OKW 2042 - 2057 deed

[ATCMickey]

So, you're OK with DVC extending the OKW contract -- just unhappy with the way they are doing it? What is your view of the right way to extend OKW that would have made you happy?

Again, if you don't want the extension and you want your original contract to end in 2042 as originally planned -- decline the extension and sign your rights for the extension over to Disney.

I just don't get the anger at DVC over this OKW extension...

DVC Mike,

My post was not intended to offer my personal opinion, but rather suggest you respect others opinions with a little less sarcasm. But since you asked, I will offer you my personal take on the situation (warning...long post ).

Here are my personal concerns:

1. I am not OK with DVC making unilateral extensions of all contracts. I believe they are operating at best on the fringe of their scope of authority and maybe beyond. Additionally, I believe it was unnecessary and damaging to owner trust to proceed this way.

When I bought back in 1993, DVD owned the OKW property. They were selling timeshare interests in property they owned. In 2042, things will once again revert to that exact same situation (i.e. DVD owns OKW and will be at liberty to sell timeshare interests in the property). At that time (in 2042), they could have thrown up a sign and said "timeshare interests for sale at Disney's OKW resort" and once again started selling 50 year contracts to another generation. So ask yourself, why can't they do that today? What's changed? DVD will own the property in 2042. What would legally tie their hands from selling timeshare interests in the property with contracts beginning in 2042? They'll own it. Why the need for all of this contract extention? If DVC is truly concerned today about what happens in 2042, why not put the for sale sign up 35 years early and start offering contracts for sale at OKW that begin in 2042? Heck, why not send out a mailing offering their valued existing owners the opportunity to buy those 2042-2092 contracts today at a dramatically discounted price. Heck, I think that's what most of us hoped would happen anyway. Every owner I've ever talked to, when the topic of what do you think will happen in 2042? comes up, has to a person said I hope they offer existing owners first dibs on buying new contracts...so why not do it today?...why the need for all of the extension language?

I kind of liken what DVC is doing to this: Imagine yourself walking into a model home. You fall in love with the home and are ready to buy at the listed price because you so love it. You approach the builder's realtor to ask about making the purchase. But before you tell the realtor you want the house, the builder's realtor says to you "we've already deeded the house into your name and you owe us $350,000. But don't worry, if you decide you don't want it, just fill out these forms, get them notarized, and send them back certified mail and we'll take the house back". So what's the big deal, right? You wanted the house anyway, right? And if you decided you didn't want it all you had to do was sign a few forms, right? Kind of sound familiar?

I've fallen in love with my DVC home. I was ready to make an offer when the home once again comes up for sale. The problem...their realtor just pissed me off for no good reason and may have lost a sure sale.

2. The first I heard of the extention was through a recent mailing. The mailing basically said...this is what we're doing and we're putting it to a vote but the outcome of that vote is already a foregone conclusion. The lack of input and the foregone nature of the approval doesn't sit right with me (again, maybe legal, but is it the right way to do things). Probably a little naive on my part, but I would have prefered notice going out to members that DVC was considering their options for 2042 with a period for legitimate input/concerns/feedback to be provided by owners to DVC before a decision was rendered. I believe this is a case of "if you turn the boat too fast some folks are going to fall off". Owners are far more accepting of changes if they feel they have had the opportunity to provide input. This is a big step and to do it with no owner input, a mass mailing, a puppet vote, and immediate implementation is going to push some folks over the side. And who knows, there are some extremely knowledgeable owners out there...maybe a better way could have surfaced to do this...but we'll never know.

3. I spoke with my guide yesterday as well as DVC. Even though the vote will occur soon, they still are unable to answer some key questions about the offering. Specifically, will I be responsible for assessments to fund projects that will occur beyond the termination date of my existing contract in 2042? What will the assessment/annual dues structure be during the 2042-2057 period. How will DVC dispose of the contracts that are not extended beyond 2042? Will the existing POS terms cover the extension period? How will DVC handle ROFR in light of this proposal and how what will be the contractual resale terms of the ROFR'd contracts. I think DVC should be able to address these issues before the vote occurs (not that that will alter the outcome).

