ROFR questions (Rhyme, Reason and Strategy)

[DVCowner2009]

Three ROFR questions for the group.

1.Would it be fair to say that there is no externally observable rhyme or reason to whether something will pass ROFR? I've read through all of the ROFR threads and the consensus seems to be there's no consensus on what will pass, at what price, and when. True?

2. With Disney's new fiscal year starting this week (presumably with a fresh set of "cash" to spend), along with the low(ish) prices on the resale market, is anyone who is waiting for ROFR worried that Disney will be more aggressive on exercising ROFR?

3. Can someone confirm that Disney's ROFR follows all contracts, and even resales of resales will be subject to ROFR?

Thanks very much....

 

[chalee94]

1.Would it be fair to say that there is no externally observable rhyme or reason to whether something will pass ROFR? I've read through all of the ROFR threads and the consensus seems to be there's no consensus on what will pass, at what price, and when. True?

there are a couple of reasons for ROFR.

1) if an owner is desperate and selling at a firesale price, disney is the one to benefit - they already have the sales machinery in place to profit
2) the threat of ROFR keeps prices higher in general - which benefits disney's ability to sell new contracts

you can get a general idea of what is a safe price by looking at ROFR history on that thread, but it can vary for a number of other reasons:

1) is the contract loaded or stripped?
2) does DVC have buyers currently lined up to add-on at certain resorts for certain UYs?
3) is the resale buyer a current member or a newbie? DVC may not want to administer a smaller contract for a newbie and may require a higher price.

an experienced broker should be able to ballpark whether your offered price is a safe bet or whether you are taking a chance.

2. With Disney's new fiscal year starting this week (presumably with a fresh set of "cash" to spend), along with the low(ish) prices on the resale market, is anyone who is waiting for ROFR worried that Disney will be more aggressive on exercising ROFR?

IMO, the improving economy will make more of a difference than the fiscal year. if disney can afford to use their liquidity for ROFR (and the demand is there to resell the ROFRed contracts as add-ons to current owners or to new buyers), then it's worthwhile.

3. Can someone confirm that Disney's ROFR follows all contracts, and even resales of resales will be subject to ROFR?

confirmed.

 

[DVCowner2009]

Thanks for the informative reply, Charles.

DVC may not want to administer a smaller contract for a newbie

What's "smaller" in this context?

 

[JimMIA]

I rarely disagree with Chalee, but I have a different perspective on two of his comments here:

1) is the contract loaded or stripped?

I don't think loaded or stripped matters to Disney. They have plenty of points in just about all UY months for most resorts and they have the ability to reassemble contracts in any size they want, so a loaded contract has minimal value to them.

IMO, the improving economy will make more of a difference than the fiscal year. if disney can afford to use their liquidity for ROFR (and the demand is there to resell the ROFRed contracts as add-ons to current owners or to new buyers), then it's worthwhile.

I think Disney's attitude toward ROFR is that it's a tool to keep "new" prices where they want them...not really something they want to do. The assumption is that if resale prices slip too low, "new" sales will suffer due to bargain-hunting. To the extent that Disney can turn around and make a profit on those points, fine -- but the reality is they usually have tens of thousands of points in their inventory. About every other year or so, they offer a "deal" on ROFR'd points, although the prices have always been unattractive to us.

I think Disney may look at ROFR differently when the economy turns around. They might take advantage of this opportunity and see how their "new" sales hold up without aggressive ROFR action. If they can maintain their price points where they want them, they may decide to let resale prices slide lower until they start to see an actual impact on their "new" sales.

 

[JimMIA]

Thanks for the informative reply, Charles.



What's "smaller" in this context?

"Smaller," to Disney would be any contract smaller than their current minimum, and certainly anything 100 points or less. There is a basic administration cost for every contract, regardless of size, and there is a sensible argument to be made for Disney wanting to get "smaller" contracts out of their system...both to reduce administrative costs and to remove the option of "getting in on the cheap."

 

[DVCowner2009]

Thanks Jim. I suspected it was below the 160, but wasn't sure. One thing I've learned waiting on ROFR is that there's not much use in fretting/worrying about it, but it is fun to try and wonder what goes on behind the ROFR scenes and makes it all tick.

