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Apollo Group looking to buy HGVC [Merged]

Discussion in 'Hilton Grand Vacations Club / HGVC' started by toontoy, Aug 20, 2019.

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  1. CalGalTraveler

    CalGalTraveler TUG Member

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    Below is a view of the industry from MVCs presentation in 2017 announcing the ILG acquisition. Prob more accurate because of SEC. Diamond not listed because it's private.

    upload_2019-9-3_9-7-19.png
     
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  2. CalGalTraveler

    CalGalTraveler TUG Member

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    It appears that Blackstone is tightly entwined with HGV beyond the HTL relationship. It has a 75% ownership stake in the Elara building, with HGV owning 25%. It seems Westgate is totally out of the mix except for legacy weeks in Elara. (I know this is old news but adds to this context.)

    https://investors.hgv.com/press-releases/2017/07-19-2017-211721311

    With this, it appears that Blackstone already owns an indirect stake in HGV plus possibly a few other HGV properties and could have considerable control over the Apollo bid for HGV in addition to the HTL. For example, the HGV annual 2018 report lists Elara as "Fee for Service." Sunrise, Grand Islander and a few others also are "Fee-for-Service."

    Does that mean that Blackstone or other developers with Fee-For-Service model resorts could potentially vote (along with owners) to remove building management from HGV if they don't want Apollo/Diamond to take control since they control the HOAs?

    https://tugbbs.com/forums/index.php...liated-information.254931/page-3#post-2322116

    Realistically, because of the complexity of the relationships, spinning off the entire business may not be feasible so Blackstone/HTL may wish to keep certain properties in HGV under the Hilton license such as Elara, MidTown, HHV, but spin off management of under-performing or non strategic properties in the portfolio. However, taking over HGV "dogs without a license" would not achieve Apollo's objective to gain Hilton brand legitimacy and lead flow for a successful IPO.

    Such misalignment of objectives is where a deal could fall apart unless they come up with a creative structure. Key question is how much control would Blackstone allow Apollo to have given they will continue to have significant stakes in the ecosystem which includes Elara and Hilton Hotels?

    Bottom Line: Blackstone/HGV/HTL will need to bless this deal in order to make it work because they hold several poison pill options to destroy value for Apollo/Diamond e.g.

    1) Withdrawing the Hilton Brand License
    2) Control of building HOAs such as Elara that could withdraw from a Diamond/Apollo takeover.

    Developers of other Fee-for-Service buildings such as Grand Islander in HHV could also present complications if those developers wish to vote out HGV management of the building if Apollo takes a stake. Not sure about "Collections" affiliates aka South Florida, Bay Club and how those relationships work.
     
    Last edited: Sep 5, 2019
  3. GT75

    GT75 Moderator

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    To me, I would think Blackstone, Strand Capital Group (built Anderson Ocean Club, Ocean Oaks, Ocean 22 and Ocean Enclave), Hilton & other developers with HGV would have an issue with Apollo's bid for HGV. I would think that these companies want to continue to profit as I am sure they have in the past. I am sure that their options will be heard much than us HGVC owners. I don't see how it would be in their interests if Apollo took over control. Maybe this is all wishful thinking on my part. At least, we are still in the speculation phase anyways.

    Just as a clarification, Sunrise was bought by HGV a couple of years ago and is no longer a fee-for-service.


    On another note, it was interesting to me that DRIs Embarc (former Intrawest) members which are around 22K were able to stop DRI from changing their rules. So, I know that we have many more resorts and members than Intrawest. I would hope that DRI has learned something from their Intrawest purchase.

    Personally, I liked it much better last year when there were all of the speculations about the merger of the Marriott, Vistana & Hyatt TS systems because then I didn't have a "horse in the race".
     
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  4. CalGalTraveler

    CalGalTraveler TUG Member

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    You are right. However Sunrise is still listed in their 10k filed in 2019 as "Fee-for-Service" unless it is a typo.

    https://tugbbs.com/forums/index.php...liated-information.254931/page-3#post-2322116

    IMO...I was relieved when Vistana/ILG was bought by MVC and not Diamond. I never dreamed this would happen to HGVC. I hope a deal fails to materialize and this is just Diamond/Apollo blowing smoke.
     
    Last edited: Sep 3, 2019
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  5. terces

    terces TUG Member

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    And here is another entwined relationship (I may not have all my facts correct, but close): HGVC is in a joint venture partnership with Grand Pacific on the MarBrisa property in Carlsbad which is still under development with a new building close to being underway. They as well have a relationship which must fall in to the category of "fee for service" on Seapoint. and Pacific Palisades at Carlsbad. How does someone unwind this? Grand Pacific has another dozen and a half or so resorts that are not part of HGVC and they appear to be a very good operator. Would they now want to have DRI running the show on the three properties at Carlsbad??
     
