DVC Right of First Refusal (ROFR): October ’17 Report
In the month of October, Disney exercised their right of first refusal (ROFR) on 7 of 160 vacation club contracts sold through the DVC Resale Market, representing 4.4% of the contracts sold. This lowers the year-to-date (YTD) buy back rate to 7.5%. In October, the buy back rate saw a nearly 40% reduction, going from a rate of 7.2% in September to 4.4% in October. In October, 95.6% of contracts were waived by Disney, slightly raising the YTD waiver rate to 92.5%.
Old Key West accounted for nearly half of the buy backs in October, raising it to the 2nd most commonly resort bought back in 2017. At nearly 50 buy backs, Saratoga Springs still ranks as the most commonly bought back resort in 2017 with over double the buy backs of any other resort.
October’s buy back rate of 4.4% helps to dip the YTD buy back rate to 7.5%, which is still trending over 70% higher than 2016’s buy back rate of 4.4%.
In October, as DVC resale prices slight increased month to month, the buy back rate continued to decrease. This inverse correlation has been consistent throughout 2017 with the exception of August, in which the buy back rate rose along with price. This relationship between price per point and buy back rate is shown in the graph below.
What is Right of First Refusal?
For those new to the concept of Right of First Refusal, it is the option Disney Vacation Club has to purchase any resale contract after a sales price has been agreed upon, and the contract has been executed. Each contract must be forwarded to DVC for review.
DVC may take up to 30 days to review the contract. At their discretion, Disney may step in and purchase the property themselves at the terms agreed upon by the Seller and original Buyer. DVC then becomes the Buyer, and the purchase is complete. Once DVC is the buyer there is not an opportunity to come back with a better offer in hopes of still purchasing the contract.
Disney Vacation Club Resort Contracts Bought Back in 2017
Please refer to the graph below for the total amount of buy backs at each DVC resort for contracts sold through the DVC Resale Market year-to-date through October of 2017:
Details on DVC Buybacks
In October, 4 resorts saw buy backs: Boardwalk, Hilton Head, Old Key West and Saratoga Springs.
Notably missing was Animal Kingdom, which encompassed nearly half of the buy backs in September. The prices of the Animal Kingdom contracts bought back in September were in the upper 80’s to upper 90’s per point. However, in October Animal Kingdom contracts were routinely being sold for over $100/pt. This change in price likely led to the significant reduction in Animal Kingdom buy backs.
All 7 of the contracts bought back had all or at least most of the 2018 points available. Some contracts for the same resorts that passed ROFR were sold at lower prices than those listed below, however, the ones that passed for the most part had low point availability for 2018. So, while price is king, point availability still plays a part in consideration.
| Resort | $/Point | Pts. on Contract | Price | Closing Costs Paid by | ’17 Dues Paid by | Use Year | Point Availability |
| Boardwalk | $109 | 270 | $29,430 | Seller | Seller | Feb. | 270 pts.’17 + 540 pts.’18 |
| Hilton Head | $68 | 150 | $10,200 | Buyer | Seller | Dec. | 0 pts.’17 + 150 pts.’18 |
| Old Key West | $80 | 230 | $18,400 | Buyer | Seller | Apr. | 0 pts.’17 + 230 pts.’18 |
| Old Key West | $92 | 210 | $19,320 | Buyer | Seller | Jun. | 13 pts.’17 + 210 pts.’18 |
| Old Key West | $80 | 232 | $18,560 | Buyer | Seller | Apr. | 0 pts.’17 + 232 pts.’18 |
| Saratoga Springs | $92 | 300 | $27,600 | Buyer | Seller | Dec. | 2 pts.’17 + 300 pts.’18 |
| Saratoga Springs | $93 | 140 | $13,020 | Buyer | Seller | Dec. | 166 pts.’17 + 56 pts.’18 |
Buy Back Rates for Disney Vacation Club Resorts
There were 4 different DVC resorts bought back in October for contracts sold by DVC Resale Market. The table below shows the percentage of buy backs for those 4 DVC resorts:
| Resort | Buy Backs | Number Sold | Percentage Bought Back |
| Boardwalk | 1 | 12 | 8.3% |
| Hilton Head | 1 | 3 | 33.3% |
| Old Key West | 3 | 14 | 21.4% |
| Saratoga Springs | 2 | 31 | 6.5% |
Comments
Do you have any insight into why the buyback rate at Saratoga has been so noticeably higher than other resorts this year?
Barry, Saratoga Springs has always been a popular resort to buy back, even last year it was in the top three. I think part of the reason for its popularity with buy backs is that it is always a strong seller for DVC direct just like it is with resale. For direct sales, it is a strong drop product as it offers a lower price point, lower dues and still have a deed that goes until 2054. Why has it moved to a dominate number one position this year for buy backs, I’m not entirely sure. Perhaps it could be because it’s resale price per point hasn’t increased as much as other popular resorts to buy back such as Bay Lake Tower.
With all of your data have you been able to develop a formula to estimate which contracts Disney are more likely to exercise ROFR? Do you have data on the contracts that passed (price, points remaining, etc)?
Brandon, great question. We have not developed a model yet. With our data we have noticed observable correlations, which we mention in the reports.
Once in a while I’ve see Vero Beach subsidized contracts. Is that something Disney would target for ROFR so they can end the subsidy ?
Jer, they have let many of those and Aulani subsidized contracts pass, but yes, we have noticed them be more aggressive on buying them back versus non-subsidized contracts.
Does the lack of Animal Kingdom buy-backs in October suggest that Disney will be more aggressive on buy backs for that resort in November and/or December?
Barry, it’s possible they get more aggressive with Animal Kingdom in November and December as not buying it in October could lead to having less inventory available. However, the lack of Animal Kingdom buy backs in October could indicate that currently it has reached a price they are unlikely to buy it back at (>100/pt.).
was that $92 OKW an extended contract?
D, great question, but it was not extended. Keep in mind whether it was extended previously or not will not matter in a buy back as when Disney resells it, it is automatically extended regardless.