Condos split up as time shares

Experts say this recession has been unlike any other, but a trend from the 1980s slump may be re-emerging in the Grand Strand's condo and time share market.

The down economy has left condo developers with a glut of properties and no one to buy them. At one troubled property in North Myrtle Beach, the developer had sold only about 45 condos in a 232-unit building until finding a creative way to lure buyers.

Aiming to see a return on its investment, Towers on the Grove contracted hotel and time share company Wyndham Vacation Ownership to sell about 137 condos as time shares in a deal announced last week, according to a Wyndham representative. Wyndham will not take an ownership stake in these units but will earn a commission for each sold. Time share sales began last week, and five units have been sold.

When the recession hit, many companies contacted Wyndham wanting to unload their unsold condos, said Franz Hanning, president and CEO of the Wyndham division.

"We started getting calls from developers with distressed assets," Hanning said. "We started thinking about how we could use what we do best, our sales and marketing ... without actually buying the inventory."

Selling properties without having to first purchase them minimizes the risk of Wyndham losing money on the deal, Hanning said. Wyndham selected the Towers as its first venture in a commission-based arrangement, but the company is working on several similar deals, he said.

A similar strategy was last used in the recession of the late 1980s, said Ken McKelvey, CEO of Defender Resorts, a time share management company. McKelvey, who has more than 30 years' experience in time shares, saw the area flood with condos after the market crashed, he said. Many of the properties were changed to time shares and sold.

McKelvey, who had no involvement in the deal, expects to see more deals like that between Wyndham and Towers because of the recession.

Time shares appeal to people during down economies because they are less expensive than outright condo ownership, said Tom Maeser, a market analyst for the Coastal Carolinas Association of Realtors. Unlike similar ventures in the 1980s, time shares now can also benefit by being associated with big names in the hotel business such as Wyndham and Marriott, he said

But time shares may not be a cure-all, as they also face stiff competition from hotels and rental condos with high discounts, Maeser said.

"These discount rental programs that are online have really created a real competitive situation," Maeser said. "My feeling is that they're getting the prices of the regular [rental] condos down where it's almost hard not to choose that option."

Time-share buyers also may have trouble getting financing, Maeser said. Although Wyndham has established a line of credit, customers will have to meet higher credit standards than before the recession. Buyers should also be aware that time shares may be hard to resell because the market is oversaturated, he said.