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 PostPosted: Fri 03 Aug 2007 5:57 pm   
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Credit Dilution? Is it affecting your ability to find availability?


EXPLORING THE CONCEPT OF YOUR CREDITS BEING "DILUTED".

by Philip Abdouch and ladycody

MYTH: Existing owners are given new resorts for “free”.

FACT: There’s no such thing as a free resort, even if sales of new credits pay for it. Understand first that, in WM...you own a tiny piece of every resort that's built and brought into the system. Let me cite an example:

Let’s say WorldMark consisted of just 50 units at Depoe Bay, and there were 25 million credits sold...and you own the equivalent of one unit/week (assume that most people are buying in 10,000 credit blocks...which is actually higher than average). Then Trendwest built 50 units at a different resort in Mugwamp Swamps, South Dakota, and merges it into WorldMark, generating another 25 million credits. Now, all of a sudden, rather than your 10,000 credits being worth 1 unit at Depoe Bay for 1 week, you now own ½ of a unit/week at Depoe Bay, and ½ of a unit/week at Mugwamp Swamps. And you have to fight it out with 2500 new owners in order to get a week at Depoe Bay.

*Note: The new addition doesn’t have to be at Mugwamp Swamps...say it's in Ocean Paradise but the credit values are 100% higher (generating twice the number of owners...because the market being sold to is the same...and they're buying 10,000 credit ownerships). Now you own the equivalent of 1/2 of a unit/week at Depoe Bay and 1/4 of a unit/week in Paradise and have to fight 5000 new small account owners for Depoe Bay. As long as Paradise is always booked solid...the impact will be far less...but there is still a negative impact on your overall owner equity...the value of your credits went down.

Every time Trendwest adds a new resort, tens of millions of new credits are generated. These new owners are given a large percentage of the existing resorts. So you are giving up a share of your favorite resort in exchange for the privilege of staying in the new resorts. As long as the new resorts are equal to or better than the existing resorts, you should be happy, or at worst neutral. When new resorts are brought in at higher credit values, or in undesirable locations, your interest in the WorldMark properties is diluted, and it becomes harder to get accommodations where and when you want them.


Last edited by ModSquad on Sat 04 Aug 2007 8:01 am, edited 3 times in total.

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 PostPosted: Fri 03 Aug 2007 7:06 pm   
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HATRACK'S ORIGINAL EXPLANATION OF CREDIT DILUTION
by Steve Kranker
Re-iterated as a more detailed example of the concept detailed above.

A Coastal Oregon resort at Depoe Bay is one of WorldMark’s more popular, high demand resorts in summer. Pretend that an early WorldMark Club consisted of 50 condos in that resort with 50 owners, each with one week. There are thus 2500 timeshare owners, each with a 1/50th ownership in a Depoe Bay condo.

Incidentally, in the Trendwest sales pitch and all subsequent communication from the developer, owners and prospective owners are fed a “myth”, that they are paying for today’s portfolio of resorts, and that Trendwest (like some benevolent Santa Claus) is building us “free” resorts and handing them to our Club debt free. They intentionally perpetuate this myth and are successful in lulling all the masses to sleep and to thinking “if the new resorts are “free” and I’m not paying for them, then I have no say in where they are built, nor what credit values get assigned to new condos". They’re helped to believe if they don’t like the new location (or credit values required to get a week), no problem….just ignore it.

Now suppose that another developer has built “Mugwamp Swamps Resort” (maybe in South Dakota), with 50 condos and 2500 owners. What if Trendwest recommends ‘merging’ WorldMark Depoe Bay with the Mugwamp Swamps Resort? If the merger is approved, the expanded Club will now have 5000 owners of 100 condos in 2 locations. Each owner still owns 1/50th of a condo. Except that now, they truly own a half week in Depoe Bay and a half week in Mugwamp Swamps. Owners should get to vote on the approval of this merger, as they are effectively “selling” half of a week in Depoe Bay and buying half of a week in Mugwamp Swamps in exchange. They will be in favor of this if they feel the real estate value of a condo in Mugwamp Swamps is roughly equivalent to a condo in coastal Oregon. They’ll be adamantly opposed to the merger and will vote against it, if they judge that Mugwamp Swamps is an inferior, less desirable location.

