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HomeMy WebLinkAboutBACKGROUND & EXHIBITSBDPMAmendSMA388.jma 09-21-20 COUNTY OF HAWAII PLANNING DEPARTMENT BACKGROUND REPORT DPM ACQUISITION LLC, dba DIAMOND RESORTS INTERNATIONAL FORMERLY PACIFIC MONARCH RESORTS, INC.) AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO. 388 DIAMOND RESORTS INTERNATIONAL,INC. (FORMERLY PACIFIC MONARCH RESORTS, INC)is requesting an amendment to Condition No. 2 (time to complete construction) of Special Management Area Use Permit No. 388,which was approved to allow the development of a commercial/condominium complex and related improvements on 76,739 square feet of land. The property is located on the makai side of Ali'i Drive bounded by Ali'i Drive and Kahakai Road, south of Royal Kona Resort and north of Kona Reef Condominium, Pua`a 3rd,North Kona, Hawai`i, TMK: 7-5-018:011. APPLICANT'S REQUEST 1. Request: The applicant is requesting a five-year time extension to comply with Condition No. 2 (time to complete construction) of Special Management Area Use Permit No. 388, which was approved on December 14, 1998, to allow the development of a commercial/condominium complex, with 7,007 square feet of retail space, forty eight 48) 2-bedroom condominium units and related improvements on approximately 76,739 square feet ofland. Final Plan Approval for the project was issued on June 6, 2007. On September 19, 2008, the Planning Commission granted a five-year extension ofthe time to complete construction. On May 15, 2014, another amendment was approved to allow a five-year time extension or until May 15,2019, to comply with Condition No. 2. The most recent Plan Approval, dated May 22, 2017, approved four levels of timeshare resort units above an existing concrete parking garage. The proposed development will consist of forty six(46) 3-bedroom units with 119 parking stalls and perimeter landscaping. Previously, the total combined area of 76,739 square feet consisted of parcel numbers 11, 16, 26, 78, and 80, and portions of property(parcel numbers 11, 78 and 80)were used for a mini golf facility. Since that time, the parcels have been consolidated into one parcel totaling 76,739 square feet. Condition No. 2 states: Construction of the proposed development shall be completed within 5 years from the effective date of this amendment." Planning Department Exhibit 1 —Applicant's request dated November 13,2018) 2. Reasons for Request: The applicant cites the reasons for the delay since the approval of the previous time extension amendment request, which include fiscal challenges with the previously proposed design of the project that make it impossible to meet the current deadline to complete construction. After assuming ownership ofthe property in 2013, Diamond Resorts had the opportunity to conduct a feasibility study to determine the current actual cost for the original design ofthe project. The study revealed that the actual cost exceeded the budget allotted for the project by a range of 20 to 30 million dollars. The applicant has stated that the design is currently being modified to make it economically feasible for build out and completion. The redesign effort has caused significant delays that have led to this time extension request. 3. Landowner:, The landowner of the property is DPM Acquisitions, LLC,who has authorized the applicant to submit the amendment request. BACKGROUND INFORMATION 4. December 3, 1998: Effective date of approval of SMA No. 388 to allow the development of a commercial/condominium complex and related improvements. Planning Department Exhibit 2—SMA No. 388 Approved on December 3, 1998) 5. January 31,2002: The Planning Director grants an administrative 5-year time extension or until December 13, 2008 to comply with Condition No. 3 (time to complete construction). 6. March 28, 2006: The Kailua Village Design Commission voted to recommend to the Planning Director the approval of their proposed design for the resort condominium project. (Planning Department Exhibit 3—Planning Department letter dated March 31,2006) 7. June 6,2007: Effective date of Final Plan Approval for a 48-unit multi-family residential building with retail space. (Planning Department Exhibit 4—Final Plan Approval dated June 6,2007) 8. September 19,2008: Effective date of approval of an amendment to SMA No. 388, which allowed a 5-year time extension or until December 13, 2013 to comply with 2- Condition No. 3 (time to complete construction). (Planning Department Exhibit 5— Amendment to SMA No.388 Approved on September 19,2008) 9. May 15,2014: Effective date of approval of an amendment to SMA No. 388, which allowed a 5-year time extension or until May 15, 2019 to comply with Condition No. 2, previously titled Condition No. 3 (time to complete construction). (Planning Department Exhibit 6—Amendment to SMA No. 388 Approved on May 15, 2014) 10. May 22, 2017: Effective date of Final Plan Approval for four levels oftimeshare resort units above an existing concrete parking garage, for a total of 46 3-bedroom units. Planning Department Exhibit 7—Final Plan Approval dated May 22, 2017) 11. Current Building Status: Several building permits have been issued and final inspections completed for construction ofretaining walls, structural columns for the foundation and an elevated concrete slab. An electrical permit was issued and final inspection completed for the installation of empty electrical conduit. Construction is currently on hold pending the approval of the amendment request to SMA Use Permit Condition No. 2 for a time extension to complete construction. Additionally,the applicant states that the design is currently in the process of being modified. Final plan approval stipulates that there shall be no modifications to plans without prior written approval of such changes by the Planning Department. The current plan approval expired May 21, 2019. (Planning Department Exhibit 8—Floor Plans and Elevations) DESCRIPTION OF THE PROPERTIES AND SURROUNDING AREA 12. Subject Property: The property is 76,739 square feet in size and is irregular in shape. The property is located on the makai side ofAli'i Drive bounded by Ali'i Drive and Kahakai road, south of Royal Kona Resort and north ofKona Reef Condominium. To date,the retaining walls, foundation and elevated concrete slab have been constructed. There have been utility improvements, including a 12-inch waterline in Walua Road dedicated to the County and an 8-inch waterline installed on the property. The water commitments and facilities charges have all been paid. 13. Zoning: Resort-Hotel (V-.75). 14. General Plan LUPAG Designation: Resort Node. 15. State Land Use Designation: Urban. 3- 16. Kona Community Development Plan: The subject property falls within the Kona CDP Urban Area. 17. SMA: The property is located within the Special Management Area(SMA). 18. Surrounding Zoning/Land Uses: Properties immediately adjacent to the subject property are within the State Land Use Urban District and zoned Resort(V-.75). There is an area zoned Single-Family Residential 7.5 (RS-7.5) southwest of the project site and across the street there are three parcels zoned Village Commercial (CV-10). The surrounding area is characterized by a mix of condominiums, single-family residences, restaurants, and a hotel. 19. USDA Soil Survey: rPYD (Punaluu extreme rocky peat, 6-20 percent slope). The Punaluu series consists of well-drained thin organic soils over pahoehoe lava bedrock. The surface layer is black peat and approximately four inches thick. The peat is rapidly permeable. Runoff is slow and the erosion hazard is slight. 20. Land Study Bureau Detailed Soil Classification System: Existing urban development. 21. ALISH: Unclassified. 22. FIRM: Zone"X", areas determined to be outside the 500-year flood plain. PUBLIC FACILITIES AND SERVICES 23. Access: There are two proposed points of driveway access, one from Ali`i Drive and the other from Kahakai Road. Condition No. 4 of SMA 388 requires that Ali`i Drive and Kahakai Road be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainage improvements, and relocation of utilities along the Ali`i Drive and Kahakai Road frontages meeting with the approval of the Department of Public Works. 24. Water: County water is available to the site. A 12-inch waterline in Walua Road has been constructed and dedicated to the County and an 8-inch waterline has been installed on the property, which has been confirmed by the Department of Water Supply. 25. Wastewater: Wastewater will be disposed ofby a sewer line that ties into the County system along Alii Drive. 26. Solid Waste: Solid waste generated by construction and operation of this development must be disposed of at the County landfill. 4- 27. Other Essential Utilities/Services: All essential utilities and services are available to the project site. AGENCY COMMENTS 28. State Office of Planning: (Planning Department Exhibit 9—December 21,2018 Letter) 29. State Department of Education: (Planning Department Exhibit 10 December 26, 2018 Letter) 30. Department of Water Supply: (Planning Department Exhibit 11 —December 21, 2018 Letter) 31. Kona Traffic Safety Committee: (Planning Department Exhibit 12—December 23, 2018 Email) 32. Department of Environmental Management—Wastewater Division: Planning Department Exhibit 13—December 11, 2018 Memo) 33. Department of Land and Natural Resources —State Historic Preservation Division: Planning Department Exhibit 14—March 14, 2019 Letter) AGENCIES—NO COMMENT/CONCERN 34. State Department of Health, Department of Environmental Management—Solid Waste Division, Police Department, Department of Land and Natural Resources—Land Division and Engineering Division AGENCIES—NO RESPONSE 35. Department of Public Works—Engineering Division, Department of Public Works— Traffic Division, Department of Public Works—Building Division, Fire Department, Office of Housing and Community Development, Planning Department—Long Range Division, Planning Department—Kona Planning Division PUBLIC COMMENTS 36. Letter of Opposition from Richard and Pat Aarhus: (P.D. Exhibit 15—December 11, 2018 Letter) 37. Letter of Opposition from Judith"Heidi"Ruffner, Ph.D.: (P.D. Exhibit 16—February 5, 2019 Letter) 38. Letter of Opposition from Bill and Cindy Armer: (P.D. Exhibit 17—February 18,2019 5- Letter) 39. Email of Opposition from Mark Pheatt: (P.D. Exhibit 18—February 19,2019 Email) 40. Letter of Opposition from Judith"Heidi"Ruffner, Ph.D.: (P.D. Exhibit 19—February 25,2019 Letter) 41. Letter of Opposition from Mai Lieu: (P.D. Exhibit 20—February 27, 2019 Letter) 42. Letter of Opposition from Peggy and Dennis Lindquist: (P.D. Exhibit 21 —March 8, 2019 Letter) 6- ma n a k a Asato ImanakaAsato.com A LIMITED LIABILITY LAW COMPANY November 13, 2018 Mr. Michael Yee, Director Planning Department County of Hawaii 101 Pauahi Street Hilo, Hawaii 96720 Dear Mr. Yee: Subject: _ Annual Report and Special Management Area Use Permit No.388 Amendment Request; TMK: 7-5-018: 11 Our firm represents DPM Acquisition LLC, dba Diamond Resorts International referred to hereinafter as "Diamond Resorts"or"the applicant"), with respect to the above referenced matter. The subject property, consisting of 1.735 acres, is located on the makai side of - Ali'i Drive, bounded by Ali'i Drive and Kahakai Road, and situated south of the Royal Kona Resort and north of the Kona Reef Condominium. On December 14, 1998, the Planning Commission for the County of Hawaii issued Special Management Area Use Permit No. 388 (referred to hereinafter as "SMA 388")to then project developer/owner Pacific Monarch Resorts,Inc. for the development of a commercial/condominium complex and related improvements (See Exhibit A). More specifically, SMA 388 states that the development would consist of a 6,500 square foot, 4-story commercial retail office building, forty-eight(48) 2-bedroom condominium units, 82-parking stalls and perimeter landscaping. This approval was subject to a number of performance conditions, one of which required the construction of the proposed development to be completed within five (5) years from the effective date of the permit. Thereafter, three (3)time extensions have been granted. In 2002, the Planning Director granted an initial administrative time extension to December 13, 2008. Subsequently, the Planning Commission, in its approval dated October 6, 2008 (See Exhibit B), granted a second time extension to complete construction by December 13, 2013. Finally, the Commission granted a third time extension to May 15, 2019 by way of its approval dated June 9, 2014 (See Exhibit C). Diamond Resorts acquired all of Pacific Monarch Resorts, Inc.'s company assets in 2013. After assuming ownership of the property, Diamond Resorts uncovered fiscal challenges with the proposed design of the project that make it impossible to meet the current deadline to complete construction, which is May 15, 2019. In that regard, we would appreciate your considering this letter as a formal request for a time extension on behalf of the applicant. Planning Dept Exhibit 1 121679 Topa Financial Center I Fort Street Tower 1745 Fort Street Mall,17th Floor I Honolulu,Hawaii 96813 I T:808.521.9500 I F:808.541.9050 Mr. Michael Yee, Director ImanakaAsato.com November 13, 2018 Page 2 Nature of Request Diamond Resorts hereby requests that Condition No. 2 of SMA 388, as amended, be further amended to state that"Construction of the proposed development shall be completed within 5 years from the effective date of this fourth amendment." JUSTIFICATION OF REQUEST In making this extension request,the applicant respectfully requests your taking the following into consideration: 1. The applicant's inability to perform within the stipulated period was a result of conditions that could not have been foreseen or were beyond the control of the applicant and not attributable to the applicant's negligence. After assuming ownership ofthe property in 2013, Diamond Resorts had the opportunity to conduct a feasibility study to determine the current actual cost for the original design of the project. The study revealed that the actual cost exceeded the budget allotted for the project by a range of 20 to 30 million dollars. As such,the applicant is currently in the process of modifying the design to make it economically feasible for build out and completion. At present, design modifications contemplate removing the commercial component proposed,but otherwise keeping the original condominium units,parking and landscaping. The redesign effort has caused significant delays that have led to this time extension request. 2.Approval of these requests would not be contrary to the prevailing General Plan, the Zoning Code or the original reasons for approval of SMA 388, as amended. The General Plan designation for this area is Resort Node and Open. The majority of the parcel is designated as Resort Node, which allows for a mix of visitor related uses such as hotels, condominium-hotels, single- family and multi-family residential units, golf courses and other typical resort recreational facilities,resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUP AG Map. The Open designation, which is located on the makai portion of the parcel, allows for parks and other recreational areas, historic sites and open shoreline areas. The property is also zoned Resort- Hotel District(V-.75). Accordingly, the granting of the time extension would not be contrary to the General Plan or Zoning Code. 874169.1 Mr. Michael Yee, Director ImanakaAsato.com November 13, 2018 Page 3 3.Current Status ofthe Conditions set forth in SMA 388, as amended SMA 388, as amended, sets forth six(6) conditions upon which the Planning Commission's approval is based. Condition No. 1 states that"[t]he applicant, its successors and assigns shall be responsible for complying with all of the stated conditions of approval." This summary addresses the applicant's current state of compliance each of the six (6) conditions. Condition No. 2 states that, "[c]onstruction of the proposed development shall be completed within 5 years from the effective date ofthis second amendment." It is this condition that Diamond Resorts is hereby seeking to amend. Moreover, it is our position that the approval issued on June 9, 2014 was in fact the third amendment to SMA No. 388, not the second amendment. Condition No. 3 states that, "[a] sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department of Environmental Management." Since Diamond Resorts is still in the design phase due to the fiscal challenges presented,this condition has not yet been satisfied. The applicant intends to address it when applying for the applicable construction permits. Condition No. 4 states that, "Ali'i Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainage improvements, and relocation of utilities along the Alii Drive and Kahakai Road frontages meeting with the approval of the Department of Public Works. The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the approval ofthe Department of Public Works. Any portion of the subject parcel upon which the improvements to meet this condition are installed, shall be subdivided and dedicated to the County,upon satisfactory completion and prior to the issuance of a Certificate of Occupancy, at no cost to the County." While the applicant did receive Final Plan Approval and a permit to work within the County right-of-way for these required off-site improvements (See Exhibit D),the unanticipated fiscal impact of the current project design resulted in the applicant deciding to delay commencement of said improvements. Condition No. 5 requires that, "[s]hould any remains of unidentified historic sites such as rock walls,terraces, platforms, or human burials, lava tube or cave systems be encountered,work in the immediate area shall 874169.1 Mr. Michael Yee, Director ImanakaAsato.com November 13, 2018 Page 4 cease and the Department of Land and Natural Resources-Historic Preservation Division(DLNR-HPD) shall be immediately notified." It further states that, "[s]ubsequent work shall proceed upon an archeological clearance from the DNLR-HPD when it finds that sufficient mitigative measures have been taken." Previous delays occurred due to the discovery of a 30-foot wide lava tube found on site, and the previous owner adhered to the requirements of this condition by clearing the tube, filling it with engineered fill and concrete and redesigning the tube along with the building to allow for potential differences in compaction. Diamond Resorts also hereby commits to strictly follow the mandates of this condition moving forward. Finally, Condition No. 6, requires that [i]f the applicant should require an additional extension oftime,the applicant shall submit the request to the Planning Commission for appropriate action." In compliance with this condition, Diamond Resorts is submitting this request in writing to the Planning Commission for a request for an additional extension of time. We have also attached an updated surrounding property owners list, and corresponding map, for your reference (See Exhibit E). In light of the above,the applicant respectfully requests your favorable consideration and processing of this time extension request. Please find enclosed twenty (20) copies of this letter request with enclosures, a list of surrounding property owners, the real property tax clearance, and the filing fee of 250. We trust that everything is in order for your processing. If there are questions, please feel free to contact me. Thank you very much. Sincerely, IMANA • ASATO, A Limited is,ility Law ompany Michael L. os Kimberley W. Yoshimoto Enclosures 874169.1 I. Stephtn K.Yamashiro Mayor gixixtdv n ixttti PLANNING COMMISSION 2S Aupunl Stmt,Room 109 • Hilo,Hawaii 96720-4252 808)961-8288 Fax(808)961.9615 CERTIFIED MAIL Z 095 324 407 t DEC'1,k4 1996 Mr. Sidney Fuke 100 Pauahi Street, Suite 212 Hilo, HI 96720 Dear Mr. Fuke: Special Management Area Use Permit Application(SMA 98-7) Applicant: Tuso Development&Management, Inc. Request: Allow for the Development of a Commercial/Condominium Complex and Related Improvements Tax Map Key: 7-5-18:11, 16, 26. 78 and 80 The Planning Commission at its duly held public hearing on December 3, 1998, voted to denystandingtoMaryRichrodonherrequestforacontestedcaseprocedureduetoher non-submittal of the $100 filing fee, as required by Rule 4 of the Planning Commission relating to contested case. The Commission then voted to approve the above-referenced application. Special Management Area Use (SMA) Permit No. 388 is hereby issued to allow the development of a commercial/condominium complex and related improvements. The property is located on the makai side of Ali'i Drive bounded by Ali'i Drive and Kahakai Road,south of Royal Kona Resort and north of Kona Reef Condominium, Puaa 3rd, North Kona, Hawaii. Approval of this request is based on the following: The purpose of Chapter 205A, Hawaii Revised Statutes (HRS) and Special Management Area Rules and Regulations of the County of Hawaii, is to preserve, protect, and where possible,to restore the natural resources of the coastal zone areas. Therefore, special controls on development within an area along the shoreline are necessary to avoid permanent loss of valuable resources and the foreclosure of management options. The development of the commercial/condominium building will not have any significant adverse environmental or ecological effect, except as such adverse effect is minimized to the extent practicable and clearly outweighed by public health, safety, or compelling public interest. Such adverse effect shall include, but not be limited to, the EXHIBIT A Mr. Sidney Fuke Page 2 potential cumulative impact of individual developments, each one of which taken in itself might not have a substantial adverse effect and elimination of planning options. The proposed development will consist of a 6,500 square foot, 4-story commercial retail office building and forty eight(48) 2-bedroom condominium units with 82-parking stalls and perimeter landscaping. The proposed development is located on the makai side of Alii Drive approximately 200 feet from the shoreline. The development has a total combined area of 76,739 square feet and is irregular in shape. Parcel numbers 11, 78, and 80 were previously used for a mini golf facility. The topography of the site varies considerably. The elevation at Alii Drive is approximately thirty four(34) feet, and mid-way through the site, the slope abruptly drops to the eighteen (18) to twenty-four foot elevation. From that point the site gradually slopes towards Kahakai Road to about thirteen (13) foot elevation. The Flood Insurance Rate Map (FIRM) indicates that the property is located in Zone "X", areas outside of the 500-year flood plain. Portions of the development have been used as a mini golf facility in the past, and was graded and bulldozed. Current vegetation on the property is dominated by non-native plants. Due to the improved nature of the subject property and the surrounding areas, it is not anticipated that endangered or threatened candidate species of flora or fauna are located within the project site, nor has the project site been identified as a significant botanical or biological habitat. Therefore, there would be no adverse impact to recreational and visual resources, access to and along the shoreline nor coastal ecosystems. The proposed development would not impact the immediate adjacent properties as the subject property is surrounded by resort, commercial establishments, condominiums, single family residences and vacant lands. The proposed development is consistent with the objectives and policies as provided by Chapter 205A, HRS, and Special Management Area guidelines containedinRuleNo. 9 of the Planning Commission Rules of Practice and Procedure. According to the applicant, the proposed project will be hooked up to the County of Hawaii's Alii Drive sewer system. The Department of Health requires that if there is any type of process wastewater discharge from the project into State waters the applicant may be required to apply for an individual NPDES permit. The applicant has stated that they will comply with NPDES requirements. Any potential runoff or discharge which could reach ocean waters can be handled by on-site improvements. Any impacts from soil erosion and runoff during site preparation and construction phases can be adequately mitigated through compliance with existing regulations. With these precautionary measures in place, the proposed development is not anticipated to have any substantial adverse effects on the coastal resources or environment.Likewise, the potential of finding rare or endangered animal life is not anticipated. The applicant's Environmental Report indicates that no significant historic sites are present on the property because of past uses and landscaping. However, during the construction of the Alil Drive sewer project a lava tube containing significant cultural material was encountered a short distance mauka of the subject parcel. A condition of approval has been included that if a lava tube is encountered during the proposed action, all work shall cease in the immediate area and the lava tube is to be protected from further damage. The Department of Land and Natural Resources, State Historic Preservation Division office should be contacted immediately and allowed to conduct a field investigation of the tube to determine site significance. If the lava tube is determined to be significant, the establishment of buffer zones, interim protection Mr. Sidney Fuke Page 3 measures and remaining archaeological data recovery may need to be completed. This will satisfy the SMA objective to "Protect, preserve and where desirable restore significant historic and cultural resources." . The proposed development is consistent with the County General Plan and Zoning Code. The proposed project does conform to the General Plan Land Use Pattern Allocation Guide (LUPAG) Map, which designates this area as Resort. This type of designation refers and includes uses such as business services, hotels, restaurants, retail establishments, theaters and visitor information centers. Mindful of the type of service the applicant will provide to the residents of West Hawaii, the proposed use will compliment the following goals, policies and standards of the Land Use, Commercial Elements, and Multiple Family Residential Elements of the General Plan: Land Use o Designate and allocate land uses in appropriate proportions and mix and in keeping with the social, cultural and physical environments of the County. o The County shall encourage the development and maintenance of communities meeting the needs of its residents in balance with the physical and social environment. Commercial o Provide for commercial developments that maximize convenience to users. o Commercial facilities shall be developed in areas adequately served by necessary services, such as water, utilities, sewers and transportation systems. •9 o Distribution of commercial areas shall be such as to best meet the demands of neighborhood, community and regional needs. o The development of commercial facilities should be designed to fit into the locale with minimal intrusion while providing the desired services. Appropriate infrastructure and design concerns shall be incorporated into the review of such developments. Multiple Family Residential o To provide for multiple residential developments that maximise convenience for its occupants. o To provide for suitable living environments which accommodate the physical, social and economic needs of the island residents. The proposed request would also complement the following Housing Element goals and policies by creating a mix of residential housing opportunities, maintaining a housing supply that allows a variety of choice and by providing housing units geared toward the middle income bracket. I Mr. Sidney Fuke Page 4 Housing o Attain safe, sanitary, and livable housing for the residents of the County of Hawaii. o Attain a diversity of socio-economic housing mix throughout the different parts of the County. o Maintain a housing supply which allows a variety of choice. o Develop better places to live in Hawaii County by creating viable communities with decent housing and suitable living environments for our people. o Improve and maintain the quality and affordability of the existing housing stock. o Seek sufficient production of new affordable rental and fee-simple housing in the County in a variety of sizes to satisfactorily accommodate the needs and desires of families and individuals. o Ensure that housing is available to all persons regardless of age, sex, marital status, ethnic background and income. The proposed use would also conform to the following goals and policies of the Economic Element: o Provide residents with opportunities to improve their quality of life. o Economic development and improvement shall be in balance with the physical and social environments of the island of Hawaii. o The County of Hawaii shall strive for diversification of its economy by strengthening existing industries and attracting new endeavors. Based on the above findings, it is determined that the proposed development will not have any substantial adverse impacts on the surrounding area, nor will its approval be contrary to the objectives and policies of Chapter 205A, HRS, relating to Coastal Zone Management and Rule No. 9 of the Planning Commission relating to theSpecialManagementArea. Approval of this request is subject to the following conditions. Should any of the foregoing conditions not be met or substantially complied with in a timely fashion, the Planning Director shall initiate procedures to revoke the Special Management Area Use Permit. 1. The applicant, its successor or assigns shall be responsible for complying with all stated conditions of approval. 2. The required water commitment payment shall be submitted to the Department of Water Supply in accordance with its "Water Commitment Guidelines Policy" within 90 days of the effective date of this SMA Permit. Mr. Sidney Fuke Page 5 3. Construction of the proposed development shall be completed within 5 years from the effective date of this permit. Prior to commencing construction, Final Plan Approval for the proposed retail/commercial office building shall be secured from the Planning Department. Plans shall identify proposed structures, paved driveway access, parking stalls and landscaping in compliance with the Zoning Code and Planning Department Rule No. 17 (Landscaping Rule) associated with the proposed use. 4. Prior to securing Final Plan Approval, the developer shall prepare a Solid Waste Management Plan for the development meeting with the approval of the Department of Public Works. 5. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department of Public Works. 6. Alii Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainage improvements, and relocation of utilities along the Alii Drive and Kahakai Road frontages meeting with the approval of the Department of Public Works. 7. Should any remains of unidentified historic sites such as rock walls, terraces, platforms, or human burials, lava tube or cave systems be encountered, work in the immediate area shall cease and the Department of Land and Natural Resources-Historic Preservation Division (DLNR-HPD) shall be immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have been taken. 8. An initial extension of time for the performance of conditions within the permit may be granted by the Planning Director upon the following circumstances: A. The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicants, successors or assigns, and that are not the result of their fault or negligence. B. Granting of the time extension would not be contrary to the General Plan or Zoning Code. C. Granting of the time extension would not be contrary to the original reasons for the granting of the permit. D. The time extension granted shall be for a period not to exceed the period originally granted for performance (i.e., a condition to be performed within one year may be extended for up to one additional year). This approval does not, however, sanction the specific plans submitted with the application as they may be subject to change given specific code and regulatory requirements of the affected agencies. Mr. Sidney Fuke Page 6 Should you have any questions, please feel free to contact Alice Kawaha of the PlanningDepartmentat961-8288 or Royden Yamasato of the Planning Department West Hawaii Officeat327-3510. Sincerely, Kevin M. Balog, Chairman Planning Commission LTusoD01.PC cc: Department of Public Works Department of Water Supply County Real Property Tax Division West Hawaii Office Office of Planning, CZM Program (w/Background) Department of Land and Natural Resources Kazu Hayashida, Director/DOT-Highways, Honolulu Corporation Counsel Mr. Norman Hayashi, SMA Section Ms. Mary Richrod l' County of Hawaig PLANNING COMMISSION Aupunl Center.• 101 Pauah!Street,Sohns a Hilo,Haw&P1 96720 Phone(809.961428 • Fax(808)961-8742 October 6, 2008 Pacific Monarch Resorts,Inc. c/o Mr.William C.Faulk 75-5656.Knakidi Highway,Suite 301 Kailua-Kona,HI 96740 Dear Mr.Faulk: 4{F Special Management AreaUse Permit(SMA 388) Request: Time Extension to Condition 3—Construction Timetable Applicant: Pacifie'MoiiaiohResorts,Inc, Tax Map ker. 7-5-1831 The Planning Commission•at its dulyheld public bearing on September 19,2008,voted to approve the above-referenced request for an amendment to ConditiOn No.3(time to complete construction)ofSpecial Management Area Use Permit No.388!which allowed the development ofa commerclaltcondominium complex and related itnprovementabn 76,739 square abet ofland. The property is Wetted on the tnakai side of Alii Drive bounded by Alii Drive and Kahalcai Road, south o atoyalK.ona Resort and north of7Cona Reef Condominium,Ptlaa 3i4;NorthKona, Hawaii. Approval ofthis.requestis based on the following: The applicant is requesting a 5-yearjtuiia exteasion to Condition No.3 of Special Management AndaUse Pit N .388(time to complete construction)to extend*the deadline within which to complete construction for the project from December 13,2008 to December 13,2013. Condition No.3 of SMA Use PerrnitNo.388 states: Construction ofthe proposed development shall be completed within 5 years from the effective date of this permit. Prior to commencing oonsttuction,Final Plan Approval for tbeproposed retail/cominex ial office building 44 be secured from the Planfing.Department. Plans shall identify proposed structures,paved driveway access,parking stalls and landscaping in compliance with the Zoning Code and Planning Department Rule 17(Landscaping Rule)associated with the. proposed use." Ralvat7 Cognh+it ake u41 OppbrtuhttyProvidervndEmpibyttr jf EXHIBIT B Pacifa Monarch Resorts,Inc. do Mr.William.C.Fortlk Page 2 The Planning Colrimissien.approved SMA Use Permit No,388,etfeet1ve Deccan)cr 14, 1098,to allow for the development of comnler'eialleoridominium complex andrelated.iinprovenieuts. The subject property is fined Resort-Hotel Disttict- V-:75). The applicant proposes to.develop 7,007'square feet ofretail space and forty eight(48)2-bedroom condominium units with 115 parking stalls and perimeter landscaping. Final Plan Approval for the project was issued on June 6,2007,and the fbumdatiof construction began in September 2007. On January 31,2002,the Planning Director granted an administrative time extension until December 13,2008 to comply with Condition Na.3(time to complete construction). The nonperfofmance is the result-of conditions that could not have been foreseen or are beyond the control ofthe applicant,successors or assigns,and are not the result of their fliult or negligence. Accotdingto the applicants there were numerous`reasons fbr the delay,including construction delays due to a 30-foot wide lava tube that was found on the site;delays due to design changes;processing delays due t0 the consolidation ofthe six lots in the Land Court;and new requirements by the Department ofPublic Works for drainage. Therefore,the Hort-pt fbrrnanee was a.resuIt of conditions that could not have been foreseeahy the applicant and are not the result of theapplicant's fault ornegligence. Granting ofthe.time extension wouldnot be contrary to the General Plan or Zoning Code. The General Plan designation for this'area is Resort Node and.)porn, The majority ofthe parcel is designated as Resort Node,which allows fora mix of visitor-related uses stigli as hotels,condominium-hotels(condominiums developed and/or operated as hotels),single-family and.multiple-fly residential units,golfcourse and- Other ndothertypicalresortrecreationalfacilities,resort commercial complexes and other support services_ Only'MMjor Resort Areas are identified as Re&ortAlndes vu the LUPAG Map. The Open designation,which is iodated on the inakai portibfi Ofthe parcel,allows for parks and..other recreational area,historic sites,and.open shoreline areas. The property is zoned Resort-Hotel District(V-.75). The gratitingof the time extensions mould not be contrary to the General Pram or the Zoning Code. Granting of the tine extension would not be contrary to the original reasons for the.granting ofthe change of Zone. The original reasons for theapprp'!al ofSpecial Management Area.UsePermit No.388,and its amendments,are still applicable today and the request is not contrary to.these reasons. Based on the discussion above,the request fora S.year rime extension to Condition No.5(time to complete construction)of SMAUsePermitNo.3.88 would not be contrary to the General Plan or Zoning Code nor the ofiginal reasons for granting ofthe permit. The request is approved as follows(material to be deleted is-bracketed and struck-through;new material is underscored); Pacific Monarch Resorts,Inc. do Mr. William C.Fouik Page3 1. The appfcanix its successor or assigns shall be responsible for complying with-alt of the stated conditions of approval. V•. l.... . . , 3]2. Construction of the proposed development shall he completed within 5 years from the effective date ofthis iternit3 amendment.te-ee n .. 1:4141ing_ohail-be-seoured-fre•• :.' .. .. . !.... .. ' .. .. ... ,... l.... ...... 4-... J3. A sewer lineshall be installed,to tie in with theAlii Drive Interettitat Stswed rneatin&with theapproval ofthe Departmentcc?tiliablie-Worcs] Bnvirozunental Management. r614, Alii btive and KaliekaiRead shall be improved along the property's frontage with curb,gutter,and.sidewalk construction,pavement widening;drainage imPro renaents,erid relooatian ofutilities along the Alii Dtive and Ircsaliekal Road frontages meeting With the Approval of the Depaitme.ntofPublio Work . The street ;tdeni :and •ad.•.e • emen s.! ' s 1) this •4-Ai'GI s}: l be installed along An AlignMent meeting with the approve'of the Department of Public Works, .Anvportion of the subieet parcel upon which the improvements to meet this condition are installed shall be subdivided faucj sledicatectio the Count& uponsatisfactory completion'and prior-to the issuance of.a.Certificate of Occupancy,at no cost to the County. 4]5. Should any remains ofunidentified historic sites ouch as rockwalls,terraeea, platforms,or human burials,lave tuba or cave systems be-enncotibfered,Work in the.hInuediate area shall cease and the Department of Land and Natural Resources-Historie.PreservationDivision(DLNKAPD)shall beilnmediately notified. Subsequent work shall proceed upon an archaeological elegance from the DLNR-HPD when it ends that sufficient mitigative measures havebeen'taken. Pacific Monarch Resorts,Inc. do Mr.WilliamC.Faulk Page 4 er--Zonng-Cede} ifthe applicant should requite an additional,exfensinn oftime.tha applicant shall submit the request to the Planning Commission for appropriate action, Further,should any of the conditiOnS not] o net or substantially complied with in a timeiv f'ashiQnJhe_Duector may initiate procedures to revoke thepermit,. This approval does not,however,sanction the specific.plans submitted with the request as they may be aublect to change given specific do,de.an4 regulatory requirements.ofthe affected agencies. Should you have any ciueation$,please contactNorman Hayashi of.the Planning Department at 961-8288. Sincei" , 4-11 Rodney Watfiudbe,Chairman Planping Commission Lpaciflute:511rdmm3883C cc: Department ofPublic Works Department ofWater Supply County Real PropertyTax Division Planning Department-Kona Department ofLand and Natural Resources/HPD DOT-Highways,Honolulu Ms.AltceKaWaha Zoning Inspector-Kona RPao[floMonuahReutita8MAMS.4a02•21.0E COUNTY OF HAWAII PLANNING DEPARTMEN'X'+ •` ' ' • RECOMMENDATION- • ' - • • ••• PACIFIC MONARCH RESORTS,INC. • . AMENDMENT TO SP,ECALAGEMENT AREA'USE PERl1 i'T NOi 3$S, Upon careful review ofthe applicaint'.a regtest_against the guidelines for approving- amendments to a Special Management Area Use Permit,the?larining Director is recommending that the request be approved bythellannirig Commisslon:• Sincethis`•• recommendation'is'made without the benefit ofpublic testimony,the Directorreserves the right- ' to modify''and/or alter this position. This approval recommendation is based'on the following findings: The applicantis requesting a S-year titneiexteitsionto Condition No.3 of Special •• • . .. - Management Area Use Permit No.588(tine to complete construction)to extend the deadline within which to complete consttt cgon fort a project from December 13,2008 • to December 13,2013. Condition No.3 of SMA Use.Permit No:388 state§`.., - • Construction ofthe proposed development'ski becompleted Within'5 years -. from the effective date ofthis permit: Prior•to' 0.. ommencing construction;Final Plan Approval for the proposed retail/comtuercial Office building shall be secured from the Planning-Department. -Plans'shall idedtifY-proposed structures;paved driveway access,parking stalls,andlandscaping-in colriplianceviiththsZoning Code and Planning Department Rule 17(Landscaping"Rule),associated'with the . proposed use." The Planning Commission approved SMA UsePerniitNo.388,'effective• " • December 14, 1998,to allow for the development of aoommercial/aondotnitilnm complex and related iniprovenlents The subject properly is zoned Resort-Hotel District.. V..75): The applicant proposes'to.develop 7;007 square feet ofretail•space and forty eight(48)2-bedroom cottdominiitm units with 115 paYking stalls and'perimeter • ', .; r landscaping. Final Plan Approval for the project was issue :on-June 6;2007; 1114the. , foundation construction began in September 2007. '- . . •. '• t On January 31;20Q2,the Planning Direetgr-grantedan administrative time extension until December 13,2008 to comply.with Condition No. 3(time tb complete construction). The non-performance is the result•of conditions that could not have been foreseen or are beyond the control of the applicant,successors or assigns,and are not the result oftheir fault or negligence. According to the applicant,there were numerous reasons for the delay,including constructiondelays due to a 30-foot Wide lava tube that was found on the site;delays due to design changes;processing delays due to the consolidation ofthe six lots-in the Land Court;and new requirements by the - Department ofPublic Works for drainage. Therefore,thenon-performance was a result • • ofconditions that could not have been foreseen by the applicant and are not the result of the applicant's fault or negligence. -. Granting of the time extension would not be contrary to the General Plan or Zoning Code. The General Plan designation for this area is Resort Node and Open. The majority ofthe parcel is designated as Resort Node,which allows for a mix of visitor- related uses such.as hotels,condominium-hotels(condominiums developed and/or operated as hotels), single-family.and multiple-family residential units,golf course and other typical resort recreational facilities,resort commercial complexes and other support servioes. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The Open designation,which is located on the makai portion ofthe parcel, allows for parks and other recreational area,historic sites,and open shoreline areas. •The property is zoned Resort-Hotel District(V:.75). The granting ofthe time extensionwould not be contrary to the General Plan or the Zoning Code. Granting of the time extention would not be contrary to the original reasons fer.the granting of the change.of zone. The original reasons for the approval ofSpecial Management Area Use Permit No.388, and its amendments,are still applicable today and the request is notcontrary to these reasons. Based onthe discussion above,the request for a 5-year time extension to ConditionNo. 3•(tuna to complete construction)of SMA Use Permit No. 388 would not be contrary to the General Plan or Zoning Code nor the original reasons for granting ofthe permit. It is recommended,that the Planning 2- 1 I 1 1 . F••i• ! i.-.. • . i i I i•;•:*.* I. I I i •Commission approve request with thefollowing changes to conditions,-(Material to i L.,• • ' • . • be deleted is bracketed and struck-through,new material is underscored): . •.. •• ' . • 1 1. '. The aPpliCant;ita successor or assigns:shall bereapensible kir Complying with all. • , . • ofthe stated ctinditions'OfapproVal. . .- - ' - •• . '. • - - ". . • '-•- .1 2— The required water eemmgmeat payftint shall be submitted to the Department of - ." - • i i3+' '•: ::.i..•:•,:i•;ii:;" ..::::: .„-,:••••:- . ::,. .). I 3]Z. Construction ofthe proposed development Abellbe completed within 5 years from • .i the effective date ofthis[permit]timendment.'[Prior-to-eemmeneing . .'- ' - l• :•• ••.: . :.• ...:: ! :::.-::• :: . . :.::-: •,.. : :•-,.. - 4 V....; e• . . assoolated with the proposed tine-] P, •. .1 •:.Z : :,••• —•••: .." I ; • ;; : .. , ..;;: : '...'; ; :...•: :...! .:' ...;•. ... :. ..:.:: ...:, . . : .. . Matagement-Plen4ef-the-development-rneting-Wiih-the-eptrevaiLefLthe. , DepertnlenVef-Publie-Werks:-] . • 1 1 511. A sewer line shall be inatilled to tie inwiththeAliiDriVelriterceptorSewer. • meeting with the approval ofthe Department of[Publie-Werles]Varivironmental • . IVIAnnemet. - - 611 Alii Drive arid Kahakai Road shall be.improved along the property's frontage. . . • - 1 4. • • with curb,gutter,and sidewalk construction;pavement widening,drainage improvements,and relocation ofutilities along the Alii DriveAnd Kahakai ROad . . ' • . frontages meeting with the approval of the Department ofPublic Works. 7.1 . . ' street widening and roadside improvements required by this condition shall be • . installed along an alignment meting-with the approval oftheDepartment t'• •. . • Public Works. Anyportion ofthe subject parcel upon which the improvements to• riled tlie condhion are installed.shall be subdadarid•dedicated to the County• upon satisfactory completion and prior to the issuance ofa Certificate-of - . • , Occupancy.'at no cost to the County. 1 l_./ - • 3- 1 a. .... , Commission'approvethe request with the following changes to conditions. (Material to be deleted is bracketed and struck-through;new material is underscored): ' 1. • The applicant,its successor or assigns:shall be responsible for complying with all. • ofthe stated conditions ofapproval. Y CL,. -. 1 .. •' . • . ... - :.. .. ... .. .• ... •. .], 3)2. Construction ofthe proposed development shall be completed within 5 years from the effective date ofthis[per]amendment: i. "....-:.• .. . ' ... • .. •. . .. i- !..1 :::.--:•.:,:• ... . a . ... . - ,-- - 3]3. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department of[ lie environmental Management. 6]A. Alii Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction,pavement widening, drainage . .. improvements, and relocation of utilities along the Alii Drive and Kahakai Road _ frontages meeting with the approval ofthe Department ofPublic Works. The street widening and roadside improvements required by this condition shall be installe.s1 along an alignment meeting with the approval ofthe DeRartrnent of Public Works. Any portion ofthe subject parcel upon which the improvements to meet this condition are installed shall be subdivided and dedicated to the County. upon satisfactory completion and prior to the issuance of a Certificate of occupancy.at no cost to the County, s extension until December 13, 2008 to comply with Condition No. 3(time to complete construction). L_. The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicant,successors or assigns,and are not the result of their fault or negligence. According to the applicant,there were numerous reasons for the delay, including construction'delays due to a 30-foot wide lava tube that was found on the site;delays due to design changes;processing delays due to the consolidation ofthe six lots in the Land Court;and new requirements by the Department ofPublic Works for drainage. Therefore,the non-performance was a result • ofconditions that could not have been foreseen by the applicant and are not the result of the applicant's fault or negligence. Granting of the time extension would not be contrary to the General Plan or Zoning Code. The General Plan designation for this area is Resort Node and Open. The majority of the parcel is designated as Resort Node,which allows for a mix of visitor- related uses such as hotels, condominium-hotels(condominiums developed and/or operated as hotels), single-family and multiple-family residential units, golf course and other typical resort recreational facilities,resort commercial complexes andother support services. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The Open designation,which is located on the makai portion ofthe parcel, allows for parks and other recreational area,historic sites, and open shoreline areas. The property is zoned Resort-Hotel District(V-.75). The granting ofthe time extension would not be contrary to the General Plan or the Zoning Code. Granting of the time extension would not.be contrary to the original reasons • forthe granting of the change of zone. The original reasons for the approval ofSpecial Management Area Use Permit No. 388, and its amendments, are still applicable today and the request is not contrary to these reasons. Based on the discussion above,the request for a 5-year time extension to Condition No. 3,(time to complete construction) of SMA Use Permit No. 388 would not be contrary to the General Plan or Zoning Code nor the original reasons for granting ofthe permit. It is recommended that the Planning 2- e f 3 a 7]5. Should any remains ofunidentified historic sites such as rock walls,terraces, platforms, or human burials, lava tube or cave systems be encountered,work in the immediate area shall cease and the Department ofLand and Natural Resources-Historic Preservation Division(DLNRHPD) shall be immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNRHPD when it finds that sufficient mitigative measures have been taken. Y. •. . ..