Developments - July 2017 - 35

along with an appraisal (ordered by the
lender, paid for by the borrower). Given
the uniqueness of the timeshare product,
an appraiser with timeshare experience is
highly recommended.
Sales Plan
You may be familiar with this great old
timeshare adage: "You can sell your way
out of any problem." Selling your timeshare
intervals is the primary way the development loan will get paid back, so your
lender will be very focused on your sales
plan, experience, and process. Since loan
repayment is so strongly linked to timeshare
sales, the vast majority of timeshare development loans are provided by timeshare
industry lenders. Most local commercial
lenders would look at a developer sideways
upon learning that 50% or more of each sale
goes to sales and marketing costs.
Financial Statements/Projections
Balance sheets will vary greatly depending
on the developer, but in general, lenders
want to see a disciplined company with
minimal debt and a commitment from
ownership to the reinvestment of profits.
Cash flow projections should be realistic
and show that the company's operations can
support the development of the project and
repayment of the loan.
Personal Guarantee
Unless you're a well-established developer
with a sizeable balance sheet, lenders are
going to expect a personal guarantee of the
development loan by the borrower's principal owner(s). This not only supplements
a young development company's balance
sheet but also provides extra incentive
for the owner(s) to keep focused on the
repayment of the development loan.
Equity
As a general rule of thumb, lenders want to
see at least 20-25% of the total project cost
contributed by the borrower. This could
be in the form of land, cash, or both, but it
will always need to be contributed to the
project before the lender begins development loan advances.

Repayment
Each project and lender is different, but there
are a few general rules of thumb in the industry. Lenders typically want their development
loan fully repaid when the project reaches
80% sell-out. A development loan gets repaid
with a small fee from each sale, called a release
fee. The release fee is typically a percentage of
each sale, often subject to a minimum dollar
amount. The release fee will differ from project to project; however, to ensure the project
can support the inventory cost, the release
fee should not exceed 25%. Also common is
a quarterly cumulative repayment covenant
designed to track sales pace versus projections
to ensure loan repayment is on schedule.
Customizing Your Project
Know your audience. Successful timeshare
projects aren't automatically successful
because they have the nicest pool, the
best location, or the fanciest fit and finish.
Successful projects are those resorts that
know their customer base and can deliver a
product that satisfies their owners at a reasonable purchase price. I've seen beautiful
projects fail because their product was too
luxurious for their location and their price
point was too high, and I've seen average
resorts thrive because they provide a quality
customer experience and deliver a solid
product at an affordable price.
Just like a log cabin in the mountains
and a studio unit in an urban city require
different design schemes and furnishings,
your resort should reflect your location and
owner base. Many resorts now use local
products and vendors for artwork, furniture, and accessories whenever affordable.
Even if it's for a just a few impact pieces,
the product quality is usually better and the
goodwill generated within the local community often pays great dividends. Also,
those local pieces double as a talking point
during the sales tour. Overall, the resort
design elements and color scheme should
have a consistent theme that gently evokes
the atmosphere you wish to establish.
Design Trends
Lenders don't opine on design features,
color schemes, or countertop materials,