 

[Chic]

I can tell you from personal experience that a loaded contract does not increase the likelihood of Disney exercising ROFR. I have purchased two fully loaded resale contracts at SSR for $64 and $65 a point. Both contracts had all points from last year, current year, and next year available. Here is where Disney really lost a sale: I personally stopped by SSR to visit my guide during a Disney World vacation in December 2008 to let him know I was interested in adding more points as soon as they were available with the opening of the tree houses. He assured me that my name was placed on a list and I would receive an e-mail when the time arrived. Well, I read on the internet a little later that the points were now for sale but I never received an e-mail as promised. I e-mailed and made a phone call to my guide asking again about the price per point and incentives but he never returned either message. After this poor customer service, it was "off to the resale broker I go" which saved me about 50% of Disney's cost.

 

[DVCowner2009]

Chic - similar story here. My guide never returned my voicemail I left for her two hours after our tour. Odd.

When did you pay $64/65 at SSR? Those are excellent numbers.

 

[wdrl]

I don't think loaded or stripped matters to Disney. They have plenty of points in just about all UY months for most resorts and they have the ability to reassemble contracts in any size they want, so a loaded contract has minimal value to them.

I wonder whether a loaded contract really has only minimal value to Disney. True, there is some disincentive for Disney to ROFR a loaded contract because it may be responsible for the MF on those points. However, if Disney ROFRs a loaded contract, it can give those points to CRO and make a profit off the cash reservation. Given that a single week-long cash reservation can recoup 25% or more of the ROFR cost, it can be economically feasible for Disney to prefer loaded resale contracts over stripped contracts.


I think Disney may look at ROFR differently when the economy turns around. They might take advantage of this opportunity and see how their "new" sales hold up without aggressive ROFR action. If they can maintain their price points where they want them, they may decide to let resale prices slide lower until they start to see an actual impact on their "new" sales.


Actually, I think Disney is already seeing an impact of low resale prices on its "new" sales of both SSR and AKV. Currently, Disney is selling SSR at about $102/point, which is about $30 higher than the resale market for SSR. I've been tracking sales of the Units declared by DVD for the THVs on January 22, 2009. In that Declaration, DVD brought 30 THVs and 452,625 points into the DVC. Through 9/30/2009, Disney has sold only 119,819 points, or about 15,000 points a month. I have no idea how many SSR points sell each month on the resale market, but based on the number of SSR ROFR waivers I see recorded on the Orange County Comptroller's website, I suspect that its greater than the "new" sales by Disney.

AKV's "new" sales have been fairly decent, partly because until 8/30/2009 the gap between resale and direct sales was not that great, and the advantage of faster processing time, no closing costs on add-ons, and getting a full complement of points from Disney offset the price difference. Nevertheless, the AKV sales lag behind BLT by about 3-to-1. And I suspect that the AKV resale market is a big reason for the slower AKV "new" sales.

At the rate Disney is selling SSR, its going to take probably another two years before it sells out the current Declaration, which brought 30 THVs into the DVC inventory. And that only takes care of half of the THVs. I'm assuming that DVD will eventually declare the other 30 THVs, but that will mean it will have to sell another 452,625 points.

So, I think resales are already impacting new sales. I suspect that, at least for right now, Disney just doesn't have the cash available to prop up the resale market.

I had given some thought to tracking the number of ROFR waivers that are recorded on the OCC website. Each waiver shows the resort and, by extrapolation, the number of points can be determined. If tracked over time, the number of waivers might give us a feel for demand. But there is no way to know if a ROFR waiver is generated because of an actual sale or because of a gift, an inheritance, or a simple change in title. So, I've given up on that idea.

 

[sorcamc]

Who knows what makes them decide? We just inquired about a 100 pt add-on direct through Disney...after dh and I spoke about it, we decided to try resale for 250 points...now, I wonder, will Disney ROFR our contract because they have a note that I *might* add 100 points? Do they go that far as to "profile" the buyers? It sounds like I have too much time on my hands. All I know is it seems they aren't buying back too much OKW, so I am crossing fingers that we will be ok.

