Two questions about Contract Extensions

[TammyAlphabet]

If the contract extensions offered at OKW are offered at the other shorter term resorts, like BWV, BCV, etc, I am wondering about a couple of things.

First, will the shorter term contracts and the longer term contracts have different maintenance fees? I am thinking that the capital reserves for shorter term contracts, as they near the end should be less than that those that have an additional 15 years to go? If the maintainence fees remain the same for both types of contracts, won't that mean that the shorter term contracts will be supplementing the longer term contracts? Also, suppose that only 50 percent of the people opt to extend their contract, who will share the maintenance fees with them after the other 50 percent have their contracts end? Will Disney actually sell new memberships for a property that is already 50 years old? And if they do renovate and resell, they would have to renovate all the units, won't that mean a potential assessment for members?

Secondly, any guess as to what the effect will be on resale prices, say, 10 years down the road?

Just thinking...

 

[CarolMN]

If the contract extensions offered at OKW are offered at the other shorter term resorts, like BWV, BCV, etc, I am wondering about a couple of things.

First, will the shorter term contracts and the longer term contracts have different maintenance fees?

No one knows at this point - nothing in the rumor mill or in the letter OKW owners have received has addressed annual dues. I'm sure you and I aren't the only ones wondering, though, LOL

I am thinking that the capital reserves for shorter term contracts, as they near the end should be less than that those that have an additional 15 years to go? If the maintainence fees remain the same for both types of contracts, won't that mean that the shorter term contracts will be supplementing the longer term contracts?

I agree with you. I doubt that I will extend and am not crazy about subsidizing the longer contracts either.

To me, it seems that the capital reserves portion of our dues will have to keep the resort in shape for 15 years longer than originally planned and that has got to cost more. FWIW, I don't think that there will be different dues for the two different ending dates.

so, suppose that only 50 percent of the people opt to extend their contract, who will share the maintenance fees with them after the other 50 percent have their contracts end? Will Disney actually sell new memberships for a property that is already 50 years old? And if they do renovate and resell, they would have to renovate all the units, won't that mean a potential assessment for members?

After the extension, I'm quite sure Disney plans to only sell add ons that end in 2057 (or whatever ending date each resort has after the extension).

And I don't think they much care about what MIGHT happen 35 years from now - this has to be mostly about selling the inventory of ROFR points they have in stock and about keeping prices up for the new unsold and future DVC resorts. I really think the plan is to keep maintaining the older "extended" resorts via dues - which already have a rather hefty (compared to many other timeshares, IMHO) portion dedicated to capital replacements/improvements. I think that portion will increase because of the extension.

Secondly, any guess as to what the effect will be on resale prices, say, 10 years down the road?

Just thinking...

No idea - but that does seem to be the question, doesn't it?

FWIW, I don't think there is going to be a $25 per point difference, though (and probably not even a $15 per point) - at least not for a long time down the road. I know it isn't exactly apples to apples (but it's pretty close except for contract length), but SSR resales sure aren't selling for $15 per point more than OKW right now! JMHO. YMMV.

 

[drusba]

Obviously, everything now is just speculation but you ask some good questions. Some views:

1. As to the operating portion of the budget and dues, it is irrelevant what the end year is because that is an amount that applies only to the year for which the dues are paid. Thus, the reserve budget is the issue. Currently the reserve budget has absolutely nothing in it that would potentially apply to anything after 2042 -- they are neither required nor need to reserve that far in the future. It won't become an issue for many years. However, by law they are required to have adequate reserves for long term replacement/repair matters, e.g., roofs. Reserves are set on estimated life of existing structures to determine potential replacement time and annual reserves are collected for that possibility. When you pay a reserve, though it may be for a project long into the future, it is an amount that is specifically applicable to the year you are in. In other words, they can legally charge that portion to you if you are a member in that year regardless of whether you may not be a member when the time comes to use it. They could do that in 2038 (or any other year) even if all ownership interests were going to expire in 2042 and the estimated time of replacement was after 2042. In others words, I would not get any hopes up that you will later be able to not pay into reserves simply because your contract will be terminating in 2042 and others would be 2057 because from a legal point of reserves and who pays them nothing has really changed. The assumption that you would get a break on reserves as 2042 approached if all owners interests ended then was itself not true to begin with. Renovations that may occur later will be in the same category -- you will pay either through operating budget or amounts already pur into reserves.

2. What they will undoubtedly do with extra 15 years not purchased by many is tack them on to interests they sell that they get through ROFR or foreclosures and thus they will sell interests as ones ending in 2057.

3. One can only speculate effect on resale prices 10 years from now but you can likely assume that new resale buyers 10 years from now will consider a 40-year contract better than a 25-year contract.

 

[Anthony1971]

Could it be that Disney will ROFR all OKW contracts after and add the extra years and sell them at a higher price? They could certianly command a premium and have the upper hand over resales for a period of time. Someone has to crunch the numbers and have a back up if sales are less than expected unless they close part of the resort.

 

[dvc at last !]

subscribing....................

 

[salmoneous]

Could it be that Disney will ROFR all OKW contracts after and add the extra years and sell them at a higher price? They could certianly command a premium and have the upper hand over resales for a period of time.

Disney can build points for - what -$35 and sell them for $104, or they can ROFR them for $75 and sell them for $104. My guess is Disney only goes the ROFR route if it faces an inventory crunch in late 2008 before Kidani opens.

 

[BostonDisneyKid]

bump

 

[Anthony1971]

Disney can build points for - what -$35 and sell them for $104, or they can ROFR them for $75 and sell them for $104. My guess is Disney only goes the ROFR route if it faces an inventory crunch in late 2008 before Kidani opens.

In that respect yes. I was more referring to if only a small percentage of OKW owners take advantage of this offering they could still ROFR all 2042 points and convert them to 2057. Although the profit may not be as high as other ventures? they certianly have a lot more to gain than closing part of the resort in 2042 or????

 

[LIFERBABE]

Could it be that Disney will ROFR all OKW contracts after and add the extra years and sell them at a higher price? They could certianly command a premium and have the upper hand over resales for a period of time. Someone has to crunch the numbers and have a back up if sales are less than expected unless they close part of the resort.

Well they cant get rid of the OKW points they are sitting on now and they are selling it for less than they are selling BCV, BWV or VWL. So I dont see the extra years commanding a significantly higher price or demand.

Young families want new. OKW is gorgeous, but it is not what most young families would purchase as their home when you compare it to the newer DVC's they are building, or the location of the EPCOT resorts.

 

[hojolo]

One quick clarification...there won't be any "short contracts". The extension to 2057 will apply to ALL contracts, so any dues or maintanence will also apply equally to all members.
The only question you get to resolve is if you want the extra 15yrs for your own interest.
If you do, you pay the fee and get them.
If you don't, whether through deeded the extra yrs back to DVC or by simply doing nothing and having the lien placed on your units, DVC will have them as part of future resales.
For example, if you do nothing and decide to sell your interest, the buyer will get 2057 term, but as part of your settlement sheet at closing the cost of satisfying the lien (including any fees or interest as allowed by law, if any) will simply be deducted from your net proceeds. Pay them now or pay them later...it's your choice. To avoid any misunderstandings, if you don't want the extra use until 2057 the safest thing to do is to clearly deed it back to DVC so your payout if you subsequently sell won't be uncertain.