which is probably a good thing since we're
not known for our creative flair. However,
my job description includes visiting projects
to which we loan money, so I can share
some trends I'm seeing.
Overall, resorts are shifting toward
providing guests more options onsite,
usually including a restaurant, bar,
and sundry store. Continuing with the
trend of keeping guests on property and
entertained, I see more premium amenities being offered like zip lines, family
theaters, splash grounds, and miniature
golf, in addition to the standard pool and
arcade. Access to these premium amenities is often tiered so it's free to owners,
but requires a resort fee or purchase
of a premium package for renters and
exchangers. These amenities can serve not
just as profit centers but also as enhancements to the guest experience, providing
additional value for owners.
Some timeshare resorts are also building
a small number of ultra-high-end units.
These units look like they come straight out
of a magazine spread and feature extensive
square footage, premium views, and unique
in-unit amenities like pool tables, movie
theaters, or outdoor kitchens. Although
perhaps not the most cost-effective way to
build inventory, showcasing a premium unit
generates significant excitement during the
sales tour, provides upgrade opportunities,
and often leads to a lot of positive social
media posts about the amazing unit that a
family stayed in at your resort.
Finishing Touches
As the new build trend-wave returns for
vacation ownership, these financing tips
and design insights can help build a solid
plan for your project in today's environment of growth.
Shawn Brydge is executive vice president of
Wellington Financial. Since 1981, Wellington
Financial has been a lender and lender's
correspondent for the timeshare industry.
Wellington Financial is the exclusive Resort
Finance correspondent for Liberty Bank.
For more information, email sbrydge@
wellington-financial.com.
July 2017 Developments

- 35



Table of Contents for the Digital Edition of Developments - July 2017

UP FRONT
FIRST WORD
AROUND THE INDUSTRY
TRUSTEE TALK
MEET THE CHAIR
SUSTAINABILITY
FACES FROM THE FRONTLINES
FOCUS ON: REPUTATION MANAGEMENT
CONVERSIONS: UNIQUE OPPORTUNITIES AND CHALLENGES
CONSTRUCTION FINANCE
CONSTRUCTION FINANCE
ASK THE EXPERTS
MEMBER MATTERS
EDUCATION
MEMBERSHIP UPDATES
LAST WORD
Developments - July 2017 - 1
Developments - July 2017 - Cover1
Developments - July 2017 - Cover2
Developments - July 2017 - 1
Developments - July 2017 - 2
Developments - July 2017 - 3
Developments - July 2017 - 4
Developments - July 2017 - 5
Developments - July 2017 - UP FRONT
Developments - July 2017 - 7
Developments - July 2017 - FIRST WORD
Developments - July 2017 - 9
Developments - July 2017 - AROUND THE INDUSTRY
Developments - July 2017 - 11
Developments - July 2017 - 12
Developments - July 2017 - 13
Developments - July 2017 - 14
Developments - July 2017 - 15
Developments - July 2017 - 16
Developments - July 2017 - 17
Developments - July 2017 - TRUSTEE TALK
Developments - July 2017 - 19
Developments - July 2017 - MEET THE CHAIR
Developments - July 2017 - 21
Developments - July 2017 - SUSTAINABILITY
Developments - July 2017 - 23
Developments - July 2017 - FACES FROM THE FRONTLINES
Developments - July 2017 - 25
Developments - July 2017 - FOCUS ON: REPUTATION MANAGEMENT
Developments - July 2017 - 27
Developments - July 2017 - 28
Developments - July 2017 - 29
Developments - July 2017 - CONVERSIONS: UNIQUE OPPORTUNITIES AND CHALLENGES
Developments - July 2017 - 31
Developments - July 2017 - 32
Developments - July 2017 - 33
Developments - July 2017 - CONSTRUCTION FINANCE
Developments - July 2017 - 35
Developments - July 2017 - CONSTRUCTION FINANCE
Developments - July 2017 - 37
Developments - July 2017 - 38
Developments - July 2017 - 39
Developments - July 2017 - ASK THE EXPERTS
Developments - July 2017 - 41
Developments - July 2017 - MEMBER MATTERS
Developments - July 2017 - 43
Developments - July 2017 - EDUCATION
Developments - July 2017 - 45
Developments - July 2017 - 46
Developments - July 2017 - 47
Developments - July 2017 - MEMBERSHIP UPDATES
Developments - July 2017 - 49
Developments - July 2017 - 50
Developments - July 2017 - 51
Developments - July 2017 - 52
Developments - July 2017 - 53
Developments - July 2017 - 54
Developments - July 2017 - 55
Developments - July 2017 - LAST WORD
Developments - July 2017 - Cover3
Developments - July 2017 - Cover4
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