May 29, 2010: WHAT’S ON THE MENU THIS WEEK? Quite a lot, so grab your coffee and head on over to a booth so you won’t be interrupted!
SOMETHING FOR NOTHING: Savvy investment groups are using an increasingly common strategy to take advantage of the nascent real estate market recovery. A case in point: New York’s 500 West 21st Street, one of the most high-profile development sites in Manhattan’s ultra-hot High Line district. Also known as 175 Tenth Avenue, the site comprises a full blockfront bordering the High Line.
In 2007 investor Andre Balazs and developer Charles Blaichman bought the property, which currently houses a low-rise garage, for $50 million. They intended to build a timeshare hotel on the site, but you can guess what happened to those plans when the bottom dropped out of real estate.
Enter Sherwood Equities, the company that developed the Renaissance Hotel in Times Square. Sherwood purchased the performing senior loan on the property from a large commercial bank in May of 2009, at a discount, in an all-cash transaction. The par value of the loan was $24 million. When the original developers defaulted on the loan in 2009, Sherwood filed for foreclosure and then took title to the property through a deed-in-lieu-of-foreclosure, which closed on May 11th, 2010.
Sherwood plans to sit on the property until the market recovers, possibly around 2012, and they figure they will most likely build a condominium development on the site. And that apparently signals an end to plans for a fancy new timeshare project adjoining the High Line Park! Buh-bye!
OPCs ASKING TO BE REGULATED? Well, that’s something new. But at Port Lucaya on Grand Bahama Island that’s exactly what’s going on.
OPCs were recently banned from the Port Lucaya area, reportedly because there have been a number of complaints from a hotel operator, the Ministry of Tourism and local Police who reported to the Port Authority that tourists complained that they felt harrassed. Well, no surprise there I guess.
But if the OPCs aren’t allowed to
harrass approach cruise ship passengers to invite them to a timeshare presentation it will affect not just the livelihood of the OPCs but the economy of the entire island, at least according to Norris Rolle, training manager of Ocean Reef Yacht Club. Rolle points out that the timeshare sales process, which begins with the OPCs, has resulted in thousands of one-time cruise ship visitors to the Bahamas becoming regular return visitors, thus putting consistent money into the coffers of the whole community. He said “Even now with the hotel closed in the Bazaar and very low occupancy elsewhere, we are enjoying 60-70 percent occupancy at timeshare resorts because of the actions of the OPCs.”
To that end, they are asking to be allowed back in but to do it in a regulated way that will make everyone happy. Hair braiders, the straw venders, taxi drivers and others who are regulated are allowed to work in the area, and it’s unfair to deny OPCs the same access to potential customers.
Rolle’s suggestion is that “They should get together, form an association and put some rules in place so that we can all move forward.”
ALSO IN THE BAHAMAS: It’s good news week for Paradise Island, thanks to Kerzner International. The company expects to begin a $100 million project later this year to renovate its existing Paradise Island properties, which include Atlantis the One & Only Ocean Club and Wyndham’s Harborside Resort at Atlantis.
What is unclear at this point is whether the Paradise Island upgrades include the proposed Hurricane Hole project, which was put on the back burner when the recession hit in 2008-2009. That project included redeveloping the former Hurricane Hole Shopping Plaza and Marina into a second Marina Village-style development that would include a timeshare resort.
Kerzner International acquired the Hurricane Hole Marina, the nearby condominiums and 11 acres of surrounding land for $23 million in June 2005, giving it control of all the main waterborne access points to Paradise Island.
NEW RULES: Both Mexico and the Republic of Malta are embracing tough new legislation for the timeshare industry.
In Malta, the “Timeshare and Timeshare-like Products Promotion – Licensing of OPC Representatives – Regulations of 2010” are probably stricter than the Bahamas OPCs have in mind. The new regulations will see OPCs fined up to a maximum of €2,300 for each infringement of the rules.
Under these new rules, each timeshare company will be required to deposit a guarantee for each OPC they hire to ensure that they behave correctly with tourists. The bond per timeshare rep is set at €2,500.
And instead of having to wait to take each incident through the courts the Malta Tourism Authority, (MTA), which regulates the tourism sector in Malta, will directly fine the companies found breaking the rules and take the fine out of the deposited bond money.
The new regulations stipulate that if a timeshare representative is found guilty of acting in an abusive manner with tourists or MTA officials, he or she will be fined €2,300, taking up almost all of his or her deposit money. Of course that will require the company to immediately top off the bond money to bring it back to €2,500. The theory is that this will not sit well with the employing company (of course they will do whatever is possible to take that money straight from the offending OPC. It’s kind of like a “reserve fund”, but with a twist.)