Now if you're still reading at this point, I'll offer you my Fox Mulder conspiracy theory for why I think DVC might do what they're doing...this is somewhat reaching so hang on.

When I bought my first OKW contract in 1993 I was 26 years old. Not an uncommon age from what I saw. When my 2042 contract expires I'll be 75. A 2057 contract would expire for me at age 90. I think if you approached most owners today and offered them a 50 year OKW contract that spanned 2042-2092, they'd politely decline unless they're like me and buying for the kids. But many may look at a 15 year contract as "hey, I could still be alive at 75 and may get some use out of it". So a 15 year contract gets more buyers and also does one crucial thing...it is a contract that will likely get left to the kids. Living to 75 years old is do-able in this day-and-age...90 years old is a little tougher. So I buy my 15 year contract and die at 82. I leave my contract to my kids who get 8 years of use out of it as owners. 2057 rolls around and DVC approaches my kids and says "how have you liked your last 8 years as OKW owners...wanna buy a 50 year contract so that you and your kids can do this for the rest of your lives just like your parents did with you?". Let's see, you've got kids born and raised on DVC and Disney, then they've spent 8 years as owners to get a flavor for it, and now you approach them to buy their own contract...BANG, immediate sale.

So in effect, the 15 year deal is a bridge between generations. And I think a rather smart one if they really put that much forthought into it. But as the clock comes back to twelve in my long winded post, go back to #1 in this post. Why not just approach me with an offer to buy another 15 year contract for 2042-2057. IMHO, there is no productive roll in going the extension route unless you're trying to be heavy handed or manipulative. DVD will own the place outright again in 2042 and certainly would be within their rights to start offering "2042 and beyond" contracts today rather than wait until 2042 to do it.

Why play the role of the ignorant builder's realtor when I sit ready to once again purchase a place I've fallen in love with?

Respectfully,

ATCMickey

 

[RumpleMom]

This is RumpleMom's better half speaking - but I suspect that if DVD doesn't get enough people to buy into the 15 year extension, the fate of OKW may be decided. OKW will be an aging resort at that point, (2042) and may not be worth to cost to keep renovated, which may be an acceptable business decision on the part of DVD, just as long as they maintain the property until the end...for those of us that will also be aging along with OKW, and don't have any intention to re-up....

My question is whether or not DVD will 'penalize' those who don't sign on for 15 more years by making reservations and trades to other resorts more difficult, although I cannot see how DVD could do that contracturally.

 

[Mamiamjo]

I think the problem with having the option now for an extension is that it sets up two tiers of ownership in the same resort, those that expire in 2042 and then the ones that expire in 2057 (are those the correct years?). I'm not fully convinced that this is necessarily bad as long as it doesn't "lessen" the worth of the contracts ending in 2042.
In order to avoid all this why doesn't Disney just offer the option of extending the contracts near the end of the contract period (like 2040)? (well I guess I know why they don't it that way$$$)

 

[fwm]

I have a different theory why DVC is doing this. I beleive they are trying to bring the cost to purchase at OKW closer to SSR and AKV.

They are competing with 35 year contracts that sell for less. They can buy up the old 35 year contracts and resell as 50 year contracts at a higher price. This will tend to minimize the differential. The sale price of a 35 year OKW contract may be in the 70s but the purchase price of a 50 year OKW contract may be in the 90s. They can control this through ROFR.

I do not know if this will be happen, but it may explain why this is being done.

 

[RobDoc]

I have a POS from 3/95. Under Section 3. Term of the Plans, (b.)Term of the Vacation Ownership Plan at Each DVC Resort it states:

"For Club Members at the Vero Beach Resort and the Hilton Head Island Resort, the term of the Vacation Ownership Plan will continue thru January 31, 2042, the expiration date of the term for years interest and the condominium, unless sooner terminated in accordance with the DVC Resort Documents or unless otherwise extended in accordance with the DVC Resort Documents. For Club Members at the Lake Buena Vista Resort, the term of the Vacation Ownership Plan will continue through January 31, 2042, the expiration date of the ground lease and the condominium, unless the ground lease is sooner terminated in accordance with its terms, or unless the Vacation Ownership Plan is sonner terminated in accordance with the DVC Resort documents, or unless the term is otherwise extended in accordance with the DVC Resort Documents."

