2008 QUESTION & ANSWER SESSION
The following is a transcript of the Question & Answer session of the 2008 Annual Owner Meeting, with my commentary.
Because
this issue comes up over and over in the Q&A session, I want to begin by
setting the background for the Board Expansion issue. Here is the pertinent (not the complete) text
from the two documents that are involved:
PROPOSAL 1: PROPOSED BYLAW AMEDMENT – 2008 (from election
materials)
A FOR vote will express your desire to increase the number of
directors on the board, up to a total of seven directors.A FOR vote will also confirm that
corresponding verbiage in the bylaws, as noted below, is changed to reflect the
potential increase:
4.4 Number. There shall be a minimum of five (5) directors and up
to seven (7) directors of the Club, as approved from time to time by a majority
of the Board of Directors.
4.4 (e) Vacancies.
(ii) Filling.Vacancies in
the Board may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director, or by the Members; provided,
however that a vacancy on the Board created by the removal of a director can
only be filled by the Members.Vacancies
in the board due to an increase in the number of directors shall be filled by a
majority of the Directors, with the term of each new director distributed by
the Board between even-numbered and odd-numbers years in compliance with
Section 4.4(d) above.If the Board
accepts the resignation of a director tendered to take effect at a future time,
the Board or the Members shall have power to elect a successor, pursuant to the
provisions hereof, to take office when the resignation is to become
effective.Each director so elected
shall hold office for the remainder of the term of the position to which he was
elected.
BYLAWS OF WORLDMARK, THE CLUB (existing)
4.4(e) Vacancies.
(ii) Filling.Vacancies in
the Board may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director, or by the Members; provided,
however, that a vacancy on the Board created by the removal of a director can
only be filled by the Members.If the
Board accepts the resignation of a director tendered to take effect at a future
time, the Board or the Members shall have the power to elect a successor,
pursuant to the provisions hereof, to take office when the resignation is to
become effective.Each director so
elected shall hold office for the remainder of the term of the position to
which he was elected.
I also need to mention that many of the Governing Documents excerpts I'll be using have the word "Declarant". The Declarant is defined as "WYNDHAM
RESORT DEVELOPMENT CORPORATION f/k/a TRENDWEST RESORTS, INC.”, which is the organization that serves as our Developer and
Manager.Therefore whenever the docs say
“Declarant”, it also means “Developer”.
Gene Hensley (President of the Board): We’ll begin with the Question and Answers, and let’s start with Mr. Philip Abdouch. How come I know everybody’s names?
Philip Abdouch: I think that means you’ve been here a while.
Gene: Oh, either that or you and I have been talking.
Philip: Uh, as you know, I’ve run for the Board for the last three years, and I’m holding about 10,000 proxies for the Board and for the ballot initiative. We have had several Board members that have asked us, the owners, to support their desire to increase the board size. If I vote for it, there’s a chance it could pass; if I vote against, there’s not a single chance it will, the way that I do the numbers, if 28% of the votes are activated for this year. So what I want to ask you is your commitment that the owners’ votes and only the owners’ votes will decide the two additional candidates. If you are going to appoint people of your choosing, I don’t see where the diversity comes in. So commit to us right now that you will allow the owners’ votes to decide the additional two candidates, and I will consider voting my proxies the way that you want me to.
Gene: You know, Phil, what I’m going to suggest is that you vote according to whatever your conscience is because what we’re going to do is that we are going to follow the guidelines to a T, so it depends on, well it’s going to be a Board decision as to how those people come on board. But we have the same objective, we want to expand and we want to diversify the board and I uh yeah I uh I’m not going to give you that commitment because I don’t know how it’s going to happen and I don’t know what the circumstances are going to be. And you’re asking me to speak on behalf of the entire board. John, you’re welcome, or anybody’s welcome to comment. I’m not the only person up here with the board.
Herrick (Sr. VP, Wyndham Resort Development Corp): I don’t think any of us are in a position to be put on the spot and make a decision like that tonight. The Board would have to evaluate all the factors and make a collective decision.
Gene: Let’s first see if we have seven uh spaces. The bottom line is that you have to vote those people in, and you know that’s exactly how it works. You know exactly how it works, Philip.
Philip: OK, thank you very much.
Gene: You’re welcome. It’s nice to know that one person controls the outcome, huh?
Marci’s
comments: Remember Gene’s comment here about one person controlling the outcome. I will address it later in the Q&A
session, where Gene talks more about proxy assignments and what they mean. His claim that “you have to vote people in”
is misleading. Yes, each Director
appointed would EVENTUALLY stand for re-election. But that would be RE-election, as an
incumbent. That is completely different
than being selected by the owners to begin with. NO INCUMBENT HAS EVER BEEN DEFEATED IN A
WORLDMARK ELECTION.
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Owner: I have a much more plebian question. I’ve been an owner since about ‘91, I think my number is 187. I’m really concerned about internet access. It’s been so different depending upon the particular resort and the time. I remember times it was possible to simply get internet access right from your room, and there’s no reason that shouldn’t be the case with just a decent wireless modem or router, and I’m just wondering why it’s necessary to charge $6 a day.
Dave Akins (VP Resort Operations): It’s a good question. We looked at any number of ways in which we could introduce high-speed internet accessibility to all the resorts, and have succeeded in doing that this last year. Unfortunately there’s a cost associated with all the equipment that was required to do this, and the only way we could due to … the people that … during our testing period approximately 12 to 15% of the people staying at the resort used the high-speed internet access so we determined the cost of the program based on those people and perhaps more than those people paying an additional fee in order to have that available to them so that those folks who didn’t use it weren’t carrying that burden. Over the course of time, the capital cost associated with that program will go through its we’ll depreciate that and then we can re-assess what that cost should be or if there should be a cost. But there was no way for us to acquire all the equipment necessary for 60 – 70 resorts without charging for it.
Owner: May I just follow that up – I don’t quite see why that substantial additional cost. What does it cost for a wireless router?
