THE CARAVELLE RESORT OWNERS ASSOCIATION, INC.

C/O RESORT ASSOCIATION MANAGEMENT, INC.

P.O. BOX 1708

NORTH MYRTLE BEACH, S.C. 29598

ATTENTION ALL HOMEOWNERS

On Wednesday, January 13th, 2021, we will be repairing an issue on the rod. Which in turn will require the building to have no hot water from 10 AM to 5 PM. 

We apologize for the inconvience but the repair is neccessary.

January 7, 2021

Dear Caravelle Homeowner:

As previously communicated, your Board has been investigating the possibility of reducing various operational and financing costs without compromising the financial viability or operational stability of The Caravelle.   Based upon The Caravelle’s current financial position, together with its existing monthly cash requirements, the Board is prepared to move forward on the following:  

• The Bulk Service Contract was opened for RFPs during the fourth quarter of 2020.  The following service categories, Maintenance, Janitorial, Pool Service, Trash Removal, Landscaping, and the coordination of the fire alarm system and elevators with the respective vendors were requested to be addressed by those interested in submitting a complete proposal on those services included in the RFP.  Four companies responded.  The levels of services to be addressed in the RFPs were required to be consistence with The Caravelle’s specifications.  Of the respondents’, only two addressed all of the RFP’s requirements.  The incomplete responses generally failed to address all of the categories included in the RFP.  The Board felt a piecemeal approach to managing The Caravelles’s maintenance essentials was incompatible with the requirements of The Caravelle maintenance model.  An organized maintenance system operated through a centralized management structure addressing all of the RFP’s requirements is deemed to be in the best interest of The Caravelle.  The Board recognizes that not everyone will agree with this centralized management approach but that is the model adopted by the majority of the Grand Strand’s CIRA entities.  The Board believes that they are on firm ground in this regard.   As such, those entities who chose not to address all of the requirements of the RFP were not considered for the reason cited above.
• The Board is sure that you will discover (from disgruntled sources) that the Board did not accept the lowest responder’s bid.  This is true.  The Board is also sure that you will not be told that the responder’s initial bid was incomplete and that it was originally considerable higher.  Upon learning that his bid was higher than the other bids, in order to tender the lowest bid, he lowered his bid on at least two subsequent occasions. When he again failed to submit the lowest bid, in desperation, he announced that he would perform the bulk Services for The Caravelle at the lowest tendered bid.   He announced that he would match the lowest bid.  Some of you may believe this to be a sound business tactic.  It is not.  This is problematic from many perspectives, not the least of which is that it speaks to the overall fairness of the process, its perceived absence of integrity and most notably its lack of ethics.  The Board is sure that any discerning individual can perceive the danger exhibited by this type of behavior.  The Caravelle chooses not to participate in any activity with someone whose integrity is in question from the outset. 
• VMB, Inc. has been awarded the Bulk Service Contract.   Because of VMB, Inc.’s on site presence, response times for accidents or emergencies will be faster that other vendors who do not have a twenty-four presence on campus.  Also, VMB, Inc.’s familiarly with the campus infrastructure also provides The Caravelle with an additional safety factor, which none of the other presenters could match.  Notwithstanding what anyone may believe, the learning curve related to the campus infrastructure is very steep.
• During the RFP process, it was determined that the cost of the current annual bundle of services could be reduced by a factor of $75K.  This saving will be effective 01/01/2021

Included in a previous communication, the Board noted that The Caravelle’s water usage and related costs had increased unexpectedly.

• The usage factor increased by a factor of approximately 300 percent.  An increase in the cost of water from approximately $30.00 to $90.00 per condominium per month was noted.
•  An inquiry of the City of Myrtle Beach’s Water and Sewer Department resulted in the disclosure that they had exercised an already scheduled replacement of the water meter sometime in June of 2020.  The water meter that was replaced caused The Caravelle’s reported water consumption to be reported at a rate which was lower that its actual consumption for quite some time. 
• In an attempt to determine the propriety of the City’s contentions regarding The Caravelle’s newly determined water usage, a number of water system infrastructure water tests were performed.  During September, the Board requested that the City check on the accuracy of the newly installed water meter’s readings via diagnostic testing.  The result of the tests indicated that the meter was operating properly.  During October, a second test was performed by closing the main water valve on the second floor of the building to determine if there was a water leak between the meter and the building’s main water valve.  No leak was determined.
• Inspections of a number of condominium’s water closets revealed that some of the mechanical flappers were faulty and required replacement.  This matter will eventually affect all of the campus water closets.  This is not an isolated situation unique to The Caravelle.  It may be found in any number of the condominium properties along the Grand Strand. 
• The Board has determined that, in an effort to assist in a reduction of the wasted water emanating from defective flappers, a flapper replacement program will be initiated as soon as possible. 
• It has been determined that a cost of approximately $10K will be needed to address this matter.  The Board wishes to assure you that this process will be addressed in a timely manner.
• Although the exact payback period for this maintenance project cannot be accurately predicted, it is certain that The Caravelle’s ongoing water consumption and associated operating costs will be favorably impacted by these corrective actions far into the future.  

One final note, the Board wishes to inform the membership of an ongoing situation among the Association and a number of The Caravelle’s homeowners.  It involves the matter of uncollected past due assessments.