I also have a POS dated 5/93. Under Section 2 (f) Duration of the Vacation Ownership Plan it states:

"For Purchasers of Ownership Interests in the Condominium, the term of the Vacatin Ownership Plan will continue until January 31, 2042, the expiration date of the Ground Lease and thge Condominium, unless the Ground Lease is sooner terminated in accordance with its terms.

There was no mention of any extension in that paragraph however, from the same POS (5/93) , Exhibit "G" to Declaration of Condominium MEMORANDUM OF GROUND LEASE Section 8. it states:

"The foregoing is only a summary of certain terms and provisions of the Ground Lease and it is not intended to be a comprehensive description of all terms and provisions of the Ground Lease. In the event of a conflist between the terms and provisions hereof and those of the Ground Lease, the Ground Lease shall in all events control."

I'll leave the interpretation of the legalese to others. In my mind, if the right to extend was not specifically included in the 5/93 document, it had certainly been specifically added by 3/95.

 

[DVC92]

I have a POS from 3/95. Under Section 3. Term of the Plans, (b.)Term of the Vacation Ownership Plan at Each DVC Resort it states:

"For Club Members at the Vero Beach Resort and the Hilton Head Island Resort, the term of the Vacation Ownership Plan will continue thru January 31, 2042, the expiration date of the term for years interest and the condominium, unless sooner terminated in accordance with the DVC Resort Documents or unless otherwise extended in accordance with the DVC Resort Documents. For Club Members at the Lake Buena Vista Resort, the term of the Vacation Ownership Plan will continue through January 31, 2042, the expiration date of the ground lease and the condominium, unless the ground lease is sooner terminated in accordance with its terms, or unless the Vacation Ownership Plan is sonner terminated in accordance with the DVC Resort documents, or unless the term is otherwise extended in accordance with the DVC Resort Documents."

I also have a POS dated 5/93. Under Section 2 (f) Duration of the Vacation Ownership Plan it states:

"For Purchasers of Ownership Interests in the Condominium, the term of the Vacatin Ownership Plan will continue until January 31, 2042, the expiration date of the Ground Lease and thge Condominium, unless the Ground Lease is sooner terminated in accordance with its terms.

There was no mention of any extension in that paragraph however, from the same POS (5/93) , Exhibit "G" to Declaration of Condominium MEMORANDUM OF GROUND LEASE Section 8. it states:

"The foregoing is only a summary of certain terms and provisions of the Ground Lease and it is not intended to be a comprehensive description of all terms and provisions of the Ground Lease. In the event of a conflist between the terms and provisions hereof and those of the Ground Lease, the Ground Lease shall in all events control."

I'll leave the interpretation of the legalese to others. In my mind, if the right to extend was not specifically included in the 5/93 document, it had certainly been specifically added by 3/95.

Doc,

I know there are reasons set forth in the DVC documents of 1992 which trigger the termination of the lease (e.g., members vote to remove DVD as the management entity), but are there any reasons set forth in the '95 POS that permit extension of the Ground Lease. (i.e, in accordance with the DVC documents).

DVC92

 

[jarestel]

With respect to OKW, Disney is only offering the opt out because they are attempting to extend the contracts in a suspect manner. It seems to me that any new contracts allows them to extend without an opt out and without any restriction on fees for the extension. Whether or not they would be so greedy remains to be seen.

If they were truly interested in selling new DVC memberships, they wouldn't choose to do this. This would likely not be a big selling point among prospective buyers.

Also, even if legal, I don't understand why some think this is no big deal. Assume, for the sake of discussion, that no one in OKW opts to extend the lease. In 2022, new roofs with a 20 year life expectancy are put on all buildings. No further reserves are needed for the roofs, or if they are still collected and never used by 2042, all members will split the remaining reserve funds for the roofs. Disney is not putting any money into the reserves. However, if the lease extends to 2057, Disney will use it to put new roofs on for themselves. Disney has not offered to set up a two-tier maintenance schedule.

