We start September with another Friday’s Letter from Australia, just to give our American cousins a rest. Today Justin Morgan, looks at the the role private equity plays in timeshare, with the introduction and comments by our very own Irene Parker. But first a little from Europe.
Earlier in August we said that it tends to be a quiet month, well this was not the case this year, as our roundup of the month article yesterday showed. We also mentioned that September usually sees the start of new companies, changes of name or even resurrected ones. Well they have started to surface already.
Doing our usual daily rounds of the internet, one site, mindtimeshare, since the beginning of August has published the names of 6 that have come to their attention. 3 of these were published yesterday. We begin with:
Appointing Consultants, with the following website, which was only registered on the 14 August, as usual, the registrant is hiding under a privacy service.
According to the website, they are a company that offers the following services:
- Appointment Setting; We can provide your business with qualified appointments for your sales team.
- Lead Generation; We can offer bespoke leads from both websites and telemarketing operations.
- Customer Service; Create the best customer services team for your business.
- Online Marketing; Run an online marketing campaign. We can help you with SEO or e-mail campaigns.
- Data Sourcing; Source the best possible data to make your business thrive.
- Sales Training; Teach your team with one of our professionals to be the best. (Their spelling mistake)
The thing is they are informing timeshare owners that they have grounds to make a claim, which for a telemarketing company making appointments for another company is a little worrying.
They also do not appear on any company house records.
The next one is Barlow & Scott, with the telephone number 01904 501 389 which is a York number. When checking on who is calling, one name comes up First 4 Legal, there was a company of this name registered in London, but it was dissolved in February 2012.
There is no mention of a website and they seem to be contacting Club Class members, stating that they are a solicitors office and that there is money being held for the client by the courts in Spain!
They claim that the purchase of membership was never completed as the client never had an NIE Number, no problem for £500 we can get this for you then you can get your money back.
This is however untrue, you do not need an NIE number unless you are going to live in Spain or for any of the following:
- Open a bank account
- Buying, selling or insuring a property
- Arranging a mortgage or credit
- Pay taxes
- Being employed
- Registering with employment agencies
- Registering to study
- Applying to start a business
- Registering with social services, receiving social security benefits
- Applying for a driving licence
- Inheriting assets
The NIE is a Spanish Tax Number for foreigners. So beware these types of claims.
The next is called Stapleton Consultancy. Once again they claim that the Spanish courts are holding money owed to the consumer from a previous fraud. Now to get this money paid out Stapleton Consultancy will need to be paid in order to do the work. There are no contact details available, so very little is known.
There is a company called Stapleton Consulting Limited, but they are chartered building surveyors, so absolutely nothing to do with timeshare. As and when new information comes to light, we will publish it here.
This really does show that you must do your homework before dealing with any company that calls you out of the blue, especially when they inform you that you have a payment waiting to be released by a court!
Just to finish off the month of August, Canarian Legal Alliance announced yet another sentence from the Court of First Instance in Maspalomas, once again it is against Anfi, who still deny that they have any cases against them.
In this particular instance the court declared the contract null & void, the infraction was again a contract over the stipulated period of 50 years. The court awarded this consumer over 23,000€, they also awarded over 4,000€ as double the amount that was taken as a deposit within the mandatory 14 day cooling off period.
If August was a quiet month, what will the next few months bring? Keep an eye on these pages and you will see.
So here we go to the land down under and this weeks article from Justin.
What Role Does Private Equity Play in Timeshare?
By Justin Morgan
Introduction and comments by Irene Parker
September 1, 2017
Private equity firms, traditionally providing capital to fund high growth start-ups, may be shortchanging timeshare consumers in their quest for returns typically targeted to reach higher returns than those of the public market.
Timeshare in general has been facing increased pressure due to overly aggressive sales tactics. This warning about escalating default rates was published February of this year by American Banker – Diamond Resorts and Wyndham under pressure due to aggressive sales tactics. Wyndham is a publicly traded company. Diamond is owned by private equity firm Apollo Global Management.
Diamond Resorts ABS under Pressure from Company’s Sales Tactics
The question is – how are higher returns for private equity investors won?
Is timeshare even an appropriate venue for private equity investment? Can higher returns be earned without strangling the timeshare consumer with excessive maintenance fee increases, reduced availability and other unsavory tactics driven by such demands?