 

[Chic]

Chic - similar story here. My guide never returned my voicemail I left for her two hours after our tour. Odd.

When did you pay $64/65 at SSR? Those are excellent numbers.

I purchased my SSR 160 point contract for $65 a point in February 2009. I purchased another SSR 160 point contract for $64 a point last month (September). Both contracts had December use years and were fully loaded with all points from 08, 09, and 10.

 

[DisneyWalker44]

One thing I've learned waiting on ROFR is that there's not much use in fretting/worrying about it, but it is fun to try and wonder what goes on behind the ROFR scenes and makes it all tick.

On another board, they explain that the ROFR process is run by a monkey with a dartboard and bottle of Jack Daniels. Probably the best way to think about it.

 

[DVCowner2009]

I purchased my SSR 160 point contract for $65 a point in February 2009. I purchased another SSR 160 point contract for $64 a point last month (September). Both contracts had December use years and were fully loaded with all points from 08, 09, and 10.

Great deal! I'm waiting on a ROFR significantly higher than your pricing. We'll see....

 

[DVCowner2009]

On another board, they explain that the ROFR process is run by a monkey with a dartboard and bottle of Jack Daniels. Probably the best way to think about it.

That's essentially what I'm finding out, too. Which is comforting in an odd way because it emphasizes there's not much we can do other than to try and submit the lowest/best price we can and hope for the best.

 

[Chic]

Great deal! I'm waiting on a ROFR significantly higher than your pricing. We'll see....

Which resort are you planning to purchase a resale? I've found that SSR has the lowest price per point with the exception of VB or HHI. This works for me because I've had excellent success booking at the 7 month window. I basically stay in all the Walt Disney World DVC resorts so my home resort is of no importance. I enjoy the longer contract at SSR along with lower maintenance fees so the lower resale value suits me just fine.

 

[DVCowner2009]

Which resort are you planning to purchase a resale? I've found that SSR has the lowest price per point with the exception of VB or HHI. This works for me because I've had excellent success booking at the 7 month window. I basically stay in all the Walt Disney World DVC resorts so my home resort is of no importance. I enjoy the longer contract at SSR along with lower maintenance fees so the lower resale value suits me just fine.

I will PM you...

 

[minniekissedme]

Which resort are you planning to purchase a resale? I've found that SSR has the lowest price per point with the exception of VB or HHI.

Oh yeah...these two are great options if you like high MFs. Stick with SSR or and extended OKW.

 

[silmarg]

I think Chic is right, I am not so sure that loaded contracts command a commesurate differential in the ROFR process. His contracts seem to point that out (and I am following his lead buying a nearly loaded 160pt SSR contract for $65 - in for ROFR as we speak).

When I explained the whole ROFR process to DW (who has no finance / real estate acumen), she thought DVD would look at a prospective buyers history w Disney (how often they travel and where they stay) in addition to price.

I never thought of it that way. But I could see Disney giving folks who stay in values / mods a lower bar in ROFR land (to make sure they keep coming back year after year) and I could see DVD giving preference to folks who come less frequent (vs more frequent). If this theory holds up, I am good on the first point, but not so good on the second.

It's all speculation in my eyes... who know how this ROFR thing works. All I know is if I get ROFRd I will come back with the same price on the same type of contract - as I am sure it will pass if the wind is blowing right in Celebration FL.

 

[carlbarry]

How the heck would Disney know the travel history of the purchaser????

 

[DenLo]

When I explained the whole ROFR process to DW (who has no finance / real estate acumen), she thought DVD would look at a prospective buyers history w Disney (how often they travel and where they stay) in addition to price.

I never thought of it that way. But I could see Disney giving folks who stay in values / mods a lower bar in ROFR land (to make sure they keep coming back year after year) and I could see DVD giving preference to folks who come less frequent (vs more frequent). If this theory holds up, I am good on the first point, but not so good on the second.

How the heck would Disney know the travel history of the purchaser????

It's called computer matching between the CRO, DVD, and ROFR.