Consolidated Resorts Bankruptcy Part IV – The Final Insult

In the last post, we dissected what the lawyer for Consolidated Resorts had to say about timeshare owners and their claim to using their timeshare weeks.

According to the article by John G. Edwards in the Las Vegas Review-Journal, attorneys for Consolidated Resorts fear that some timeshare owners may stop making payments.  So Judge Linda Riegle authorized the companies to temporarily hire a company to start collection actions against delinquent timeshare owners, pending a final decision on a contract with a collection company.

So, timeshare owners must continue to pay their mortgages and payments even though the company itself is bankrupt?  Or, they’ll be threatened by a collections agency.  Given this fact, would you say that the timeshare there is an asset or a liability?

This article continues to explain how timeshare companies in the past financed major percentages of timeshare purchases and then were able to sell the loans on the secondary market – the same methods used on Wall Street that caused the now global economic meltdown.

The major creditor to the company is GMAC Commercial Finance which provided a $250 million line of credit as well as a $200 million  acquisition and development loan.  Other creditors included HSBC Bank USA, Textron and several thousand timeshare sales prospects who were promised four days in Las Vegas.

Consolidated and the 12 related companies filed for Chapter 7, which calls for liquidation of assets for the benefit of creditors.

Tahiti Village Resort in Las Vegas on the famed Las Vegas Strip had to close and in the process laid off over 1,200 employees and contract workers.

For Part V of this series, click on this Consolidated Resorts Bankruptcy Part V link

For Part I of this series, click on the Consolidated Resorts Bankruptcy Part I link.
For Part II of this series, click on the Consolidated Resorts Bankruptcy Part II link.
For Part III of this series, click on the Consolidated Resorts Bankruptcy Part III link.

14 Responses

  1. thanks for keeping us updated on this issue

  2. […] in Part 4, there is one other interesting angle to this story – one that should point out that […]

  3. […] click this Consolidated Resorts Bankruptcy Part III link. For Part IV of our series, click this Consolidated Resorts Bankruptcy Part IV link. Possibly related posts: (automatically generated)Timeshares Can Depreciate Down To Zero […]

  4. Reading this series of articles has been very interesting to me for several reasons: (1) I actually went to Vegas and almost bought at Tahiti Village; (2) I am a brand new timeshare owner; (3) I am a bankruptcy attorney; and (4) I used to represent condominium associations.

    The amount of money that timeshare organizations charge for dues compared to normal condominiums is obscene. A typically condominium association in Southern California might charge $200 a month or about $2400 per year. If a timeshare resort charges say $800 per year per owner and each unit has 52 owners, that is $41,600 per unit. That is a lot of operating income per unit.

    I know that staffing and operating a timeshare resort will be more expensive than maintaining residential condos, but not 17 times more expensive. I suspect that the owners of Tahiti Village will be just fine in light of what is probably a huge operating surplus.

    • Timeshares are definitely cash cows. Before the recession, timeshare divisions of the major hotel chains made up significant percentages of overall revenue and profit for their bottom lines. It seems as if Consolidated Resorts was over-leveraged. So, when they lost the $200M line of credit, they ran out of cash. I guess they are looking for new ownership to take over the property & timeshare contracts (the golden eggs of the deal).

    • Carl, what’s your take on the Consolidated Resorts bankruptcy? Should timeshare owners have anything to worry about?

      • It’s hard for me to get a read on this situation because of some potentially conflicting information. One article ready seemed to say that ASNY Corp., the subsidiary of Consolidated Resorts that owns Tahiti Village, did not file for bankruptcy.

        Most common interest developments (a legal term for condos and similar developments) are run by a homeowners association that is a nonprofit corporation. It is run by a board of directors and the developer is often and owner just like the people who purchased timeshares there. The developer usually has to either pay dues or provide maintenance or other service in lieu of dues for the units it owns.

        Once a project is built out, the develop no longer has a voice on the board of directors. The board of directors often hires a management company run the operation and doe thing like maintenance, staffing and reservations. And by coincidence, I’m sure many time share developers offer managements services for a nice fee.

        In a Chapter 7 case, the court appoints a trustee to liquidate the assets and pay creditors. If ASNY Corp. did not file for bankruptcy, it might be sold off as a whole unit and probably to a secured creditor. if ASNY Corp. itself filed bankruptcy, the remaining interests that it owns will most likely be sold off.

        In the larger scheme, I suspect that the timeshare HOA will continue to exist, collect dues and make reservations. The down side to all of these is that the market value of timeshares at this resort will plummet.

        I don’t know if Tahiti Village was ever completed. It may be quite some time before they finish it and that will also negatively impact resale values.

      • Thank you for the analysis Carl. I also think that Tahiti Village has not been completed yet and that some of those undeveloped units have already been sold. We’ll see how it goes.

        – Bobby

      • I didn’t think about the possibility that people may have purchased units that hadn’t been built. They would essentially be creditors and they ability to collect might not be very good.

      • It is the definition of “slim to none”

    • Carl: what is your take on how a judge can order a collection agency be allowed when none of the timeshare owners were put on notice of the request, the court date, etc.? I am behind only 1 payment and it was because I was worried about this bankruptcy. Since then I have been called everyday and then today someone showed up at my door and demanded that I pay the fee. Again I am only behind 1 payment. This seems a little over the top. I feel the fees have increased to the point where I could pay for my own vacation and it would cheaper. I also heard from another timeshare owner that the shuttles are no longer running and staff is slim to none. How is this right?

  5. […] on this Consolidated Resorts Bankruptcy Part III link For Part IV of this series, click on this Consolidated Resorts Bankruptcy Part IV link For Part V of this series, click on this Consolidated Resorts Bankruptcy Part V link Possibly […]

  6. Pretty cool post. I just came by your blog and wanted to say that I have really enjoyed browsing your posts.

    Any way I’ll be subscribing to your feed and I hope you post again soon!

  7. We’ve used our Tahiti Village membership only twice since purchasing. One again, maybe it WAS too good to be true.

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