This is a good point and one I would like to see addressed by DVC within any new & amended POS documents. But simply choosing to opt out of the OKW extension shouldn't be used as a reason to try and avoid responsibilities up until 2042 or a reasonable period thereafter.

For example if room furnishings have been replaced every 7 years, it's not unreasonable for DVC to replace the furnishings in 2040 if that is the schedule they have been on all along - though if DVD/DVC still owns any extended years at that point, they would certainly be obligated to kick in their share. Charging 2042 owners MFs for maintenance/replacement/refurbishment for a large number of items due for implementation just as their contracts expire though would certainly cause eyebrows to raise.

As with any business dealing, if you believe you're dealing with an entity you believe to be "not trustworthy", caution is advised and in certain instances a severing of the business relationship might be the way to proceed. I personally am not comfortable dealing with people/companies that need watching all of the time.

 

[DVC Mike]

My post was not intended to offer my personal opinion, but rather suggest you respect others opinions with a little less sarcasm.

ATCMickey, I apologize if you took my post as disrespectful of your or other's opinions. I had read post after post of people complaining about the "illegal action on the part of Disney" where they are "forcing people to buy the extension".

My point is that before we start making claims that Disney is violating the law, we should do the necessary research. While it may be possible that there is an issue here, my review of the POS seems to indicate that Disney is apparently acting within the limits of the POS.

Since "what will happen in 2042" has been a common topic of discussion, and since many had hoped that Disney would offer some sort of extension, you would think that people would be happy that an extension is, in fact, being offered. We may not like the point cost they are offering, and we may have preferred that they offer the extension later on down the line, but at least the offer is available. It's up to each OKW owner to decide if they want to take it or not.

I don't think that Disney is "forcing people to buy the extension". There's probably some legal reason that DVC is handling it in the manner they are; that is, extending the lease and condominium and asking owners to decline if they don't want it (with the default being you accept it). Perhaps that is the only way that is allowed under the POS. Not being a lawyer, I don't know what other legal options are available to them. If there are other legal options, than this was probably the easiest way for DVC (and DVC seems to be making a lot of choices on what is simpler for them lately).

I'm sure if the price were much less -- say $10 a point -- that the outcry would be less than it is now. The $25 per point seems too high to me.

I sympathize with your concern over the lack of input from existing OKW owners that went into this plan. However, I'm not sure what real voice DVC owners have.

There are still a lot of outstanding questions that need to be answered. We'll see these addressed in the coming months, I hope.

Mike

 

[jarestel]

The letter I received from DVC said nothing about being forced to pay for the extension, I can opt out if I want to. Where is this thought process coming from. I just don't get this line of thinking.

I'm not the right source to answer that question.

 

[RobDoc]

Doc,

I know there are reasons set forth in the DVC documents of 1992 which trigger the termination of the lease (e.g., members vote to remove DVD as the management entity), but are there any reasons set forth in the '95 POS that permit extension of the Ground Lease. (i.e, in accordance with the DVC documents).

DVC92

From the 3/95 POS, under PUBLIC OFFERING STATEMENT TEXT, 1. The Vacation Club and the Vacation Ownership Plans., a. The Plans., (2) Vacation Ownership Plans at DVC Resorts., (b) Lake Buena Vista Resort. it states:

"Disney Vacation Club at WALT DISNEY WORLD Resort, a leasehold condominium, is located at 1450 Miller's Road, Lake Buena Vista, Florida 32830-0350. The Lake Buena Vista Resort has been created on a ground lease, and the portion of DVD's interest in the ground lease that has been declared into the condominium is a common element of the Lake Buena Vista Resort. Purchasers of an Ownership Interest in Units in the Lake Buena Vista Resort receive an undivided percentage real property interest in a Unit as a tenant-in-common with other Purchasers of undivided percentage interests in that Unit in accordance with the Declaration of Condominium for the Lake Buena Vista Resort. Fee title to an Ownership Interest will be conveyed to the Purchaser until January 31, 2042, unless otherwise extended in accordance with the DVC Resorts Documents, at which time the ground lease will expire, the condominium will terminate and title the property will terminate and title to the property will vest in LBVC as the lessor. ..."

