1. travel
2. vacation rentals

AVA Conference 26th April 2014
Sheraton Hotel
Nha Trang Vietnam
Time Share – Issues and methods
Presented by: Leon Cheneval Director CBRE Vietnam
Certified Property Practitioner Vietnam and Australia
Certificate IV in Workplace Training and Assessment
Contents
Contents
1. Introduction
2. Origin
3. What is the market saying
4. Timeshare
5. Types of ownership
6. Sub groups
7. Pitfalls and Strategies
8. Valuation method
9. Valuation checklist
10.Another view
11.Final say
CBRE | Page 2
Introduction
Timeshare is a form of ownership or right to the
use of a property, or the term used to describe
such properties.
Typically resort condominium units, in which
multiple parties hold rights to use the property,
and each share is allotted a period of time
(typically one week, and almost always the same
time every year) in which they may use the
property.
Units may be on a part-ownership or lease/"right to
use" basis, in which the shareholder holds no claim
to ownership of the property.
CBRE | Page 3
Origin
Time share originated in the 1960s where a
ski resort operator suggested that skiers
should stop renting a room but rather buy
the hotel.
These properties are typically resort
condominium units, in which multiple parties
hold rights to use the property, and each
share is allotted a period of time (typically
one week, and almost always the same time
every year) in which they may use the
property. Units may be on a part-ownership
or lease/"right to use" basis, in which the
shareholder holds no claim to ownership of
the property.
CBRE | Page 4
What the market is saying
Timeshares are not very good for spontaneous traveling, especially in high season
and…
• There aren't as many resorts available as they made you think.
• Hidden Fees. When they tell you how much you are going to pay a month, you
aren't counting in all the other fees.
• Re-sell Values are horrible. You buy your timeshare and you think, "Well, if it
doesn't work, I can always sell it." Wrong.
• They are too expensive. If you purchase a timeshare from a specific resort,
chances are you are paying too much for it. If you absolutely need to buy a
timeshare do it from one of those reselling websites or from ebay.
• The interest rates are up to the roof. I have pretty decent credit and I got
approved for the loan immediately. However, they are charging me a 16% interest
rate.
• They won't let you cancel your reservation after 24 hours. Once you reserve
your room and 24 hours go by you can forget about getting your money or points
back if you have to cancel.
• Many of these places are still "under construction". It doesn't happen all the
time but many of these resorts aren't complete yet so they don't have everything
that their webpage boasts.
• Even if you have "points" they aren't enough most of the time. If you purchase
a timeshare that includes a point system, they never end up being enough and
they are always trying to sell you more. This is especially true if you are trying to
vacation in high season.
CBRE | Page 5
Timeshare
What is Time share?
 Time share allows shared ownership to an entitled party for a specific period of
time annually generally 1 week.
 Time share can be for a specific project or for a pool of properties both local
and worldwide.
 The cost of a time share varies from country to country and location to location
when dealing in a specific or localized concept and a time share could cost
from $12,000 for a 20 year term. The evolution of time share has now created a
secondary market.
Why buy a timeshare?
 Time share said to be an affordable option and allows people the opportunity to
buy a vacation in some of the best locations for a fraction of the price.
 Repair and maintenance costs are shared.
 Ownership long term could be a cheap and affective alternative.
Other option:
Traditional outright purchase or in Vietnam the lease of a property that may only
be used a few times a year.
CBRE | Page 6
Types of Ownership
There are 3 main types of ownership with further sub groups that are outlined
below.
Fee Simple: This is where an actual deeded interest in real estate is recorded and
tangible at law via proper authorities and receives a title in perpetuity.
Leasehold: This ownership option provides ownership rights, protections, obligations
and interests similar to Fee Simple but is for a determined period not perpetuity.
This type of ownership has been common for many years, though it is becoming less
common as resort companies purchase full ownership rights to the land underlying
the resorts.
Right-to-Use (‘RTU’): Allows the purchaser a right to use or occupy a particular unit
or unit size each year with no ownership or interest in the real estate. Traditionally,
your right to use that property will expire after a stated number of years and the
property reverts to the owner of the leasehold property.
CBRE | Page 7
Sub Groups
Other types of timeshare, there are a few sub-groups to be aware of…
Fixed week: Where you own rights to a specific week, often in a specific
condo/villa (this is called fixed week/fixed unit).
Floating (or Flex) time: Instead of owning a specific week, you own a week (or
a time period which may be longer than a week) within a specific range of time.
Usually you will not purchase a specific unit but instead a unit size and may
operate on a first-come-first-served basis, subject to availability, so the
desirable weeks are occupied quickly and if you want to exchange globally
creates issues of value and availability.
Points/Club Membership: Under a traditional points system, each unit/week of
time is appointed a specific number of points based on its location, size, quality,
desirability, time of year, etc. These points are then “spent” like money to
reserve a unit….. some flexibility as an owner of those points can trade…. must
check what they are getting as some of these schemes are subject to scams.
CBRE | Page 8
Sub groups cont.
 Fractional/Private Residence/Destination Clubs allows buyers the opportunity
to buy partial ownership in a more upscale development/ resort… Fractional
interest divided into various parts, you acquire a fraction or part interest...
owners typically buy shares from a management company… which handles
maintenance and schedules everyone’s time.