- . . ... .. •. _ ....• . -. . . . .. .• • • ... . •.. ng-Gede; Y. .... -. .. 4- r E l•=al-4. County of Hawaii LEEWARD PLANNING COMNIISSION Aupuni Center • 101 Pauahi Street,Suite 3 • Hilo,Hawaii 96720 Phone(808)961-8288 • Fax(808)961.8742 JUN — 9 2014 Dr.William C.Poulk Parthenon Group,Inc.,A.I.A 75-5656 Kuakini Highway,Suite 301 Kailua-Kona,HI 96740 Dear Dr.Foulk: SMA No. 388(Docket No.98-000007) Applicant Diamond Resorts International,Inc.(formerly Pacific Monarch Resorts,Inc.) Request: 5-Year Time Extension to Comply With Condition No.2(Time to Complete Construction) Tax Map Key.7-5-018:011 The Leeward Planning Commission,at its duly held public hearing on May 15,2014,voted to approve the above-referenced request for an amendment to Special Management Area(SMA) Use Permit No.388 to allow a 5-year time extension to comply with Condition No.2(time to complete construction). SMA Use Permit No.388 had allowed the development of a commercial condominium complex and related improvements on 76,739 square feet ofland. The property is located on the makai side ofAIN Drive bounded by AIN Drive and Kahakai Road,south of Royal Kona Resort and north of Kona Reef Condominium,Pua'a 3`d,North Kona,Hawai`i. Approval ofthis amendment is based on the following: 1. The applicant,its successor or assigns shall be responsible for complying with all ofthe stated conditions ofapproval. 2. Construction ofthe proposed development shall be completed within 5 years from the effective date of this second amendment, Hawat i County Ls an Equal Opportunity Provider andEmployer EXHIBIT C SUN - °° 42°4 Dr.William C.Foulk Parthenon Group,Inc.,A.I.A Page 2 3. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department ofEnvironmental Management. 4. Alii Drive and Kahakai Road shall be improved along the property's frontage with curb,gutter,and sidewalk construction,pavement widening,drainage improvements,and relocation ofutilities along the Alii Drive and Kahakai Road frontages meeting with the approval of the Department of Public Works. The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the approval of the Department of Public Works. Any portion of the subject parcel upon which the improvements to meet this condition are installed,shall be subdivided and dedicated to the County, upon satisfactory completion and prior to the issuance of a Certificate of Occupancy,at no cost to the County. 5. Should any remains of unidentified historic sites such as rock walls,terraces, platforms,or human burials,lava tube or cave systems be encountered,work in the immediate area shall cease and the Department of Land and Natural Resources-Historic Preservation Division(DLNR-HPD)shall be immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have been taken. 6. Ifthe applicant should require an additional extension of time,the applicant shall submit the request to the Planning Commission for appropriate action. Further,should any of the conditions not be met or substantially complied with in a timely fashion,the Director may initiate procedures to revoke the permit. This approval does not,however,sanction the specific plans submitted with the application as they may be subject to change given specific code and regulatory requirements of the affected agencies. Approval ofthis permit is based on the reasons given in the attached recommendation report. r 3 Dr.William C.Poulk Parthenon Group,Inc.,A.I.A Page 3 Should you have any questions,please contact Daryn Arai of the Planning Department at 961-8288,ext 8142. Sincerely, r Brandi K.Boaudet.,Chairman Leeward Planning Commission II3iamondraaost3sma3881Qc Enclosure: PC Recommendation Report cc: Diamond Resorts International,Inc. Department of Public Works Department of Water Supply County Real Property Tax Division State DLNR-HPD Mr.Gilbert Bailado Planning Department-Kona r I 3 COUNTY OF HAWAII PLANNING COMMISSION RECOMMENDATION DIAMOND RESORTS INTERNATIONAL,INC. AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO.388 The applicant is requesting a 5-year time extension to Condition No.2 of Special Management Area Use Permit No. 388(time to complete construction)to extend the deadline within which to complete construction for the proposed project. Condition No.2 of SMA Use Permit No.388 states: Construction of the proposed development shall be completed within 5 years from the effective date of this amendment." • The Planning Commission approved SMA Use Permit No. 388,effective December 14, 1998,to allow for the development of a commercial/condominium complex and related improvements. The subject property is zoned Resort-Hotel District(V-.75). The applicant propose to develop 7,007 square feet of retail space and forty eight(48)2-bedroom condominium units with 115 parking stalls and perimeter landscaping. Final Plan Approval for the project was issued on June 6,2007. On September 19,2008,the Planning Commission granted a five-year time extension amendment to comply with Condition No. 3 (time to complete construction). The reasons for the delay since the approval of the previous time extension amendment request include the local and national economies entering into a catastrophic cycle of decline and financial difficulties. As a result, the previous owner of the property went into receivership as the bank held it in portfolio until a resolution of the debt could be arranged. Between 2009-2010, the existing building permits received final inspections for the electrical rough-in, foundation and retaining walls. Additionally, there have been improvements costing several million dollars put in place, including a 12-inch waterline in Walua Road dedicated to the County and an 8-inch waterline installed on the property. The water commitments and facilities charges have all been paid. Lastly, all the company assets were purchased by Diamond Resorts in 2013. The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicant, successors or assigns, and are not the result of their fault or negligence. According to the applicant,there were numerous reasons for the delay,including the local and national economies entering into a catastrophic cycle of decline and financial difficulties with the owners of the property. There have been major improvements constructed in excess of several million dollars,including the underground parking facilities, foundation, rough-in for the electrical and major waterline improvements. Therefore,the non- performance was a result of conditions that could not have been foreseen by the applicant and are not the result of the applicant's fault or negligence. Granting of the time extension would not be contrary to the General Plan or Zoning Code. The General Plan designation for this area is Resort Node,which allows for a mix of visitor-related uses such as hotels,condominium-hotels(condominiums developed and/or operated as hotels),single-family and multiple-family residential units, golf course and other 1- typical resort recreational facilities,resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The property is zoned Resort-Hotel District(V-.75). The granting of the time extension would not be contrary to the General Plan or the Zoning Code. Granting of the time extension would not be contrary to the original reasons for the granting of the change of zone. The original reasons for the approval of Special Management Area Use Permit No. 388,and its amendments, are still applicable today and the request is not contrary to these reasons. Based on the discussion above,the request for a 5-year time extension to Condition No.2(time to complete construction)of SMA Use Permit No. 388 is approved. S 1 2- Michael YeeHarryKimew ' ;. Mayor Director f4' ,• M: r,..r ;. Daryn Arai Deputy Director West Hawaii Office East Hawaii Office 74-5044 Ane Keohokable Hwy 101 Pauahi Street,Suite 3 KKailua- ana,Hawaii 96740 County Of Hawaii Hib,Hawaii 96721) Phone(808)323-4770 Phone(808)961-8288 Fax(808)327-3563 PLANNING DEPARTMENT Fax(808)961-8742 May 22,2017 Mr. Michael Shalmy 10600 W. Charleston Blvd. Las Vegas NV 89135 Dear Mr. Shalmy, PLAN APPROVAL APPLIED FOR: Timeshares at Grand Kona Resort TMK: 7-5-018: 011 PLA-17-001427 We have reviewed and approved the plan for the subject proposed project for FINAL PLAN APPROVAL. Enclosed is a copy of the FINAL PLAN APPROVAL,dated May 22,2017 for your file. Please note any conditions of approval included as part of the FINAL PLAN APPROVAL. These conditions must be complied with prior to occupancy ofthe project, or as otherwise conditioned. Should you have any questions,please contact Terry K. Dunlap of our West Hawaii Office at 323- 4770. Sincerely, v HAEL YEE Planning Director TKD/tkd: \\coht41 y`4pianning''Statl\Terry`AAA-REVfEWS`TTMK 7-5.018-011 Grand Kona ResortlApproval Letter PLA-17-001427 Grand Kona Resottdoc cc: West Hawaii Office www cohplanningdept.cum Haxai'i County is an Equal Opportunity Provider and Employer plarningnihawaiicolt nw.go, EXHIBIT D COUNTY OF HAWAII PLANNING DEPARTMENT FINAL PLAN APPROVAL PLA-17-001427 APPLICANT: DATE APPROVED: EXPIRATION DATE: Diamond Resorts Kona II Development LLC May 22,2017 May 21,2019 LOCATION:TAX MAP KEY: Northwest coma ofAlii Drive&Kahakai road 7-5-018: 011 PARCEL AREA/ PROJECT SITE AREA: ZONING: Total site: 1.77 acres Resort Hotel V.75 PROPOSED USE: four levels of timeshare NUMBER OF UNITS: resort units above an existing concrete parking 46 three bedroom units(including lockoff) garage. Two ofwhich are ADA accessible. As Shown on Plan Comments Front Yard (East 20'-0" OK, Minimum Setback 20'-0" Front Yard (South)20' OK,Minimum Setback 20'-0 Front Yard (West) 21 OK,Minimum Setback 20'-0" Side Yard (North) 14' OK, Minimum Setback 14'-0" Ht. of Structure: 45' for maximum height— OK, 45'-0"Maximum Ht.permitted Elevators and mechanical below an additional 10' as permitted by 25-4-22(a). Access to parking: Kahakai Road OK Subject to Public Works requirements Off-Street Parking: Proposed Parking OK,Required Parking is based on 46 three(3)bedroom Standard 114 stalls units with lockoffs. Compact 0 92 rentals x 1.25 spaces per rental= 115 ADA 5 Total spaces provided----------119 Loading Space: 10' x 22' & 12' x 50' loading spaces OK,Per prior Plan Approval were previously approved by Plan Approval on June 6,2007. Density 46(3)bedroom units with lockoffs OK, 1.77 x 43,560 sq. ft.=771,012 sq. ft. 46 =46 = 92 Divided by 750(density for V-.75)= 103 units 7 Jj Final Plan Approval PLA-17-001427 (TMK: 7-5-08: 011) May 22,2017 Page 2 of 3 Fencing and Walls: Material N/A I OK Height N/A OK Location N/A OK Landscaping Proposed: OK New landscaping surrounding entire project in conformance with Rule# 17. Others Tax Clearance OK, per letter oftax clearance from RPT dated April 21, 2017 and paid up to June 30, 2017 Site Drainage Plan OK,Approved by Dept. of Public Works 4/19/17 SMA Permit#388 Approved on December OK, Interpreted by Planning Director that they do not 14, 1998 for 48 (2)bedroom units. need to return to the Planning Commission for 46(3) bedroom units since they will be sold as 46 units and parking is adequate to handle the total number of keys. Conditions of Approval: 1. Approved landscaping to be installed and maintained prior to issuance of the Certificate of Occupancy. 2. No exterior lighting fixtures are shown. All exterior lighting shall comply with Chapter 14, Article 9 Outdoor Lighting)of the Hawai`i County Code, including shielding direct transmissions to neighboring properties,open sky and public lands. 3. Accessible Parking Spaces shall be designed and installed in accordance with all current Federal and State standards and requirements for a facility or site. The following links below are provided to assist in determining current Federal and State requirements for number of stalls, access aisle, striping, signage,and loading zone. These links are not inclusive and are provided by the County for public education and information purposes. The Planning Department makes no representation for the completeness or correctness of this list. State of Hawaii Disability and Communications Access Board: http://health.hawaii.gov/dcab/parking and http://health.hawaii.gov/dcab/files/2013/05/DCAB-Parking- Brochure-11-29-12A pdf Hawaii Revised Statutes Section 103-50: http://www.capitol.hawaii.gov/hrscurrentNo102 Ch0046- 0115/HRS0103/HRS 0103-0050.htm Hawaii Administrative Rules Title 11, Chapter 219: http://health.hawaii.gov/dcab/files/2013/01/Hawaii-Administrative-Rules-Title-1 l-Chapter-219- Parking-for-Persons-With-Disabilities l.pdf U.S.Department of Justice: https://www.ada.gov/2010ADAstandards index.ht U.S.Dept.of Housing and Urban Development: http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair housing equal opp Final Plan Approval PLA-17-001427 (TMK: 7-5-08: 011) May 22, 2017 Page 3 of3 If any of the above federal and state laws recommend and require more stringent parking standards for persons with disabilities than those contained in the above cited sections those requirements shall be followed. 4. No Modifications to Plans without Prior Written Approval. All work shown on the development plans covered by this Final Plan Approval shall be completed as shown. No additions,substitutions or alterations to the site,parking,landscaping,or building design plans covered by this Final Plan Approval,nor any modification of the types of uses designated therein,shall be made without prior written approval of such changes by the Planning Department. A request for approval of such changes shall be submitted in writing and include scaledplan sheets clearly depicting and specifying all proposed changes. Upon assessing the requested changes,the Director may approve or deny the requested changes or require a new,complete application for Plan Approval where the Director finds the changes to be substantial. Prior to approval of a Certificate of Occupancy(C.O.), the Planning Department may inspect the subject property to verify compliance with the approved plans. A C.O. shall not be approved where the buildings,site improvements,landscaping or use plans are found by the Director to be inconsistent with the submittals for which this Final Plan Approval is issued. 5. This Final Plan Approval is valid for two years from the date ofapproval, and shall expire on May 21, 2019. 6. Applicant shall comply with all other applicable laws.rules, regulations and requirements of Hawai'i County. 7. Prepare an easement for all sidewalks and rights-of-way, within your property, to be granted to the County of Hawaii for public use. This must be complete and accepted by the County of Hawaii then recorded with the Bureau of Conveniences prior to the issuance of certificate of occupancy. 1 i(*\ In ing Director D:to May 22,2017 TKD/tkd: s.'toh141 planningStaff\Terry\AAA-REVlEWS\TMK 7-5-0I8-011 Grand Kona Resort:TMK 7-5-01E-011 Grand Kona resort Plan Approval dot List of Surrounding Property Owners 11\U°11 t. s t 4 G T O 6 Ai . Y Subject Property 9 2 s I1 ) P s1, 1101 X11 13 12 0 100 00 330 4€0 ft s s - ---- Key TMK Fee Owner Location Address 1 7-5-018-077 C J Kimberly Trust 75-5875 Kahakai Road 2 7-5-018-017 Hale Kona Kai Condominium 75-5870 Kahakai Road 3 7-5-009-001 Pleasant Travel Service 4 7-5-009-002 Pleasant Travel Service 5 7-5-009-034 Los Habaneros Inc 75-5864 Walua Road 6 7-5-018-068 John H Kong 7 7-5-018-015 David/Ruth Arthurs Family Trust 8 7-5-018-014 David/Ruth Arthurs Family Trust 75-5870 Walua Road 9 7-5-018-019 Annie Chong Park 75-5874 Walua Road 10 7-5-018-008 Alii Cove Condominium 75-5905 Alii Drive 11 7-5-018-082 Gomes,Family Ltd Partnership 12 7-5-018-071 AOAO Kona Reef Inc 75-5888 Alii Drive 13 7-5-018-086 James Rodney Paul 75-5880 Kahakai Road EXHIBIT E 877130.1 Harry Kim 0Y 9f M•. Deanna S.Sako Mayor J..•r ••1!y7 Finance Director 3- a f iNiM i•'\\. County of Hawaii DEPARTMENT OF FINANCE-REAL PROPERTY TAX Aupuni Center • 101 Pauahi Street • Suite No.4 • Hilo,Hawaii 96720 • Fax(808)961-8415 Appraisers(808)961-8354 • Clerical(808)961-8201 • Collections(808)961-8282 West Hawaii Civic Center • 74-5044 Ane Keohokalole Hwy. • Bldg.D,2nd Flr. • Kailua Kona,Hawai'i 96740 Fax(808)327-3538 • Appraisers(808)323-4881 • Clerical(808)323-4880 Website..www.hawaiipropertytax.com REAL PROPERTY TAX CLEARANCE Rev. 07/13) Date: 11/09/2018 TMK(s): (3) 7-5-0187011-0000 This is to certify that the real property taxes due to the County of Hawai'i on the parcel(s) listed above have been paid for the tax year 2018-2019 up to and including December 31, 2018. The County's real property taxes are levied on July 1st each year. The taxes become a lien on the property assessed as of the levy date. This clearance was requested on behalf of DPM Acquisition LLC for the County Planning Department and is issued for this/these parcel(s) only. Ohl 4I°* by Dana Downing REAL PROPERTY TAX DIVISION Paid up to and including December 31 , 2018. Tax Clearance for Planning Department(rev.3/11) Hawaii County is an Equal Opportunity Provider and Employer i y I 0.t131!,'Jptr •. Stephen K.Yamuhiro 4. ./t ,Mayor e•t- Count of pafratii PLANNING COMMISSION 25 Aupuni Street,Room 109 • Hilo,Hawaii 96720-4252 808)961-8288 Fax(808)961-9615 CERTIFIED MAIL Z 095 324 407 t DEC 1 4 1998 Mr. Sidney Fuke 100 Pauahi Street, Suite 212 Hilo, HI 96720 Dear Mr. Fuke: Special Management Area Use Permit Application (SMA 98-7) Applicant: Tuso Development & Management, Inc. Request: Allow for the Development of a Commercial/Condominium Complex and Related Improvements Tax Map Key: 7-5-1.8:11, 16. 26. 78 and 80 The Planning Commission at its duly held public hearing on December 3, 1998, voted to deny standing to Mary Richrod on her request for a contested case procedure due to her non-submittal of the $100 filing fee, as required by Rule 4 of the Planning Commission relating to contested case. The Commission then voted to approve the above-referenced application. Special Management Area Use (SMA) Permit No. 388 is hereby issued to allow the development of a commercial/condominium complex and related improvements. The property is located on the makai side of Ali'i Drive bounded by Ali'i Drive and Kahakai Road, south of Royal Kona Resort and north of Kona Reef Condominium, Puaa 3rd, North Kona, Hawaii. Approval of this request is based on the following: The purpose of Chapter 205A, Hawaii Revised Statutes (HRS) and Special Management Area Rules and Regulations of the County of Hawaii, is to preserve, protect, and where possible, to restore the natural resources of the coastal zone areas. Therefore, special controls on development within an area along the shoreline are necessary to avoid permanent loss of valuable resources and the foreclosure of management options. The development of the commercial/condominium building will not have any significant adverse environmental or ecological effect, except as such adverse effect is minimized to the extent practicable and clearly outweighed by public health, safety, or compelling public interest. Such adverse effect shall include, but not be limited to, the Planning Dept, oil4Oi Exhibit 2.-pEc Mr.'Sidney Fuke Page 2 potential cumulative impact of individual developments, each one of which taken in itself might not have a substantial adverse effect and elimination of planning options.The proposed development will consist of a 6,500 square foot, 4-story commercialretailofficebuildingandfortyeight (48) 2-bedroom condominium units with82-parking stalls and perimeter landscaping. The proposed development is located onthemakaisideofAliiDriveapproximately200feetfromtheshoreline. The development has a total combined area of 76,739 square feet and is irregular in shape.Parcel numbers 11, 78, and 80 were previously used for a mini golf facility. The topography of the site varies considerably. The elevation at Alii Drive is approximately thirty four (34) feet, and mid-way through the site, the slope abruptlydropstotheeighteen (18) to twenty-four foot elevation. From that point the site gradually slopes towards Kahakai Road to about thirteen (13) foot elevation. The Flood Insurance Rate Map (FIRM) indicates that the property is located in Zone "X",areas outside of the 500-year flood plain. Portions of the development have been used as a mini golf facility in the past, and was graded and bulldozed. Current vegetation on the property is dominated by non-native plants. Due to the improved nature of the subject property and the surrounding areas, it is not anticipated that endangered or threatened candidate species of flora or fauna are located within the project site, nor has the project site been identified as a significant botanical or biological habitat. Therefore, there would be no adverse impact to recreational and visual resources, access to and along the shoreline nor coastal ecosystems. The proposed development would not impact the immediate adjacent properties as the subject property issurroundedbyresort, commercial establishments, condominiums, single familyresidencesandvacantlands. The proposed development is consistent with the objectives and policies as provided by Chapter 205A, HRS, and Special Management Area guidelines contained in Rule No. 9 of the Planning Commission Rules of Practice and Procedure. According to the applicant, the proposed project will be hooked up to the County ofHawaii's Alii Drive sewer system. The Department of Health requires that if there is any type of process wastewater discharge from the project into State waters the applicant may be required to apply for an individual NPDES permit. The applicant has stated that they will comply with NPDES requirements. Any potential runoff or discharge which could reach ocean waters can be handled by on-site improvements.Any impacts from soil erosion and runoff during site preparation and construction phases can be adequately mitigated through compliance with existing regulations. With these precautionary measures in place, the proposed development is not anticipated to have any substantial adverse effects on the coastal resources or environment. Likewise, the potential of fording rare or endangered animal life is not anticipated. The applicant's Environmental Report indicates that no significant historic sites are present on the property because of past uses and landscaping. However, during theconstructionoftheAliiDrivesewerprojectalavatubecontainingsignificantculturalmaterialwasencounteredashortdistancemaukaofthesubjectparcel. A condition of approval has been included that if a lava tube is encountered during the proposedaction, all work shall cease in the immediate area and the lava tube is to be protectedfromfurtherdamage. The Department of Land and Natural Resources, State Historic Preservation Division office should be contacted immediately and allowed to conduct afieldinvestigationofthetubetodeterminesitesignificance. If the lava tube isdeterminedtobesignificant, the establishment of buffer zones, interim protection i Mr. Sidney Fuke Page 3 measures and remaining archaeological data recovery may need to be completed. This will satisfy the SMA objective to "Protect, preserve and where desirable restore significant historic and cultural resources." The proposed development is consistent with the County General Plan and Zoning Code. The proposed project does conform to the General Plan Land Use Pattern Allocation Guide (LUPAG) Map, which designates this area as Resort. This type of designation refers and includes uses such as business services, hotels, restaurants, retail establishments, theaters and visitor information centers. Mindful of the type of service the applicant will provide to the residents of West Hawaii, the proposed use will compliment the following goals, policies and standards of the Land Use, Commercial Elements, and Multiple Family Residential Elements of the General Plan: Land Use o Designate and allocate land uses in appropriate proportions and mix and in keeping with the social, cultural and physical environments of the County. o The County shall encourage the development and maintenance of communities meeting the needs of its residents in balance with the physical and social environment. Commercial o Provide for commercial developments that maximize convenience to users. o Commercial facilities shall be developed in areas adequately served by necessary services, such as water, utilities, sewers and transportation systems. o Distribution of commercial areas shall be such as to best meet the demands of neighborhood, community and regional needs. o The development of commercial facilities should be designed to fit into the locale with minimal intrusion while providing the desired services. Appropriate infrastructure and design concerns shall be incorporated into the review of such developments. Multiple Family Residential o To provide for multiple residential developments that maximize convenience for its occupants. o To provide for suitable living environments which accommodate the physical, social and economic needs of the island residents. The proposed request would also complement the following Housing Element goals and policies by creating a mix of residential housing opportunities, maintaining a housing supply that allows a variety of choice and by providing housing units gearedtowardthemiddleincomebracket. I Mr.'Sidney Fuke Page 4 Housing o Attain safe, sanitary, and livable housing for the residents of the County ofHawaii. o Attain a diversity of socio-economic housing mix throughout the different partsoftheCounty. o Maintain a housing supply which allows a variety of choice. o Develop better places to live in Hawaii County by creating viable communitieswithdecenthousingandsuitablelivingenvironmentsforourpeople. o Improve and maintain the quality and affordability of the existing housing stock. o Seek sufficient production of new affordable rental and fee-simple housing intheCountyinavarietyofsizestosatisfactorilyaccommodatetheneedsanddesiresoffamiliesandindividuals. o Ensure that housing is available to all persons regardless of age, sex, marital status, ethnic background and income. The proposed use would also conform to the following goals and policies of theEconomicElement: o Provide residents with opportunities to improve their quality of life. o Economic development and improvement shall be in balance with the physical and social environments of the island of Hawaii. o The County of Hawaii shall strive for diversification of its economy by strengthening existing industries and attracting new endeavors. Based on the above findings, it is determined that the proposed development will not have any substantial adverse impacts on the surrounding area, nor will its approval be contrary to the objectives and policies of Chapter 205A, HRS, relating toCoastalZoneManagementandRuleNo. 9 of the Planning Commission relating to theSpecialManagementArea. Approval of this request is subject to the following conditions. Should any of the foregoingconditionsnotbemetorsubstantiallycompliedwithinatimelyfashion, the Planning DirectorshallinitiateprocedurestorevoketheSpecialManagementAreaUsePermit. 1. The applicant, its successor or assigns shall be responsible for complying withallstatedconditionsofapproval. 2.The required water commitment payment shall be submitted to the Department of Water Supply in accordance with its "Water Commitment Guidelines Policy"within 90 days of the effective date of this SMA Permit. Mr.-Sidney Fuke Page 5 3.Construction of the proposed development shall be completed within 5 yearsfromtheeffectivedateofthispermit. Prior to commencing construction, FinalPlanApprovalfortheproposedretail/commercial office building shall besecuredfromthePlanningDepartment. Plans shall identify proposed structures, paved driveway access, parking stalls and landscaping in compliancewiththeZoningCodeandPlanningDepartmentRuleNo. 17 (LandscapingRule) associated with the proposed use. 4.Prior to securing Final Plan Approval, the developer shall prepare a Solid Waste Management Plan for the development meeting with the approval of theDepartmentofPublicWorks. 5.A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department of Public Works. 6.Alii Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainageimprovements, and relocation of utilities along the Alii Drive and Kahakai RoadfrontagesmeetingwiththeapprovaloftheDepartmentofPublicWorks. 7.Should any remains of unidentified historic sites such as rock walls, terraces, platforms, or human burials, lava tube or cave systems be encountered, work in the immediate area shall cease and the Department of Land and Natural Resources-Historic Preservation Division (DLNR-HPD) shall be immediatelynotified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have beentaken. 8.An initial extension of time for the performance of conditions within the permit may be granted by the Planning Director upon the following circumstances: A. The non-performance is the result of conditions that could not have beenforeseenorarebeyondthecontroloftheapplicants, successors or assigns, and that are not the result of their fault or negligence. B. Granting of the time extension would not be contrary to the General PlanorZoningCode. C. Granting of the time extension would not be contrary to the originalreasonsforthegrantingofthepermit. D. The time extension granted shall be for a period not to exceed the period originally granted for performance (i.e., a condition to be performed within one year may be extended for up to one additional year). This approval does not, however, sanction the specific plans submitted with the application astheymaybesubjecttochangegivenspecificcodeandregulatoryrequirementsoftheaffectedagencies. f Mr. Sidney Fuke Page 6 Should you have any questions, please feel free to contact Alice Kawaha of the PlanningDepartmentat961-8288 or Royden Yamasato of the Planning Department West Hawaii Officeat327-3510. Sincerely, KK . A4y Kevin M. Balog, Chairman Planning Commission LTusoDol.PC cc: Department of Public Works Department of Water Supply County Real Property Tax Division West Hawaii Office Office of Planning, CZM Program (w/Background) Department of Land and Natural Resources Kazu Hayashida, Director/DOT-Highways, Honolulu Corporation Counsel Mr. Norman Hayashi, SMA Section Ms. Mary Richrod 411 Harry Kim tYo`"?!r Mayor Christopher J. Yuend` Vis,„• % Director Brad Kurokawa,AKA,LEEDTm APartos...............Deputy Director County of Hawaii PLANNING DEPARTMENTAupuniCenter • 101 Pauahi Street,Suite 3 • Hilo,Hawaii 96720Phone(808)961-8288 • Fax(808)961-8742 March 31, 2006 Dr. William C. Foulk 75-5656 Kuakini Highway, Suite 301 Kailua, Hawaii 96740 Dear Dr. Foulk: Kailua Village Design Commission Meeting of March 28, 2006 Design review of Resort Condominium Hotel, consisting of five 4-story buildingsKailuaVillageSpecialDistrict Tax Map Key: 7-5-018: 011, 016, 026, 078, and 080 This letter is to inform you that the Kailua Village Design Commission, at its March 28, 2006meeting, voted to recommend to the Planning Director the approval of your proposed design fortheResortCondominiumproject. The Design Commission recognizes and appreciates that you have agreed to use the followingorsimilar) historic colors for your project: For the roofing, Kingsport Gray, HC-86; for thewalls, Louisberg Green, HC-113 and Greenmount Silk, HC-3; and for the Trim, Glacier White. The Design Commission also discussed and recommends that roof-top air conditioning units beshieldedfromview, and trusts that this will be addressed in the project's design. Planning staff indicated that your preliminary plans improperly showed a portion ofthe buildingwithinthefrontyard, which will need to be corrected when you submit your application for PlanApproval. Should you have any questions, please feel welcome to contact Bennett Mark at theWestHawaiiofficeat327-3510. Sincerely, Maile B. Melrose, Chair Kailua Village Design Commission Planning Dept.Hawaii County is an Equal Opportunity Provider and Employer Exhibit 5 Dr. William C. Foulk March 31, 2006 Page 2 Coh21\Planning_Kona\Staff\KVDC\2006 Corresp\TMK 7-5-018.011,016,026,078,080 Grand Kona Resort LKVDC 3-28-06.doc cc: Chris Yuen, Planning Director West Hawaii Office TMK file KVDC file 0I Harry Kim 4).o"iv o`" ., Mayor l y"Christopher J. Yuen1t /'+ ; Director J< !! Brad Kurokawa,ASLA,LEEDTM AP 14*ri;*4 !- Deputy Director County of Hawaii PLANNING DEPARTMENTAupuniCenter • 101 Pauahi Street,Suite 3 • Hilo,Hawaii 96720Phone(808)961-8288 • Fax(808)961-8742 June 6, 2007 Dr. William C. Foulk 75-5656 Kuakini Hwy., Suite 301 Kailua-Kona, HI 96740 Dear Dr. Foulk: PLAN APPROVAL APPLIED FOR: 48 Unit Multiple-Family Residential Building withRetailSpace TMK: 7-5-018:011 We have reviewed and approved the plan for the subject proposed project for FINAL PLANAPPROVAL. Enclosed is a copy of the FINAL PLAN APPROVAL, dated 6/6/07, for your file. Please note any conditions of approval included as part of the FINAL PLAN APPROVAL.These conditions must be complied with prior to occupancy of the project, or as otherwiseconditioned. Should you have any questions, please contact Deanne Bugado of our West Hawaii Office at327-3510. Sincerely, i 4/ite. ,. , PHER J. EN Planning Director DEB:deb K:\Staff\Deanne\Plan Approvals\L-7-5-18-11 Foulk for Grand Kona.doc cc: West Hawaii Office Hawai'i County is an equal opportunity provider and employer Planning Dept. Exhibit f r COUNTY PLANNING DEPARTMENT FINAL PLAN APPROVAL APPLICANT: DATE APPROVED:Dr. William C.Foulk 6/6/07 LOCATION: TAX MAP KEY:North Kona 7-5-018:011 PARCEL AREA: ZONE:1.753 acres V-.75 PROPOSED USE: 48 Unit Multiple-Family Residential Building with Retail Space As Shown on PIan Comments Front Yard: 20'-0"OK, 20'-0" Minimum requiredFrontYard: 20'-0"OK, 20'-0" Minimum requiredFrontYard: 20'-0"OK, 20'-0" Minimum requiredSideYard:20'-0"OK, 14'-0"Minimum requiredHt. of Structure:45'-0"OK, 45'-0" Maximum allowed Access to parking: Driveways off ofAli'I Drive and OK, Must comply with the requirements of theKahakaiRoadDepartmentofPublicWorks.Off-Street Parking: 115 stalls with 5 van accessible OK, 48 dwelling units @ 1.25 =60stalls7,007 s.f/300 =23.3 or 24 TOTAL REQUIRED = 84 stalls. Of the proposed 115 stalls 5 must be accessible of which 1 must be a van accessible stall.Loading and Unloading Space: 2 - 12' x 50' and 1 - 10' x 22' OK, with 48 units = 1 stall and 7,007 s.f of commercial retail = 1 stalls TOTAL REQUIRED =2 loading stalls ofwhich 1 must be a 12'x 50' stall Density: I OK, Fencing and Walls: Material Height Location OK Hawai'i County is an equal opportunity provider and employer I T Final Plan Approval(TMK: 7-5-018:011) 6/6/07 Page 2 Landscaping OK, Complies with Rule No. 17 of the Planning Department's Rules of Practice and Procedure. Others Tax Clearance: OK, per letter of tax clearance from RPT.KVDC OK Special Management Area OK, SMA No. 388 Conditions: 1. Applicant shall comply with all other applicable laws, rules, regulations and requirements of Hawai'i County 2. Approved parking to be paved, striped, and appropriate signage installed prior to issuance of the Certificate ofOccupancy. 3. Approved landscaping to be installed and maintained prior to issuance of the Certificate of Occupancy. ing Director Date 6/6/07 PD 11/99 (MsWord) S RPacificMonarchResortsSMA388.rjn 08-21-08 COUNTY OF HAWAII PLANNING DEPARTMENT RECOMMENDATION PACIFIC MONARCH RESORTS, INC. AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO. 388 Upon careful review ofthe applicant's request against the guidelines for approving amendments to a Special Management Area Use Permit, the Planning Director is recommending that the request be approved by the Planning Commission. Since this recommendation is made without the benefit of public testimony, the Director reserves the right to modify and/or alter this position. This approval recommendation is based on the following findings: The applicant is requesting a 5-year time extension to Condition No. 3 of Special Management Area Use Permit No. 388 (time to complete construction) to extend the deadline within which to complete construction for the project from December 13, 2008 to December 13, 2013. Condition No. 3 of SMA Use Permit No. 388 states: Construction of the proposed development shall be completed within 5 years from the effective date ofthis permit. Prior to commencing construction, Final Plan Approval for the proposed retail/commercial office building shall be secured from the Planning Department. Plans shall identify proposed structures, paved driveway access, parking stalls and landscaping in compliance with the Zoning Code and Planning Department Rule 17 (Landscaping Rule) associated with the proposed use." The Planning Commission approved SMA Use Permit No. 388, effective December 14, 1998, to allow for the development ofa commercial/condominium complex and related improvements. The subject property is zoned Resort-Hotel District V-.75). The applicant proposes to develop 7,007 square feet ofretail space and forty eight (48) 2-bedroom condominium units with 115 parking stalls and perimeter landscaping. Final Plan Approval for the project was issued on June 6, 2007, and the foundation construction began in September 2007. On January 31, 2002, the Planning Director granted an administrative time 1- Planning Dept. Exhibit 5" t extension until December 13, 2008 to comply with Condition No. 3 (time to complete construction). The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicant, successors or assigns, and are not the result of their fault or negligence. According to the applicant, there were numerous reasons for the delay, including construction delays due to a 30-foot wide lava tube that was found on the site; delays due to design changes; processing delays due to the consolidation of the six lots in the Land Court; and new requirements by the Department ofPublic Works for drainage. Therefore, the non-performance was a result ofconditions that could not have been foreseen by the applicant and are not the result of the applicant's fault or negligence. Granting of the time extension would not be contrary to the General Plan or Zoning Code. The General Plan designation for this area is Resort Node and Open. The majority of the parcel is designated as Resort Node, which allows for a mix of visitor- related uses such as hotels, condominium-hotels (condominiums developed and/or operated as hotels), single-family and multiple-family residential units, golf course and other typical resort recreational facilities, resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The Open designation, which is located on the makai portion ofthe parcel, allows for parks and other recreational area, historic sites, and open shoreline areas. The property is zoned Resort-Hotel District (V-.75). The granting of the time extension would not be contrary to the General Plan or the Zoning Code. Granting of the time extension would not be contrary to the original reasons for the granting of the change of zone. The original reasons for the approval of Special Management Area Use Permit No. 388, and its amendments, are still applicable today and the request is not contrary to these reasons. Based on the discussion above, the request for a 5-year time extension to Condition No. 3 (time to complete construction) of SMA Use Permit No. 388 would not be contrary to the General Plan or Zoning Code nor the original reasons for granting of the permit. It is recommended that the Planning 2- Commission approve the request with the following changes to conditions. (Material to be deleted is bracketed and struck-through; new material is underscored): 1.The applicant, its successor or assigns shall be responsible for complying with all ofthe stated conditions of approval. 3] 2. Construction of the proposed development shall be completed within 5 years from the effective date of this [permit] amendment. [Prior-te-commencing Ate.. . .. . . . ' . 1 • ' - . 3. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department of Environmental Management. 6] 4. Alii Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainage improvements, and relocation ofutilities along the Alii Drive and Kahakai Road frontages meeting with the approval of the Department of Public Works. The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the approval of the Department of Public Works. Any portion of the subject parcel upon which the improvements to meet this condition are installed, shall be subdivided and dedicated to the County, upon satisfactory completion and prior to the issuance of a Certificate of Occupancy. at no cost to the County. 3- MI Should any remains ofunidentified historic sites such as rock walls,terraces, platforms,or human burials,lava tube or•cave systems be encountered,work in L. the immediate area shall cease and the Department ofLand and Natural Resources-Historic Preservation Division.(DLNRHPD)shall bo immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have been taken. • er Zon g-Cede; 1 4- r Ar r 1008 AUG 18 RP1.i ncpvmtTtiDtOHATYAn37y •;LAM/ MAIO4TOMMY 111, z•• PAIDL4LANDAID NAROf[IALDNIra J^-.`Ili i`!'•: r F:f 'r S " OTOTNf10MfetWA,II.Y .MN.GDtD.f ii IENT I t uneu.v.TWACOUN(r tut- HAWAII nut rmTcw WASALAr_Ta1lI10lI(f'inl-MATII AQUATICszamArn STATE OF HAWAII WITINQWOMAN NIZAI DEPARTMENT OF LAND AND NATURAL RESOURCES NONIVAWOAD NI(TOM,AE OaroleTIMINTITMAteAWK2LAMMI[MEMYARAIAIDf/a-a oL NCISserfD16tLYATMSIATO•E70I f:A QMC[imR STATE HISTORIC PRESERVATION DIVISION 0NIMIDD F RE ITIITANDTTLLADi August 5,2008 601 KAMOKILABOULEVARD,ROOM 555 aiTf]DC TAOa TATUII IU-111,4COMO:WV KAPOLEI,HAWAII 96707 cAaaaAasmAwLAND MTATC?ARA1 ChristopherJ.Yuen,Planning Director LOG NO:2008.2896 County of Hawaii Planning Department DOC NO:0808MD47 101 Pauahi Street,Suite 3 Archaeology Hilo,HI 96720-4224 Dear Mr:Yuen: SUBJECT: Chapter 6E-42 Historic Preservation Review— Request for Comment on a Special Management Area Use Permit(SMA 388) Pna`a 3rd Abupaa`a, North Kona District,Island of Hawal`i TMK:((31 7-5-018:11 Thank you for the opportunity to comment on the aforementioned project,which we received on July 18, 2008. You had requested comments by August 7, 2008; we apologize for the delay in our reply. The applicant, Pacific Monarch Resorts, Inc. is requesting a time extension to condition 3 — construction timetable. We determine that no historic properties will be affected by this project because: Intensive cultivation has altered the land Subdivision development/urbanization has altered the land Previous grubbing/grading has altered the land An accepted archaeological inventory survey(AIS)found no historic properties SHPD previously reviewed this project and mitigation has been completed Other: This application involves a change in a required county permit due date,not ground-altering activity. In the event that historic resources,including human skeletal remains,cultural materials, lava tubes, and lava blisters/bubbles'are identified during the construction activities, all work needs to cease in the immediate vicinity of the find, the find needs to be protected from additional disturbance, and the State Historic Preservation Division, Hawaii Island Section, needs to be contacted immediately at(808) 981- 2979. If you have any questions about this letter please'contact Morgan Davis at the Hawaii Island Section at 808)981-2979. Aloha, • ps44da Nancy McMahon,Deputy SHPO/Statc Archaeologist and Historic Preservation Manager 0 4 4 57 3 State Historic Preservation Division i Aug 11 08 10:06a Engineering 808) 327-3533 p.1 2008 RUG 11 PP1 2 1`I PAN;Nir`I( . •1`i arm DEPARTMENT OF PUBLIC WORKS COUNTY OF HAWAII COUNTY OF HAWAII HILO, HAWAII DATE: August 8, 2008 Memorandum TO Christopher J. Yuen, Planning Director Planning Department FROM Galen M. Kuba, Division Chief*/ Engineering Division SUBJECT :Special Permit Application(SMA 388) mApplicant: Pacific Monarch Resorts, Inc: z ELocation: TMK: 317-5-018:011c We reviewed the subject application and our comments are as follows: 1. Conditions 4 and 5 should be amended to change the approval to Department of Environmental Management. 2. Condition 6 should be amended to add:The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the Department of Public Works.Any portion of the subject parcel upon which the improvements to meet this condition are installed,shall be subdivided and dedicated to the County, upon satisfactory completion and prior to the issuance of a Certificate of Occupancy, at no cost to the County. Should there be any questions concerning this matter,please feel free to contact Kiran Emier of our Kona Engineering Division office at 327-3530. KE copy: ENG-HILO/KONA PLNG-KONA Hawaii County is an Equal Oppo tuii yProvider and Employer 044358 ti 2141 .. UG P( .1.. 33 Darryl J.Oliveira Harry 1 c' / Fire Chid ui)1rP•il'Iil•I •i l (:p':?'i't i=NT s '•OUNTY UF HAWAII algia P.I.Honda Dept,Fire age QCountp of 30atuai`i HAWAII FIRE DEPARTMENT 25 Aupnn1 Stud• Suite 103 • 1111o,Hawat'i 96720 808)981-8394 • Fax(808)981-2037 July 23,2008 TO CHRISTOPHER J.YUEN,PLANNING DIRECTOR FROM : DARRYL OLIVEIRA,FIRE CHIEF SUBJECT: SPECIAL MANAGEMENT AREA USE PERMIT(SMA 388) APPLICANTS:PACIFIC MONARCH RESORTS,INC. REQUEST; TIME EXTENSION TO CONDITION 3— CONSTRUCTION TIMETABLE TAX MAP KEY: 7-5-18:11 We have no comments to offer at this time in reference to the above-mentioned Special Management Area Use permit. ARR O I IRA Fire Chief GA:lpc 044211 Haman Cnwth,is an Faud fhnortunitu Provider and Fmn mrrr. RPacafcl anuchR ah8MA988.ijn 48.21-08 iCOUNTYOFHA'VAI•I PLANNING DEPARTMENT RECOMMENDATION PACIFIC MONARCH RESORTS,INC. ' • •-- • . ' AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO.388 - Upon careful review ofthe applicant's request against the guidelines for approving amendments to a Special Management Area Use Permit,the Planning Director is recommending that the request be approved by the Planning Commission. Since this recommendation is made without the benefit of public testimony,the Director reserves the right to modify and/or alter this position. This approval recommendation is based on the following findings: The applicant is requesting a 5-year time extension to Condition No.3 of Special •.: .- Management Area Use Permit No. 3.88(time to complete construction)to extend the deadline within which to complete construction for the project from December 13;2008 to December 13, 2013. Condition No. 3 of SMA thePermit No. 388-states: Construction of the proposed development shall be completed within 5 years from the effective date of this permit. Prior to commencing construction,Final Plan Approval for the.proposed reteil/commeroial office building shall be secured from the Planning-Depaitinent. Plans shall identify proposed structured, paved driveway access,Parking stalls.and landscaping.in compliance with the-Zoning Code and Planning Department Rule 17(Landscaping Rule)associated with the ` , proposed use" The Planning Commission approved SMA Use Permit No, 388,'effective" December 14, 1998,to allow for the development of a'commercial/condominium ', complex and related improvements. The subject property is zoned Resort-Hotel District V-.75). The applicant proposes to develop 7,007 square feet of retail•space and forty eight'(48)2-bedroom condominium units with 1.15 parking stalls and perimeter r , r -landscaping. Final Plan Approval for the project was issued on June 6,2007, and the foundation construction began in September 2007: .•' On January 31,2002,the Planning Director granted•an administrative time 1 HP. Should any remains of unidentified historic sites such as rock walls, terraces, platforms, or human burials, lava tube or cave systems be encountered, work in the immediate area shall cease and the Department of Land and Natural Resources-Historic Preservation Division(DLNR-HPD) shall be immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have been taken. e de; 1 4- County of Hawaii LEEWARD PLANNING COMMISSION Aupuni Center • 101 Pauahi Street,Suite 3 • Hilo,Hawaii 96720 Phone(808)961-8288 • Fax(808)961-8742 JUN - 9 2014 Dr. William C. Foulk Parthenon Group, Inc.,A.I.A 75-5656 Kuakini Highway, Suite 301 Kailua-Kona,HI 96740 Dear Dr. Foulk: SMA No. 388 (Docket No. 98-000007) Applicant: Diamond Resorts International, Inc. (formerly Pacific Monarch Resorts, Inc.) Request: 5-Year Time Extension to Comply With Condition No. 2 (Time to Complete Construction) Tax Map Key: 7-5-018:011 The Leeward Planning Commission, at its duly held public hearing on May 15, 2014, voted to approve the above-referenced request for an amendment to Special Management Area(SMA) Use Permit No. 388 to allow a 5-year time extension to comply with Condition No. 2 (time to complete construction). SMA Use Permit No. 388 had allowed the development of a commercial/ condominium complex and related improvements on 76,739 square feet of land. The property is located on the makai side of Alii Drive bounded by Alii Drive and Kahakai Road, south of Royal Kona Resort and north of Kona Reef Condominium,Pua'a 3'1,North Kona,Hawai`i. Approval of this amendment is based on the following: 1. The applicant,its successor or assigns shall be responsible for complying with all of the stated conditions of approval. 2. Construction of the proposed development shall be completed within 5 years from the effective date of this second amendment. Planning Dept. Exhibit „CP— __- Hawai'i County is an Equal Opportunity Provider and Employer A - 91"4 Dr. William C. Foulk Parthenon Group, Inc., A.I.A Page 2 3. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval of the Department ofEnvironmental Management. 4. Ali`i Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction,pavement widening,drainage improvements, and relocation of utilities along the Ali`i Drive and Kahakai Road frontages meeting with the approval of the Department ofPublic Works. The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the approval of the Department of Public Works. Any portion of the subject parcel upon which the improvements to meet this condition are installed, shall be subdivided and dedicated to the County, upon satisfactory completion and prior to the issuance of a Certificate of Occupancy, at no cost to the County. 