Thoughts from the week

Well, I admit my posting frequency has slowed down considerably here lately. It’s not for a lack of interest trust me! It seems to be for a lack of time these days, as my MBA finance course is turning out to be quite the challenge.

Anyhow, I’ve been thinking over several of the Disney related items in the news lately as we ponder the future of our economic markets on one hand and our love for the mouse on the other. Okay, so maybe not in equal amounts granted.

As we roll into the end of Disney’s FY, the past couple of weeks have been crammed with announcements and changes across the Disney front. All those announcements can only be to as setups for the quarters and fiscal year(s) to come. As the finance guys would say, you want to get as much of that good will priced into the stock as expected returns as you can going forward. I think as a result of all this talk, Disney’s stock is still holding it’s own, which is great.

The studio’s has been very active this week with announcements of almost their entire upcoming slate.

Parks and Resorts has announced next’s years promotion: one which as I think about it more and more could be a true stroke of marketing brilliance where everybody can be a winner. And the Magic is out of dry dock with many of the upgrades that are on the Wonder.

The Networks are rolling and making announcements.

It’s a very busy time as you can see for all of the major business units.

The only thing that’s bugging me down in my gut is all the discounts for fall hotel rooms on property. We are going to be going down for some, *ahem* highly motivated looking around shall we say over Columbus Day weekend and the hotels are PACKED on property. It’s always a busy weekend.

But the very next week prices on a value resort are half the rack rate at $59 a night? Stay at Ole’ Key West for less that $200 a night? That bothers me for some reason, especially given that Bob and Tom said forward looking bookings were holding up well through the end of the year. No doubt they are pulling out all the stops to flex the profit potential and margins as much as possible.

Oh, and for those of you lamenting the loss of the Hard Rock Park just up the road from me in Myrtle Beach? We went at the beginning of the year, and frankly we just weren’t that impressed. It’s a park that really catered to adults, with a LOT of adult innuendo in their advertising and shows (a bunch of surfer guys smoking pot in a VW microbus interest you and your tweens? I didn’t think so.) As you would expect from Hard Rock, the food was pretty decent (they had a pretty killer coffee/sweets shop and a darn good barbecue place), and they did the best they could for their nightly closing/fireworks given their location right in the flight path for the airport (no certain who thought of that one), but the Nights in White Satin ride left me wondering what in the heck I’d just seen.

It’s unfortunate… Myrtle Beach could use something, but it’s a tough crowd that, as someone else mentioned, has lots of Six Flags and other parks close to them already when they are at home. On that scale it just wasn’t different enough.

Marceline, MO hosts 10th Annual Toonfest

I think I’ve mentioned that my father currently lives in Marceline, MO, often referred to as Walt’s boyhood home (even though he was born in Chicago and lived in Marceline for only about 5 years as a youngster).  Walt often credited Marceline with being the foundation of so much of his life in film, the parks, etc.

In fact, dad lives about 5 blocks from the home the Disney’s lived in, which is still on the edge of town.  Today it’s on the main north south road, Highway 5, that runs along the eastern edge of town (which is not the same as the town’s Main Street by the way, which is Kansas Avenue). 

A house is still there, though I believe it’s not the original and it’s in private hands.  Out back however still stands a barn and a tree many in the area refer to as Walt’s Dreaming Tree.  There is a little walkway from the side street, which is Broadway as I recall where you can walk to the tree and a few small benches in the area.  There is a nice picture on the web here, along with some good pictures of the recreated barn.

Every year they host a festival in town called Toonfest.  Over the last decade they’ve attracted some pretty big names to come and speak, including the likes of Pete Doctor, Ann Telnaes, and many others. 

I’ve yet to make it myself, but my brother was there this year.  I asked him to take some pictures for us, so we’ll see if he got any that are worth sharing.

Give It Up for Disney

Wow...

What a mess!  The market's are reeling, stocks are taking a beating and my 401(k) looks like pounded group round . . .

But Disney's stock?  Holding just fine, thank you very much.  After three days of market pounding with over 1000 points off the Dow, Disney share are still trading in a tight dollar range from $32 to $33.

That's just phenomenal folks.  Almost unbelievable.  Even more so for those of you who are finance or market stock pickers, since Disney has a Beta of .96 (which basically means the stock almost moves in unison with the market, in general).

Props to the folks at Disney for hanging tough.

Bob Iger says Disney Still Doing Well

Reuters had an article a couple of days ago that highlighted a recent talk Bob Iger gave at a London Disney movie premiere.

Mr. Iger basically confirmed the same general guidance they gave from the 3rd quarter conference call, which is that Disney is doing okay despite the tough economy.  He also noted that they don't see any changes in the way they are managing the company going into 2009.