 Private Residence Club is generally ultra-luxury offering a wide array of special
services to club owners, well above and beyond what is typically offered. This
concept establishes exclusivity and a sense of belonging, similar to the country
club lifestyle. Owners typically own a deeded fractional interest… trade or
exchange options among other locations either within their group or with
affiliates.
 Destination Clubs are similar to a Residence Clubs, most not all provide
memberships that do not include equity ownership. With a few exceptions,
members do not own any interest in real estate, nor is their membership
invested in a property.
CBRE | Page 9
Pitfalls and Strategies
 Converting a hotel to time share may be rewarding… but needs careful
consideration… key elements to any time share or managed resort is
management.
 Time share groups needs to make a resort successful year in year out… Capital
expenditure program needs to be able to meet the needs of an active resort…
must consider long term upgrades as well as day to day repairs and
maintenance.
 Time share needs expert operators with defined documentation and
procedures...
 The sales of secondary timeshare reveals that secondary purchases can be
made at the fraction of the cost of the original payment… Therefore before a
developer considers time share they must have regard to the members and
owners expectations.
 Poorly drafted management and membership documents may see buyers trend
toward traditional ownership.
 Time share is a specialist field and regardless of the method of ownership
careful planning needs to be the first consideration not all resorts may be
suited to time share.
 The main element to a buying decision is likely to be management and track
record. Value for money has always been a strong buying point for this type
of property ownership.
CBRE | Page 10
Valuation method
 Valuation Methods:
When approaching the issue of valuing a time share you need not change your
thinking as agreement sand ownership varies.
Normal approaches prevail with direct comparability the most obvious method to
approach what is a tradable commodity or asset in the market. But that’s where
it also changes….
 What is the estimated value of a similar share or what is it likely to be traded
for when considering an arm’s length transaction when all terms are alike… This
is most important and key issue as not all schemes and benefits are alike.
 See Types of Ownership Annexure A in the paper provided. This leads to the
critical valuation issue when contemplating an approach to valuing a time
share.
The rights being transferred need to be definable and as a first step you need
to obtain a statement or time share agreement.
CBRE | Page 11
Valuation Check list
The following check list may not follow the exact order but for the untrained this is
a good point to start and process to follows:
Step 1.
Step 2.
Step 3.
Step 4.
Request a detailed description of the timeshare interest being offered.
Determine the type of interest being offered.
Determine how the timeshare regime will operate.
Consider in your analysis:




Valuation
considerations:
Valuation
considerations:
Usage rights.
Reservation systems and operating capabilities.
Annual budgeting procedures and establishment of maintenance fees.
Special assessments; taxes and very important the determination and
extent of insurance cover.
Is there will be any sort of association for purchasers and, if so, whether this
association will have any rights, obligations or input with respect to the
operation of the property. What costs may be associated and not reported in
the offering document.
What are the maintenance fees (budgeted and actual).
Step 4.
The imposition of special assessments and other permitted charges. Note
this is quite often overlooked by the untrained valuer.
Determine the track record of the developer and their reputation.
Step 5.
Carefully select and analyse the available evidence.
Look carefully at the secondary market and be aware of discounts and any
historical (where available) variations between offered price and secondary
market price.
CBRE | Page 12
Another view
How to Get a Realistic Timeshare Appraisal
By eHow Contributor
One of the most frustrating aspects of selling a timeshare is determining its fair
market value. It's common knowledge that a timeshare depreciates once the ink is
dried on the contract--anywhere from 30% to 60% off the developer's price--but
most timeshare owners don't have a good estimate beyond this range.
Know the factors of timeshare depreciation and deduct accordingly from the
developer's price. Typically, you can expect at least 20% depreciation right off the
bat. Then another 10%-20% if the resale market is saturated with units like yours.
Expect 10%-20% for having an off-season week, and another 10% if timeshare
owners in your resort have little say in how the property is managed.
For example, if the resort sells units like yours for around $15,000, and you
calculate the depreciation rate to be around 20+10+10+10 = 50%. That works out
to a resale value of $7,500.
CBRE | Page 13
Final Say
Wall Street Journal March 2014.
Beware the Retiree Timeshare Trap
BUD HEBELER: Those who buy timeshare vacation homes often have second
thoughts after it's too late. Once the purchase money is in the sellers' hands, it's
virtually impossible to get it back. Worse, timeshares are extraordinarily difficult
to sell and sometimes even tough to give away because a lifelong burden of everincreasing taxes, maintenance and assessments follow.
Wall street Journal April 4, 2012,
Timeshare Prices Plummet to $1
By Anna Maria Andriotis
Unable to sell his parents’ ocean-front timeshare for the past year, David Suder
became so fed up he offered to give it away. They paid $8,000 for the Orange
County, Calif. unit a decade ago, but since there are no willing buyers, and his 81year-old mother, now a widow, can no longer afford the monthly maintenance
fees, Suder says he doesn’t have a choice. The San Diego-based real estate
investor is offering the unit for free in the hopes that someone will take it before
his mother dies. “I don’t want to inherit it,” he says. “I want it to go away.”
CBRE | Page 14