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  6. CalGalTraveler

    CalGalTraveler TUG Member

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    Good info. No developer/property owner would like to be faced with the prospect of an empty building with no profitable way to pay the bills if it is true that Diamond has alienated TS owners causing them to default/walk and underfunded HOA capital reserves by redirecting funds to corporate overhead that they will never see to keep their buildings in shape.

    IMO, HGV would be better off working with its asset light partners and building new buildings and converting wings of Hiltons rather working with legacy timeshares like Diamond. My fear is such an merger/acquisition would be distracting and a drag on profitability with so many properties and only a dozen or so that are HGV quality. The HGV board probably considered a merger or acquisition in the past but rejected the idea in favor of the current organic expansion plans they are pursuing.
     
    Last edited: Sep 3, 2019
  7. dayooper

    dayooper TUG Member

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    Eh, Diamond has a relationship with Grand Pacific. All of their resorts but MarBrisa have an affiliation with DRI.
     
  8. CalGalTraveler

    CalGalTraveler TUG Member

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    Entwined also means the developers who own the Hilton Hotel managed properties where floors or wings have been converted.

    BTW...Any real estate legal pros who can shed light what it means for a developer to "own" a timeshare as stated in these press releases with Elara and Sunrise? Timeshare owners own a major portion of the building, there are HOA management contracts, and there are developer-owned units.

    Beyond that does it mean that the developer has exclusive rights to sell and take back TS properties in the building? Lease retail space or restaurants etc.? Further develop the property as in new floors on Elara or new wings? Parking Garage and grounds?
     
  9. terces

    terces TUG Member

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    So does GP have a relationship with DRI AND HGVC on Seapoint and Grand Pallisades? How the heck does that work. The Seapoint "Concierge" directs a quest to HGVC Marbrisa for the "Owners Update", but you are telling me they are also in bed with DRI on these same properties. wtf?
     
  10. CalGalTraveler

    CalGalTraveler TUG Member

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    Perhaps it is reciprocal affiliate exchange similar to HGVC and Fiesta Americana where each manages their own resorts but you can book at the other resort using your points? That's very different than Fee-for-Service management.

    From what I can gather (DRI owners please correct), DRI claims 370 resorts (per Wikipedia) but only about 90 of those are "managed or owned" by DRI. The rest are reciprocal exchange relationships or paying to reserve a block of units with resorts in Raintree, Vacation Internationale etc.
     
    Last edited: Sep 3, 2019
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  11. dayooper

    dayooper TUG Member

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    While MarBrisa has the fee-for-service tag, Palisades and Seapointe aren’t listed on the ownership page for HGVC. Are they actively selling those two still? I know they used to be “Hiltonized” (I have a friend who has a week in HGVC from Palisades), can they still be? Those two resorts are listed on the HGVC website as external exchange, like the Fiesta Americana resorts are.

    I believe GP has an affiliate relationship with all if it’s resorts (except for MarBrisa) with DRI. The DRI resort pages have them listed as affiliate resorts. Nothing more than an external exchange, but there is a relationship there. I don’t see GP standing in the way of Apollo buying out HGVC. Blackstone, as long as they see value in their relationship with HGVC, might. Then again, everyone has their price and if firm like Blackstone can make their investment with those HGVC resorts turn a profit, whose to say they wouldn’t let them go?
     
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  12. SmithOp

    SmithOp TUG Member

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    Grand Pacific has its own exchange company GPX, and it gets excess deposits from other companies like DRI, Wyndham, Welk, etc.

    I have used GPX in the past for bonus cash weeks and stayed at KBC Maui and several DRI properties in Sedona. I used to own Seapointe but it wasn’t enrolled in HGV. I could trade it through GPX or RCI.

    I’m a little fuzzy on Marbrisa, I seem to recall HGV kicked in an investment as well as taking over management. Grand Pacific was a over-extended expanding Marbrisa at The Cove.


    Sent from my iPad using Tapatalk Pro
     
  13. terces

    terces TUG Member

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    There is no TS Selling Office in Seapoint but there is a "Concierge Desk" right front and centre in the lobby, and while they are very helpful and friendly let there be no mistake that their sole purpose is to direct guests to the HGVC sales office at the MarBrisa. Our booking in Seapoint last week was through the HGVC website using HGVC points and we had the option to do the same with MarBrisa and Pacific Pallisades.
     
