Could DVC cease its ROFR practice?

[CannonSTL]

Wondering about this (and searched a bit with no luck). Clearly Disney can decide when/whether to exercise right of first refusal per contract being sold. But, can they cease the practice altogether? Are they obligated to go through this step? ROFR seems to play such an important role in point value that I'm wondering (with my AKL bid in ROFR territory right now) if they are obligated legally to say they have it, review every sale, etc. Thanks for any insights, source materials, etc.

 

[CarolMN]

Contracts give them the right. Nothing obligates them to exercise it.

 

[Lorana]

Last year for a couple of months during the middle of the summer, Disney seemed to cease exercising ROFR entirely.

 

[DaveNan]

As long as direct buyers are willing to pay a premium over the current resale market prices, Disney will keep exercising the process. If direct buyers had no interest in sold out resorts, or they were not willing to pay any more than what they could buy on the resale market, than Disney would not "take" any contracts. This is why Disney looks for ways to "add value" to direct sales of sold out resorts (member benefits and restrictions). It helps justify that premium and adds to their bottom line. If there was nothing to gain from "flipping" those contracts, Disney wouldn't.

 

[Brian Noble]

But, can they cease the practice altogether? Are they obligated to go through this step? ROFR seems to play such an important role in point value

Absolutely. They went a long time during the Great Recession ROFR'ing nothing for all intents and purposes.

And, I don't think ROFR is a cause of the market. I think it is a consequence of the market, and it is co-cyclical. When the market is hot and people are beating down DVD's door to buy retail points at sold-out resorts, it makes a certain amount of sense to buy back if there's not much more effort in closing the sale. However, If the market for DVC softens and selling becomes more of a chore, Disney's appetite for buying back more points will also soften. They have their own points to sell, after all.

 

[DonMacGregor]

Are they obligated to go through this step? ROFR seems to play such an important role in point value that I'm wondering (with my AKL bid in ROFR territory right now) if they are obligated legally to say they have it, review every sale, etc.

Well, given that they have contractually reserved that right for themselves, there's no obligation for them to exercise that right. Here is the language (emphasis added):

14.1.2.2 After receipt of such written notice, DVD may determine prior to the proposed transfer date whether to exercise its right of first refusal set forth in this Section 14.1.2. If DVD elects to exercise its right of first refusal, DVD must notify the Owner in writing of such election, and the transfer to DVD must be completed on or before the proposed transfer date.

The last few posts/page in the ROFR thread provide some good information.

 

[CannonSTL]

Well, given that they have contractually reserved that right for themselves, there's no obligation for them to exercise that right. Here is the language (emphasis added):



The last few posts/page in the ROFR thread provide some good information.

perfect. thanks for the details.

 

[CannonSTL]

Absolutely. They went a long time during the Great Recession ROFR'ing nothing for all intents and purposes.

And, I don't think ROFR is a cause of the market. I think it is a consequence of the market, and it is co-cyclical. When the market is hot and people are beating down DVD's door to buy retail points at sold-out resorts, it makes a certain amount of sense to buy back if there's not much more effort in closing the sale. However, If the market for DVC softens and selling becomes more of a chore, Disney's appetite for buying back more points will also soften. They have their own points to sell, after all.

Thanks, Brian. Good points. I see the supply-side market influence in future pricing and sales for DVC. That is, if DVC allowed for substantial dips, that affects future value that they can extract. Knowing Disney will buy back points means there is little to no dumping like you see in the rest if the market.

 

[MICKIMINI]

Last year for a couple of months during the middle of the summer, Disney seemed to cease exercising ROFR entirely.

Yes, they sure did and we did take advantage of it LOL!!!

 

[Brian Noble]

Knowing Disney will buy back points means there is little to no dumping like you see in the rest if the market.

Again, I think this is backward. There is no dumping because there are plenty of people who want to buy and do not find any potential resale limits material, and those people exist in an ecosystem that doesn't have a ton of owners clamoring to sell. Part of that is the underlying economics of the resort, and part of that is Disney's Reality Distortion Field (aka "pixie dust.")

This is the same reason why there is no "dumping" of Marriott timeshares. There is plenty of organic demand, driven in part by brand recognition and in part by the underlying economics of the properties.

 

[CannonSTL]

Again, I think this is backward. There is no dumping because there are plenty of people who want to buy and do not find any potential resale limits material, and those people exist in an ecosystem that doesn't have a ton of owners clamoring to sell. Part of that is the underlying economics of the resort, and part of that is Disney's Reality Distortion Field (aka "pixie dust.")

This is the same reason why there is no "dumping" of Marriott timeshares. There is plenty of organic demand, driven in part by brand recognition and in part by the underlying economics of the properties.

Well, ebay has 10-15 Marriott timeshare options for under $10K right now, which suggests that Marriott doesn't exercise their buy-back arrangement with the vigor that Disney has generally applied. In effect, the resale market is a bit like decoy pricing to buoy DVC's direct sales. With the contractual right to buy back (didn't know how that was expressly stated), they are protected from their inventory being dumped. I get the demand-side exists and is also important and unique, but the difference between us and others seems in part to be the application of ROFR.

 

[Brian Noble]

Is ROFR the tail or the dog? I am pretty sure it is the tail, you are pretty sure it's the dog. I guess that's where we leave it.

 

[kilik64]

Is ROFR the tail or the dog? I am pretty sure it is the tail, you are pretty sure it's the dog. I guess that's where we leave it.

But which part wags the other!!!???

 

[Arthur2990]

From what I understand DVC is required by FL law to have ROFR as a way to maintain the value of the timeshare.

 

[Brian Noble]

But which part wags the other!!!???

There's a Zen koan in there somewhere, but I'm too tired to suss it out.

DVC is required by FL law to have ROFR as a way to maintain the value of the timeshare.

This is not remotely true.