Akins: Well most of our resorts do not have the capability because of their construction or because of having multiple buildings of just having a simple wireless solution. We had to find technology that was universal, that could be used throughout the whole resort system, and that’s a system that uses – I’m not as techy as some, but it puts the signal across on the electrical lines, so it enabled us in a 100 year old building like the Camlin, to have wireless accessibility in every unit as well as in a resort that’s spread out across 26 acres. So that’s where the cost of the equipment came in to play.
Owner: But you believe as we gain greater efficiencies, that cost …. (drowned out by Akins)
Akins: Well as we depreciate the equipment, we can re-look at that at the end of the 36 month period.
Owner: Well I look forward to hearing that.
Akins: Alright.
Marci’s
comments:When they did the testing
period and found that only 12 – 15% of owners used the service, how many of
those owners knew in advance that it would be available to them? I visited a resort during that time and did
not use it, because not knowing it would be available, I had not brought my
laptop. This is equivalent to building a
temporary ice skating rink and making it available to owners who happen to have
brought along their ice skates, then declaring that it doesn’t get enough use
and closing it down. I would like to see
a NEW study period, now that all resorts have the service available and more
owners know about it.What percentage of
owners use the exercise room at resorts? My guess would be that a parallel study would show a much higher
percentage using the hi-speed internet than using the treadmill and weight
bench. And I do not expect to see the
fee disappear in three years. In three
years, we will be told that the equipment is worn out or outdated and must be
replaced. These fees are like taxes –
once in place, they are almost never removed.
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Owner: I’m a sixteen year member of WM the Club and the first time I’ve ever encountered the housekeeping fee and I realize, of course I talked to Peggy earlier, and it’s never ever been brought up before and I think that everyone should know that if you only have certain amount of credits, 10,000, you have one week of housekeeping fee, and then of course if you’ve got more, then it needs to be brought up and I guess I was totally unaware of it. Yes, it’s in the contract, but never once has ever a reservation person ever mentioned that, and I think that should be done, while you make a reservation, to make people know.
Gene: Notify that there is going to be a housekeeping fee attached? They should, you’re right.
Owner: That you are entitled to one housekeeping fee, but if you are going to make additional within the year, you will get charged.
Gene: Right. You know that housekeeping, that came up actually here in an owners’ meeting in 1991 there were two people that were talking they had both gone to Eagle Crest. One of them owned 10,000 credits had gone there for a week, the other one had spent half a dozen weekends.One stood up in the meeting of maybe 20 people and said how come I went once and I’m paying the same dues as this person who has gone half a dozen times? Aren’t I subsidizing all those stays? And the answer was yeah, you are. So the housekeeping fees were developed so that your initial use is covered in your maintenance fee, which is one per 10,000 credits, and additional uses thereafter is the housekeeping fee application. But you’re absolutely correct, any time there’s any fee whatsoever, it should be disclosed at the time.
Owner: Exactly, and that’s my point. It’s never ever been mentioned, and I was shocked when it was mentioned to me this time.
Gene: I’m sorry you found out that way.
Marci’s
comments:If this owner has never in
sixteen years paid a housekeeping fee, my guess is that she has a
No-Housekeeping Account and does not realize it. The recent housekeeping charge is likely an
error in the handling of NHK accounts that many owners at WMOwners.com have
experienced and documented.
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Owner: My husband and I have been owners since 94, and I remember several discussions at owner meetings about increasing …. I remember several comments about increasing king size beds in the units. So I’d like to know what’s been done about that, is there going to be still a plan to do that? Because I don’t see a whole lot in the system.
Dave Akins: There
are a couple of resorts that we’re looking at for this coming year, one is
Owner: Thank you.
Marci’s
comments:The important thing to note
here is the comment about cases where there isn’t room in the bedroom for a
king size bed. This is a symptom of the
Developer’s efforts to maximize their credits for sales and maintenance fees by
squeezing more units into less space. Older resorts have king size beds and armchairs in the master bedrooms,
and Murphy beds in the living rooms. In
the newer resorts, a queen bed is shoe-horned into the master bedroom and Murphy
beds are replaced by sofa sleepers because they require less floor space. (There are no Murphy beds in the new
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George: Good
evening, I’m George, I’m from
Gene: Ooohhh You know, I uh I share that with you and you know I uh I ran the operations of TrendWest which by the way no longer exists, it’s been gone since 2005, but we did not allow sales on site. Part of our mission part of the culture of TrendWest and WorldMark was to keep the owner experience completely separate and exclusive to the owners, which was why you never saw a sales person anywhere on those locations and which is why all of the upgrades, which is what you’re discussing right now, was done with a telephone call. If we had the ability to change it, we would. Now I share this with you, the overwhelming majority of owners, they pretty much know that someone’s going to ask them something when they go, but I mean uh I .. I .. I ..I agree with you, I think that part of our culture should be that there should be no sales presence on the uh locations. My personal feeling.
George: thank you very much.
Marci’s comments: If you
are so opposed to it, do something about it! The Declaration of Vacation Ownership Program does provide the Developer
an easement for sales, but it also restricts that use: ”Notwithstanding
any provision herein, Declarant shall have the right to perform such acts as
are necessarily incident to construction and development of the Property and
sales of the Memberships without Board approval, provided such rights shall not
unreasonably interfere with the use and enjoyment of the Property by Members.”
(Declaration, 2.5) Making me stand in a separate line under the guise
of claiming a parking pass, applying pressure to schedule an “update”, and
following that with repeated calls to my unit DEFINITELY interfere with my use
and enjoyment of the property.Asking me upon check-in whether I
would be interested in hearing about special upgrade offers would be fine. They keep
telling us that the Board’s job is to enforce the Bylaws and Guidelines of our
Club. So enforce already!
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Art: Hello Mr. Hensley I’m sure all of you know me, I’m just here to say hello to you all, I’ve been around since Club Esprit days as you know, Art Martin my wife Pat here, we’ve actually had a fractional at Depoe Bay and we still have friends down there. We recently sold ours a year ago because we enjoy the WorldMark travels to the casinos and the comps and stuff. Now since they’ve done these repairs out there, I’ve talked to a few people and they’re very satisfied. I’m just wondering, is all the litigation done down there? It’s all done?
