PART III
LAKE TROPICANA RESORT (LAS VEGAS, NEVADA):
The site of MPTV's future Lake Tropicana timeshare resort (Lake Tropicana Apartments, 303 E. Harmon Ave, Las Vegas, NV 89109, 702-733-8383) is located only three blocks from the billion-dollar MGM Grand Hotel/Casino, one block from the Hard Rock Hotel and midway between the "Las Vegas Strip" and the local airport. It sits on 7.5 acres and currently consists of 176 apartment units located in 22 separate buildings, and upon completion of renovation will feature swimming pools, a tennis court, a spa and recreational center, waterfalls and lush landscaping throughout the project. The 176 units are comprised of 96 two-bedroom units averaging 880 square feet, 56 one-bedroom units averaging 660 square feet and 24 studio units, with dividers, averaging 420 square feet. The units are presently rented as apartments on a monthly or weekly basis, averaging a 90% occupancy of the available units, and MPTV intends to continue the rental of apartments on an weekly or monthly basis until all units have been renovated and dedicated to the interval ownership concept. MPTV currently maintains insurance on Lake Tropicana that management considers adequate for comparable properties in similar stages of development. The current market value of the property has been assessed at over $30 million.
lasvegas.com
Despite the large number of hotels in Las Vegas, which continues to increase as developers announce new major projects, there is a regular deficiency in the number of available rooms for visitors. In addition, the increasing popularity of Las Vegas as a family vacation destination creates a need for more spacious accommodations with self-contained cooking and dining facilities. As such, the planned renovation program for the Lake Tropicana property is intended to appeal to family-oriented visitors to Las Vegas and includes major common area improvements such as landscaping, parking and a decorative security wall, as well as construction of a reception area and activity center and installation of a new roof and porches, the rebuilding of the main pool and construction of two additional pools and a tennis court. As the property is approximately 25 years old, MPTV also anticipates undertaking a complete renovation of the timeshare units, including kitchens, bathroom fixtures, air conditioning, wall and floor coverings and complete furniture and fixture packages. Management currently estimates that timeshare unit renovations will cost approximately $38,000 per unit, while common area renovations will require an additional $1,000,000. The entire renovation project will require six phases and approximately $7,000,000 to $8,000,000 to complete, of which approximately $1,000,000 (excluding capitalized interest paid in cash of $1,400,000) has been expended to date. In April 1994, the company commenced phase one of the project, which involved partial renovation of the first 16 timeshare units and the construction of a sales facility. Due to liquidity and other financial concerns, phase one of the renovation was delayed but resumed in the second quarter of 1997. Management currently anticipates completion of phase one to be within 30 days of closing on the Las Vegas property (i.e. some time in August/September; 75% of phase one is already completed). Funds spent to date for phase one of the renovation and project carrying costs have been derived from equity private placements conducted by the company, issuances of Common Stock to vendors and incurrence of debt. MPTV then intends to utilize the proceeds from timeshare sales (derived from the $100 million end-loan financing of timeshare receivables, for which the company has received a letter of commitment, subject to the completion of definitive documents and due diligence procedures, from Stanford Investors Ltd.) plus cash flow from operations, to fund the remainder of the renovations. After completing phase one of the renovation, the company plans to commence phases two and three, which will include the renovation of approximately one-half of the 176 timeshare units. Architects retained by the company have prepared plans for the purpose of soliciting fixed bids for remaining phases of the renovations. All six phases of renovation are expected to be completed within 12 months of the Las Vegas property's closing.
In addition, a timeshare owners association has been incorporated and management expects that it will provide the services required by its owners, including the payment of master association assessments. Through CRS, MPTV will act as the managing agent for this association, and will receive a management fee (10%) for its services. Timeshare owners will be required to pay annual assessments on their units, thus providing funding for services and any required maintenance or repairs. Annual assessments have been estimated to be in the $2 to $5 million range, with CRS receiving a management fee in the $200,000 to $500,000 range (assuming all the intervals have been purchased).
