Diamond Resorts’ Royal Palm is profitable 2011 resort budget shows

POSTED: 08/3/11 1:02 PM

St. Maarten – While Diamond Resorts suffered defeat in the Court in first Instance last month at the hands of its whole-owners, the company’s attorney suggested that its Royal Palm Beach resort will face bankruptcy if Diamond Resorts is not allowed to charge the whole-owners a hefty increase in maintenance fees. But the 2011 Royal Palm budget, of which this newspaper obtained a copy, tells a different story.

An analysis of this budget shows that Diamond Resorts has projected $9.6 million income for its Royal Palm Resort in 2011. However, this revenue projection is based solely on the whole-owner maintenance fees at an annual $6,000 contract rate. The post seems not to include other revenue from for instance overnight stays, the sale and resale of timeshare weeks and the sale of Club Points.

Budgeted expenses for 2011 amount to $6.1 million. Outside these operational expenses, Diamond Resorts charges Royal Paml $997,000 for “corporate administrative costs” and $1.1 million in management fees.

The regular expenses include $2.3 million for payroll and other expenses, $2.2 million operating expenses and $1.5 million “other expenses.”

All in all, Diamond Resorts projects a 37 percent net operating surplus of $3.5 million for its Royal Palm operation, and a net profit of $2.5 million (26 percent).

But Diamond Resorts brings that net profit down to zero by claiming the reimbursement of undisclosed “unbilled costs and expenses.”

These figures seem at odds with Diamond Resorts’ claim that it needs to increase the maintenance fee for whole-owners to a stunning $52,000 per year to avoid bankruptcy.

On July 8, Diamond Resorts submitted a prospectus to the United States Securities and Exchange Commission, accompanying its offer to exchange $425 million worth of Senior Secured Notes. From it, it appears that in 2010 Diamond Resorts made a $70 million profit on hospitality and management services, and a close to $40 million profit on vacation interest sales and financing. Losses at the corporate offices amounted to almost $130 million, virtually wiping out the profits of its core business activities.

 

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