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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 001-13003
SILVERLEAF RESORTS, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-2259890
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1221 RIVER BEND DRIVE, SUITE 120 75247
DALLAS, TEXAS (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 214-631-1166
Securities Registered Pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $.01 PAR NYSE
VALUE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
---------------
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sales price of the Common Stock on March
13, 2000 as reported on the New York Stock Exchange, was approximately
$24,177,081. At March 13, 2000, there were 12,889,417 shares of the Registrant's
Common Stock outstanding.
Documents Incorporated by Reference: Certain portions of the Registrant's
Definitive Proxy Statement, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the close of
the Registrant's 1999 fiscal year, are incorporated by reference in Part III of
this Form 10-K.
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FORM 10-K INDEX
PAGE
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PART I
Items 1 and 2. Business and Properties.................................................... 4
Item 3. Legal Proceedings.......................................................... 37
Item 4. Submission of Matters to a Vote of Security Holders........................ 37
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...... 37
Item 6. Selected Financial Data.................................................... 38
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 40
Item 7a. Quantitative and Qualitative Disclosures about Market Risk................. 47
Item 8. Financial Statements and Supplementary Data................................ 47
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure................................................ 47
PART III
Item 10. Directors and Executive Officers of the Registrant......................... 47
Item 11. Executive Compensation..................................................... 49
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 49
Item 13. Certain Relationships and Related Transactions............................. 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........... 49
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
OVERVIEW
Silverleaf Resorts, Inc. ("Silverleaf" or the "Company") is a leading
developer, marketer, and operator of "drive-to" timeshare resorts. Silverleaf
currently owns and/or operates fourteen "drive-to resorts" in Texas, Missouri,
Illinois, Alabama, Georgia, South Carolina, Pennsylvania, and Tennessee (the
"Drive-to Resorts"). Silverleaf also owns and/or operates four "destination
resorts" in Missouri, Mississippi, and Massachusetts (the "Destination
Resorts"). The Company also owns four properties that are currently under
development, including two properties being developed as Drive-to Resorts near
Kansas City, Missouri, and Philadelphia, Pennsylvania, and two properties being
developed as Destination Resorts in Las Vegas, Nevada, and Galveston, Texas
(collectively, the "New Resorts"). The Drive-to Resorts are designed to appeal
to vacationers seeking comfortable and affordable accommodations in locations
convenient to their residences and are located proximate to major metropolitan
areas. Silverleaf locates its Drive-to Resorts near principal market areas to
facilitate more frequent "short stay" getaways, which it believes is a growing
vacation trend. Silverleaf's Destination Resorts, which are located in or near
areas with national tourist appeal, offer Silverleaf customers the opportunity
to upgrade into a more upscale resort area as their lifestyles and travel
budgets permit. Both the Drive-to Resorts and the Destination Resorts
(collectively, the "Existing Resorts") provide a quiet, relaxing vacation
environment. The New Resorts extend Silverleaf's core strategy of drive-to
getaways with opportunity to upgrade to Destination Resorts. Silverleaf believes
its resorts offer its customers an economical alternative to commercial vacation
lodging. The average price for an annual one-week vacation ownership ("Vacation
Interval") for a two-bedroom unit at the Existing Resorts was $8,896 for 1999
and $8,166 for 1998, which compares favorably to an industry average price of
$13,017 for 1998.
Owners of Silverleaf Vacation Intervals ("Silverleaf Owners") enjoy benefits
which are uncommon in the timeshare industry. These benefits include (i) use of
vacant lodging facilities at the Existing Resorts at no extra cost through
Silverleaf's "Endless Escape" program; (ii) year-round access to the Existing
Resorts' non-lodging amenities such as fishing, boating, horseback riding,
tennis, or golf on a daily basis for little or no additional charge; and (iii)
the right to exchange a Vacation Interval for a different time period or
different Existing Resort through Silverleaf's internal exchange program. These
benefits are subject to availability and other limitations. Most Silverleaf
Owners may also enroll in the Vacation Interval exchange network operated by
Resort Condominiums International ("RCI").
OPERATIONS
Silverleaf is in the business of marketing and selling Vacation Intervals.
Silverleaf's principal activities in this regard include (i) acquiring and
developing timeshare resorts; (ii) marketing and selling one week annual and
biennial Vacation Intervals to prospective first-time owners as well as leasing
unsold Vacation Intervals (i.e., sampler sales); (iii) marketing and selling
upgraded Vacation Intervals to existing Silverleaf Owners; (iv) providing
financing for the purchase of Vacation Intervals; and (v) operating timeshare
resorts. The Company has substantial in-house capabilities which enable it to
coordinate all aspects of development and expansion of the Existing Resorts and
New Resorts and the potential development of any future resorts, including site
selection, design, and construction pursuant to standardized plans and
specifications. The Company also performs substantially all marketing and sales
functions internally and continues to make significant investments in operating
technology, including sophisticated telemarketing and computer systems and
proprietary software applications. The Company identifies potential purchasers
through internally developed marketing techniques, and sells Vacation Intervals
through on-site sales offices located at certain of its resorts which are
located in close proximity to major metropolitan areas. This practice allows the
Company an alternative to the more expensive marketing costs of subsidized
airfare and lodging which are typically associated with the timeshare industry.
As part of the Vacation Interval sales process, the Company offers potential
purchasers financing of up to 90% of the purchase price over a seven-year to
ten-year period. The Company has historically financed its operations by
borrowing from third-party lending institutions at an advance rate of up to 85%
of eligible customer receivables. At December 31, 1999, the Company had a
portfolio of approximately 51,886 customer promissory notes totaling
approximately $317.5 million with an average yield of 13.7% per annum, which
compares favorably to the Company's weighted average cost of borrowings of 9.2%
per annum. At December 31, 1999, approximately $14.3 million in principal, or
4.5% of the Company's loans to Silverleaf Owners, were 61 to 120 days past due,
and approximately $27.4 million in principal, or 8.6% of the Company's loans to
Silverleaf Owners, were more than 120 days past due. The Company provides for
uncollectible notes by reserving an amount which management believes is
sufficient to cover anticipated losses from customer defaults.
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Each Existing Resort has a timeshare owners' association (a "Club"). Each
Club operates through a centralized organization, either Silverleaf Club or
Crown Club (collectively "Management Clubs"), to manage the Existing Resorts on
a collective basis. Crown Club consists of several individual Club agreements
which have terms of two to five years with a minimum of two renewal options
remaining. The Management Clubs, in turn, have contracted with the Company to
perform the supervisory, management, and maintenance functions at the Existing
Resorts on a collective basis. All costs of operating the Existing Resorts,
including management fees to the Company, are to be covered by monthly dues paid
by Silverleaf Owners to their respective Clubs as well as income generated by
the operation of certain amenities at the Existing Resorts.
RECENT DEVELOPMENTS
o INVESTMENTS IN MARKETING PROGRAMS AND TECHNOLOGY. During 1999, the
Company was able to increase its tour flow and sales through significant
investments in marketing programs, such as implementation of an automated
scanning system to improve efficiency in leads processing, addition of a
fourth telemarketing call center, and investments in state-of-the-art
predictive dialing equipment for its call centers. Due to recent growth
rates and implementation of new leads generation programs, the Company is
experiencing higher than anticipated marketing costs in the first quarter
of 2000. The Company has increased its headcount at the call centers
significantly since the fourth quarter of 1999, which created
inefficiencies due to lack of available training resources. In addition,
the Company is moving towards reliance on national retail chains for its
leads generation efforts, in addition to the traditional local programs.
The transition to national programs has been slower in generating leads
than originally planned.
o INCREASED SALES OF VACATION INTERVALS AT EXISTING RESORTS. The Company
has been successful in improving internal sales growth at the Existing
Resorts. During 1999, Silverleaf sold 15,829 Vacation Intervals
(excluding upgrades) compared to 12,934 and 6,592 during 1998 and 1997,
respectively. Total sales increased to $195.5 million in 1999 from $138.4
million and $70.1 million in 1998 and 1997, respectively.
o INCREASED CREDIT FACILITIES. The Company increased its revolving credit
facilities to $310.0 million during 1999, from $130.0 million at December
31, 1998.
o IMPROVEMENTS IN COLLECTION EFFORTS. The Company has improved its
provision for uncollectible notes from 12.1% of Vacation Interval sales
in 1998 to 10.0% of Vacation Interval sales in 1999. This is primarily
the result of improvements in the collection efforts, including increased
staffing, improved collections administrative software, and the
implementation of a program through which certain delinquent loans are
assumed by existing owners with a consistent payment history. Collection
efforts have also been enhanced with the implementation of auto-payment
mechanisms. In late 1998, the Company initiated an auto-debit program
whereby new Vacation Interval buyers can elect to have their monthly dues
and installment payments charged directly to their bank accounts. In
December 1999, Vacation Interval buyers were given the option to have
their monthly dues and installment payments charged directly to their
credit cards.
o CONTINUED DEVELOPMENT OF TIMBER CREEK RESORT. Timber Creek Resort,
located 50 miles south of St. Louis, Missouri, has 72 existing units.
Silverleaf intends to develop approximately 528 additional units (27,456
Vacation Intervals) at the Timber Creek Resort. During 1999, the Company
completed construction of a state-of-the-art miniature golf course at the
resort.
o CONTINUED DEVELOPMENT OF FOX RIVER RESORT. Fox River Resort, located
approximately 70 miles southwest of Chicago, Illinois, has 126 existing
units. Silverleaf intends to develop approximately 674 additional units
(35,048 Vacation Intervals) on this property. During 1999, the Company
added 66 units at the resort and purchased undeveloped land near the
resort for $805,000.
o CONTINUED DEVELOPMENT OF OAK N' SPRUCE RESORT. Oak N' Spruce Resort,
located 134 miles west of Boston, has 180 existing units. Silverleaf
intends to develop approximately 520 additional units (27,040 Vacation
Intervals) at this resort. During 1999, the Company added 48 units,
lighted tennis facilities, and an outdoor pool at the resort.
o CONTINUED DEVELOPMENT OF THE VILLAGES. The Villages Resort, located on
the shores of Lake Palestine, approximately 100 miles east miles east of
Dallas, Texas, has 294 existing units. Silverleaf intends to develop
approximately 406 additional units (20,908 Vacation Intervals) at this
resort. During 1999, the Company added 18 units at the resort and
purchased undeveloped land near the resort for $1.5 million.
o CONTINUED DEVELOPMENT OF HOLIDAY HILLS RESORT. Holiday Hills Resort,
located two miles east of Branson, Missouri, in Taney County, has 176
existing units. Silverleaf intends to develop approximately 624
additional units (32,396 Vacation Intervals) at
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this resort. During 1999, the Company added 98 units at the resort,
completed construction of several amenities, including an outdoor pool,
clubhouse, restaurant, and a conference room and pro shop overlooking the
golf course, and purchased undeveloped land near the resort for $500,000.
o CONTINUED DEVELOPMENT OF HILL COUNTRY RESORT. Hill Country Resort,
located near Canyon Lake in the hill country of central Texas between
Austin and San Antonio, has 226 existing units. Silverleaf intends to
develop approximately 374 additional units (19,418 Vacation Intervals) at
this resort. During 1999, the Company added 37 units, a state-of-the-art
miniature golf course, and an activity center at the resort.
o CONTINUED DEVELOPMENT OF APPLE MOUNTAIN RESORT. Apple Mountain Resort,
located 72 miles north of Atlanta, Georgia, has 48 existing units.
