Realtors Study Timeshare Issue

The South Carolina Association of Realtors is examining ways to beef up the state's timeshare laws, citing a recent series of articles by The Post and Courier that detailed a rash of complaints and lawsuits from buyers of the vacation properties.

South Carolina has more timeshare resorts than every state but Florida. It also has 32 pages of laws concerning the industry. But as business surged and a wave of new units went up from the Grand Strand to Beaufort, the state cut funding for oversight.

"We're very concerned about the apparent lack of investigatory ability," said Nick Kremydas, chief executive of the association, which is made up of about 20,000 real estate agents. "And we want to make sure our laws are as consumer-friendly as they can be, balanced with the interests of the industry."

The Columbia-based trade group plans to compare South Carolina's regulations to those in other states over the next few weeks. Kremydas said researchers may draft stronger measures for the General Assembly to consider when the legislative session starts in January.

"Maybe it's time to look at some additional changes," he said. "That's the good thing about our statutes and code of laws - as an industry changes, we have the power to change the rules to better fit it. ... I can tell you that the legislature would be very concerned about issues like the ones you all raised in the paper."

Ken Kitts, timeshare coordinator at the state Real Estate Commission, is now the only state employee keeping an eye on the industry, which in South Carolina comprises 14 developers and 130 resorts.

Two-thirds of the state's timeshare investigative staff has been laid off or reassigned since the late 1990s, meaning the commission no longer has enough workers on payroll to anonymously screen sales pitches.

The Post and Courier published a series of articles earlier this month detailing mounting complaints and lawsuits connected to the timeshare industry.

The reports pointed out that would-be timeshare sales representatives are no longer required to pass a 50-question test on how well they know South Carolina's timeshare laws. The state stopped those screenings in 2003.

Also, the series noted that South Carolina gives consumers five days to cancel timeshare contracts, a shorter period than other states allow.

Buyers in Florida, the nation's timeshare mecca, have 10 days to cancel a signed contract.

Arizona and Hawaii both give consumers a week to rescind. And the United Kingdom requires that timeshare sellers honor a 14-day cancellation period.

James Teodosio, a 77-year-old Charleston resident, was one of the aggrieved buyers who called the newspaper and the state Real Estate Commission this week in response to the stories. Teodosio spent almost $15,000 on a Myrtle Beach timeshare resort in 2002. He said he has never been able to make a reservation, and that each time he called he was told he was a little too late.

Although the developer is selling those same units for almost $22,000 today, Teodosio has had no luck in reselling his. "I'm an engineer," he said. "I should have some brains in my head. But I swear ... I don't know what to do with that thing."

Timeshare Improves The Vacation Experience For Owners, According to National Study Released By AIF

Vacation owners report high satisfaction rates with their timeshare purchase, and over three quarters claim owning a timeshare has increased their looking forward to vacations, according to a new study released today by The American Resort Development Association International Foundation (AIF). Conducted by Ragatz Associates, Resort Timeshare Consumers: Who They Are, Why They Buy examines the demographics, buying patterns, and usage of vacation ownership based on surveys of 938 recent timeshare buyers and 1,547 owners who purchased prior to 2005.

By all leisure indicators, timeshare has improved the vacation experience for owners. The vast majority of all owners (80.3 percent) express satisfaction with their timeshare purchase; 75.7 percent say owning a timeshare has increased their looking forward to vacations, and 68.4 percent say owning a timeshare has increased the amount of time on vacations. A full 66.4 percent of all owners say timeshare has increased their learning experiences, and 52.8 percent claim owning timeshare has increased their health and happiness.

Approximately 25 percent of recent buyers expressed interest in purchasing additional timeshares--a sizeable amount considering the average American is only allotted two weeks of vacation leave each year.

"Consistently high satisfaction rates along with repeat sales to existing owners and owner referrals of potential buyers point to the premium value vacation owners find in timeshare," said Howard C. Nusbaum, ARDA's president and CEO. "The study findings also show that timeshare owners are committed travelers and savvy purchasers. By attracting a steady stream of repeat visitors who stay longer and spend more than the average traveler, timeshare resorts accrue a host of economic benefits to the surrounding region."