MPTV has currently completed the process of complying with applicable regulations to sell interval units in Lake Tropicana in Nevada. MPTV commenced taking reservations for sales of timeshare units at Lake Tropicana on July 18, 1997. Before they were temporarily halted sales (due to liquidity problems arising from the $471,674 that Mr. Gould withheld), they were averaging an over 20% buy when their target was only 10%. With the sale of approximately 200 timeshare intervals last fall (for which $1 to $2 million is currently sitting in escrow), they surpassed the minimum requirement of 104 time share intervals and have become registered in Nevada as an official timeshare company. Once the company secures new financing and receives title to the property, they will restart timeshares sales within 2 to 3 weeks. An average of 1,000 to 1,500 prospects per week are expected to be given the sales pitch at the newly constructed sales facility on the Las Vegas property. To accommodate the expected business, MPTV plans on hiring a sales force of 60 employees and compensating them with a base salary and highly competitive commission schedule. In addition, there are over 600 existing corporate orders, worth over $8 million in sales, that are waiting to be finalized. CEO James Vellema has already begun efforts to finalize these contracts, departing on a business trip for this purpose on July 21, 1998. The timeframe for the sale of all 9152 intervals (176 units x 52 weeks) has been estimated to take between 9 to 15 months. Corporate and timeshare dealer sales are expected to play a large part. This is money that's paid all up front (i.e. no end-financing required from Stanford Investors Ltd.). As such, the deal is worth an estimated $114,400,000 in revenues over a period of 9 to 15 months.
RANCHO MIRAGE VACATION RESORT (PALM SPRINGS, CA):
Effective February 15, 1994, MPTV entered into a general partnership (the "Rancho Mirage Partnership") with GGS Hotel Holdings California, Inc., and certain other affiliates of GGS Co., Ltd. of Tokyo for the development, marketing, sales and management of a timeshare resort, Rancho Mirage Vacations in the Palm Springs area (currently the Days Inn Suites, 69-151 E. Palm Canyon Dr., Cathedral City, CA 92234, Phone 760-324-5939, Fax 760-324-3034, Toll free 800-892-5085). This 96-unit resort is comprised of 24 studio units, 60 one-bedroom units and 12 two-bedroom units, and also contains a pool, spa and meeting area. Each unit will also include a full membership in the Rancho Mirage Country Club (38-500 Bob Hope Drive, Rancho Mirage, California 92270, Phone 760-328-1444, Fax 760-324-1165), which is also owned by GGS. While using his or her week at the resort, a timeshare owner has full privileges at the Club, and during other times may utilize certain facilities for a nominal charge.
MPTV will serve as the managing partner of the Rancho Mirage Partnership, and will provide management services to the Rancho Mirage resort and to the related timeshare interval owners association, pursuant to the terms and conditions of a general partnership agreement with GGS. The General Partnership Agreement also requires that MPTV contribute $500,000 in working capital to the Partnership. MPTV is currently awaiting the closing of title and continuation of timeshare sales at the Las Vegas property before it contributes the working capital to the Partnership. The General Partnership Agreement provides that GGS will maintain control of the resort until it deems transfer of management to MPTV appropriate. MPTV will receive allocations of income, gain, loss, deductions and credits, as well as distributions of net income before taxes (as defined in the General Partnership Agreement) equal to its interest in the Partnership. Such interest is currently set at 65% for MPTV (35% for GGS); subject, however, to a 50%-50% readjustment in the event that MPTV sells, assigns, transfers or otherwise encumbers its Partnership interest. GGS will receive the following proceeds from the sale of the timeshare resort intervals sold: (i) $816.99 per interval sold, in consideration of the Club memberships contributed to the Partnership by GGS; (ii) an aggregate of $6,200,000, pursuant to a schedule to be determined by MPTV and GGS, for all unit releases of the timeshare interests; (iii) $30 per year per interval sold, as the Club's maintenance fee (subject to adjustment in the event that Club usage varies from the assumptions set forth in the General Partnership Agreement); and (iv) a two percent management fee. MPTV will also receive a two percent management fee. The General Partnership Agreement provides that GGS may change, at any time and in its sole discretion, the allocation of the distributions set forth in (i) and (ii) above. The parties may also dissolve the Rancho Mirage Partnership at any time; however, to date neither party has effected a dissolution.
The General Partnership Agreement also states that upon or at any time after the sale of 25% of the total timeshare units at the Rancho Mirage resort, GGS in its sole discretion may sell the resort facility to MPTV for a purchase price of $3,000,000. The purchase price will be reduced in proportion to the percentage of additional timeshare intervals sold at the time GGS elects to sell. GGS has begun renovating the property by replacing the existing furniture, fixtures and equipment together with minor renovations that will be required to timeshare the resort. Timeshare permits for the resort have been approved (subject to the posting of a required bond) and MPTV began the sale of timeshare interests at Rancho Mirage Vacations on August 9, 1997. Pre-sales reached over 100 timeshare units (totaling over $1.2 million in sales which remains in escrow) before a lack of funding prevented the company from proceeding. Management currently expects to resume the sales of timeshare interests at the resort by September of 1998. To accommodate the expected business, MPTV plans on hiring a sales force of 20 to 30 employees and compensating them with a base salary and competitive commission schedule. The timeframe for the sale of all 4992 intervals (96 units x 52 weeks) has been estimated to be between 1 to 2 years. The price of intervals will be in the $10,000 to $12,500 range, depending on the unit's location and size (with an average cost of $11,250 per unit, by averaging the two figures). As such, the deal is worth an estimated $36,504,000 (65% of $56,160,000) in revenues over a period of 2 years.
