ROFR for Starwood may increase

Hello;

After following Starwoods margin calls for a few years, things seem to be turning positive for SVO.

I follow this recent news here.

http://seekingalpha.com/article/532...ses-q1-2012-results-earnings-call-transcript?

Vasant Prabhu stated; for 1st Quarter 2012
Our Vacation Ownership business remains stable with interval sales and revenues up. The cash profile of the business continues to improve as we see more cash sales and more prepayment of loans. Default rates continue to drop with Q1 defaults at 4.2%, levels not seen since early 2007. We remain on track to deliver over $100 million in cash from this business in 2012. Since 2009, our Vacation Ownership business will have delivered $800 million in cash to Starwood.

We finished the quarter with over $800 million in cash, almost $700 million in excess of working capital needs. Our net debt, not including Vacation Ownership receivables, was $1.38 billion, $150 million lower than we ended 2011. As our debt declines and our EBITDA climbs, we have been upgraded by all 3 rating agencies to investment grade.

Frits van Paasschen said;

Our continuing philosophy with Vacation Ownership is we'll look at ways that are high IRR, high return opportunities to sustain the sales volume for the business, but not focus on growing the absolute size. We like being able to control and manage our Vacation Ownership business and having it be part of our portfolio at the size as it is. And, as Vasant mentioned over the course of some of his remarks, at the end of this year, we will have gotten to $800 million in positive cash out of our Vacation Ownership business. And the trends of the business right now are very healthy. So while, clearly, others have pursued a different strategy, we feel very good about where we stand right now. And if there's an asset-light model for growing our Vacation Ownership business, clearly in the philosophy of higher return ways of adding inventory, that's something we would look at. But again, we need to make sure that we have product that we can control, that fits with our brands and that works with the owner base that we've developed over time.


I personally believe this means Starwood will be active in ROFR.

Reagds

Scott

All they need is to take 1% of that cash and build a great web site to support owners, lower costs (increase profit long term) and give another tool for them to use in showing the flexibility of their product during sales meetings.

Thanks for the post. Very interesting. What part of this makes you think more ROFR than previously? They only have it at Mission Hills (where I think it's unlikely given all the Desert Willow Villas inventory), Princeville (plenty of inventory and a slow seller) and the Kaanapali resorts (where they have exercised consistently).

I think these statements are solely to address questions as to their strategy vis-a-vis Marriott's spin-off and move to asset-light, making SVO stick out a bit given HGVC was already asset-light(er).

Purchasing units at resale (either by ROFR, or in the open market) for resorts with active sales is one way Starwood can continue to generate income from SVO. They put this acquired inventory into their resort sales channel and benefit from their enormous markup. This strategy lets them control their inventory. If sales slacken, they just stop purchasing resale units.

This has less risk than building a new resort because they can control their inventory, rather than having a whole resort to sell. Plus they get the marketing tool of telling the customers the resort is almost sold out.

As long as the resales prices are 1/2 to 1/3 or even less than the retail prices, Starwood makes out like a bandit.

So I agree, this seems to suggest that Starwood will remain active in the ROFR and maybe even resales market. Got to give all of those sales people something to sell.

Greg

I agree with Greg's analysis. Specifically, these statements could be construed in support of Starwood taking advantage of ROFR:




Whether that means we'll notice a pick up in the number of ROFR units, we'll just have to wait and see.

Glorian

ocdb8r said:

What part of this makes you think more ROFR than previously? They only have it at Mission Hills (where I think it's unlikely given all the Desert Willow Villas inventory), Princeville (plenty of inventory and a slow seller) and the Kaanapali resorts (where they have exercised consistently).

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Starwood has been aggressively exercising ROFR at WMH (Platinum Season) and Princeville. They have been doing so for at least the past 6 months.

Since they are not building anything new they need to ROFR to keep a variety of inventory available. WLR is still selling and I'm guessing they still have weeks at SVV, in addition to WDW and Princeville. So they need other prime locations for sales. SBP has a good flow of potential buyers, so ROFR there would make sense (not the highest dollar sales, but it's better than nothing). WKORV/N has a huge margin on their ROFR so what Fred is seeing also makes sense. WMH also has a high end customer base ripe for selling to. ROFR is the only option unless/until they acquire more properties in desirable locations.

Fredm said:

Starwood has been aggressively exercising ROFR at WMH (Platinum Season) and Princeville. They have been doing so for at least the past 6 months.

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Hmmm, I must have missed that. I haven't noticed many posts on here for those resorts and based on the deeds recorded for those resorts over the last 6 months, it didn't look like they were picking up anything other than the occassional defaulted units.

ocdb8r said:

Hmmm, I must have missed that. I haven't noticed many posts on here for those resorts and based on the deeds recorded for those resorts over the last 6 months, it didn't look like they were picking up anything other than the occassional defaulted units.

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I have, from time to time, posted specific ROFR experiences at these resorts.
To add to these, WMH annual Platinum was exercised at $5,500 on Monday.
Several weeks ago a WMH Platinum was exercised at $5,000.
WMH ROFR activity actually goes back further than 6 months.
Starwood started exercising in earnest when it ran short of Platinum inventory at WDW over a year ago.