Akins: Yes, the litigation was completed late last year and a settlement was reached.
Art: I understand, I understand. And uh the purpose of my asking is that I still haven’t heard from some of my friends that Phase II has been finalized with regard to litigation because I got involved with looking into those things when I was down there before they built it and I told the manager at that time five years ago that there was some problems with defects and that being in the insurance industry for 35 years and handling claims for Club Esprit back then the insurance companies don’t pay for shoddy workmanship and this is where the problem lies which kind of brought about the litigation and so I’m just wondering just if there’s still going to be any litigation in Phase II, is it a done deal, is that the way I hear this?
Akins: The whole project is a done deal all litigation is over and done with and the insurance companies have paid what they were going to pay.
Art: Ok, one last question. The gentleman that asked about the high-speed
internet. I was at
Akins: Well there is a wireless connec … the same ResortNet program exists in the common areas as well and there is a wireless connection there but it does take them to the same landing page that they would get if they were connected to the system in their unit as well.
Art: Ok that’s the point I want to make, so you’re going to end up paying in the room or paying at the pool room, right?
Akins:Yes.
Art: OK, that’s all I got.
Marci’s comments: I agree with Art. Even if they do have to charge for in-room internet service in order to recoup the costs, to add a fee for a service that has always been available at no cost is simply a money grab.
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Owner: I’m also a Club Esprit member, and I’m
old. I would like to know if I want to
go from
Peggy: Well yes, you can call and book, if it’s available, you can book.
Owner: But would you help me do the booking.
Peggy: Oh, so you’re trying to set up maybe a group reservation that goes down the coastline?
Owner: Well, I’m not a group.
Peggy: We will absolutely help you, either in reservations or owner services. We’re there for you.
Owner: Thank you.
Marci’s comments: Kudos to Peggy. She quickly saw the source of the misunderstanding and rather than nit-picking over terminology and further confusing the owner, she simply reassured her that of course reservations or owner services would help. When that owner calls in, a staff member can take whatever time is necessary to make sure she understands the process without taking up Q&A time or making the owner feel embarrassed.
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Owner: I uh have been WorldMark since ‘91 have enjoyed a lot of vacations but I am an extremely senior citizen I’m on a very static income and these constant increases in the yearly dues are getting very laborious and I can see ways where you could cut back a lot of expenses. Like uh not have all this … I’ve been in hundreds of board meetings in my life unfortunately, but you don’t need all this fancy stuff to tell us what we already know. So cut the damn dues.
Herrick?: I’m sure there was a question in there somewhere. Gene: There was.
Marci’s comments:To borrow a phrase from Nena (see the last question of the Q&A session), “But not one that you’re considering answering … “
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Cliff: My name is Cliff Connors, and I am an engineer and an attorney. And I am pretty well trained in analysis, and I’ve done some analysis on what the direction of the developer has been, I’m not sure I like it. I’ve also looked at how the board has conducted itself, and I think it tracks pretty well what the Developer does. As a result, I’ve noticed last year we had an independent candidate who was likely to win enough votes from the owners to achieve a seat on the Board, that’s Philip Abdouch. Seeing that this was likely, it’s obvious that the developer felt threatened. For the first time, it felt it had to over-ride the vote of the popular membership by exercising for the first time its right to vote based on its held shares, the shares that had not yet sold. Now incidentally the votes were in my view falsely categorized as owner votes, they were lumped in with the other votes. The Developer does not own this Club.
Gene: No, and we made that clear. We made that clear.
Cliff: Ok, I would like to see a breakout of that next time, if the Developer votes.
Herrick: The Developer does own credits, though. They own credits just like an owner owns credits.
Cliff: They own credits, but they do not own a membership.
Gene: Yeah, they do. The developer membership is based on the credits that they own on the unsold inventory which they also have the right to use, the condition being that they can’t book it further out than 45 days in advance. So all the unsold inventory remains inside the Club, which is what’s available to you and accounts for a lot of the bonus time that you use. As far as the way that the board voted last year, the only comment I’m going to make on that is up until last year the proxies were assigned to the Board, it was the first time last year that we had a substantial amount of proxies that were outside the Board, we had no idea how it was going to be voted, but we knew it wasn’t going to be according to the popular vote of the owner so the Board met and determined who they felt best. When you assign your proxies to the Board, you’re entrusting us to use our best judgment on how to vote them and that’s exactly what we did.
Cliff: Ok, I understand what you’re saying. Let me get to my question. Having set the stage for this, you understand that if this is the pattern for the future, the developer has the uncontrolled and unchecked ability to over-ride the vote of this group of good people here who have paid good money to own. Let me ask the question. What are you doing as a Board to prevent that from happening?
Herrick: I’m just going to say that the Developer owns credits, the Developer has the right to vote their credits, and the Developer can vote those credits any way he chooses to. Those are written in the Governing Documents, there’s nothing the Board can do to change that, that’s the Developer’s right, and if they choose to vote their credits, they can.
Cliff: OK, I appreciate that. Let me make just one other comment to the board, that just because something is arguably legal, that doesn’t make it right.
Gene: You know, I think one of the things you’re going to see as a difference this year is that the developer has done some incredible expansion and all of that inventory sits in the club and those are the unsold credits that they have the right to vote. But what I talked about earlier, telling you about the adjustments that they had to make according to the economy, you’re going to see much slower growth, you’re going to see much less inventory, especially unsold inventory, and I would be amazed if that developer vote had the power that Philip Abdouch right now has. There is an unusual amount of those credits. We’ll see.
Marci’s
comments:This will be long, so I’ll
take it in pieces.
1) Gene’s claim that the
Developer owns a membership. Our
Governing Documents specifically state “Except as otherwise specifically
provided, Declarant is not to be deemed a Member based on unsold or reacquired
Vacation Credits. For purposes of assessments and Voting Power, Declarant shall
be deemed to hold the number of Memberships determined by dividing (the unsold
or reacquired Vacation Credits) by (the average number of Vacation Credits per Membership
held by Members other than Declarant), as adjusted periodically.” (Declaration
of Vacation Ownership Program, Section 3.2) The Developer does NOT own a membership and
does NOT have membership rights.