The penalties are tiered according to the severity of the offense:
- Timeshare reps found guilty of arguing, shouting or engaging in an argument of any kind with other timeshare reps will be fined €1,200.
- Timeshare reps found guilty of using cars in a manner which breaches the regulations will also be fined €1,200.
- ‘Minor’ offences under the new regulations include not wearing the identity document issued by the MTA or not wearing it prominently displayed, which will cost the offender €450.
- Misrepresenting the operational resort or product or providing misleading information on the resort: another €450.
- Carrying timeshare activities within a distance not authorised by the MTA will also bring a penalty of €450.
- Finally, not being dressed in accordance with the dress code approved by the Authority and being present in an area forming part of a larger number of timeshare reps present in that area not so authorised by the Authority will be fined €250 for each episode respectively.
OPCs in Malta are mostly from the UK and have been notorious for their aggressive tactics for years. Guess it’s time to learn new tricks…
In Mexico, the Ministry of the Economy has established new information requirements and regulations for providers of timeshare services. Failure to comply with such rules can result in substantial fines and affect the enforceability of timeshare purchase agreements. I don’t have nitty gritty specifics yet, but in general the new regulations:
- Broaden the definition of timeshare service “provider” to make timeshare regulations applicable to any person or entity that periodically offers, provides, and/or sells timeshare services.
- Recognizes the privacy rights of timeshare consumers, prohibiting the use, sale, or assignment of their information for marketing purposes without their written consent.
- Establishes less onerous requirements for terminating a timeshare plan.
- Lessens the burden of guarantees shouldered by providers regarding the performance of obligations under timeshare purchase agreements.
- Prohibits providers from using raffles, gifts, prizes, and lodging certificates to offer their services without specifying, in clear and unambiguous terms, the purpose of the corresponding offer.
- Establishes procedural, content, and registration requirements for all timeshare sale and presale agreements, in addition to those in Mexico’s Consumer Protection Act and other applicable regulations (e.g., Mexico’s Truth in Lending Act, which may be applied in certain timeshare-financed transactions).
Noncompliance with the new rules can result in financial penalties of $50 to $200,000 and partial or total unenforceability of the corresponding timeshare purchase agreements against the consumer, among other things.
It remains to be seen what kind of enforcement will actually be employed to execute the new rules…
AFTER THE GOLD RUSH: Will there or won’t there be a massive new resort development in the northern California foothills outside of sleepy little Sutter Creek, a historic town often called “The Jewel of the Mother Lode”? That’s what voters will decide on June 8.
At issue is the proposed 945-acre Gold Rush Ranch and Golf Resort, already nine years in the making, which would include 1,300 single-family homes, an 18-hole golf course, hotel and 300 timeshare units. As planned, the project could more than double the city’s 3,000-resident population in 10 years.
The size of the project is not the only thing that has divided the town on the possible advantages/disadvantages of approving it. Also at issue is what many consider untenable environmental damage to the area, and several environmental groups have joined the fight against it.
Developer Bill Bunce, with Gold Rush Golf LLC, says if Measure N passes on June 8, Gold Rush Ranch is scheduled to emerge in stages over the next two decades, a schedule that will allow the town to adjust to the demands of such significant growth.
June 8. Up or down. Do or die. I’ll let you know how it goes.
STILL CONSOLIDATING: A couple of years after the initial blood bath of sales center closures and the layoffs of some 4,000 timeshare-related personnel, Wyndham Vacation Ownership is still consolidating and laying-off in some areas, even as it expands in others. The company has notified the state of Florida that it plans to lay off 79 employees at its Margate call center facility just north of Ft. Lauderdale. The layoffs will be effective Aug. 1. Most of those (38) impacted are customer service agents, though the director, manager, supervisor, analyst and receptionist are also on the list.
Wyndham is offering the employees the opportunity to apply for call center positions in Orlando, but relocation packages are not included in the offer. Once the layoffs are completed the operation will be shut down and Wyndham no longer will lease the property.
Wyndham giveth and Wyndham taketh away.
NEVER UNDERESTIMATE THE STUBBORNESS OF A SCOTSMAN: Donald Trump is still planning to build the “world’s greatest golf course” on the Menie estate near Aberdeen, a project which will include two 18-hole championship golf courses, a luxury hotel and timeshare flats. But the Scots he has pissed off over the deal are determined to throw every possible monkey wrench into the deal, to which end a group of local protestors has bought a parcel of land that they argue will thwart the £1 billion seaside development.