Silverleaf intends to develop approximately 560 additional units (29,120
Vacation Intervals) at this resort. During 1999, the Company completed
construction of several amenities at the resort, including a 9,445 square
foot administration building and activity center, tennis court, swimming
pool, stable and corral, miniature golf course, and volleyball and
basketball courts.
o DEVELOPMENT OF GALVESTON, TEXAS, SITE. In December 1997 and February
1998, Silverleaf acquired two adjoining tracts of land in Galveston,
Texas, for approximately $1.7 million, to be developed as a new
beach-front Gulf Coast Destination Resort (i.e., Silverleaf's Seaside
Resort). Silverleaf intends to develop approximately 282 units (14,664
Vacation Intervals) at this resort. During 1999, the Company began
construction on the first 24 units at this resort. Completion of these
units will occur in the second quarter of 2000.
o DEVELOPMENT OF NEW RESORTS. In November 1997, Silverleaf acquired a
two-acre parcel near the "strip" in Las Vegas, Nevada, for $2.7 million.
Silverleaf intends to develop this property as a new Destination Resort,
which will contain approximately 157 units (8,164 Vacation Intervals). In
December 1998, the Company purchased 1,940 acres of undeveloped land near
Philadelphia, Pennsylvania, for approximately $1.9 million. The property
will be developed as a Drive-to Resort (i.e., Beech Mountain Resort).
Silverleaf intends to develop 408 units (21,216 Vacation Intervals) at
this resort. In September 1998, the Company purchased 260 acres of
undeveloped land near Kansas City, Missouri, for approximately $1.5
million. The property will be developed as a Drive-to Resort (i.e.,
Lakeview Lodge). Silverleaf intends to develop approximately 608 units
(31,616 Vacation Intervals) at this resort.
GROWTH STRATEGY
Silverleaf intends to grow through the following strategies:
INCREASING DEVELOPMENT AND SALES OF VACATION INTERVALS. Silverleaf intends
to capitalize on its significant expansion capacity at the Existing Resorts and
the New Resorts by increasing marketing, sales, and development activities. At
December 31, 1999, Silverleaf owned approximately 1,641 acres of land that were
available for further development of timeshare units and amenities under
Silverleaf's master plan. Silverleaf's master plan projects development of 6,099
additional units (including 204 units presently under construction), which would
result in 316,682 additional Vacation Intervals. During 1999, Silverleaf has
enhanced its marketing efforts, including increased telemarketing capacity
through investments in computer and automated dialing technology, increased its
sales force, enhanced its lead generation methods, completed the construction of
new sales offices and other amenities, enhanced its collection efforts, and
commenced the development of new lodging facilities. Furthermore, Silverleaf
continues to emphasize its Endless Escape program designed to accommodate
shorter, "getaway" vacations and market secondary products such as biennial
(alternate year) intervals and short-term leasing packages ("Samplers") which
are designed to broaden Silverleaf's potential market with a wider price range
of product.
INCREASING SALES OF UPGRADED INTERVALS. Silverleaf believes it can continue
to improve operating margins by increasing sales of upgraded Vacation Intervals
to existing Silverleaf Owners since these sales have significantly lower sales
and marketing costs. Upgrades by a Silverleaf Owner include the purchase of a
Vacation Interval (i) in a newly designed and constructed standard unit; (ii) in
a larger or higher quality unit; (iii) during a more desirable time period; (iv)
at a different Drive-to Resort; or (v) at a Destination Resort. Silverleaf has
designed specific marketing and sales programs to sell upgraded Vacation
Intervals to Silverleaf Owners. Silverleaf continues to construct higher
quality, larger units for sale as upgraded Vacation Intervals, as well as
developing sites at Las Vegas and Galveston as new upgrade locations. For
example, at Ozark Mountain Resort in Branson, Missouri, luxury "Presidents View"
units are offered for sale at prices ranging from $12,500 to $21,000 per
Vacation Interval. Vacation Intervals exchanged for upgraded Vacation Intervals
are added back to inventory, at historical cost, for resale at the current sales
price. Sales of upgrades increased to $50.4 million in 1999 from $30.0 million
in 1998 (upgrade sales represented 26.4% of Silverleaf's Vacation Interval sales
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in 1999 as compared to 22.1% for 1998). Silverleaf incurs additional sales
commissions upon the resale of Vacation Intervals reconveyed to Silverleaf by
purchasers of upgraded Vacation Intervals. Such sales absorb their proportionate
share of marketing costs to the extent they displace the sale of another
Vacation Interval, although they do not directly result in incremental marketing
costs.
DEVELOPMENT OF ADDITIONAL RESORTS AND ACQUISITIONS. In 1999, Silverleaf
acquired undeveloped land for future development near three of its resorts.
Silverleaf continues to seek new properties for Drive-to Resorts in scenic
wooded areas on lakes or waterways that are near major metropolitan areas with
favorable demographic characteristics. For Destination Resorts, Silverleaf seeks
popular destination resort areas that are easily accessible to Silverleaf
Owners. Silverleaf is currently exploring a number of other property acquisition
opportunities, and intends to continue analyzing expansion through acquiring
and/or developing additional resorts.
COMPETITIVE ADVANTAGES
Silverleaf believes the following characteristics afford it certain
competitive advantages:
CONVENIENT DRIVE-TO LOCATIONS. Silverleaf's Drive-to Resorts are located
within a two-hour drive of a majority of the target customers' residences, which
accommodates the growing demand for shorter, more frequent, close-to-home
vacations. This proximity facilitates use of Silverleaf's Endless Escape
Program, allowing Silverleaf Owners to use vacant units for no additional
charge, subject to availability and certain limitations. Silverleaf believes it
is the only timeshare operator in the industry which offers its customers these
benefits. Silverleaf Owners can also conveniently enjoy non-lodging resort
amenities year-round on a "country-club" basis.
SUBSTANTIAL INTERNAL GROWTH CAPACITY. At December 31, 1999, Silverleaf had
an inventory of 17,073 Vacation Intervals, and a master plan to construct new
units which will result in up to 241,022 additional Vacation Intervals at the
Existing Resorts and 75,660 Vacation Intervals at the New Resorts. Silverleaf's
master plan for construction of new units is contingent upon future sales at the
Existing Resorts and New Resorts and the availability of financing, grant of
governmental permits, and future land-planning and site-layout considerations.
IN-HOUSE OPERATIONS. Silverleaf has in-house marketing, sales, financing,
development, and property management capabilities. While Silverleaf utilizes
outside contractors to supplement internal resources, when appropriate, the
breadth of Silverleaf's internal capabilities allows greater control over all
phases of its operations and helps maintain operating standards and reduce
overall costs.
LOWER CONSTRUCTION AND OPERATING COSTS. Silverleaf has developed and
generally employs standard architectural designs and operating procedures which
it believes significantly reduce construction and operating expenses.
Standardization and integration also allow Silverleaf to rapidly develop new
inventory in response to demand. Weather permitting, new units at Existing
Resorts can normally be constructed on an "as needed" basis within 180 days.
CENTRALIZED PROPERTY MANAGEMENT. Silverleaf presently operates all of the
Existing Resorts on a centralized and collective basis, with operating and
maintenance costs paid from Silverleaf Owners' monthly dues. Silverleaf believes
that consolidation of resort operations benefits Silverleaf Owners by providing
them with a uniform level of service, accommodations, and amenities on a
standardized, cost-effective basis. Integration also facilitates Silverleaf's
internal exchange program, and the Endless Escape Program.
EXPERIENCED MANAGEMENT. The Company's senior management has extensive
experience in the acquisition, development, and operation of timeshare resorts.
Robert E. Mead, Chairman of the Board and Chief Executive Officer, has more than
20 years of experience in the timeshare industry and since 1995 has served as a
trustee member of American Resort Developers Association ("ARDA"), the primary
trade association for the timeshare industry. The Company's senior officers have
an average of eighteen years of experience in the timeshare industry.
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RESORTS SUMMARY
The following tables set forth certain information regarding each of the
Existing Resorts and New Resorts at December 31, 1999, unless otherwise
indicated.
EXISTING RESORTS
VACATION INTERVALS
UNITS AT RESORTS AT RESORTS
------------------------- -------------------------
PRIMARY INVENTORY INVENTORY DATE
MARKET AT PLANNED AT PLANNED SALES
RESORT/LOCATION SERVED 12/31/99 EXPANSION(B) 12/31/99 EXPANSION COMMENCED
- ---------------------- ------------- --------- ------------ --------- ------------- ---------
DRIVE-TO RESORTS
Holly Lake Dallas- 130 108 427 5,508(d) 1982
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 294 406 1,796 20,908(f)(i) 1980
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 189 800(d) 1987
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 154 446(i) 1,532 23,176(e)(i) 1988
Conroe, TX
Hill Country Austin-San 226(h) 374(i) 2,755 19,418(e)(i) 1984
Canyon Lake, TX Antonio, TX
Timber Creek St. Louis, 72 528(i) 1,901 27,456(e)(i) 1997
DeSoto, MO MO
Fox River Chicago, IL 126 674(i) 1,911 35,048(e)(i) 1997
Sheridan, IL
Apple Mountain Atlanta, GA 48 560(i) 1,770 29,120(e)(i) 1999
Clarkesville, GA
Treasure Lake Central PA 145 --(f) 959 --(f) 1998
Dubois, PA
Alpine Bay Central AL 54 --(f) 4 --(f) 1998
Alpine, AL
Beech Mountain Lakes Eastern PA, 54 --(f) 124 --(f) 1998
Drums, PA NY
Foxwood Hills Eastern SC, 114 --(f) 322 --(f) 1998
Westminster, SC Western GA
Tansi Resort Nashville- 124 --(f) 367 --(f) 1998
Crossville, TN Knoxville, TN
Westwind Manor Dallas- 37 --(f) 342 --(f) 1998
Bridgeport, TX Ft. Worth, TX
DESTINATION RESORTS LOCATIONS
Ozark Mountain Branson, 136 388(i) 444 20,152(e)(i) 1982
Kimberling City, MO MO
Holiday Hills Branson, 176 624(i) 898 32,396(e)(i) 1984
Branson, MO MO
Oak N' Spruce Boston, MA 180 520(i) 1,164 27,040(e)(i) 1998
South Lee, MA New York, NY
Hickory Hills Gulf Coast, 80 --(e) 168 --(e) 1998
Gautier, MS MS
----- ------ ------ -------
Total 2,214 4,644 17,073 241,022
===== ====== ====== =======
VACATION INTERVALS
SOLD
--------------------- AVERAGE
PRIMARY IN SALES
MARKET THROUGH 1999 PRICE AMENITIES/
RESORT/LOCATION SERVED 12/31/99 ONLY (A) IN 1999 ACTIVITIES(C)
- ---------------------- ------------- -------- -------- --------- -------------
DRIVE-TO RESORTS
Holly Lake Dallas- 6,073 1,179 $ 7,390 B,F,G,H,M,S,T
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 13,084 2,552 7,996 B,F,H,M,S,T
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 3,011 450 7,596 F,M,S,T(g)
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 6,284 1,623 9,403 B,F,H,M,S,T
Conroe, TX
Hill Country Austin-San 8,625 1,681 9,279 H,M,S,T(g)
Canyon Lake, TX Antonio, TX
Timber Creek St. Louis, 1,843 1,049 8,617 B,F,G,H,M,S,T
DeSoto, MO MO
Fox River Chicago, IL 4,641 2,967 9,923 B,F,G,H,M,S,T
Sheridan, IL
Apple Mountain Atlanta, GA 726 671 9,877 G,H,M,S,T
Clarkesville, GA
Treasure Lake Central PA 6,372 57 4,975 G,B,F,S,T,M
Dubois, PA
Alpine Bay Central AL 2,750 1 5,344 G,B,F,S,T,M
Alpine, AL
Beech Mountain Lakes Eastern PA, 2,630 57 4,530 B,F,S,T
Drums, PA NY
Foxwood Hills Eastern SC, 5,396 253 7,690 G,T,F,S,M(g)
Westminster, SC Western GA
Tansi Resort Nashville- 5,905 27 6,676 T,G,F,B,M
Crossville, TN Knoxville, TN
Westwind Manor Dallas- 1,545 -- -- G,F,M,S,T
Bridgeport, TX Ft. Worth, TX
DESTINATION RESORTS LOCATIONS
Ozark Mountain Branson, 6,404 296 9,699 B,F,H,M,S,T