2) The proxy process. Gene
says that last year they “knew (Philip’s proxies) wouldn’t be according to the
popular vote of the owners … when you assign your proxies to the Board, you’re
entrusting us to use our best judgment on how to vote them.” I think he has it backward. For more than a decade and a half, the Board
made a big deal out of the fact that they cast their proxies in proportion to
the owner vote so as to not affect the outcome of the election. Owners have been shocked to learn that that
has changed.In contrast, owners who
made the effort to assign their proxies to Philip Abdouch had to make the
conscious decision to do so, based on a clear understanding of what Philip
stood for and what his goals and intentions were for those votes. Philip’s proxy power is not voted according
to the popular vote of the owners, it IS the popular vote of the owners. At the beginning of the Q&A session, Gene
made a comment about the decision being controlled by one person. When Philip casts his proxies (or I mine, or
Jim Pappas his), he is not speaking as one person. He is speaking with the cumulative voice of
thousands of owners who are fed up with the way the Board has been speaking for
them. Last year, the Developer vote accounted
for over one third of all votes cast. As
Cliff is saying in his question here, if any one person (or entity) controls
the outcome, it is the Developer!
3) Gene’s prediction that the Developer vote has less power than
Philip Abdouch. The Developer’s Voting
Power for the 2008 election is approximately 28,000 “vote points” (which are
then multiplied by the number of seats open). Philip said that he held about 10,000 proxies, which really meant 10,000
“vote points”. Just over 1/3 as much
voting power as the Developer holds.
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Gloria: My name is Gloria Benson and actually after that I have a pretty simple question.
Gene: We like simple (laughs).
Gloria: My husband and I usually get one or studio apartments, and what I’d like to request is a full complement of dishes and silverware. Cause we have three choices, and I’ve done all of theme -- I’ve run an almost empty dishwasher, I’ve brought dishes from home, and I’ve washed dishes by hand. If I know there is an expense, but if we could just have a normal of complement of dishes we could save a lot of energy by running empty dishwashers.
Akins: Well ma’am I was under the impression we did have so maybe you can grab me at the break and explain a little further.
Gloria: We usually have in the studios just four bowls and four plates and four forks and knives, in the one bedrooms, I think it’s six.
Gene: The maximum occupancy.
Akins: The maximum occupancy plus two.
Gloria: Well I understand that, but then that leaves you washing dishes in an empty dishwasher because you could utilize dishes for several days before you had to actually run the dishwasher but I bring dishes from home so I don’t have to do that.
Akins: OK, appreciate your comments.
Marci’s
comments:
This could have been handled
better.Yes, she has a point about
having to run an almost-empty dishwasher or do dishes by hand. I have
had the same complaint. But the Club is not going to over-stock every
unit in order to avoid that. A WMO
participant pulled this woman aside and gave her a TRULY helpful
response … if
she just calls Housekeeping, they will provide any extra dishes she
needs for
the duration of her stay.
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Clay: I’m Clay Williams, and I hope the Board is listening tonight because we’ve had three or four people speak about the owners or the board action on how they us set up this uh voting and uh my question is can you tell us the owners why the proposal proposed bylaw amendment calls for any new board members to be selected by the present board rather than elected by the board, to the board by the owners. It sounds very much like the good ol’ boys club to me.
Herrick: I’ll just say that the language is consistent with the existing documents that were written 19 years ago.
Clay: It doesn’t sound much like a reason.
Marci’s
comments: It’s consistent with A PORTION
OF the existing documents. The existing Bylaw language about filling vacancies
(quoted above) says: “Vacancies in the Board may be filled by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, or by the Members”
(Bylaws of WorldMark the Club, 4.4(e)(ii), emphasis added). They are conveniently ignoring that part of the
“existing documents”. The proposal could
have been written in such a way that the owners approve expansion this year,
and that expansion takes effect in 2010 with the owners selecting the
additional directors during the regularly scheduled 2009 annual meeting and
election.
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Nola: I’m Nola ____, owner 119. ‘89 was when we joined. I think that my I’m voting to add the two additional board members, I think that’s a good move, but I think badly that we couldn’t have made that separate from the vote for the board members. I would have voted differently for the board members if I had known there was actually the possibility of four.
Herrick: Unfortunately, the way that uh when you put something on the ballot it is uh something that takes place after the election. You don’t know if you’ve approved that bylaw amendment or not until the election is over, so you don’t know if you’re voting for more than what we currently have because that motion hasn’t passed yet, so it would take effect the following year.
Marci’s comments: Same as above – it could have been written in a way that the expansion was approved one year and took effect the following year, after a new election. Also, she clearly misunderstood the situation, thinking that owners were selecting four candidates this year – he made no attempt to correct that misunderstanding.
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Louise: Hi, my name is Louise, and I am a member of
WMOwners.com.I would like to know why
is
Herrick: Well I’ll say that all occupancy, heads in beds in a unit, are factored into occupancy numbers. So it doesn’t matter how that booking was made, if there’s a person in that room, it’s counted as an occupied night. I don’t know what is online from Expedia or who is putting those out there, if it’s the company, if it’s an individual owner, I’d have to research that to comment on that. Inventory Specials are set up…
Louise: The pictures are of WorldMark.