5.Should any remains of unidentified historic sites such as rock walls,terraces, platforms, or human burials, lava tube or cave systems be encountered, work in the immediate area shall cease and the Department of Land and Natural Resources-Historic Preservation Division(DLNR-HPD) shall be immediately notified. Subsequent work shall proceed upon an archaeological clearance from the DLNR-HPD when it finds that sufficient mitigative measures have been taken. 6. If the applicant should require an additional extension of time, the applicant shall submit the request to the Planning Commission for appropriate action. Further, should any of the conditions not be met or substantially complied with in a timely fashion,the Director may initiate procedures to revoke the permit. This approval does not,however, sanction the specific plans submitted with the application as they may be subject to change given specific code and regulatory requirements of the affected agencies. Approval of this permit is based on the reasons given in the attached recommendation report. Dr. William C. Foulk Parthenon Group, Inc., A.I.A Page 3 Should you have any questions,please contact Daryn Arai of the Planning Department at 961-8288, ext 8142. Sincerely, T3Q Brandi K. Beaudet., Chairman Leeward Planning Commission LDiamondresortssma3881pc Enclosure: PC Recommendation Report cc: Diamond Resorts International, Inc. Department of Public Works Department ofWater Supply County Real Property Tax Division State DLNR-HPD Mr. Gilbert Bailado Planning Department- Kona COUNTY OF HAWAII PLANNING COMMISSION RECOMMENDATION DIAMOND RESORTS INTERNATIONAL, INC. AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO.388 The applicant is requesting a 5-year time extension to Condition No. 2 of Special Management Area Use Permit No. 388 (time to complete construction) to extend the deadline within which to complete construction for the proposed project. Condition No. 2 of SMA Use Permit No. 388 states: Construction of the proposed development shall be completed within 5 years from the effective date of this amendment." The Planning Commission approved SMA Use Permit No. 388, effective December 14, 1998,to allow for the development of a commercial/condominium complex and related improvements. The subject property is zoned Resort-Hotel District(V-.75). The applicant propose to develop 7,007 square feet of retail space and forty eight (48) 2-bedroom condominium units with 115 parking stalls and perimeter landscaping. Final Plan Approval for the project was issued on June 6, 2007. On September 19, 2008, the Planning Commission granted a five-year time extension amendment to comply with Condition No. 3 (time to complete construction). The reasons for the delay since the approval of the previous time extension amendment request include the local and national economies entering into a catastrophic cycle of decline and financial difficulties. As a result, the previous owner of the property went into receivership as the bank held it in portfolio until a resolution of the debt could be arranged. Between 2009-2010, the existing building permits received final inspections for the electrical rough-in, foundation and retaining walls. Additionally, there have been improvements costing several million dollars put in place, including a 12-inch waterline in Walua Road dedicated to the County and an 8-inch waterline installed on the property. The water commitments and facilities charges have all been paid. Lastly, all the company assets were purchased by Diamond Resorts in 2013. The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicant, successors or assigns, and are not the result of their fault or negligence. According to the applicant,there were numerous reasons for the delay, including the local and national economies entering into a catastrophic cycle of decline and financial difficulties with the owners of the property. There have been major improvements constructed in excess of several million dollars, including the underground parking facilities, foundation, rough-in for the electrical and major waterline improvements. Therefore, the non- performance was a result of conditions that could not have been foreseen by the applicant and are not the result of the applicant's fault or negligence. Granting of the time extension would not be contrary to the General Plan or Zoning Code. The General Plan designation for this area is Resort Node, which allows for a mix of visitor-related uses such as hotels, condominium-hotels (condominiums developed and/or operated as hotels), single-family and multiple-family residential units, golf course and other 1- typical resort recreational facilities, resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The property is zoned Resort-Hotel District(V-.75). The granting ofthe time extension would not be contrary to the General Plan or the Zoning Code. Granting of the time extension would not be contrary to the original reasons for the granting of the change of zone. The original reasons for the approval of Special Management Area Use Permit No. 388, and its amendments, are still applicable today and the request is not contrary to these reasons. Based on the discussion above, the request for a 5-year time extension to Condition No. 2 (time to complete construction) of SMA Use Permit No. 388 is approved. 2- Harry Kim 01.of N Ma or Michael YeeyDirector aryn Arai Deputy Director West Hawaii Office v East Hawaii Office74-5044 Ane Keohokalole Hwy 101 Pauahi Street,Suite 3Kailua-Kona,Hawaii 96740 County of Hawaii Hilo,Hawaii 96720Phone(808;323-4770 Phone(808)961-8288Fax(808)327-3563 PLANNING DEPARTMENT Fax(808)961-8742 May 22, 2017 Mr. Michael Shalmy 10600 W. Charleston Blvd. Las Vegas NV 89135 Dear Mr. Shalmy, PLAN APPROVAL APPLIED FOR: Timeshares at Grand Kona Resort TMK: 7-5-018: 011 PLA-17-001427 We have reviewed and approved the plan for the subject proposed project for FINAL PLAN APPROVAL. Enclosed is a copy of the FINAL PLAN APPROVAL,dated May 22,2017 for your file. Please note any conditions of approval included as part of the FINAL PLAN APPROVAL. These conditions must be complied with prior to occupancy of the project, or as otherwise conditioned. Should you have any questions,please contact Terry K. Dunlap of our West Hawaii Office at 323- 4770. Sincerely, HAEL YEE Planning Director TKD/tkd: \\cohI4ly\planning\Staff\Terry'•,AAA-REVIEWS\TMK 7-5-018-011 Grand Kona Resort\Approval Letter PLA-17-001427 GrandKonaResort.doe cc: West Hawaii Office www.cohplanningdept_com Nawai'i County is an Equal Opportunity Provider and Employer planning?ahawaiicountv.gov Planning Dept. Exhibit_ 1 --- COUNTY OF HAWAII PLANNING DEPARTMENT FINAL PLAN APPROVAL PLA-17-001427 APPLICANT:DATE APPROVED: EXPIRATION DATE: Diamond Resorts Kona Il Development LLC May 22,2017 May 21,2019 LOCATION: TAX MAP KEY: Northwest corner ofAlii Drive&Kahakai road 7-5-018: 011 PARCEL AREA / PROJECT SITE AREA: ZONING: Total site: 1.77 acres Resort Hotel V.75 PROPOSED USE: four levels of timeshare NUMBER OF UNITS: resort units above an existing concrete parking 46 three bedroom units(including lockoff) garage. Two of which are ADA accessible. As Shown on Plan Comments Front Yard (East 20'-0"OK, Minimum Setback 20'-0" Front Yard (South) 20' OK, Minimum Setback 20'-0 Front Yard (West) 21 OK, Minimum Setback 20'-0" Side Yard (North) 14' OK, Minimum Setback 14'-0" Ht. of Structure: 45' for maximum height— OK, 45'-0"Maximum Ht. permitted Elevators and mechanical below an additional 10' as permitted by 25-4-22 (a). Access to parking: Kahakai Road OK Subject to Public Works requirements Off-Street Parking: Proposed Parking OK, Required Parking is based on 46 three(3)bedroom Standard 114 stalls units with lockoffs. Compact 0 92 rentals x 1.25 spaces per rental = 115 ADA 5 Total spaces provided 119 Loading Space: 10' x 22' & 12' x 50' loading spaces OK, Per prior Plan Approval were previously approved by Plan Approval on June 6, 2007. Density 46 (3)bedroom units with lockoffs OK, 1.77 x 43,560 sq. ft. =771,012 sq. ft. 46=46 =92 Divided by 750(density for V-.75)= 103 units Final Plan Approval PLA-17- 001427 (TMK: 7-5-08: 011) May 22, 2017 Page 2 of 3 Fencing and Walls: Material N/A OK Height N/A OK Location N/A OK Landscaping Proposed: OK New landscaping surrounding entire project in conformance with Rule# 17. Others Tax Clearance OK, per letter of tax clearance from RPT dated April 21,2017 and paid up to June 30, 2017 Site Drainage Plan OK, Approved by Dept. of Public Works 4/19/17 SMA Permit#388 Approved on December OK, Interpreted by Planning Director that they do not 14, 1998 for 48 (2)bedroom units. need to return to the Planning Commission for 46(3) bedroom units since they will be sold as 46 units and parking is adequate to handle the total number ofkeys. Conditions of Approval: 1. Approved landscaping to be installed and maintained prior to issuance of the Certificate of Occupancy. 2. No exterior lighting fixtures are shown. All exterior lighting shall comply with Chapter 14, Article 9 Outdoor Lighting)of the Hawai`i County Code, including shielding direct transmissions to neighboring properties, open sky and public lands. 3. Accessible Parking Spaces shall be designed and installed in accordance with all current Federal and State standards and requirements for a facility or site. The following links below are provided to assist in determining current Federal and State requirements for number of stalls, access aisle, striping, signage, and loading zone. These links are not inclusive and are provided by the County for public education and information purposes. The Planning Department makes no representation for the completeness or correctness of this list. State of Hawaii Disability and Communications Access Board: http://health.hawaii.gov/dcab/parking and http://health.hawaii.gov/dcab/files/2013/05/DCAB-Parking- Brochure-11-29-12A.pdf Hawaii Revised Statutes Section 103-50: http://www.capitol.hawaii.gov/hrscurrent/Vo102 Ch0046- 0115/HRS0103/HRS 0103-0050.htm Hawaii Administrative Rules Title 11,Chapter 219: http://health.hawaii.gov/dcab/files/2013/01/Hawaii-Administrative-Rules-Ti t 1e-1l-Chapter-219- Parking-for-Persons-With-Disabilities l.pdf U.S.Department of Justice: https://www.ada.gov/2010ADAstandards index.ht U.S. Dept.of Housing and Urban Development: http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair housing equal opo Final Plan Approval PLA-17- 001427 (TMK: 7-5-08: 011) May 22, 2017 Page 3 of 3 If any of the above federal and state laws recommend and require more stringent parking standards for persons with disabilities than those contained in the above cited sections, those requirements shall befollowed. 4. No Modifications to Plans without Prior Written Approval. All work shown on the development plans covered by this Final Plan Approval shall be completed as shown. No additions, substitutions or alterations to the site,parking, landscaping, or building design plans covered by this Final Plan Approval, nor any modification of the types of uses designated therein, shall be made without prior written approval of such changes by the Planning Department. A request for approval of such changes shall be submitted in writing and include scaled plan sheets clearly depicting and specifying all proposed changes. Upon assessing the requested changes, the Director may approve or deny the requested changes or require a new, complete application for Plan Approval where the Director finds the changes to be substantial. Prior to approval of a Certificate of Occupancy(C.O.), the PlanningDepartmentmayinspectthesubjectpropertytoverifycompliancewiththeapprovedplans. A C.O. shall not be approved where the buildings, site improvements, landscaping or use plans are found by the Director to be inconsistent with the submittals for which this Final Plan Approval is issued. 5. This Final Plan Approval is valid for two years from the date of approval, and shall expire on May 21, 2019. 6. Applicant shall comply with all other applicable laws, rules, regulations and requirements of Hawai'i County. 7. Prepare an easement for all sidewalks and rights-of-way, within your property, to be granted to the County of Hawaii for public use. This must be complete and accepted by the County of Hawaii then recorded with the Bureau of Conveniences prior to the issuance of certificate of occupancy. ing Director D:to May 22, 2017 TKD/tkd: ,'\coh141v\planningtstaf\Teny\AAA-REVIEWS\TMK 7-5-018-011 Grand Kona ResortTMK 7-5-018-011 Grand Kona resort.Plan Approval.doe to O W Cr)9FMhVWoeWW = • x 004 i g 7 W i tl ill pIiilita2gMlitt` tb ] i°4 Iia = 4i13 iT_ 0) C s X 0- W Pirdir a NIr Ili l b+I% a a 70, tkIj ,. alk. . ,, a A I' 6 1, Y I i p L.: 111 i it. cc h W t cc I 1 O 31 Z Y Q N 0 Y O U)!O C•I O rZH fi ;F flit 1 t,l W 11 a 5 q4 4 z ¢asp-J tll t 'illi all Q Bl Q3 _ c ° 11 /r I.isae , $33 111 1 i' 1 Z a Jrtlli'ti t llil11T. 11 *! a .1' i. .. vso : ... . _.o vs i8 ii38 0 1 I 5 0 ID 1 Y 4.— aA kt x r Q01 o, O O O I— cece O ' U) W ccQ Z .3O v s O W Z ° Q co tY EDL u1r._Q 4,.'i',..!:yv.('- ?1 O 4 Z O n w N _. Z H _ HN el.;' F / h X 10"+G" W I '14.,> E;/I r Ii fir i 'a . n i. 14j 14, , 0- .Idiric I. c,,,, G40, .. ... d' n , " Y VA t. 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U xQNMMI isminimp . if_._7.. ,..,. 4, . a C. o- rT 41 . 0, n 1,e,/ a yy r 1 vs 5E __ O r%, £#- dIF .40 }f gr i 4 4. ite _ w r I a w t 1 I i)11 w NQ 2_' wa,C 1l J ILE : rll 4 V 1- z0 ceiti2v, -ace y4 I' K Y V_¢ J mJ z ?Ez zo _ 9 O J Z ¢ U J O 6uU nCD ? Q ¢ n O m Oa© © UO © NOCI) DOA co IC Q thN O 2 Z amts a~' N cQwo W r i-i f-^-7-1 1 I :sit 22 ix, j ; -----[ 4 t,1 I I t 1 7"."- T-7-- , , , ,,, 00,,, Ill' . , C713'1 i tmirf"91 - ' : ,-- ' .,. .„. r J i' R 4a W 11 r as w 1" 111111i ' it otE i I' ',; Z n i a T'z P"••''2 L v 0 Z Lu LL=w i , p! w J Jy 1 1 t ' k ZQwwUw w Q N N 1A 4% I= 1 Ar.iiit 01W CC iCXVr , \i i0aA Z 7, -0 1 X (i 11) 1--IN N N 0 W _ -3-D w I ` p I— a. 0 w t,#,• I I— rtdlOrL Z ,C OJ ciJ !-- 1 J W 3 6 O Qw = w Q.ZwI- w w3OoN0 13 2 \7 1=3 ZY rr•c0...,,k9y;;DAVID Y.IGE y ` v_ OFFICE OF PLANNING 11u ,, , 9 2 LEO R.ASUNCION STATE OF HAWAIIDIRECTOR OFFICE OF PLANNING gJ t it 235 South Beretania Street,6th Floor,Honolulu,Hawaii 96813 Telephone: 808)587-2846 Mailing Address: P.O.Box 2359,Honolulu,Hawaii 96804 Fax: 808)587-2824 Web: http://planning.hawaii.gov/ OTS 2018122110856BE December 21, 2018 Mr. Michael Yee, Director Department of Planning County of Hawaii East Hawaii Office 101 Pauahi Street, Suite 3 Hilo, Hawaii 96720 Attention: Mr. Christian Kay Dear Mr. Yee: Subject: Request for Special Management Area Use Permit No. 388 (Docket No. 98- 000007)Time Extension to Comply with Condition No.2 to Complete Construction; Tax Map Key: (3) 7-5-018: 011 Thank you for the opportunity to provide comments on the subject amendment request to Special Management Area(SMA) Use Permit No. 388, transmitted via memorandum received December 5, 2018. According to the subject request, DPM Acquisition LLC, dba Diamond Resorts International requests an amendment of SMA Use Permit No. 388, Condition No. 2, to allow another five-year time extension from the effective date of this time-extension amendment to complete the proposed development. SMA Use Permit No. 388 states that the development would consist of a 6,500 square foot, 4-story commercial retail office building, forty-eight(48) 2-bedroom condominium units, 82 parking stalls and perimeter landscaping. The Office of Planning(OP)has reviewed the request, and has the following comments to offer: 1. The request states that the applicant is currently in the process of modifying the design to contemplate removing the proposed commercial component, but keeping the condominium units,parking and landscaping to make the proposed development economically feasible. The applicant should provide the revised site plan and design as the necessary documentation for the amendment request to SMA Use Permit No. 388. Planning Dept Exhibit 12 229 1 Mr. Michael.Yee December 21, 2018 Page 2 2. The SMA Use Permit No. 338 requires that if a lava tube is encountered during the proposed action,the State of Hawaii Department of Land and Natural Resources, State Historic Preservation Division(SHPD) shall be contacted immediately for a field investigation of the tube to determine site significance. The subject request indicates that previous delays occurred due to the discovery of an onsite 30-foot wide lava tube, and the previous owner adhered to the requirements of Condition No. 5 by clearing the tube, filling it with engineered fill and concrete. The applicant shouldprovidetherecommendationand/or determination issued from the SHPD for the subject lava tube engineered fill action, and ensure that Condition No. 5 shall be met in the proposed development. 3. Sea level rise will increase the risk of flooding, landslides, and coastal erosion. The review on the subject request should consider whether the subject property area is located within the 3.2-foot sea level rise exposure area by incorporating the findings of the Hawaii Sea Level Rise Vulnerability and Adaptation Report 2017, accepted by the Hawaii Climate Change Mitigation and Adaptation Commission. The Hawaii Sea Level Rise Viewer at climateadaptation.hawaii.gov particularly identifies 3.2-foot sea level rise exposure areas across the main Hawaiian Islands, which may occur in the mid to latter half ofthe 21st century. 4. Given that the completion deadline of construction for the proposed development was first administratively extended from December 13, 2003 to December 13, 2008, then extended by the Planning Commission to December 13, 2013 and May 15, 2019,respectively, the OP suggests inserting the date of new completion deadline if granted under the amendment to Condition No. 2 as follows: Construction ofthe proposed development shall be completed by the date,five years from the effective date of this fourth amendment. If you have any questions regarding this comment letter, please contact Shichao Li of our office at(808) 587-2841. Sincerely, Leo R. Asun" Director tE OF N7 4 1978, 1 w— -i n,l.`i 1;1 JT .:` DAVID Y.IGE tea,'. DR.HRISTINA M.KISHIMOTO GOVERNOR Ir ";' SUPERINTENDENT s Q STATE OF HAWAI'C'"IC't i 1 ' 'ii DEPARTMENT OF EDUCATION P.O.BOX 2360 HONOLULU,HAWAII 96804 •'—" OFFICE OF SCHOOL FACILITIES AND SUPPORT SERVICES i ,. i.... December 26,2018 Mr.Michael Yee,Planning Director County of Hawaii Planning Department 101 Pauahi Street, Suite 3 Hilo,Hawaii 96720 Re: Amendment to Special Management Area Use Permit No. 388 Docket No. 98-000007)for DPP Acquisition LLC,dba Diamond Resorts International North Kona,Hawaii TMK: 7-5-018:011 Dear Mr.Yee: The Hawaii State Department ofEducation(HIDOE)has the following comments on the amendment to Special Management Area Use Permit No. 388 (SMA Permit). According to the application,DPP Acquisition LLC,dba Diamond Resorts International is requesting a time extension to comply with Condition No 2 with a proposed mixed use development(Project)on approximately 1.735 acres ofland located in North Kona,Island of Hawaii,TMK: 7-5-018:011. Three five year time extensions have been granted for the Project since the issuance of the SMA Permit. The requested time extension is also for five years. The proposed Project consists of 48 two bedroom condominium units,a commercial retail and office building,and associated improvements. Once completed,Kahakai Elementary,Kealakehe Intermediate, and Kealakehe High Schools will service the Project. Thank you for the opportunity to comment. Should you have questions,please contact Robyn Loudermilk, School Lands and Facilities Specialist of the Facilities Development Branch,Planning Section at(808)784-5093 or via email at robyn_loudermilk@notes.k12.hi.us. Respectfully enneth G.Masden II Public Works Manager Planning Dept.Planning Section Exhibit ___ .0 122388KGM:rll c: Arthur Souza,Complex Area Superintendent,Honokaa/Kealakehe/Kohala/Konawaena Complex Area AN AFFIRMATIVE ACTION AND EQUAL OPPORTUNITY EMPLOYER 0 O WAT SGA'6.,. Al 319 49 DEPARTMENT OF WATER SUPPLY • COUNTY OF HAWAII 0 P " 345 KEKOANAO'A STREET, SUITE 20 • HILO, HAWAI'I 96720 HAW '"TELEPHONE (808) 961-8050 • FAX (808) 961-8657 December 21, 2018 L TO: Mr. Michael Yee,Director Planning Department FROM: Keith K. Okamoto, Manager-Chief Engineer Subject:Special Management Area Use Permit (SMA 388) Z co Request: Time Extension to Comply with Condition No. 2 Applicant—Diamond Resorts International,Inc. Tax Map Key 7-5-018:011 We have reviewed the subject time extension request and have the following comments. Please be informed that the subject parcel is served by an existing 12-inch service lateral which can accommodate a fire-domestic meter. This service is allowed an average usage of 22,000 gallons per day. The Department notes that the applicant is in the process ofmodifying the design of the project. The applicant should keep in mind that the demand of water should be equal to or less than the amount allotted for the existing service. Should there be any questions, please contact Mr. Ryan Quitoriano of our Water Resources and Planning Branch at 961-8070, extension 256. Sincerely yours, 0110/14A61 ) Keith K. Okamoto, P.E. Manager-Chief Engineer Planning Dept. RQ:dfg Exhibit_41 copy—Imanaka Asato, LLC 122267 Water, Our!Most Precious gesource. . . %g WaiA Kane. . . The Department of Water Supply is an Equal Opportunity provider and employer. Brumaghim, Tiffanie From: Joel Gimpel <alohafidlr@aol.com> Sent: Sunday, December 23, 2018 9:07 AM PL:\ . ,._ 7.L1 _ A NT-•--.•• --- To: Planning Internet Mail Ct. i r-1--t ,--t : A"- ', ti Cc:ken@obenski.net Subject: Special Mgm't.Area Use Permit No. 388 (Docket No. 988000007) Dear Director Yee: The Kona Traffic Safety Committee (KTSC) has reviewed the request foria;fottrth:five-year extension for the subject Special Management Area Use Permit, and thankfu!y note that the,rev.sedgy:.;- plan no longer calls for a 4-story commercial retail office building. Nevertheless;we-are extremely---- ... concerned with the amount of time (more than 20 years) that has elapsed sirnce1hefaD[tiog... Department first issued the Special Permit (December 14, 1998). During that time, the initial applicant, Pacific Monarch Resorts, filed and received two 5-year extensions, and the present applicant, Diamond Resorts International, received a third 5-year extension to May 15, 2019. The present applicant states that after assuming ownership of the property in 2013, it conducted a feasibility study to determine the actual cost for the original design, which revealed that it exceeded the allotted budget by 20 to 30 million dollars. It's apparent that the applicant failed to perform an adequate "due diligence" and feasibility study before purchasing the property, and has failed, even after completing the study, to complete a timely redesign in the five years that have elapsed since purchasing the property. It cites the "unanticipated fiscal impact" of the project as the reason for the delay. Again, had the applicant done a reasonably thorough due diligence, it would have been an anticipated fiscal impact when the property was purchased five years ago. We are also concerned regarding the absence of a current traffic impact study. Given that according to the existing plan approval dated May 22, 2017, the proposed 46 three (3) bedroom units will result in 92 vehicle rentals, the effect on traffic in the area should be significant. We therefore believe that a traffic impact study should be performed. Accordingly, the KTSC urges caution and very careful consideration of this fourth request for a time extension, given the applicant's failure to make any meaningful progress on this development in the previous five years, and the absence of a current traffic impact study. Sincerely, Joel Gimpel Kona Traffic Safety Committe Planning Dept; Exhibit =12- 1222(;)511222w5 MAY Oi Harry Kim w .. ' William A.Kucharski Mayor fut8 t1CQlrectpr Wilfred M.Okabe a:;;;' Diane A.Noda Managing Director QRuty Director 'T .•Ii bl itoff'c tai t f"' 1 !,e :.i; DEPARTMENT OF ENVIRONMENTAL MANAGEMENT 345 Kekuanao`aStreet,Suite 41 •Hilo,Hawaii 96720 Ph:(808)961-8083•Fax:(808)961-8086 cohdem@co.hawaii.hi.us http://www.hawaiicounty.gov/environmental-management/ MEMORANDUM TO: Michael Yee,Director Planning Department l FROM: William A. Kucharski, Director O.Environmental Management Dep.'/ • • DATE: December 11,2018 SUBJECT: Special Management Area Use Permit No. 388 (Docket No. 98-000007) Applicant: DPM Acquisition LLC,dba Diamond Resorts International formerly Pacific Monarch Resorts,Inc.) Request: Time Extension to Comply with Condition No. 2 Time to Complete Construction) Tax Map Key: (3) 7-5-018:011 The Solid Waste Division has reviewed the subject application and offers the following , comments and/or recommendations(contact the Solid Waste Division for details): X) No comments. Commercial operations, State and Federal agencies,religious entities and non-profit organization may not use transfer stations for disposal. Aggregates and any other construction/demolition waste should be responsibly reused to its fullest extent. Ample and equal room should be provided for rubbish and recycling. Green waste may be transported to the green waste sites located at the West Hawai`i Organics Facility and East Hawai`i Organics Facility, or other suitable diversion programs. Construction and demolition waste is prohibited at all County Transfer Stations. Submit Solid Waste Management Plan in accordance with attached guidelines. Existing Solid Waste Management Plan is to be followed. Provide update to the department on current status. Other: planning Dept. Exhibit t'_ County of Hawaii is an Equal Opportunity Provider and Employer 122103 Mr.Michael Yee, Director December 11,2018 Page 2 The Wastewater Division has reviewed the subject application and offers the following comments and/or recommendations(contact the Wastewater Division for details): No comments. Require connection of existing and/or proposed structures to the public sewer in accordance with Section 21-5 of the Hawaii County Code. Require Council Resolution to approve sewer extension in accordance with Section 21- 26.1 of the Hawai`i County Code. Complete Sewer Extension Application. Require extension ofthe sewer system to service the proposed subdivision in accordance with Section 23-85 of the Hawaii County Code. X) Check or line out as applicable: [X] If required by the Director of the Department of Environmental Management("Director of DEM"), [X] applicant shall conduct a sewer study in accordance with the then applicable wastewater system design standards prior to approval to connect to the County sewer system. Applicant shall provide such sewer line or other facility improvements as the Director of DEM may reasonably require,which the sewer study may indicate are advisable for mitigation ofimpacts of the proposed project. Contact Wastewater Division Chief for details. X ) Other: Connection to the County sewer system shall be made in accordance with Condition 3 of Special Management Area Use Permit No.388. WK:mef APR 0 1 2019I'D• • 33DAVIDV.ICE SUZANNE CHAIRPERSONGOVERNOROFHAWAIIIEOFN LANDANDPFRSON4 SOU%•.S t:• JJ U1 *4 ••._ BOARDOF ANDNATURALRESOUR4F$• .GR() 7 4 1059 ,•1, COMMISSIONONWADERRESOURCE MANAGEMENTI o f ,. a ROBERT TK. DLASLDA rii'' .r2 pl v H. PLANNING D:I ARTMEN ,; yb, ' nL KALAEO MAN Fe° d COUNTY OF HAWAII A.` DEPUTYDIRECDOR..WATER 3415/7 AQUATIC RESOURCES•`E r f7 '•Ui Kn 1'••.,,,,,,- .,}- BOATINGANDOCEANRECREATION •• • 91 ZI-vy•. COMMISSIONOWATER RESOURCE MANAGEMENT. • CONSERVATIONAND COASTALLANDSyCONSERVATIONANDRESOURCESENFORLIAIWTSTATEOFHAWAIIL FORESTRYANDIMIIRIEEStateOf1a+lA`' DEPARTMENT OF LAND AND NATURAL RESOURCESRNeoouwOWRPRESD ERVTIONSLON • • LANDSTATEHISTORICPRESERVATIONDIVISIONsuTERARILS KAKUHIHEWA BUILDING 601 KAMOKILA BLVD,STE 555 KAPOLEI,HAWAII 96707 March 14,2019 IN REPLY REFER TO: Michael Yee,Planning Director Log No.2018.02925 County of Hawaii—Planning Department Doc No. 1902GC26 101 Pauahi St.,suite 3 Archaeology Hilo,Hawai`i 96720 Email:christian.kayahawaiicounty.gov Russell Y.Tsuji,Land Administrator Land Division,Department of Land and Natural Resources P.O.Box 621 Honolulu,HI 96809 Email:Darlene.K.Nakamuraahawaiigov Dear Mr.Yee and Mr.Tsuji: SUBJECT: Chapter 6E-42 Historic Preservation Review— Special Management Area(SMA)Use Permit No.388(Docket No.98-000007) Request for Time Extension to Comply with Condition No.2(Time to Complete Construction) Pua'a 3'Ahupua`a,North Kona District,Island of Hawaii TMK:(3)7-5-018:011 This letter provides the State Historic Preservation Division's (SHPD's) review of the subject application received by our office on December 12, 2018. The applicant/owner, DPM Acquisition LLC, dba Diamond Resorts International,requests a 5-year extension to comply with Condition No.2 of SMA Use Permit No.388(Docket No. 98-000007),within the 1.735-acre property identified as TMK:(3)7-5-018:011. The submittal indicates that the current owners acquired the property in 2013 from Pacific Monarch Resort, Inc. After assuming ownership of the property, Diamond Resorts uncovered fiscal challenges with the previously proposed design for the development of a commercial/condominium complex and related improvements. Diamond Resorts indicates that it is impossible to meet the current deadline to complete construction by May 15,2019.Per the submittal,three time extensions have been granted to SMA 388 as follows: 1. In 2002,the Planning Director granted an initial administrative time extension to December 13,2008, to complete construction; 2. On October 6, 2008, the Commission granted a 5-year time extension to December 13, 2013, to complete construction;and 3. On June 14,2014,the Commission granted a third time extension to May 15,2019. A review of SHPD records indicates that numerous archaeological studies have been conducted along Alii Drive near the current project area. These studies documented numerous traditional and historic properties including, habitation complexes,platforms, lava tubes(probable sleeping or storage area); discontinuous wall segments,burial platforms, agricultural remnants, and permanent habitation sites. Additionally, our records indicate that no archaeological inventory survey has been conducted for the subject parcel. Planning Dept. Exhibit . 124402 Michael Yee and Russell Tsuji March 14,2019 Page 2 Based on the information provided the SHPD has no objections to the project proponents request for a timeextension. However, SHPD requests the opportunity to review any permits involving future ground disturbances associatedwithdevelopmentofthesubjectprojectproperty. Please contact Dr. Susan A. Lebo, Archaeology Branch Chief, at(808)692-8019 or at Susan.A.Lebo(a,hawaii.govforanyquestionsregardingthisletter. Aloha, Oawiret Alan S.Downer,PhD Administrator,State Historic Preservation Division Deputy State Historic Preservation Officer cc: public works a,hawaiicounty.gov planningchawaiicounty.gov CZ le&GIUUC-et_ 6/1 Jc LGG t -r-d4 k- 7-8 -67/.07.-8 - 9/p : 07e 0/ g. 0/ 14, 10 ) /-/ 4,02,6/, .7i 7020 a i• s`t- a n ,,%. of et--6 m !// 7/ f<;t T vd C Gt v d 691- t/G:y.e,' s b J e 1-rritAi yam-5-7./9 /1/.2/ .o Z , ott itCdc - ot / Hr, ys(74" rZ - --P e-r,ne cJs , a---% y cu Planning Det. Exhibit I6 SidneyFuke, Planning Consultant 100 Pauahi Street,Suite 212•Hilo,Hawaii 96720 Planning•variance•Zoning Telephone:(808)969-1522•Cell:(808)989-0640 Subdivision•Land Use Permits E-mail:sidfuke@hawaiiantel.net Environmental Reports DecemberDAZE: e 7, 2018 TO: Surrounding Property Owners FROM: Sidney Fuke, Planning Consultan RE: Notice of Submittal of Special Management Area Use Permit Application 3 Pacifica Big Island,LLC,TMK: 7-8-010: 078 and 090 Please be informed that in a letter dated,November 29, 2018,the County Planning Department acknowledged receipt of a request to amend Condition No. 2 of Special Management Area Use Permit No. 388 submitted by Ms. Kimberly W. Yoshimoto,Esq., representing DPM Acquisition LLC,dba Diamond Resorts International. The request is to allow an additional five(5)years from the effective date of the amendment to complete construction of the project. The approved project allowed the development of a 6,500-square foot, 4-story commercial retail/office building, forty-eight(48) condominium residential units, eighty two (82)parking stalls, landscaping,and related improvements. See attached) The subject properties, identified by TMK: 7-8-010: 078 and 090 and consisting of a combined area of 76,739 square feet,are located on the makai side of All i Drive,bounded by Ali'i Drive and Kahakai Road, south of the Royal Kona Resort and north of the Kona Reef Condominium in Pua'a 3rd,North Kona, Hawai'i. (See attached) The Leeward Planning Commission will eventually conduct a public hearing and, if required, a contested case hearing on this matter. Prior to this hearing,this office will again notify you of the hearing date,place, and time. This notice comes to you pursuant to Planning Commission Rule Nos. 4 (Contested Case Procedure) and Section 25-2-4 ofthe Zoning Code which require property owners within 300 feet of the perimeter boundary of the property be notified of the submittal ofthis application and eventually, of the public hearing. To provide input on this matter,you may: a.Provide written testimony to the Commission prior to the public hearing or verbally at the public hearing; and/or b. Request for a contested case hearing. Should you seek to intervene as a party to this hearing,you must file a written request on the attached form, "Petition for Standing in Contested Case Hearing," no later than 7 calendar days prior to the Commission's first hearing on this matter. The completed form, together with a$200 filing fee,must be filed with the Planning Department, 101 Pauahi Street, Hilo, HI 96720. Surrounding Property Owners December 7,2018 Page 2 The application is available for review at the County Planning Department, 101 Pauahi Street,Hilo, HI 96720 or at its Kona office in the Kona Civic Center located 74-5044 Ane Keohokalole Highway, Kailua-Kona, HI 96740. Should you have questions on this matter, please feel free to contact Ms. Kimberly Yoshimoto, Esq., at(808) 521-9500 or the County Planning Department at 961-8288. Thank you very much. Enclosures Copy—Ms. Kimberly Yoshimoto, Esq.,w/enclosures 223NaturePointeDrive119FEBpm 33Tijeras, NM 87059 1 February 2, 2019 L;-„. NT1h;vir.A11 Mr. Michael Yee, Director Planning Department, County of Hawaii Aupuni Center 101 Pauahi Street, Suite 3 Hilo, HI 96720 Subject:Request to Deny 5-Year Time Extension for SMA Use Permit No.388,TMK 7-8-010 and 090 Dear Mr. Yee My husband and I are the owners of Kona Reef D-8 which is located directly across Kahakai Road from a proposed 6,500 square foot,4-story commercial retail/office building with 48 two-bedroom condominium residential units as described in Special Management Area (SMA) Use Permit No. 388. We recently received notification from Sidney Fuke, Planning Consultant,that the current owner of the land and permit(DPM Acquisition LLC dba Diamond Resorts International)has requested another 5-year extension to complete construction of the proposed project(Attachment 1) WE ARE STRONGLY OPPOSED TO THIS PROPOSED TIME EXTENSION AND RESPECTFULLY REQUEST THAT YOUR OFFICE DENY THE REQUEST FOR THE FOLLOWING REASONS: 1) There has been virtually no progress since the original SMA Use Permit was issued back in 1998. Since then,the owners have requested and been granted 3 extensions and are now requesting a fourth extension. Diamond Resorts International (DRI)acquired the property and associated permit from Pacific Monarch Resorts, Inc. in 2013 and has made no progress on the construction project since then. 2) Approval of the most recent 5-year time extension request was granted to DRI in 2014 Attachment 2)and was contingent upon several conditions which have not been met. Condition 2 calls for construction of the proposed development to be completed within the 5- year extension period (by May 15, 2019). However, no progress whatsoever has been made on construction in those 5 years. Furthermore,Condition 4 in Attachment 2 calls for numerous off-site improvements which have not been started: Ali'i Drive and Kahakai Road shall be improved along the property's frontage with curb, gutter, and sidewalk construction, pavement widening, drainage improvements,and relocation of utilities along the Ali'i Drive and Kahakai Road frontages meeting with the approval of the Director of Public Works. DRI has acknowledged their lack of progress in a letter from their Attorney to you dated Nov 13, 2018(Attachment 3). The letter states that"While the applicant did receive Final Plan Approval and a permit to work within the County right-of-way for these required off-site improvements, 1 Planning Dept. Exhibit 1(123058 the unanticipated fiscal impact of the current project design resulted in the applicant deciding to delay commencement of said improvements." DRI's inability(or unwillingness)to meet the conditions of the previously-granted extension and make these required improvements greatly impacts the neighboring community. The partially- completed structure has been an eyesore on Ali'i Drive and Kahakai Road for well over 10 years and poses numerous safety,security, and environmental hazards(please see photographs in Attachment 4). It is reminiscent of the numerous partially-built resorts along the shorelines of third world countries. Yet DRI has done nothing since acquiring the property in 2013 to improve it or the surrounding area in spite of its agreement with your office in 2014 to do so. 3) There reportedly have been numerous changes to the site plans originally approved in 1998 which could significantly impact the community. Among these changes are the elimination of the commercial retail/office section and design modifications to the 48 condominium residential units that would increase the number of bedrooms and sleeping areas to accommodate up to 10 people per unit(potentially 480 guests for the entire site). This very high density of guests in the area would create tremendous parking issues(the proposed site plan includes only 82 parking stalls)and traffic congestion on Ali'i Drive and Kahakai Road. Kona has grown significantly since the original SMA Use Permit was granted in 1998. According to the Hawaii Tourism Authority,the number of Visitor Days in Kona had increased from 6.8 Million in 1998 to 10.3 Million in 2017,an increase of 50%. In addition,the local population of Kona has increased by over 50%during that same time period. This dramatic increase in the number of Kona visitors and residents as well as unvetted, potentially significant changes to the DRI site plans over the past 21 years should warrant that SMA Use Permit No. 388 be expired. Diamond Resorts International should be required to apply for a new SMA Use Permit based on updated and accurate plans that must be evaluated by the Planning Department to determine the potential impacts on the current local community prior to approval. 4) When asked, DRI would not provide a start date for construction or any assurance to nearby residents that the construction project would be completed within the requested 5-year extension. We believe that DRI's refusal to commit to action is further indication that approval of yet another 5-year extension will yield the same result as the first three extensions: Nothing. For these reasons,we respectfully request that the County of Hawaii Planning Department deny DRI's request for a fourth 5-year extension to SMA Use Permit No.388. Denying the extension would require that a future construction project undergo a thorough plan evaluation by the Planning Department prior to issuance of a new permit. While DRI might argue that requiring a new permit would only delay construction even longer, DRI's complete lack of progress or concern for how their inaction negatively impacts the local community leads us to expect more of the same. If the Planning Department does decide to grant the 5-year extension,then we request that it require DRI to meet certain conditions stated in the previously granted extension within 2 years(by May 15,2021). The conditions should include the listed improvements to Ali'i Drive and Kahakai Road such as adding a curb and gutter,extending the sidewalk,widening the pavement, improving drainage,and relocating utilities. These improvements are supposed to be completed by May 15, 2019, but DRI has 2 not started construction even though they have obtained Final Plan and permit approvals. We request that the Planning Department monitor these improvements to ensure that they are completed on time. Failure to do so should result in revocation of the SMA Use Permit. Thank you for your consideration. Please feel free to contact me at(505) 220-1274 or jaruffn@q.com if you have questions or would like additional information. Sincerely, udith "Heidi" Ruffner, Ph.D. 3 Attachment 1 SidneyFuke, Planning Consultant r 100 Pauahi Street,Suite 212•Hilo,Hawaii 96720 Punning•Variance•ZoningTelephone:(808)969-1522•Cell:(808)989-0640 Subdivision•Land Use Permits Email:sidfuke@hawaiiantel.net Environmental Reports DATE: December 7,2018 TO: Surrounding Property Owners FROM: Sidney Fuke,Planning Consultan RE: Notice of Submittal of Special Management Area Use Permit Application Pacifica Big Island,LLC,TMK: 7-8-010:078 and 090 Please be informed that in a letter dated,November 29, 2018,the County Planning Department acknowledged receipt of a request to amend Condition No.2 of Special Management Area Use Permit No. 388 submitted by Ms.Kimberly W.Yoshimoto,Esq., representing DPM Acquisition LLC,dba Diamond Resorts International. , The request is to allow an additional five(5)years from the effective date ofthe amendment to complete construction ofthe project. The approved project allowed the development of a 6,500-square foot,4-story commercial retail/office building,forty-eight(48)condominium residential units,eighty two(82)parking stalls,landscaping,and related improvements. See attached) The subject properties,identified by TMK: 7-8-010: 078 and 090 and consisting of a combined area of 76,739 square feet,are located on the makai side ofAli'i Drive, bounded by Ali'i Drive and Kahakai Road,south ofthe Royal Kona Resort and north ofthe Kona Reef Condominium in Pua a 3`d,North Kona,Hawaii. (See attached) The Leeward Planning Commission will eventually conduct a public hearing and, if required,a contested case hearing on this matter. Prior to this hearing,this office will again notify you of the hearing date,place,and time. This notice comes to you pursuant to Planning Commission Rule Nos. 4(Contested Case Procedure)and Section 25-2-4 ofthe Zoning Code which require property owners within 300 feet ofthe perimeter boundary ofthe property be notified ofthe submittal of this application and eventually,ofthe public hearing. To provide input on this matter,you may: a.Provide written testimony to the Commission prior to the public hearing or verbally at the public hearing;and/or b. Request for a contested case hearing. Should you seek to intervene as a party to this hearing,you must file a written request on the attached form, "Petition for Standing in Contested Case Hearing,"no later than 7 calendar days prior to the Commission's first hearing on this matter. The completed form, together with a$200 filing fee,must be filed with the Planning Department, 101 Pauahi Street,Hilo,HI 96720. 4 Surrounding Property Owners December 7,2018 Page 2 The application is available for review at the County Planning Department, 101 Pauahi Street,Hilo,HI 96720 or at its Kona office in the Kona Civic Center located 74-5044 Me Keohokalole Highway,Kailua-Kona,HI 96740. Should you have questions on this matter,please feel free to contact Ms.Kimberly Yoshimoto,Esq.,at(808)521-9500 or the County Planning Department at 961-8288.; Thank you very much. . . Enclosures i; , Copy—Ms.Kimberly Yoshimoto,Esq.,w/enclosures f • 5 70-4-4. INPs-to m. l CtD-STS 414. I C• I t tWJ' J 7... M11,114v f wa. Apt' V4..a5. Ag/ PROJECT LOCATION at CV.7.5 I. sezt 1iWe V t.Z5 i i 41% 4 SAN--=yr 15t.AHC OF HAWAO GE7I.LOCATION MAP i 4/I 0gh4, P•.M- v-7s. y RM-4111111;t1IPIP N. 11,4 _ M-t 41 r O 40. v am Walua R ac 1‘.. ,\!..... 40.. 4 k_1„----77....,_: PROJECT LOCATION! 4 qui to Royal Kona Resort d' G l e J t t tt 44rKona,Reef it # 111111 G'y G too 4.00 Figure 1 ft...:-..ii7.04' ' 6 General Location Map PUAA 3rd, KAILUA, NORTH KONA, HAWAII I' f mitt e a0j8 a v S-=ix u, C myEm a 1 W o U , 0 ,' 0 0. i y r two} Q d O - g•Y I o1.. a - -rF- ''- - tl ac i iii, r I 4,.... -1 r- rei ,t. S 1 J 4111 k,_ ntv.w,,,,,:,_,____. ,___..,_, • ...... ,...,. ,I- I 1r oa L_ 1t.Si- 1 - Il jw`r I 1 t- - 1 t It r ® i r s' 4.....` 1 zi tI • 1 UAml• I 4 r - s`•v: Attachment 2 fir County of Hawaii LEEWARD PLANNING COMMISSION Aupuni Center • 101 Pauahi Street,Suite 3 • Hilo,Hawaii 96720 Phone(808)9614288 • Fax(808)961-8742 JUN - 92014 Dr. William C. Foulk Parthenon Group, Inc.,A.I.A 75-5656 Kuakini Highway, Suite 301 Kailua-Kona,HI 96740 Dear Dr. Foulk: SMA No. 388 (Docket No.98-000007)Applicant: Diamond Resorts International,Inc. (formerly Pacific Monarch Resorts, Inc.)Request: 5-Year Time Extension to Comply With Condition No. 2(Time to Complete Construction) Tax Map Key: 7-5-018:011 The Leeward Planning Commission, at its duly held public hearing on May 15, 2014, voted to approve the above-referenced request for an amendment to Special Management Area(SMA) Use Permit No. 388 to allow a 5-year time extension to comply with Condition No.2 (time to complete construction). SMA Use Permit No. 388 had allowed the development ofa commercial/ condominium complex and related improvements on 76,739 square feet of land. The property is located on the makai side of Alii Drive bounded by Alii Drive and Kahakai Road,south of Royal Kona Resort and north ofKona Reef Condominium,Pua'a 3",North Kona,Hawai`i. Approval of this amendment is based on the following: 1. The applicant,its successor or assigns shall be responsible for complying with all of the stated conditions of approval. 2. Construction of the proposed development shall be completed within 5 years from the effective date of this second amendment. Hawaii County is an Equal Opportunity Provider and Employer 8 91"4 uN Dr.William C. Foulk Parthenon Group, Inc., A.I.A Page 2 3. A sewer line shall be installed to tie in with the Alii Drive Interceptor Sewer meeting with the approval ofthe Department ofEnvironmental Management. 4. Ali`i Drive and Kahakai Road shall be improved along the property's frontagewithcurb, gutter, and sidewalk construction,pavement widening, drainageimprovements, and relocation of utilities along the Alii Drive and Kahakai RoadfrontagesmeetingwiththeapprovaloftheDepartmentofPublicWorks. The street widening and roadside improvements required by this condition shall beinstalledalonganalignmentmeetingwiththeapprovaloftheDepartmentofPublicWorks. Any portion ofthe subject parcel upon which the improvements to meet this condition are installed, shall be subdivided and dedicated to the County,upon satisfactory completion and prior to the issuance ofa Certificate ofOccupancy, at no cost to the County. 5. Should any remains of unidentified historic sites such as rock walls,terraces, platforms, or human burials, lava tube or cave systems be encountered, work intheimmediateareashallceaseandtheDepartmentofLandandNatural Resources-Historic Preservation Division(DLNR-HPD) shall be immediatelynotified. Subsequent work shall proceed upon an archaeological clearance fromtheDLNR-HPD when it finds that sufficient mitigative measures have been taken. 6. If the applicant should require an additional extension of time, the applicant shall submit the request to the Planning Commission for appropriate action. Further,should any,of the conditions not be met or substantially complied with inatimelyfashion,the Director may initiate procedures to revoke the permit. This approval does not,however, sanction the specific plans submitted with the application astheymaybesubjecttochangegivenspecificcodeandregulatoryrequirementsoftheaffectedagencies. Approval of this permit is based on the reasons given in the attached recommendation report. 9 Dr.William C.Foulk Parthenon Group, Inc.,A.I.A Page 3 Should you have any questions,please contact Daryn Arai of the Planning Department at 961-8288,ext 8142. Sincerely, Brandi K. Beaudet.,Chairman Leeward Planning Commission cniarnonaresorts:ma3881 Enclosure: 'PC Recommendation Report cc: Diamond Resorts International,Inc. Department of Public Works Department ofWater Supply County Real Property Tax Division State DLNR-HPD Mr. Gilbert Bailado Planning Department-Kona 10 COUNTY OF HAWAII PLANNING COMMISSION RECOMMENDATION DIAMOND RESORTS INTERNATIONAL, INC. AMENDMENT TO SPECIAL MANAGEMENT AREA USE PERMIT NO.388 The applicant is requesting a 5-year time extension to Condition No.2 of Special Management Area Use Permit No. 388 (time to complete construction) to extend the deadline within which to complete construction for the proposed project. Condition No. 2 of SMA UsePermitNo. 