Kimberling City, MO MO
Holiday Hills Branson, 8,118 903 10,465 G,S,T(g)
Branson, MO MO
Oak N' Spruce Boston, MA 8,196 2,052 8,421 F,G,S,T
South Lee, MA New York, NY
Hickory Hills Gulf Coast, 3,912 11 3,573 B,F,G,M,S,T
Gautier, MS MS
------ ------ --------
Total 95,515 15,829 $ 8,896
====== ====== ========
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NEW RESORTS
PRIMARY DATE PLANNED PLANNED EXISTING AND PLANNED
RESORT/LOCATION MARKET SERVED ACQUIRED UNITS(i) INTERVALS(i) AMENITIES/ACTIVITIES
---------------- ------------- --------- ---------- ------------ --------------------
Galveston, TX........ Houston, TX 1997(j) 282 14,664(e) B,F,M,S,T
Las Vegas, NV........ Las Vegas, NV 1997 157 8,164(e) S
Smithville, MO....... Kansas City, MO 1998 608(k) 31,616(e)(k) F,M,S,T(g)
Drums, PA............ Philadelphia, PA 1998 408(k) 21,216(e)(k) B,F,M,S,T
----- ------
Total........ 1,455 75,660
===== ======
- ----------
(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For the year ended December 31, 1999, upgrade sales at
the Existing Resorts were as follows:
AVERAGE SALES PRICE
FOR THE YEAR
ENDED 12/31/99
UPGRADED VACATION -- NET OF
RESORT INTERVALS SOLD EXCHANGED INTERVAL
------------------ ----------------- -------------------
Holly Lake....................... 302 $ 3,664
The Villages..................... 1,208 4,686
Lake O' The Woods................ 175 3,661
Piney Shores..................... 895 4,390
Hill Country..................... 1,535 4,845
Timber Creek..................... 475 3,793
Fox River........................ 741 3,756
Ozark Mountain................... 940 5,180
Holiday Hills.................... 3,712 4,388
Oak N' Spruce.................... 1,218 4,032
Beech Mountain................... 16 5,462
Treasure Lake.................... 154 5,230
Foxwood Hills.................... 4 3,917
Apple Mountain................... 25 1,913
------ -------
11,400 $ 4,420
====== =======
(b) Represents units included in the Company's master plan. This plan is subject
to change based upon various factors, including consumer demand, the
availability of financing, grant of governmental land-use permits, and
future land-planning and site layout considerations. The following chart
reflects the status of certain planned units at December 31, 1999:
LAND-USE LAND-USE LAND-USE
PROCESS PROCESS PROCESS CURRENTLY IN SHELL
NOT STARTED PENDING COMPLETE CONSTRUCTION COMPLETE TOTAL
----------- ------- -------- ------------ -------- -----
Holly Lake................................... 54 -- 50 -- 4 108
The Villages................................. 162 180 40 24 -- 406
Lake O' The Woods............................ -- -- 16 -- -- 16
Piney Shores................................. 266 -- 180 -- -- 446
Hill Country................................. 175 -- 172 24 3 374
Timber Creek................................. 156 276 96 -- -- 528
Fox River.................................... 248 240 138 48 -- 674
Ozark Mountain............................... 364 -- 12 -- 12 388
Holiday Hills................................ 268 132 150 60 14 624
Oak N' Spruce................................ 304 96 72 48 -- 520
Apple Mountain............................... 482 -- 78 -- -- 560
----- --- ----- --- --- -----
2,479 924 1,004 204 33 4,644
===== === ===== === === =====
"Land-Use Process Pending" means that the Company has commenced the
process which the Company believes is required under current law in order to
obtain the necessary land-use authorizations from the applicable local
governmental authority with jurisdiction, including submitting for approval
any architectural drawings, preliminary plats, or other attendant items as
may be required.
"Land-Use Process Complete" means either that (i) the Company believes
that it has obtained all necessary land-use authorizations under current law
from the applicable local governmental authority with jurisdiction,
including the approval and filing of any required preliminary or final plat
and the issuance of building permit(s), in each case to the extent
applicable, or (ii) upon payment of any required filing or other fees, the
Company believes that it will under current law obtain such necessary
authorizations without further process.
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"Shell Complete" units are currently devoted to such uses as a general
store, registration office, sales office, activity center, construction
office, or pro shop. The Company anticipates that these units will continue
to be used for such purposes during 2000.
(c) Principal amenities available to Silverleaf Owners at each resort are
indicated by the following symbols: B -- boating; F -- fishing; G -- golf;
H -- horseback riding; M -- miniature golf; S -- swimming pool; and
T -- tennis.
(d) These figures are based on either 50 or 51 one-week intervals per unit.
(e) These figures are based primarily on 52 one-week intervals per unit.
(f) The Company has management rights with respect to these resorts and
presently has no ability to expand the resorts.
(g) Boating is available near the resort.
(h) Includes three units which have not been finished-out for accommodations and
which are currently used for other purposes.
(i) Engineering, architectural, and construction estimates have not been
completed by the Company, and there can be no assurance that the Company
will develop these properties at the unit numbers currently projected.
(j) One portion of this tract was acquired in February 1998.
(k) The Company has not commenced the timeshare permit process. The Company has
commenced the land use permit process.
FEATURES COMMON TO EXISTING RESORTS
Drive-to Resorts are primarily located in rustic areas offering Silverleaf
Owners a quiet, relaxing vacation environment. Furthermore, the resorts offer
different vacation activities, including golf, fishing, boating, swimming,
horseback riding, tennis, and archery. Destination Resorts are located in or
near areas with national tourist appeal. Features common to the Existing Resorts
include the following:
ENDLESS ESCAPE PROGRAM. The Company's Endless Escape Program offers
Silverleaf Club members a benefit not typically enjoyed by many other timeshare
owners. In addition to the right to use a unit one week per year, the Endless
Escape Program allows Silverleaf Club members to also use vacant units at any of
the Company's owned resorts for no additional charge. The Endless Escape Program
is limited based on the availability of units. Silverleaf Owners who have
utilized the resort less frequently are given priority to use the program and
may only use an interval with an equal or lower rating than the owned Vacation
Interval. The Company believes this program is important as many vacationers
prefer shorter two to three day vacations.
The Company amended the Endless Escape Program for customers purchasing a
Vacation Interval after July 1, 1998. Customers purchasing a Vacation Interval
at a Drive-to Resort after July 1, 1998 are unable to use the Endless Escape
Program at the Company's Destination Resorts. However, customers who became
Silverleaf Owners before such date are able to use the Endless Escape Program at
all Destination Resorts, except the Galveston and Las Vegas resorts. Silverleaf
Owners who purchase a Vacation Interval at any Destination Resort after such
date are able to use the Endless Escape Program at any of the Company's owned
resorts.
YEAR-ROUND USE OF AMENITIES. Even when not using the lodging facilities,
Silverleaf Owners have unlimited year-round day usage of the amenities located
at the Existing Resorts, such as boating, fishing, miniature golf, tennis,
swimming, or hiking, for little or no additional cost. Certain amenities,
however, such as golf, horseback riding, or watercraft rentals, may require a
usage fee.
EXCHANGE PRIVILEGES. Each Silverleaf Owner has certain exchange privileges
which may be used on an annual basis to (i) exchange an interval for a different
interval (week) at the same resort so long as the different interval is of an
equal or lower rating; or (ii) exchange an interval for the same interval (week)
at any other of the Existing Resorts. These intra-company exchange rights are a
convenience Silverleaf provides its members as an accommodation to them, and are
conditioned upon availability of the desired interval or resort. The Company
executed approximately 2,044 intra-company exchanges in 1999. In addition, for
an annual fee of approximately $86, most Silverleaf Owners may join the exchange
program administered by RCI.
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DEEDED OWNERSHIP. The Company typically sells a Vacation Interval which
entitles the owner to use a specific unit for a designated one-week interval
each year. The Vacation Interval purchaser receives a recorded deed which grants
the purchaser a percentage interest in a specific unit for a designated week.
The Company also sells a biennial (alternate year) Vacation Interval, which
allows the owner to use a unit for a one-week interval every other year with
reduced dues.
MANAGEMENT CLUBS. Each of the Existing Resorts has a Club for the benefit of
the Silverleaf Owners. The Clubs operate under one of the Management Clubs to
manage the Existing Resorts on a centralized and collective basis. The
Management Clubs have contracted with the Company to perform the supervisory,
management, and maintenance functions granted by the Clubs to the Management
Clubs. Costs of these operations are covered by monthly dues paid by Silverleaf
Owners to their respective Clubs together with income generated by the operation
of certain amenities at the Existing Resorts. Due to Nevada timeshare laws, the
proposed resort in Las Vegas will be managed by the Company as a separate club.
ON-SITE SECURITY. The Existing Resorts are patrolled by security personnel
who are either employees of the Management Clubs or personnel of independent
security service companies which have contracted with the Clubs.
DESCRIPTION OF EXISTING RESORTS OWNED AND OPERATED BY THE COMPANY
HOLLY LAKE RESORT. Holly Lake is a family-oriented golf resort located in
the Piney Woods of East Texas, approximately 105 miles east of Dallas. The
timeshare portion of Holly Lake is part of a 4,300 acre mixed-use development of
single-family lots and timeshare units with other third-party developers. The
Company owns approximately 2,740 acres within Holly Lake, of which approximately
2,667 acres may not be developed due to deed restrictions. At December 31, 1999,
approximately 27 acres were developed and approximately 46 remaining acres are
currently planned by the Company to be used for future development.
At December 31, 1999, 130 units were completed and an additional 108 units
are planned for development. Three different types of units are offered at the
resort: (i) two bedroom, two bath, wood siding, and stucco fourplexes; (ii) one
bedroom, one bath, one sleeping loft, log construction duplexes; and (iii) two
bedroom, two bath, log construction fourplexes. Each unit has a living room with
sleeper sofa and full kitchen. Other amenities within each unit include
whirlpool tub, color television, and vaulted ceilings. Certain units include
interior ceiling fans, imported ceramic tile, over-sized sliding glass doors,
and rattan and pine furnishings.
Amenities at the resort include an 18-hole golf course with pro shop,
19th-hole private club and restaurant, Holly Lake restaurant, country store,
indoor rodeo arena and stables, six tennis courts (two lighted), four different
lakes (one with sandy swimming beach and swimming dock, one with boat launch for
water skiing), two swimming pools with bathhouses, children's pool and pavilion,
recently completed hiking/nature trail, children's playground area, two
miniature golf courses, five picnic areas, activity center with big screen
television, gameroom with arcade games and pool tables, horseback trails,
activity areas for basketball, horseshoes, volleyball, shuffleboard, and
archery, and camp sites with electrical and water hookups. Silverleaf Owners can
also rent canoes, bicycles, and water trikes. Homeowners in neighboring
subdivisions are entitled to use the amenities at Holly Lake pursuant to
easements or use agreements.