Herrick: That doesn’t necessarily mean that …
Gene: Yeah, the fact of the matter is part of your right of membership is that you do have the right to rent, and what I said when I was talking is one of the very big frustrations is it’s not unusual if an owner is not going to use their credits, you’ll see them on eBay, they’ll rent them, there are individuals that will keep accumulating keep accumulating keep accumulating.There’s absolutely nothing we can do because it’s fully within their rights to do that. The frustration of it is that some of these owners because of the number of credits that they own, they can actually reach beyond that 13 month window, and they can reach into that high-demand time and they can take that time, and then if they want to rent it, they rent it, and it is unbelievably frustrating. And we’ve looked at the guidelines, we’ve tried to … you know the closest we came to controlling it is what we could do with the Olympics and we didn’t want that exact thing to happen, somebody to come in and manipulate all of the inventory and try to rent it. It’s there for the owners to use and what we try to do is to make sure that that’s exactly how it’s being utilized. But in these situations where you have these big rentals that are going out our hands are tied on it until we can figure something out our hands are tied. There was an owner, doesn’t make any difference who it is, that had over 700 weeks for rent on eBay at one time.
Louise: The descriptions on Expedia are that they are rented by the company, they say …
Herrick: We’ll look at that
Louise: …how many units or whatever.
Herrick: Sure, and I’ll be happy to look into that. Typically when a property is on Inventory Special it’s also I mean if they property is being rented as a distress rental resort it’s typically on Inventory Special. Maybe not always, but typically. But I’ll be happy to look at that.
Louise: OK, I have the printouts if you want.
Herrick: OK
Marci’s comments:They did a good job of steering the response
away from the actual question. Yes,
owners have the right to rent. But the
question was not about owners renting, it was about the Developer renting. An individual cannot list a rental on
Expedia! Gene talks a lot about the
rental abuse and the fact that owners have the right to rent and the Club
doesn’t want to do anything to interfere with that right. What he does not mention is that Wyndham is
the #1 renter of WorldMark units! They
talk a lot about the Developer owning credits and having the same rights with
those credits as owners have; this is simply not true. The credits that the Developer owns and has
the right to use come with very strict restrictions.They cannot be booked more than 45 days out: “Declarant shall not reserve
any occupancy period earlier than 45 days before the first day
of that period, and all such reservations must be in accordance with Vacation
Credits attributable to Declarant, whether unsold or reacquired by Club or
Declarant.” (Declaration, 2.5) Also, the clause that gives owners the right to rent
specifically denies that right to the Developer! “Renting of Units. A Member other than Declarant may charge a fee or rent for the use of a Unit
during such Member's Vacation Credit Uses by a guest or invitee.” (Declaration,
2.15, emphasis added) The Governing Documents specifically and clearly prevent the
Declarant (Developer) from reserving more than 45 days in advance and from
renting their reservations.
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Theresa: My question is somewhat similar to what Louise was talking about. Um and to make clear, she was talking about Expedia, NOT an individual owner.
Gene: Hmm-hmm.
Theresa: My question was what Dave was explaining to us about the occupancies percentages. I’m wondering, can you tell us what the occupancy percentages are for the units that are booked with credits, because that’s the health of the club. Or bonus time, or inventory special, or with Developer credits that are used for promotional ____.
Herrick: We do have a report what we call a credit utilization report that shows what level of activity is booked with credits. But I can tell you we have a credit utilization report. How it breaks down in detail past that, I can’t give you an answer on.
Theresa: And the developer credits, how many units are the occupancy levels used with developer credits.
Herrick: Uh I …
Theresa: It’s important to us for the health of our club.
Herrick(over top of Theresa): Sure, sure …
Gene (over top of Theresa and Herrick): You know what, ____ said the best thing to do is let them get to the office so they can access the information that you’re requesting, because nobody has this information on the tips of their tongue.
Herrick: Yeah, if you’ll just shoot me an email if I can ….
Theresa (smiling): But you guys know everything, you’re supposed to know this.
Herrick: Yes, I know. Shoot me an email and if it’s information that’s …
Theresa: Well I would like everybody here to be able to hear that, so if you could share that with everybody in an email or something, because it goes to how we are able to book on our own the resorts and the ones that are all booked up and they’re gone …
Herrick: I understand. Recognize the Developer owns credits …
Gene: Jim, why don’t you just get next in line, that way …
Herrick:… the Developer owns credits, the developer has a right to book inventory, they are even restricted with their developer credits, more than an owner, but the developer also has FAX credits, and those FAX credits are …
Theresa: I know that, we all know that Dave …
Herrick: OK, I’m trying to answer your question. I’m just saying they have a right to book that inventory, and when they book FAX credits, they book on the same rules that the owners book.
Gene: Is everybody clear on FAX credits? You all know what that is? When you use your credits for an airfare, a cruise, the adventure club, or any of those things, those credits have to be turned back into cash.It’s just like doing an exchange. The Developer will buy those credits, they don’t buy all of them, but they will buy a great many of them, and then they use them for different promotions. It’s no different than if you’re doing an exchange with RCI or II or anything else, it’s a like for like exchange. But if they didn’t absorb those and if they didn’t monetize them we wouldn’t be able to use the credits as a currency. It took us years to talk them into doing it.
Theresa: (Sigh.) OK.
Gene: Sorry that you don’t like the answer Theresa, it’s the truth.
Theresa: no, that’s
ok. I mean we want to be able to book
and go to
Gene: We all do, yeah!
Theresa … so that’s all I wanted to know, what the percentages are for the occupancy.
Gene: Call the office, we’ll be happy to give them to you.
Theresa: so this also has to do with the Olympics and what you just told us all tonight, the restrictions that are going to be put on owners for booking units at the Olympics which it’s a touchy subject, a lot of people want to go and …
Gene: yeah, and we’re trying to make it available to as many people as possible.
Theresa: … however, regardless of it being the Olympics, I think a precedent should be looked at that may be set here that we don’t want, because how can you say that we’re just going to put a restriction for this event on owners booking however many units they want to book. So disregarding that it’s the Olympics, the precedent is what concerns me, that the B … that you can say that we have restrictions that over-ride our Bylaws.
Gene: We did it because of the Olympics and we did
it because of what happened in
Theresa: So we’ll be able to know that Developer credits aren’t used for those either?
Gene: No. Exactly right.
Herrick: Just a point of clarification. What the Board did in that action was not over-riding the bylaws. The Board has the authority to make those types of special rules.
Gene & Peggy
overlapping ….
