Projected Operating Expenses for DVC Resorts Question

[corpcomp]

Just received the latest 2024 projections for BCV. I read a lot of financial statements and have difficulty understanding why they provide 2024 projections of expenses but never seem to show prior year actual expenses. Unless I keep these I have no idea what they are increasing or decreasing. Am I the only one this nerdy?

And DVC - bring back the ceiling fans!! It Florida! Please!

 

[crvetter]

They do tell you if the budget was short or not. Just not which line items were short, and it is usually a year behind.

So this is telling me that the budget was short 855,111 for 2022. You could divide that number by the total number of points to see what the shortage was. Basically DVD doesn't pay dues on the unsold inventory but they guarantee that they will make up the budget shortage every year if there is one (and they get the budget excess essentially, if it exists ever up to a max of what the dues on their points would have been).

Remember DVD is a different entity than Disney. So the points that Disney retains as the 2% ownership they do pay dues on. This is simply the dues they don't pay on inventory DVD is sitting on to be sold.

You could go look at 2022 to 2023 and see what the line items look like, if they want up assume that actual expesnes were over budget in 2022 and vice-versa.

Edit: The developer guarantee has usually been a positive for members from what I can tell looking at historical budgets. It is just DVD probably does it given that it is a huge advantage to them when they first selling a resort. And to only have the guarantee on the new resorts would seem weird to owners so they apply it to all resorts.

 

[Sandisw]

They do tell you if the budget was short or not. Just not which line items were short, and it is usually a year behind.
View attachment 808771
So this is telling me that the budget was short 855,111 for 2022. You could divide that number by the total number of points to see what the shortage was. Basically DVD doesn't pay dues on the unsold inventory but they guarantee that they will make up the budget shortage every year if there is one (and they get the budget excess essentially, if it exists ever up to a max of what the dues on their points would have been).

Remember DVD is a different entity than Disney. So the points that Disney retains as the 2% ownership they do pay dues on. This is simply the dues they don't pay on inventory DVD is sitting on to be sold.

You could go look at 2022 to 2023 and see what the line items look like, if they want up assume that actual expesnes were over budget in 2022 and vice-versa.

Edit: The developer guarantee has usually been a positive for members from what I can tell looking at historical budgets. It is just DVD probably does it given that it is a huge advantage to them when they first selling a resort. And to only have the guarantee on the new resorts would seem weird to owners so they apply it to all resorts.

Where do you see that the points they must maintain are exempt from the dues?

My understanding is any and all points owned by DVD are exempt for the operational costs in exchange for the guarantee.

 

[zavandor]

I don't really know how it works for sure, but this is how I  think it works:
If a resort has a total of 10 million points, the total budget is divided by 10 millions. Disney doesn't pay dues like we do, in advance in January, but at the end of the year pays in the difference between what they have collected from owners and the actual expenses.

I think it works this way for two reasons:

• They pay in the difference every year (as we can see in the budget, I think). If they are allowed to not pay for their points, why not try to make a more accurate budget?
• What stops them to keep 30% or even higher percentage of points and make the remaining 70% of owners pay for the rooms they rent out? It would be a scam and I don't believe that, whatever it's written in the POS, it would be allowed

It would be interesting to calculate if the actual total budget divided by the total points at a resort gives the MF per point we pay (regardless of how many points are owned by Disney). But I'm too lazy to do it

 

[Sandisw]

I don't really know how it works for sure, but this is how I  think it works:
If a resort has a total of 10 million points, the total budget is divided by 10 millions. Disney doesn't pay dues like we do, in advance in January, but at the end of the year pays in the difference between what they have collected from owners and the actual expenses.

I think it works this way for two reasons:

• They pay in the difference every year (as we can see in the budget, I think). If they are allowed to not pay for their points, why not try to make a more accurate budget?
• What stops them to keep 30% or even higher percentage of points and make the remaining 70% of owners pay for the rooms they rent out? It would be a scam and I don't believe that, whatever it's written in the POS, it would be allowed

It would be interesting to calculate if the actual total budget divided by the total points at a resort gives the MF per point we pay (regardless of how many points are owned by Disney). But I'm too lazy to do it

From the way it was explained to me, and the way that the document shows things, the budget is prepared based on number of declared rooms into the condo assocation.

So, once a resort is 100% declared, the budget is prepared to cover operations for all of them. The price per point is then determined off of this for all the resort.

DVD then guarantees a certain amount we pay, which is actually slightly less than the actual budget…ieL for RIV in 2024, it’s $.30/pt…

Now, they do not pay upfront like we do but are responsible for the shortage beyond that guarantee…obviously, since they do the guarantee every year, it must benefit them and they are paying less this way.

So, I do think any an all points they own are “free” in the traditional sense, but the more points they own, the larger the shortfall, the more they pay.

 

[mort1331]

I don't really know how it works for sure, but this is how I  think it works:
If a resort has a total of 10 million points, the total budget is divided by 10 millions. Disney doesn't pay dues like we do, in advance in January, but at the end of the year pays in the difference between what they have collected from owners and the actual expenses.