388 states: Construction of the proposed development shall be completed within 5 years from theeffectivedateofthisamendment." The Planning Commission approved SMA Use Permit No. 388, effective December,14,1998,to allow for the development ofa commercial/condominium complex and relatedimprovements. The subject property is zoned Resort-Hotel District(V-.75). The applicant propose to develop 7,007 square feet of retail space and forty eight (48) 2-bedroom condominium units with 115 parking stalls and perimeter landscaping. Final Plan Approval for the project was issued on June 6, 2007. On September 19, 2008,the PIanning Commissiongrantedafive-year time extension amendment to comply with Condition No. 3 (time to completeconstruction). The reasons for the delay since the approval of the previous time extension amendment request include the local and national economies entering into a catastrophic cycle of declineandfinancialdifficulties. As a result, the previous owner of the property went into receivership as the bank held it in portfolio until a resolution of the debt could be arranged. Between 2009-2010, the existing building permits received final inspections for theelectricalrough-in, foundation and retaining walls. Additionally, there have been improvements costing several million dollars put in place, including a 12-inch waterline inWaluaRoaddedicatedtotheCountyandan8-inch waterline installed on the property. Thewatercommitmentsandfacilitieschargeshaveallbeenpaid. Lastly, all the company assetswerepurchasedbyDiamondResortsin2013. The non-performance is the result of conditions that could not have been foreseen or are beyond the control of the applicant, successors or assigns, and are not the result of their fault or negligence. According to the applicant,there were numerous reasons for thedelay,including the local and national economies entering into a catastrophic cycle of decline and financial difficulties with the owners of the property. There have been major improvements constructed in excess of several million dollars, including the underground parking facilities,foundation, rough-in for the electrical and major waterline improvements. Therefore,the non- performance was a result of conditions that could not have been foreseen by the applicant and arenottheresultoftheapplicant's fault or negligence. Granting of the time extension would not be contrary to the General Plan or ZoningCode. The General Plan designation for this area is Resort Node, which allows for a mix of visitor-related uses such as hotels, condominium-hotels (condominiums developed and/oroperatedashotels),single-family and multiple-family residential units, golf course and other 1- 11 typical resort recreational facilities,resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUPAG Map. The property is zoned Resort-Hotel District(V-.75). The granting ofthe time extension would not be contrary totheGeneralPlanortheZoningCode. Granting of the time extension would not be contrary to the original reasons for the granting of the change of zone. The original reasons for the approval of Special Management Area Use Permit No. 388,and its amendments, are still applicable today and the request is not contrary to these reasons. Based on the discussion above, the request for a 5-year time extension to Condition No. 2 (time to complete construction)of SMA Use Permit No. 388 is approved. 2- 12 Attachment 3 m a n a k a As a t o ImanakaAsato.com A LIMITED LIABILITY LAW COMPANY November 13,2018 Mr.Michael Yee,Director Planning Department County ofHawaii 101 Pauahi Street Hilo,Hawaii 96720 Dear Mr.Yee: Subject: . Annual Report and Special Management Area Use Permit No.388 Amendment Request; TMK: 7-5-018: 11 Our firm represents DPM Acquisition LLC,dba Diamond Resorts Internationalreferredtohereinafteras"Diamond Resorts"or"the applicant"),with respect to the above referenced matter. The subject property,consisting of 1.735 acres, is located on the makai side ofAli'i Drive, bounded by Ali'i Drive and Kahakai Road, and situated south of the RoyalKonaResortandnorthoftheKonaReefCondominium.On December 14, 1998,the Planning Commission for the County of Hawaii issued Special Management Area UsePermitNo. 388 (referred to hereinafter as"SMA 388")to then project developer/ownerPacificMonarchResorts;Inc.for the development of a commercial/condominium complex and related improvements(Sec Exhibit A). More specifically, SMA 388 states that the development would consist of a 6,500 square foot,4-story commercial retail office building,forty-eight(48)2-bedroom condominium units, 82-parking stalls andperimeterlandscaping. This approval was subject to a number ofperformance conditions,one ofwhich required the construction ofthe proposed development to be completed within five(5)years from the effective date ofthe permit. Thereafter,three(3)time extensions have been granted. In 2002,the PlanningDirectorgrantedaninitialadministrativetimeextensiontoDecember13,2008. Subsequently, the Planning Commission,in its approval dated October 6,2008 (SeeExhibitB),granted a second time extension to complete construction by December 13,2013. Finally,the Commission granted a third time extension to May 15, 2019 by way ofitsapprovaldatedJune9,2014(See Exhibit C)., Diamond Resorts acquired all of Pacific Monarch Resorts,Inc.'s company assetsin2013. After assuming ownership ofthe property,Diamond Resorts uncovered fiscal challenges with the proposed design Ofthe project that make it impossible to meet thecurrentdeadlinetocompleteconstruction,which is May 15,2019. In that regard,we would appreciate your considering this letter as a formal request for a time extension onbehalfoftheapplicant. 13 121679 Topa Financial Center I Fort Street Tower 1745 Fort Street Mall,17th Floor I Honolulu,Hawaii 96813 I T:808.521.9500 I F:808.541.9050 Mr.Michael Yee,Director imanakaAsato.com November 13,2018 Page 2 Nature of Request Diamond Resorts hereby requests that Condition No.2 of SMA 388,as amended, be further amended to state that"Construction of the proposed development shall be - completed within 5 years from the effective date ofthis fourth amendment." JUSTIFICATION OF REOUEST In making this extension request,the applicant respectfully requests your taking the following into consideration: 1. The applicant's inability to perform within the stipulated period was a result of conditions that could not have been foreseen or were beyond the control ofthe applicant and not attributable to the applicant's negligence. After assuming ownership of the property in 2013,Diamond Resorts had the opportunity to conduct a feasibility study to determine the current actual cost for the original design of the project. The study revealed that the actual cost exceeded the budget allotted for the project by a range of 20 to 30 million dollars. As such,the applicant is currently in the process of modifying the design to make it economically feasible for build out and completion. At present,design modifications contemplate removing the Commercial component proposed,but otherwise keeping the original condominium units;parking and landscaping. The redesign effort has caused significant delays that have led to this time extension request. 2. Approval of these requests would not be contrary to the prevailing General Plan,the Zoning Code or the original reasons for approval ofSMA 388,as amended: The,General Plan designation for this'area is Resort Node and Open. The majority ofthe parcel is designated as Resort Node,which allows for a mix ofvisitor related uses such as hotels,condominium-hotels,single- family and multi-family"residential units,golf courses and other typical resort recreational facilities,resort commercial complexes and other support services. Only Major Resort Areas are identified as Resort Nodes on the LUP.AG Map. The Open designation,which is located on the makai portion ofthe parcel,allows for parks and other recreational areas, historic sites and open shoreline areas. The property is also zoned Resort- Hotel'District(V-.75). Accordingly,the granting ofthe time extension would not be contrary to the General Plan or Zoning Code. 14 874169.1 Mr.Michael Yee,Director ImanakaAsato.com November 13,2018 Page 3 3. Current Status of the Conditions set forth in SMA 388,as amended SMA 388;as amended,'sets forth six(6)conditions upon which the Planning Commission's approval is based. Condition No. 1 states that"[t]he applicant,its successors and assigns shall be responsible for complying with all of the stated conditions of approval." This summary addresses the applicant's current state of compliance each ofthe six(6)conditions. Condition No.2 states that,"[c]onstruction ofthe proposed development shall be completed within 5 years from the effective date ofthis second amendment." It is this condition that Diamond Resorts is hereby seeking to amend. Moreover,it is our position that the approval issued on June 9, 2014 was in fact the third amendment to SMA No.388, not the second amendment. Condition No. 3 states that,"[a] sewer line shall be installed to tie in with the Ali'i Drive Interceptor Sewer meeting with the approval ofthe Department of Environmental Management." Since Diamond Resorts is still in the design phase due to the fiscal challenges presented,this condition has not yet been satisfied. The applicant intends to address it when applying for the applicable construction permits. Condition No.4 states that,"Ali'i Drive and Kahakai Road shall be improved along the property's frontage with curb,gutter, and sidewalk construction,pavement widening,drainage improvements,and relocation of utilities along the Alii Drive and Kahakai Road frontages meeting with the approval ofthe Department of Public Works. The street widening and roadside improvements required by this condition shall be installed along an alignment meeting with the approval ofthe Department of Public Works. Any portion of the subject parcel upon which the improvements to meet this condition are installed,shall be subdivided and dedicated to the County,upon satisfactory completion and prior to the issuance of a Certificate of Occupancy,at no cost to the County." While the applicant did receive Final Plan Approval and a permit to work within the County right-of-way for these required off-site improvements(See Exhibit D),the unanticipated fiscal impact ofthe current project design resulted in the applicant deciding to delay commencement of said improvements. Condition No. 5 requires that,"[s]hould any remains ofunidentified historic sites such as rock walls,terraces,platforms, or human burials,lava tube or cave systems be encountered,work in the immediate area shall 874169.1 15 Mr.Michael Yee,Director ImanakaAsato.com November 13,2018 Page 4 cease and the Department of Land and Natural Resources-Historic Preservation Division(DLNR-HPD)shall be immediately notified." It further states that,"[s]ubsequent work shall proceed upon an archeological clearance from the DNLR-HPD when it finds that sufficient mitigative measures have been taken." Previous delays occurred due to the discovery of a 30-foot wide lava tube found on site,and the previous owner adhered to the requirements ofthis condition by clearing the tube,filling it with engineered fill and concrete and redesigning the tube along with the building to allow for potential differences in compaction. Diamond Resorts also hereby commits to strictly follow the mandates ofthis condition moving forward. Finally,Condition No.6,requires that [i]f the applicant should require an additional extension oftime,the applicant shall submit the request to the Planning Commission for appropriate action." In compliance with this condition,Diamond Resorts is submitting this request in writing to the Planning Commission for a request for an additional extension oftime. We have also attached an updated surrounding property owners list,and corresponding map,for your reference(See Exhibit E). In light of the above,the applicant respectfully requests your favorable consideration and processing of this time extension request. Please find enclosed twenty(20)copies ofthis letter request with enclosures,a list of surrounding property owners,the real property tax clearance,and the filing fee of 250. We trust that everything is in order for your processing. If there are questions, please feel free to contact me. Thank you very much. Sincerely, IMAN• • ASATO, A Limited is aility Law ompany Michael L. os = Kimberley W.Yoshimoto Enclosures 16 874169.1 Attachment 4 View from Kona Reef/Kahakai Road of current DRI construction project SMA Use Permit 388). Photos taken 1/18/2019. 7(.. .._.,_,_,,... ....,,,_._. ._,-..... ,-;. ---,' 7''' r„ .... ...,,,,, I' : _ . . . .._ . t 5,,44_4,,,--4....ty3aKfi s jl ,, q t--___F-_• _.....-.,..„-.2, i • - • R•r/` • tot 1 tk•-;j f..+._ •_mss yt ,.. . ( f a vg _ rIyyy} - •;Z„ 4 ':3 ----1•'....!....,,-.:.t.,"•,--+r• 1,*N s f `'h 1.. a„y.T••••'' .l• ;+,3:-r.:•'°-1 .--,. rti. •, yt•,;:,-g• : s elk: 1 S.t y:.: ..o-, ,.s Sir•'•rha{` s .v 1 t-F rT .: 4i`^ °•L ,ri,?ye,11::',-;"11.-..<,:-.... .r r ..is;, ,''i r...•-..-6•V‘t .. -''., _ t Z rx,,,, i ry ;#" + '1.N,;••7•,'", Y , .,y. Y '^•'i'.":,• '•-.• F: 31...r a fycx; i""*,:i. f: *Rn 7v±,:s+'a.r rt:S... +,:•%•.;+..,,,....„ryi-'.14y3. bs:•. dr —44III"fi r ' .:.. •..' •fi" v.. „' ... ,-: ±"•'''• r`ii! r"=",r:':. z.+•.'. ,... w _ J } Lay .6t' 1,., r z y1eyh.r+' '°r'`t ''`r.,: . + : t sI t.-- a"u? g ,%- 41: 2• 14'.‘4172:".4`••,•1-S.' C _ y r ' . ' t'Y i.''-'1V.`"%.; 5R• 1 ..-, :•t'i y?:j:• •-h .'!'f.' -.j:"5...;t. -''=':a.;'% :iSC•:•.: ''i: r. _ `' 41ViAmo4 • 11..•:."!:70..,::,'-"::'',--. 4.-:- T v'.= •. f t`Aa- s-'-- t ` t-_ erre: ts i *; f•• _ moi 0 r pii i r e iii 4tf '"--{,••spa T a : f, ' - ti:,_•• r t. t --'1 ;' 4:-% . Yh 4'' rrT. yJmrrrr I:...%.2,,r%.':" A. s' ot ii-r '•. rp . pr;.ti, i _ . .+ . . Yi 44.,,,,c,,,,-• y',i,%» ' ' _,, . - , .Yz- h r 7---1,----0,0 ei: . d .: •-^ s .zt '. •v s r%[:.;Y ;•;... r.-•- ..: . :- j_ 1 '. ms,;_ y•wt - y'± ., , L Je ' s.S :s7,4-.y• .r i. `•V .,,`•4 ' + 17 i319 FEB 25 f rl 7 93 75-5888 Ali'i Drive- C-12 i f - INT Kailua-Kona.HI 96740:. 1_)..)i I r' Or li' i ' l February 18, 2019 Mr. Michael Yee, Director Planning Department, County of Hawaii 101 Pauahi St. Hilo HI 96720 Subject: Request to Deny 5-Year Time Extension for SMA Use Permit No.388,TMK 7.8.010&090 Dear Mr. Yee, We request that Hawaii County Planning Department DENY the identified request submitted by Attorneys at Law, Imanaka Asato Law Firm, that the current owner of the land and permittee, DPM Acquisition LLC dba Diamond Resorts International, be given another 5-year extension to complete construction of the proposed project. For 16 years my wife and I have resided full time at the Kona Reef, a neighboring condominium complex, located directly south Kahakai Road/Alii Drive intersection. We have no desire to spend another 16 years looking at this same incomplete structure and community eyesore. Help us understand why your department lets this project remain incomplete, unoccupied, and uncared for year after year. We know of no other project of this size and magnitude on our island that has lain dormant for almost a generation. Please identify all the other 20+year stagnant projects that are on major thoroughfares in our community so that we can drive around and compare our misfortune to live at this particular intersection. It is well past time to change the dynamic of expecting the public to sit and wonder why that monolith of concrete is allowed to simply deteriorate and spoil the landscape and view before our eyes. WE ARE STRONGLY OPPOSED TO THIS PROPOSED FIVE YEAR TIME EXTENSION AND RESPECTFULLY REQUEST THAT YOUR OFFICE DENY THE REQUEST FOR THE FOLLOWING REASONS: 1) Diamond Resorts International(DRI) has chosen inaction and inactivity on this project for 5 years and not met any of the performance expectations of the expiring contract conditions established in 2013. Why give this company five more years to do nothing? Is DRI too small and under-capitalized to complete the project? We ask you to investigate and report your findings to the community at the unscheduled, but upcoming, hearing date in March. A bare minimum expectation! 2)What differentiates and makes this 2018 application any different or more worthy than the past four paperwork requests? Diamond Resort Intl has had 5 years to produce results and demonstrate corporate investment in constructing a resort property to add to their expansive porfolio of over 200 resorts —why give them 10'total years to produce nothing? There has been no observable construction, improvement, or maintenance for five years. The DRI owners do not even clean up the graffiti sprayed on the walls—Kona Reef neighbors and community members perform that minimal maintenance task. We are reflecting a community's impatience and lack of any more tolerance for a casual and unenforced timeline and conditions for permit renewal. The proposed 6,500 square foot, 4-story commercial retail/office building with 48 two- bedroom condominium residential units needs to be converted into a functional and attractive community resource instead of a daily reminder about a resort investor's incomplete, underfunded, poorly planned investment schemes. How many other projects with parallel Use permits in Hawaii County have had 4 or more extensions? What other projects have sat in an unimproved condition on a major thoroughfare anywhere on Hawaii island? How many projects are as unsightly as this project? Pictures of the current state of deterioration and disrepair have been forwarded to your office. Would you want this structure next to your house in your neighborhood? Why do you expect this community to tolerate such indifference and the willingness of a developer to sit on a project on our busiest, most traveled road next to the ocean? Drivers, tourists, walkers,joggers, residents and baby strollers travel by this property daily. DRI does not even pretend to care by planting foliage, screening or anything other than a chain link fence? If the Planning Department is going to approve projects on the major thoroughfare in this resort community, create the conditions and expectation that the project will be completed in a Planning Dept. Exhibit 11 23440 timely manner. Your past approach has not worked and needs to be remedied with this iteration of project approval. Time is up before another permit renewal! 3) Mr. Fuke's request to extend the timeline one more time is a recycled, repetitive, request–four amendments of the timeline since the initial December 1998 approval (2002, 2008, 2013, and 2019). For the cost of a$250 filing fee, Mr. Fuke's clients would be afforded an additional 1816 days to subject our community to continued viewing of an ugly, unsightly, poorly maintained, concrete edifice with no apparent responsibility nor oversight by the Planning Department or the respective County Departments to assure that the applicant construct, improve,or even maintain the property. We request and expect a conditional permit with unequivocal performance expectations if the extension is granted in 2019. What is the projected value of this development? Assuming a $150,000,000 development and construction cost, the Planning Department can require DRI to submit a performance bond of 10% of the project's projected value? A 15,000,000 escrow check would be deposited as a guarantee that Diamond International will meet or exceed specified benchmarks might produce a different level of activism and performance that the past 21 years. Failure to meet the benchmarks results in the immediate forfeiture of the escrow funds to a county account to fund an alternative Open Space park in that location. Kamehameha Schools was able to demolish the Outrigger Beach Hotel by Kahaluu Beach Park in a timeline that would allow the Kailua Kona community to be released from this corporate dumping ground before the end of the next permit timeline assuming you enforce a conditional approval. Take the 15 million to construct a project of beauty rather than continuing to support corporate inaction! 4) When asked, DRI would not provide a start date for construction nor assure nearby residents that the construction project would be completed within the requested 5-year extension period. There are rumors that the new 48 condominium units reportedly have been redesigned to accommodate up to 10 guests per unit(potentially 480 guests for the entire site). This very high density of guests is likely to cause significant parking issues and community congestion. DRI is proposing to build only 82 parking stalls o support its residents and commercial visitor's congestion on Ali'i Drive. Unacceptable! 5) Approval of the most recent 5-year time extension request was granted to DRI in 2014 and was contingent upon several • condition—none of which have been met. Condition 2 calls for construction of the proposed development to be completed within the 5-year extension period (by May 15, 2019). However, no progress whatsoever has been made on construction in those 5 years. e.g. "improvements to Ali'i Drive and Kahakai Road such as adding a curb and gutter, extending the sidewalk, widening the pavement, improving drainage, and relocating utilities," This work is supposed to be completed by May 15, 2019 but DRI has made no progress except for obtaining final plan and permit approvals. The Planning Department needs to monitor that these improvements are completed on time. Failure to show significant results is prima facie evidence that the revocation of the SMA Permit is warranted! 6) DRI has acknowledged their lack of progress in a letter from their Attorney to you dated Nov 13, 2018. The letter states that"While the applicant did receive Final Plan Approval and a permit to work within the County right-of-way for these required off-site improvements, the unanticipated fiscal impact of the current project design resulted in the applicant deciding to delay commencement of said improvements." DRI has not prioritized this project for completion. Please review this attached description from Bloomberg about the size and expansiveness of DRI: "Diamond Resorts Holdings, LLC, together with its subsidiary, Diamond Resorts Corporation, engages in the development,ownership, operation, and management of vacation ownership resorts. It has approximately 200 branded and affiliated resorts with approximately 27,000 guest beds, as well as 6 cruise itineraries in 28 countries in the continental United States and Hawaii, Canada, Mexico, the Caribbean, Europe, Asia, Australia, and Africa. Diamond Resorts Holdings, LLC has a strategic alliance with Dorsett Hospitality International.The company is headquartered in Las Vegas, Nevada. Diamond Resorts Holdings, LLC operates as a subsidiary of Diamond Resorts International, Inc." This project is obviously a very small cog in a big machine. Remove the Kailua Kona community from the DRI stranglehold! For these reasons,we respectfully request that the County of Hawaii Planning Department deny DRI's request for their second, and the fourth, 5-year extension to SMA Use Permit No. 388. Denying the extension would require that a future construction project undergo a thorough plan evaluation by the Planning Department prior to issuance of a new permit. While DRI might argue that requiring a new permit would only delay construction even longer, DRI's complete lack of progress or concern for how their inaction negatively impacts the local community leads us to expect nothing more than thesamewillresultfromarubberstampbythecounty.. The public hearing on this proposal must deal with DRI application and • past performance as well as the Hawaii County Planning Department's historical," laissez faire, good old boy" attitudetowardanon-performing corporate entity. You have taken the side of the developer for 21 years. Show the people of KailuaKonathesamemodicumofrespectandvalue. Thank you for your consideration of our request. Now is the time to takethesideofthecommunity. Respectfully, Ree,,C S Bill and Cindy Armer n19 FFR 10 cm i p5 --- Mori, Ashley jl9TEB11q '. om_ i5-Nib -,.. From: Mark Pheatt <apeconsulting@gmail.com> Sent: Tuesday, February 19, 2019 12:00 PM Pi.; To: Planning Internet Mail Jt. " ' ' ii."''i sl' •._ . - Subject: Fwd: Diamond Resorts International Attachments: DiamondResortsInternational 8K 20120525 (2).pdf; DiamondResorts- 12 312015 - 10K;'• FINAL.PDF Dear Mr Yee. I sent this note to Mr. Miculka with WHT. In retrospect you should also have received the . . ; note I have also attached the Form 8K and 10K from the SEC giving some public background information. Forwarded message From: Mark Pheatt<apeconsulting cr,gmail.com> Date: Tue, Feb 19, 2019 at 8:02 AM Subject: Diamond Resorts International To: <cmiculka@westhawaiitoday.com> Dear Mr. Miculka Thank you for writing the article regarding the proposed development of the property A.( A 1 t, 7 7 !.l i,t f .l,,, - -`, µonCE OF Smp PGA70N rx_Xsttf.(t,ft,xt It Jc i t'Y r (t.( C,I,t t C"< < 1] ' r ti AMENWdENi APS R i l' a (rte ly'1yl.,C -Xiiii'ttf, ,,t xtf•Z's:f'. 1 L.tom, t) , /r.C,:" ,`Y y ('4,e.01,<.(C•;4.'' Y..(.A sE0 nue EXTENSION OF f + } [ •C{ i'',•. i A ..k 6EOUEST.iF 2 Of SMA 388t.`, -Jf,•t r f • r x t rX a.1`i <.` ; .(\ F coNarla+ r,t)N x c,c.c c Y Y fCrti.`, `t `, cct",+ 4('-',!t;• t> e,•i• ci'1 c ,,: ` r 'r i a T4IX 7"5 Q13 Ort h f, ' (1K.: ,t a . pi i f( ! ( i 7-) • I ) r ti • a • jitA .I t`. !atitn,. jjgut , .. 1,,r4. 7 ri d'! FOR YOKE INFORMATION.CONTACT: t 'c-'r",-!!moi- kap+" ,.• t...1 A .I' ,I Department 4, al c>-ts rrir; i- t y!s•;'+•n - 4;41 K }, • ' ' f '1,n, ti,To,k4awai'96720 . s Ar' r47.'s:4..*c4';';'''''•; P f P444l(80v 961-8288- 6S5r)•X' ` rte, .*" 7.?,"*"'' 1' } L !` a_s 3` far+ 4 .9 *1 s.,... ,„ ii:;fi-_., ,,,,, - ..44044.--.4r4v."100a1.11. we see every time we walk in this area. It is a huge pile of concrete. I did a little checking on this company, DPM Acquisitions LLC, doing business as Diamond Resorts International out of Las Vegas. I think you and the planning commission should conduct a criminal investigation, criminal background check, of the applicant (s). Shady. Bilked hundreds of people out of their time share investments that are owned by this company. You need to read about the CEO and his financial dealings. Obtain and read a copy of the time share agreement typically signed by members of the time share. Its a one way street. What are the planning commission's objectives with regard to this site? Here is a good example that Hawaii visitors and owners will face if Diamond is permitted to build their time share palace:Planning Dept.1 Exhibit je?_—Mm 123327 http://insidetimeshare.com/tao/diamond-resorts-consumer-advocacy-department/ I also read the 8K and 10K acquisition statements. These statements set in place the vision of Diamond. Buyer beware. Will this development benefit the Kailua Kona community? Will they hire local underserved and underemployed native citizens? At a living wage that will enable the employee to have a better and equal future for themselves and their families? There is a lot to think about with this corporation The owners are worth over 100,000 million each. Hardly chump change. The pressure is on the commission to collapse and grant the permit to build. We do not need this type of industrial sized time share product in our community. Consider Florida, they have their hands full dealing with citizens complaints about their Diamond Resorts timeshare. The commission needs to think long and hard about the future of the community. What will be good for this community in 20 years. 916 768 6246 Mark Pheatt MS CIH 916 768 6246 2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d)ofthe Securities Exchange Act of 1934 Date ofReport(Date ofEarliest Event Reported):May 21,2012 Diamond Resorts Corporation Exact name ofregistrant as specified in its charter) Maryland 333-172772 95-4582157 State orotherjurisdiction Commission I.R.S.Employer of incorporation) File Number) Identification No.) 10600 West Charleston Boulevard,Las Vegas,Nevada 89135 Address of principal executive offices) Zip Code) Registrant's telephone number,including area code:702-684-8000 Not Applicable Former name orformeraddress,ifchanged since last report Check the appropriate box below ifthe Form 8-K filing is intended to simultaneously satisfy the filing obligation ofthe registrant under any ofthe following provisions: Written communications pursuant to Rule 425 under the Securities Act(17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 underthe Exchange Act(17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b)under the Exchange Act(17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c)under the Exchange Act(17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement On May 21,2012,DPM Acquisition,LLC("DPM"),an unrestricted subsidiary ofDiamond Resorts Corporation(the"Company"),closed the previously disclosed acquisition ofassets pursuant to an Asset Purchase Agreement,among DPM and Pacific Monarch Resorts,Inc.,Vacation Interval Realty,Inc., Vacation Marketing Group,Inc.,MGV Cabo,LLC,Desarrollo Cabo Azul,S.de R.L.de C.V.,and Operadora MGVM S.de R.L.de C.V.(collectively,the Sellers").Pursuant to the Asset Purchase Agreement,DPM acquired from the Sellers certain real estate and timeshare related assets,including declarant rights in certain owners associations,for approximately$49,250,000 in cash,plus the assumption ofspecified liabilities related to the acquired assets(the"PMR Acquisition"). In order to fund the PMR Acquisition,on May 21,2012,DPM entered into a Loan and Security Agreement with Guggenheim Corporate Funding,LLC,as administrative agent forthe lender parties thereto("Agent"),and the lenders party thereto(the"PMR Acquisition Loan").The PMR Acquisition Loan is collateralized by substantially all ofthe assets ofDPM.The PMR Acquisition Loan is in an aggregate amount of$71.25 million(which consists ofa$61.25 million term loan and a$10.0 million revolving loan),has an interest rate of18.0%(ofwhich an amount equal to not less than 10.0%is paid currently and the remaining accrued amount may be paid,at DPM's election,in cash oraccrued and added to the principal amount ofthe applicable term orrevolving loan),and matures on May 21,2016.The Loan and Security Agreement contains customary covenants and restrictions applicable to DPM,including agreements to provide financial information,comply with laws,maintain its legal existence,its properties and equipment and insurance,and restrict the incurrence ofliens,certain dispositions ofassets,the payment ofcertain costs and expenses,and investments other than specified permitted investments. Further,the Loan and Security Agreement provides that,(1)DPM is required to pay quarterly(a)to Agent,for its own account,an administration fee,and(b) to Agent,for the benefit of lenders with commitments to make revolving loans thereunder,an unused line fee based upon each such lender's commitment to provide revolving loans and the then outstanding principal amount of such lender's revolving loan,(2)DPM shall make certain mandatory monthly and quarterly prepayments of amounts borrowed underthe PMR Acquisition Loan,and(3)on the maturity date for the term loan,ifnot paid earlier in accordance therewith,DPM is required to pay an exit fee ofup to 10%ofthe initial loan amount.On the closing date forthe PMR Acquisition,pursuant to the Loan and Security Agreement,DPM paid a closing fee ofapproximately$2.1 million to Agent and certain lenders party thereto.The proceeds ofthe PMR Acquisition Loan were used to fund the purchase price for the PMR Acquisition and closing costs associated therewith. Relationship with GuggenheimPartners,LLC Two members ofthe Company's board ofmanagers,Messrs.Zachary D.Warren and B.Scott Minerd,are principals ofGuggenheim Partners,LLC Guggenheim").An affiliate ofGuggenheim is currently an investor in each of(1)the Company's consumer loan backed notes(the"DROT 2009 Notes") issued in connection with the Company's completion ofits 2009 securitization transaction,and(2)the Company's Diamond Resorts Owners Trust Series 2011-1 Timeshare Loan Backed Notes,Series 2011-1 issued in connection with a second securitization in 2011(the"DROT 2011 Notes").For additional information regarding the DROT 2009 Notes and DROT 2011 Notes,see Item 7,"Management's Discussion and Analysis ofFinancial Condition and Results ofOperations-Liquidity and Capital Resources"included in the Company's Annual Report on Form 10-K for the year ended December 31,2011. In addition,in order to fund the Company's previously disclosed acquisition ofcertain assets ofTempus Resorts International,Ltd.and certain ofits affiliates,on July 1,2011,Tempus Acquisition,LLC,a wholly-owned subsidiary ofthe Company,entered into a Loan and Security Agreement with Guggenheim Corporate Funding,LLC,an affiliate ofGuggenheim,as administrative agent forthe lender parties thereto.This loan is collateralized by all assets ofTempus Acquisition,LLC,is in an aggregate amount of$41.1 million(which includes a$5.5 million revolving loan),has an interest rate of18.0% and matures on June 30,2015.For more information on this loan,see Item 7,"Management's Discussion and Analysis ofFinancial Condition and Results of Operations—Liquidity and Capital Resources"included in the Company's Annual Report on Form 10-K forthe year ended December 31,2011. Relationship with certain lenders under the Loan and Security Agreement Affiliates or related parties ofGuggenheim,Agent and certain ofthe lenders party to the Loan and Security Agreement are the beneficial owners ofcommon equity units of Diamond Resorts Parent,LLC.As disclosed in the Company's Annual Report on Fomi 10-K for the yearended December31,2011,DRP Holdco,LLC beneficially owned as of March 30,2012 approximately 21.1%of the common equity units of Diamond Resorts Parent,LLC,and is an investment vehicle managed by an affiliate of Guggenheim,and has members that are clients ofaffiliates ofGuggenheim.Further,Wellington Management Company,LLP,an affiliate or other related party to certain ofthe lenders underthe Loan and Security Agreement,beneficially owned as ofMarch 30,2012 approximately 20.2%ofthe common equity units ofDiamond Resorts Parent,LLC(which common units are owned ofrecord by clients ofWellington Management).In addition,affiliates or other related parties of other lenders under the Loan and Security Agreement beneficially owned as of March 30,2012 in the aggregate less than 5%ofthe common equity units ofDiamond Resorts Parent,LLC. Item 2.01 Completion ofAcquisition or Disposition of Assets The information in Item 1.01 above is incorporated by reference herein. Item 2.03 Creation ofa Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement ofa Registrant The information in Item 1.01 above is incorporated by reference herein. Item 7.01.Regulation FD Disclosure On May 22,2012,the Company issued a news release announcing the closing ofthe PMR Acquisition,which is attached hereto as Exhibit 99.1 and incorporated herein by reference. The infomiation furnished pursuant to this Item 7.01,including Exhibit 99.1,shall not be deemed"filed"forpurposes ofSection 18 ofthe Securities Exchange Act of 1934,as amended(the"Exchange Act"),orotherwise subject to the liabilities underthat Section and shall not be deemed to be incorporated by reference into any filing ofthe Company under the Securities Act of 1933,as amended,or the Exchange Act. Item 9.01.Financial Statements and Exhibits d)Exhibits Exhibit No.Description 99.1 News Release by Diamond Resorts Corporation dated May 22,2012 SIGNATURES Pursuant to the requirements ofthe Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Diamond Resorts Corporation May 25,2012 By: /s/David F.Palmer Name: David F.Palmer Title: President and ChiefFinancial Officer Exhibit 99.1 13 DIAMOND RESORTS INTE RN ATIO NAL"' Media Contact: Stevi Wara Diamond Resorts Corporation Tel: 702.823.7069;Fax:702.684.8705 media@diamondresorts.com DIAMOND RESORTS INTERNATIONAL®CLOSES ACQUISITION OF PACIFIC MONARCH RESORTS Purchase Adds Nine Resorts and 75,000 Owners to Diamond Resorts International®Network LAS VEGAS,Nev.,(May 22,2012)—DIAMOND RESORTS INTERNATIONAL®,a global leader in the hospitality and vacation ownership industries,today announced that it has closed,through its subsidiary DPM Acquisition,LLC,the acquisition ofa substantial portion ofthe assets of Pacific Monarch Resorts, Inc.This transaction adds nine resorts located in California,Nevada,Utah and San Jose del Cabo,Mexico,as well as approximately 75,000 owners to Diamond Resorts International®.The acquisition was originally announced in October 2011. We are delighted to finalize this acquisition and bring these resorts into our global network ofproperties,"said Stephen J.Cloobeck,Chainnan and Chief Executive OfficerofDiamond Resorts International®."Ourgrowth strategy is clear:to acquire properties in leading destination locations at good valuations, to make the necessary investments in plant and equipment to bring them up to our standards and to transformthe service levels by introducing our industry- leading service program,The Meaning ofYes®.We look forward to integrating the current Monarch Grand Vacation owners into the broader Diamond Resorts International®network,offering opportunities to vacation at our more than 200 resorts in 28 countries around the world.In addition,we look forward to an expanded relationship with Guggenheim Partners and Resort Finance America,LLC("RFA")and RFA's management company,Lantern Asset Management,LLC."Financing for the acquisition ofthe Pacific Monarch Resorts assets was provided by Guggenheim Partners. Pacific Monarch has resorts in the following locations: Cabo Azul Resort in San Jose del Cabo,Mexico Cancun Resort in Las Vegas,NV Cedar Breaks Lodge&Spa in Brian Head,UT Desert Isle of Palm Springs in PalmSprings,CA Palm Canyon Resort&Spa in Palm Springs,CA Riviera Beach&Spa Resort in Capistrano Beach,CA Riviera Oaks Resort&Racquet Club in Ramona,CA Riviera Shores Resort in Capistrano Beach,CA Tahoe Seasons Resort in South Lake Tahoe,CA Diamond Resorts International®,with global headquarters in Las Vegas,Nevada,is one ofthe largest hospitality companies in the world with more than 200 branded and affiliated resorts and over27,000 guest beds in 28 countries with destinations throughout the continental United States and Hawaii,Canada, Mexico,the Caribbean,Europe,Asia,Australia and Africa.Offering simplicity,choice and comfort to more than 418,000 owners and members through the branded hospitality service ofapproximately 5,000 team members worldwide,Diamond Resorts International®is dedicated to providing its guests with effortless and relaxing vacation experiences every time,for a lifetime. Annually,nearly 1.4 million owners,members and guests enjoy the simplicity,choice and comfort Diamond Resorts International®offers through our branded hospitality experience. About Guggenheim Partners Guggenheim Partners is a privately held global financial services firm with more than$125 billion in assets under management.The firm provides asset management,investment banking and capital markets services,insurance,institutional finance and investment advisory solutions to institutions, governments and agencies,corporations,investment advisors,family offices and individuals.Guggenheim Partners is headquartered in New York and Chicago and serves clients across North America,Europe and Asia from morethan 25 offices in nine countries.For more information about Guggenheim Partners,visit guggenheimpartners.com. About Lantern Asset Management,LLC and Resort Finance America,LLC Lantern Asset Management,LLC is a real estate asset management company headquartered in Dallas,Texas with offices in Orlando and NewYork that is wholly owned by affiliates ofCenterbridge Partners,L.P.("Centerbridge").Lantern was formed in September 2010 to assist Centerbridge and Resort Finance America,LLC with the origination,underwriting,acquisition,and servicing of commercial real estate assets.RFA was formed by Centerbridge in connection with the acquisition of$1.0 billion portfolio ofloans related to timeshare resorts throughout North America from Ally Commercial Finance LLC in September 2010.In addition to asset management and continued investments in the Ally portfolio,RFA seeks to make new debt and equity investments across the timeshare industry.RFA is managed and operated by principals ofLantern. CONTACTS For Diamond Resorts Corporation media@diamondresorts.com For Resort Finance America and Lantern Asset Management Jaquelyn M.Schamick,Brunswick Group 1.214.459.8181 jschamick@brunswickgroup.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K Mark One) D ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2015 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 001-35967 DIAMOND RESORTS INTERNATIONAL, INC. Exact name ofregistrant as specked in its charter) Delaware 46-1750895 State or other jurisdiction of I.R.S.Employer incorporation or organization)Identification No.) 10600 West Charleston Boulevard Las Vegas,Nevada 89135 Address of principal executive offices)Zip code) 702)684-8000 Registrant's telephone number including area code) Securities registered pursuant to Section 12(b)of the Act: Title ofEach Class Name ofeach exchange on which registered Common Stock,par value$0.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g)ofthe Act:None Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 ofthe Act.YES 5] NO 0 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)ofthe Act.YES 0 NO(5 Indicate by check mark whether the Registrant(1)has filed all reports required to be tiled by Section 13 or 15(d)ofthe Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the Registrant was required to tile such reports),and(2)has been subject to such filing requirements for the past 90 days.YES X NO 0 Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site,ifany,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 0232.405 of this chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit and post such files).YES NO 0 Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter)is not contained herein, and will not be contained,to the best ofregistrant'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.x Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company. See the definitions of"large accelerated filer," "accelerated filer"and"smaller reporting company"in Rule 12b-2 of the Exchange Act.(Check one): Large accelerated tiler x Accelerated tiler 0 Non-accelerated filer 0 Smaller reporting company 0 Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company(as defined inRule 12b-2 ofthe Act). 0 YES X NO The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 30,2015(the last business day ofthe registrant's most recently completed second fiscal quarter)was$1,446,879,088 based on the last reported sale price on the New York Stock Exchange on June 30,2015. As of February 25,2016,there were 69,705,619 outstanding shares of the common stock,par value$0.01 per share,ofthe registrant. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement,to be tiled pursuant to Regulation 14Aunder the Securities Exchange Act of 1934,in connection with the registrant's 2016 Annual Meeting of Stockholders,are incorporated by reference into Part III ofthis report. TABLE OF CONTENTS PART I 3 ITEM 1.BUSINESS ITEM 1A.RISK FACTORS 25 ITEM 1B.UNRESOLVED STAFF COMMENTS 40 ITEM 2.PROPERTIES 40 ITEM 3.LEGAL PROCEEDINGS 40 ITEM 4.MINE SAFETY DISCLOSURES 40 PART II 41 ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 41 ITEM 6. SELECTED FINANCIAL DATA 43 ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 44 ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 68 ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 69 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 69 ITEM 9A.CONTROLS AND PROCEDURES 69 ITEM 9B.OTHER INFORMATION 72 PARTIII 73 ITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 73 ITEM 11.EXECUTIVE COMPENSATION 73 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 73 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE 73 ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES 73 PARTIV 74 ITEM 15.EXHIBITS,FINANCIAL STATEMENT SCHEDULES 74 SIGNATURES 79 2 PART I CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements,which are covered by the"Safe Harbor for Forward-Looking Statements"provided by the Private Securities Litigation Reform Act of 1995.You can identify these statements by the fact that they do not relate strictly to historical or current facts.We have tried to identify forward-looking statements in this report by using words such as"anticipates,""estimates,""expects,""intends,""plans"and"believes,"and similar expressions or future or conditional verbs such as"will,""should,""would,""may"and"could."These forward-looking statements include,among others,statements relating to our future financial performance,our business prospects and strategy,anticipated financial position,liquidity and capital needs and other similar matters.These forward-looking statements are based on management's current expectations and assumptions about future events,which are inherently subject to uncertainties,risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those expressed in,or implied by,the forward-looking statements included in this report as a result ofvarious factors,including,among others: the effects of our previously announced process to explore strategic alternatives,including the impact on our business, financial and operating results and relationships with our employees and other third parties(including homeowners associations("HOA")and prospective purchasers of vacation ownership interests("VOIs"or"Vacation Interests")) resulting from this process and uncertainty as to whether this process will result in a transaction or other action that maximizes stockholder value or any transaction or other action at all; adverse trends or disruptions in economic conditions generally or in the vacation ownership,vacation rental and travel industries; adverse changes to,or interruptions in,relationships with our affiliates and other third parties,including termination of our hospitality management contracts; our ability to maintain an optimal inventory of VOIs for sale overall,as well as in eight multi-resort trusts and one single-resort trust(collectively,the"Diamond Collections"); our use of structures for development of new inventory in a manner consistent with our asset-light model,including the risk in these structures that we will not control development activities or the timing of inventory delivery and the risk that the third parties do not fulfill their obligations to us; our ability to sell,securitize or borrow against our consumer loans; decreased demand from prospective purchasers of VOIs; adverse events,including weather-related and other natural disasters and crises.or trends in vacation destinations and regions where the resorts in our network are located; changes in our senior management; our ability to comply with current or future regulations applicable to the vacation ownership industry or any actions by regulatory authorities; the effects of our indebtedness and our compliance with the terms thereof; changes in the interest rate environment and their effects on our outstanding indebtedness; our ability to successfully implement our growth strategy,including our strategy to selectively pursue complementary strategic acquisitions; risks associated with acquisitions,including difficulty in integrating operations and personnel,disruption of ongoing business and increased expenses; our ability to compete effectively;and other risks and uncertainties discussed in"Item IA.Risk Factors"and elsewhere in this annual report. Accordingly,you should read this report completely and with the understanding that our actual future results may be materially different from what we expect. Forward-looking statements speak only as of the date of this report.Except as expressly required under federal securities laws and the rules and regulations of the Securities and Exchange Commission(the"SEC"),we do not have any obligation,and do not undertake,to update any forward-looking statements to reflect events or circumstances arising after the date of this 3 report,whether as a result of new information or future events or otherwise.You should not place undue reliance on the forward-looking statements included in this report or that may be made elsewhere from time to time by us,or on our behalf.All forward-looking statements attributable to us are expressly qualified by these cautionary statements. On July 24,2013,Diamond Resorts International,Inc. ("DRII")closed the initial public offering of an aggregate of 17,825,000 shares of its common stock at the IPO price of$14.00 per share(the"IPO").In the IPO,DRII sold 16,100,000 shares of common stock,and Cloobeck Diamond Parent,LLC("CDP"),in its capacity as a selling stockholder,sold 1,725,000 shares of common stock.Prior to the consummation of the IPO,DRII was a newly-formed Delaware corporation,incorporated in January 2013,that had not conducted any activities other than those incident to its formation and the preparation of filings with the SEC in connection with the IPO.DRII was formed for the purpose of changing the organizational structure of Diamond Resorts Parent,LLC("DRP")from a limited liability company to a corporation. Immediately prior to the consununation of the IPO,DRP was the sole stockholder of DRII.In connection with,and immediately prior to the completion ofthe IPO,each member of DRP contributed all of its equity interests in DRP to DRII in return for shares ofcommon stock of DRU.Following this contribution,DRII redeemed the shares of common stock held by DRP and DRP was merged with and into DRII.As a result,DRII became a holding company,with its principal asset being the direct and indirect ownership of equity interests in its subsidiaries,including Diamond Resorts Corporation("DRC").We refer to these and other related transactions entered into substantially concurrently with the IPO as the"Reorganization Transactions." Except where the context otherwise requires or where otherwise indicated,references in this annual report on Form 10-K to"the Company," "we,""us"and"our"refer to DRP prior to the consummation of the Reorganization Transactions and DRII, as the successor to DRP,following the consummation of the Reorganization Transactions,in each case together with its subsidiaries. INDUSTRYAND MARKET DATA Certain market,industry and similar data included in this report have been obtained from third-party sources that we believe to be reliable,including the ARDA International Foundation,(the"AIF").Our market estimates are calculated by using independent industry publications and other publicly available information in conjunction with our assumptions about our markets.We have not independently verified any market,industry or similar data presented in this report. Such data involves risks and uncertainties and are subject to change based on various factors,including those discussed under the headings Cautionary Statement Regarding Forward-Looking Statements"and"Item L4.Risk Factors" in this report. TRADEMARKS Diamond Resorts International®,Diamond Resorts®,THE Club®,Polo Towers&Design®,Relaxation. . . simplified®, DRIVEN®,The Meaning of Yes®,We Love to Say Yes®,Vacations for Life®,Affordable Luxury.Priceless Memories',Stay Vacationed®,Events of a Lifetime',Vacations of a LifetimeTM and our other registered or common law trademarks,service marks or trade names appearing in this report are our property.This report also refers to brand names,trademarks or service marks of other companies.All brand trademarks,service marks or trade names cited in this report are the property of their respective holders. 