Also included in this POS, was similar language for the Vero Beach Resort and the Hilton Head Island Resort including similar mention of "unless otherwise extended" regarding the ground lease. There is no document for the DVC Resorts Document that I have found.

The POS I have is identified as a SUMMARY PUBLIC OFFERING STATEMENT with the following caveat:

"This document is a summarized version of the Public Offering Statement. You can obtain a copy of the non-summarized Public Offering Statement anytime by requesting it in writing from the Developer. However, your statutory 10-day right of rescission will not be extended if you request the non-summarized Public Offering Statement after the day you sign the Purchase Contract."

I do not have a copy of the non-summarized POS and I cannot find a copy of the oft mentioned DVC Resorts Documents in any of the POS documents I have ... and I have about 6 ranging from 5/93 to 7/2003. It would appear that some of the specific legalese that may apply to this discussion may appear (or not) in the non-summarized version.

Even my 5/93 POS, in the first page, states:

" THIS PUBLIC OFFERING STATEMENT CONTAINS IMPORTANT MATTERS TO BE CONSIDERED IN ACQUIRING AN INTEREST IN A VACATION OWNERSHIP PLAN UNDER FLORIDA LAW. THE STATEMENTS CONTAINED HEREIN ARE ONLY SUMMARY IN NATURE. A PROSPECTIVE PURCHASER SHOULD REFER TO ALL REFERENCES. EXHIBITS HERETO, CONTRACT DOCUMENTS, AND SALES MATERIALS. YOU SHOULD NOT RELY UPON ORAL REPRESENTATIVES AS BEING CORRECT. REFER TO THIS DOCUMENT AND ACCOMPSANYING EXHIBITS FOR CORRECT REPRESENTATIONS. THE SELLER IS PROHIBITED FROM MAKING ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE CONTRACT AND THIS PUBLIC OFFERING STATEMENT."

The final caveat in the first page of the 5/93 POS states:

This public Offering Statement is fo information purposes only. The Disvision of Florida Land Sales, Condominiums and Moblie Homes has neither approved nor disapproved the merits of this offering. The Developer is responsible for the accuracy and completeness of this statement. Report deviations and misrepresentations to the Division of Florida Land Sales, Condominiums and Mobile Homes, Bureau of Time-Share, Johns Building, 725 South Bronough STtreet, Tallahassee, Florida 32399-1032.

I wonder if anyone has (at least until now) requested a non-summarized copy of the POS and all related documents?

 

[JimC]

Might this be a possible reasoning?

Disney wants to continue using OKW as a DVC resort after 2042. Disney also wants a mechanism to keep resale value rising as it continues to add DVC resorts. How best to do that?

First consideration is to offer current owners a program to extend. Benefits of doing this include good member relations, lower sales (conversion) costs, ability to do it now (raise additional revenue -- which might fund improvements eliminating the need for a special assessment, or not).

But DVC needs to have an answer within a reasonable amount of time as to who will buy and who will not. There also may be a need to demonstrate that all owners were offered the same program. Thus the program they announced. If approved, everyone will get an extension and a period of time to accept (pay the extension fee) or decline (assign the ownership rights). I still believe the lien is to prompt timely responses and to protect DVC's rights beyond 2042 for those who do not respond.

There are some 26,000 OKW members if I remember correctly. Getting a 100% response from this group is not an easy undertaking.

Just my 2 cents.

 

[salmoneous]

When someone is actually forced to purchase the extension, there will be a whole lot of new recruits to your position, salmoneous. But as long as the option of "opting out" exists (and it does at the moment), I'm not quite ready to grab the pitchfork and fire up the torches. [But I AM keeping them handy, just in case!]

It's a virtual certainty that at least one of the thousands of OKW owners will not see the instructions on how to avoid this assessment and be forced to buy an extension they don't want.