Peggy: I can guarantee you that the Developer, we will not trade any information, any of those units with exchange, it will not be any developer use, it will be purely owner use at the winter Olympics.
(That was my question to them in the 2006
owner meeting.)Marci’s
comments:The Credit Utilization Report
was first produced in 2006, after Jim Pappas and I both hounded the Board about
providing better information regarding resort usage. The problem with this
report is that it only separates reservations into two categories –
“credits” and “Bonus Time/Inventory Special/Other”. Anything reserved using credits, whether
owner reservations, FAX time, Fun Time, Developer use (sales promotions, Party
Weekends, employee bonuses, etc) is listed as a “credit reservation”. Our Board says that all Theresa would need to
do is email or call the office, and they would give her the numbers she
wants. What she wants is the detail of
Developer credit use. I have asked for a
report showing this level of detail for over a year. I finally got an official response from the
Board: “Board decided
that posting detailed reports would only create confusion.Reports that are currently being created will
be available upon request.” I asked for a list of current reports that track that kind
of information, and was told that there were none! How can the Manager be doing its job if it is
not tracking how and when resorts are being used? IRIS can tell me when a reservation was
booked and by what method. It has to in order to enforce guest use and
cancellation guidelines.The information
IS available … they just don’t want to provide it.
Regarding
FAX credits – the Developer has a specific “Use Easement”, or right to use the
properties. Owners have a different “Use
Easement”. Just because we sell our
credits to the Developer in exchange for a cruise or a coffee mug does not give
the Developer our Use Easement to accompany those credits. Ladycody on WMOwners.com had a great
analogy. A Use Easement is a license,
much like a driver’s license. I have a
license to drive a passenger vehicle. But my license says that I have to wear corrective lenses when I
drive. My brother’s license has no
restrictions on it. If my brother loans
his car to me, I still have to wear corrective lenses to drive it. The restriction is connected to my license,
not to his car. The restrictions placed
on the Developer using our resorts (for instance, not booking more than 45 days
out) are connected to the Developer, not to the credits. It does not matter whose credits the
Developer is using, they are still bound by the Developer restrictions within
the Governing Documents. If I rent those credits back from the Developer and
use MY account to book them as a FAX reservation, then it is MY license that
applies, and I can book up to 13 months out. But if the developer books the units then turns around and rents them to
the general public, or uses them for Party Weekends or sales tours, or books
them as Fun Time, then they are booking under the Developer’s name/account, and
the Developer restrictions apply.
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Bob: Hello
Gene: Hi, Bob.
Bob: My name is Bob Wendt. I have been a member for a bunch of years now. What I’m concerned about is that in the economy that we’re dealing with right now, discretionary dollars are tight. The developer is in the business of selling our points. If they jack up the point value of the new units in order to be able to sell the points cheaply, same net income to pay for the project, we have a whole bunch of new people with a whole bunch of points that were purchased cheaply that are making it more difficult for me to book in the units that I was able to book in before with the number of points that I have.
Gene: OK, that’s not happening. You understand that that’s not happening. You understand.
Bob: I don’t understand that, because I can’t afford any of the new units that have come online in the last two years with the number of points that I have, whereas I could afford ANY of the units with the number of points that I had prior to that. I’m talking one bedroom.
Gene: And the saving grace is that none of those credits will ever change, so everything you’ve always been able to do, you’ll continue to be able to do. That’s the fact. Right now the developer is charging almost $2 a credit, and they’re about to out price themselves right out of the market. Right now, in order to get 10,000 credits, $20,000. That is not competitive in today’s market. Sales is slowing down, it’s not speeding up. OK?
Bob: OK, you heard 60% of my concern there. What you didn’t hear was in this economy,
what’s coming is going to motivate the developer to sell cheaply and already
the demand for the units at Ocean Shores and other areas that have been in the
system for ten years or more has gone up because people can’t afford the new
units but points are being sold for the new units. It’s relatively cheap
Gene: I did.
Bob: … if they are being fully booked at the higher point values, then there’s no impact, I agree. Being a math teacher, I can do the numbers. But if the bookings there are down, that is negatively impacting the rest of us who have been members for a number of years.
Gene: OK I’m going to give you two numbers that are privileged information and they’re going to roll because I said it, but sales and marketing costs over 40%, product cost over 35%, add them up, you’re right there at 75%, you have 25% left, and you have 6 other departments to run, and they’re doing that at $2 a credit. If they lower that price as you’re suggesting, they’ll lower themselves right out of business.
Herrick: I think the bottom line is we all understand your concern, it’s been a common topic of discussion, and recognize that the Board cannot control what the Developer does, but we’ll certainly make sure that they hear your concerns.
Gene: But YOU can. Do you understand that? You can because the developer agreement is an agreement between WM and the developer and it’s an agreement that you can challenge any time you want.
Bob: Right, and we’re depending upon YOU to safeguard our interests.
Gene: And we do, you’re absolutely right.
Marci’s
comments: Gene, that is absolutely
happening, and you gave the evidence in your answer: “Right now the developer is charging almost $2 a credit,
and they’re about to out price themselves right out of the market. Right now, in order to get 10,000 credits,
$20,000. That is not competitive in
today’s market.” He is absolutely right –
that is not competitive in today’s market. At that price, they are selling a red week in a two bedroom at
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Gloria: Hi, my name is Gloria S__ I’m an eighteen year member and this is the first time I’ve heard of special assessment. Um I was wondering what triggers a special assessment, can I expect a bill in the mail, and …
Gene: There’s never been a special assessment,
which is what I said. If you heard
different than that, then I apologize for mumbling. What I said was there has never been a
special assessment in the history of the Club, and what I was saying was that
in the case of
Gloria: That doesn’t mean we won’t be getting one in the future for whatever comes along. I was thinking like …
Gloria & Gene talking over one another …
Gloria:…the little situation down there.
Gene: They did. And thankfully I believe it was reserves that refurbished a great deal of that, and then the Developer picked up a lot of that as well.
Gloria: So if we ever do get a special assessment, it will come …
Gene: In twenty years, it’s never happened. It’s never happened. Why would you even think about things like that?