  14. terces

    terces TUG Member

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    I have been through the Boulevard documents quite thoroughly and believe the HOA has granted HGVC the right to manage the property for a fee and to continue selling timeshares there. It is sold out so they find a steady stream of inventory through the rofr buy-backs, BUT, and this is interesting, they have also been granted the right to handle foreclosures. As someone pointed out earlier, HGVC would likely have stacked the Board of Directors of the HOA and can therefore accomplish what it wants and needs to there. I don't oppose what HGVC is doing as we are getting a well managed property out of the deal.
     
  15. CalGalTraveler

    CalGalTraveler TUG Member

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    In the case of Blvd. do the TS owners have land rights or is it a common share of the building? I believe there is room for another tower. HGV or another developer would need to own the land rights to build another tower.
     
    Last edited: Sep 4, 2019
  16. nuwermj

    nuwermj TUG Member

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    -- Deleted
     
  17. Jason245

    Jason245 TUG Review Crew: Veteran TUG Member

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    I have tried to understand what everyone has been talking about for the last several posts and am confused. Hgvc owns the board of directors on almost all the resorts in their network except for a few affiliates .. And by own I mean have enough interval ownership to decide who is on board.

    Anyone buying hgvc would get that board ownership and we the owners would be at their mercy. The program docs are very specific in that the program can be ended by them at will.

    The only thing u are every truly guaranteed is the interval u own at the resort u own.



    Sent from my SM-N950U using Tapatalk
     
  18. NOLA47

    NOLA47 TUG Member

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    found this on Reuters --

    Exclusive: Hilton Grand Vacations to explore sale following takeover interest - sources

    Greg Roumeliotis
    3 Min Read

    (Reuters) - Hilton Grand Vacations Inc (HGV.N) has decided to explore strategic alternatives, including a potential sale, following acquisition interest in the U.S. timeshare operator from private equity firms, people familiar with the matter said on Thursday.

    A potential deal would come as the timeshare industry seeks to improve its occupancy rates and shed its reputation of locking customers into complex contracts they do not understand, in the hope of becoming a more popular alternative for U.S. vacationers.

    Hilton Grand Vacations has hired an investment bank to advise it on a sale process, the sources said, cautioning that no deal is certain. It has asked for preliminary bids in September, one of the sources added.

    Hilton Grand Vacations shares jumped as much as 8.5% on the news, and were trading up 3.5% at $33.51 in afternoon trading in New York on Thursday, giving the company a market capitalization of $2.9 billion.

    The sources asked not to be identified because the matter is confidential.

    Hilton Grand Vacations, which was spun out of hotel operator Hilton Worldwide Holdings Inc (HLT.N) in 2017, did not immediately respond to a request for comment.

    The New York Post reported last week that buyout firm Apollo Global Management LLC (APO.N), which owns time-share operator Diamond Resorts Holdings LLC, had made an offer for Hilton Grand Vacations.

    Headquartered in Orlando, Hilton Grand Vacations develops, markets and operates vacation ownership resorts in destinations such as the Hawaiian Islands, New York City and Las Vegas. It had 54 properties, representing 8,888 units, as of the end of December.

    The company also manages and operates two Hilton-branded club membership programs, providing leisure travel and reservation services for more than 315,000 members. It licenses the Hilton Grand Vacations brand from Hilton. It also has an agreement with Hilton to use some Hilton brands and intellectual property for its timeshare business.

    Advertisement

    These agreements would give Hilton a veto on any sale of the company it would deem detrimental to its brands.

    “Our view is that the longer-term growth opportunities for Hilton Grand Vacations are considerable, given its currently limited geographic exposure, forthcoming inventory based on capital spent, and remaining capital resources,” Jefferies analysts wrote in a note last week examining the prospects of a deal.

    Last year, another timeshare operator, Marriott Vacations Worldwide Corp (VAC.N), acquired peer ILG for $4.7 billion, turning it into a more formidable competitor to Hilton Grand Vacations and Wyndham Destinations Inc (WYND.N).
     
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  19. Tamaradarann

    Tamaradarann TUG Review Crew: Veteran TUG Member

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    I agree with you Jason, that is why any takeover of HGVC is a concern to all of us owners who value the flexibility that the club offers. Furthermore, on your point about the interval that U own at the resort U own, I want to stress a point about the DRI Collection Model. You don't own ANY interval at any resort. You own a share of a Collection Trust that is represented by points. Furthermore, DRI has set up a Hawaii Collection that is NOT all Hawaii resorts. I don't know the exact number of units in this collection or in each resort in this collection but there are more non Hawaii resorts in the Collection than Hawaii resorts. They call it a Hawaii Collection instead of a US West Collection(which it really is) because "Hawaii" is the magnet to get one to purchase in the Collection. However, adding the Continental US resorts to this Collection gives them a great deal more Hawaii Collection Inventory to sell.