ranchomiragegolf.com
smartpages.com
soramanagement.com
travelweb.com
smartpages.com
KONA REEFSHARE RESORT (KAILUA-KONA, HAWAII):
In June 1994, MPTV signed a letter of intent to acquire the Kona Reefshare resort timeshare program (Kona Reef Condominiums, 75-5888 Alii Dr, Kailua Kona, HI 96740, 808-329-2959), an existing timeshare resort / condominium complex located in Kailua-Kona on the island of Hawaii. This resort is one of only a few timeshare resorts actually located on the beach in Hawaii. The complex features 129 units, of which 12 have two bedrooms and the balance one bedroom. Common areas include a swimming pool, spa and meeting areas. The property currently possesses all required local timeshare permits. While the 1994 letter of intent has expired, the company entered into a substantially similar letter of intent in 1997. The Kona Reefshare resort is expected to be acquired from current owners of individual condominiums in increments of no fewer than five units. The resort is owned by Reefshare Ltd. (9615 Brighton Way, Suite 200, Beverly Hills, CA 90210, 310-275-9166) and currently managed by Castle Resorts and Hotels (1150 South King Street, Honolulu, Hawaii 96814, 808-334-9545). Reefshare currently owns a permit to sell timeshare interests in the State of Hawaii. In connection with this transaction, MPTV entered into an agreement to purchase the common stock of Reefshare, Ltd. (a company that has obtained a permit to sell timeshare interests in Hawaii) in June 1994. James C. Vellema, the MPTV's Chairman and Chief Executive Officer and a principal stockholder, was previously a principal shareholder of Reefshare, but no longer holds an interest in that firm personally. However, a portion of the consideration to be paid by MPTV in this transaction involves the payment of certain liabilities owed by Mr. Vellema to third parties. In June 1994, MPTV entered into an agreement with James C. Vellema and an unrelated individual to purchase all of the outstanding common stock of Reefshare, Ltd. ("Reefshare") in exchange for 250,000 freely tradable shares of MPTV Common Stock and a warrant to purchase an additional 50,000 shares of Common Stock at an exercise price of $6.00 per share (all of such consideration will be received by the unrelated individual). In order to consummate this transaction, the company must assume approximately $500,000 of liabilities owed by the sellers (including Mr. Vellema) to certain third parties and satisfy in full a $262,000 note receivable. Finalization of this agreement is currently awaiting the Las Vegas property's closing.
Reefshare owns and operates 30 recently renovated units and is currently in the process of acquiring 5 more. With regard to the remaining 94 units, Reefshare has a buy back agreement with almost all the private condominium owners (except 5 units) which will allow them to buy out units as need demands and funds become available. MPTV plans on using these options to convert the entire property into a timeshare resort in the next two to three years. The purchase price for these condominiums will be in the $100,000 to $200,000 range, depending on the size, location, and condition of the unit. The company currently anticipates that minor refurbishing of the resort will be required after consummation of the acquisition, with costs in the range of $7,500 to $15,000 per unit. MPTV expects to consummate the agreement in the next six months, plans on hiring a sales force that will conduct on-site and off-site marketing, and start timeshare sales in between 6 to 9 months. The timeframe for the sale of all 6708 intervals (129 units x 52 weeks) has been estimated to take between 2 and 3 years. The price of intervals will be in the $16,000 (1 bedroom) to $21,000 (2 bedrooms) range, depending on the unit's location and size (average cost per unit is $16,465.12, considering there are 12 two bedroom and 117 one bedroom units). Corporate sales are expected to play an important role. As such, the deal could be worth an estimated $110,448,024.96 in revenues over a period of 3 years.
castleresorts.com and castleresorts.com
yp.yahoo.com
RENO AREA COUNTRY CLUB & TIMESHARE RESORT (RENO, NEVADA):
In a deal similar to Ranch Mirage Vacations, MPTV is currently in negotiations with the owner of a country club and condominium complex in the Reno area. The deal is expected to be finalized in the next 6 to 9 months, with timeshare sales beginning shortly thereafter. MPTV plans on buying the units from the condominium complex owner as timeshare sales progress. In the interim, they will be rented out on a monthly basis. Renovations costs are believed to be minimal. MPTV will acquire approximately 100 units with country club memberships for timeshare owners. The timeframe for the sale of the estimated 5200 intervals (100 units x 52 weeks) has been estimated to take between 2 and 3 years. The price of intervals will be in the $6,000 to $10,000 range, depending on the size and location of the unit (average cost is estimated at $8,000 per interval). As such, the deal could be worth an estimated $41,600,000 in revenues over a period of 2 to 3 years.
