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With regard to the increasing values appearing
in credit allocations for new resorts:
My inquiry to Peggy Fry regarding allocation was as follows:
Quote: by ladycody
From the declaration with regard to credit allocation-section 3.4: “Such allocation shall be based on the relative use-value of the new
Resort compared to existing Resorts, in the Declarant's reasonable discretion.”
This line makes complete and utter sense to me. This indicates that, with a bit of wiggle room, all resorts’ credit allocation should be based on their use-value to owners relative to other resorts already in existence. If this practice had been followed throughout the development process...the price per credit would be the only true supporting factor regarding profit. If this practice had been followed, credit costs would have risen in direct proportion to real estate value and development costs.
I believe this is how the credit allocation was intended to be done...and that it was put into the declaration specifically to protect the owners from higher credit costs in equivalent resorts.
If this directive were followed (as opposed to basing allocation on product cost) it would require TW to raise credit costs to pay for a resort when the profit margin was too small...not increase credit values...unless the resort offered significantly more use-value than the resorts already in the system. If Trendwest put in a resort in Florence Oregon on the Coast...its use value would likely be the same as other coastal resorts and should be valued the same....construction cost be damned.
My fear is that credit costs have not been forced to remain in line with rising expenses...and that for Trendwest to follow this directive now would be difficult at best. I do understand that the declaration's clause would be a far less attractive means of valuing new resorts for any developer... because higher credit costs means more difficult sales...but that doesn’t negate the obligation to follow it.
How can the current model/formula for credit allocation be justified...??? "
Their response to my inquiry about method of allocation was as follows: (any blue within the following quote is me)
| Quote: | What document gives Trendwest the right to set vacation credit values on new resorts? (note: this is not the question I asked...I questioned the fact that credits are allocated based predominantly on product costs.) Answer: The Declaration of Vacation Owner Program.
Specifically Section 3.4(a) indicates that credit values are established by the Declarant using its reasonable discretion to do so. (note: no acknowledgement of the use value reference in the clause which is quoted in its entirety below). Some of the factors that timeshare regulatory agencies have recognized in setting vacation credit values include location, size, furnishings, recreational amenities, demand, cost to build and operate, and the vacation experience.
3.4(a) Allocation. Prior to recording of filing this Declaration as to a Phase of the Property, Declarant shall allocate to each Unit in that Phase the number of Vacation Credits required for occupancy during different seasons of the year and on different days of the week. Such allocation shall be based on the relative use-value of the new Resort compared to existing Resorts, in Declarant’s reasonable discretion. Declarant shall notify Club in writing of the schedule of Credits allocated to a Unit no later than when the Unit is conveyed or transferred to the Club. The total Vacation Credits allocated to each Unit is shown on Exhibit “A” attached hereto. |
They're right...many TS companies use these factors to assign value to their properties....and TW does have some wiggle room. But if you put up two comparable properties...the credit values should be comparable....cost be damned. Our documents even specify that the word "shall" is mandatory and not permissive....meaning that that IS how they are to be assigned....not may be how they are assigned.
Let's look at it from another view just for giggles.
My mother-in-law owns a Marriott that she bought 10 years ago. If someone (OwnerX) buys into the same property or an equivalent (trade value etc) Marriott property today...they are going to pay FAR more than my mother-in-law did...but their rights and use-value will be identical with regard to using the Marriott vacation program. They can trade into any Marriott for $89 based on availability. If OwnerX wanted more "power" within the Marriott system...he would need to buy/spend even more. In Marriott... that would mean buying more weeks or purchasing at a more valuable property (the equivalent of which, for a WorldMark owner, would be buying a larger membership).
I believe the use-value reference in 3.4(a) was included to ensure that our system was protected. Instead, when Trendwest uses product costs to determine credit values... they keep their purchase price lower by increasing the costs within the system. It just won’t work out over the long haul and will bite us in the fanny at some point...hard. If the relative use-value wasn’t inherently important to the WorldMark concept...it wouldn’t have been included. The verbiage is there for a reason....and can’t be willfully disregarded as it was in the reply above. |
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