Apollo putting bid in for HGVC

[chemteach]

This is news from the Hilton site:

I just got a stock alert, and HGV's stock has just popped a few dollars.

Apparently, Bloomberg is reporting that Apollo is making a bid of "near $40 per share" for HGV. See https://thefly.com/landingPageNews.php?id=2975111 (Apollo said to bid near $40 per share for Hilton Grand Vacations, Bloomberg says)

More reporting on the supposed offers to buy HGV. (https://finance.yahoo.com/news/apollo-offers-40-per-share-162234456.html) Blackstone has also supposedly put in a bid, though the amount/terms were not disclosed. I expect HGV will issue an 8-K at some point when its board has considered and either accepted/rejected these supposed bids.

It will be interesting for Diamond Resort owners to see if anything actually happens. Would be nice to be able to use The Club for reserving HGVC weeks. But of course, these things often fall apart. In a few years we should know what is happening.

 

[dougp26364]

This is news from the Hilton site:




It will be interesting for Diamond Resort owners to see if anything actually happens. Would be nice to be able to use The Club for reserving HGVC weeks. But of course, these things often fall apart. In a few years we should know what is happening.

I suppose it would take another 5+ years before any significant integration occurred. If DRI expects to sell HGVC owners on the idea that converting their deeded weeks to DRI trust points or, putting their weeks into THE Club for an extra management fee, it could be a tough sell.

Then again, HGVC owners have been begging for access to Maui, so maybe a good number will jump on joining THE Club and getting access to not just Maui, but Kauai as well.

 

[RLS50]

If Apollo wins the bidding, will they try to integrate DRI with HGVC or keep them separate?

It seems due to the numerous potential synergies some kind of merger would be more likely than not.

So to me the key question if that happens is who is going to be the CEO of the new company? That will say a lot about the future direction of any merged entity.

 

[chemteach]

Diamond never could combine Embarc into The Club. Not sure why. But perhaps the same thing would happen with HGVC. Only time will tell.

 

[nuwermj]

Diamond never could combine Embarc into The Club. Not sure why. But perhaps the same thing would happen with HGVC. Only time will tell.

Embarc owners organized a very effective resistance to Diamond's plans to merge Embarc into the Club.

 

[nuwermj]

If Apollo wins the bidding, will they try to integrate DRI with HGVC or keep them separate?

It seems due to the numerous potential synergies some kind of merger would be more likely than not.

So to me the key question if that happens is who is going to be the CEO of the new company? That will say a lot about the future direction of any merged entity.

There is a very long thread in the Hilton forum. I have argued there that it makes more sense to put HGV in charge of a merged enterprise.

As for integration of the two clubs I have also argued that it would be more profitable to market separate clubs, for reasons similar to GM marketing of Chevy and Cadillac. There is also a problem with the Hilton brand name. This link has the legal details:
https://tugbbs.com/forums/index.php...to-buy-hgvc-merged.294385/page-3#post-2326712

 

[RLS50]

There is a very long thread in the Hilton forum. I have argued there that it makes more sense to put HGV in charge of a merged enterprise.

As for integration of the two clubs I have also argued that it would be more profitable to market separate clubs, for reasons similar to GM marketing of Chevy and Cadillac. There is also a problem with the Hilton brand name. This link has the legal details:
https://tugbbs.com/forums/index.php...to-buy-hgvc-merged.294385/page-3#post-2326712

I wonder if Hilton would negotiate allowing their brand to stay in return for having a say in who leads any merged entity?

It seems HGVC really is going to be acquired. It will be interesting to see who wins.

 

[chemteach]

Embarc owners organized a very effective resistance to Diamond's plans to merge Embarc into the Club.

Unfortunately for Embarc owners, the resale price of Embarc basically went to 0 when Diamond Resorts took over. When it was the original name - Club Intrawest - it was a mid priced product. I had been looking at Club Intrawest to possibly purchase a membership, but never did because of the cost. After Diamond took over, I didn't want to purchase because I had enough Diamond ownerships.

 

[Sandy VDH]

I sure wish Apollo is NOT successful and Blackstone prevails.

 

[ccwu]

I suppose it would take another 5+ years before any significant integration occurred. If DRI expects to sell HGVC owners on the idea that converting their deeded weeks to DRI trust points or, putting their weeks into THE Club for an extra management fee, it could be a tough sell.

Then again, HGVC owners have been begging for access to Maui, so maybe a good number will jump on joining THE Club and getting access to not just Maui, but Kauai as well.