But what if the bylaws of the Club don’t require a vote by all owners; perhaps the elected 5-member Board of Directors has power to approve this merger? The merger is approved, and it should be no surprise, that when the original Depoe Bay owner goes to make his reservation, on a 1st come, 1st served basis, that all the Mugwamp Swamps owners want to go to Depoe Bay and there’s twice as much competition for the desirable weeks there. Of course, it naturally follows that Mugwamp Swamps is easy to get….no demand for those weeks.

Admittedly, I used an undesirable Mugwamp Swamps example to exaggerate my point. If the proposed merger is equal or better than the original Depoe Bay, the pre-existing WorldMark owners will be thrilled to merge with the expansion resort proposed (maybe beachfront in Maui?)

I want to establish that each WorldMark resort expansion is truly a “merger”. Initially, a one-resort Club became a two-resort Club, then three-resort Club and then in 2004, the 53-resort Club became a 57-resort Club via expansion. There are no ‘free gifts’. In each expansion, the Club owners “sold” a share of their pre-existing portfolio of resorts and exchanged it or “bought” a fraction of the new resort. About 1999, WorldMark was a Club with 2,000 condos in 30 resorts. Unfortunately, the pre-1999 owners don’t ask themselves, “do I like the new 2000 condos added since 1999 as much as I like the original 2000 condos? They truly “sold” 50% interest in the mid-1999 Club to the new owners added since then, and they truly “bought” 50% interest in the newer 30 resorts added since mid-1999.

Continuing the hypothetical story, the lack of a vote to approve these mergers becomes even more outrageous when you realize that there weren’t really 2500 happy owners of the Mugwamp Swamps that joined our expanded Club, and the two-resort flexibility ‘added value’ to both halves of the Club by allowing them to enjoy variety. The way it really works is that Trendwest themselves owned 50 empty condos in Mugwamp Swamps and had ZERO owners who really wanted to go there. Back on the west coast, they had huge demand for WorldMark Credits that represent the right to a week in popular Depoe Bay condos but they were “sold out” of Oregon inventory. By acquiring a piece of cheap real estate in Mugwamp Swamps (maybe it’s a $120,000 condo instead of a $200,000 coastal OR condo), forcing the merger on the 2500 WorldMark owners at the time (after all, Trendwest controls the WorldMark Board….the “fox is guarding the henhouse”), Trendwest is allowed to “deem” a 2br/red week in either place is still 10,000 WorldMark Credits. Thus, they get a half million credits per condo independent of what the underlying real estate is worth (be it $120k or $200k). They sell the credits to new owners for $1.70 each; in fact, it’s very likely that the sales office in Oregon sells 95% of the new owners, and the newly opened Trendwest sales office in Mugwamp Swamps sells only 5% of the new members. So, Trendwest can continue to “sell” Oregon vacationers new credits with the promise of going to Oregon, when in reality, the real vacancy lies in Mugwamp Swamps. Theoretically any owner can aspire to go to Oregon, but only half of them in reality can get there on the 1st come, 1st served reservation basis.

I suggested Mugwamp Swamps condos were worth 60% of Depoe Bay condos; thus, a popular 2BR week should be 6000 WorldMark credits to go to Mugwamp Swamps and 10,000 credits to go to Depoe Bay. Under that scenario (fairly valued, equitable merger), an Oregon owner could trade one week in their higher value condo for perhaps 12 days in Mugwamp Swamps, and conversely, Mugwamp owners would have to trade 12 days usage in their original resort to go to Oregon for 7 nights. It could work. It could be equitable. (but not with the ‘fox guarding the henhouse’!)

Thus, if the developer is allowed to add over-valued (but less desirable resorts) to the portfolio, eventually, the Club is “diluted” in value to where there are an disproportionate number of new owners competing for the original popular destinations, and rampant vacancy in all the lowly new resorts. In WorldMark, we have some of that. I’m not alleging that Cendant has “totally wrecked” WorldMark over night, but the dilution is getting noticeable if you know where to look.


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 PostPosted: Fri 03 Aug 2007 9:38 pm   
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EXAMPLE OF CREDIT DILUTION
by ladycody


Increased Credit Values Makes San Diego resort a MISTAKE!

Trendwest recently announced the addition of a new resort in San Diego with the highest credit value assignment in the history of the club. 15,000 credits for a 1-bedroom every single week of the year, an 87% increase over the Oceanside resort, 39 miles away. That's higher than a 3-bedroom in Hawaii! The July 2006 Destinations magazine contains an article entitled "Increased Credit Values Make Prime Locations a Reality". In it, Trendwest tries to justify this outrageous inflation in credit values. Since Cendant purchased Trendwest, the number of credits needed to use the new resorts keeps rising. They are destroying the club as it previously existed. Let's examine some of the rationale Trendwest uses to justify these increases.