At December 31, 1999, the resort contained 6,500 Vacation Intervals, of
which 427 intervals remained available for sale. The Company plans to build an
additional 108 units, which would yield an additional 5,508 Vacation Intervals
available for sale. Vacation Intervals at the resort are currently priced from
$6,900 to $10,800 for one-week stays. During 1999, 1,179 Vacation Intervals were
sold.
THE VILLAGES AND LAKE O' THE WOODS RESORTS. The Villages and Lake O' The
Woods are sister resorts located on the shores of Lake Palestine, approximately
100 miles east of Dallas, Texas. The Villages, located approximately five miles
northwest of Lake O' The Woods, is an active sports resort popular for
water-skiing and boating. Lake O' The Woods is a quiet wooded resort where
Silverleaf Owners can enjoy the seclusion of dense pine forests less than two
hours from the Dallas-Fort Worth metroplex. The Villages is a mixed-use
development of single-family lots and timeshare units, while Lake O' The Woods
has been developed solely as a timeshare resort. The two resorts contain
approximately 650 acres, of which approximately 379 may not be developed due to
deed restrictions. At December 31, 1999, approximately 103 acres were developed,
such that approximately 168 remaining acres are currently planned by the Company
to be used for future development.
At December 31, 1999, 294 units were completed at The Villages and 64 units
were completed at Lake O' The Woods. An additional 406 units and 16 units are
planned for development at The Villages and Lake O' The Woods, respectively.
There are five different types of units at these resorts: (i) three bedroom, two
and one-half bath, wood siding exterior duplexes and fourplexes (two units);
(ii) two bedroom, two and one-half bath, wood siding exterior duplexes and
fourplexes; (iii) two bedroom, two bath, brick and
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siding exterior fourplexes; (iv) two bedroom, two bath, siding exterior
fourplexes, sixplexes, and three-story twelveplexes; and (v) one bedroom, one
bath with two-bed loft sleeping area, log construction duplexes. Amenities
within each unit include full kitchen, whirlpool tub, and color television.
Certain units include interior ceiling fans, ceramic tile, and/or a fireplace.
"Presidents Harbor" units feature a larger, more spacious floor plan (1,255
square feet), front and back verandas, washer and dryer, and a more elegant
decor.
Both resorts are situated on Lake Palestine, a 27,000 acre public lake.
Recreational facilities and improvements at The Villages include a full service
marina with convenience store, boat launch, water-craft rentals, and covered and
locked rental boat stalls; two swimming pools; lighted tennis court; miniature
golf course; nature trails; camp sites; riding stables; soccer/softball field;
children's playground; RV sites; a new 9,445 square foot activity center with
movie theater, wide-screen television, reading room, tanning beds, pool table,
and small indoor gym; and competitive sports facilities which include horseshoe
pits, archery range, and shuffleboard, volleyball, and basketball courts.
Silverleaf Owners at The Villages can also rent or use bicycles, jet skis, motor
boats, paddle boats, pontoon boats, and water trikes. Neighboring homeowners are
also entitled to use these amenities pursuant to a use agreement.
Recreational facilities at Lake O' The Woods include swimming pool,
bathhouse, lighted tennis court, a recreational beach area with picnic areas, a
fishing pier on Lake Palestine, nature trails, soccer/softball field, children's
playground, RV sites, an activity center with wide-screen television and pool
table, horseshoe pits, archery range, putting green, miniature golf course,
shuffleboard, volleyball, and basketball courts. Guests can also ride horses or
rent bicycles.
At December 31, 1999, The Villages contained 14,880 total Vacation
Intervals, of which 1,796 remained available for sale. The Company plans to
build 406 additional units at The Villages, which would yield an additional
20,908 Vacation Intervals available for sale. At December 31, 1999, Lake O' The
Woods contained 3,200 total Vacation Intervals, of which 189 remained available
for sale. The Company plans to build 16 additional units at Lake O' The Woods,
which would yield 800 additional Vacation Intervals available for sale. Vacation
Intervals at The Villages and Lake O' The Woods are currently priced from $6,900
to $11,800 for one-week stays (and start at $4,500 for biennial intervals),
while one-week "Presidents Harbor" intervals are priced at $8,400 to $19,000
depending on the value rating of the interval. During 1999, 2,552 and 450
Vacation Intervals were sold at The Villages and Lake O' The Woods,
respectively.
PINEY SHORES RESORT. Piney Shores Resort is a quiet, wooded resort ideally
located for day-trips from metropolitan areas in the southeastern Gulf Coast
area of Texas. Piney Shores Resort is located on the shores of Lake Conroe,
approximately 40 miles north of Houston, Texas. At December 31, 1999, the resort
contained approximately 116 acres, of which approximately 34 acres are planned
by the Company for future development.
At December 31, 1999, 154 units were completed and an additional 446 units
are planned for development. All units are two bedroom, two bath units and will
comfortably accommodate up to six people. Amenities include a living room with
sleeper, full kitchen, whirlpool tub, color television, and interior ceiling
fans. Certain "lodge-style" units feature stone fireplaces, white-washed pine
wall coverings, "age-worn" paint finishes, and antique furnishings.
The primary recreational amenity at the resort is Lake Conroe, a 21,000 acre
public lake. Other recreational facilities and improvements available at the
resort include a swimming pool with spa, a new bathhouse complete with showers
and restrooms, lighted tennis court, miniature golf course, stables, horseback
riding trails, children's playground, picnic areas, boat launch, beach area for
swimming, 4,626-square foot activity center with big-screen television, 32-seat
movie theatre, covered wagon rides, and facilities for horseshoes, archery,
shuffleboard, and basketball.
At December 31, 1999, the resort contained 7,816 Vacation Intervals, of
which 1,532 remained available for sale. The Company intends to build 446
additional units, which would yield an additional 23,176 Vacation Intervals
available for sale. Vacation Intervals at the resort are currently priced from
$6,900 to $19,000 for one-week stays (and start at $4,500 for biennial
intervals). During 1999, 1,623 Vacation Intervals were sold.
HILL COUNTRY RESORT. Hill Country Resort is located near Canyon Lake in the
hill country of central Texas between Austin and San Antonio. At December 31,
1999, Hill Country Resort contained approximately 122 acres, of which
approximately 25 acres are currently planned by the Company to be used for
future development.
At December 31, 1999, 226 units were completed and an additional 374 units
are planned for development. Twenty units are single story, while all other
units are two-story structures in which the bedrooms and baths are located on
the second story. Each unit contains two bedrooms, two bathrooms, living room
with sleeper sofa, and full kitchen. Other amenities within each unit include
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whirlpool tub, color television, and interior design details such as vaulted
ceilings. Certain units include interior ceiling fans, imported ceramic tile,
over-sized sliding glass doors, rattan and pine furnishings, or fireplace. 64
units feature the Company's new "lodge style". "Presidents Villas" units feature
a larger, more spacious floor plan (1,228 square feet), front and back verandas,
washer and dryer, and a more elegant decor.
Amenities at the resort include a 7,943-square foot activity center with
electronic games, pool table, and wide-screen television, miniature golf course,
a children's playground area, barbecue and picnic areas, enclosed swimming pool
and heated spa, children's wading pool, newly-constructed tennis court, archery
range, and activity areas for shuffleboard, basketball, horseshoes, and
volleyball. Area sights and activities include water-tubing on the nearby
Guadalupe River and visiting the many tourist attractions in San Antonio, such
as Sea World, The Alamo, The River Walk, and the San Antonio Zoo.
At December 31, 1999, the resort contained 11,380 Vacation Intervals, of
which 2,755 remained available for sale. The Company plans to build 374
additional units, which collectively would yield 19,418 additional Vacation
Intervals available for sale. Vacation Intervals at the resort are currently
priced from $6,900 to $11,800 for one-week stays (and start at $4,500 for
biennial intervals), while one-week "Presidents Villas" intervals are priced at
$8,400 to $21,000 depending on the value rating of the interval. During 1999,
1,681 Vacation Intervals were sold.
OZARK MOUNTAIN RESORT. Ozark Mountain Resort is a family-oriented resort
located on the shores of Table Rock Lake, which features bass fishing. The
resort is located approximately 15 miles from Branson, Missouri, a family music
and entertainment center, 233 miles from Kansas City, and 276 miles from St.
Louis. Ozark Mountain Resort is a mixed-use development of timeshare and
condominium units. At December 31, 1999, the resort contained approximately 116
acres, of which approximately 82 acres are currently planned by the Company to
be used for future development.
At December 31, 1999, 136 units were completed and an additional 388 units
are planned for development. There are two types of units at the resort: (i) two
bedroom, two bath, one-story fourplexes and (ii) two bedroom, two bath,
three-story sixplexes. Each standard unit includes two large bedrooms, two
bathrooms, living room with sleeper sofa, and full kitchen. Other amenities
within each unit include whirlpool tub, color television, and vaulted ceilings.
Certain units contain interior ceiling fans, imported ceramic tile, over-sized
sliding glass doors, rattan or pine furnishings, or fireplace. "Presidents View"
units feature a panoramic view of Table Rock Lake, a larger, more spacious floor
plan (1,255 square feet), front and back verandas, washer and dryer, and a more
elegant decor.
The primary recreational amenity available at the resort is Table Rock Lake,
a 43,100-acre public lake. Other recreational facilities and improvements at the
resort include a swimming beach with dock, an activities center with pool table,
covered boat dock and launch ramp, olympic-sized swimming pool, concession area
with dressing facilities, lighted tennis court, nature trails, horseback riding
trails, two picnic areas, two playgrounds, miniature golf course, and a
competitive sports area accommodating volleyball, basketball, tetherball,
horseshoes, shuffleboard, and archery. Guests can also rent or use canoes,
paddle boats, or rowboats. Owners of neighboring condominium units developed by
the Company in the past are also entitled to use these amenities pursuant to use
agreements with the Company. Similarly, owners of Vacation Intervals are
entitled to use certain amenities of these condominium developments, including a
wellness center featuring a jacuzzi and exercise equipment.
At December 31, 1999, the resort contained 6,848 Vacation Intervals, of
which 444 remained available for sale. The Company plans to build 388 additional
units which would yield an additional 20,152 Vacation Intervals available for
sale. Vacation Intervals at the resort are currently priced from $8,900 to
$13,000 for one-week stays, while one-week "Presidents View" intervals are
priced at $12,500 to $21,000 depending on the value rating of the interval.
During 1999, 296 Vacation Intervals were sold.
HOLIDAY HILLS RESORT. Holiday Hills Resort is a resort community located in
Taney County, Missouri, two miles east of Branson, Missouri. The resort is 224
miles from Kansas City and 267 miles from St. Louis. The resort is heavily
wooded by cedar, pine, and hardwood trees, and is favored by Silverleaf Owners
seeking quality golf and nightly entertainment in nearby Branson. Holiday Hills
Resort is a mixed-use development of single-family lots, condominiums, and
timeshare units. At December 31, 1999, the resort contained approximately 395
acres, including a 91-acre golf course, of which approximately 119 acres are
currently planned by the Company to be used for future development.
At December 31, 1999, 176 units were completed and an additional 624 units
are planned for future development. There are four types of timeshare units at
this resort: (i) two bedroom, two bath, one-story fourplexes, (ii) one bedroom,
one bath, with upstairs loft, log construction duplexes, (iii) two bedroom, two
bath, two-story fourplexes, and (iv) two bedroom, two bath, three-story
sixplexes. Each unit includes a living room with sleeper sofa, full kitchen,
whirlpool tub, and color television. Certain units will include a fireplace,
ceiling fans, imported tile, oversized sliding glass doors, vaulted ceilings,
and rattan or pine furniture. "Presidents Fairways"
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units feature a larger, more spacious floor plan (1,255 square feet), front and
back verandas, washer and dryer, and a more elegant decor.
