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Casey:

In the past, developers did not always conduct careful con-

sumer credit screening. Thanks to the tough lessons learned in the

recession, developers and lenders are doing a better job of prescreening

for creditworthiness. For example, many lenders and developers now

require minimum FICO scores in their credit base.

4. As a lender, how has your appetite

for lending in the timeshare sector changed?

Has it increased?

Casey:

Our appetite continues to be strong. Since we entered this

market in 2011, we have continued to see an opportunity for growth.

Although there are challenges as developers consolidate and more

financing options are available, we believe our flexible approach will

continue to help us strategically grow our portfolio.

Brydge:

We’ve been lending to the timeshare industry for 33 years

and Liberty Bank (for whom we are the exclusive resort finance corre-

spondent) has been lending to the industry for 36 years, so we continue

our focus on building long-term relationships that grow over time. We

added significant market share in 2008 and 2009, when most other

industry lenders were leaving the industry or taking a break, and we’ve

continued to grow since then. Our philosophy and appetite haven’t

changed. We support our existing borrowers’ growth, and we’re always

looking to add new borrowers who are looking for a strong, steady

lending partner.

Ward:

Speaking for our lender, National Bank of Arizona, they were the

first new bank to step into the timeshare lending void in 2010. They were

rewarded with and continue to experience flawless performance on their

timeshare loans. Their appetite is to continue to increase the portfolio.

5. What types of products are you lending on?

Casey:

We are primarily focused on notes receivable financing, as

well as inventory and construction loans.

Brydge:

We provide acquisition, development, construction, inventory,

and receivables financing for vacation ownership developers with

projects in the U.S. and U.S. territories. We have experience lending to

resorts that sell contract-for-deed, deeded, and most points-based and

related club structures.

Ward:

All vacation ownership products are suitable, provided that the

requested debt is supportable. National Bank of Arizona provides the

full menu of loan types for timeshare developers, including construction

financing, acquisition financing, inventory loans, and notes receivable

financing, as well as loans to homeowners’ associations.

6. And where are you lending? The U.S.?

Farther afield?

Casey:

We are currently focused on the U.S. market. However, we are

looking at selected opportunities in the Caribbean, Mexico, and

Canada. Our annual survey at the ARDA World conference in April

[2014] found that professionals see the Florida market as the most

competitive, followed by Nevada/Las Vegas and California.

Brydge:

In addition to the U.S. and U.S. territories, we are also able to

lend to various club structures that include some inventory outside of

the United States.

Ward:

To date, all the timeshare loan activity has been nationwide in

the U.S. However, the National Bank of Arizona personnel also have

experience in Canada, Mexico, and the Caribbean. Opportunities in

those destinations are not out of the question.

7. In terms of credit qualifications, how have

your criteria changed since the recession?

Brydge:

In general, in response to the financial crisis in 2007/2008,

advance rates dropped from 90 percent to 85 percent, interest rates

increased, and portfolio FICO requirements became more conserva-

tive. With the increase in competition, we’ve seen interest rates

decrease and some FICO requirements have become more flexible,

though in general, developers have maintained their more conservative

credit underwriting.

Ward:

Since the recession, developers were quick to either decline

credit to low-FICO consumers or require higher down payments to

mitigate the default risk. We simply assimilated the revised approach

into our note receivable loan structures. Since then, the performance of

the note portfolios has been so stellar that discussions of slightly more

generous credit criteria have started to occur. No one wants it to swing

back to the pre-recession conduct, but if justified, a little more lenient

criteria will probably occur.

Azzi:

At Welk, we have always had credit qualifications. Since the reces-

sion, we have tightened them and focused on tracking the performance

TIMESHARE

TALK

RESORTDEVELOPER.COM

vacation industry review

APRIL – JUNE 2015

“In the past, developers did

not always conduct careful

consumer credit screening.

Thanks to the tough

lessons learned in the

recession, developers and

lenders are doing a better

job of prescreening for

creditworthiness.”

— Jim Casey, senior vice president and managing

director of vacation ownership, Capital One