INCREASED CONSTRUCTION COSTS

It's true that the value of resort property has risen drastically. But that includes the value of our existing resorts. The original founders of WorldMark built a very important protection into our governing documents, one that Trendwest and our Board of Directors is choosing to ignore. Article 3.4(a) of the Declaration of Vacation Ownership Programs states that the credit assignment will be based on the relative use-value of the resort to the owners. NO MENTION IS MADE OF COST. What that means is if San Francisco and Seattle (other inner city hotel conversions) cost 12,000 credits for a 1 bedroom, then San Diego MUST cost 12,000 credits for a 1 bedroom.

Trendwest says they are faced with the choice of charging more credits or walking away from the project. But they fail to mention a third choice; simply raising the price charged for credits to match the increasing costs of resort property. That's the exact reason that protection was created by WorldMark's founders. In the last 5 years, the value of our existing resorts has risen by up to 500%, depending on location. In that time, the price of credits has gone up about 25%. That means new owners are paying less in relative terms than you did.

It's really simple; if Trendwest raises credit prices to match inflation, all new resorts can come in at traditional WorldMark values and the money you spent on your credits is protected. You'll continue to be able to use all resorts without having to add more credits. The resale value of your credits will rise. It should be no more or less difficult for Trendwest to sell credits than it was in the past, since the increases match inflation of resort properties. So the new owners would pay exactly the same (in 2006 dollars) as you did in 1992 or 2002.

However, if Trendwest continues the current trend of raising credit values for new resorts, all of us 230,000 current owners will either have to continually buy more credits or we'll be relegated to all competing (along with new owners) for the same existing resorts. The value of our credits will go down. At the current rate of increase, it would take 45,000 credits to stay in a new 1-bedroom within 10 years. Is that the system you thought you bought into? The system I heard described was one in which you "locked in" the price of future vacations. I knew that Maintenance Fees would increase, but the initial investment was supposed to be a one time expense, unless I wanted to add a second “week” of ownership.

WORLDMARK BOARD OF DIRECTORS

So where is our Board of Directors on this? Since we elect them to represent our interests, they are our only line of defense against this outrage. Instead of fighting these fundamental changes to our club, they've spent their energy spreading the following myths about their responsibilities and duties.

1) They say the WorldMark Board of Directors has no say in credit assignments, seasonal calendars or resort locations. That's absolutely untrue. San Diego (or any other resort) can NOT be brought into WorldMark without the signature of the Board of Directors of WorldMark. They say the Declaration of Vacation Owner Program gives Trendwest the right to annex property, but they forget to mention that it doesn't become effective until WorldMark signs it. Each Declaration is specific to one property; signing one Declaration for San Diego does NOT give Trendwest the right to add a property elsewhere.

2) They say existing owners were never guaranteed access to future resorts in WorldMark. Is that the way you understand WorldMark to work? Do you think it would be legal for Trendwest to sell new owners part ownership of our existing resorts, if we don't get partial ownership of the new resorts as well? Of course not?

So why would our elected representatives spread such blatant misinformation? As in much of business and politics, one need only FOLLOW THE MONEY! 4 of the 5 members of the board are long time executives of Trendwest or Cendant (the parent company). They are required to look out for the interests of their shareholders, so they can't also look out for WorldMark’s interests.

WHAT CAN YOU DO ABOUT IT

We can't depend on Trendwest or Cendant to protect us. They've already shown their game plan; take every penny they can out of WorldMark, regardless the long term effect. We can't depend on their employees on the WorldMark Board to protect us; they'd lose their jobs if they tried. While 2 of the board members have retired from Trendwest and/or Cendant, we can only assume they are still greatly influenced (through severance contract or "golden handcuffs" or otherwise) by Cendant, since they were career top level executives with those companies. All we have left is ourselves, and we can do the following:

1 - Educate yourself to the changes going on. Go to www.wmowners.com and participate in the discussion forum. Even if you only read, you'll became a knowledgeable owner, something Trendwest fears most.

2 - Help spread the word. There are efforts on-going to send a mailing to every single WorldMark owner. Help is needed in funding it. Even if you can only contribute a dollar or ten dollars, you'll be involved in the solution.