4 ITEM 1. BUSINESS Company Overview We are a global leader in the hospitality and vacation ownership industry,with a worldwide resort network of 379 vacation destinations located in 35 countries throughout the world,including the continental United States("U.S."),Hawaii, Canada,Mexico,the Caribbean,Central America, South America,Europe,Asia,Australia,New Zealand and Africa(as of January 31,2016).Our resort network includes 109 resort properties with approximately 12,000 units that we manage and 250 affiliated resorts and hotels and 20 cruise itineraries,which we do not manage and do not carry our brand,but are a part of our resort network and,through the Clubs(defined below),are available for our members to use as vacation destinations.We offer Vacations for Life®--a simple way to acquire a lifetime of vacations at top destinations worldwide.We believe in the power and value of vacations to create lifelong memories and nurture our humanity.They are essential to our well-being. We offer avacation ownership program whereby members acquire VOIs in the form of points.Members receive an annual allotment ofpoints depending on the number of points purchased,and,through the Clubs,they can use these points to stay at destinations within our network of resort properties,including Diamond Resorts managed properties as well as affiliated resorts,luxury residences,hotels and cruises.Unlike a traditional interval-based vacation ownership product that is linked to a specific resort and week during the year,our points-based system permits our members to maintain flexibility relating to the location,season and duration oftheir vacation. A core tenet of our management philosophy is delivering consistent quality and personalized services to each of our members,and we strive to infuse hospitality and service excellence into every aspect ofour business and each member's vacation experience.This philosophy is embodied in We Love to Say Yes®,a set of Diamond values designed to provide each of our members and guests with a consistent,"high touch"hospitality experience through our commitment to be flexible and open in responding to the desires of our members and guests.Our service-oriented culture is highly effective in building a strong brand name and fostering long-term relationships with our members,resulting in additional sales to our existing member base and attracting new members. On October 16,2015,we completed the Gold Key Acquisition,which added six managed resorts to our network,in addition to unsold VOIs and other assets.On January 29,2016,we completed the Intrawest Acquisition,which added nine managed resorts to our network,in addition to a portfolio of Vacation Interests notes receivable,unsold VOIs and other assets. See "Note 1—Background,Business and Basis ofPresentation"and "Note 24—Business Combinations"of our consolidated financial statements included elsewhere in this annual report for the definition of and further detail on the Gold Key Acquisition and "Note 30—Subsequent Events"for the definition ofand further detail on the Intrawest Acquisition. Our business consists of two segments:(i)hospitality and management services and(ii)Vacation Interests sales and financing. Hospitality and Management Services. We are fundamentally a hospitality company that manages a worldwide network of resort properties and provides services to a broad member base.We manage 109 resort properties,as well as the Diamond Collections,each ofwhich holds ownership interests in a group of resort properties(including a vast majority of our managed resorts). Substantially all of our management contracts automatically renew,and the management fees we receive are based on a cost-plus structure.As the manager,we operate the front desks,provide housekeeping,conduct maintenance and manage human resources services.We also operate,directly or by managing outsourced providers of,amenities such as golf courses, food and beverage venues and retail shops,an online reservation system,customer contact centers,rental,billing and collection,accounting and treasury functions,communications and information technology services. In addition to resort services,key components of our business are the Clubs,which enable our members to use their points to stay at resorts in our network.Our Clubs include THE Club,which is the primary Club sold,and provides members with full membership access to all resorts in our resort network and offers the full range of member services,as well as other Clubs that enable their members to use their points to stay at specified resorts in our resort network and provide their members with a more limited offering of benefits.We refer to THE Club and other Club offerings as"the Clubs."The Clubs offer our members a wide range of other benefits,such as the opportunity to redeem their points for(or,in some cases,purchase for cash)various products and services, including private luxury property rentals,high-profile sporting events,guided journeys and adventures,various air miles programs and cruises.We believe the Clubs'offerings enhance the overall experience ofour members and,thus,the perceived value of their memberships.Fees paid by our members cover the operating costs ofour managed resorts(including the absorption ofa substantial portion of our overhead related to the provision of our management services),our management fees, maintenance fees for VOIs at resorts that we do not manage that are held by the Diamond Collections,and,in the case of members of the Clubs,membership dues.As part ofour hospitality and management services,we typically enter into agreements with our managed resorts and the Diamond Collections under which we reacquire VOIs previously owned by members who have failed to pay their annual maintenance fees or other assessments,serving as the primary source ofour VOI inventory that we sell. 5 Vacation Interests Sales and Financing. We sell VOIs principally through presentations,which we refer to as"tours,"at our 61 sales centers,a majority ofwhich are located at our managed resorts.We generate sales prospects by utilizing a variety of marketing programs,including presentations at our managed resorts targeted at existing members and current guests who stay on a per-night or per-week basis,overnight minivacation packages,targeted mailings,member referrals,telemarketing, gift certificates and various destination-specific marketing efforts.As part of our sales efforts,and to generate interest income and other fees,we also provide loans to qualified VOI purchasers. The charts below show the total revenue and net income for each segment of our business for the year ended December 31,2015(with the percentages representing the relative contributions of these two segments): Segment Revenue for the Year Segment Net Income for the Year Ended December 31,2015 Ended December 31,2015 Hospitality And Hospitality Management And Services $lBBmm 1 Management 20%)Services 133 mm 32%) $291 mm 5765 mm Vacatun 68%l Vacatun 80%) / Interest Interest r/ Sales and Sales and Financing Finanang Revenue fromtwo segments above 595 millionMet Income contribution from two segments above 5429 mill on Corporate and'Other 1 million Corporate and Other 279)million Total ltevenue 5954 million Total Net income 150 million The Vacation Ownership Industry The vacation ownership industry enables individuals and families to purchase VOIs,which facilitates shared ownership and use offully-furnished vacation accommodations at a particular resort or network of resorts.VOI ownership distinguishes itself from other vacation options by integrating aspects oftraditional property ownership and the flexibility afforded by pay- per-day resorts or hotels.As compared to pay-per-clay resort or hotel rooms,VOI ownership typically offers consumers more space and home-like features,such as a full kitchen,living and dining areas and one or more bedrooms.Further,room rates and availability at pay-per-day resorts and hotels are subject to periodic change,while much of the cost ofa VOI is generally fixed at the time of purchase.Relative to traditional vacation property ownership,VOI ownership affords consumers greater convenience and a variety of vacation experiences and requires significantly less up-front capital,while still offering common area amenities such as swimming pools,playgrounds,restaurants and gift shops. Consequently,for many vacationers,VOI ownership is an attractive alternative to traditional vacation property ownership and pay-per-day resorts and hotels. Typically,a vacation ownership resort is overseen by an organization generally referred to as a homeowners association HOA"),which is administered by a board of directors,generally elected by the owners of VOIs at the resort.The HOA is responsible for ensuring that the resort is financially sound and adequately maintained and operated.To fund the ongoing operating costs of the resort,each VOI holder is required to pay its pro rata share of the expenses to operate and maintain the resort,including any management fees payable to a company to manage and oversee the thy-to-thy operation of the resort.Ifa VOI owner fails to pay its maintenance fee,that owner will be in default,which may ultimately result in a forfeiture of that owner's VOI to the HOA and a consequent ratable increase in the expense-sharing obligations of the non-defaulted VOI owners. The management and maintenance of a resort in which VOIs are sold are generally either provided by the developer of the resort or outsourced to a management company,but,in either case,many developers often regard the management services provided as ancillary to the primary activities of property development and VOI sales.Historically,certain real estate developers have created and offered VOI products in connection with their investments in purpose-built vacation ownership properties or converted hotel or condominium buildings.These developers have frequently used substantial project-specific debt financing to construct or convert vacation ownership properties.The sales and marketing efforts of these developers have typically focused on selling out the intervals in the development,so that the developer can repay its indebtedness,realize a profit from the interval sales and proceed to a new development project. As the vacation ownership industry evolved,some in the industry recognized the potential benefits of a more integrated 6 approach,where the developer's resort management operations complemented its sales and marketing efforts.In addition,the types ofproduct offerings have also expanded over time,moving from fixed-or floating-week intervals at individual resorts, which provide the right to use the same property each year,or in alternate years,to points-based memberships in multi-resort vacation networks.These multi-resort vacation networks are designed to offer more flexible vacation opportunities.In addition to these resort networks,developers of all sizes may also affiliate with vacation ownership exchange companies in order to give customers the ability to exchange their rights to use the developer's resorts for the right to access a broader network of resorts. According to the AIF,a trade association representing the vacation ownership and resort development industries,the percentage ofresort networks offering points-based products has been rising in recent years and,due to the flexibility of these types of products,the AIF believes that this trend will continue in the near future as companies that have traditionally offered only weekly intervals expand their product offerings.Entry into this market,particularly by single site developers,is expensive and complex due to the need for the necessary support systems,such as the technology requirements,legal know-how and strong business and inventory controls,to provide such services. Growth in the vacation ownership industry has been achieved through expansion of existing resort companies as well as the entry of well-known lodging and entertainment companies that either operate vacation ownership businesses directly or license their brands to other operators of vacation ownership businesses,including Disney,Four Seasons,Hilton, Hyatt,Marriott,Starwood and Wyndham.The industry's growth can also be attributed to increased market acceptance of vacation ownership resorts,enhanced consumer protection laws and the evolution from a product offering a specific week-long stay at a single resort to the multi-resort points-based vacation networks,which offer a more flexible vacation experience. According to the AIF's State of the Vacation Timeshare Industry Report("State of the Industry Report"),as of December 31,2014,the U.S.vacation ownership community was comprised of approximately 1,600 resorts,representing approximately 198,000 units and an estimated 8.7 million vacation ownership week equivalents.As reported by the AIF and reflected in the graph below,VOI sales during 2009 through 2011 were down significantly from levels prior to the economic downturn that started in 2008,which the AIF attributes largely to the fact that several of the larger VOI developers intentionally slowed their sales efforts through increased credit score requirements and larger down payment requirements in the face ofan overall tighter credit environment;however,according to the State of the Industry Report,VOI sales in the U.S.increased by an average of more than 7.0%annually from 2011 to 2014.Based on AIF's Quarterly Pulse Survey reports,this trend of increasing VOI sales continued to accelerate to a 7.8%increase for the first three quarters of 2015 as compared to the same period in 2014. Sales of Vacation Ownership Week Equivalents Since 1985 12.0 10.0 80 18; 6.0 O 0° $4.0 2.0 0.0 19851986 1987 1988 19891990 1991 1992 1993 19941995 19961997 1998 1999 20002001 2002 2006 2004 2005 2006 2007 2008 2009 20102011 2012 2013 2014 Source:Historical timeshare industry research conducted by Ragatz Associates and American Economic Group.as of December 31,2014. 7 We expect the U.S.vacation ownership industry to continue to grow over the long term due to favorable demographics, more positive consumer attitudes,availability of capital and the low penetration of vacation ownership in North America. According to the AIF's bi-annual 2014 Shared Vacation Ownership Owners Report(the"Owners Report"),based upon a survey of the U.S.VOI owners,the median household income ofVOI owners was$89,500 in 2014,90%of VOI owners own their primary residence and 67%have a college degree.The Owners Report indicated that 83%of VOI owners rate their overall ownership experience as good to excellent and that the top four reasons for purchasing a VOI are resort location,saving money on future vacations,overall flexibility and quality ofthe accommodations.According to the Owners Report,less than 8%of U.S.households own a VOI.We believe this relatively low penetration rate of vacation ownership suggests the presence of a large base ofpotential customers. The European vacation ownership industry is also significant.According to AIF,based on the latest survey,the European vacation ownership community was comprised of approximately 1,300 resorts in 2010,representing approximately 88,000 units. In addition,we believe that rapidly-growing international markets,such as Asia and South and Central America,present significant opportunities for expansion of the vacation ownership industry due to the substantial increases in spending on travel and leisure activities forecasted for consumers in those markets. As the vacation ownership industry continues to mature,we believe that keys to success for a company in this industry include: Hospitality Focus. Integrating hospitality into every aspect of a guests vacation experience,including VOI sales, should result in higher levels of customer satisfaction and generate increased VOI sales,as compared to companies that do not view hospitality as an integral component of the services they provide. Broad,Flexible Product Offering.Offering a flexible VOI product that allows customers to choose the location, season,duration and size ofaccommodation for their vacation,based upon the size of the product purchased,coupled with a broad resort network,will likely attract a broader spectrum of customers. Consistent,High-Quality Resort Management.Ensuring a consistent,high-quality guest experience across a company's managed resorts and a brand the customer can trust should enhance VOI sales and marketing efforts targeted at new customers and increase the potential for additional VOI sales to existing customers. Financing.Providing quick and easy access to consumer financing will often expedite a potential purchaser's decision- making process and result in additional VOI purchases. We believe that competition in the vacation ownership industry is based primarily on the quality of the hospitality services and overall experience provided to customers,the number and location of vacation ownership resorts and hotels in the network,trust in the brand and the availability of program benefits. Competitive Strengths Our competitive strengths include: A substantialportion ofthe revenuefrom our hospitality and management services business converts directly to Adjusted EBITDA. Substantially all of our management contracts with our managed resorts and the Diamond Collections automatically renew,and under these contracts we receive management fees generally ranging from 10%to 15%of the other costs of operating the applicable resort or Diamond Collection(with a weighted average of 13.9%based upon the total management fee revenue for the year ended December 31,2015).The covered costs paid by our managed resorts and the Diamond Collections include both the direct resort operating costs and the absorption of a substantial portion of our overhead related to this part of our business.Accordingly,our management fee revenue results in a comparable amount of Adjusted EBITDA.Generally,our revenue from management contracts increases to the extent that(i)operating costs(including reserves for capital projects such as renovations and upgrades)at our managed resorts and the Diamond Collections rise and,consequently,our management fees increase proportionately under our cost-plus management contracts;(ii)we add services under our management contracts;or iii)we acquire or enter into contracts to manage resorts not previously managed by us.Adjusted EBITDA is a non-U.S. GAAP financial measure and should not be considered in isolation from,or as an alternative to net cash provided by(used in) operating activities or any other measure of liquidity,or as an alternative to net income(loss),operating income(loss)or any other measure of financial performance,in any such case calculated and presented in accordance with U.S. GAAP. See"Item 7. Management's Discussion and Analysis ofFinancial Condition and Results of Operations—Liquidity and Capital Resources Indebtedness—Senior Credit Facility"for further discussion regarding our Adjusted EBITDA. Theprincipal elements ofour businessprovide us with significantfinancial visibility. Managementfeesfrom our cost-plus management contracts.All anticipated operating costs of each of our managed 8 resorts and Diamond Collections,including our management fees and costs pertaining to the specific managed resort or Diamond Collection,such as costs associated with the maintenance and operations of the resort,are included in the annual budgets of these resorts and Diamond Collections.These annual budgets are approved by the board of directors ofeach HOA and each Diamond Collection's non-profit members association(each,a"Collection Association"),as applicable,and are typically finalized before the end of the prior year.As a result,a substantial majority ofour management fees are collected by January of the applicable year as part of the annual maintenance fees billed to VOI owners and released to us as services are provided.Unlike typical management agreements for traditional hotel properties,our management fees are not affected by average daily rates("ADR")or occupancy rates at our managed resorts.In addition,while our management contracts may be subject to non-renewal or termination,no resort or Diamond Collection has terminated or elected not to renew any of our management contracts during the past five years. Fees earned by operating the Clubs.Dues payments for each of the Clubs are billed and generally collected together with the member's related annual maintenance fees. Substantially all Club dues are collected by January of the applicable year.Members of the Clubs are not permitted to make reservations or access the applicable Club's services and benefits ifthey are not current in payment of these dues.The Clubs also provide specific services to the Diamond Collections,such as call center services,for which the Clubs charge a fee to the Diamond Collections,and are included in the Diamond Collection maintenance fees. Some ofthe Clubs offer a tiered loyalty membership whereby additional affiliated resorts and benefits are made available as the member purchases more points,resulting in higher Club dues for members in a higher loyalty tier. VOI sales.Our VOI sales revenue is primarily a function of three levers:the number oftours we conduct,our closing percentage(which represents the percentage ofVOI sales closed relative to the total number of tours at our sales centers)and the sales price per transaction.We generally have a high degree of near-term visibility as to each of these factors.Before the beginning of a year,we can predict with a high degree of confidence the number of tours we will conduct that year,and we believe that we can tailor our sales and marketing efforts to effectively influence our closing percentage and average transaction size in order to calibrate our VOI sales levels over the course of the year. Financing ofVOI sales in the U.S.We target the level of our consumer financing activity in response to capital market conditions.We accomplish this by offering sales programs that either encourage or discourage our customers to finance their VOI purchases with us,without compromising our underwriting standards.As of December 31,2015,the weighted average Fair Isaac Corporation("FICO")score(based upon loan balance)for our borrowers across our existing loan portfolio was 723,and the weighted average FICO score for our borrowers on loans originated by us since 2011 was 757.The default rate on our originated consumer loan portfolio was 7.7%(as a percentage of our outstanding originated portfolios)for 2015,and ranged from 5.7%to 8.2%on an annual basis from 2011 through 2015. Our capital-efficient business model requires limited investment in working capital and capital expenditures. Limited working capital required.Our hospitality and management services business consumes limited working capital because a substantial portion of the funds we receive under our management contracts is collected by January of each year and released to us as services are provided.Moreover,all resort-level maintenance and improvements except for expenditures related to space owned by us)are paid for by the owners of VOIs,with our financial obligation generally limited to our pro rata share of the VOIs we hold as unsold VOIs. Limited investment capital required.As a result of our VOI inventory strategy,we have limited requirements to build resort properties or acquire real estate to support our anticipated VOI sales levels.Although the volume of points or intervals that we recover could fluctuate in the future for various reasons,we reacquire approximately 2%to 5%of our total outstanding VOIs from defaulted owners on an annual basis.This provides us with a relatively low-cost, consistent stream of VOI inventory that we can resell,and we anticipate that this stream will satisfy a majority of our inventory needs in the foreseeable future.In certain geographic areas,we may from time to time acquire additional VOI inventory through open market purchases or other means.We supplement these inventory acquisition strategies with targeted development projects,particularly in attractive locations where member demand exceeds our existing supply. In these circumstances,we expect that we will generally seek to structure developments in a manner that limits our financial exposure,including by minimizing the amount of time between when we are required to pay for the new VOI inventory and when such inventory is sold.For example,in 2015,we entered into an agreement with Hawaii Funding LLC(the"Kona Seller"),an affiliate of Och-Ziff Real Estate,for the Kona Seller to develop a new resort on property located in Kona,Hawaii,in this manner(the"Kona Agreement").Additionally,in a majority of our strategic transactions,we have acquired an ongoing business,consisting of management contracts,unsold VOI inventory and an existing owner base,which has generated immediate cash flows for us. Access tofinancing.The liquidity to support our provision of financing to our customers for VOI purchases is 9 provided through the Conduit Facility,the$100.0 million loan sale facility with Quorum Federal Credit Union(the Quorum Facility")(collectively,the"Funding Facilities")and securitization financings and,as a result,also consumes limited working capital. See"Item 7.Management's Discussion andAnalysis ofFinancial Condition and Results ofOperations—Liquidity and Capital ResourcesIndebtedness"for the definition of and further detail of these borrowings. Our scalable VOIsales and marketing platform has considerable operating leverage and drives increases in Adjusted EBITDA. We have built a robust and versatile sales and marketing platform.This platform enables us to take actions that directly impact the three levers that primarily determine our VOI sales revenue:the number of tours we conduct,our closing percentage and the sales price per transaction.Our objective is to consistently monitor and adjust these three factors to reach an optimum level of VOI sales based on our available VOI inventory.With our scalable sales platform in place,we do not foresee the need to significantly increase the number ofsales centers(other than in connection with business acquisitions)or the size of our sales support team.Accordingly,we believe our VOI sales business has considerable operating leverage and the ability to drive increases in Adjusted EBITDA. Our high level ofcustomer satisfaction results in significant sales ofadditional VOIs to our members. We believe our efforts to introduce hospitality,service excellence and quality into each member's vacation experience have resulted in a high degree of customer satisfaction,driving significant sales of additional VOIs to our existing members who previously purchased points from us,as well as members we acquired in our strategic acquisitions who purchased points from us for the first time("Acquired Members").After anAcquired Member makes his or her first purchase from us,all future transactions involving that Acquired Member are treated as sales to an existing member. In 2015,approximately 69%of our VOI sales were to existing members who previously purchased points from us,and approximately 10%of these sales were to Acquired Members.In 2014,approximately 62%of our VOI sales were to existing members,and approximately 15%were to Acquired Members. Our accomplished leadership team positions usfor continued growth. We have an experienced leadership team that has delivered strong operating results through disciplined execution.Our management team have taken a number of significant steps to refine our strategic focus,build our brand recognition and streamline our operations,including(i)maximizing revenue from our hospitality and management services business;(ii) driving innovation throughout our business,most significantly by infusing our hospitality focus into our customer interactions; and(iii)adding resorts to our network and owners to our owner base through complementary strategic acquisitions and efficiently integrating businesses acquired. Certain members of our management team and board of directors have substantial equity interests in our Company that closely align their economic interests with those of our other stockholders. Growth Strategies Our growth strategies are as follows: Continue to grow our hospitality and management services business. We expect our hospitality and management services revenue will continue to grow as rising operating expenses at our managed resorts result in higher revenues under our cost-plus management contracts.We intend to generate additional growth in our hospitality and management services business by(i)increasing Club membership revenue;(ii)broadening hospitality service and activity offerings for members of the Clubs;including opportunities for our members to purchase third-party products and services;and(iii)adding services provided to our members under our management agreements and pursuing additional management and service contracts. Increase Club membership revenue.Purchasers of our points,in almost all cases,are automatically granted membership in THE Club.In addition,as existing members purchase more points and thereby upgrade Club memberships to a higher loyalty tier with additional member benefits,higher fees are collected.When we complete an acquisition,we typically create a tailor-made Club,introducing a subset of additional resorts and benefits.This results in an owner base that becomes familiar with the benefits of THE Club,and should therefore be more likely to upgrade and purchase points from us with membership in THE Club.We also have implemented programs to encourage interval owners at our managed resorts tojoin THE Club. Broaden hospitality service and activity offerings. We intend to continue to make membership in the Clubs more attractive to our members by expanding the number and variety of offered services and activities,such as airfare, cruises,guided excursions,golf outings,entertainment,theme park tickets,luggage and travel protection and access to luxury accommodations outside our network of resorts,such as the Diamond Luxury Selection,a Club member 10 benefit exclusively for our members with large point ownership and,therefore,in a higher loyalty tier.Qualifying members can access The Diamond Luxury Selection using their points through THE Club for stays within a collection ofapproximately 2,500 private luxury properties.Additionally,we now offer to our members in a higher loyalty tier access to luxury cruises,premier vacation adventures and premier sports events(including VIP access).We believe the Clubs'offerings enhance the overall experience of our members and,thus,the perceived value of their memberships. As membership in the Clubs becomes more valuable to consumers through hospitality-focused enhancements,we may be able to increase the dues paid by members of the Clubs,in addition to commission revenue that we are able to generate as a result of these Club membership enhancements. Add servicesprovided to our members under management contracts andpursue additional management and service contracts. We expect to add services provided to our members under our management contracts,which may result in increased management fees relating to those new services.In addition,we may purchase or otherwise obtain additional management contracts at resorts that we do not currently manage.Furthermore,we intend to broaden our business-to- business services on a fee-for-service basis to other companies in the hospitality and vacation ownership industry.For example,we have,on occasion,entered into fee-for-service agreements with resort operators and hospitality companies pursuant to which we provide them with resort management services,VOI sales and marketing services and inventory rental services.These types of arrangements can be highly profitable for us because we are not required to invest significant capital.In the future,in situations where we can leverage our unique expertise,skills and infrastructure,we intend to expand our provision of business-to-business services on an a la carte basis or as a suite of services to third-party resort developers and operators and other hospitality companies. Continue to leverage our scalable sales andmarketing platform to increase VOI sales revenue. We intend to continue to utilize the operating leverage in our sales and marketing platform.While we focus on attracting potential new owners,we will also continue to market to our existing long-term membership base,and expect that through these efforts and our continuing commitment to ensuring high member satisfaction,a significant percentage of our VOI sales will continue to be made to our existing members.We will also continue to target the ownership base at resorts that we now manage as a result of our strategic acquisitions to encourage these prospective customers to purchase our VOIs.While we anticipate that the bulk of our future VOI sales will be made through our traditional selling methods,we are seeking to more fully integrate the VOI sales experience into our hospitality and management services.We have found that,by driving innovation throughout our business,most significantly by infusing our hospitality focus into the sales process and creatively engaging with potential purchasers,we improve potential purchasers'overall experience and level of satisfaction and,as a result,are able to increase the likelihood that they will buy our VOIs and increase the average transaction size.We have extended this philosophy of increased engagement and hospitality focus into other sales techniques,and intend to continue to innovate in this area. Pursue additional revenue opportunities consistent with our capital-efficient business model. We believe that we can achieve growth without pursuing revenue opportunities beyond those already inherent in our core business model.However,to the extent consistent with our capital-efficient business model,we intend to: Selectively pursue strategic transactions.We intend to continue to pursue acquisitions ofongoing businesses, including management contracts and VOI inventory,on an opportunistic basis where we can achieve substantial synergies and cost savings. See"Item 7.Management's Discussion andAnalysis ofFinancial Condition and Results of Operations—Overview"for a discussion ofour recent acquisitions. We will evaluate future acquisitions with a focus on adding additional resort locations,management contracts,new members to our owner base and VOI inventory that we may sell to existing members and potential customers. Prudently expand our geographicfootprint.We believe that there are significant opportunities to expand our business into new geographic markets in which we currently may have affiliations,but do not manage resorts or market or sell our VOIs.We believe that certain countries in Asia and Central and South America are particularly attractive potential new markets for us due to the substantial increases in spending on travel and leisure activities forecasted for their consumers.To the extent that we can maintain our high quality standards and strong brand reputation,we are selectively exploring acquisitions of ongoing resort businesses in these markets and may also pursue co-branding opportunities,joint ventures or other strategic alliances with existing local or regional hospitality companies.For example,we recently entered into ajoint venture with affiliates of Dorsett Hospitality International,a large hotel developer,owner and operator in Asia,and China Travel International Investment Hong Kong Ltd.,an investment holding company engaged in the operation of travel destinations(including hotels,theme parks,natural and cultural scenic spots and leisure resorts),travel agencies and related business operations and invested$1.5 million in this joint venture.We expect the venture to create,market,sell and service prepaid multiple-year vacation packages and associated benefits to customers in Asia. In addition,we may engage in targeted development projects,particularly in attractive locations where member demand exceeds our existing supply,in a manner consistent with our capital-light 11 model,such as our recent agreement with respect to the development of a new resort in Ko Hawaii.We believe thatP expansion of our geographic footprint will produce revenue from consumers in the markets into which we enter and also make our resort network more attractive to existing and prospective members worldwide. Our Customers Ourcustomers are typically families seeking a flexible vacation experience.A majority of our new customers stay at one of the resorts in our network,eitherby reserving a unit on a per-night or per-week basis,exchanging points through an external exchange service,or purchasing a minivacation package,prior to purchasing a VOI.We have also generated significant additional sales to our existing members who wish to purchase additional points and thereby increase their benefit options within our resort network. We believe a majority of our customers are between 45 and 65 years old.The baby boomer generation is the single largest population segment in the U.S.and Europe and is our key target market.With the premium resorts in our network and the broad range of benefits that we offer,we believe we are well-positioned to target an affluent subsection of the baby boomer population. Our Services Hospitality andManagement Services. We manage 109 resort properties,which are located in the continental U.S., Hawaii,Mexico,the Caribbean and Europe,as well as the Diamond Collections.As the manager of these resorts and the Diamond Collections,we operate the front desks,provide housekeeping,conduct maintenance and manage human resources services.We also operate,or outsource the operation of,amenities such as golf courses,food and beverage venues and retail shops,an online reservation system,customer service contact centers,rental,billing and collection,accounting and treasury functions and communications and information technology services. As an integral part of our hospitality and management services,we have entered into inventory recovery and assignment agreements("IRAAs")with a substantial majority of the Collection Associations and HOAs for our managed resorts in North America,together with similar arrangements with the European Collection and a majority ofour European managed resorts, whereby we recover VOIs previously owned by members who have failed to pay their annual maintenance fee or assessments due to,among other things,death or divorce or other life-cycle events or lifestyle changes.Because the majority of the cost of operating the resorts that we manage is spread across our member base,by recovering VOIs previously owned by members who have failed to pay their annual maintenance fee or assessments,we reduce bad debt expense at the managed resorts and Diamond Collection level,which is a component of the management fees billed to members by each resort's HOA or Collection Association,supporting the financial well-being ofthose managed resorts and the Diamond Collections. HOAs. Each ofthe Diamond Resorts managed resorts,other than certain resorts in our European Collection and Latin America Collection,is typically operated through an HOA,which is administered by a board of directors.Directors are elected by the owners of VOIs at the resort(which may include one or more of the Diamond Collections)and may also include representatives appointed by us as the developer of the resort.As a result,we are entitled to voting rights with respect to directors of a given HOAby virtue of(i)our ownership of VOIs at the related resort;(ii)our status as the developer of the resort;or(iii)our ownership of points in the Diamond Collections that hold VOIs at the resort.The board of directors of each HOA hires a management company to provide the services described above,which in the case of all Diamond Resorts managed resorts,is us. Our management fees with respect to a resort are based on a cost-plus structure and are calculated based on the direct and indirect costs(including the absorption ofa substantial portion of our overhead related to the provision of management services)incurred by the HOA of the applicable resort.Under our current resort management agreements,we receive management fees generally ranging from 10%to 15%of the other costs ofoperating the applicable resort(with a weighted average of 13.9%based upon the total management fee revenue for the year ended December 31,2015).Unlike typical commercial lodging management contracts,our management fees are not impacted by changes in a resort's ADR or occupancy level.Instead,the HOA for each resort engages in an annual budgeting process in which the board of directors of the HOA estimates the costs the HOA will incur for the coming year. In evaluating the anticipated costs of the HOA,the board of directors of the HOA considers the operational needs of the resort,the services and amenities that will be provided at or to the applicable resort and other costs of the HOA,some of which are impacted significantly by the location,size and type of the resort.Included in the anticipated operating costs of each HOA are our management fees.The board of directors ofthe HOA discusses the various considerations and votes to approve the annual budget,which determines the annual maintenance fees charged to each owner.One of the management services we provide to the HOA is the billing and collection of annual maintenance fees on the HOA's behalf.Annual maintenance fees for a given year are generally billed during the previous November,due by January and deposited in a segregated or restricted account,which is not included in our consolidated 12 balance sheet but is managed by us on behalf of the HOA.As a result,a substantial majority of our fees for February through December of each year are collected from owners in advance.Funds are released to us from these accounts on a monthly basis for the payment of management fees as we provide our management services. Our HOA management contracts typically have initial terms of three to ten years,with automatic renewals.These contracts can generally only be terminated by the HOA upon a majority vote of the owners(which may include one or more of the Diamond Collections)prior to each renewal period,other than in some limited circumstances involving cause. Our HOA management contracts with the managed resorts that are part of the European Collection generally have either indefinite terms or lengthy remaining terms(approximately 40 years)and can only be terminated for an uncured breach by the manager or a winding up ofthe European Collection. No HOA has terminated any of our management contracts during the past five years.We generally have the right to terminate our HOA management contracts at any time upon written notice to the respective HOA.During the past five years, we have terminated only one HOA management contract and sold two immaterial HOA management contracts. Diamond Collections. The Diamond Collections currently consist ofthe following: the Diamond Resorts U.S. Collection(the"U.S.Collection"),which includes interests in resorts located in Arizona, California,Colorado,Florida,Indiana,Missouri,Nevada,New Mexico,South Carolina,Tennessee,Virginia and St. Maarten; the Diamond Resorts Hawaii Collection(the"Hawaii Collection"),which includes interests in resorts located in Arizona,California,Hawaii,Nevada and Utah; the Diamond Resorts California Collection(the"California Collection"),which includes interests in resorts located in Arizona,California and Nevada; the Premiere Vacation Collection(the"Premiere Vacation Collection"),which includes interests in resorts located in Arizona,Colorado,Indiana,Nevada and Baja California Sur,Mexico; the Monarch Grand Vacations(the"Monarch Grand Collection"),which includes interests in resorts located in California,Nevada,Utah and the Cabo Azul Resort located in San Jose Del Cabo,Mexico; the Diamond Resorts European Collection(the"European Collection"),which includes interests in resorts located in Austria,England,France,Italy,Norway,Portugal, Scotland and Spain; the Diamond Resorts Latin America Collection(the"Latin America Collection"),which currently includes interests in the Cabo Azul Resort located in San Jose Del Cabo,Mexico; the Diamond Resorts Mediterranean Collection(the"Mediterranean Collection"),which includes interests in resorts located in the Greek Islands of Crete and Rhodes;and Club Intrawest,which includes interests in resorts located in Canada,Mexico,as well as Florida and California,which was added to our resort network in connection with the Intrawest Acquisition in January 2016. Each ofthe Diamond Collections is operated through a Collection Association,which is administered by a board of directors.Directors are generally elected by the points holders within the applicable Diamond Collection,subject to limited exceptions. We own a significant number of points in each ofthe Diamond Collections(which in the case of the Mediterranean Collection are in the form of shares but for simplicity are also referred to in this annual report as points),which we hold as inventory.The board ofdirectors of each Diamond Collection hires a company to provide management services to the Diamond Collection,which in each case is us. As with our HOA management contracts,management fees charged to the Diamond Collections in the U.S.are based on a cost-plus structure and are calculated based on the direct and indirect costs(including the absorption of a substantial portion of our overhead related to the provision of our management services)incurred by the Diamond Collection.Under our current Diamond Collection management agreements,we receive management fees of 15%ofthe costs of the applicable Diamond Collection(except with respect to our management agreement with the Monarch Grand Collection,under which we receive a management fee of 10%of the costs of the Monarch Grand Collection).Our management fees are included in the budgets 13 prepared by each Collection Association,which determines the annual maintenance fee charged to each owner and is voted on and approved by the board of directors of each Collection Association.One ofthe management services we provide to all ofthe Diamond Collections is the billing and collection of annual maintenance fees on the Diamond Collection's behalf.Annual maintenance fees for a given year are generally billed during the previous November,due by January and deposited in a segregated or restricted account,which is not included in our consolidated balance sheet but is managed by us on behalf of each Diamond Collection.As a result,a substantial majority of our fees for February through December of each year are collected from owners in advance.Funds are released to us from these accounts on a monthly basis for the payment of management fees as we provide our management services. Apart from the management contract for the European Collection and the Mediterranean Collection,our Diamond Collection management contracts have initial terms ofthree to ten years,with automatic renewals of three to ten years,and can generally only be terminated by the Diamond Collection upon a majority vote of the Diamond Collection's members prior to each renewal period,other than in some limited circumstances involving cause. In the case ofthe Mediterranean Collection,the management agreement is indefinite and irrevocable.No Diamond Collection has terminated,or elected not to renew,any of our management contracts during the past five years.We generally have the right to terminate our Diamond Collection management contracts at any time upon written notice to the applicable Diamond Collection.The management contract for the European Collection has an indefinite term,can only be terminated by the European Collection for an uncured breach by the manager or a winding up of the European Collection,and may not be terminated by the manager. Clubs. Another key component of our hospitality and management services business is our management of the Clubs. We operate a Vacation Interests exchange program that enables our members to use their points to stay at resorts outside of their home Diamond Collection,as well as other affiliated resorts,hotels and cruises,for which an annual fee is charged. In addition, the Clubs provide services to the Diamond Collections,such as reservation call center services and customer services,which are billed on a cost-plus basis to the Diamond Collections directly. The Clubs offer our members a wide range of other benefits,such as the opportunity to purchase various products and services,including guided excursions and member events and reservation protection products,for which we earn commissions. See "Our Flexible Points-Based Vacation Ownership System and the Clubs—The Clubs"for additional information regarding the Clubs. Vacation Interests Sales and Financing. We market and sell VOIs that provide access to our resort network of 109 Diamond Resorts managed resorts and 250 affiliated resorts and hotels and 20 cruise itineraries. The VOI inventory that we reacquire pursuant to our IRAAs provides us with a steady stream of low-cost VOI inventory that we can sell to our current and prospective members.Our VOI inventory is also supplemented by recovering VOIs previously owned by members who default on their consumer loans,whether the consumer loans were originated by us or were acquired from third-parties,as well as inventory purchased in strategic acquisitions. In addition,we may engage in targeted development projects,particularly in attractive locations where member demand exceeds our existing supply. We have 61 sales centers across the globe,51 of which are located at managed resorts,six of which are located at affiliated resorts and four of which are located off-site.We currently employ an in-house sales and marketing team at 49 of these locations and also maintain agency agreements with independent sales organizations at 12 locations.A relatively small portion ofour sales,principally sales of additional points to existing members,are effected through our call centers.Our sales representatives utilize a variety ofmarketing programs to generate prospects for our sales efforts,including presentations at resorts targeted to current members and guests,enhanced mini-vacation packages that we refer to as Events of a Lifetime"`, overnight mini-vacation packages,targeted mailing,telemarketing,gift