According to the study, the average timeshare visitor spends 8.6 nights per vacation in the resort area where their timeshare is located. The average timeshare visitor party spends $1,334 per timeshare vacation--an increase of 10.7 percent since 2002. The average size of timeshare visitor parties is 3.8 persons.

Of all owners, 35.8 percent personally used their own timeshare purchase during the past 12 months, while 47.4 percent exchanged or space banked it, 4.4 percent rented it out, and 2.9 percent gave it away. Only 9.5 percent of time owned by all owners went unused during the last 12 months.

Vacation owners are savvy travelers who shop around: The average recent buyer attended 2.6 sales presentations before making a purchase. Of recent buyers, 57.4 percent purchased directly from a developer; 24.9 percent purchased from a home owners' association; 10.5 percent acquired their timeshare as a gift, inheritance, or from some other source; and 7.2 percent purchased from a pervious owner.

Upscale Timeshare Outfits Are In A State Of Flux After A Cruel Summer

It's been a rocky summer for destination clubs, the vacation interval alternative of choice for wealthy travelers. The announced merger of Quintess and Dream Catcher Retreats last week will hopefully take some of the sting out of the industry pioneer's filing for bankruptcy reorganization back in July.

What? You've never heard of destination clubs? Few have, given the elite nature of the business and the pricey entry fees. Quintess, for instance, charges $345,000 for membership. After that, high-rolling vacationers pay $21,000 a year in exchange for 30 days at any of the dozens of available properties in the Quintess portfolio.

At those prices, you're not expecting a run-down townhouse with a community pool or a dingy flat on the wrong side of town. Instead, Quintess uses the deposits to acquire upscale homes that average $3 million to $4 million apiece. If none of the exotic locales grab your fancy, maybe the 92-foot yacht will help you lose the landlubber in you. In a nutshell, it's a timeshare for the ultra-rich that often allows members to participate in the appreciation of its assets.

This summer's Chapter 11 filing by industry pioneer Tanner & Haley rocked the nascent sector. In its quest to avoid refusing member travel requests at properties that were already booked, Tanner & Haley entered into costly leases to offer compatible digs. It proved to be an unsustainable practice, and coupled with a few unsuccessful investments, it meant reorganization seemed to be the best strategy for the company to get back on its feet.

Last week's merger between Quintess and Dream Catcher may or may not be a response to Tanner & Haley's filing, but it may not be the last combination in an industry that remains just a few dozen entities strong.

Unlike conventional timeshare operators such as Sunterra, Silverleaf(AMEX:SVL), Bluegreen(NYSE:BXG), and Wyndham's (NYSE:WYN) Trendwest Resorts, destination clubs don't need thousands or tens of thousands of participants to be successful. Some have only dozens of members. In the larger clubs, memberships number merely in the hundreds. That has allowed for some creative travel clubs that specialize in golf course homes, vineyard estates, and even waterfront retreats for fly-fishing enthusiasts. Yes, fly-fishing.

Destination clubs are really just the logical step up from the timeshare industry that was once chastised for its shady sales tactics and hard-sell presentations. That was before companies like Marriott(NYSE:MAR), Disney(NYSE:DIS), and Hilton(NYSE:HLT) helped educate the market and polish the reputation of vacation interval outfits. Now let's see if one timely merger is enough to keep a niche business growing.

Timeshare Deal Oversight Gets Shortchanged

South Carolina's timeshare industry may be booming, but the state agency that commission that is to look out for consumer interests in those deals has seen staff and budget cuts.

Only Florida has more time shares than South Carolina, but South Carolina Real Estate Commission has only one person keeps an eye on 14 developers and 130 resorts after layoffs and staff shifts.

That means the commission lacks enough workers to anonymously screen sales pitches.

"We only have time now to respond to complaints," Ken Kitts, the commission's time share coordinator, said. "The business has grown, and our staff has shrunk."

The business of selling timeshare points has grown, too. With that system, people don't buy rights to use specific property or a specific block of time. Instead, they're buying what amounts to a type of timeshare currency that they can use at a seller's resorts in the future.