Taneycomo Lake, a popular lake for trout fishing, is approximately three
miles from the resort, and Table Rock Lake is approximately ten miles from the
resort. Amenities at the resort include a newly renovated 18-hole golf course,
miniature golf course, tennis court, picnic area, camp sites, archery range,
basketball court, activity area which includes shuffleboard, horseshoes, and a
children's playground, a new 5,356 square foot clubhouse that includes a pro
shop, restaurant, and meeting space, and a new 2,800 square foot outdoor
swimming pool with a wellness center. Lot and condominium unit owners are also
entitled to use these amenities pursuant to use agreements between the Company
and certain homeowners' associations.
At December 31, 1999, the resort contained 9,016 Vacation Intervals, of
which 898 remained available for sale. The Company plans to build 624 additional
units, which would yield an additional 32,396 Vacation Intervals available for
sale. Vacation Intervals at the resort are currently priced from $8,900 to
$14,000 for one-week stays (and start at $6,000 for biennial intervals), while
one-week "Presidents Fairways" intervals are priced at $12,500 to $21,000
depending on the value rating of the interval. During 1999, 903 Vacation
Intervals were sold.
TIMBER CREEK RESORT. In August 1997, the Company acquired the Timber Creek
Resort in Desoto, Missouri. The resort is located approximately 50 miles south
of St. Louis. Prior to its acquisition by the Company, Timber Creek Resort was
operated as a campground by a nationwide campground operator. At December 31,
1999, the resort contained approximately 331 acres, of which approximately 142
acres are currently planned by the Company to be used for development.
At December 31, 1999, 72 units were completed and an additional 528 units
are planned for future development. All units are two bedroom, two bath units.
Amenities within each new unit include a living room with sleeper sofa, full
kitchen, whirlpool tub, and color television. Certain units will include a
fireplace, ceiling fans, imported ceramic tile, oversized sliding glass doors,
and rattan or pine furniture.
The primary recreational amenity available at the resort is a 35-acre
fishing lake. Other amenities, either existing or currently under construction,
include a clubhouse, a par three executive golf course, swimming pool, two
lighted tennis courts, themed miniature golf course, volleyball court,
shuffleboard/multi-use sports court, archery, horseback riding trail with stable
and corral, a welcome center, and hook-ups for recreational vehicles. The
Company plans to construct a lake pavilion, indoor pool, indoor heated cedar
sauna, and boat docks. Other planned improvements by the Company include
conversion of the existing sales and registration buildings and renovation of
the clubhouse and clubhouse pool. The Company is obligated to maintain and
provide campground facilities for members of the previous owner's campground
system.
At December 31, 1999, the resort contained 3,744 Vacation Intervals and
1,901 Vacation Intervals remained available for sale. The Company plans to build
528 additional units, which would collectively yield 27,456 additional Vacation
Intervals available for sale. Vacation Intervals at the resort are currently
priced from $7,400 to $11,800 for one-week stays (and start at $4,500 for
biennial intervals). During 1999, 1,049 Vacation Intervals were sold.
FOX RIVER RESORT. In August 1997, the Company acquired the Fox River Resort
in Sheridan, Illinois. The resort is located approximately 70 miles southwest of
Chicago. Prior to its acquisition by the Company, Fox River Resort was operated
as a campground by a nationwide campground operator. At December 31, 1999, the
resort contained approximately 371 acres, of which approximately 216 acres are
currently planned by the Company to be used for future development.
At December 31, 1999, 126 units are completed and an additional 674 units
are planned for future development. All units are two bedroom, two bath units.
Amenities within each unit include a living room with sleeper sofa, full
kitchen, whirlpool tub, and color television. Certain units will include a
fireplace, ceiling fans, imported ceramic tile, oversized sliding glass doors,
and rattan or pine furniture.
Amenities currently available or under construction at the resort include a
new par three five-hole executive golf course, outdoor swimming pool, clubhouse,
covered pool, miniature golf course, horseback riding trails, stable and corral,
welcome center, new sales and registration buildings, and hook-ups for
recreational vehicles. The Company plans to construct a tennis court, sports
court, shuffleboard courts, outdoor pavilion, playground, and children's movie
theater. The Company also offers winter recreational activities at this resort,
including ice-skating, snowmobiling, and cross-country skiing. The Company is
obligated to maintain and provide campground facilities for members of the
previous owner's campground system.
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At December 31, 1999, the resort contained 6,552 Vacation Intervals and
1,911 Vacation Intervals remained available for sale. The Company plans to build
674 additional units, which would collectively yield 35,048 additional Vacation
Intervals available for sale. Vacation Intervals at the resort are currently
priced from $7,400 to $11,800 for one-week stays (and start at $4,500 for
biennial intervals). During 1999, 2,967 Vacation Intervals were sold.
OAK N' SPRUCE RESORT. In December 1997, the Company acquired the Oak N'
Spruce Resort in the Berkshire mountains of western Massachusetts. The resort is
located approximately 134 miles west of Boston and 114 miles north of New York
City. Oak N' Spruce Resort is a mixed-use development which includes a hotel and
timeshare units. At December 31, 1999, the resort contained approximately 240
acres, of which approximately 120 acres are currently planned by the Company to
be used for future development.
At December 31, 1999, the resort had 180 units and an additional 520 units
are planned for development. There are seven types of existing units at the
resort: (i) studio flat, (ii) one-bedroom flat, (iii) one-bedroom townhouse,
(iv) two-bedroom flat, (v) two-bedroom townhouse, (vi) two-bedroom, flex-time,
and (vii) two-bedroom, lockout. There is also a 21-room hotel at the resort
which could be converted to timeshare use. Amenities within each new unit will
include a living room with sleeper sofa, full kitchen, whirlpool tub, and color
television. Certain units will include a fireplace, ceiling fans, imported
ceramic tile, oversized sliding glass doors, and rattan or pine furniture.
Amenities at the resort include two indoor heated swimming pools with hot
tubs, one outdoor olympic-sized, spring fed pool with bar and snack bar, sauna,
health club, nine-hole golf course, ski rentals, shuffleboard, basketball and
tennis courts, horseshoe pits, hiking and ski trails, and activity areas for
sledding and badminton. The resort is also near Beartown State Forest.
At December 31, 1999, the resort contained 9,360 Vacation Intervals, of
which 1,164 remained available for sale. The Company plans to build 520
additional "lodge-style" units, which would yield an additional 27,040 Vacation
Intervals available for sale. Vacation Intervals at the resort are currently
priced from $6,400 to $14,000 for one-week stays (and start at $3,700 for
biennial intervals). During 1999, 2,052 Vacation Intervals were sold.
APPLE MOUNTAIN RESORT. In October 1998, the Company acquired the Apple
Mountain Resort in Clarkesville, Georgia, which is approximately 125 miles north
of Atlanta, Georgia. The resort is situated on 285 acres of beautiful open
pastures and rolling hills, with 162 acres being the resort's golf course. At
December 31, 1999, approximately 91 acres are currently planned by the Company
to be used for future development.
At December 31, 1999, the resort had 48 units and an additional 560 units
are planned for development. The "Lodge Get-A-Way" units were the first units
developed. Each unit is approximately 827 square feet with all units being two
bedrooms, two full baths. Amenities within each unit include a living room with
sleeper sofa, full kitchen, whirlpool tub, and color television. Certain units
include a fireplace, ceiling fans, imported ceramic tile, oversized sliding
glass doors, electronic door locks, and rattan or pine furniture.
Amenities at the resort include a 9,445 square foot administration building
and activity center featuring a wide screen television, pool tables, arcade
games, snack area, and movie theatre. Other amenities at the resort include a
tennis court, swimming pool, horseshoes, stable and corral, shuffleboard,
archery, miniature golf course, and volleyball and basketball courts. This
resort is located in the Blue Ridge Mountains and offers accessibility to many
other outdoor recreational activities, including Class 5 white water rapids. A
member services building is currently under construction.
The primary recreational amenity available to the resort is an established
18-hole golf course situated on approximately 150 acres of open fairways and
rolling hills. Elevation of the course is 1,530 feet at the lowest point and
1,600 feet at the highest point. The course is designed with approximately
104,000 square feet of bent grass greens. The course's tees total approximately
2 acres, fairways total approximately 24 acres, and primary roughs total
approximately 29 acres, all covered with TIF 419 Bermuda. The balance of grass
totals approximately 95 acres and is covered with Fescue. The course has 19 sand
bunkers totaling 19,800 square feet and there are approximately seven miles of
cart paths. Lining the course are apple orchards totaling approximately four
acres, with white pine roughs along twelve of the fairways. The course has a
five-acre irrigation lake and two ponds, one approximately 3,000 square feet and
located on the fourth hole and the second approximately 1,500 square feet and
located on the fifteenth hole. The driving range covers approximately nine acres
and has 20,000 square feet of tee area covered in TIF 419 Bermuda. The pro shop
offers a full line of golfing accessories and equipment. There is also a golf
professional on site to offer lessons and to plan events for the club.
At December 31, 1999, the resort contained 2,496 Vacation Intervals, of
which 1,770 remained available for sale. The Company
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plans to build 560 additional "lodge-style" units, which would yield an
additional 29,120 Vacation Intervals available for sale. Vacation Intervals at
the resort are currently priced from $7,400 to $11,800 for one-week stays (and
start at $4,500 for biennial intervals). During 1999, 671 Vacation Intervals
were sold.
DESCRIPTION OF EXISTING RESORTS MANAGED BY THE COMPANY
The management rights to the following resorts were acquired via the
acquisition of Crown Resort Co., LLC in May 1998.
ALPINE BAY RESORT. Alpine Bay Resort is located in Talledega County,
Alabama, near Lake Logan Martin and is approximately 50 miles east of
Birmingham. The resort contains 54 units and includes a golf course, pro shop
lounge, outdoor pool, and tennis courts. At December 31, 1999, there are four
unsold Vacation Intervals at this resort. During 1999, one Silverleaf Club
Endless Escape Program membership was sold. No further development is planned at
this resort.
HICKORY HILLS RESORT. Hickory Hills is located in Jackson County,
Mississippi, near the Pascagoula River and is approximately 20 miles east of
Biloxi. The resort contains 80 units and has a golf course, restaurant/lounge,
outdoor pool, clubhouse, fitness center, miniature golf course, tennis courts,
and playground. At December 31, 1999, there are approximately 168 unsold
Vacation Intervals at this resort. During 1999, 11 Vacation Intervals and
Silverleaf Club Endless Escape Program memberships were sold. No further
development is planned at this resort.
BEECH MOUNTAIN LAKES RESORT. Beech Mountain Lakes is located in Butler
Township, Luzerne County, Pennsylvania, and is approximately 30 miles south of
Wilkes Barre-Scranton. The resort contains 54 units and has a restaurant/lounge,
indoor pool/sauna, clubhouse, fitness center, tennis courts, and pontoon boat.
At December 31, 1999, there are approximately 124 unsold Vacation Intervals at
this resort. During 1999, 57 Vacation Intervals and Silverleaf Club Endless
Escape Program memberships were sold. No further development is planned at this
resort.
TREASURE LAKE RESORT. Treasure Lake is located in Sandy Township, Clearfield
County, Pennsylvania, and is approximately 160 miles northeast of Pittsburgh.