Disney also announced the date of the 4th quarter and EOY results webcast will be November 6th at 4:30 PM EST.  That's a half hour after market close at the NYSE, so we'll see if they get a Friday bounce depending on what they announce.

As for Jay Rasulo's announcement coming up this week, my bet is on another hotel complex along with some kind of Big Apple package.  Disney has had the Broadway hook-up for sometime of course, but no real way to exploit that beyond the tickets (think hotel rooms, alternate entertainment, etc.). 

This is pure speculation on my part, but my money would be on a semi-fixed Adventures-By-Disney sort of setup that ties in a trip to the Big Apple along with other family fun fair that anybody can book and 'afford', along with tickets to whatever Disney has on Broadway.  The A-B-D trips are nice, but very pricey for most pocketbooks with a family of 4 (almost $10 grand BEFORE airfare).  Besides, at certain times of the year Disney World is like a little New York, in that everybody in the park seems to be from Jersey, the City, or even down Philly way.  So they have a captive audience that WANTS an outlet.  Maybe they'll throw in some more of the regional based entertainment complex idea like they just pseudo announced with the Oriental Land Company in Japan?

Regardless, I'm betting against anything to explicitly do with China/Shanghai.  You don't bring in a family travel expert to talk about China in NY City.  And my bet is that anything in China will a) have to wait until Hong Kong gets straightened out and b) when it comes, it'll come from Iger, not Rasulo.

I wonder if Disney is a first name joint?  Does everybody call them Bob and Jay?  I know Walt insisted on being called Walt. . . 

Ed Catmull Authors HBR Article on Pixar

Ed Catmull has authored an article for the cream of business management magazine, The Harvard Business Review on managing creativity.  The article, entitled 'How Pixar Fosters Collective Creativity' is a great look inside the management philosophy and interior of Pixar, and probably to a slightly lesser extent what Ed and John are trying to do at Disney Animation Studios.

You can read the article for free at the HBR website after agreeing to a short Terms and Conditions page here.

Go check it out!

Disney Cruise Ship Coating

For those of you who are geeky like the engineer in me, I did some more looking over the weekend at ship hull coatings like the one the Disney Magic is going to get in dry dock soon.

Here is probably what it comes close too, if this isn't the actual stuff:

International Marine Intersleek 900

This particular coating is made by a British company.  The coating in question has been used on more than 100 ships (it's predecessor Intersleek 700 was far more than that of course). 

As we speculated, other cruise lines are using it already, predominately Carnival (WARNING: PDF link). 

The manufacturer claims an up to 6% increase in efficiency and less hull issues to deal with in subsequent dry docks: it's ding resistant, slimy, gooey thing resistant (they call it fowling and slime), and also helps resist steel deterioration under the coating and is environmentally friendly.

Plus, it's nice and glossy... something like it should look good an Disney's ladies of the sea.

WDW and Four Seasons Update

Sorry it's been a little slow around here lately.  It's been a very busy couple of weeks!  But this blog update should be fun for any of you interested in the land transaction for the Four Seasons property, and hopefully make up for some of my lack of posts earlier with it's detail.

The wonderful thing about the Internet (at least for most of us) is the level of access to government records is growing very quickly.  One of those areas of rapid growth is in the areas of public records management, and more specifically county records of deeds, mortgages, etc. 

Most people don't realize that this type of information has ALWAYS been in the public domain.  Your ownership rights to property in most jurisdictions in the US is a matter of public knowledge, as well as anybody you owe money to in relation to that property (mortgages, liens, property taxes, etc.).  In the past you've had to go to the country courthouse or the county records office to look this information up, but today many counties are putting ALL that information online.  In our case that also includes information about the deeds and property sale of land from inside the Reedy Creek Improvement District to the Four Seasons group. 

Here are some of the details from the many documents required to file this property conveyance.  You can do the search yourself at the Orange County Comptroller website. 

All of these agreements in most counties are recorded by a book designation and then a starting page designation.  The size of the books varies from place to place, but isn't necessary for this discussion really.

BTW, before I get into this, if you've ever bought a timeshare in Florida, those are fractional OWNERSHIP purchases, so your deeds and mortgage liens are in the same database as well!

Oh, and one other thing, Disney calls this are the NERP, for Northeast Resort Parcel.  This isn't ALL the documents, but it's the major ones.

In the immortal words of Peter Pan, 'Here we GO!'

Book 9745 Page 8651 -

Actual Deed of Conveyance from WDW to Four Seasons LLC (hotel parcel)

Sold for the price of $10.

Book 9745 Page 8663 -

Actual Deed of Conveyance from WDW to Four Seasons Orlando Residential LLC (housing parcel)

Sold for the price of $10.

Book 9745 Page 8670 -

Actual Deed of Conveyance from WDW to Four Seasons Orlando Golf LLC (golf course parcel)

Sold for the price of $10.

