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developers and offered high advance rates, and developers were heavily
leveraged while operating on thin margins. Given the credit crises and
the volume generated by our industry, the free flow of liquidity took a
quick turn and no new lines were being offered.
Bill Ward, vice president, The changing
of the guard. The roster of vacation ownership lenders serving the
industry today is significantly different than in 2007.
2. How has the scenario changed for
our industry in the past year or so?
Jim Casey, senior vice president and managing director of
vacation ownership, The past year has been strong,
and the market appears to be getting stronger. More liquidity and
sources of financing are available, and more developers are accessing
the capital markets. The industry saw more securitization activity in
2014 than in previous years.
Morrisroe: Multiple new lenders have entered our space, driving
interest rates to affordable rates for developers, and the growth of the
major players/brands has helped stabilize our market space.
Ward: By the beginning of 2012, the roster of new lenders had been
established. The last two years saw those lenders jockeying for client
relationships. The timeshare companies have benefited as lenders fight
hard to provide loan facilities to established developers. The most signif-
icant consequence has been lower interest rates to developers, even
though the U.S. interest-rate market has been flat over that same period.
3. Timeshare consumer receivables,
among many others, were once described
as “toxic assets.” Was that a fair description?
Morrisroe: I don’t believe that to be a fair description then, and defi-
nitely not now. There have been multiple investors coming into the
receivables space and that would not be the case if receivables were
toxic. I believe another contributing factor to recognizing receivables as
a good investment asset is the continuing portfolio experience brought
forth from the lenders, and the ever-expanding analytical tools to under-
stand aging and being able to forecast timeshare consumers’ buying
and spending behavior.
Ward: Lumping timeshare consumer receivables into the junk pile of
toxic assets was unwarranted. There were plenty of toxic assets created
leading up to 2008 and 2009, and many of those assets were tied to a
consumer obligation, so it is understandable why timeshare was painted
with the same brush.
When the recession hit, many critics expected timeshare receivables
to tank, but the actual data proved otherwise. Timeshare experienced
less delinquency than credit-card obligations and home equity loans.
More importantly, the securitization issues and loans made against
timeshare notes performed, whereas poorly underwritten and over-
leveraged residential loans nearly crippled the global economy.
Perhaps it was consumers’ determination to not lose their invest-
ment in their vacation, but ultimately the performance of timeshare
receivables proved the naysayers wrong.
Brydge: I don’t recall any widespread discussion specific to time-
share consumer receivables being considered toxic assets, but it
wouldn’t be an illogical leap for generalists to lump timeshare consumer
receivables with credit-card receivables, auto receivables, and even
some mortgage receivables.
However, anyone who tracked the historic performance of time-
share consumer receivables pledged to securitizations and to commer-
cial lenders would see that the vast majority of portfolios performed
extremely well during even the height of the financial crisis. Lenders
and investors learned what many of us already believed: that the struc-
ture of a timeshare consumer receivables portfolio, which usually
includes the combination of a geographically and socioeconomically
diverse portfolio of consumer loans with relatively small loan balances,
is a reasonably efficient hedge against many economic downturns.
Azzi: For the most part, I would not call consumer receivables toxic
assets. If you have a sound developer who has good business practices
operating with underwriting guidelines, the performance of the portfolios
generated really held up during the recession. In addition, if a developer
takes care of its owners and focuses on the quality of the guest experi-
ence, then owners will continue to pay and enjoy using the product.
“Anyone who tracked the
historic performance of
timeshare consumer
receivables pledged to
securitizations and to
commercial lenders
would see that the vast
majority of portfolios
performed extremely well
during even the height of
the financial crisis.”
— Shawn Brydge, senior vice president,
Wellington Financial