We also had a rash of WPORV sales exercised. In fact, it burned through our inventory at the time. The good news was that I had to go fishing for an eoy to sell to a buyer, and found a TUG owner who was interested in selling. That eoy passed ROFR at $8,500. Prior sales below $8,000 were exercised.

We are opening escrow today at $6,000 for a WMH Platinum. I will let you know how it goes.

Seven of our last ten sales at these resorts were exercised by Starwood.

My first EOY WPORV was ROFR when I went to sell it for around $5k. I was not happy as Starwood messed up the paperwork 3 times and it took about 6 months to finalize.

Fred on the other hand helped me with my other week. I received a much better price that was not ROFR. The transaction was fast and smooth. Thank you Fred!

I am now in the market for a Marriott Aruba Surf OF Gold and I am hoping to find it for around $10k and that it is not ROFR by Marriott. Based on two other recent sales that I am aware of, I should be fine if I stay over $10k.

Westin5Star - you may find this thread interesting:

http://tugbbs.com/forums/showthread.php?t=173371

Thanks for the information Jersey.

Starwood exercised on two of my Island Villa annual sales at WKORVN. Both were for $12,000

Westin5Star said:

Thanks for the information Jersey.

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I was looking for a 3-bedroom gold season for Marriott Surf Club. I had found several units for $12k

We loved our stay there that much to buy a week at the resort. In the end, we decided not to purchase a week and just make a trade with a Marriott owner when we want to go back.

tomandrobin said:

I was looking for a 3-bedroom gold season for Marriott Surf Club. I had found several units for $12k

We loved our stay there that much to buy a week at the resort. In the end, we decided not to purchase a week and just make a trade with a Marriott owner when we want to go back.

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Thanks. I know of two recent sales for 2BR OF gold for $10,500 each at the Surf. I have an II request in right now for next June but I am also looking to buy. Maybe I will just have to go to Aruba twice next year. I sure wish Starwood would surprise us all and build a TS there.

Westin5Star said:

Thanks. I know of two recent sales for 2BR OF gold for $10,500 each at the Surf. I have an II request in right now for next June but I am also looking to buy. Maybe I will just have to go to Aruba twice next year. I sure wish Starwood would surprise us all and build a TS there.

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Ditto.....I was pumped for Westin Aruba and was really let down when Starwood cancelled its development. Hence why I own Cancun now.

tomandrobin said:

Ditto.....I was pumped for Westin Aruba and was really let down when Starwood cancelled its development. Hence why I own Cancun now.

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Did you see the plans? Those ocean front 3-bed units looked amazing! Maybe they'll build them one day.

Ken555 said:

All they need is to take 1% of that cash and build a great web site to support owners, lower costs (increase profit long term) and give another tool for them to use in showing the flexibility of their product during sales meetings.

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Agreed 100%. It is a joke the websites TS customers (starwod, II, RCI) have to use to trade. I am by no means "a techie," and if i can illustrate dozens of system improvements, you know it is bad.

Not sure how a business which specializes in online trading can have such a horrible online product.

gregb said:

So I agree, this seems to suggest that Starwood will remain active in the ROFR and maybe even resales market. Got to give all of those sales people something to sell.

Greg

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So, tuggers unite, spread the word that buying TS from builders is a bad decision, but buying resale can be a good investment.

Basically cut off the resale gravytrain for starwood, so the only way they can make money is building new resorts and selling these properties.

Cause while i wont ever buy from a developer, there is real value from buying from a developer to get into a newly exclusive property.

Doesnt mean it is a good business decision, but likely the only way to buy into a newly built resort if you have to.

Fredm said:

I have, from time to time, posted specific ROFR experiences at these resorts.
To add to these, WMH annual Platinum was exercised at $5,500 on Monday.
Several weeks ago a WMH Platinum was exercised at $5,000.
WMH ROFR activity actually goes back further than 6 months.
Starwood started exercising in earnest when it ran short of Platinum inventory at WDW over a year ago.

We also had a rash of WPORV sales exercised. In fact, it burned through our inventory at the time. The good news was that I had to go fishing for an eoy to sell to a buyer, and found a TUG owner who was interested in selling. That eoy passed ROFR at $8,500. Prior sales below $8,000 were exercised.

We are opening escrow today at $6,000 for a WMH Platinum. I will let you know how it goes.

Seven of our last ten sales at these resorts were exercised by Starwood.

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Starwood exercised ROFR at $6,000 on WMH Platinum.

Fredm said:

Starwood exercised ROFR at $6,000 on WMH Platinum.

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Thanks for the update--I appreciate you letting us know what's going on with Starwood and ROFR.

Glorian

Starwood did not exercise ROFR on WKORV OFC

Starwood seems to be all over the place with what they are exercising ROFR on these days. My purchase passed this week for an OFC at WKORV for $32,000.

I thought they'd snap this one up for sure. Was extremely surprised that they passed.

They must be having better luck selling the less expensive IV & OV units.

We worked with Syed again on this purchase & he was a pleasure to deal with.
Syed advised me today that Starwood had exercised on the last 8 contacts he had submitted.

Maybe I was lucky and they ran out of money.

Which resorts does Starwood have ROFR "rights" at? Thx

All I believe.

Downhill1 said:

Which resorts does Starwood have ROFR "rights" at? Thx

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WKORV, WKORV-N, WPORV, WMH, WDW.