The resort contains 145 units and has two golf courses, a restaurant/lounge,
indoor pool/sauna, outdoor pool, clubhouse, tennis courts, and pontoon boat. At
December 31, 1999, there are approximately 959 unsold Vacation Intervals at this
resort. During 1999, 57 Vacation Intervals and Silverleaf Club Endless Escape
Program memberships were sold. No further development is planned at this resort.
FOXWOOD HILLS RESORT. Foxwood Hills is located in Oconee County, South
Carolina, near Lake Hartwell and is approximately 100 miles northeast of
Atlanta. The resort contains 114 units and has a golf course, restaurant/lounge,
indoor pool/sauna, outdoor pool, clubhouse, miniature golf course, tennis
courts, pontoon boat, and playground. At December 31, 1999, there are
approximately 322 unsold Vacation Intervals at this resort. During 1999, 253
Vacation Intervals and Silverleaf Club Endless Escape Program memberships were
sold. No further development is planned at this resort.
TANSI RESORT. Tansi Resort is located in Cumberland County, Tennessee, and
is approximately 75 miles west of Knoxville. The resort contains 124 units and
has a golf course, restaurant/lounge, indoor pool/sauna, outdoor pool,
clubhouse, fitness center, miniature golf course, tennis courts, and playground.
At December 31, 1999, there are approximately 367 unsold Vacation Intervals at
this resort. During 1999, 27 Vacation Intervals and Silverleaf Club Endless
Escape Program memberships were sold. No further development is planned at this
resort.
WESTWIND MANOR RESORT. Westwind Manor is located in Wise County, Texas, on
Lake Bridgeport and is approximately 65 miles northwest of the Dallas-Fort Worth
metroplex. The resort contains 37 units and has a golf course,
restaurant/lounge, outdoor pool, clubhouse, miniature golf course, tennis
courts, and playground. At December 31, 1999, there are approximately 342 unsold
Vacation Intervals at this resort. During 1999, no Vacation Intervals or
Silverleaf Club Endless Escape Program memberships were sold. No further
development is planned at this resort.
DESCRIPTION OF NEW RESORTS
Silverleaf has four locations that are presently in various stages of
development or pre-development as New Resorts. Except as specifically set forth
below, the Company has not scheduled target dates for construction, completion
of initial units, or commencement of sales and marketing efforts for these
locations. Until such target dates have been definitively designated, the
Company will continue to evaluate the development potential of each of these New
Resorts.
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SILVERLEAF'S SEASIDE RESORT. In December 1997 and February 1998, the Company
acquired over 83 acres of land, including beachfront, in Galveston, Texas. These
adjacent tracts are located approximately 50 miles south of Houston, Texas, and
were acquired for development as a new Destination Resort. Prior to its
acquisition by the Company, one tract was operated by a nationwide campground
operator.
The Company plans to build 282 new units situated in three-story 12-plex
buildings, with construction of 24 units in process as of December 31, 1999.
Completion of these 24 units will occur in the second quarter of 2000. Sales
efforts began in January 2000. All units will be two bedroom, two bath units.
Amenities within each unit will include two large bedrooms, two bathrooms (one
with a whirlpool tub), living room with sleeper sofa, full kitchen, color
television, and vaulted ceilings. This resort will also include the Company's
upscale "Presidents Dunes" units which will overlook the Gulf of Mexico and
offer 1,255 square feet of floor space, front and back verandas, washer and
dryer, and a more elegant decor.
The primary amenity at the resort is the Gulf of Mexico. This site has 635
feet of beachfront. Other currently existing amenities include a lodge with
kitchen, sports court, and swimming pool. The Company is obligated to maintain
and provide campground facilities for members of the previous owner's campground
system.
The Company plans to build 282 units which would yield 14,664 Vacation
Intervals for sale. Sales efforts began in January 2000. Vacation Intervals at
the resort will be priced from $7,400 to $17,500 for one-week stays (and start
at $5,500 for biennial intervals).
SILVERLEAF'S LAS VEGAS RESORT. In November 1997, the Company acquired a two
acre parcel of land two blocks off the "strip" in Las Vegas, Nevada, for
development as a new Destination Resort. The Company plans to build a five-story
tower and a nine-story tower which will include approximately 157 units,
including 83 two-bedroom and 74 one-bedroom units. This resort will feature
balconies, washer and dryer, whirlpool tubs, living room with sleeper sofa, full
kitchen, and color television.
Amenities at the resort will include a swimming pool, health spa with sauna,
exercise facilities, children's theatre, and video arcade. The resort will also
feature a waterfall cascading down the front of one tower.
The Company plans to build 157 units which would yield 8,164 Vacation
Intervals for sale. The Company anticipates Vacation Intervals at the resort
will be priced from $9,500 to $13,500 for one-week stays.
LAKEVIEW LODGE. In September 1998, the Company completed its purchase of 260
acres of undeveloped land near Kansas City, Missouri, to be developed as a
Drive-to Resort. At December 31, 1999, 608 units are planned for development,
with all units being two bedroom, two bath. Amenities within each unit will
include a living room with sleeper sofa, full kitchen, whirlpool tub, and color
television. Certain units will include a fireplace, ceiling fans, imported
ceramic tile, oversized sliding glass doors, and rattan or pine furniture.
The primary recreational amenity available at the resort is an adjoining
fishing lake. Other planned amenities include a clubhouse, outdoor pavilion,
swimming pool, lighted tennis courts, themed miniature golf course, volleyball
court, shuffleboard/multi-use sports court, archery, horseback riding trail,
stable and corral, lake pavilion, indoor pool, indoor heated cedar sauna,
welcome center, and hook-ups for recreational vehicles.
The Company plans to build 608 units which would yield 31,616 Vacation
Intervals for sale. The resort is in the preliminary development phase. Vacation
Intervals at the resort will be priced from $6,500 to $12,500 for one-week stays
(and start at $3,800 for biennial intervals).
BEECH MOUNTAIN RESORT. In December 1998, the Company acquired 1,998 acres of
undeveloped land near Philadelphia, Pennsylvania, to be developed as a Drive-to
Resort. At December 31, 1999, all units planned for development will be two
bedroom, two bath. Amenities within each unit will include a living room with
sleeper sofa, full kitchen, whirlpool tub, and color television. Certain units
will include a fireplace, ceiling fans, imported ceramic tile, oversized sliding
glass doors, and rattan or pine furniture.
The primary recreational amenity available at the resort is a fishing lake.
Other planned amenities include a clubhouse, outdoor pavilion, swimming pool,
lighted tennis courts, themed miniature golf course, volleyball court,
shuffleboard/multi-use sports court, archery, horseback riding trail, stable and
corral, lake pavilion, indoor pool, indoor heated cedar sauna, welcome station,
and hook-ups for recreational vehicles.
The Company has received regulatory approval to develop 408 units, which
would yield 21,216 Vacation Intervals for sale. The
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resort is in the preliminary development phase. Vacation Intervals at the resort
will be priced from $6,500 to $12,500 for one-week stays (and start at $3,800
for biennial intervals).
MARKETING AND SALES
Marketing is the process by which the Company attracts potential customers
to visit and tour an Existing Resort or attend a sales presentation. Sales is
the process by which the Company seeks to sell a Vacation Interval to a
potential customer once he arrives for a tour at an Existing Resort or attends a
sales presentation. In 1999, the Company was able to increase its tour flow and
sales through significant investments in marketing programs, such as
implementation of an automated scanning system to improve efficiency in leads
processing, addition of a fourth telemarketing call center, and investments in
state-of-the-art predictive dialing equipment for its call centers. Due to
recent growth rates and implementation of new leads generation programs, the
Company is experiencing higher than anticipated marketing costs in the first
quarter of 2000. The Company has increased its headcount at the call centers
significantly since the fourth quarter of 1999, which created inefficiencies due
to lack of available training resources. In addition, the Company is moving
towards reliance on national retail chains for its leads generation efforts, in
addition to the traditional local programs. The transition to national programs
has been slower in generating leads than originally planned.
MARKETING. The Company's in-house marketing staff develops prospects through
a variety of marketing programs specifically designed to attract the Company's
target customers. Databases of new prospects are principally developed through
cooperative arrangements between Database Research, Inc., a subsidiary of the
Company, and other local businesses and special event sponsors. Under these
cooperative marketing programs, basic demographic information of potential
customers is solicited on a voluntary basis from individuals who patronize these
businesses or events. After entering this demographic information into its
permanent database, the Company utilizes its systems to identify prospects who
meet the Company's marketing criteria. Using the Company's automated dialing and
bulk mailing equipment, in-house marketing specialists conduct coordinated
telemarketing and direct mail procedures which invite prospects to tour one of
the Company's resorts and receive an incentive, such as a free gift.
SALES. The Company actively sells its Vacation Intervals primarily through
on-site salespersons at certain Existing Resorts. Upon arrival at an Existing
Resort for a scheduled tour, the prospect is met by a member of the Company's
on-site salesforce who conducts the prospect on a 90 minute tour of the resort
and its related amenities. At the conclusion of the tour, the sales
representative explains the benefits and costs of becoming a Silverleaf Owner.
The presentation also includes a description of the financing alternatives
offered by the Company. Prior to the closing of any sale, a verification officer
(a salaried employee of the Company) interviews each prospect to ensure
compliance with Company sales policies and regulatory agency requirements. No
sale becomes final until a statutory waiting period (which varies from state to
state) of three to fifteen calendar days has passed.
Sales representatives receive commissions ranging from 5% to 14% of the
sales price depending on established guidelines. Sales managers also receive
commissions of 1% to 3% and are subject to commission chargebacks in the event
the purchaser fails to make the first required payment. Sales directors also
receive commissions of 1% to 3%, which are also subject to chargebacks.
Prospects who are interested in a lower priced product are offered biennial
(alternate year) intervals or Samplers, which entitle the prospect to sample a
resort for a specified number of nights. The prospect may apply the cost of a
Sampler against the down-payment on a Vacation Interval if purchased at a later
date. In addition, the Company actively markets upgraded Vacation Intervals to
existing Silverleaf Owners. Although most upgrades are sold by the Company's
in-house sales staff, the Company has contracted with a third party to assist in
offsite marketing of upgrades at the Destination Resorts. These upgrade programs
have been well received by Silverleaf Owners and accounted for approximately
26.4% and 22.1% of the Company's gross revenues from Vacation Interval sales for
1999 and 1998, respectively. By offering Samplers and upgraded Vacation
Intervals, the Company believes it offers an affordable product for all
prospects in its target market. Also, by offering products with a range of
prices, the Company attempts to attract younger purchasers with its lower-priced
products and gradually upgrade such purchasers over time as their earnings
increase.
Because the Company's sales representatives are a critical component of the
sales and marketing effort, the Company continually strives to attract, train,
and retain a dedicated salesforce. The Company provides intensive sales
instruction and training which, coupled with the representative's valuable local
knowledge, assists the sales representatives in acquainting prospects with the
resort's benefits. Each sales representative is an employee of the Company and
receives some employment benefits. At December 31, 1999, the Company employed
approximately 856 sales representatives at its Existing Resorts.
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CUSTOMER FINANCING
The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers typically make a down payment of at least 10% of
the purchase price and deliver a promissory note to the Company for the balance.
The promissory notes generally bear interest at a fixed rate, are generally
payable over a seven-year to ten-year period, and are secured by a first
mortgage on the Vacation Interval. The Company bears the risk of defaults on
these promissory notes, and this risk is heightened inasmuch as the Company
generally does not verify the credit history of its customers and will provide
financing if the customer is presently employed and meets certain household
income criteria.