Hgvc Maui resort is under construction. It is expected to be open by late 2020. So don’t expect hgvc owners will buy into DRI. They are already dread of it. Their deeded resort is very different than Dri. They get points from deed but MF is by size of the unit. A 3500 points pays the same MF as 9600 points. People pays more in the front to have a lower MF forever. Not like Dri Mf pee points not by deed.


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[dougp26364]

Hgvc Maui resort is under construction. It is expected to be open by late 2020. So don’t expect hgvc owners will buy into DRI. They are already dread of it. Their deeded resort is very different than Dri. They get points from deed but MF is by size of the unit. A 3500 points pays the same MF as 9600 points. People pays more in the front to have a lower MF forever. Not like Dri Mf pee points not by deed.


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I think we can say, don’t expect HGVC TUG members to buy into DRI. Otherwise, all bets are off. I’ve had enough conversations around the hot tub/pools to know John Q Public is largely clueless and will buy into things a TUGGER wouldn’t.

I’m pretty familiar with both systems. We own HGVC and we use to be Silver Elite with DRI before we deeded our two eels back to DRI. DRI is a mix of deeded weeks, deeded weeks in THE Club and trust points. The deeded weeks in THE Club are much like the deed weeks with HGVC, except with HGVC, you have no choice and you’re required to pay membership dues. With DRI, it’s optional.

TUG members might not believe any HGVC members would join DRI. But what I’ve seen over 20 years and how I’ve heard non-TUG owners talk, my bet is there will be more than what’s generally believed on TUG.

 

[CalGalTraveler]

Hgvc Maui resort is under construction. It is expected to be open by late 2020. So don’t expect hgvc owners will buy into DRI. They are already dread of it. Their deeded resort is very different than Dri. They get points from deed but MF is by size of the unit. A 3500 points pays the same MF as 9600 points. People pays more in the front to have a lower MF forever. Not like Dri Mf pee points not by deed.


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Hilton Hotels HLT and Blackstone as an influencer (hotel franchise and HGVC Elara property owner) have an outsize say in whether this happens. They have been on a strategic trajectory of mixed use Hilton Hotel/HGV properties.

The only real value in the deal is if Diamond gets the hotel license rights since adding more TS properties without the hotel brand reputation doesn't get Apollo closer to exit (and adds more risk burden to the deal.) However, spinning off HGV in its entirely does not fit Hilton/Blackstones/HGV current strategic direction and is complicated given the mixed hotel and affiliate model. It is rumored that Hilton Hotel HLT is against bringing on Diamond as they don't want the negative association with their brand. However this could be a blustery negotiation tactic to extract more license money from Apollo.

HGV needs more locations and these are Wall St. deal makers so something creative may come out of this. I wouldn't be surprised if there is some swapping or cherry picking of specific properties between Apollo and Blackstone in which Blackstone may buy some DRI properties to continue the mixed hotel/HGV strategy e.g. buy DRI Maui and convert partial to Hilton hotel, or sell to HGVs large Japanese base who have high demand for Hawaii (remember, the reason HGV quarterly sales were down last quarter is that they didn't have enough Hawaii inventory to satisfy Asian demand.) I could also envision HGV spinning off properties in locations with overcapacity.

Apollo also wins by realizing some quick ROI on the Diamond investment for their shareholders by getting this off their books. Although not a home run, it may be their only choice for some ROI on their exit if HLT/Blackstone is unwilling to license to them. Apollo must get out soon to pay out something to their shareholders before their ten year fund expires.

Does anyone know what Apollo fund DRI is in and when it expires? This will provide clues as to whether Apollo is desperate with this deal. If it is close to the 10 year fund expiration, then Apollo's back is against the wall - and Blackstone/HLT would factor this in their negotiation.

Glad to be an educated Tugger. If a sale of HGV is made to DRI, will simply continue to enjoy our Westin WKORVN resale next door to DRI Maui and will use our existing HGV points for other locations. Renting is also an option. Plenty of choice. We own HGV in NYC and Vegas so will have home access there. If they limit our HGV points trading into Hawaii, or jack up our MF, that would incent us to get out rather than buy more into their system.

 

[nuwermj]

I wouldn't be surprised if there is some swapping or cherry picking of specific properties between Apollo and Blackstone in which Blackstone may buy some DRI properties to continue the mixed hotel/HGV strategy e.g. buy DRI Maui and convert partial to Hilton hotel, or sell to HGVs large Japanese base who have high demand for Hawaii (remember, the reason HGV quarterly sales were down last quarter is that they didn't have enough Hawaii inventory to satisfy Asian demand.) ...