• Currently, The Caravelle has a serious past due assessment portfolio of approximately $150K.
• During 2020, The Caravelle notified delinquent homeowners via certified mail of their accounts past due status.  The Caravelle will continue to employ other means to contact these homeowners to inform the delinquent homeowners of these important matters.
• The Caravelle has initiated the processes as outlined in the Master Deed to secure the payment of these past due assessments.
• You will undoubtedly hear comments regarding the Board’s draconian measures being utilized to obtain these past due assessments. 
• The Board can assure you that the methods being employed are fully endorsed by The Caravelle’s Master Deed.
• These past due assessment balances represent approximately 5% of The Caravelle’s 2020 and 2021 budgets, respectively. 
• If the timely collection of these past due assessments from the delinquent homeowners could have been assured, the Board could have elected to reduce your 2021 assessments by an additional factor of 5%, or a total of 15%, instead of the 10% currently incorporated in the 2021 budget. 
• Homeowners who faithfully satisfy their financial obligations to the association are placed at an economic disadvantage when some of their fellow homeowner’s fail to discharge their respective financial responsibilities to the Association in a timely manner.
• When some homeowners fail to properly remit their assessments to The Caravelle, their failure causes all of the other homeowners’ assessments to be increased to cover the shortage created by those who failed to pay.

Thank you

Your Board of Directors

                                                 December 22, 2020

Dear Caravelle Homeowners,

There seems to be some confusion and frustration that dues are being lowered by 10%.

Here is a recap of some of the financial concerns and obligations for which the Association continues to be responsible. A copy of the 2021 budget has been posted on the website www.ramresorts.com for your review.

• The Board is responsible for the fiscal viability and stability of the Association's financial affairs.
  • Liquidity and Cash Resources: Despite approximately $3.3M in budgeted revenue for 2020 the Association has experienced a decrease in cash resources of approximately $295K since December 31, 2019 through the end of November2020.
  • The Association continues to amortize its financial responsibility related to its long-term debt ("loans"). Since the beginning of the year, and through the end of November 2020, the Association has paid approximately $892K in principal and interest to its lenders and is required to pay $82K in December. Despite what may have been claimed, the Association will be required to pay an additional $388K during 2021 to fulfill its obligations under the terms of these debtresponsibilities.
  •  The 2020 Budget called of an insurance expenditure of approximately $604K. The actual cost of the Association's 2020 insurance was approximately $790K. It is expected that the Association's 2021 insurance cost will be in the $790Krange.
• The 2021 bulk services cost will decrease by a factor of$51K.
  • Utility costs continue to increase. Due to a malfunctioning water meter which was replaced by the City during the year, and based upon the water and sewer usage experience since the meter's replacement, it is expected that the water and sewer costs will increase by a factor of$1OOK.
  • It is never a sound concept to defer or delay major repairs and replacement activities, (Reserve costs), into some unknown time period in the future. To base maintenance activities related to long term capital assets based on someone's definition of what constitutes an emergency is unwise indeed. One only needs to observe all of the deferred maintenance capital project occurring in the Grand Strand to understand the inadequacy of such a policy. The obvious danger to the homeowner is the unexpected, but usually necessary, compounded costs which the homeowner will be required to pay. These funding requirements generally take on the form of a special assessment which may run into the tens of thousands of dollars depending upon when the "deferred  or delayed" maintenance is recognized to have become an emergency. The 2019 "Reserve Study” which was compiled last year, indicates that the Association should have approximately  $641K allocated to its Reserve Fund Cash balances at the end of 2020 with an additional expected

2021 contribution to the Reserve Fund Cash  Balance of approximately  $418K.  Currently the Association has approximately $112K in a Reserve Money Market account and a 2021 budgeted Reserve Fund contribution of approximately$202K.

• The 2021 budget does not provide for a 10% reserve funding position. This will be problematic for those owners who may wish to sell their unit due to the restrictions encountered by potential buyers seeking financing from the major lendingsources.

I would now like to address the financial viability of the 30% reduction in the dues for the 2021 budget year which is being advocated by some of our homeowners.In its simplest evaluation,the proposal will cause extreme financial damage to the stability of the Association's financial position which in tum will be forced down to the homeowner level in the form of a potential special assessment or other unpleasant circumstance.

• The 2021 budget already includes a 10% or $328K decrease indues.

  •     An additional 20% would reduce dues and related cash into the Association's funding of

$656K.

• The  argument  of  all  of  the  loans  have  been  satisfied  does  not   represent  reality.    The Association will have a amortization burden of $388k to address in 2021.      The Associations 2021 Insurance funding requirement is $186K more than the  2020 budgeted allotment.

• Bulk services will increase by a factor of $51K from the 2020 budget.
  • Water and Sewer costs are expected to increase by a factor of $100K.
• Reserve Cash is understated by a factor of approximately $745K.

These factors cited alone without taking into consideration  the  Reserve  Cash  understatement comes to approximately $725K. This value exceeds the additional 20% reduction  in dues  by  a factor of $69K.

The Board has also reviewed the cash flow consequences of an additional 20% or $656K  reduction in the Association's dues structure. The 2021 budget was prepared using the accrual method of accounting. The 2021 budget was then adjusted for the decrease in dues and for the impact that certain cash-based transactions have on the cash position of the Association throughout the 2021 year. Based upon the consequences of  these  modifications  to  the  Association's  cash  requirements, the model demonstrated that the  Association  would  be out of cash  in  April  2021. By the end of 2021 the Association would  be required  to acquire  an additional  $529K  in funding to brings it cash position back to break even. Obviously, the Association cannot operate  without  cash nor can it operate with a zero cash position. The  Association  would  be forced  to  special assess the membership, reduce its operating costs, reduce services, or a combinationall.

I am actually a little surprised to hear a petition is going around. Who wouldn't sign a petition to reduce dues? Whomever decided to start this petition should have reached out to the management company to make sure their thoughts were correct. There is a budget which is included in this email. Believe me, we the board would love to reduce the HOA dues even more. If you look at your budget, this is not feasible at this time. As I always say, this board did not put us in this financial situation but has worked hard to clean up the property and slowly get us out of this financial position.We also have a responsibility to everyone to keep the resort financially stable.