Calling their group “Tripping up Trump“, several families whose properties are on the land have bought a piece of the land belonging to Michael Forbes, the original pissed off Scotsman who dug in his heels and refused to sell. The one-acre parcel (dubbed “The Bunker”) is in the heart of the planned Trump golf resort, and the group claims the development cannot proceed in its current form without access to it.
Just to make things as difficult as possible for the Trump Organisation and Aberdeenshire Council if they were to pursue a compulsory purchase order for the site, the group has put the names of hundreds of protesters on the title deeds. Migraine time in the legalities category!
Of course, The Donald is of Scottish descent himself and he has lots and lots of money in addition to stubborness, so who knows how it will turn out. But so far Michael Forbes’ determination to at least make Trump’s life a little miserable has been bearing fruit for at least a couple of years.
It might not have turned out that way if The Donald had not insulted Forbes in public, and had the Trump machine not been so arrogant. Take note of this quote from Forbes:
“I knew what kind of people they were the first time I met them… George Sorial [Trump’s US lawyer] invited me up to the big house about three months back, and offered me £350,000 for everything. I said, ‘What? I could build one house on my land and sell it for that.’ Sorial said, ‘We’ll make sure that never happens.’ I thought, ‘So that’s the way you want to play it, is it?’
If you want to get a grin about the whole affair, while refreshing your memory, you can start here:
PEOPLE: Mary Dieckmann has been named director of owner loyalty at Grand Pacific Resort Management, a timeshare management company in Carlsbad. Dieckmann, who previously was regional director of operations, joined the company in 1992 as resort general manager at Coronado Beach Resort.
Shell Vacations LLC has announced some major personnel movement in the company, as a result of which we now have an indication of the direction in which the company is moving:
Shell has selected Karen Buttice to lead all of the company’s programs that provide extensive fee-based services for resorts, hotels, condominiums and owner associations.
Premier fee-based services currently being offered by Shell include:
- Direct Member Affiliate Program
- Hospitality and association management
- Rental distribution of unused inventory
- Employee certification programs
- A comprehensive travel program and
- Sales and Marketing services
For the past three years, Buttice has implemented new corporate initiatives across all disciplines for Shell, from Club operations to hospitality services to sales and marketing products and programs. In addition to her 22 years in the timeshare industry, including 19 years with RCI, she is familiar with a wide range of programs offered by other developers.
Bernard Freibaum, an accomplished financial executive with extensive real estate experience, has joined Shell as Chief Financial Officer. Freibaum will work closely with Shell Vacations Chairman and CEO Sheldon H. Ginsburg and President and COO Tracy L. Sherles in evaluating new growth opportunities and enhancing business operations within the company’s many divisions.
Ilese Flamm, an accomplished attorney with nearly two decades of experience in timesharing and resort development law, has been selected by Shell to serve as its Senior VP, Legal Affairs.
During her 18 years as a legal professional for the timeshare industry, Flamm spent nine years at Wyndham Exchange & Rentals and nine years with Disney Vacation Club. She will work closely with Shell Vacations Chairman & CEO Sheldon H. Ginsburg, President & COO Tracy L. Sherles as well as Daniel B. Glickstein, VP and General Counsel in helping lead the legal functions of the company, and also serving in a business role utilizing Flamm’s experience as Shell Vacations moves forward into new levels of expansion.
DEAD SKUNK IN THE MIDDLE OF THE ROAD AWARD: In Israel a fellow name Roni Perle, of Reality Group, has been sentenced to five years in prison and fined NIS 100,000 for defrauding investors. He was convicted of stealing NIS 25 million and was ordered to pay NIS 1 million in compensation to his victims.
Perl’s “business”? It’s the same old story. He set up meetings with people looking to sell off timeshare units they no longer wanted, saying he would assume control of the properties as well as the costs in exchange for a one-time fee. Then he persuaded them to place sums ranging from NIS 50,000 to NIS 200,000, on which he promised double-digit profits for investments that were unconnected to the timeshares. But the investment plan turned out to be a Ponzi scheme, where he used money from new investors to pay older investors.
After obtaining the money, he gave his customers postdated checks for small sums. At first, the checks were honored by the banks, but eventually they began bouncing.
When Perle was arrested in Tel Aviv in mid 2009, he said he owed millions of shekels on the “gray market” due to the collapse of his business. In a search of his home, police found dozens of rubber stamps for what were believed to be fictitious companies to which Perl transfered his clients’ money.
Reality Group’s Web site claimed the company had more than 3,000 customers and provided business services, including financial solutions, for people with timeshare units and other private individuals and businesses.
Definitely a dead stinking skunk!
And that’s it for this week’s Roadkill. See ya next weekend, and keep your eyes on the road… Oh, and if you enjoyed this, tell a friend!
Published every Saturday.
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