Does anyone know what Apollo fund DRI is in and when it expires? This will provide clues as to whether Apollo is desperate with this deal. If it is close to the 10 year fund expiration, then Apollo's back is against the wall - and Blackstone/HLT would factor this in their negotiation.

1) Diamond does not own the Hawaii resorts and cannot sell them to Blackstone.

2) Diamond Resorts, Inc. has a $1.1 billion loan from 4 Apollo funds. Part is at 7.75% the other part is 10.75%.

 

[CalGalTraveler]

1) Diamond does not own the Hawaii resorts and cannot sell them to Blackstone.

2) Diamond Resorts, Inc. has a $1.1 billion loan from 4 Apollo funds. Part is at 7.75% the other part is 10.75%.

Who owns KBC and Point at Poipu unsold units, land etc if not Diamond.? aka rights to sell units in the building etc.

 

[T_R_Oglodyte]

Who owns KBC and Point at Poipu unsold units, land etc if not Diamond.? aka rights to sell units in the building etc.

The land, building, and common areas are owned by the Apartment Owners Association (aka Homeowners Association). By law, the associations are comprised of all of the deed owners. So that can't be sold Diamond. DRI controls the association through the voting power is holds through the trusts (because it also controls the trusts). But DRI couldn't sell the Association because it doesn't own it.

DRI does hold unsold inventory, and that can be sold off, just as DRI acquired unsold inventory when it acquired Sunterra. But both resorts are almost entirely sold out, and the inventory that DRI does own (largely through surrenders) winds up back in the trusts -DRI sells little, if any, direct deeded ownership in the resorts.

The right to sell inventory is granted to DRI by the owners associations, which DRI controls (as noted above). So that could be sold, again in the same way that DRI acquired those rights when it took over Sunterra.

 

[CalGalTraveler]

So if I understand this correctly, DRI could sell the unsold inventory, the management contract with rights to sell and ROFR in the building, and select deeds that are in the trust? I presume that's what most TS developers "own" and what DRI is trying to buy when they want to buy HGV (other than the brand).

 

[bogey21]

I haven't a clue how this will play out but my gut tells me that if and when something happens, users (that's us) will get the short end of the stick...

George

 

[T_R_Oglodyte]

So if I understand this correctly, DRI could sell the unsold inventory, the management contract with rights to sell and ROFR in the building, and select deeds that are in the trust? I presume that's what most TS developers "own" and what DRI is trying to buy when they want to buy HGV (other than the brand).

That's about what I understand, when talking about deeded properties. Again, it's directly comparable to what happened when DRI took over Sunterra.

I think it would be a different picture with a RTU timeshare operation. In that case, there is an entity that owns the resort - the only thing the RTU members own is the right to use the property.

 

[nuwermj]

So if I understand this correctly, DRI could sell the unsold inventory, the management contract with rights to sell and ROFR in the building, and select deeds that are in the trust? I presume that's what most TS developers "own" and what DRI is trying to buy when they want to buy HGV (other than the brand).

In addition to what has already been said ... The Hawaii Collection (the trust fund) (which is also an independent owners' association) owns about 55% of the deeds at Kaanapali Beach and 60% of the deeds at The Point at Poipu. Diamond could withdraw those deeds from the trust fund and sell them as a bundle. They have done this for some resorts in the European Collection. But, and I think this is a big but, there are requirements about the balance between the number of points and the number of deeds, meaning that, if the deeds were withdrawn, the Collection would have to reduce the points, and that is not easy when individuals own those points. In Europe, Diamond's sales are much lower than member exits, so Diamond has an accumulating surplus of points that it owns, making it possible to reduced the inventory held in the trust and the points in the Collection. That is not easily done in the case of the Hawaii Collection.

A second possible option (in principle) would be to sell the Collection-owned deeds at Kaanapali Beach and replace them with deeds from anther resort. But the rules of the trust agreement contains language about holding real property in the interest of point owners. And I think the legal exposure would be very high if Diamond made such a move.

 

[CalGalTraveler]

Perhaps to replace points they could swap and substitute properties where HGVC has an abundance of inventory. Specifically Waikiki/Hokulani, BI/Kohala, Orlando and Vegas.

 

[Tamaradarann]

1) Diamond does not own the Hawaii resorts and cannot sell them to Blackstone.