    Another Tread on TUG addressed HGVC's need to build more high end high point inventory to sell at presentations. Well if HGVC used a version of the DRI Collection Model they wouldn't need to build more high end high point inventory; they could just sell larger point packages in a TRUST!
     
  20. dougp26364

    dougp26364 TUG Review Crew: Veteran TUG Member

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    IF the merger happens, and it’s a big if at this point, I don’t see much changing within the HGVC system or how HGVC owners access the system. We’ll still have any rights of usage guaranteed in the original documents.

    What DRI will gain would be management of the HGVC resorts and the management fees associated with them and they can claim them as inventory for their collection, even its only one interval per resort, which gives sizzle to sell prospects.

    What HGVC owners will “gain” is the OPTION to enroll their Interval in DRI’s THE Club (for another membership fee based on the number of THE Club points their interval is assigned) and access to all of DRI’s resorts (even if they only have one interval at a particular resort). Honestly, with DRI, HGVC owners would have instant, good access, to Maui, Kauai, Sedona and Lake Tahoe. I could see the sales floor making this look VERY attractive to HGVC owners who aren’t TUG members that understand DRI’s fee structure. Membership in THE Club will likely add another $200 to $300 in pure management fees, just to access DRI’s inventory.

    Past those changes I don’t see a lot of effect for HGVC owners. My worry is DRI’s management fees vs what they put into cash reserves for resort upkeep. We left DRI secondary to their management fees and nothing else. Their collection was good, access to the majority of their resorts in their system was very good to great (never had an issue booking ocean front units in Maui) and the quality was acceptable (not great).

    Honestly, for the majority of HGVC owners, this gives them everything they’ve been asking for without waiting to see if/when HGVC will actually build something AND keep the price/points reasonable. Fortunately for use, are scope of use for HGVC is very narrow (Vegas) and we won’t need or really want to join DRI’s THE Club for access to inventory we’re already well versed in and locations we have great access to through Marriott, with the exception of Sedona.
     
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  21. brp

    brp TUG Member

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    This is sort of like Seinfeld: A thread about nothing.

    And yet it lives on! :)

    Cheers.
     
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  22. Tamaradarann

    Tamaradarann TUG Review Crew: Veteran TUG Member

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    In view of what Jason said above, which is really true not conjecture, a DRI takeover could mean that you could ONLY use the unit and season you own UNLESS you join the CLUB for an additional annual membership. While that may give better opportunities to go to different places, it may make it more difficult to reserve numbers of weeks in a row in Honolulu since there are more members which is what was an important aspect of my ownership. Now that we own a condo in Honolulu it is a moot point for us. However, it is an example of where the merger could go and be disappointing.
     
  23. Ralph Sir Edward

    Ralph Sir Edward TUG Member

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    Tamaradarann, The real question will be - will there still be an owner's only window, as there is today, or will the "Club" directly compete for reservations from booking day1 (a la Marriott DC)? (And also for affiliates, where would those owners who aren't part of HGVC fall? Fixed week is OK, but Bay Club is 1-50 seasonal. I wonder how that would fall out. . . )
     
  24. CalGalTraveler

    CalGalTraveler TUG Member

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    Whoa. Marriott DC trust inventory is separate from the inventory available to home week owners. The trust consists of developer weeks from ROFR etc. that have been converted into the DC trust.

    It is only when the enrolled home week owner (who has paid to enroll in the trust points system) elects to convert their home week to trust points for the year. Only then does the inventory become available to DC trust owners. That owner is not denied their home week privilege.

    If Diamond manages their trusts differently, inquiring minds would like to know!

    (BTW I may have mangled the MVC terminology but the description is correct.)
     
    Last edited: Sep 10, 2019
  25. Jason245

    Jason245 TUG Review Crew: Veteran TUG Member

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    Ultimatly, I think everyone just needs to wait and see, there are a lot of possibilities of what may come, and while we can debate each of them, until you know what the reality is going to be, you just have to wait and see.

    This is partly why I am a believer in paying as close to nothing as possible on these things, so much of the "value" can be stripped away or taken away without you even getting a say.

    Even without HGVC being aquired, in my short time here I have seen Open season go from an ok value to a questionable value and program fees increase in excess of inflation and value increases.

    Right now I take advantage of the "borrow next years points for free"... and I worry each year that they will start charging for that.
     
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