The Company's credit experience is such that in 1999 it allocated 10.0% of
the purchase price of Vacation Intervals to its provision for uncollectible
notes. In addition, in 1999 the Company decreased sales by $3.7 million for
customer returns (cancellations of sales transactions in which the customer
fails to make the first installment payment) and increased operating, general
and administrative expenses by $1.2 million for customer releases (voluntary
cancellations of properly recorded sales transactions which in the opinion of
management is consistent with the maintenance of overall customer goodwill). If
a buyer of a Vacation Interval defaults, the Company generally must foreclose on
the Vacation Interval and attempt to resell it; the associated marketing,
selling, and administrative costs from the original sale are not recovered; and
sales and marketing costs must be incurred again to resell the Vacation
Interval. Although the Company, in many cases, may have recourse against a
Vacation Interval buyer for the unpaid price, certain states have laws which
limit or hinder the Company's ability to recover personal judgments against
customers who have defaulted on their loans. For example, under Texas law, if
the Company were to pursue a post-foreclosure deficiency claim against a
customer, the customer may file a court proceeding to determine the fair market
value of the property foreclosed upon. In such event, the Company may not
recover a personal judgment against the customer for the full amount of the
deficiency, but may recover only to the extent that the indebtedness owed to the
Company exceeds the fair market value of the property. Accordingly, the Company
has generally not pursued this remedy. In 1998, the Company implemented a
program through which a significant number of delinquent loans have been assumed
by existing owners with a consistent payment history.
Prior to 1996, the Company sold customer promissory notes and mortgages to
third parties, generally with recourse, as a means of financing its operations.
As a result, the Company may be required to repurchase customer promissory notes
previously sold which become delinquent. The Company takes these contingent
obligations into account in establishing its allowance for uncollectible notes.
At December 31, 1999, the Company had notes receivable (including notes
unrelated to Vacation Intervals) in the approximate principal amount of $318.9
million, was contingently liable with respect to approximately $2.2 million
principal amount of customer notes sold with recourse, and had an allowance for
uncollectible notes of approximately $32.3 million.
The Company recognizes interest income as earned. If interest payments on
customer notes become delinquent, the Company ceases recognition of the interest
income until collection is deemed probable. When inventory is returned to the
Company, any unpaid note receivable balances are charged against the allowance
for uncollectible notes net of the amount at which the Vacation Interval is
being restored to inventory.
The Company intends to borrow additional funds under its existing revolving
credit facilities to finance its operations. Under its existing revolving credit
facilities, the Company may borrow up to $310.0 million collateralized by
customer promissory notes and mortgages. At December 31, 1999, the Company had
borrowings under such revolving credit facilities in the approximate principal
amount of $178.3 million. These facilities permit borrowings up to 85% of the
principal amount of performing notes, and payments from Silverleaf Owners on
such notes are credited directly to the lender and applied against the Company's
loan balance. At December 31, 1999, the Company had a portfolio of approximately
51,886 Vacation Interval customer promissory notes in the approximate principal
amount of $317.5 million, of which approximately $41.7 million in principal
amount was 61 days or more past due and therefore ineligible as collateral.
At December 31, 1999, the Company's portfolio of customer notes receivable
had an average yield of 13.7%. At such date, the Company's borrowings, which
bear interest at variable rates, had a weighted average cost of 9.2%. The
Company has historically derived net interest income from its financing
activities because the interest rates it charges its customers who finance the
purchase of their Vacation Intervals exceed the interest rates the Company pays
to its lenders. Because the Company's existing indebtedness currently bears
interest at variable rates and the Company's customer notes receivable bear
interest at fixed rates, increases in interest rates would erode the spread in
interest rates that the Company has historically experienced and could cause the
interest expense on the Company's borrowings to exceed its interest income on
its portfolio of customer loans. The Company has not engaged in interest rate
hedging transactions. Therefore, any increase in interest rates, particularly if
sustained, could have a material adverse effect on the Company's results of
operations, liquidity, and financial position.
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Limitations on availability of financing would inhibit sales of Vacation
Intervals due to (i) the lack of funds to finance the initial negative cash flow
that results from sales that are financed by the Company, and (ii) reduced
demand if the Company is unable to provide financing to purchasers of Vacation
Intervals. The Company ordinarily receives only 10% of the purchase price on the
sale of a Vacation Interval but must pay in full the costs of development,
marketing, and sale of the Vacation Interval. Maximum borrowings available under
the Company's current credit agreements may not be sufficient to cover these
costs, thereby straining capital resources, liquidity, and capacity to grow. In
addition, to the extent interest rates decrease generally on loans available to
the Company's customers, the Company faces an increased risk that customers will
pre-pay their loans and reduce the Company's income from financing activities.
The Company typically provides financing to customers over a seven-year to
ten-year period, and customer notes had an average maturity of 5.7 years at
December 31, 1999. The Company's revolving credit facilities mature between
December 2000 and October 2005. Accordingly, there could be a mismatch between
the Company's cash receipts and the Company's cash disbursements obligations in
December 2000 and subsequent periods. Although the Company has historically been
able to secure financing sufficient to fund its operations, it does not
presently have agreements with its lenders to extend the term of its existing
funding commitments or to replace such commitments upon their expiration.
Failure to obtain such refinancing facilities could require the Company to sell
its portfolio of customer notes receivable, probably at a substantial discount,
or to seek other alternatives to enable it to continue in business. While the
Company has been successful in obtaining financing to date, there is no
assurance it will be able to do so in the future.
DEVELOPMENT AND ACQUISITION PROCESS
The Company believes there is substantial opportunity to develop and acquire
resorts. As part of its current growth strategy, the Company intends to develop
and selectively acquire new resorts with characteristics similar to the Existing
Resorts and New Resorts. In evaluating a potential site for a Drive-to Resort,
the Company generally seeks locations within 100 miles of large metropolitan
areas that have favorable demographic characteristics. For Drive-to Resorts, the
Company generally seeks wooded rustic settings with amenities such as golf
courses or water frontage. For Destination Resorts, the Company seeks popular
destination resort areas that are easily accessible to Silverleaf Owners. The
Las Vegas, Nevada, site, for example, was acquired in response to a survey in
which Silverleaf Owners expressed a strong interest in a Destination Resort in
Las Vegas. The Company also seeks locations offering an absence of competing
properties near the target location, ease of development with respect to zoning
and land-use issues, and ease of compliance with governmental regulations
concerning timeshare sales and operations.
Before committing capital to a site, the Company tests the market using
certain marketing techniques developed by the Company. The Company also explores
the zoning and land-use laws applicable to the potential site and the regulatory
issues pertaining to licenses and permits for timeshare sales and operations.
The Company will also contact various governmental entities and review
applications for necessary governmental permits and approvals. If the Company is
satisfied with its market and regulatory review, it will prepare a conceptual
layout of the resort, including building site plans and resort amenities. After
the Company applies its standard lodging unit design and amenity package, the
Company prepares a budget which estimates the cost of developing the resort,
including costs of lodging facilities, infrastructure, and amenities, as well as
projected sales, marketing, and general and administrative costs. Purchase
contracts typically provide for additional due diligence by the Company,
including obtaining an environmental report by an environmental consulting firm,
a survey of the property, and a title commitment. The Company employs legal
counsel to review such documents and to also review pertinent legal issues. If
the Company continues to be satisfied with the site after the environmental and
legal review, the Company will complete the purchase of the property.
All construction activities are managed internally by the Company. The
Company typically completes the development of a new resort's basic
infrastructure and models within one year, with additional units to be added
within 180 days based on demand, weather permitting. A normal part of the
development process is the establishment of a functional sales office at the new
resort.
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CLUBS / MANAGEMENT CLUBS
Upon purchasing a Vacation Interval at a resort, the purchaser automatically
becomes a member of a homeowner's association ("Club") for that particular
resort. At the resorts owned by the Company, the Company has the right to
appoint the directors of the Clubs (collectively, the "Silverleaf Club").
However, the Company does not have this right related to the Clubs of the
exclusively managed resorts (collectively, the "Crown Club"). The Silverleaf
Owners are obligated to pay monthly dues to their respective Clubs, which
obligation is secured by a lien on their Vacation Interval in favor of the Club.
If a Silverleaf Owner fails to pay his monthly dues, the Club may foreclose on
the delinquent Silverleaf Owner's Vacation Interval. During 1999 and 1998,
approximately 268 and 201 foreclosures, respectively, resulted from Silverleaf
Owners' failure to pay monthly dues.
Each Existing Resort has a Club which has entered into a Management Club
Agreement with the Management Clubs. The Management Club Agreements authorize
the Management Clubs to manage the Existing Resorts on a centralized and
collective basis. The consolidation of resort operations through the Management
Clubs permits: (i) a centralized reservation system for all resorts; (ii)
substantial cost savings by purchasing goods and services for all resorts on a
group basis, which generally results in a lower cost of goods and services than
if such goods and services were purchased by each resort on an individual basis;
(iii) centralized management for the entire resort system; (iv) centralized
legal, accounting, and administrative services for the entire resort system; and
(v) uniform implementation of various rules and regulations governing all
resorts. All furniture, furnishings, recreational equipment, and other personal
property used in connection with the operation of the Existing Resorts are owned
by the Management Clubs, rather than the Company.
At December 31, 1999, the Management Clubs had 568 full-time employees and
is solely responsible for their salaries. The Management Clubs are also
responsible for the direct expenses of operating the Existing Resorts, while the
Company is responsible for the direct expenses of new development and all
marketing and sales activities. To the extent the Management Clubs provide
payroll, administrative, and other services that directly benefit the Company,
the Company reimburses the Management Clubs for such services.
The Management Clubs collect dues from Silverleaf Owners, plus certain other
amounts assessed against the Silverleaf Owners from time to time, together with
all income generated by the operation of certain amenities at the Existing
Resorts. Silverleaf Club dues are currently $49.98 per month ($24.99 for
biennial owners), except for certain members of Oak N' Spruce Resort which
prepay dues at an annual rate of approximately $350. Crown Club dues range from
$275 to $355 annually. Such amounts are used by the Management Clubs to pay the
costs of operating the Existing Resorts and the management fees due to the
Company pursuant to Management Agreements between the Company and the Management
Clubs. These Management Agreements authorize the Company to manage and operate
the resorts and provide for a maximum management fee equal to 15% of gross
revenues for Silverleaf Club or 10% to 15% of dues collected for Clubs within
Crown Club, but the Company's right to receive such fee on an annual basis is
limited to the amount of each Management Club's net income. However, if the
Company does not receive the maximum fee, such deficiency is deferred for
payment to succeeding year(s), subject again to the net income limitation. Due
to anticipated refurbishment of units at the Existing Resorts, together with the
operational and maintenance expenses associated with the Company's current
expansion and development plans, the Company believes its 2000 management fee
will be subject to the net income limitation. For financial reporting purposes,
management fees from the Management Clubs are recognized based on the lower of
(i) the aforementioned maximum fees or (ii) each Management Club's net income.
The Silverleaf Club Management Agreement is effective through March 2010, and
will continue year-to-year thereafter unless cancelled by either party. Crown
Club consists of several individual Club agreements which have terms of two to
five years with a minimum of two renewal options remaining. At December 31,
1999, there were approximately 77,000 and 24,000 Silverleaf Owners who pay dues
to Silverleaf Club and Crown Club, respectively.
As the Company develops new resorts, their respective Clubs are expected to
be added to the Silverleaf Club Management Agreement. However, the timeshare
laws of some states, including Nevada, prohibit the collective dues/expense
arrangement used by Silverleaf Club. Accordingly, the Club for the New Resort in
Las Vegas will not be managed by Silverleaf Club but will be managed directly by
Silverleaf.