certificates and various destination-specific local marketing efforts.Additionally,we offer incentive premiums in the form of tickets to local attractions and activities,hotel stays, gift certificates or meals to guests and other potential customers to encourage attendance at tours. We generate our VOI sales primarily through conducting tours at our sales centers.These tours generally include a tour of the resort properties,as well as an in-depth explanation of our points-based VOI system and the value proposition it offers our members.Our tours are designed to provide guests with an in-depth overview ofour Company,our resort network and benefits associated with membership in THE Club,as well as a customized presentation to explain how our products and services can meet their vacationing needs.We also conduct tours at various offsite and hotel locations(outside of our managed resorts)based on potential leads for VOI sales identified through innovative marketing targeted toward individuals with desired demographics. Our sales force is highly trained in a consultative sales approach designed to ensure that we meet customers'needs on an individual basis.We manage our sales representatives'consistency of presentation and professionalism using a variety of sales tools and technology.The sales representatives are principally compensated on a variable basis determined by performance, subject to a base compensation amount. Our marketing efforts are principally directed at the following channels: 14 our existing member base; consumers who own VOIs sold by businesses«e have acquired: guests who stay at our managed resorts; of property contacts who are solicited from the premises of hospitality,entertainment,gaming and retail locations; participants in third-party vacation ownership exchange programs,such as Interval International,Inc. ("Interval International"),and Resorts Condominiums International,LLC("RCI"),who stay at our managed resorts; member referrals;and other potential customers who we target through various marketing programs. We employ innovative programs and techniques designed to infuse hospitality into our sales and marketing efforts.For example,we offer enhanced mini-vacation packages at some of our managed resorts,which we refer to as Events of a Lifetime,at which our members or prospective customers who have purchased such packages are invited to dine together, along with our sales team members,and to attend a show,golfouting or other local attraction as a group over a two-day period. At the end of the stay,our sales team provides an in-depth explanation of our pointsbased VOI system and the value proposition it offers our members.In addition,we have an initiative in which select members and guests receive"high-touch" services such as a special welcome package,resort orientation and concierge services,as part of a pre-scheduled in-person tour. Results from these enhanced programs and initiatives have been positive.We have found that,by driving innovation throughout our business,most significantly by infusing our hospitality focus into the sales process and creatively engaging with potential purchasers,we improve potential purchasers'overall experience and level of satisfaction and,as a result,are able to increase the likelihood that they will buy our VOIs and increase the average transaction size. Although the principal goal of our marketing activities is the sale of points,in order to generate additional revenue and offset the carrying cost of our VOI inventory,we use a portion of the points and intervals which we own or acquire the right to use to offer accommodations to consumers on a per-night or per-week basis,similar to hotels.We generate these stays through direct consumer marketing,travel agents,external websites and our own website and vacation package wholesalers.We believe that these operations,in addition to generating supplemental revenue,provide us with a good source of potential customers for the purchase ofpoints. We provide loans to eligible customers who purchase VOIs through our U.S.,Mexican and St.Maarten sales centers and choose to finance their purchase.These loans are collateralized by the underlying VOI,generally bear interest at a fixed rate,have a typical term of 10 years and are generally made available to consumers who make a down payment within established credit guidelines.Our minimum required down payment is 10%.From January 1,2011 through December 31, 2015,our average cash down payment was 20.0%and the average initial equity contribution for new VOI purchases by existing owners(which take into account the value of VOIs already held by purchasers and pledged to secure a new consumer loan)was 30.2%,which resulted in an average combined cash and equity contribution of 50.2%for these new VOI purchases. As of December 31,2015,our loan portfolio(including loans we have transferred to special-purpose subsidiaries in connection with the Conduit Facility,Quorum Facility and securitization transactions)was comprised of approximately 64,000 loans with an outstanding aggregate loan balance of$916.1 million.Our total portfolio includes loans that have been written off for financial reporting purposes due to payment defaults and delinquencies but which we continue to administer and loans that were originated by us and loans that were acquired in connection with our acquisitions. Approximately 46,000 of these consumer loans were loans under which the consumer was not in default,and the outstanding aggregate loan balance was$751.8 million.Approximately 42,000 of these loans were originated by us and approximately 4,000 of the loans were acquired in connection with one of our acquisitions. Approximately 18,000 loans within our loan portfolio,with an outstanding aggregate loan balance of$164.3 million, were loans that are in default(accounts that are greater than 180 days delinquent and have not yet been foreclosed upon or canceled).Approximately 15,000 ofthese loans that were in default as ofDecember 31,2015 were loans acquired by us, including approximately 12,000 already in default at the time we acquired them in connection with various acquisitions and approximately 3,000 of the loans were not yet in default at the time of the acquisition.Approximately 3,000 ofthe loans that were in default in default as of December 31,2015 were originated by us.The loans originated by us have already been written off for fmancial reporting purposes but we continue to administer them until we elect,subject to applicable law,to foreclose or cancel them.Loans that were in default at the time they were acquired were never included in our loan portfolio and,accordingly,are not part of our provision for uncollectible accounts or reserve for uncollectible accounts.We elect to recover VOI inventory underlying defaulted loans based on a variety of factors,including our VOI inventory needs and the carrying costs associated with recapturing the VOI inventory. Consumer loans in default at the time of acquisition represent 15 future sources of low-cost inventory to us. The weighted-average interest rate for all ofthe loans in our portfolio as of December 31,2015 was 14.9%,which includes a weighted average interest rate for loans in default of 16.4%.As of December 31,2015,8.8%of our owner- families had an active loan outstanding with us. We underwrite each loan application to assess the prospective buyer's ability to pay through the credit evaluation score methodology developed by FICO based on credit files compiled and maintained by Experian(for U.S.residents)and Equifax for Canadian residents).In underwriting each loan,we review the completed credit application and the credit bureau report and/or the applicant's performance history with us,including any delinquency on existing loans with us,and consider in specified circumstances,among other factors,whether the applicant has been involved inbankruptcy proceedings within the previous 12 months and any judgments or liens,including civil judgments and tax liens,against the applicant.As of December 31,2015,the weighted average FICO score(based upon loan balance)for our borrowers across our existing loan portfolio was 723,and the weighted average FICO score for our borrowers on loans we originated since 2011 was 757. Our consumer finance servicing division includes underwriting,collection and servicing of our consumer loan portfolio. Loan collections and delinquencies are managed by utilizing modem collection technology and an in-house collection team to minimize account delinquencies and maximize cash flows.We generally monetize a substantial portion of the consumer loans we generate from our customers through conduit and securitization financings.We act as servicer for consumer loan portfolios, including those monetized through conduit or securitization financings and receivables owned by third parties,for which we receive a fee. Through arrangements with certain financial institutions in Europe,we broker financing for qualified customers who purchase points through our European sales centers. Our Resort Network Our resort network consists of 379 vacation destinations,which includes 109 Diamond Resorts managed properties with approximately 12,000 units worldwide that we manage,and 250 affiliated resorts and hotels and 20 cruise itineraries(as of January 31,2016),which we do not manage and which do not carry our brand name but are a part of our resort network and, consequently,are available for our Club members to use as vacation destinations.Through our management,we provide guests with a consistent and high quality suite of services and amenities,and,pursuant to our management agreements,we have oversight and management responsibility over the staff at each location. Ofthe managed resorts,47 have food and beverage operations,49 have a gift shop,pro shop or convenience store,and 29 have a golf course,leisure center or spa.Most of these amenities are operated by third parties pursuant to leases,licenses or similar agreements.Revenue from these operations is included in Consolidated Resort Operations Revenue in our consolidated statements of operations. Affiliated resorts are resorts with which we have contractual arrangements to use a certain number ofvacation intervals or units.These resorts are made available to members ofthe Clubs through affiliation agreements.In the majority of cases,our affiliated resorts provide us with access to their vacation intervals or units in exchange for our providing similar usage of intervals or units at our managed resorts,and no fees are paid by us in connection with these exchanges.However,in a limited number of circumstances,we receive access to accommodations at our affiliated hotels and cruises through two other types of arrangements.In the first of these types of arrangements,we pay an upfront fee to an affiliated hotel or cruise company for access to a specified number of vacation intervals or units,and we incorporate this upfront fee into our calculation for annual dues to be paid by members of the Clubs.In the second ofthese types of arrangements,a member who desires to stay at an affiliated hotel for a particular time period deposits points with us and,in exchange,we pay our affiliated hotel the funds required in order to allow such member access and,in turn,we use the points redeemed to secure a unit,which we then use for marketing or rental purposes.The benefit of these arrangements,in comparison to traditional exchange companies,is that there is no need to wait for an owner to deposit their week's ownership into the program in order to then make it available to members.These arrangements secure availability for our members in advance and,therefore,tend to provide better customer service and availability. We identify and select affiliated resorts based on a variety of factors,including location,amenities and preferences of our members.We have established standards of quality that we require each of our affiliates to meet,including with respect to the maintenance of their properties and level of guest services. In general,our affiliate agreements allow for termination by us upon 30 days'notice to the affiliate,although some of our affiliate agreements cannot be terminated until a specified future date.Further,our affiliate agreements permit us to terminate our relationship with an affiliate if it fails to meet our standards.In any event,none of our affiliate agreements requires us to make any payments in connection with terminating the agreement.In addition to our affiliate agreements,we own,through one or more of the Diamond Collections,intervals at a few of our affiliated resorts. Our network of resorts includes a wide variety of locations and geographic diversity,including beach,mountain,ski and 16 major city locations,as well as locations near major theme parks and historical sites.The accommodations at these resorts are fully furnished and typically include kitchen and dining facilities,a living room and a combination ofbedroom types including studios and one-,two-,three-and four-bedroom units with multiple bathrooms.Resort amenities are appropriate for the type of resort and may include an indoor and/or outdoor swimming pool,hot tub,children's pool,fitness center,golf course,children's play area and/or tennis courts.Further,substantially all ofour Diamond Resorts managed resorts in Europe and some ofour Diamond Resorts managed resorts in North America include onsite food and beverage operations,the majority of which are operated by third-party vendors. The following table presents a summary of our managed resorts,affiliated resorts and hotels and cruises by geographic location as of January 31,2016: Number of Number of Affiliated Managed Resorts and Number of Resorts Hotels Cruises North America and the Caribbean 64 142 14 Europe 45 32 4 Central and South America 3 2 Asia 54 Australia 12 Africa 7 Total 109 250 20 DiamondLuxury Selection In addition to our managed resorts,affiliated resorts and hotels and cruises,since October 2013 we have offered members with large point ownership,as an additional Club benefit,the ability to use their points to rent from a collection of approximately 2,500 private luxury properties,including villas,resorts,boutique hotels and yachts,through participation in The Diamond Luxury Selection.In general,a qualifying member is able to rent these private luxury properties by depositing a designated number ofpoints with us,and we are then required to pay to the owners ofthese private luxury properties,on behalf ofour members,a rental fee.This rental fee determines the number of points required to be used by our members for any particular rental.We also have the ability to use these properties for marketing or rental purposes.We do not manage these luxury properties,they do not carry our brand name and they are not part of any of our Diamond Collections or our resort network. Our Flexible Points-Based Vacation Ownership System and the Clubs Our Points-Based System. Our customers become members of our vacation ownership system by purchasing points, which act as an annual currency that is exchangeable for occupancy rights in accommodations at the managed and affiliated resorts in our network. In 2015,the average cost to purchase points equivalent to an annual one-week vacation in our network globally was$26,007.Purchasers of points do not acquire a direct ownership interest in the resort properties in our network. Rather,our customers acquire a membership in one of the Diamond Collections. See "Operation andManagement ofthe Diamond Collections"for additional information regarding the Diamond Collections. The principal advantage of our points-based system is the flexibility it gives to members with respect to the use of their points versus the use of traditional intervals.With traditional intervals,an owner has the"fixed"use of a specific accommodation type for a designated one-week time period at a specific resort or has the"floating"use of a specific type of accommodation for a week to be selected for a particular season at that same resort.An owner may exchange their interval through an external VOI exchange program,such as the exchange programs offered by Interval International or RCI,for which an annual membership fee as well as an exchange transaction fee are charged to the owner.Unlike traditional interval owners, points holders can redeem their points for one or more vacation stays in the resorts included in our network without having to use an external exchange company and without having to pay any exchange transaction fees.Because points function as currency within our resort network,our members have flexibility to choose the location,season,duration and size of accommodation for their vacation based on their annual points allocation,limited only by the range of accommodations within our resort network,the number ofpoints owned,availability and,in some cases,by membership type limitations.Members of a particular Diamond Collection have the ability to make reservations at resorts within that Diamond Collection before those resorts are open for bookings by members of other Diamond Collections.Our members may also"save"their points from prior 17 years,"borrow"points from future years,or pay cash for additional one-time points usage for additional flexibility with respect to reserving vacations at peak times,in larger accommodations,for longer periods oftime or for vacationing more often throughout the year. We allocate points values for each of the resorts in our network.Points values are determined by unit type for each resort and are based on season,demand,location,views,amenities and facilities.Once the accommodation has been placed in a Collection,the points values assigned cannot be altered.We make a points directory available to our customers online,which allows them to evaluate how they may allocate their available points and select dates and locations for stays at resorts within our network,subject to certain rules and restrictions. We operate in-house call centers globally for members to make reservations,payments and to handle queries.In addition, we offer a comprehensive online booking service which members can use to reserve stays at the resorts in our network,manage their purchased points and pay fees.We also manage an in-house concierge service for our members with large point ownership at a higher loyalty tier of Club membership,offering services 24/7 globally. Between January 2013 and November 2015,our European subsidiary offered a VOI product with a limited term(the European Term Product")available to purchasers in Europe.Purchasers of the European Term Product received an allocation of points which represented an assignment of a specific week or weeks in a specific unit(without specific occupancy rights),at certain of our European resort properties,as well as use rights to any of the resort properties within our European Collection, for a period of 15 years.At the end ofthe 15-year period,the trustee of the European Collection will attempt to sell the unit and the net proceeds will be distributed to the then current owners of the unit,which may,or may not,include us.The current trustee ofthe European Collection also provided trust services relating to the European Term Product.The owners of the European Term Product paid annual maintenance fees at substantially the same rate as owners of points in our European Collection and were also members of THE Club and paid Club fees as part oftheir maintenance fees.For the year ended December 31,2015,a large majority of the sales of the European Term Product have been to existing members of the European Collection,in particular points owners.We discontinued offering the European Term Product in November 2015 as we switched our focus to VOI sales in the form ofpoints. The Clubs. Through the Clubs,we operate VOI exchange programs that enable our members to use their points,or points equivalent in the case of intervals,at resorts within our resort network,subject to certain rules and restrictions.The Clubs continue to provide services to a segment of the membership base who historically purchased intervals at some of our managed properties.Purchasers of points in the Collections other than Club Intrawest are automatically granted membership in THE Club,except for purchasers in Florida and Mexico who must affirmatively elect to join THE Club.THE Club provides members with access to all resorts in our network and offers the full range of member services.In certain circumstances, typically in connection with an acquisition,we offer a restricted version ofTHE Club for a lower annual fee for new members resulting from such acquisition,which allows those members to stay at a subset of resorts within our network and provides those members with a portion ofthe benefits available to full members ofTHE Club. In addition to the exchange programs,the Clubs offer a global array of other member benefits,discounts,offers and promotions that allow members to exchange points for a wide variety of products and travel services,including airfare,cruises and guided excursions.Most members of the Clubs,irrespective of ownership of points or intervals,have access to an external VOI exchange program for vacation stays at resorts outside of the Clubs'resort network if they desire,as the annual membership fee generally also includes annual membership in the Interval International external exchange program.For our more limited Club offerings,exchanges through the Interval International external exchange program typically require payment to Interval International of an additional membership fee and transaction fees. Generally,members of the Clubs do not have the right to terminate their membership.However,due to regulatory requirements,members who purchase points in Arizona,California,Florida,Hawaii and Mexico may terminate their membership in the Clubs under specific circumstances.Following two acquisitions completed in 2010 and 2012,we also offered the existing members of the Premiere Vacation Collection and the Monarch Grand Collection the option to opt out of our limited Club offerings that were granted following the respective acquisitions.To date,only a minimal number of purchasers of points have opted out of the Clubs. In addition to annual dues associated with the Clubs,we also earn revenue associated with legacy owners of deeded intervals at resorts that we acquired in our strategic acquisitions exchanging the use of their intervals for membership in the Clubs,which requires these owners to pay the annual fees associated with Club membership.Furthermore,we also earn reservation protection plan revenue,which is an optional fee paid by customers when making a reservation to preserve their points should they need to cancel their reservation,and earn other revenue through our provision oftravel-related services and other affinity programs. In the past,we also earned revenue associated with customer conversions into THE Club,which involved the payment of a one-time fee by interval owners who wished to retain their intervals but also participate in THE Club.Expenses associated with our operation of the Clubs include costs incurred forthe in-house call centers,annual membership fees paid to a third-party exchange company,where applicable,and administrative expenses. 18 Operation and Management of the Diamond Collections Purchasers of points acquire interests in one ofthe Diamond Collections.For each Diamond Collection,one or more trustees hold legal title to the deeded fee simple real estate interests or the functional equivalent,or,in some cases,leasehold real estate interests for the benefit of the respective Diamond Collection's association members in accordance with the applicable agreements.Under trust agreements,points are established as the currency to be used by members for the use and occupancy ofaccommodations held in trust.The Diamond Collections generally have members'associations,which are organizations of persons who own membership points in the applicable Diamond Collection,which are managed by a board of directors.The associations act as agents for all of the members in collecting assessments and paying taxes,utility costs and other costs incurred by the Diamond Collection on behalf of members. Generally,the term ofeach Diamond Collection,except the European Collection,is perpetual(or in the case of the Latin America Collection,may be renewed or reconstituted and thus is practically perpetual)and may only be terminated with a unanimous vote of the board of directors and approval by a significant majority of the voting power of members.The European Collection trusts,including customer use rights,have approximately 40-year terms.The Mediterranean Collection trusts,including customer use rights,expire between the end of December 2029 and the end of December 2043. The Collection Associations have entered into management agreements with us pursuant to which the board's management powers are delegated to us.The management agreements generally have three to ten year terms and automatically renew for additional three to ten year terms unless terminated by the applicable members'association.The Club Intrawest management agreement automatically renews annually unless terminated by the members'association. For each of the Diamond Collections,pursuant to the applicable trust and related agreements,we have the right to hold a significant number ofunsold points as inventory for sale.Further,in North America,we hold title(via subsidiary resort developer entities)to certain intervals which have not yet been transferred to a Diamond Collection.When these intervals are transferred to a Diamond Collection,we will receive an allocation ofpoints.The majority of the common areas for resorts located in North America are owned by the related HOA.At certain locations,we own commercial space which we utilize for sales centers as well as other guest services,such as a gift shop,mini-market or a food and beverage facility.The amount of such commercial space represents an insignificant portion of our total facilities and no such space is used for any significant retail orcommercial operations. Each Diamond Collection member is required to pay to the respective Diamond Collection a share of the overall cost of that Diamond Collection's operations,which includes that Diamond Collection's share of the costs of maintaining and operating the component resort units within that Diamond Collection.A specific resort property may have units that are included in more than one Diamond Collection,or have a combination ofunits owned by a Diamond Collection and by individual interval owners.To the extent that an entire resort property is not held completely within a specific Diamond Collection,each Diamond Collection pays only the portion of operating costs attributable to its interval ownership in that resort.With the exception of the Mediterranean Collection and Club Intrawest,each Diamond Collection member's annual maintenance fee is composed of a base fee and a per point fee based on the number of points owned by the member.The annual maintenance fee is intended to cover all applicable operating costs of the resort properties and other services,including reception,housekeeping,maintenance and repairs,real estate taxes,insurance,rental expense,accounting,legal,human resources,information technology and funding of replacement and refurbishment reserves forthe underlying resorts.In 2015,the annual maintenance fee for a holder of points equivalent to one week at one of the resorts in our network generally ranged between$1,240 and$1,715,with an average of$1,468. Special assessments may be levied if insufficient operating funds are available or if planned capital improvements exceed the amount of available replacement and refurbishment reserves. Managed Resorts Outside of Diamond Collections VOIs for a limited number of the resorts managed by us,consisting principally of the resorts acquired in our July 24, 2013 acquisition of management contracts,unsold VOIs,a portfolio of consumer loans and other assets from Island One,Inc. and Crescent One,LLC in exchange for$73.3 million of shares of our common stock(the"Island One Acquisition"),are not included in any of our Diamond Collections.Owner-families hold deeded VOIs in these resorts.Unsold intervals have been allocated point equivalent amounts that allow members of the Clubs to stay at these resorts. Interval Ownership We generally discontinued selling deeded intervals in October 2007;however,several of the resorts we manage continue to have a significant number of legacy deeded interval owners.We believe that points offer our members greater choice and flexibility in planning their vacations as compared to intervals.From an operational perspective,our points-based structure enables us to more efficiently manage our inventory and sales centers by selling points-based access to our global resort network from any sales location,rather than being limited to selling intervals at a specific resort. 19 An interval typically entitles the owner to use a fully-furnished vacation accommodation for a one-week period,generally during each year or in alternate years,usually in perpetuity.Typically,the owner holds either a fee simple ownership interest in a specific vacation accommodation or an undivided fee simple ownership interest in an entire resort.An interval owner has the right to stay only at the specific resort from which the interval owner has purchased the interval.However,many of our interval owners in the U.S.are also members of one of the Clubs,and thereby are entitled to the points equivalent for their interval which they may use to stay at other resorts in our network. Each interval owner is required to pay an annual maintenance fee to the related HOA to cover the owner's share of the cost of maintaining the property.The annual maintenance fee is intended to cover the owner's share of all operating costs ofthe resort and other related services,similar to a Diamond Collection member's annual maintenance fee.Assessments may be billed if insufficient operating funds are available or if planned capital improvements exceed the amount ofavailable replacement and refurbishment reserves.In 2015,annual maintenance fees for interval owners generally ranged between$624 and$1,629 per year for a one-week interval,with an average of$1,046.The amount of an interval owner's annual maintenance fees and assessments is determined on a pro rata basis consistent with such person's ownership interest in the resort.For purposes of this allocation,each of the Diamond Collections is assessed annual maintenance fees and assessments based on the intervals held by such Diamond Collection. Relationship among Points Owners,THE Club,HOAs and Diamond Collections The following diagram depicts the relationship among our points owners that are members of THE Club,the HOAs and the Diamond Collections: Points Owners Matibenance Polma Peen swrrership Affiliated Resorts and Managed Resorts not a 8e'a THE Club Access I Other Diamond Included In any Diamond Collections 1.Collection Legacy Interval Owners Diamond Collection PAarmgeraerii Maintenance Ma ritenance Fars Fees Interval Interval Ownereh;p Owwner&h, iaUd Nes Resorts in the Diamond Collection I -. Management Management Fees Sereo„es Dia morkd Resorts Recovery of VOIs In the ordinary course of our business,we recover VOIs from our members as a result of(i)failures by our members to pay their annual maintenance fee or any assessment,which failures may be due to,among other things,death or divorce or other life-cycle events or lifestyle changes and(ii)defaults on our members'consumer loans for the purchase oftheir VOIs. With respect to consumer loan defaults,we are able to exercise our rights as a secured lender to foreclose upon the VOI subject to our lien. 20 With respect to members who have failed to pay their annual maintenance fee or any assessment,we have entered into IRAAs with a substantial majority of the Collection Associations and HOAs for our managed resorts in North America, together with similar arrangements with the European Collection and a majority of ourEuropean managed resorts.Each agreement provides that in the event that a member fails to pay these amounts,we have the option to enforce the rights of the HOA or Collection Association with respect to the subject VOL which includes preventing members from using their points or intervals and,if the delinquency continues,recovering the property in the name of the HOA or Collection Association.Our rights to recover VOIs for failure to pay annual maintenance fees or assessments are subject to any prior security interest encumbering such VOL including any interest we hold as a lender on a consumer loan.We are responsible for payment of certain fees,ranging from 30%to 100%of the annual maintenance fees relating to the defaulted intervals or points.Depending upon whether the VOI in default is intervals or points,recovery is effected through a foreclosure proceeding or by contract termination.The recovery of points is more efficient than the recovery of intervals,because the recovery of intervals is governed by local real estate foreclosure laws that significantly lengthen recovery periods and increase the cost of recovery. Under the terms of our IRAAs,we are granted full use of the inventory as a result of delinquent annual maintenance fees or assessments for rental and marketing purposes,and we are under no obligation to commence recovery proceedings. Generally,when we recover intervals,we pay from approximately one to three years'worth of annual maintenance fees on such intervals.Upon recovery,the HOA or Collection Association transfers title to the VOI to us,and we are responsible for all annual maintenance fees and assessments thereafter.We have written or oral agreements with most of our European HOAs that provide us similar rights with respect to recovering delinquent VOIs.After recovery,VOIs are returned to our inventory and become available for sale.Although we recover inventory in the form of intervals as well as points,all inventory recovered is sold in the form of points.Recovered intervals are transferred to one of the Diamond Collections and become part of our points-based system. VOIs recovered through the default process are added to our existing inventory and resold at full retail value.Although the volume ofpoints or intervals that we recover could fluctuate in the future for various reasons,we have recovered in the ordinary course ofour business approximately 2%to 5%of the total outstanding VOIs in each of the past five years.Recovered VOI inventory may be sold by us in the form of points to new customers or existing members. Competition In our hospitality and management services segment,our competition includes pure real estate and hospitality management companies,as well as the VOI companies that conduct hotel management operations,some of which are noted below.Our competitors may seek to compete against us based on the pricing terms of our current hospitality management contracts.Our competitors may also compete against us in our efforts to expand our fee-based income streams by pursuing new management contracts for resorts that are not currently part of our network. In our Vacation Interests sales and financing segment,we compete for prospects,sales leads and sales personnel from established,highly visible vacation ownership resort operators,as well as a fragmented array of smaller operators and owners. In marketing and selling VOIs,we compete against not only vacation ownership companies,but also the vacation ownership divisions of other hospitality companies.Our competitors include Bluegreen Corporation,Hilton Hotels Corporation,Marriott Vacations Worldwide Corporation,Vistana Signature Experiences,Inc.and Wyndham Worldwide Corporation.In addition,in certain markets,we compete with many established companies focused primarily on vacation ownership,and it is possible that other potential competitors may develop properties near our current resort locations and thus compete with us in the future. We also compete with other vacation options such as cruises,as well as alternative lodging companies such as Airbnb and other similar entities,which operate websites that market available furnished,privately-owned residential properties in locations throughout the world,including homes and condominiums that can be rented on a nightly,weekly or monthly basis, and particularly in Europe,low-cost tour operators. There has been consolidation within the vacation ownership industry,including by us through our targeted acquisitions. Recently,International Leisure Group,which owns and manages the Hyatt Residence Club and provides management services through Hyatt Vacation Ownership,agreed to acquire Vistana Signature Experiences,Inc.We believe that the vacation ownership industry will continue to consolidate in the future. In our rental of VOIs,we compete not only with all of the foregoing companies,but also with traditional hospitality providers such as hotels and resorts. In our consumer financing business,we compete with numerous subsets of financial institutions,including mortgage companies,credit card issuers and other providers of direct-to-consumer financing.These providers permit purchasers to utilize a home equity line of credit, mortgage,credit card or other instrument to finance their VOI purchase. 21 Governmental Regulation Our marketing and sale of VOIs and other operations are subject to extensive regulation by the federal government and state timeshare laws and,in some cases,by the foreign jurisdictions where our VOIs are located,marketed and sold.The U.S. federal legislation that is or may be applicable to the sale,marketing and fmancing of VOIs includes,but is not limited to,the Federal Trade Commission Act,the Fair Housing Act,the Americans with Disabilities Act,the Truth-in-Lending Act and Regulation Z,the Home Mortgage Disclosure Act and Regulation C,the Equal Credit Opportunity Act and Regulation B,the Interstate Land Sales Full Disclosure Act,the Telephone Consumer Protection Act,the Telemarketing and Consumer Fraud and Abuse Prevention Act,the Gramm-Leach-Bliley Act,the Deceptive Mail Prevention and Enforcement Act,Section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980,the Bank Secrecy Act,the USA Patriot Act,and the Civil Rights Acts of 1964, 1968 and 1991 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. In addition,the majority of states and foreign jurisdictions where the resorts in our network are located extensively regulate the creation and management of vacation ownership resorts,the marketing and sale ofVOIs,the escrow of purchaser funds and other property prior to the completion of construction and closing,the content and use ofadvertising materials and promotional offers,the delivery of an offering memorandum describing the sale of VOIs and the creation and operation of exchange programs and the multi-site Vacation Interests plan reservation system.Many other states and certain foreign jurisdictions have adopted similar legislation and regulations affecting the marketing and sale of VOIs to persons located in those jurisdictions.In addition,the laws of most states and foreignjurisdictions in which we sell VOIs grant the purchaser of the interest the right to rescind a purchase contract during the specified rescission period provided by law.Rescission periods vary by jurisdiction in which we operate,but typically are five to 15 days from the date of sale. The Diamond Collections are required to register pursuant to applicable statutory requirements for the sale of VOI plans in an increasing number ofjurisdictions.For example,our subsidiary that serves as the developer of the U.S. Collection is required to register pursuant to the Florida Vacation Plan and Timesharing Act. Such registrations,or any formal exemption determinations,for the Diamond Collections confirm the substantial compliance with the filing and disclosure requirements of the respective timeshare statutes by the applicable Diamond Collection.They do not constitute the endorsement of the creation, sale,promotion or operation of the Diamond Collections by the regulatory body,nor relieve us or our affiliates of any duty or responsibility under other statutes or any other applicable laws.Registration under a respective timeshare act is not a guarantee or assurance of compliance with applicable law nor an assurance or guarantee of how any judicial body may interpret the Diamond Collections'compliance therewith. Additionally,certain third parties have indicated that the Consumer Financial Protection Bureau("CFPB")might increase their oversight of the vacation ownership industry. While the CFPB recently enacted new disclosure rules for lenders in the real estate mortgage lending industry,these rules were applicable to the real estate mortgage lending industry,notjust vacation ownership industry lenders.The CFPB's new rules also do not apply if the underlying transaction does not involve the sale of a real estate interest,and because we sell points-based VOIs,our operations have not been affected by these new CFPB rules. While we have no knowledge ofany efforts to increase oversight by the CFPB or any other governmental authority,the enactment of any additional laws or regulations by the CFPB or any other governmental authorities applicable to the vacation ownership industry may adversely affect our operations. Furthermore,most states and foreign jurisdictions have other laws that apply to our activities,including but not limited to real estate licensure laws,travel sales licensure laws,advertising laws,anti-fraud laws,telemarketing laws,prize,gift and sweepstakes laws and labor laws.In addition,we subscribe to"do not call"("DNC")lists for certain states and foreign jurisdictions into which we make telemarketing calls,as well as the federal DNC list.Enforcement ofthe federal DNC provisions began in the fall of 2003,and the rule provides for fines of up to$16,000 per violation.We also maintain an internal DNC list as required by law.Our master DNC list is comprised of our internal list,the federal DNC list and the applicable state DNC lists. In addition to government regulation relating to the marketing and sales of VOIs,our servicing and collection of consumer loans is subject to regulation by the federal government and the states and foreignjurisdictions in which such activities are conducted.These regulations may include the federal Fair Credit Reporting Act,the Fair Debt Collections Practice Act,the Electronic Funds TransferAct and Regulation B,the Right to Financial Privacy Act,the Florida Consumer Collection Practices Act,the Nevada Fair Debt CollectionPractices Act and similar legislation in other states and foreign jurisdictions. Certain local laws may also impose liability on property developers with respect to construction defects discovered by future owners of such property.Under these laws,future owners of VOIs may recover amounts in connection with repairs made to a resort as a consequence of defects arising out ofthe development of the property. A number of the U.S.federal,state and local laws and the laws of the foreign jurisdictions where we operate,including the Fair Housing Amendments Act of 1988 and the Americans with Disabilities Act,impose requirements related to access to 22 and use by disabled persons of a variety of public accommodations and facilities.A determination that we are subject to and that we are not in compliance with these accessibility laws could result in a judicial order requiring compliance,imposition of fines or an award of damages to private litigants. Ifan HOA at a resort was required to make significant improvements as a result of noncompliance with these accessibility laws,assessments might be needed to fund such improvements,which additional costs might cause owners of VOIs to default on their mortgages or cease making required HOAassessment payments.In addition,the HOA under certain circumstances may pursue the resort developer to recover the cost of any corrective measures.Any new legislation may impose further burdens or restrictions on property owners with respect to access by disabled persons.To the extent that we hold interests in a particular resort(directly or indirectly through our interests in a Diamond Collection),we would be responsible for our pro rata share of the costs of improvements resulting from noncompliance with accessibility laws. The marketing and sale of our points-based VOIs and our other operations in Europe are subject to national regulation and legislation.Directive 2008/122/EC of the European Parliament(the"Directive")regulates vacation ownership activities within the European Union(which includes the majority of the European countries in which we conduct our operations).The Directive required transposition into domestic legislation by the members of the European Union no later than February 23, 2011 and replaced the previous regulatory framework introduced by EC Directive 94/47/EC.Most of our purchasers in Europe are residents of the United Kingdom,where the Directive has been implemented under The Timeshare,Holiday Products, Resale and Exchange Contracts Regulations 2010.The Directive has now been implemented in all other member states,as well as in Norway,which,although not a member of the European Union,is a member of the European Economic Area.The Directive(i)requires delivery of specified disclosure in the potential purchaser's native language(some ofwhich must be provided in a specified format);(ii)requires a"cooling off"rescission period of 14 calendar days after they return to their resident country;and(iii)prohibits any advance payments in all member states. Prior to February 23,2011,vacation ownership activities within the European community were governed by the European Timeshare Directive of 1994(94/47/EC)(or the 1994 Directive). Other United Kingdom laws which are applicable to us include the Consumer Credit Act 1974 as amended by the Consumer Credit Act 2006,the Consumer Credit(Disclosure of Information)Regulations 2010,the Consumer Credit Agreements)Regulations 2010(as amended),the Misrepresentation Act 1967,the Unfair Contract Terms Act 1977,the Unfair Terms in Consumer Contracts Regulations 1999(as amended),the Consumer Protection from Unfair Trading Regulations 2008,the Data Protection Act 1998 and the Privacy and Electronic Communications(EC)Regulations 2003,the Equality Act 2010,the Employment Rights Act 1996,the Environmental Protection Act 1990,the Clean Air Act 1993,the Companies Act 2006 and the Trade Descriptions Act 1968.The Timeshare,Holiday Products,Resale and Exchange Contracts Regulations 2010 has an extra-territorial effect when United Kingdom residents purchase VOIs in accommodations located in other European Economic Area states. We are also subject to the laws and regulations ofMexico and Canada,including regulations applicable to developers and providers of timeshare services throughout Mexico and Canada.In addition to specific timeshare rules and regulations,we are also subject to its constitution and other laws and regulations of Mexico,including limitations with respect to ownership of land near Mexico's borders and beaches by Mexican citizens and companies(including Mexican subsidiaries of foreign companies); provided,however,that the federal government may grant the same right to foreign parties if they agree to consider themselves Mexican nationals with respect to such property and bind themselves not to invoke the protection of their governments in matters relating thereto and take title through a Mexican trust. All of the countries in which we operate have consumer protection and other laws that regulate our activities in those countries. We believe that we are in compliance with all applicable governmental regulations,except where noncompliance would not reasonably be expected to have a material adverse effect on us. Seasonality Vacation Interests Sales and Financing Segment.Historically,our fiscal quarter ended March 31 has produced the weakest operating results primarily due to the effects of reduced leisure travel.The next three quarters have historically produced the strongest operating results because they coincide with the typical summer vacation season and winter holidays, which result in a greater number of families vacationing as compared to the first fiscal quarter. Generally,a greater number of vacationers at the resorts in our network results in higher tour flow through our sales centers and increased VOI sales. Hospitality and Management Services Segment.Our management service business is generally not subject to seasonal fluctuations due to pre-determined management fees and recovery of our expenses incurred on behalf of the HOAs and the 23 Collection Associations we manage.We experience little seasonality in the operation of our Clubs as a majority of the Club revenue is pre-determined and recognized ratably throughout the year. Insurance We generally carry commercial general liability insurance.With respect to resort locations that we manage and for corporate offices,we and the HOAs cany all-risk property insurance policies with fire,flood,windstorm and earthquake coverage as well as additional coverage for business interruption arising from insured perils.Further,we cavy pollution insurance on all Diamond Resorts managed resort and administrative locations,which covers multiple perils,including exposure to Legionnaire's Disease.We believe that the insurance policy specifications,insured limits and deductibles are similar to those carried by other resort owners and operators.There are certain types of losses,such as losses arising from acts of war or terrorism,which are not generally insured because they are either uninsurable or not economically insurable. Intellectual Property We own and control a number of trade secrets,trademarks,service marks,trade names,copyrights and other intellectual property rights,including Diamond Resorts International®,Diamond Resorts®,THE Club®,Polo Towers& Design®,Relaxation. . . simplified®,Diamond Resorts®,DRIVEN®,The Meaning of Yes®,We Love to Say Yes®,Vacations for Life®,Affordable Luxury.Priceless Memories, Stay Vacationed®,Events of a Lifetime,Vacations of a Lifetime,which, in the aggregate,are of material importance to our business.We are licensed to use technology and other intellectual property rights owned and controlled by others,and we license other companies to use technology and other intellectual property rights owned and controlled by us.In addition,we have developed certain proprietary software applications that provide functionality to manage lead acquisition,marketing,tours,gifting,sales,contracts,member profiles,maintenance fee billing,property management,inventory management,yield management and reservations. Environmental Matters The resort properties that we manage are subject to federal,state and local laws and regulations relating to the protection ofthe environment,natural resources and worker health and safety,including laws and regulations governing and creating liability relating to the management,storage and disposal of hazardous substances and other regulated materials and the cleanup of contaminated sites.The resorts are also subject to various environmental laws and regulations that govern certain aspects oftheir ongoing operations.These laws and regulations control such things as the nature and volume of wastewater discharges,quality of water supply and waste management practices.The costs of complying with these requirements are generally covered by the HOAs that operate the affected resort property,and the majority of the HOAs maintain insurance policies to insure against such costs and potential environmental liabilities.To the extent that we hold interests in a particular resort(directly or indirectly through our interests in a Diamond Collection),we would be responsible for our pro rata share of losses sustained by such resort as a result of a violation of any such laws and regulations. Employees As ofDecember 31,2015,we had 8,174 full and part-time employees.Our employees are not represented by a labor union,with the exception of 138 employees in St.Maarten,209 employees in Mexico,277 employees in Hawaii and 25 employees in Nevada. Certain of our employees in Europe are also represented by unions.We are not aware of any union organizational efforts with respect to our employees at any other locations.We believe we have a good relationship with the members of our workforce. Available Information We are required to file annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K and other information with the SEC.We are subject to the informational requirements of the Exchange Act and file or furnish reports,proxy statements,and other information with the SEC. Copies of these materials,filed by us with the SEC,are available free of charge on our website at investors.diamondresorts.com.These filings are available as soon as reasonably practicable after we electronically file such material with,or furnish it to,the SEC.You can also obtain copies of these materials by visiting the SEC's Public Reference Room at 100 F Street,NE,Washington,D.C. 20549,by calling the SEC at 1-800-SEC-0330,or by accessing the SEC's website at www.sec.gov. The information on,or that may be accessed through, these websites is not incorporated into this filing and should not be considered a part of this filing. 