3 - Elect an independent board of directors. The only solution possible involves electing a board free of influence from Trendwest or Cendant. That's not an easy task; most owners don't vote. Of those that do, about half give their proxies to the board because they don't know any better. We must educate owners to stop doing that.

4 - Don't split your votes. There are always several independent candidates running for each open seat on the board. While we can't prevent that (nor should we want to), it's important that we not split our vote, allowing the incumbent to get re-elected. The only way I know to do that is to participate on www.wmowners.com and all vote for the same candidates, or to all give our proxies to someone that will do so. There is currently a proxy drive going on, check the discussion forum on wmowners.com.


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 PostPosted: Sun 13 Apr 2008 7:19 pm   
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While some of the articles (links) below were written some time ago, other than name changes, Trendwest to Cendant to Wyndham, they continue to be relevant.

Relationships
    *WorldMark the Club (WM): WM is a Not for Profit Vacation Club. You are a club member if you own WM credits. WorldMark the Club does not sell or manage WM Credits.

    *Wyndham (Wyn): Formerly Trendwest, Wyndham is the Corporation that employs Wyn the Developer and Manager for WM.

    *WM Board of Directors (WM BoD): Directors are elected by WM club members and Wyndham the Developer to represent owners and to protect WM the Club and the owners. The WM BoD may collect Proxies from WM owners who do not exercise their voting right to use for election purposes.

    *WM BoD contracts with Wyndham the Manager to Manage the clubs affairs.

    *Wyndham the Developer has a long standing, exclusive agreement with WM the Club to build and/or acquire resort inventory for WM owners use.

    ..The developer also can and does vote in elections for WM BoD candidates. This is an exclusive arrangement made by WorldMark the Club founders in it's formative years once the Club reached a pre-determined size.

    ..Trendwest's (now Wyn) agreement with WM is to build/acquire resort inventory for the Club. In exchange, they have exclusive rights to sell all credits generated by the resort/acquisition.

    ..Once developed, they deed the resort inventory/credits to WM the Club free and clear of encumbrances.

    ..They retain the use of the credits for voting in club elections, until all credits generated are sold. It is to their advantage to add resorts during the year to WM inventor, even if the resorts aren't available for use, and use the unsold credits to generate voting power.

    ..The Developers (Wyn's) Voting Power is determined by taking the total number of unsold WM credits throughout the system and dividing that by the "average" WM owner account size. As of October 2007, the average sized account was 9700 credits.

    *WM BoD is comprised of all but one current or past employee of Wyndham the Corporation. WM club owners have tried unsuccessfully to nominate and elect an Independent, not employed by Wyn, candidate for several years.

    *Travelshare (TS) is a Wyndham developer program. Wyndham implemented this program in November of 2006. A WM owner may "choose" to purchase and participate in the program for a fee, in addition to a standard or Premier account ownership. No one is required to join TS.

    ..TS is not a WM program. It is owned and operated by Wyn; TS is a program that can be terminated or changed at any time.

    *RCI is a Wyndham owned Vacation Inventory Exchange specialty group. A WM owner can "choose" to become a member or not. WM's Exchange partner has changed several times, depending on who the Developer chooses.

    *WMOwners.com is an advocacy group dedicated to advocating, educating and developing community for WM owners to learn more about the Club and the relationship between the WM Club and the WM BoD and Wyndham the developer and manager.

    The following are provided to give WM owners more information about those relationships and how they affect you.


Credit Dilution? Is it affecting availability?

Stop Dave Herrick's Proxy Drive

History f WM BOD positions

Election Results Over the years (links)

Link to WMOwners Informational Flyers

Can WorldMark refuse acceptance of resorts?

Are Increasing credit allocations for new resorts necessary?

10 Myths Trendwest [Wyndham] would like you to believe.

How has WorldMark been affected by Cendant? [Wyndham]

Attorneys General Addresses and Locations

How to Contact WM BOD and TW/Wyndham


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 PostPosted: Fri 06 Jun 2008 9:31 am   
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These articles are written by various wmo participants.
Credit Dilution, how and why it is happening has been identified as one of the top of concerns for owners.
We are bumping these up to make them easier to find.


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 PostPosted: Thu 05 Aug 2010 7:52 pm   
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ModSquad wrote:
These articles are written by various wmo participants.
Credit Dilution, how and why it is happening has been identified as one of the top of concerns for owners.
We are bumping these up to make them easier to find.
Bumping these important informational paper for readers this year.


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