could sell the off property resorts essentially as on property.

 

[tjkraz]

While this is true, none of the executives employed by DVD will be judged on potential future profits in 2041, but how they perform in 2011. While it may seem short-sighted, executives fighting for larger bonuses (or even their jobs) are more likely to sell the proverbial bird in the hand rather than wait for the two in the bush....

Undeniably executives can be short-sighted, but they do still need to answer to their higher-ups for decisions that are made. Extensions are flawed to the extent that you're not going to get 100% participation. Even if Jim Lewis was inclined to go forward with more extensions, others above him (Staggs, Rasulo, Iger, shareholders, the board) would expect a plan for dealing with the non-extended contracts come 2042.

We're approaching the 4 year anniversary of the OKW extension (fall 2007) and others have not followed. That alone suggests some are thinking long-term.

While extensions at BCV, BWV and VWL would be easy money to a certain extent, I don't know that it's the sort of money which would prompt execs to throw common sense out the window. We aren't exactly talking about a big bump in profitability--a few million dollars per quarter (over a year or two) for a company that typically generates in excess of $1 billion profit per quarter. Analysts and investors would quickly identify such extensions as the one-time cash grabs that they are.

 

[marie1981]

Two months ago, my guide called me and ask me if I would be interested in buying extension years at BWV if they would offer it.

He told me they are calling members just to have an idea if they should offer it .

Of course, when I asked him how many years and how much, he told me no decision was made, yet.

 

[DVCconvert]

.... IMO, their better option from a sales standpoint would have been a trust system without a home resort, that way they could sell the off property resorts essentially as on property.

Oh boy...I can hear it now....

"I own a piece of the Disney Trust"......


DVC....where 'Being a Member' carries a fiduciary responsibility

 

[Dean]

Oh boy...I can hear it now....

"I own a piece of the Disney Trust"......


DVC....where 'Being a Member' carries a fiduciary responsibility

If they were able to sell SSR, they'd have been able to sell a trust system with the right sales spin.

 

[DVCconvert]

If they were able to sell SSR, they'd have been able to sell a trust system with the right sales spin.

Good Point!!