Gloria:Y eah, that’s why I want to know more.
I
don’t have anything to say about this one.
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Ralph(?): I’m
Ralph(?) from
Gene: Hi Ralph.
Ralph: We’ve been members since Club Esprit and when we bought in it was fee simple real estate. Is it still fee simple?
Gene: It was never, I don’t mean to contradict you, but it’s always been a mutual beneficiary cooperative that gives you the available usage right, you never had a deed entitled to a specific unit. The nature of the Club doesn’t allow that. So your five thousand, for every block of 5000 credits, you have an undivided interest in the total assets, not in a single condominium or in a single resort, but in the total assets. So even these high-end things that they’re throwing in right now, you’re part owner of. That has never changed. Nobody can change that. Nobody can touch those.
Ralph: OK, my next question is then, when we pass on can we put in our will to split up our ownership so that each of our three kids can have ten or twelve thousand credits?
Gene: If you have that many; you can break it down to increments of 5000. It takes a minimum of 5000 credits. So if I have 15000 credits and I’m just slowing down, I want to give 5000 to one child, 5000 to another, keep 5000 for myself, I can do it. You can divide it up in as little as 5000 increments, but it takes a minimum of 5000 credits.
Again,
no comments. But don’t get too comfortable, it won’t last long. *wink
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Toni: My name is Toni, I’ve been an owner since Club Esprit.
Gene: This is wonderful! I’ve never met so many Club Esprit owners. Not since 1990.
Toni: Last year I went to a TravelShare sales pitch, and I was rather shocked to find out that they can reserve our units two years in advance, where we can only reserve thirteen months in advance.
Gene & Peggy: Not true. Absolutely not true.
Toni: That’s what we were told.
Gene: I apologize. Not true. No. All according to the guidelines, yeah.
Marci’s
comments: Old owners who have been quiet
for years are coming to meetings and expressing concerns.That should tell the Board that all is not
right in WorldMark. People don’t come to
these meetings to praise; they come to complain.If more Club Esprit owners are showing up at
WorldMark annual meetings, there’s a reason for it.
----------------------------------
Steve: Good
evening, my name is Steve Cook, I live in
Gene: We break it down now. The reason that the developer wasn’t broken out is that they fall under an owner category, regardless of … that’s how they fall. But I ... I have no problem with that at all.
Herrick: It will be the developer’s choice to determine if they want to share that, just like it would be if you shared your credits.
Marci’s response:The Developer does have some right to privacy in HOW those votes are cast, but the NUMBER of votes held by the Developer is a matter of Club record. The credits held by the Developer as of August 25, 2008 (the Date of Record for this election) was 143,541,500.The average account size was 10,246. Therefore according to the formula set out in the Declaration for determining Developer voting power (Declaration section 3.2), the Developer “is deemed to hold” 14,010 memberships for voting purposes.Because the average account size is over 10,000, each membership receives two votes per open seat. The Developer voting power for the 2008 election is therefore 28,020. (Of course the total Developer credit and average account size numbers are subject to correction, but they were provided by Stephanie Aardal, spokesperson for the Board. The calculations are my own.)
----------------------------------
Owner: When I purchased an additional 20,000 points, I was told I was a gold member and would have preference above the people who have 10,000 credits on bookings. And then at Tahoe a couple of months ago I was told that 20,000 doesn’t cut the mustard. You need 50,000 points, and if you got 50,000 points, you would have preference and you could go on like the lady just said three years booking ahead. I haven’t been able to book 13 months ahead with quite a few points. And you know this deceptive salesmanship is revolting.
Gene: It is, it’s worse than that. It is. There’s absolutely no excuse for it either. Whenever that you need to call the corporate office and claim a misrepresentation against the sales rep. They have no business being involved in the business. It’s a beautiful product that we have, if it complements a person’s lifestyle they’re going to embrace it and own it, it’s as simple as that. It should be information-based selling and that’s the end of it. Please understand that regardless of what you’re told, the guidelines are the guidelines. Nobody can change them, nobody can bend them, there is no first class or second class owner, everybody follows the exact same rules.
Owner: Thank you sir.
Gene:I apologize for that experience. Terrible.
Marci’s
comments: Apologies are not worth much
without action to back them up. The
sales staff are not employed by WorldMark, but they are the “face” of WorldMark
that the public first encounters. We
have been told over and over that the job of the Board is to oversee the
Developer and Manager and ensure that everything is happening in accordance
with the Governing Documents. If the
Developer’s sales people are materially misrepresenting the Club and lying to
prospective owners, the Board has an obligation to stop it. If a Ford dealership were using lies and
intimidation to sell the new Mustang, you can be sure that Ford would not say
“tisk tisk, that shouldn’t be happening.” The dealership would no longer be selling Fords.
----------------------------------
Owner: I guess I’m up. I’m a little confused on the issue of the votes. Some people here have 5000 credits, they get to vote for the board. I have 40,000 credits, I get a vote for the board.
Gene: More than one.
Owner: Well everybody gets two, I guess, huh?
Herrick: Your vote is weighted.
Owner: You mean after I vote, after the fact, it gets weighted by the number of points?
Herrick: Yeah, they have your owner number, and they have how many credits you own, and then your vote is weighted based on the number of credits you have.
Owner: OK, then and I’m still a little confused, that if the seven director initiative passes, is it the board that chooses the two additional members from those that were on the ballot?
Gene: I can tell you the way I see it and all I’m doing is kind of speculating here because I don’t know, first of all we don’t know if it’s going to pass.
Owner: So who knows?
Gene: Well …
Owner: Who knows what you’re going to do if it passes? That’s a baloney answer if you say I don’t know what we’re going to do.
Gene: You didn’t let me answer the question!
Owner: Answer then.