Former Diamond CEO David Palmer explained this concept to investors at a September 2014 conference, according to a transcript, “Anything that is put in the budget that gets expended on an annual basis, we get our 15 percent fee, That is basically a 100 percent profit business.”
Meanwhile, timeshare members received this notification:
“Timeshare owners of the Grand Beach Resort, a 192-unit property in Orlando, Fla. … learned in a letter in September that their annual maintenance fee would rise 14.9 percent this year.”
I asked Advocate Justin Morgan, our Australian Contributor, his thoughts:
This is the ‘Super Profits’ issue that I questioned years ago… I pointed out that retail prices for vacation points were sometimes four to six times retail value across Asia and Australia. But the real focus involves turning vacation ‘currency’ into more fiat currencies at super profit level. In my opinion, they are not interested in member value at all. It’s an early version of cryptocurrency! My sentiments are no different today…even worse.
In my case, I found my Diamond Resorts account terminated for renting, although my contracts clearly gave me in writing the right to rent. If they changed the rules, that’s unfair, but virtually all timeshare contracts state the rules can be changed at any time for any reason. It is now apparent we were ‘all-in’ against the Vegas House that takes all it can get.
Irina Allen agrees. Irina is a professional who ended up with 139,000 Diamond points alleging she was up-sold to that level by deceit. Inside Timeshare previously reported on how Irina’s account was suspended for posting one ad on RedWeek. Rental ads for Diamond points on RedWeek abound.
The timeshare point’s product is a cryptocurrency that offers no backing other than your promise to keep paying ‘whatever it is this year’ maintenance fee increases. Some timeshare companies force maintenance fee increases for any reason…They can then pick up default points.
Timeshare developers pocket millions and millions this way. Most members are not allowed to leave. It’s like ‘Hotel California’s’…you can check in anytime you want, but you can never check out.
“Last thing I remember, I was
running for the door
I had to find the passage back
to the place I was before
“Relax, “said the nightman,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave!” The Eagles
It doesn’t matter much whether they are public or private, though I feel private equity firms have far less scrutiny. The problems lie in the legal structuring of these entities, and how they can basically bill members for whatever tab that they find is allowable. If they control the HOA, and therefore budget approvals, the rest of the structure is usually just a financing and ‘dividend’ pay out model. Wages can be like a hidden dividend, if they are simply looking to pull money from members over to those they seek to pay out: i.e. usually management, vs the actually financiers, who are often at the back of house in the financing structure.
In my opinion these private equity firms are targeting the timeshare industry now because they understand that they can raid them by simply jacking up maintenance fees by 20%, or even their required rate of 30% return, by simply hiding cost allocations within their structure, or simply paying their executives directly from the Club. There’s no stopping what they can do under some structures. It is a license for them to take what they want.
As reported by Business Wire, “A class action lawsuit has been filed against timeshare developer Diamond Resorts International, timeshare owners associations Bali Condominium Association and Parkway International Owners Association, and auditor RSM U.S. L.P. alleging breaches of fiduciary duty, breach of contract, and professional negligence over billing practices for maintenance.”
The plaintiffs allege that the language addressing maintenance and management fees in the condominium association’s governing documents were outdated and ambiguous. The outdated language allowed the defendants to include subsequent amendments to:
- Charge inappropriate maintenance fees.
- Inflate management fees.
- Hide inappropriate fees.
- Charge costs unrelated to the maintenance and management of the timeshare development including an “indirect corporate fee.”
“BBX Capitol is not a private equity firm. Alan Levan has had a significant ownership interest in Bluegreen since at least 2008. Something like 85% of BBX revenue and 75% of their income comes from Bluegreen.”
What falls from the mouths of timeshare company public relations departments in their message to the investment community often sounds like a foreign language to beleaguered timeshare members. New York, Tennessee, Colorado and Arizona Attorneys General settlements against timeshare companies are but the tip of the iceberg.
Thank you Justin, we look forward to more from our Australian cousins and your insights into this worldwide product called timeshare. No matter where you are, the story seems to be the same, you are the UP’s, you have the money and we will take it from you, but give you nothing but hassle in return!
It now just leaves us to say thank you to all who contribute to Inside Timeshare, a very big thank you to all the volunteer advocates of our advocacy group, who do a splendid job of helping others with their problems. Have a great weekend and we’ll be back again next week with more from the murky world of timeshare.