2) Diamond Resorts, Inc. has a $1.1 billion loan from 4 Apollo funds. Part is at 7.75% the other part is 10.75%.

I was thinking that if Apollo bought HGVC and placed HGVC and their business model in charge of their timeshare business the DRI resorts could be an affiliate of HGVC and nothing would change as far as HGVC or Diamond except the ability to deposit DRI owned points or weeks into HGVC to get HGVC points. HGVC owners would be able to reserve weeks in DRI that were deposited. A points currency exchange system would need to be set up to allow the weeks/points to transfer between the 2 clubs but that has been done with the other affiliates. One sticking point could be the following: I stayed at the Kaanapali Beach Club and found it to be comparable to HGVC resorts, however, I understand that some of the DRI resorts may be substandard. If that is the case then they would need to be brought up to HGVC standard and prevented from being an affiliate until they are upgraded. The boards or owners of those resorts may resist that since it may raise their maintenance significantly.

 

[pedro47]

I feel those sub standard DRI resorts could be brought up to HGVC standards, if the MF was spend correctly by Apollo. Apollo needs only to purchase the same quality furnitures and appliances plus maintained all their resorts as HGVC and this would not Costs DRI owners or Apollo one additional Penny or Dollar.
The high cost of Apollo MF and Management Fees profits would / could be used to update all their DRI resorts around the world.

DRI, MF are some of the highest in timeshare industry.

This statement was based upon x employees in Vegas and x resort management from DRI.

 

[Tamaradarann]

I feel those sub standard DRI resorts could be brought up to HGVC standards, if the MF was spend correctly by Apollo. Apollo needs only to purchase the same quality furnitures and appliances plus maintained all their resorts as HGVC and this would not Costs DRI owners or Apollo one additional Penny or Dollar.
The high cost of Apollo MF and Management Fees profits would / could be used to update all their DRI resorts around the world.

DRI, MF are some of the highest in timeshare industry.

This statement was based upon x employees in Vegas and x resort management from DRI.

While I wouldn't argue with your statement that better allocation of the MF could pay for some upgrades, however, I don't know of any timeshare management company that doesn't take the opportunity to upgrade units as a reason to raise maintenance fees or issue a special assessment.

 

[CalGalTraveler]

I was thinking that if Apollo bought HGVC and placed HGVC and their business model in charge of their timeshare business the DRI resorts could be an affiliate of HGVC and nothing would change as far as HGVC or Diamond except the ability to deposit DRI owned points or weeks into HGVC to get HGVC points. HGVC owners would be able to reserve weeks in DRI that were deposited. A points currency exchange system would need to be set up to allow the weeks/points to transfer between the 2 clubs but that has been done with the other affiliates. One sticking point could be the following: I stayed at the Kaanapali Beach Club and found it to be comparable to HGVC resorts, however, I understand that some of the DRI resorts may be substandard. If that is the case then they would need to be brought up to HGVC standard and prevented from being an affiliate until they are upgraded. The boards or owners of those resorts may resist that since it may raise their maintenance significantly.

Interesting ideas. However they don't need to acquire/merge to make this happen. They could set up a trading arrangement similar to Fiesta Americana in Mexico. This may add value for HGV to get more locations but doesn't do much for Diamond because they already have many locations. Apollo needs the brand to get this off their books. The question is whether HLT/Blackstone and HGV will make a deal that doesn't blow the bank at Apollo. If Apollo moves ahead with a nosebleed price tag, we will all pay as owners with hefty MF increases to support it. Therefore, I am not in favor of this deal coming together.

 

[Tamaradarann]

Interesting ideas. However they don't need to acquire/merge to make this happen. They could set up a trading arrangement similar to Fiesta Americana in Mexico. This may add value for HGV to get more locations but doesn't do much for Diamond because they already have many locations. Apollo needs the brand to get this off their books. The question is whether HLT/Blackstone and HGV will make a deal that doesn't blow the bank at Apollo. If Apollo moves ahead with a nosebleed price tag, we will all pay as owners with hefty MF increases to support it. Therefore, I am not in favor of this deal coming together.

I am not in favor of an Apollo purchase either. My thoughts above were putting out there a way that HGVC could be bought by Apollo and not have their system changed since most HGVC people are very pleased with the way HGVC system works. I am not a DRI owner but in reading posts on TUG from DRI owners I understand that DRI owners would like to be able to exchange into HGVC.