OTHER OPERATIONS
OPERATION OF AMENITIES. The Company owns, operates, and receives the
revenues from the marina at The Villages, the golf course and pro shop at
Holiday Hills, and the golf course and pro shop at Apple Mountain. Although the
Company owns the golf course at Holly Lake, a homeowners association in the
development operates the golf course. In general, the Management Clubs receive
revenues from the various amenities which require a usage fee, such as
watercraft rentals, horseback rides, and restaurants.
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UNIT LEASING. The Company also recognizes revenues from sales of Samplers
which allow prospective Vacation Interval purchasers to sample a resort for a
specified number of nights. A five night Sampler package currently sells for
$595. For the years ended December 31, 1999 and 1998, the Company recognized
$4.3 million and $2.8 million, respectively, in revenues from Sampler sales.
UTILITY SERVICES. The Company owns its own water supply facilities at Piney
Shores, The Villages, Hill Country, Holly Lake, Ozark Mountain, Holiday Hills,
Timber Creek, and Fox River resorts. The Company also currently owns its own
waste-water treatment facilities at The Villages, Piney Shores, Ozark Mountain,
Holly Lake, Timber Creek, and Fox River resorts. The Company is in the process
of applying for permits to build expanded water supply and waste-water
facilities at the Timber Creek and Fox River resorts. The Company has permits to
supply and charge third parties for the water supply facilities at The Villages,
Holly Lake, Holiday Hills, Ozark Mountain, Hill Country, Piney Shores, and
Timber Creek resorts, and the waste-water facilities at the Ozark Mountain,
Holly Lake, Piney Shores, Hill Country, and The Villages resorts.
OTHER PROPERTY. The Company owns an undeveloped five-acre tract of land in
Pass Christian, Mississippi, which has been listed with a broker for sale. The
Company had planned to develop this property as a Destination Resort. However,
in a survey, Silverleaf Owners expressed a strong interest in a Texas resort on
the Gulf of Mexico. In response, the Company acquired land in Galveston, Texas,
which is currently being developed as the Company's Seaside Resort. This resort
was developed in lieu of the Pass Christian property. Additionally, the Company
owns approximately 44 acres in Mississippi, and the Company is entitled to 85%
of any profits from this land. An affiliate of a director of the Company owns a
10% net profits interest in this land.
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORKS
INTERNAL EXCHANGES. As a convenience to Silverleaf Owners, each purchaser of
a Vacation Interval from the Company has certain exchange privileges which may
be used to: (i) exchange an interval for a different interval (week) at the same
resort so long as the different interval is of an equal or lower rating; and
(ii) exchange an interval for the same interval of equal or lower rating at any
other Existing Resort. These intra-company exchange rights are conditioned upon
availability of the desired interval or resort. Owners of Vacation Intervals at
the Drive-to Resorts generally do not have exchange rights to Destination
Resorts.
RCI EXCHANGES. The Company believes that its Vacation Intervals are made
more attractive by the Company's participation in Vacation Interval exchange
networks operated by RCI. The Existing Resorts, except Oak N' Spruce Resort, are
registered with RCI, and approximately one-third of Silverleaf Owners
participate in RCI's exchange network. Oak N' Spruce Resort is currently under
contract with a different network exchange company, Interval International.
Membership in RCI allows participating Silverleaf Owners to exchange their
occupancy right in a unit in a particular year for an occupancy right at the
same time or a different time of the same or lower color rating in another
participating resort, based upon availability and the payment of a variable
exchange fee. A member may exchange a Vacation Interval for an occupancy right
in another participating resort by listing the Vacation Interval as available
with the exchange organization and by requesting occupancy at another
participating resort, indicating the particular resort or geographic area to
which the member desires to travel, the size of the unit desired, and the period
during which occupancy is desired.
RCI assigns a rating of "red", "white", or "blue" to each Vacation Interval
for participating resorts based upon a number of factors, including the location
and size of the unit, the quality of the resort, and the period during which the
Vacation Interval is available, and attempts to satisfy exchange requests by
providing an occupancy right in another Vacation Interval with a similar rating.
For example, an owner of a red Vacation Interval may exchange his interval for a
red, white, or blue interval. An owner of a white Vacation Interval may exchange
only for a white or blue interval, and an owner of a blue interval may exchange
only for a blue interval. If RCI is unable to meet the member's initial request,
it suggests alternative resorts based on availability.
RCI has more than 3,300 participating resort facilities and over 2.4 million
members worldwide as of December 31, 1999. During 1999, RCI processed over 1.8
million Vacation Interval exchanges. The cost of the annual membership fee in
RCI, which is at the option and expense of the owner of the Vacation Interval,
is currently $86 per year. Exchange rights require an additional fee of
approximately $118 for domestic exchanges and $155 for foreign exchanges.
COMPETITION
The timeshare industry is highly fragmented and includes a large number of
local and regional resort developers and operators. However, some of the world's
most recognized lodging, hospitality, and entertainment companies, such as
Marriott Ownership Resorts ("Marriott"), The Walt Disney Company ("Disney"),
Hilton Hotels Corporation ("Hilton"), Hyatt Corporation ("Hyatt"), and Four
Seasons Resorts ("Four Seasons") have entered the industry. Other companies in
the timeshare industry, including Sunterra
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Corporation ("Sunterra"), Fairfield Communities, Inc. ("Fairfield"), Starwood
Hotels & Resorts Worldwide Inc. ("Starwood"), Ramada Vacation Suites ("Ramada"),
TrendWest Resorts, Inc. ("TrendWest"), and Bluegreen Corporation ("Bluegreen")
are, or are subsidiaries of, public companies, with the enhanced access to
capital and other resources that public ownership implies.
Fairfield, Sunterra, and Bluegreen own timeshare resorts in or near Branson,
Missouri, which compete with the Company's Holiday Hills and Ozark Mountain
resorts, and to a lesser extent with the Company's newly-acquired Timber Creek
Resort. Sunterra also owns a resort which is located near and competes with the
Company's Piney Shores Resort. Additionally, the Company believes there are a
number of public or privately-owned and operated timeshare resorts in most
states in which the Company owns resorts which will compete with the Company's
Existing Resorts and New Resorts.
The Company believes Marriott, Disney, Hilton, Hyatt, and Four Seasons
generally target consumers with higher annual incomes than the Company's target
market. The Company believes the other competitors named above target consumers
with similar, but slightly higher, income levels than the Company's target
market. The Company's competitors may possess significantly greater financial,
marketing, personnel, and other resources than the Company, and there can be no
assurance that such competitors will not significantly reduce the price of their
Vacation Intervals or offer greater convenience, services, or amenities than the
Company.
While the Company's principal competitors are developers of timeshare
resorts, the Company is also subject to competition from other entities engaged
in the commercial lodging business, including condominiums, hotels, and motels;
others engaged in the leisure business; and, to a lesser extent, from
campgrounds, recreational vehicles, tour packages, and second home sales. A
reduction in the product costs associated with any of these competitors, or an
increase in the Company's costs relative to such competitors' costs, could have
a material adverse effect on the Company's results of operations, liquidity, and
financial position.
Numerous businesses, individuals, and other entities compete with the
Company in seeking properties for acquisition and development of new resorts.
Some of these competitors are larger and have greater financial and other
resources than the Company. Such competition may result in a higher cost for
properties the Company wishes to acquire or may cause the Company to be unable
to acquire suitable properties for the development of new resorts.
GOVERNMENTAL REGULATION
GENERAL. The Company's marketing and sales of Vacation Intervals and other
operations are subject to extensive regulation by the federal government and the
states and jurisdictions in which the Existing Resorts and New Resorts are
located and in which Vacation Intervals are marketed and sold. On a federal
level, the Federal Trade Commission has taken the most active regulatory role
through the Federal Trade Commission Act, which prohibits unfair or deceptive
acts or competition in interstate commerce. Other federal legislation to which
the Company is or may be subject includes the Truth-in-Lending Act and
Regulation Z, the Equal Opportunity Credit Act and Regulation B, the Interstate
Land Sales Full Disclosure Act, the Real Estate Settlement Procedures Act, the
Consumer Credit Protection Act, the Telephone Consumer Protection Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the Fair Housing Act,
and the Civil Rights Acts of 1964 and 1968.
In response to certain fraudulent marketing practices in the timeshare
industry in the 1980's, various states enacted legislation aimed at curbing such
abuses. Certain states in which the Company operates have adopted specific laws
and regulations regarding the marketing and sale of Vacation Intervals. The laws
of most states require the Company to file a detailed offering statement and
supporting documents with a designated state authority, which describe the
Company, the project, and the promotion and sale of Vacation Intervals. The
offering statement must be approved by the appropriate state agency before the
Company may solicit residents of such state. The laws of certain states require
the Company to deliver an offering statement (or disclosure statement), together
with certain additional information concerning the terms of the purchase, to
prospective purchasers of Vacation Intervals who are residents of such state,
even if the resort is not located in such state. The laws of Missouri generally
only require certain disclosures in sales documents for prospective purchasers.
There are also laws in each state where the Company currently sells Vacation
Intervals which grant the purchaser of a Vacation Interval the right to cancel a
contract of purchase at any time within three to fifteen calendar days following
the date the contract was signed by the purchaser.
The Company markets and sells its Vacation Intervals to residents of certain
states adjacent or proximate to the states where the Company's resorts are
located. Many of these neighboring states also regulate the marketing and sale
of Vacation Intervals to their residents. Most states have additional laws which
regulate the Company's activities and protect purchasers, such as real estate
licensure laws; travel sales licensure laws; anti-fraud laws; consumer
protection laws; telemarketing laws; prize, gift, and sweepstakes laws; and
other related laws. The Company does not register all of its resorts in each of
the states where it registers certain resorts.
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The Company believes it is in material compliance with applicable federal
and state laws and regulations relating to the sales and marketing of
Vacation Intervals. However, the Company is normally and currently the subject
of a number of consumer complaints generally relating to marketing or sales
practices filed with relevant authorities, and there can be no assurance that
all of these complaints can be resolved without adverse regulatory actions or
other consequences. The Company expects some level of consumer complaints in the
ordinary course of its business as the Company aggressively markets and sells
Vacation Intervals to households which may include individuals who may not be
financially sophisticated. There can be no assurance that the costs of resolving
consumer complaints or of qualifying under Vacation Interval ownership
regulations in all jurisdictions in which the Company desires to conduct sales
will not be significant, that the Company is in material compliance with
applicable federal and state laws and regulations, or that violations of law
will not have adverse implications for the Company, including negative public
relations, potential litigation, and regulatory sanctions. The expense, negative
publicity, and potential sanctions associated with the failure to comply with
applicable laws or regulations could have a material adverse effect on the
Company's results of operations, liquidity, or financial position. Further,
there can be no assurance that either the federal government or states having
jurisdiction over the Company's business will not adopt additional regulations
or take other actions which would adversely affect the Company's results of
operations, liquidity, and financial position.
During the 1980's and continuing through the present, the timeshare industry
has been and continues to be afflicted with negative publicity and prosecutorial
attention due to, among other things, marketing practices which were widely
viewed as deceptive or fraudulent. Among the many timeshare companies which have
been the subject of federal, state, and local enforcement actions and
investigations in the past were certain of the partnerships and corporations
that were merged into the Company prior to 1996 (the "Merged Companies", or
individually "Merged Company"). Some of the settlements, injunctions, and
decrees resulting from litigation and enforcement actions (the "Orders") to
which certain of the Merged Companies consented purport to bind all successors
and assigns, and accordingly binds the Company. In addition, at that time the
Company was directly a party to one such Order issued in Missouri. No past or