24 ITEM 1A.RISK FACTORS We are subject to various risks, including those described below, which could materially adversely affect our business,financial condition and results ofoperations and, in turn, the value ofour securities.In addition,other risks not presently known to us or that we currently believe to be immaterial may also adversely affect our business,financial condition and results ofoperations, perhaps materially. The risks discussed below also includeforward-looking statements, and actual results and events may differ substantiallyfrom those discussed or highlighted in theseforward-looking statements. Before making an investment decision with respect to any ofour securities,you should carefully consider thefollowing risks and uncertainties described below and elsewhere in this annual report. See also "Cautionary Statement Regarding Forward-Looking Statements." Risks Related to Our Business Our revenues are highly dependent on the travel industry and declines in or disruptions to the travel industry,such as those caused by adverse economic conditions,terrorism and man-made disasters may adversely affect us. A substantial amount of our VOI sales activities occur at the managed resort locations in our network,and the volume of our sales correlates directly with the number ofprospective customers who visit these resorts each year.The number ofvisitors to these resorts depends upon travel industry conditions,on an overall basis and in the specific geographic areas in which our resorts are located. Such conditions may be adversely affected by a variety of factors,such as weather conditions,general travel patterns and the potential impact of natural disasters and crises. Actual or threatened war,terrorist activity,political unrest or civil strife and other geopolitical uncertainty could have a similar effect. In addition,any increased concern about terrorist acts directed against the U.S.and foreign citizens, transportationfacilities and assets,and travelers'fears of exposure to contagious diseases may reduce the number oftourists willing to fly or travel in the future,particularly if new significant terrorist attacks or disease outbreaks occur or are threatened. More generally,the travel industry has been hurt by various events occurring in prioryears,including the effects of weak domestic and global economies.A sustained downturn in travel patterns,including as a result of increases in travel expenses, could cause a reduction in the number of potential customers who visit the managed resorts in our network.If we experience a substantial decline in visitors to these resorts,our VOI sales would likely decline. Ourfuture success depends on our ability to market VOIs successfully and efficiently,including sales to new members, as well as sales ofadditionalpoints to our existing ownership base. We compete for customers with hotel and resort properties and with other vacation ownership resorts and other vacation options such as cruises.The identification of sales prospects and leads,and the marketing of our products to those leads,are essential to our success.We have incurred and will continue to incur significant expenses associated with marketing programs in advance of closing sales to the leads that we identify.Ifour lead identification and marketing efforts do not yield enough leads or we are unable to successfully convert sales leads to a sufficient number of sales,our growth,including from our efforts to expand Club revenue,and our overall fmancial performance may be adversely affected.We have continued to expand our use of hospitality-focused marketing methods,such as enhanced mini-vacation packages focused on small groups of potential customers.These marketing methods are more expensive and require a greater commitment of resources than traditional marketing activities,and there can be no assurance that we will be successful in continuing to expand these efforts. In addition,a significant portion of our sales are additional points purchased by existing members who previously purchased points from us,as well as by customers of resorts where we recently acquired the HOA management contracts,and our results ofoperations depend in part on our ability to continue making sales to these members and customers.Our recent rate of sales of additional points to existing owners and such other customers may not be sustainable in future periods.Furthermore, we do not receive all of the same benefits from sales of additional points to existing members as we do from sales ofpoints to new members,such as new Club members paying the associated fees and to whom we can offer services,activities and upgrade opportunities and an expanded ownership base to which we can potentially sell additional points. Our business may be adversely affected ifwe are unable to maintain an optimal level ofpoints or intervals in inventory for sales to customers. Our ability to maintain an optimal level of points or intervals in inventory for sale to customers is dependent on a number of factors,including fluctuations in our sales levels and the amount ofinventory recovered through consumer loan and association fee defaults. Ifwe experience a significant decline in our inventory ofpoints available for sale,we may be required to expend more capital to acquire or build inventory. We have entered into IRAAs with substantially all of the Collection Associations and HOAs for our managed resorts in 25 North America,together with similar arrangements with the European Collections and a majority of our European managed resorts.Pursuant to these agreements and arrangements,we have the option to recapture VOIs either in the form ofpoints or intervals,and may recover the underlying inventory at a later date.During each of the past five years,approximately 2%to 5% of the outstanding points or intervals were recovered by us pursuant to these agreements.We need to maintain such level of recovery to provide us with our relatively low-cost inventory of VOIs for sales to our customers.However,the volume of points or intervals recovered by us could decline in the future for a variety of reasons,including as a result of termination or non- renewal of our IRAAs and a decrease in owners who are delinquent on their maintenance fees.In addition,if a viable VOI resale market were to develop in the future,our members may choose to resell their interests to third parties.Further,in the event applicable state law makes it more difficult to recover points or intervals,it could extend the time required to consummate a recovery or otherwise make it more difficult to consummate such recoveries.An increased level of VOI sales would also reduce our inventory available for sale. If our inventory available for sale were to decline significantly,generally or in a particular Diamond Collection,we may need to either substantially reduce the volume of our VOI sales or make significant capital expenditures to replenish our inventory by purchasing points or intervals or building or acquiring new inventory at new or existing resorts.To the extent we need or desire to build or acquire new inventory,we may rely upon arrangements with third-party financial sponsors,such as the arrangement we entered into in 2015 with the Kona Seller,an affiliate of Och-Ziff Real Estate,to develop a new resort on property located in Kona,Hawaii. See "Note 18—Commitments and Contingencies"of our consolidated financial statements included elsewhere in this annual report and "Item 9B.—Other Information"for additional information regarding our arrangement with the Kona Seller.Any such arrangements are subject to a variety of risks,including that the fmancial sponsor may fail to deliver new inventory promptly or in a manner that meets agreed upon specifications;the fmancial sponsor may not be able to obtain or maintain financing necessary to build the new inventory;construction may be delayed forvarious reasons, including due to any delay or failure in obtaining necessary permits or authorizations or the occurrence of natural disasters;and we or the financial sponsor may incur unanticipated project costs.These risks could adversely affect the development ofthe new inventory. Ifthe volume ofour inventory ofpoints held by us were to significantly increase, our carrying costs with respect to that inventory would increase. If VOI sales levels do not keep pace with inventory recovery levels,the volume of our inventory of points or intervals may become higher than desired.Also,if the amount ofcustomer defaults increases,our carrying costs will increase due to the maintenance fees on the recovered VOI inventory that we are required to pay. Our strategic acquisitions have provided us with additional VOI inventory,and potential future acquisitions may include additional inventory.Further,as part of some of our acquisitions,we have incurred additional obligations to repurchase defaulted inventory(either by taking back defaulted consumer loans or repurchasing the inventory that collateralizes such loans).We incur carrying costs associated with our VOI inventory,as we are obligated to pay annual maintenance fees and assessments on any VOIs held in inventory,and higher-than-desired VOI inventory levels would result in increases in these carrying costs.If our inventory available for sale were to increase significantly,we may need to sell some of this excess inventory at significantly discounted prices or expand our rental programs. In addition,the IRAAs we enter into with the HOAs and Collection Associations are subject to annual renewal,and as a result,we may not always repurchase VOI inventory from customers in default. Ifwe do not repurchase such inventory,the annual maintenance fees and assessments are allocated among the remaining non-defaulting owners of units in the HOA and the Collection Association,increasing the amounts paid by each of those owners(including us,to the extent we hold units in inventory).This increases the risk that owners of such other units may be unwilling or unable to pay such increased fees and may default as well.The increased per-unit costs could also make units in the HOA and the Collection Association less attractive to prospective purchasers. A substantialportion ofour business is dependent upon contracts with HOAs to manage resortproperties and with the Diamond Collections. The expiration,termination or renegotiation ofthese management contracts could adversely affect our business andresults ofoperations. We are party to management contracts relating to 109 properties and the Diamond Collections,under which we receive fees for providing management services.We derive a substantial amount of revenue from these contracts,and our hospitality and management services business accounts for a greater percentage of our Adjusted EBITDA than of our total consolidated revenue. See"Business—Our Services—Hospitality andManagement Services"for further information regarding management ofour managed resorts and the Diamond Collections. Some state regulations impose limitations on the amount of fees that we may charge the HOAs and Collection Associations for our hospitality management services and the terms of our management contracts.Our management contracts generally have three to ten year terms and are automatically renewable,but provide for early termination rights in certain circumstances.Any of these management contracts may expire at the end of its then-current term(following notice by a party of non-renewal)or be terminated,or the contract terms may be renegotiated in a manner adverse to us.In addition,our growth strategy contemplates adding services provided to our members under our management 26 contracts,which may result in increased management fees relating to those new services.We believe there are limits to how much we can increase management fees for additional services provided before the HOAs and Collection Associations are unwilling or unable to pay such increased fees,and,if such fees are perceived as being too high by prospective customers,our VOI sales may be adversely affected. Our growth strategy also contemplates our acquisition of,and entry into,new management contracts.We face significant competition to secure new contracts and may be unsuccessful in doing so on favorable terms,if at all. To the extent our rentalproceeds may decline or our Vacation Interests carrying costs may increase,we may not be able to cover certain other expenditures against which we offset rentalproceeds. Under our IRAAs,we are required to pay owners'past due maintenance and assessment fees to the HOAs and Collection Associations. See"Item 1.BusinessRecovery ofVOIs."In order to offset these expenses,we rent the available units,in which case we are also obligated to pay to the HOAs and Collection Associations cleaning fees for room stays incurred by our guests who stay with us on a per-night or per-week basis.In 2015,2014 and 2013,our net Vacation Interests carrying costs,consisting of carrying costs and cleaning fees related to the VOIs that we owned in each ofthese periods,less amounts generated from rental of these VOIs in these periods were$39.7 million,$35.5 million and$41.3 million,respectively.Additionally, participating members can rent private luxury properties,book high-profile sporting events and take customized international guided excursions by depositing a designated number of points with us. In turn,we pay a usage fee to third parties on behalf of our members. See"Item 1.Business—Our Resort Network—Diamond Luxury Selection." Similarly,under arrangements that we have with certain of our affiliated resorts,holders of our points or intervals who desire to stay at any such affiliated resort deposit points with us and,in exchange,we pay our affiliated resort the funds required to allow such holder access to the desired unit.In order to offset these payments to the third parties or the affiliated resorts,as applicable,we rent available units at our managed resorts.Our ability to rent units is subject to a variety of risks common to the hospitality industry,including competition from large and well-established hotels,changes in the number and occupancy and room rates for hotel moms, seasonality and changes in the desirability of geographic regions of the resorts in our network. In addition,we experience strong competition in the rental market.We may be at a disadvantage when competing against larger and better-established hotel and resort chains that focus on the rental market,have more experience in and greater resources devoted to such market,and can offer rental customers additional benefits such as loyalty points related to rentals and a significantly larger pool of potentially available rental options.We also experience competition from numerous other smaller owners and operators ofvacation ownership resorts,as well as alternative lodging companies such as Airbnb and other similar entities. See"Our industry is highly competitive and we may not be able to compete effectively" We utilize external exchangeprogram affiliations as sources ofsales prospects and leads,and anyfailure to maintain such affiliations could reduce these prospects. We have an affiliation agreement for an external exchange program with Interval International,which complements our own vacation ownership exchange programs.As a result ofthis affiliation,members of THE Club may use their points to reserve the use of a vacation accommodation at more than 3,000 resorts worldwide that participate in Interval International. In addition,interval owners at our managed resorts mayjoin either Interval International or RCI,as their HOA constitutions dictate. Such interval owners may then deposit their deeded intervals in exchange for an alternative vacation destination.When our points and intervals are exchanged through Interval International or RCI,this inventory is made available to owners from other resorts,who are potential customers for our VOI sales. If we do not maintain our external exchange program affiliations, the number of individuals exchanging interests through these programs to stay at our managed resorts may decline substantially.Furthermore,the benefits associated with being a member of THE Club may be less desirable to current and prospective members. We are dependent on the managers ofour affiliated resorts and theproperties in the Diamond Luxury Selection to ensure that thoseproperties meet our customers'expectations. The members of the Clubs have access to all or a portion of the 250 affiliated resorts and hotels and 20 cruise itineraries in our resort network. Certain members with large point ownership may also rent properties through participation in the Diamond Luxury Selection.We do not manage,own or operate the affiliated resorts,hotels,cruises or the properties in the Diamond Luxury Selection,and we have limited or no ability to control their management and operations.Ifthe managers of a significant number of those properties were to fail to maintain them in a manner consistent with our standards of quality,we may be subject to customer complaints and our reputation and brand could be damaged.In addition,our affiliation agreements with these resorts may expire,be terminated or not be renewed,or may be renegotiated in a manner adverse to us,and we maybeunabletoenterintonewagreementsthatprovidemembersoftheClubswithequivalentaccesstoadditionalresorts. Furthermore,the properties in the Diamond Luxury Selection may not have a number of the attributes associated with traditional resort locations,such as security,fire safety and life safety systems.If a member is injured while staying at an affiliated property or a property in the Diamond Luxury Selection,we may have to rely on the insurance coverage of the 27 manager or owner of such property,as our insurance policies may not apply in such situations. The resale marketfor VOIs could adversely affect our business. There is not currently an active,organized or liquid resale market for VOIs,and resales of VOIs generally are made at sales prices substantially below their original customer purchase prices.These factors may make the initial purchase of a VOI less attractive to potential buyers who are concerned about their ability to resell their VOIs.Also,buyers who seek to resell their VOIs compete with our own VOI sales efforts. Ifthe secondary market for VOIs were to become more organized and liquid,the resulting availability of resale VOIs(particularly where the VOIs are available for sale at lowerprices than ours)could adversely affect our sales and our sales prices.Furthermore,the volume of VOI inventory that we recapture each year may decline if a viable secondary market develops. We are subject to certain risks associated with our management ofresortproperties. Through our management of resorts and ownership of VOIs,we are subject to certain risks related to the physical condition and operation of the managed resort properties in our resort network,including: the presence of construction or repair defects or other structural or building damage at any of these resorts; any noncompliance with or liabilities under applicable environmental,health or safety regulations or requirements or building permit requirements relating to these resorts; any damage resulting from natural disasters,such as hurricanes,earthquakes,fires,floods and windstorms,which may increase in frequency or severity due to climate change or other factors;and claims by employees,members and their guests for injuries sustained on these resort properties. Some of these risks may be more significant in connection with the properties for which we recently acquired management agreements.For additional risks related to our acquired businesses,see"Our strategic transactions may not be successful and may divert our management's attention and consume significant resources."Ifan uninsured loss or a loss in excess of insured limits occurs as a result of any ofthe foregoing,we or the HOAs or Collection Associations may be subject to significant costs. See"The properties included in our resort networkmay experience damages that are not covered by insurance" Additionally,a number of U.S.federal,state and local laws and the laws of the foreignjurisdictions where we operate, including the Fair Housing Amendments Act of 1988 and the Americans with Disabilities Act,impose requirements related to access to and use by disabled persons of a variety ofpublic accommodations and facilities.A determination that our managed resorts are subject to,and that they are not in compliance with,these accessibility laws could result in ajudicial order requiring compliance,imposition of fines or an award of damages to private litigants.If an HOA at one of our managed resorts was required to make significant improvements as a result of noncompliance with these accessibility laws,assessments might be needed to fund such improvements,which additional costs may cause our VOI owners to default on their consumer loans from us or cease making required HOA maintenance fee or assessment payments. The resort properties that we manage are also subject to federal,state and local laws and regulations relating to the protection of the environment,natural resources and worker health and safety,including laws and regulations governing and creating liability relating to the management,storage and disposal of hazardous substances and other regulated materials and the cleanup of contaminated sites.The resorts are also subject to various environmental laws and regulations that govern certain aspects of their ongoing operations.These laws and regulations control such things as the nature and volume of wastewater discharges,quality of water supply and waste management practices. To the extent that we hold interests in a particular resort(directly or indirectly through our interests in a Diamond Collection),we would be responsible for our pro rata share of losses sustained by such resort as a result of a violation of any of the laws and regulations to which they are subject and for our pro rata share of any costs related to improvements to the resorts made in order to comply with such laws and regulations. Theproperties included in our resort network may experience damages that are not covered by insurance. Our managed resorts are covered by all-risk property insurance policies with fire,flood,windstorm and earthquake coverage,as well as additional coverage for business interruption arising from insured perils.However,market forces beyond our control may limit the scope of the insurance coverage that we obtain or our ability to obtain coverage at reasonable rates. Specifically,certain types of losses,such as losses arising from acts ofwar or terrorism,are generally not insured because they are either uninsurable or not economically feasible to insure.Accordingly,our insurance may not be adequate to cover all losses in every circumstance. In the event of an uninsured loss,including a loss in excess of insured limits,at any of the resorts in our network,such resorts may not be adequately repaired in a timely manner or at all and we may lose some or all ofthe future 28 revenues anticipated to be derived from such resorts. Furthermore,if an HOA or a Collection Association is subject to any such loss,we will also be responsible for a portion of such loss to the extent of our ownership of VOIs in the resort or Diamond Collection,and any substantial assessments charged by the HOAs or Collection Associations as a result of any of these items could cause customer dissatisfaction,result in additional defaults on assessments by members or harm our business and reputation.For example,in October 2011,the HOA of one of our managed resorts levied a substantial assessment to the owner-families of that resort for water intrusion damage,and we are responsible for a portion of this assessment due to deeded inventory or Diamond Collection points held by us at the time ofthe assessment. In addition,pursuant to the related class action settlement,we agreed to pay any amount ofassessments defaulted on by owners in return for our recovery of the related VOIs. In addition,uninsured losses,natural disasters,terrorism or similar events may also have an adverse effect on our business, operations and financial condition.As an example,the Cabo Azul Resort and the surrounding areas in San Jose Del Cabo, Mexico were severely impacted by Hurricane Odile in September 2014.The storm damaged the buildings as well as the facilities and amenities related to the Cabo Azul Resort,resulting in the Cabo Azul Resort temporarily being taken out of service,until completion of necessary repairs as well as related infrastructure repairs in Baja California Sur by September 1, 2015,when the Cabo Azul Resort was reopened. See "Note 18—Commitments and Contingencies"of our consolidated financial statements included elsewhere in this annual report for further discussion. We generally renew our insurance policies on an annual basis.If the cost ofcoverage becomes too high,we may need to reduce our policy limits,increase the deductibles or agree to certain exclusions from our coverage in order to reduce the premiums to an acceptable amount.Natural disasters and other catastrophic events could materially and adversely affect our ability to obtain adequate future insurance coverage at commercially reasonable rates. Unfavorable general economic conditions in the U.S. and globally have adversely affected our business in the past and could in thefuture result in decreased demandfor VOIs and our ability to obtainfuturefinancing. There have been periods in which our business has been materially adversely affected by unfavorable general economic conditions,including effects of weak domestic and world economies.Future volatility and disruption in worldwide capital and credit markets and any declines in economic conditions in the U.S.,Europe and in other parts of the world could adversely impact our business and results of operations,particularly if the availability of financing for us or for our customers is limited, or if general economic conditions adversely affect our customers'ability to pay amounts owed under our loans to them or for maintenance fees or assessments.If the HOAs and Collection Associations are unable to collect maintenance fees or assessments from our customers,not only would our management fee revenue be adversely affected,but the resorts we manage could fall into disrepair and fail to comply with the quality standards associated with the Diamond Resorts brand,which could decrease customer satisfaction,tarnish our reputation and impair our ability to sell our VOIs. Our international operations are subject to risks not generally applicable to our North American operations. We manage resorts in,and have sales and marketing operations in, 13 countries.Our operations in foreign countries are subject to a number of particular risks,including: exposure to local economic conditions; potential adverse changes in the diplomatic relations of foreign countries with the U.S.; hostility from local populations; restrictions and taxes on the withdrawal offoreign investment and earnings; the imposition of government policies and regulations against business and real estate ownership by foreigners; foreign investment restrictions or requirements; limitations on our ability to legally enforce our contractual rights in foreign countries; regulations restricting the sale of VOIs,as described in"Business—Governmental Regulation;" foreign exchange restrictions and the impact of exchange rates on our business: conflicts between local laws and U.S. laws; withholding and other taxes on remittances and other payments by our subsidiaries;and 29 changes in and application of foreign taxation structures,including value added taxes. In addition,international markets,such as China,have recently experienced moderation in their economic growth and an increase in market volatility,which may have a negative effect on our managed resorts and sales and marketing operations located in,and our growth plans for,these international markets. We are also subject to the laws and regulations ofthe European Union and countries in which we operate resorts. See Item 1.Business—Governmental Regulation."Our international business operations are also subject to various anti-corruption laws and regulations,including restrictions imposed by the Foreign Corrupt Practices Act("FCPA").The FCPA and similar anti-corruption laws in otherjurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or generating business.We cannot provide assurance that our internal controls and procedures will always protect us from the reckless or criminal acts that may be committed by our employees or third parties with whom we work. If we are found to be liable for violations ofthe FCPA or similar anti- corruption laws in international jurisdictions,criminal or civil penalties could be imposed onus. Weface challenges expanding our operations in new international markets in which we have limited experience, including developing markets in Asia and Latin America. We are exploring growth opportunities in geographic markets in which we have limited experience.We currently have affiliation agreements in place with a number of resorts in Asia and a few resorts in Latin America,and may explore additional cobranding opportunities with existing resorts,joint ventures or other strategic alliances with local or regional operators in those markets.For example,we have entered into a joint venture to create,market,sell and service vacation packages and associated benefits(including vacation ownership)to customers in Asia. We may also expand our footprint in international markets by pursuing acquisitions.For example,we recently expanded our operations into Canada as a result of the closing of our acquisition of the vacation ownership business of Intrawest Resort Club Group from Intrawest Resorts Holdings,Inc.in January 2016.As a result of our expansion into new international markets, we will have only limited experience in marketing and selling our products and services in those markets.Expansion into new and developing international markets is challenging,requires significant management attention and financial resources and may require us to attract,retain and manage local offices or personnel in such markets.We also need to comply with regulations and other laws to which our operations become subject as a result of any such international expansion. International expansion also requires us to tailor our services and marketing to local markets and adapt to local cultures,languages,regulations and standards.To the extent we are unable to adapt,or to the extent that we are unable to find suitable acquisition targets or potential affiliates in such markets or to the extent that any such acquisition or existing or future relationships with affiliates in such markets are not as beneficial to us as we expect,our expansion may not be successful.In some of these markets,including China,the concept of vacation ownership is relatively novel.As a result,in these markets there is limited infrastructure and government support for the vacation ownership industry and the industry may lack sufficient mechanisms for consumer protection.There is also currently not a large supply ofvacation ownership products and resorts in those markets,which may limit opportunities and increase competition for those limited opportunities. In addition,many countries in Asia and Latin America are emerging markets and are subject to greater political, economic,legal and social risks than more developed markets,including risks relating to: political and governmental instability,including domestic political conflicts and inability to maintain consensus; economic instability,including weak banking systems,inflation and currency risk,lack of capital,and changing or inconsistent economic policy; weaknesses in legal systems,including inconsistent or uncertain national and local regimes,unavailability ofjudicial or administrative guidance and inexperience; tax uncertainty,including tax law changes,limited tax guidance and difficulty determining tax liability or planning tax- efficient structures; the lack of reliable official government statistics or reports;and organized crime,money laundering and other crime. There are also risks related to entering into joint ventures or strategic alliances with local or regional operators,including the joint venture with respect to operations in Asia noted above,such as the possibility that these operators might become bankrupt or fail to otherwise meet their obligations to us.We may not have,and specifically as a minority investor in the 30 venture with respect to operations in Asia,we do not have,control over thejoint venture's business or the decisions of the venture,and the other parties to the joint venture may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives.Disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business.In addition,we may,in some circumstances,be liable for the actions of our partners.Furthermore,if we do enter into joint ventures or other affiliations with local or regional operators and a significant number of such operators fail to maintain their properties or provide services in a manner consistent with our standards of quality,we may be subject to customer complaints and our reputation and brand could be damaged.To the extent we expand into new international markets,our exposure to the risks described above in"Our international operations are subject to risks not generally applicable to our domestic operations"will also increase. Our industry is highly competitive and we may not be able to compete effectively. The vacation ownership industry is highly competitive.We compete against not only vacation ownership companies,but also vacation ownership divisions of other hospitality companies,including various high profile and well-established operators, some of which have substantially greater liquidity and financial resources than we do. Some of these operators also have substantially greater experience and familiarity with emerging international markets,such as Latin America and Asia,in which we intend to explore or may continue to explore opportunities.Many of the world's most recognized lodging,hospitality and entertainment companies develop and sell VOIs in resort properties.We also compete with numerous other smaller owners and operators ofvacation ownership resorts,as well as alternative lodging companies,which have experienced significant growth in recent years. See"Item 1.Business—Competition"for further detail. Our competitors could seek to compete against us based on the pricing terms of our current hospitality management contracts or in our efforts to expand our fee-based income streams by pursuing new management contracts for resorts that are not currently part of our network.We may not be able to compete successfully for customers,and increased competition could result in price reductions and reduced margins,as well as adversely affect our efforts to maintain and increase our market share. Our existing indebtedness,or indebtedness that we may incur in thefuture,could adversely affect us,and the terms ofour debt covenants could limit how we conduct our business and our ability to raise additionalfunds. As of December 31,2015,we had$574.7 million in principal amount outstanding under our Senior Credit Facility originally entered into on May 9,2014 and subsequently amended on December 22,2014 and December 3,2015(the"Senior Credit Facility"),$642.8 million of non-recourse indebtedness in securitization notes and borrowings of our subsidiaries and 4.8 million of other recourse indebtedness,for total principal indebtedness of$1.22 billion(excluding original issue discounts).See"Item 7.Management's Discussion andAnalysis ofFinancial Condition andResults ofOperations—Liquidity and Capital Resources"for the definition of and additional information on these borrowings.Our ability to maintain a level of cash flows from operating activities to make scheduled payments,including excess cash flow sweep payments as required under our Senior Credit Facility,orto refinance our debt obligations depends on our future financial and operating performance,which is subject to prevailing economic and competitive conditions and to various financial,business,regulatory and otherfactors,some of which are beyond our control. Ifwe are unable to fund our debt service obligations,we may be forced to reduce or delay capital expenditures or sell assets,seek additional capital or seek to restructure or refmance our indebtedness.Further,our indebtedness may impair our ability to obtain additional financing for working capital,capital expenditures,debt service requirements,restructuring,acquisitions or general corporate purposes,or such financing may not be available on terms favorable to us.We may also incur substantial additional indebtedness in the future. If new debt or other liabilities are added to our current debt levels,the related risks that we and our subsidiaries now face,as described above, could intensify. In addition,the Senior Credit Facility and the agreements governing other debt obligations contain,and the agreements that govern our future indebtedness may contain,covenants that restrict our ability and the ability of our subsidiaries to: incur additional indebtedness or issue certain preferred shares; create liens on our assets; pay dividends or make other equity distributions; repurchase our capital stock; purchase or redeem equity interests or subordinated debt; make certain investments; sell assets; consolidate,merge,sell or otherwise dispose ofall or substantially all of our assets;and 31 engage in transactions with affiliates. As a result of these covenants,we could be limited in the manner in which we conduct our business.and we may be unable to engage in favorable business activities or finance future operations or capital needs. Our business plan historically has dependedon our ability to sell,securitize or borrow against the consumer loans that we generate,and our liquidity,financial condition and results ofoperations would be adversely impacted ifwe are unable to do so in thefuture We generally offer financing of up to 90%of the purchase price to qualified customers who purchase VOIs through our sales centers,other than those in Europe,and a significant portion of customers choose to take advantage of this opportunity. For example,from January 1,2011 through December 31,2015,we financed 74.5%of the total amount of our VOI sales.Our ability to borrow against or sell our consumer loans has been an important element of our continued liquidity,and our inability to do so in the future could have a material adverse effect on our liquidity and cash flows.Furthermore,our ability to generate sales of VOIs to customers who require or desire financing may be impaired to the extent we are unable to borrow against or sell such loans on acceptable terms. In the past,we have sold or securitized a substantial portion of the consumer loans we originated from our customers.If we are unable to continue to participate in securitization transactions or generate liquidity and create capacity on our Funding Facilities,on acceptable terms,our liquidity and cash flows will be materially and adversely affected.Moreover,ifwe cannot offer financing to our customers who purchase VOIs through our U.S.,Mexican and St.Maarten sales centers,our sales may be adversely affected. We have historically relied on our Funding Facilities to provide working capital for our operations.The Funding Facilities are asset-backed commercial finance facilities,with terms currently scheduled to expire in 2017,secured by,or funded through the sale of,our consumer loans. Ifwe are unable to extend or refinance our Funding Facilities by securitizing our consumer loan receivables or entering into new Funding Facilities,our ability to access sufficient working capital to fund our operations may be materially adversely affected and we may be required to curtail our sales,marketing and consumer finance operations. See"Item 7.Management's Discussion andAnalysis ofFinancial Condition and Results ofOperations— Liquidity and Capital Resources"for additional information. To the extent that our Funding Facilities, Senior Credit Facility and operating cash flows are not sufficient to meet our working capital requirements,our ability to sustain our existing operations will be impaired. We may be unable to raise additional capital we need to grow our business. We may need to raise additional capital to expand our operations and pursue our growth strategies,including potential acquisitions of complementary businesses,and to respond to competitive pressures or unanticipated working capital requirements.We may not be able to obtain additional debt or equity financing on favorable terms,if at all,which could impair our growth and adversely affect our existing operations. If we raise additional equity financing,our stockholders may experience significant dilution of their ownership interests,and the per share value of our common stock could decline. Our credit underwriting standards may prove to be inadequate,and we could incur substantial losses ifthe customers we finance default on their obligations.In addition, we rely on certain thirdparty lenders toprovidefinancing to purchasers of our VOIs in Europe,andthe loss ofthese customerfinancing sources could harm our business. We generally offer financing of up to 90%ofthe purchase price to qualified purchasers of VOIs sold through our U.S., Mexican and St.Maarten sales centers.There is no assurance that the credit underwriting system we utilize as part of our domestic consumer finance activities will result in acceptable default rates or otherwise ensure the continued performance of our consumer loan portfolio.The default rate on our consumer loan portfolio was 7.7%(as a percentage of our outstanding originated portfolios)for 2015,and ranged from 5.7%to 8.2%on an annual basis from 2011 through 2015.As of December 31, 2015,6.3%(based on loan balance)of our VOI consumer loans that we held,or were held under securitizations and funding facilities,and that were not in default(which we define as having occurred upon the earlier of(i)the customer's account becoming over 180 days delinquent,or(ii)the completion of cancellation or foreclosure proceedings)were more than 30 days past due.Although in many cases we may have personal recourse against a buyer for the unpaid purchase price,certain states have laws that limit our ability to recover personal judgments against customers who have defaulted on their loans.Even where permitted,attempting to recover a personal judgment may not be advisable due to the associated legal costs and the potential adverse publicity.Historically,we have generally not pursued personal recourse against our customers,even when available. If we are unable to collect the defaulted amount due,we traditionally have foreclosed on the customer's VOI or terminated the underlying contract and remarketed the recovered VOL Irrespective ofour remedy in the event of a default,we cannot recover the often significant marketing,selling and administrative costs associated with the original sale,and we will have to incur such costs again to resell the VOI. See "The resale marketfor VOls.could adversely affect our business"for additional risks related 32 to the resale of VOIs. Currently,portions of our consumer loan portfolio are concentrated in certain geographic regions within the U.S.As of December 31,2015,our loans to California residents constituted 33.3%ofour consumer loan portfolio.No other state or foreign country concentration accounted for in excess of 10.0%of our consumer loan portfolio. California has been particularly negatively impacted during the economic downturn.Any deterioration ofthe economic condition and financial well-being of the regions in which we have significant loan concentration could adversely affect our consumer loan portfolio. If default rates for our borrowers were to increase,we may be required to increase our provision for loan losses.An increased level of delinquencies could result from changes in economic or market conditions,increases in interest rates,adverse employment conditions and other factors beyond our control.Increased delinquencies could also result from our inability to evaluate accurately the credit worthiness of the customers to whom we extend financing or our inability to maintain the hospitality level that our customers have come to expect.In addition,increased delinquency rates may cause buyers of,or lenders whose loans are secured by,our consumer loans to reduce the amount of availability under our Funding Facilities,or to increase the interest costs associated with such facilities.In such an event,our cost of financing would increase,and we may not be able to secure financing on terms acceptable to us,if at all. Under the terms of our securitization facilities,we are required,under certain circumstances,to repurchase or substitute loans if we breach any of the representations and warranties we made with respect to the eligibility of the receivables at the time we sold such receivables.Additionally,under the terms of our securitization facilities,we are permitted to repurchase,or substitute new eligible loans in exchange for,defaulted loans up to stated thresholds;to the extent the level of defaulted loans exceeds such stated thresholds,we may be required to pay substantially all of our cash flows generated from the underlying receivables to pay down the principal balance of the applicable securitization facility. Finally,we rely on certain third-party lenders to provide consumer financing for sales of our VOIs in Europe.Ifthese lenders discontinue providing such financing,or materially change the terms of such financing,we would be required to find an alternative means of financing for our customers in Europe.Ifwe failed to find other lenders,our VOI sales in Europe could decline. Changes in interest rates may increase our borrowing costs and otherwise adversely affect our business. We rely on the securitization markets to provide liquidity for our consumer finance operations. Increases in interest rates, changes in the financial markets and other factors could increase the costs of our securitization fmancings,prevent us from accessing the securitization markets and otherwise reduce our ability to obtain the funds required for our consumer financing operations.To the extent interest rates increase and to the extent legally permitted,we may be required to increase the rates we charge our customers to finance their purchases of VOIs.Our business and results of operations are dependent on the ability of our customers to finance their purchase of VOIs,and in the U.S.we believe we are currently the only generally available lending source to directly finance the sales of our VOIs.Limitations on our ability to provide financing to our customers at acceptable rates or increases in the cost of such financing could reduce our sales of VOIs. Our variable-rate borrowings consist of the Senior Credit Facility and the Conduit Facility,which stipulate a minimum LIBOR interest rate floor.In the event LIBOR increases above the interest rate floor and we have not entered into derivative instruments to hedge against such increases,our financial performance may be adversely affected. Changes in the U.S.tax and other laws and regulations may adversely affect our business. The U.S.government may revise tax laws,regulations or official interpretations in ways that could have a significant adverse effect on our business,including modifications that could reduce the profits that we can effectively realize from our international operations,or that could require costly changes to those operations,or the way in which they are structured.For example,the effective tax rates for most U.S.companies reflect the fact that income earned and reinvested outside the U.S.is generally taxed at local rates,which may be much lower than U.S.tax rates. If changes in tax laws,regulations or interpretations significantly increase the tax rates on non-U.S income,our effective tax rate could increase and our profits could be reduced.If such increases resulted from our status as a U.S.company,those changes could place us at a disadvantage to our non-U.S.competitors if those competitors remain subject to lower local tax rates. Fluctuations inforeign currency exchange rates may affect our reported results ofoperations. In addition to our operations in the U.S.,we conduct operations in international markets from which we receive,at least in part,revenues in foreign currencies.For example,we receive Euros and British Pound Sterling in connection with our European managed resorts and European VOI sales and Mexican Pesos in connection with our operations in Mexico.Because our financial results are reported in U.S.dollars,fluctuations in the value of the Euro and British Pound Sterling against the U.S.dollar have had and will continue to have an effect,which may be significant,on our reported financial results.Exchange 33 rates have been volatile in recent years and such volatility may persist due to economic and political circumstances in individual Euro zone countries.In addition,we could experience exchange rate fluctuations depending upon the outcome of a referendum in the United Kingdom to be held in June 2016 on whether to remain in the European Union. In connection with our Intrawest Acquisition in January,we expanded our international operations by acquiring VOI sales operations and management contracts at six resorts in Canada. See "Note 30—Subsequent Events"of our consolidated financial statements included elsewhere in this annual report for the definition of and further detail on the Intrawest Acquisition. A decline in the value of any of the foreign currencies in which we receive revenues,including the Euro,British Pound Sterling.Mexican Peso or Canadian dollar,against the U.S.dollar will tend to reduce our reported revenues and expenses, while an increase in the value ofany such foreign currencies against the U.S.dollar will tend to increase our reported revenues and expenses.Variations in exchange rates can significantly affect the comparability of our financial results between financial periods. We are also exploring further international expansion opportunities in markets such as Asia and Latin America,including pursuing acquisitions in those geographic areas,or seeking out co-branding opportunities,joint ventures or other strategic alliances with local or regional operators in those markets.Any such international expansion would result in increased foreign exchange risk,as described above,as the revenue received from such expansion would primarily be in non-U.S.currency. We are subject to extensive regulation relating to the marketing andsale of vacation interests and the servicing and collection ofcustomer loans. As discussed above,our marketing and sale ofVOIs and our other operations are subject to extensive regulation by the federal government and state timeshare laws and,in some cases,by the foreign jurisdictions where our VOIs are located, marketed and sold.For a list of certain U.S.federal legislation that is or may be applicable to the sale,marketing and financing ofour VOIs,see"Item 1.Business—Governmental Regulation."In addition,the majority of states and foreign jurisdictions where the resorts in our network are located extensively regulate numerous aspects of our industry,and many other states and certain foreignjurisdictions have adopted similar legislation and regulations affecting the marketing and sale of VOIs to persons located in thosejurisdictions.Furthermore,most states and foreign jurisdictions have other laws not specific to our industry that apply to our activities,and all ofthe countries in which we operate have consumer protection and other laws that regulate our activities in those countries.The cost of compliance with such laws and regulations can be significant,and we cannot guarantee that we will at all times maintain compliance with all such regulations and other laws. A determination that specific provisions or operations of the Diamond Collections do not comply with relevant timeshare acts or applicable law may have a material adverse effect on us,the trustees of the Diamond Collections,the Collection Associations or the related consumer loans. Such noncompliance could also adversely affect the operation of the Diamond Collections or the sale of points within the existing format ofthe Diamond Collections,which would likely increase costs of operations or the risk of losses resulting from defaulted consumer loans. Moreover,from time to time,potential buyers of VOIs assert claims with applicable regulatory authorities alleging unlawful sales practices by the developers ofthe Diamond Collections and Vacation Interests salespersons.Actions by regulatory authorities,in response to these claims or otherwise,could result in our having to make modifications to our business practices or policies that adversely affect(or result in changes to our industry as a whole that adversely affect)our VOI sales or other business activities and could have other adverse implications for us,including negative public relations, potential litigation or regulatory sanctions. We currently sell VOIs in the U.S.and Canada solely through our employees,and in Europe,we currently sell VOIs through employees and third-party sales agents.In the event the federal,state or local taxing authorities in foreign jurisdictions were to successfully classify such independent contractors or sales agents as our employees,rather than as independent contractors,we could be liable for back payroll taxes,termination indemnities and potential claims related to employee benefits,as required by local law. See"Item 1. Business—Governmental Regulation." We are also subject to the laws and regulations of Mexico with respect to our operations of resorts located in Mexico.As discussed above,for purposes of ownership of land in Mexico foreign parties may acquire property located near Mexico's beaches and borders if they(i)agree not to invoke the protection of their governments in matters relating thereto and(ii)take title through a Mexican trust or subsidiary.Noncompliance with such agreement by a foreign party would result in forfeiture of the property to the country of Mexico. See"Item 1.Business—Governmental Regulation." We are also subject to the laws and regulations of Canada,including timeshare and consumer protection laws and regulations and other laws and regulations applicable to developers and providers of timeshare services throughout Canada. 