It can be a tricky system.

While the Federal Trade Commission leaves time share regulation up to the states, South Carolina doesn't audit timeshare companies to see if the number of points sold is more than can be accommodated in their respective units in a given year.

Three years ago, South Carolina stopped screening timeshare promoters with a 50-question test on the state's timeshare laws.

By the timeshare industry's own reckoning, 15 percent of all timeshare owners in the country - nearly 600,000 households - are unhappy with their purchase.

South Carolina isn't making it easier for consumers to get out of soured deals. For instance, Florida has a 10-day window for consumers to cancel deals and Hawaii and Arizona give their consumers a week. In the United Kingdom there is a 14-day window. South Carolina give consumers five days.

The window is important because buyers often don't read contract details until they return from vacations. By then, the window may have closed, Kitts said.

The Legislature did pass a law this year that says an attorney paid for by the consumer has to be present at a time share closing. But the consumer can waive that.

One consumer protection is long gone. South Carolina began regulating the industry in 1981 and set up the Vacation Time Sharing Recovery Fund to reimburse consumers losing money to unscrupulous sellers. That fund once had $250,000 to help aggrieved time share owners, but it never was used to make buyers whole. The Real Estate Commission said the money was never needed and Legislators siphoned off the money for other projects.

"It was our hammer with which we'd put the time share industry on the anvil," Kitts said. "Over my time here, we have been successful in getting many problems resolved because of the cooperative nature of everyone. ...We didn't really feel we had to use it."

The industry should regulate itself, said Howard Nusbaum, president of the American Resort Development Association, the time share industry trade group.

"We were founded to protect the good guys, because there are still some bad guys. ... It would be counterintuitive to purposely have an industry that's trying to be unscrupulous."

Nusbaum said recent complaints and lawsuits come mostly from consumers who don't fully understand what they are buying.

"It's true of any industry," he said. "If I went and bought a brand new computer and didn't know how to use it, I wouldn't be too happy about it."

Byron Wiegand, a former time share developer who now owns a California time share resale firm, said there are "worms" in the industry, "people who have to steal" sullying the entire market.

"They're making so much money it's scary, but as far as the poor customer is concerned, I feel sorry for them," Wiegand said. "It's a shame because if they would straighten up their act, it's a good product. Underneath all this hocus-pocus, it is a good product."

Dallas Timeshare Firm Closes $128 Million Securitization

Dallas-based Silverleaf Resorts Inc., in an effort to pay down debts, has formed a special purpose finance subsidiary and succeeded in issuing about $128 million of notes in a private offering and sale through UBS Securities L.L.C. to that newly created company.

The developer and operator of getaway and destination timeshare resorts in the U.S. closed on a term securitization through its subsidiary, Silverleaf Finance V, L.P. (SF-V), a Delaware limited partnership. SF-V was formed for the purpose of issuing the timeshare loan-backed notes series 2006-A. The series 2006-A notes were issued between the company, as servicer of the timeshare loans and SF-V, as issuer, and Wells Fargo Bank, National Association, as trustee.

"This is the second one we've been able to do and it allows us to access capital markets and fixes our rate," Thomas J. Morris, senior vice president of capital markets for Silverleaf told CPN. "This type of finance is a critical type of financing for our business. It fixes our rates while allowing us to continue to execute our business strategy."

This transaction lowers the cost of this debt from 8.0 percent floating to 6.7 percent fixed, Morris said. He added that Silverleaf plans to pursue similar securitizations if the market is amenable "as an additional form of liquidity. There is an unlimited interest that particular marketplace," he said.

The series 2006-A notes are currently secured by approximately $125.3 million in timeshare loans sold to SF-V by the company and one of its other fully consolidated special purpose finance subsidiaries.

The cash proceeds from the sale of the timeshare loans to SF-V have been primarily used to pay down $93.2 million in consolidated indebtedness to senior lenders. Approximately $24.8 million of the proceeds received by SF-V from the sale of the series 2006-A notes is being set aside for 90 days to finance SF-V's purchase of up to $33 million in additional qualifying timeshare loans from the company.