A time for creativity

LIHUE — Kauai is a year-round premium condo and timeshare location, but the number of foreclosures indicates that keeping them filled calls for flexibility and creativity.

There were about 220 judicial foreclosures filed at 5th Circuit Court in 2013. Around 57 Association Of Apartment Owner’s were party to 88 of these foreclosures, with 19 law firms handling them on behalf of 38 financial institutions.

Walking away when an owner falls behind on maintenance fees, assessments or taxes and cannot sell their interval is usually preventable, said John Young, The Cliffs of Princeville general manager. It’s about providing good service and business practices, he added.

“At the end of day it’s not rocket science,” Young said. “It is about providing a good quality product at a fair price with exceptional service and they will fill up.”

The Cliffs is attributing its success to becoming a self-managed property 11 years ago. Cliffs General Manager Kimo Keawe said it was about getting past the issues of the old order and taking a fiscally conservative approach to managing the property.

Once the owners were on board with the plan, the property was renovated over time and vacancies dropped as management rented out for whole unit owners to generate income for them.

“The large share of owners are looking for flexibility and the bottom line is that people want value and a good experience when they come,” Keawe said. “We are trying to make the product desirable from the common area standpoint because that is important for everyone regardless of ownership base.”

The Cliffs Realty Group was created in part to get away from high-pressure sales with programs. It is preferable to educate buyers without gimmicks to appeal to potential long-term members, he said.

The “dog and pony show” of selling to the emotions of unprepared buyers remains the stigma with the timeshare industry, Young said.

Part of the appeal is allowing owners of deeded weeks to make their units available as vacation timeshares, rentals, or to points programs on the open market through Gold Program exchanges.

“Foreclosure inventory also goes on the open market,” Young said. “We see that as an advantage.”

Foreclosures happen

Timeshare management companies say the latest number of foreclosures shouldn’t be alarming.

Lindsay Graham, corporate communications for Wyndham Vacation Resorts, said if owners or members are delinquent and run into a foreclosure situation then Wyndham provides foreclosure services through property agreements with homeowner associations.

“What we do is process these in batches which result in all the foreclosure notices at one time which is standard procedure,” Graham said.

Foreclosures are expected as owners change priorities and make new choices in their lives, said Bill Malish, CFO, broker, and controller of The Cliffs of Princeville. Starting a family, buying a home, a divorce, or elderly people deciding not to travel, or passing away are common reasons for sudden vacancies.

Aggressive rental and resale programs help offset the tough times that bring the negative effects from foreclosures and keep money in reserves, he said. The goal is to find owners who are prepared to keep the vacancy rates under 6 percent.

Nicki Thompson, a registrar with the State of Hawaii Bureau of Conveyances, also cautioned against making assumptions regarding published foreclosures as it does not necessarily reflect poorly upon the management or AOAO. Foreclosures occur over time and are often processed together at one time, she said.

“A lot of the cases sit until they pile up and are processed through,” Thompson said.

Kauai Finance Director Steven Hunt said there does not appear to be a spike in foreclosures at any level, from the county perspective.

“If anything, we are hearing the opposite,” Hunt said. “The value is starting to solidify again.”

Timeshare options

A timeshare is a right-to-use ownership of a unit by weeks at a time, once or several times a year. Membership vacation clubs and points programs are similar as non-owner intervals with sales based on location, season and unit type.

In basic terms, timeshare points function like currency. Timeshare points offer a way for you to accumulate currency from year to year, allowing you the spending power to vacation at larger timeshares or more desirable locations than the timeshare originally purchased.

Graham said the points system has evolved with changing vacation trends. At one time, families and retirees would take long vacations at the same location each year, while today people take shorter trips and weekend stays to different areas and different destinations.

“The points give that flexibility,” she said.

The point values vary by location and time of year at any of the 180 resorts nationwide that Wyndham manages including eight Kauai properties. Kauai is a year-round premium location but the points values for any given unit in January are not the same as in March, she said.

“We don’t see the point system as a negative, but as a positive,” Graham said. “It offers flexibility to use them when and where they want them.”

Mike Givens, a broker with Timeshare Resales Hawaii in Koloa, said timeshares are a smart option for families that would otherwise need to rent multiple hotel rooms.

“Timeshares are also attractive for couples planning an extended stay and want a kitchen, laundry while also having all of the amenities of a resort location,” Givens said.

Malish said success comes with providing whole- and interval-based ownership, with vacation rentals and points collaboration. It fills the gap weeks throughout the year.

With two time share associations of 106 units with 5,406 intervals, and a 23-unit building with 1,173 intervals, Malish said The Cliffs of Princeville is standing solid.

“We haven’t had to raise maintenance fees in three to four years and have a lot of programs to offset anyone being foreclosed on and we rent them out and this negates any effects,” said Malish. “We are fortunate at The Cliffs to have these programs on property so that we have not been affected more so than other years.”