SAN FRANCISCO HOTEL TIMESHARE PROJECT (SAN FRANCISCO, CALIFORNIA):
MPTV is currently seeking a joint venture partner in the partial conversion of a San Francisco hotel with over 200 to 300 rooms into a timeshare resort and has begun negotiations with one prospect. The hotel will be somewhere in the Nob Hill, Fisherman's Wharf, or Union Square part of San Francisco. The company expects to have an agreement by late 1999, and renovation expenses are expected to be paid by the hotel itself. As most hotels often operate with a room surplus, this timeshare deal is expected to be a protection against vacancies for the hotel. While it is still in the planning stages, MPTV expects to convert up to 35% of the partner hotel's rooms. The timeframe for the sale of the estimated 4576 intervals (estimated 88 units (you get this by averaging 200 + 300, and then multiplying by .35) x 52 weeks) has been estimated to take between 1 and 2 years. The price of intervals will be in the $25,000 range as San Francisco has one of the highest demands for timeshare intervals. As such, the deal could be worth an estimated $114,400,000 in revenues over a period of 2 years.
OCEAN LANDINGS RESORT & CITIES SUN CLUB (FLORIDA):
On June 15, 1993 and May 17, 1994, the company agreed to acquire a total of 655 timeshare intervals at Ocean Landings Resort and Racquet Club (900 N Atlantic Ave, Cocoa Beach, FL 32931, Phone 407-783-9430, Fax 407-783-1339, Toll free 800-323-8413) at Cocoa Beach, Florida and 200 timeshare intervals at the Cities Sun Club in Claremont, Florida (in the vicinity of Orlando). It is believed to be one of the closest oceanfront timeshare resort to Orlando, Disney World, Universal Studios, Sea World, and the Kennedy Space Center. These intervals were acquired from an unrelated third party in consideration for the issuance of an aggregate of 429,958 shares of MPTV's Common Stock. As the Florida timeshare market is currently very overcrowded with competitors, MPTV has no immediate plans to develop or market these intervals. Efforts to sell them to other timeshare companies have proven fruitless.
smartpages.com
condocorner.com
timeshares.com
royalvacation.net
FUTURE PROJECTS:
MPTV will keep its focus on the less crowded timeshare market encompassing the area west of Colorado. The companies plans on initiating 3 to 5 new projects every year. The projects targeted for this year are Las Vegas, Hawaii, and Palm Springs. Projects targeted for 1999 include Reno and San Francisco. Projects targeted for 2000 include Park City, Utah (the site of the 2002 Olympics) and other parts of the Hawaiian Islands.
MARKETING:
The marketing of timeshare units typically involves a variety of techniques designed to maximize the number of prospective purchasers who visit the subject property. Salespersons contact prospective purchasers through telephone sales, forms of direct marketing and referrals from current interval unit owners. These persons are then offered tours of the timeshare properties, usually in conjunction with discounted tour packages, where they view the property and are shown targeted, sophisticated video presentations featuring celebrity endorsements. The resort's sales staff then conducts informal interviews of the prospective purchasers. Industry sources estimate that approximately 12% to 14% of the persons attending these tours purchase timeshare interests.
MPTV currently intends to market timeshare interests in the Lake Tropicana project through similar on-site presentations as well as through infomercials. See "Infomercial and Video Production and Marketing". Each tour will last approximately 90 minutes, and will combine viewing of the project with a structured sales presentation. Management anticipates that prospective buyers of the interval units will come from the large number of visitors on packaged tours of Las Vegas. Prospective buyers will also be solicited through booth locations in the Strip area of Las Vegas. The company will employ a sales staff to provide sales services in Las Vegas with respect to the timeshare interests. Similar measure will be taken at the other parties, and there will also be some cross-marketing where deemed appropriate. In addition to the Las Vegas sales office, another sales office will likely be opened in the Orange County, California vicinity (near MPTV's corporate headquarters in Newport Beach). A company web site with marketing aspects is also expected to be set up within 8 to 12 weeks after the Las Vegas deal is closed.
MPTV also intends to offer services to those timeshare owners who wish to resell their interests. In the resort timeshare industry, resales typically occur on an owner-to-owner basis and involve self-financing, and as a result the market for timeshare interests is relatively illiquid. The company intends to provide financing from Stanford Investors Ltd. for resales of timeshare interests at its resort properties, and believes that the availability of such financing and the increased potential for resale will allow each resort to maintain an active ownership base that will continue to pay annual assessments. |