Gene: Thank you. So I don’t know what the outcome is going to be, but I can tell you how I think it would turn out, which is that it would more than likely if the positions are empty, and it passes, they would be appointed, and then voted on the next election. Now let me finish. It costs about a quarter of a million dollars to conduct an election. So we can either incorporate it into the annual meeting, which is in the budget and paid for, or there can be a special election and the owners, you bear the cost of it. You truly bear the cost of it. It is in the guidelines for us to have this annual meeting and for us to allocate the funds for it. And if a person is appointed and it’s three months before the end of the term, in three months you’ve got to vote them back in, that’s the only way they can get back in.
Owner: OK, that’s a good answer. I appreciate it. The fact being that we will again vote next year for these two positions that are additional.
Gene: If in fact it passes, and if they are appointed, then yes you would, you would vote for them.
Owner: Thank you.
Gene: You’re welcome.
Marci’s
response:
The owner was right. Those were baloney answers. They know EXACTLY who
would select the two
additional members, because they wrote the proposal to CHANGE the
existing
Bylaws to guarantee it! As theBylaws read now, a vacancy in the Board
(including one created by expanding the number of directors) can be
filled by
appointment by the Board OR by the members. Their proposed amendment to
the Bylaws removes the “or by the members”
part and guarantees that any vacancy can ONLY be filled by Board
appointment! I asked the same question
last year, not having read the proposal clearly enough. And I got the
same response … “we don’t
know”. I call “BULL” on that
answer. As for the idea that owners will
vote on the appointed directors – yes, technically, the appointed
directors
would have to stand for re-election at the end of their terms. But the
key here is RE-election. They would run as incumbents, with all the
privileges that Wyndham affords to incumbents. NO INCUMBENT HAS EVER
BEEN DEFEATED IN A WORLDMARK ELECTION. Peggy Fry was appointed to fill
the vacancy
when Don Harrill retired in May of 2005. In the October 2005 election,
she was listed as an incumbent. In the February 2006 Destinations magazine, Peggy’s re-election was announced (page
6). In the March 2006 Destinations That is less than a dollar per owner.
(page 8), under “Notes from
the Board”, Peggy’s appointment in May of 2005 was finally announced!
She ran as an incumbent and was “re”-elected
before her appointment had even been announced to the owners! Gene
keeps talking about the cost of a
separate election. As I’ve already
pointed out, there would be no need for a separate election. Vote to
expand this year; vote to fill the
vacancies next year. And if for some
reason we did have to have a special election, so what? He said it
costs $250,000. We have over 270,000 owners.If only one owner in ten
were interested enough
in the election to be willing to pay for it, that would still only be
$10 per
owner. If some critical issue were to
come before our Club, I would gladly pay my $10 for the right to have
my voice
heard on the issue, and I’m certain that I’m not alone.
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Owner: My question relates to the question that was just asked. Earlier in the evening, a question was also asked about why the proposed amendment here indicates that the board will select the people to expand the board. And your answer I believe because it was in some document. Was that the answer to that question?
Herrick: The answer that the language is consistent with the original documents. In other words, when a position is vacated by the Board, the Board has the opportunity to fill that appoint that position.
Gene:T hey are the Club guidelines that tell you how the Board appoints or how the position is filled. We follow those guidelines.
Owner: Does it specifically say that the Board will appoint rather than the owners have the …
Gene: It does in fact. It does in fact say that it is an appointed position. Now you know there’s the option of having an election the fact is you’ve gotta ask yourself where you want your money to go. It’s a lot of money. It really is a lot of money. Now if we start having multiple meetings like this during the year, I’m just telling you (Herrick talks over)… the money … There’s an owner right now that’s really mad at me because his issues didn’t get on this agenda, and because he didn’t follow the process to do it, and he’s …well anyway, we have this once a year and it’s for this purpose.
Herrick: It’s just consistent with the way the documents are written. And then when those terms are up, typically when a position is appointed during the middle of a term, that person then fills the balance of that term. In these new positions, if I’m not corr … I could be incorrect, but if these new positions are appointed by the board, I believe they have a two year term before they are up for re-election. Just like all the rest of the terms. They are all two-year terms.
Gene: Probably a good example is let’s just say next April something happened and for whatever reason I could no longer serve I resign my position. Then they would appoint, and then in October you would have to vote on whoever was appointed to fill my position. OK? That’s right according to the guidelines and we’ve gotta follow the guidelines, it’s as simple as that.
Owner: When a new position is created, you’re considering that a vacancy.
Gene: Well it would be a vacancy at that point, yes it would.
Owner: Well I hope you will consider putting some owners on the board.
Gene: Absolutely! And diversify the Board for gosh sakes. Yes, yes!
Owner: Thank you.
Gene: You’re welcome!
Marci’s
response: Again, it’s consistent with PART of what the existing documents
say. (And by the way it’s the Bylaws,
not the Guidelines, that establish the rules for filling a vacancy.) Gene keeps insisting that they just follow the
Guidelines (and, presumably, the other Governing Documents). If only they would! Gene again brings up the cost of a special
election – there would be no need for a special election. As I said earlier, simply write the proposal
to state that the expansion would be effective as of the date of the next
election, and that the additional members would be elected by the owners at
that next (regularly scheduled, already budgeted) election. In fact, an owner I spoke to during the
annual meeting had a better idea – change the term of office to three years,
and have two expire one year, then three, then two. That way we avoid the potential learning
curve of replacing four Directors at once.
----------------------------------
Gene: Please, we’re well over our time, but we’ll keep taking the questions if you want to keep asking them.
Audience: NO.
Gene: No! One more question. One more question. Sorry.
----------------------------------
Nena: Hi. Is this on? OK.
Gene: Yeah.
Nena: I’m Nena Gray.
Gene: Hi Nena.
Nena: Hi. My question is following this gentleman’s question over here, when you appoint, what would be the objection to appointing one of the high candidates like the second candidate that would have been elected except somebody beat him? Why couldn’t you go down the list of candidates and appoint someone?
Gene: Wonderful option, Nena. Wonderful option. It’s an option. That’s a wonderful option.
Nena: But that’s not one that you’re considering, is that what I’m hearing?
Gene: Ladies and gentlemen, we’re going to close the questions. Thank you very much. Thank you very much.