It's also very likely that a significant number of OKW owners, while not being forced to buy, will be sloppy, forgetful, etc. and end up billed thousands of dollars for something they don't want.

While I'm not at the pitchfork and first stage yet, nor am I calling a lawyer, I am extremely disappointed in DVC for using such an incredibly slimy technique and I am looking for an appropriate venue for a complaint. But, the thing is, I'm not a OKW owner and don't really have standing. I just hope a precedent isn't being set, so it will be too late when Disney tries this with one of my resorts.

 

[RobDoc]

...
But DVC needs to have an answer within a reasonable amount of time as to who will buy and who will not. There also may be a need to demonstrate that all owners were offered the same program. Thus the program they announced. If approved, everyone will get an extension and a period of time to accept (pay the extension fee) or decline (assign the ownership rights). I still believe the lien is to prompt timely responses and to protect DVC's rights beyond 2042 for those who do not respond.
...

I'm not clear why DVC needs to have an answer within any specific timeframe. Once the vote is taken on 9/24/07 they are committed and the outcome of that vote is a foregone conclusion as indicated in the letter aleady sent. Unless they get ZERO response - an unlikely possibility IMO - they are then stuck/committed to the 9/24 vote and the extension is official and unrevocable as long as at least one owner accepts and pays for the extension.

They can certainly make any "incentive" discount time sensitive if they wish, but I don't understand why the ability to extend the expiration could not be for an indefinite period of time - only limited by the January 31, 2042 date. In fact, IMO, they have handcuffed themselves by putting a price on the extension in the resolution to be voted upon since that would seem to be a limiting factor without another vote.

 

[jarestel]

It's a virtual certainty that at least one of the thousands of OKW owners will not see the instructions on how to avoid this assessment and be forced to buy an extension they don't want.

This is possible. How Disney handles these folks will be significant in and of itself. But I expect this case to be the exception and not the norm.

 

[RobDoc]

It's a virtual certainty that at least one of the thousands of OKW owners will not see the instructions on how to avoid this assessment and be forced to buy an extension they don't want.
...

I would hope that DVC would be wise enough to send any instruction with assessment potential by certified mail with return signature so they have proof of receipt before initiating any lien against a contract.

I know just how I would proceed if I was denied the use of my membership.

It is certainly DVC's responsibility to notify members of any such litigious changes in ownership well prior to taking any legal stance against the ownership.

 

[Sammie]

I think the problem with having the option now for an extension is that it sets up two tiers of ownership in the same resort, those that expire in 2042 and then the ones that expire in 2057 (are those the correct years?). I'm not fully convinced that this is necessarily bad as long as it doesn't "lessen" the worth of the contracts ending in 2042.
In order to avoid all this why doesn't Disney just offer the option of extending the contracts near the end of the contract period (like 2040)? (well I guess I know why they don't it that way$$$)

Interesting, I guess we know which group will get first dibs on room requests.

 

[rsinj]

.

 

[tjkraz]

I will guarantee you, there will be more than one notice for those who do not promptly do what they need to.

Totally agree. I'm envisioning multiple mailings followed by telephone calls to those people who haven't responded. A telephone call to a few dozen (?) non-responders is going to be a lot cheaper than legal action.

Unless DVC intends to use this offer as a "gotcha" (clearly differing opinons on that), they will go to great lengths to get SOME response from every single member before going down other avenues.

 

[rsinj]

.

 

[JimC]

I'm not clear why DVC needs to have an answer within any specific timeframe.....

1. They are a public company with quarterly reporting requirements with each division having very specific targets to meet. This also probably affects incentive pay programs for various levels of management.

2. If DVC is using this in lieu of a special assessment for improvements to the resort (just one possibility) then they need to know how much will be funded by the extension which could affect the scale of their improvements.

3. I'm guessing that their planners did their due diligence and concluded that there is an opportune window to conduct such an extension and they would want to use that to their best effect.

At the $25 per point in the notice there is roughly $190 million in revenue potential in this offer for OKW. Even at $15 there is approximately $115 million. While not material to consolidated revenues, it is a sizable infusion of cash.