I wasn't able to attend the Manhattan Club owners' meeting last week — what did I miss?
Good news — we recorded it! Here is the meat of the meeting in three separate tracks:
One hundred and twenty timeshare owners at The Manhattan Club (TMC) — representing an estimated 14,000 to 18,000 frustrated buyers — rallied in Manhattan Aug. 2 to discuss legal strategies as well as the practical problems of escalating maintenance fees, reservation hassles, and resale roadblocks. The meeting, hosted by RedWeek.com, the National Timeshare Owners Association, and TimeSharing Today, was the first focused "take action" meeting among Manhattan Club owners who are stuck in legal limbo while New York Attorney General Eric Schneiderman battles TMC developer Ian Bruce Eichner over the fate of the Club and its owners, most of whom paid $20,000 to $40,000 — or more — for timeshares they can rarely, if ever, use.
The meeting was a planning session, of sorts, for a group of unlikely activists who are seeking answers to basic questions — such as, should they continue to pay rising maintenance fees during the legal investigation, or hold off to see what happens? They also strategized to prepare for the TMC Timeshare Association's annual meeting on Aug. 4, where they intended to challenge the board's stewardship of the Club. However, those efforts went for naught, because the board refused to take any questions from the 53 owners who attended the meeting and adjourned the session as abruptly as possible. The board also refused entry to several owners who, according to the Club, had not been vetted by security prior to the meeting. (FYI, TMC's security people also refused to allow RedWeek to attend the meeting. Building security subsequently escorted RedWeek's representative out of the building.)
"Their counsel said they can't say anything because of the investigation. They just fed us a lot of BS," said Michelle Nee of New York. "This is my first time attending a board meeting, but I thought it was important to show our power and unity with other owners."
Full disclosure: neither the AG's office nor the TMC, Eichner or their attorneys are saying anything publicly about the investigation. The upshot of this non-communication is that TMC owners are left in the dark — which is precisely why RedWeek, TST and the NTOA agreed to host a meeting, at their expense, to inform owners about what's happening with the AG's case and, most importantly, their timeshares.
The AG's office got a court order in July, 2014 to shut down the Club's timeshare sales (estimated at $400 million), freeze bank accounts, and compel the developer — Eichner, his relatives, business associates, and a group of interlocking companies linked to the Club — to turn over all relevant documents about the Club's offering plan, reservation policies, ownership lists, etc., as part of a civil fraud investigation. Now, a year later, the plot has thickened considerably with Eichner moving in court to block the investigation while Schneiderman releases new documents suggesting that Eichner and family siphoned $6 million a year from the Club for management services that were never performed. Going way beyond civil fraud, the AG is now pursuing a criminal probe against the Eichners for a variety of transactions — including misleading sales practices, inaccurate offering plans, securities violations and, in the last case, pocketing 20 percent of the annual $30 million in maintenance fees paid by TMC owners.
The Aug. 2 owners meeting — a first-time alliance among RedWeek, NTOA and TST — included a Q&A session with New York attorney Douglas Wasser, who is very familiar with the AG's investigation, real estate law and similar litigation; and Bob Schmidt from Sharket.com, a timeshare resale research company based in Florida. Wasser informed owners about the legal issues in the AG's case while Schmidt discussed the market values of TMC timeshares — based on resale and developer sales from 2012-2015.
Here are some of the highlights and consensus opinions released at the TMC owners meeting:
- Future legal actions: Launching a new legal case against the Club, at this stage, would probably serve no purpose, because the AG already has a year's worth of investigative data in his possession. Wasser urged owners to show patience and evaluate their options after the AG's case comes to a head. Three previous class-action cases have already been thrown out of court. In its most recent court filing, the AG's office said, "Nearly every week the NYAG discovers new evidence of potential wrongdoing."
- Maintenance fee issues: Owners who want to continue using their timeshares must continue paying maintenance fees, even if they don't like the cost ($2,500 - $3,000 a year). Many owners, however, have already opted out, refusing to pay due to frustration or other financial considerations. According to the AG's office, a total of 2,265 contracts were inactive, or delinquent, as of March 2015. The Club has 14,147 active contracts, and those active payers will, in effect, have to shoulder the costs of the inactive timeshares.
- Sharket's survey of TMC resales shows that Manhattan Club sales and prices plummeted in recent years — no surprise, given all of the negative publicity about the Club. From 2012 - 2015, Sharket traced 144 resales that had an average selling price of $2,148. Only nine resales have been recorded in New York property records in 2015 (during which, the Club itself was barred from transferring, selling or foreclosing on property).
- During that same 2012 - 2015 period, the Manhattan Club took back 1,554 timeshares through buybacks or foreclosures, paying an average price of $133 per unit. Developer retail sales, in contrast, remained stayed strong right up until the AG closed down the sales operation. From 2012 to July of 2014, the Club notched 1,521 sales worth $86 million, with an average selling price of $21,000. Many owners noted the striking similarity of the buyback/foreclosure numbers and the developer sales. Overall, the Club claims to have sold $400 million worth of timeshares since 1997.
- A key allegation in the AG's probe is that the Club deliberately oversold timeshares and rented rooms to the public while denying consistent access to owners. Proving that, however, is a major paper chase that continues to generate heated debate between the lawyers for both sides. In its most recent court filing, the AG says: "NYAG has sought — and still seeks — to determine not only whether Sponsor (Eichner and his operating companies) had oversold any units in the timeshare plan, at any time, but also whether anyone at the Manhattan Club was keeping accurate records as to the inventory that Sponsor has sold, has yet to sell, and has bought back and re-sold."
The next court date is Aug. 21, but could easily be postponed to accommodate a settlement conference or status update with a court-approved referee. There have been no public hearings — where owners could learn, first hand, what is happening — since the original court order on July 24, 2014.