Book 9722 Page 7598 -

First document is what's called an Interlocal Agreement.  It's basically between Disney, RCID and Orange County on who will provide what basic services to the new area, since in the past it has all been RCID and Disney's responsibility.

Here are some interesting facts:

• There are at least 6 permits for improvement of the property under RCID's control that govern water control, stormwater runoff, wetlands, etc.
• This agreement is good for 40 years
• Under this agreement WDW and RCID will maintain those permits and responsibility for maintenance of the appropriate items in the new area just as they have in the past (not Four Seasons or the county).
• RCID will maintain all the required ecological resources in the NERP area in accordance with their permits.
• RCID and Disney have agreed to build the necessary infrastructure to support water and sewer, and then will transfer those to the county who will be responsible for them after that.

Book 9722 Page 6348 -

Second Interlocal Agreement that updates property description

Book 9722 Page 9231 -

Second Interlocal Agreement Incorporated

Generally the same Interlocal Agreement as above, this time with the appropriate pictures in the appendices that show the area in question, and a detailed survey description of the property area (which strangely enough is NOT a simple shape of any sort).

Book 9745 Page 8624 -

This is the drainage contract between the property owners association and RCID for providing drainage services.  Annually the new owners have to pay a fixed percentage of the total costs for RCID operations in accordance with their percentage of the total RCID area, which is apparently 1.5% (in other words, the property in question is 1.5% of the total property under RCID's responsibility).

Here is a list of the planned improvements:

• NE Mansions
• NW Villas
• NW Condos
• NW Time Share
• Hotel
• Central Villas/Cottages/Estate/Club Homes
• South Central Mansions, Club Homes and clubhouse
• SW Clubhouse and golf view Villas
• SE Clubhouse Villas, clubhouse homes
• parking and roads

Book 9317 Page 295

Agreement on modifications to the Orange County planning usage to allow the new construction.

Book 9745 Page 8186 -

Covenants, Restrictions, & Conditions for NERP (316 pages!)

Basically in accordance with the transfer of property control, Disney and the purchasing entities agree to establish a non-residential property association that consists of membership RESTRICTED to the Disney Parcel owner and the Hotel Parcel owner.  Everybody else has to abide by the rules in this document, but have to take any requested changes to said group.  This allows for maintenance of the properties construction, appearance and maintenance to remain thematically matched to the greater WDW resort area.

NOT permitted on the property (non-inclusive, since the list is HUGE):

• freestanding video arcade, lounge, or game room
• bowling alleys
• freestanding bars, night clubs, etc.
• liquor or package store
• gun ranges
• freestanding theater or cinema
• outdoor entertainment areas
• no attraction materials for anything but Disney, Disney Cruise Lines, gambling establishments, or Vacation Clubs for DVC
• trailer courts or campgrounds
• industrial uses
• adult entertainment shops or venues
• flea markets
• massage parlors
• no banks (other than ATM's)

Current planned layout.  The dark double line is the main access road, the curvy line to it's left if the existing drainage canal.  (look for the hidden Mickey!, it's the putting green for the golf course.)

The Disney Parcel:

Book 9745 Page 8502 -

Covenants, Restrictions, & Conditions for Hotel, Timeshare and golf course parcels

This is where it gets interesting. 

If the hotel owner does not meet the agreements in this contract, then Disney has, at it's sole discretion, the right to repurchase the hotel property or to compel the owner to sell it to someone else of Disney's choice.  The repurchase prices is set out specifically depending on the level and type of default.

This doesn't really apply to the single family homes nor the sold timeshares, but does include any unsold timeshare units or single family lots.

Book 9745 Page 8767 -

a non-disturbance agreement which basically says Disney will leave the new company to run operations as long as they are within the guidelines established.  Also names the Hotel parcel owner as Four Seasons Hotels Limited, the fractional ownership as Four Seasons Vacation Ownership and the resort management as Four Seasons-Resort Club Management, Inc.

Book 9722 Page 7639 -

This is the Developer's Agreement between Orange County, RCID and WDW, which is also good for a term of 40 years.  This sets out basically how the commercial property association will be setup and maintained, what it's responsible for, etc.  It also describes how the Home Owners Associations will be setup, run, etc. for the single family homes and the CPOA's responsibilities for infrastructure in those areas as well.

Other notes:

• Orange County has traffic control and law enforcement
• RCID will provide EMS, fire and waste

Book 9722 Page 7639 -

Lease agreement under which Disney agrees to run the golf course for the FS Golf LLC for a contract terms of 30 months.

That's really just the tip of the iceberg, with lots of other ancillary agreements for power, etc. etc. etc.... 

Again, it's all stuff that guys like Lou Mongello LIVE for (it's that lawyer thing I think).