I think it works this way for two reasons:

• They pay in the difference every year (as we can see in the budget, I think). If they are allowed to not pay for their points, why not try to make a more accurate budget?
• What stops them to keep 30% or even higher percentage of points and make the remaining 70% of owners pay for the rooms they rent out? It would be a scam and I don't believe that, whatever it's written in the POS, it would be allowed

It would be interesting to calculate if the actual total budget divided by the total points at a resort gives the MF per point we pay (regardless of how many points are owned by Disney). But I'm too lazy to do it

I cant find a total budget anywhere. I can find lots of places with breakdown of how we arrived at each $ for dues.
ie. SSR 2022 dues were 7.33/point, with just over 14million points = just under 103million budget. But cant find if this was what it was.
The other problem is not knowing how many points Disney owns. But on a resort like SSR, if you did just the 2% then you can find out what they paid, but need the unknown of what the actual budget was.
If someone can point me in that direction would be great. Then we can figure out what we paid vs. Disney per point.

 

[Sandisw]

I cant find a total budget anywhere. I can find lots of places with breakdown of how we arrived at each $ for dues.
ie. SSR 2022 dues were 7.33/point, with just over 14million points = just under 103million budget. But cant find if this was what it was.
The other problem is not knowing how many points Disney owns. But on a resort like SSR, if you did just the 2% then you can find out what they paid, but need the unknown of what the actual budget was.
If someone can point me in that direction would be great. Then we can figure out what we paid vs. Disney per point.

They do not publish that info but you can make an appointment with the offices in Celebration , as an owner, to see more detailed break down of the expenses for the year.

As you can see, what we pay, with the DVD guarantee,is less than the actual budget, so they go in accounting for a shortfall.

But, they are subject to audits as well. So, in the end, it doesn’t really matter because DVD has agreed to cover the shortfalls, which they do every year. They do not have to do this which makes me think they continue to do it because costs them less this way.

 

[drusba]

From the way it was explained to me, and the way that the document shows things, the budget is prepared based on number of declared rooms into the condo assocation.

So, once a resort is 100% declared, the budget is prepared to cover operations for all of them. The price per point is then determined off of this for all the resort.

DVD then guarantees a certain amount we pay, which is actually slightly less than the actual budget…ieL for RIV in 2024, it’s $.30/pt…

Now, they do not pay upfront like we do but are responsible for the shortage beyond that guarantee…obviously, since they do the guarantee every year, it must benefit them and they are paying less this way.

So, I do think any an all points they own are “free” in the traditional sense, but the more points they own, the larger the shortfall, the more they pay.

What was explained to you is the same thing explained to me about 20 years ago, so they are undoubtedly being consistent. Legally, they cannot be overly greedy by setting estimated dues significantly higher than they will most likely be. The applicable statute that allows DVD to not have to pay dues. but must cover costs that exceed the estimates paid by the members, requires a good faith estimate of the dues needed essentially using accepted accounting standards for doing such estimates. DVD always retains at least the minimum 2% ownership but it can be higher, and it is usually always higher after a resort is officially sold out because it is usually buying back points via right of first refusal, which will most likely be sold again later, and DVD gets back points from foreclosures when a member stops paying dues or any part of a mortgage.

 

[LAX]

Just out of curiosity, has DVD ever paid more on a per point basis when making up for the shortfalls than the members at any of the resorts? In other words, does this "guarantee" always end up favoring the "house"?

LAX

 

[Sandisw]

Just out of curiosity, has DVD ever paid more on a per point basis when making up for the shortfalls than the members at any of the resorts? In other words, does this "guarantee" always end up favoring the "house"?

LAX

Yes, they pay. If you look at the budgets, our guarantee is less than the actual projections.

Since they do it every year, I am pretty sure that they still pay a lot less doing it that way then paying on the points they actually own.

But, as owners, we benefit from it as well.

 

[LAX]

Yes, they pay. If you look at the budgets, our guarantee is less than the actual projections.

Since they do it every year, I am pretty sure that they still pay a lot less doing it that way then paying on the points they actually own.

But, as owners, we benefit from it as well.

I am sure they pay. The question is how much compared to other owners. It's sounds great that DVD will guarantee to make up any shortfall, but how much is the shortfall every year? Let's say DVD owns half of 2,000 points at a theoretical DVC resort. The owners pay $10 per point of AD, so $10,000 for their "share." I suspect the shortfall will always be less than $10K, so DVD's "share" will always be less than $10 per point.

LAX

 

[AstroBlasters]

So it would seem they have an incentive to keep maintenance, refurb costs, and upgrades as low as possible unless they think they can actively ROFR and sell the resort to make it worth their while…

 

[Sandisw]

I am sure they pay. The question is how much compared to other owners. It's sounds great that DVD will guarantee to make up any shortfall, but how much is the shortfall every year? Let's say DVD owns half of 2,000 points at a theoretical DVC resort. The owners pay $10 per point of AD, so $10,000 for their "share." I suspect the shortfall will always be less than $10K, so DVD's "share" will always be less than $10 per point.

LAX

I am pretty confident that they don't pay as much as they would if they were paying full amount on their points. However, as owners, we'd definitely be paying more and would then be on the hook for the shortfalls, if they occurred

They are certainly not required to provide the guarantee, but personally, I am glad that they do and am okay if they are paying less than I am in the end on a per point basis. Its also a reason for them to be as accurate as they can in developing the budgets for owners.

But, we can figure out at least a general idea of what they are paying....for example, for RIV in 2024, it appears they are picking up $.30/pt from owners. If almost 3 million points are sold, that is $900K in MF's for operating expenses they are paying toward the operations of the resort...