34 See"We are subject to certain risks associated with our management ofresortproperties"for a discussion of additional regulations and laws we are,or may be,subject to in connection with the operation of our business.The laws and regulations to which our operations are subject may change,and new and potentially more stringent and burdensome regulations,at the foreign,federal,state or local level,may be adopted and regulatory oversight may increase,including by the CFPB.We may need to modify our business practices and incur significant,unanticipated expenses as a result of our compliance with any such new laws or regulations or in response to any such increased oversight. Depending on the provisions of applicable law and the specific facts and circumstances involved,violations of these laws, policies or principles to which our operations are,or may become subject,may limit our ability to collect all or part of the principal or interest due on our consumer loans,may entitle certain customers to a refund of amounts previously paid and could subject us to regulatory investigations or actions,fines,penalties,damages,administrative sanctions and increased exposure to litigation,and may also impair our ability to commence cancellation and forfeiture proceedings on our VOIs. We are aparty to certain litigation matters and are subject to additional litigation risk. From time to time,we or our subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business,including claims and proceedings relating to our VOI sales,consumer finance business and hospitality and management services operations. Should there be increased scrutiny of our company or the vacation ownership industry,we may face an increased risk of significant legal proceedings or claims,which could include class action litigationby our members or HOAs.Any adverse outcome in any litigation involving us or any of our affiliates could negatively impact our business,reputation and financial condition. Failure to maintain the security ofpersonally identifiable information could adversely affect us. In connection with our business,we collect and retain significant volumes ofpersonally identifiable information, including credit card and social security numbers of our customers and other personally identifiable information of our customers and employees.The continued occurrence of high-profile data breaches provides evidence of the serious threats to information security.Our customers and employees expect that we will adequately protect their personal information,and the regulatory environment surrounding information security and privacy is increasingly demanding,both in the U.S.and other jurisdictions in which we operate.Protecting against security breaches,including cyber-security attacks,is an increasing challenge,and penetrated or compromised data systems or the intentional,inadvertent or negligent release or disclosure of data could result in theft,loss,fraudulent or unlawful use ofcustomer,employee or company data.It is possible that our security controls over personally identifiable information,our training of employees on data security and other practices we follow may not prevent the improper disclosure of personally identifiable information that we store and manage.A significant theft,loss or fraudulent use of customer or employee information could adversely impact our reputation and could result in significant costs,fines and litigation. Our reputation andfinancial condition may be harmed by systemfailures,computer viruses and any inability to keep pace with advancements in technology. We maintain a proprietary hospitality management reservation and sales system.The performance and reliability of this system and our technology is critical to our reputation and ability to attract,retain and service our customers.Any system error or failure may significantly delay response times or even cause our system to fail,resulting in the unavailability of our services. Any disruption in our ability to provide the use of our reservation system to the purchasers of our VOIs,including as a result of software or hardware issues related to the reservation system,could result in customer dissatisfaction and harm our reputation and business. In addition,a significant portion of our reservations are made through the online reservation system that we operate on behalf of the Diamond Collections and the Clubs as opposed to over the phone,and our costs are significantly lower in connection with bookings through the online reservation system.As a result,if our online reservation system is unavailable for any reason,our costs will increase and the resale value and the marketability of our VOIs may decline.Our system and operations are vulnerable to interruption or malfunction due to certain events beyond our control,including natural disasters, power loss,telecommunication failures,data and other security breaches,break-ins,sabotage,computer viruses,intentional acts of vandalism and similar events.Any interruption,delay or system failure could result in financial losses,customer claims and litigation and damage to our reputation. Competitive conditions within the vacation ownership industry require that we use sophisticated technology in the operation of our business.We may not be successful,generally or relative to our competitors in the vacation ownership industry,in timely implementing new technology into our systems,or doing so in a cost-effective manner.During the course of implementing any such new technology into our operations,we may experience system interruptions and failures discussed above.Furthermore,there can be no assurances that we will recognize,in a timely manner or at all,the benefits that we may expect as a result of our implementing new technology into our operations. 35 Our intellectualproperty rights are valuable,and ourfailure toprotect those rights could adversely affect our business. Our intellectual property rights,including existing and future trademarks,trade secrets and copyrights,are and will continue to be valuable and important assets of our business.We believe that our proprietary technology,as well as our other technologies and business practices,are competitive advantages and that any duplication by competitors would harm our business.The measures we have taken to protect our intellectual property may not be sufficient or effective.Additionally, intellectual property laws and contractual restrictions may not prevent misappropriation ofour intellectual property or deter others from developing similar technologies.Finally,even if we are able to successfully protect our intellectual property, others may develop technologies that are similar or superior to our technology. We are required to make a number ofsignificantjudgments in applying our accounting policies,and our use ofdifferent estimates and assumptions in the application ofthesepolicies couldresult in material changes to our reportedfinancial condition and results ofoperations.In addition,changes in accounting standards or their interpretation could significantly impact our reported results ofoperations. Our accounting policies are critical to the manner in which we present our results of operations and financial condition. Many ofthese policies,including with respect to the recognition of revenue and determination of Vacation Interests cost of sales are highly complex and involve many subjective assumptions,estimates andjudgments. See "Note 2—Summary of Significant Accounting Policies"of our consolidated fmancial statements included elsewhere in this annual report for further detail.We are required to review these estimates regularly and revise them when necessary.Our actual results of operations vary from period to period based on revisions to these estimates. In addition,the regulatory bodies that establish accounting and reporting standards,including the SEC,the Financial Accounting Standards Board and the American Institute of CPAs, periodically revise or issue new financial accounting and reporting standards that govern the preparation of our consolidated financial statements. Changes to these standards or their interpretation could significantly impact our reported results in future periods. Our directors and executive officers may have interests that could conflict with those ofour stockholders. There are relationships and transactions between our company and entities associated with our executive officers and directors and between certain of such entities.These relationships and transactions,and the financial interests of our executive officers and directors in the entities party to these relationships and transactions,as well as other financial interests of our executive officers and directors,may create,or may create the appearance of,conflicts of interest,when these executive officers and directors are faced with decisions involving those other entities or that could otherwise affect their financial interests. See Note 6-Transactions with Related Parties"of our consolidated financial statements included elsewhere in this annual report for further detail on these relationships and transactions. Loss ofkey members ofmanagement,or our inability to attract andretain qualifiedpersonnel could adversely affect our business. Our success and future growth depends to a significant degree on the skills and continued services of our senior management team.The loss of key members of management could inhibit our growth prospects.Our future success also depends in large part on our ability to attract,retain and motivate key management and operating personnel.As we continue to develop and expand our operations,we may require personnel with different skills and experiences,with a sound understanding of our business and the vacation ownership industry.The market for highly qualified personnel(sale personnel in particular)is very competitive.As a result and potentially also because of our announcement that we are exploring strategic alternatives,we may not be able to continue to attract and retain the personnel needed to support our business. Our strategic transactions may not be successful and may divert our management's attention and consume significant resources. We intend to continue our strategy of selectively pursuing complementary strategic transactions.We may also purchase management contracts and purchase VOI inventory at resorts that we do not manage,with the goal of acquiring sufficient VOI ownership at such a resort to become the manager of that resort.The successful execution of this strategy will depend on our ability to identify opportunities for potential acquisitions that fit within our capital-light business model,enter into the agreements necessary to take advantage of these potential opportunities and obtain any necessary financing.We may not be able to do so successfully.In addition,from time to time,we encounter resistance from existing VOI owners at a resort when we attempt to become the new manager of such resort.Furthermore,our management may be required to devote substantial time and resources to pursue these opportunities,which may impact their ability to manage our operations effectively. Acquisitions involve numerous additional risks,including: (i)difficulty in integrating the operations and personnel of an acquired business;(ii)potential disruption of our ongoing business and the distraction of management from our day-to-day operations;(iii)difficulty entering markets in which we have limited or no prior experience and in which competitors have a 36 stronger market position;(iv)difficulty maintaining the quality of services that we have historically provided across new acquisitions;(v)potential legal and financial responsibility for liabilities of acquired businesses;(vi)challenges in complying with regulations and other laws to which our operations may become subject as a result of acquired businesses being located in areas where we did not previously operate;(vii)overpayment for the acquired company or assets;(viii)increased expenses associated with completing an acquisition and amortizing any acquired intangible assets;and(ix)challenges in implementing uniform standards,controls,procedures and policies throughout an acquired business. Some of our acquisitions have focused on acquiring management contracts and related businesses of operators in financial distress or in bankruptcy at the time of such acquisition.To the extent we pursue similar acquisitions in the future,we will be subject to additional risks,including risks and uncertainties associated with bankruptcy proceedings,the risk that such properties will be in disrepair and require significant investment in order to bring them up to our quality standards and potential exposure to adverse developments in the receivable portfolios that we acquire or agree to manage. We also intend to expand our business-to-business services provided to resorts in our affiliated resort networks.We cannot assure you that our attempts to expand business-to-business services will be successful,and our failure to expand such services could harm our business and our relationships with those affiliated resorts. Risks Related to the Ownership of our Common Stock We are exploringpossible strategic alternatives;thisprocess may not result in a transaction or other action that creates additional valuefor our stockholders,or any transaction or other action at all,and this process may be disruptive to our business. On February 24,2016,our board of directors announced that it has formed a committee of independent directors to explore strategic alternatives to maximize stockholder value.This strategic review process,including the announcement thereof,could expose us and our operations to a number of risks and uncertainties,including the diversion of management's attention from our business,the incurrence of significant expenses associated with the retention of legal,financial and other advisors as a result of the review of strategic alternatives,our failure to retain,attract or strengthen our relationships with key personnel,suppliers or customers(in particular,HOAs and prospective purchasers of VOIs),and exposure to potential litigation in connection with this process and effecting any strategic alternative.Due to these and other consequences of pursuing a strategic alternative,we may fail to achieve financial or operating objectives and may lose potential business opportunities. There can be no assurance that this process will result in any transaction or other action by us or our board of directors, that any transaction or other action will be consummated or that any transaction or other action will maximize stockholder value or that we or our stockholders will otherwise realize the anticipated benefits from any such transaction or other action.Any potential transaction could be dependent upon a number of factors that may be beyond our control,including,among other factors,market conditions,industry trends,stockholder approval and the availability of fmancing.Even if a strategic alternative is identified,we may be affected by factors related to the feasibility and timing of consummating a transaction,including our ability,or the ability of others,to obtain required third-party consents and regulatory approvals and any adverse regulatory developments or determinations or adverse changes in,or interpretations of,the U.S.or foreign tax and other laws,rules or regulations that could materially impact,delay or prevent completion of any transaction or other action. Further,as previously disclosed,we do not intend to discuss or disclose further developments during this process unless and until our board of directors has approved a specific action or otherwise determined that further disclosure is appropriate. Accordingly,speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our company could cause our stock price to fluctuate significantly. The concentration ofour capital stock ownership with certain members ofmanagement and our Board ofDirectors and related entities,together with the Director Designation Agreement andthe Stockholders Agreement,will limit stockholders' ability to influence corporate matters,including the ability to influence matters requiring stockholder approvaL Of the outstanding shares ofcommon stock,members of management and our Board of Directors and related entities, together hold 25.5%of our outstanding common stock. In particular,entities controlled by Stephen J. Cloobeck,our founder and Chairman,hold 16.7%of our outstanding common stock,entities controlled by Lowell D.Kraff,our Vice Chairman,hold 2.3%of our outstanding common stock,and entities controlled by David F.Palmer,our President,Chief Executive Officer and a member of our Board of Directors,hold 5.6%of our outstanding common stock.In addition,certain members of management and our Board of Directors and other stockholders,which collectively hold 38.7%of our outstanding common stock,are parties to a Stockholders'Agreement(the"Stockholders Agreement")with us,pursuant to which such parties have agreed,subject to the terms of the Stockholders Agreement,in any election of members of our Board of Directors,to vote their shares ofour common stock in favor of our Chief Executive Officer,and individuals designated by DRP Holdco,LLC,one of our significant investors(the"Guggenheim Investor"),as well as an entity controlled by our founder and Chairman,pursuant to a director 37 designation agreement(the"Director Designation Agreement")among us and certain stockholders party to the Stockholders Agreement. As a result of their collective ownership of our outstanding capital stock,members of management and our Board of Directors,including Messrs.Cloobeck,Kraff and Palmer,and related entities could have significant influence over matters requiring stockholder approval,including amendment of our certificate of incorporation and approval of significant corporate transactions.This influence could make the approval of certain transactions difficult without the support ofsuch individuals and entities. We incur significant costs and demands upon management and accounting andfinance resources as a result ofcomplying with the laws and regulations affectingpublic companies;ifwefail to maintain proper and effective internal controls,our ability toproduce accurate and timelyfinancial statements could be impaired, which could harm our operating results,our ability to operate our business and our reputation. As a SEC reporting company,we are required to,among other things,maintain a system of effective internal control over financial reporting,which requires annual management and independent registered public accounting firm assessments of the effectiveness of our internal controls.Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently.Over the past few years,we have dedicated a significant amount of time and resources to implement our internal financial and accounting controls and procedures,and have had to retain additional finance and accounting personnel with the skill sets that we need as a SEC reporting company. Substantial work may continue to be required to further implement,document,assess,test and remediate our system of internal controls.We may also need to retain additional finance and accounting personnel in the future. If our internal control over financial reporting is not effective,we may be unable to issue our financial statements in a timely manner,we may be unable to obtain the required audit or review of our financial statements by our independent registered public accounting firm in a timely manner or we may be otherwise unable to comply with the periodic reporting requirements of the SEC,our common stock listing on the NYSE could be suspended or terminated and our stock price could materially suffer. In addition,we or members of our management could be subject to investigation and sanction by the SEC and other regulatory authorities and to stockholder lawsuits,which could impose significant additional costs on us and divert management attention. In addition,see"Item 9A. Controls and ProceduresInherent Limitations on the Effectiveness ofControls"for inherent limitations in a cost-effective control system. Provisions in our amended and restated certificate ofincorporation and underDelaware law mayprevent orfrustrate attempts by our stockholders to change our management andhinder efforts to acquire a controlling interest in us. Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay orprevent a merger,acquisition or other change in control that stockholders may consider favorable,including transactions in which stockholders might otherwise receive a premium for their shares.These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.These include provisions that: classify our Board ofDirectors; limit stockholders'ability to remove directors; include advance notice requirements for stockholder proposals and nominations;and prohibit stockholders from acting by written consent or calling special meetings. Furthermore,the affirmative vote of the holders of at least two-thirds of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our amended and restated certificate of incorporation. In addition,absent approval ofour Board ofDirectors,our amended and restated bylaws may only be amended or repealed by the affirmative vote of the holders ofat least two-thirds of our shares of capital stock entitled to vote. Our amended and restated certificate ofincorporation designates the Court of Chancery ofthe State ofDelaware as the sole andexclusiveforumfor some litigation that may be initiated by our stockholders,which could limit our stockholders'ability to obtain afavorablejudicialforumfor disputes with us. Our amended and restated certificate of incorporation provides that,unless we consent in writing to the selection of an alternate forum,the Court of Chancery of the State ofDelaware will be the sole and exclusive forum for(i)any derivative 38 action or proceeding brought on our behalf;(ii)any action asserting a claim of breach of fiduciary duty owed by any director or officer to us or our stockholders or creditors;(iii)any action asserting a claim against us or any director or officer pursuant to the Delaware General Corporation Law,our amended and restated certificate ofincorporation or our amended and restated bylaws;or(iv)any action asserting a claim against us or any director or officer governed by the internal affairs doctrine.Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above.This forum selection provision may limit our stockholders'ability toobtainajudicialforumthattheyfindfavorablefordisputeswithusorourdirectors,officers,employees or other stockholders. Our stockprice may be volatile or may decline regardless ofour operatingperformance The market price for our common stock may be highly volatile.In addition,the market price of our common stock may fluctuate significantly in response to a number of factors,most of which we cannot control,including: variations in our fmancial results or those of companies that are perceived to be similar to us; actions by us or our competitors,such as sales initiatives,acquisitions or restructurings; changes in our earnings estimates or expectations as to our future financial performance,as well as financial estimates by securities analysts and investors,and our ability to meet or exceed those estimates or expectations; additions or departures of key management personnel; legal proceedings involving our company,our industry,or both; changes in our capitalization,including future issuances of our common stock or the incurrence of additional indebtedness; changes in market valuations of companies similar to ours; the prospects of the industry in which we operate; actions by institutional and other stockholders; speculation or reports by the press or investment community with respect to us or our industry in general; the level of short interest in our stock; changes in our credit ratings; general economic,market and political conditions;and other risks,uncertainties and factors described in this annual report. The stock markets in general have often experienced volatility that has sometimes been unrelated or disproportionate to the operating performance of particular companies.These broad market fluctuations may cause the trading price ofour common stock to decline. In the past,following periods ofvolatility in the market price of a company's securities,securities class-action litigation has often been brought against that company.We may become involved in this type of litigation in the future. Litigation of this type may be expensive to defend and may divert our management's attention and resources from the operation ofour business. Ifsecurities or industry analysts do notpublish research orpublish unfavorable research about our business,our stock price and trading volume could decline The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly,we could lose visibility in the financial markets,which in turn could cause the stock price of our common stock or trading volume to decline.Moreover,if our operating results do not meet the expectations of the investor community,one or more of the analysts who cover our company may change their recommendations regarding our company and our stock price could decline. 39 ITEM 113.UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES Except for unsold VOI inventory,we generally do not have any ownership interest in the resorts in our network other than the ownership of various common areas and amenities at certain resorts and a small number of units in European resorts.We believe our properties are in generally good physical condition with the need for only routine repairs and maintenance and periodic capital improvements.In addition,we lease our global corporate headquarters,located in Las Vegas,Nevada,which consists of approximately 133,000 square feet of space.We also lease our European headquarters,located in Lancaster,United Kingdom,and lease 18 sales and marketing and administrative offices,both domestically and internationally. We also own certain real estate,the majority ofwhich is held for future or ongoing development,including 159.8 acres in Williamsburg,Virginia,51.9 acres in Gatlinburg,Tennessee,32.5 acres in Orlando,Florida,21.4 acres in Kitty Hawk,North Carolina, 15.0 acres in Branson,Missouri,7.0 acres in Las Vegas,Nevada,4.2 acres in Scottsdale,Arizona,2.1 acres in Costa del Sol, Spain,2.0 acres in St.Maarten and 1.8 acres in Kona,Hawaii. ITEM 3. LEGAL PROCEEDINGS From time to time,we or our subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business,including claims and proceedings relating to our VOI sales,consumer finance business and hospitality and management services operations.Accruals have been recorded when the outcome is probable and can be reasonably estimated. While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on our financial position or our results of operations,legal proceedings are inherently uncertain and unfavorable resolution of some or all of these matters could,individually or in the aggregate,have a material adverse effect on our business,financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 40 PARTH ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Price of Common Stock Our common stock is listed on the New York Stock Exchange("NYSE")under the symbol"DRII."As of February 25, 2016,there were 52 holders of record of our common stock. The following table sets forth the quarterly high and low sales prices per share ofour common stock as reported by the NYSE for the periods presented below: Stock Price Year Ended December 31,2015 High Low Fust Quarter of 2015 35.42 $ 25.69 Second Quarter of 2015 34.93 $ 30.97 Third Quarter of 2015 32.49 $ 22.80 Fourth Quarter of 2015 29.86 $ 22.29 Year Ended December 31,2014 High Low First Quarter of 2014 20.69 $ 16.51 Second Quarter of 2014 23.83 $ 16.89 Third Quarter of 2014 26.33 $ 21.82 Fourth Quarter of 2014 28.50 $ 19.59 Dividend Policy We have never declared or paid any cash dividends on our capital stock. Our current policy,which is subject to regular review by our Board of Directors,is to retain any earnings to finance the development and expansion of our business,as well as to repurchase our common stock.Any future determination to declare cash dividends will be made at the discretion of our Board of Directors,subject to applicable laws,and will depend on our financial condition,results of operations,contractual restrictions,capital requirements,general business conditions,other alternate uses of cash(including stock repurchases)and other then-existing factors that our Board of Directors may deem relevant.The Senior Credit Facility limits our ability to make restricted payments,including the payment of dividends and expenditures for stock repurchases,subject to specified exceptions based upon our excess cash flow sweep payments determined in accordance with the Senior Credit Facility. See"Note 16— Borrowings"of our consolidated financial statements included elsewhere in this annual report for further details. Issuer Purchases of Equity Securities On October 28,2014,our Board of Directors authorized a stock repurchase program allowing for the expenditure of up to 100.0 million for the repurchase of our common stock(the"Stock Repurchase Program").The Stock Repurchase Program was originally announced on October 29,2014 and has no scheduled expiration date. On July 28,2015,our Board of Directors authorized the expenditure of up to an additional$100.0 million for the repurchase ofour common stock under the Stock Repurchase Program.The Senior Credit Facility limits our ability to make restricted payments,including the payment of dividends or expenditures for stock repurchases,subject to specified exceptions based upon our excess cash flow sweep payments determined in accordance with the Senior Credit Facility. 41 The following is a summary of common stock repurchased by us by month during the fourth quarter of 2015 under our stock repurchase program: Approximate dollar Total number of value ofshares that shares purchased as may yet be Total number of Average price part ofpublicly purchased under Period shares purchased paid per share announced program the program(a) October 1 to 31 1,023,264 $ 24.10 1,023,264 $ 77,281,000 November 1 to 30 1,048,867 $ 27.28 1,048,867 $ 48,662,000 December 1 to 31 1,045,468 $ 26.89 1,045,468 $ 20,547,000 Total 3,117,599 $ 26.11 3,117,599 a)Reflects availability under the Stock Repurchase Program;however,our ability to repurchase our stock is limited by the terms of the Senior Credit Facility.Accordingly,as of December 31,2015,in accordance with the Senior Credit Facility we were permitted to purchase an additional$3.5 million in shares of our stock. Stock Performance Graph The following line graph compares the performance of our common stock against the S&P MidCap 400 Index and the S&P Composite 1500 Hotels,Resorts&Cruise Lines Index,from July 19,2013 (the date our conunon stock commenced trading on the NYSE)through December 31,2015.The graph tracks the performance of a$100 investment at the market close on July 19,2013 in our Common Stock and in the S&P MidCap 400 Index and the S&P Composite 1500 Hotels,Resorts& Cruise Lines Index(with the reinvestment of all dividends and other distributions).The stock price performance reflected below is based on historical results and is not necessarily indicative offuture stock price performance. The Stock Performance Graph is not deemed to be "soliciting material"or to be 'filed"with the SECfor the purposes of Section 18 ofthe Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into anyfiling ofDRII under the Securities Act of1933 or the Securities Exchange Act of1934. Comparison of Cumulative Total Return AmongDiamond ResortsInternationat,Inc.,theS&P Composite 1500 Hotels,Resorts&CruiseLines Index and the S&P MfidCap 100 Index. 215 195 ..____ _. 175 155 135 115 411111V 4111111111111 7/19/2013 4/30/2013 12/51/2013 3/31/2014 6/30/2014 9/30/2014 12/33/2014 3/31/2015 6/342015 9/30/2015 12/31/2015 4-0ianord ResortsInternational,Inc —IB—S&P Composite1500 liotek,Resorts&CruiseLinmInda -5&P MidCap400 Mac 42 ITEM 6. SELECTED FINANCIAL DATA Set forth below is selected consolidated audited financial and operating data at the dates and for the periods indicated. The financial and operating data set forth below(i)through July 24,2013 is that ofDRP and its subsidiaries,after giving retroactive effect to the Reorganization Transactions and(ii)after July 24,2013 is that ofDRII and its subsidiaries.Our historical results are not necessarily indicative of the results that may be expected in any future period.The selected consolidated statement of operations data for the years ended December 31,2015,2014 and 2013,and the selected consolidated balance sheet data as of December 31,2015 and 2014 have been derived from our audited consolidated financial statements included elsewhere in this annual report.The selected consolidated statement of operations data for the years ended December 31,2012 and 2011 and the selected historical consolidated balance sheet data as ofDecember 31,2013,2012 and 2011 have been derived from our audited consolidated statements of operations for the years ended December 31,2012 and 2011 and our audited consolidated balance sheets as ofDecember 31,2013,2012 and 2011 which are not included in this 1 annual report. The selected consolidated financial and operating data set forth below should be read in conjunction with"Item 7. Management's Discussion andAnalysis ofFinancial Condition andResults ofOperations"and our audited consolidated financial statements included elsewhere in this annual report. Year Ended December 31, 2015 2014 2013 2012 2011 in thousands,except as otherwise noted) Statement of Operations Data: Total revenues 954,040 $ 844,566 $ 729,788 $ 523,668 $ 391,021 Total costs and expenses 702,392 734,875 726,536 524,335 390,235 Income(loss)before provision(benefit)for income taxes and discontinued operations 251,648 109,691 3,252 667) 786 Provision(benefit)for income taxes 102,170 50,234 5,777 14,310)9,517) Net income(loss) 149,478 $ 59,457 $ (2,525) $ 13,643 $ 10,303 Other Financial Data(Unaudited): Capital expenditures 26,325 $ 17,950 $ 15,150 $ 14,329 $ 6,276 Net cash provided by(used in): Operating activities 175,894 $ 121,314 $ (2,158) $ 22,374 $ 13,099 Investing activities 203,685) $ (17,100) $ (58,065) $ (69,355) $ (109,743) Financing activities 63,796 $ 104,919 $ 80,025 $ 49,044 $ 90,377 Operating Data: Managed resorts(1) 99 93 93 79 71 Affiliated resorts and hotels(1) 247 236 210 180 144 Cruise itineraries(1) 4 4 4 4 4 Total destinations 350 333 307 263 219 Total number of tours(2) 229,782 220,708 207,075 180,981 146,261 Closing percentage(3) 15.0% 14.4% 14.5% 14.8% 14.4% Total number of VOI sale transactions(4) 34,528 31,759 29,955 26,734 21,093 Average VOI sale price per transaction(5) 21,285 $ 18,988 $ 16,771 $ 12,510 $ 10,490 Volume per guest(6) 3,198 $ 2,732 $ 2,426 $ 1,848 $ 1,513 43 As of December 31, 2015 2014 2013 2012 2011 S in thousands) Balance Sheet Data: Cash and cash equivalents 290,510 $ 255,042 $ 47,076 $ 27,101 $ 24,676 Vacation Interests notes receivable,net 622,607 498,662 405,454 312,932 283,302 Unsold Vacation Interests,net 358,278 262,172 298,110 315,867 256,805 Total assets 1,993,026 1,577,776 1,301,195 993,008 833,219 Senior Credit Facility,net ofunamortized original issue discount 569,931 440,720 Securitization notes and Funding Facilities,net of unamortized original issue discount 642,758 509,208 391,267 256,302 250,895 Senior Secured Notes,net of unamortized original issue discount 367,892 416,491 415,546 Notes payable 4,750 4,612 23,150 137,906 71,514 Total liabilities 1,722,064 $ 1,310,427 $ 1,093,382 $ 1,091,607 $ 950,421 1) As of the end of each period. 2) Represents the number of sales presentations at our sales centers during the period presented. 3) Represents the percentage of VOI sales closed relative to the total number of tours at our sales centers during the period presented. 4) Represents the number of VOI sale transactions during the period presented. 5) Represents the average purchase price(not in thousands)of VOIs sold during the period presented. 6) Represents VOI sales(not in thousands)divided by the total number oftours during the period presented. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read thefollowing discussion and analysis in conjunction with "Item 6. Selected Financial Data"and our consolidatedfinancial statements and related notes in "Item 8. Financial Statements and Supplementary Data."The following discussion includesforward-looking statements about our business,financial condition and results ofoperations, including discussions about management's expectationsfor our business. These statements representprojections,beliefs and expectations based on current circumstances and conditions and in light ofrecent events and trends, and you should not construe these statements either as assurances ofperformance or as promises ofa given course ofaction.Instead,various known and unknownfactors are likely to cause our actualperformance and management's actions to vary, and the results ofthese variances may be both material and adverse. See "Cautionary Statement Regarding Forward-Looking Statements"and"Item IA.RiskFactors." Overview We are a global leader in the hospitality and vacation ownership industry,with a worldwide resort network of 379 destinations located in 35 countries,throughout the world,including the continental U.S.,Hawaii,Canada,Mexico,the Caribbean,Central America,South America,Europe,Asia,Australia,New Zealand and Africa.Our resort network includes 109 resort properties with approximately 12,000 units that we manage and 250 affiliated resorts and hotels and 20 cruise itineraries as of January 31,2016),which we do not manage and do not cany our brand,but are a part of our resort network and are available for our members to use as vacation destinations. We are led by an experienced management team that has delivered strong operating results through disciplined execution. Our management team has taken a number of significant steps to refine our strategic focus,build ourbrand recognition and streamline our operations,including(i)maximizing revenue from our hospitality and management services business; ii)driving innovation throughout our business,most significantly by infusing our hospitality focus into our customer interactions;and(iii)adding resorts to our network and owners to our owner base through complementary strategic acquisitions 44 and efficiently integrating businesses acquired.We have also implemented growth strategies to increase our revenues while remaining consistent with our capital-efficient business model. Significant 2015 Developments HM&CAcquisition Pursuant to the Homeowner Association Oversight,Consulting and Executive Management Services Agreement that we entered into with Hospitality Management and Consulting Service,LLC("HM&C"),a Nevada limited liability company(the HM&C Agreement"),HM&C has provided certain services to us,including the services of certain executive officers, including David F.Palmer,President and Chief Executive Officer,C.Alan Bentley,Executive Vice President and Chief Financial Officer,Howard S.Lanznar,Executive Vice President and Chief Administrative Officer,and other officers and employees and,through December 31,2014,also provided the services of Stephen J. Cloobeck,our founder and Chairman. On January 6,2015,we entered into a Membership Interest Purchase Agreement(the"Purchase Agreement"),whereby we acquired from an entity controlled by Mr.Cloobeck and an entity controlled by Mr.Palmer(which entities owned 95.0% and 5.0%of the outstanding membership interests of HM&C,respectively),all of the outstanding membership interests in HM&C in exchange for an aggregate purchase price of$10,000(the"HM&C Acquisition"). As a result of the HM&C Acquisition,effective January 1,2015,transactions between us and HM&C were fully eliminated from our consolidated financial statements,as HM&C became our wholly-owned subsidiary. MasterAgreement Concurrent with our entry into the Purchase Agreement,on January 6,2015,we entered into a master agreement(the Master Agreement")with Mr. Cloobeck,HM&C,JHJM Nevada I,LLC("JHJM")and other entities controlled by Mr. Cloobeck or his immediate family members.Pursuant to the Master Agreement,the parties made certain covenants to and agreements with the other parties,including: (i)the termination effective as of January 1,2015,of the services agreement between JHJM and HM&C;(ii)the conveyance to us of exclusive rights to market timeshare and vacation ownership properties from a prime location adjacent to Polo Towers on the"Las Vegas Strip,"pursuant to the terms of an Assignment and Assumption Agreement;(iii)Mr. Cloobeck's agreement to various restrictive covenants,including non-competition,non- solicitation and non-interference covenants;and(iv)Mr.Cloobeck's grant to us of a license to use Mr. Cloobeck's persona, including his name,likeness and voice.In connection with the transactions contemplated by the Master Agreement,we paid Mr. Cloobeck or his designees an aggregate of$16.5 million and incurred$0.3 million in expenses related to this transaction. In addition,in light of the termination of the services agreement between JHJM and HM&C and the existence ofa director designation agreement dated July 17,2013,we agreed in the Master Agreement that,at least through December 31, 2017,so long as Mr. Cloobeck is serving as a member of our Board ofDirectors,he will continue to be the Chairman of the Board and,in such capacity,will receive annual compensation equal to two times the compensation generally paid to other non- employee directors,and he,his spouse and children will receive medical insurance coverage. Deconsolidation ofthe St Maarten Resorts Effective January 1,2015,we assigned the rights and related obligations associated with assets we previously owned as the HOA of two properties located in St.Maarten to newly-created HOAs(the"St.Maarten HOAs"). Since then,we have had no beneficial interest in the St.Maarten HOAs,except through our ownership of VOIs,but continue to serve as the manager of the St.Maarten HOAs pursuant to customary management agreements.As a result,the operating results and the assets and liabilities ofthe St.Maarten properties were deconsolidated from our consolidated financial statements effective January 1, 2015(with the exception of all employee-related liabilities,including a post-retirement benefit plan,which were transferred to the St.Maarten HOAs during the quarter ended September 30,2015,and cash accounts,the majority of which are expected to be transferred to the St.Maarten HOAs during the quarter ending March 31,2016)(the"St.Maarten Deconsolidation"). Gold Key Acquisition On October 16,2015,we completed the acquisition of substantially all of the assets of Ocean Beach Club,LLC,Gold Key Resorts,LLC,Professional Hospitality Resources,Inc.,Vacation Rentals,LLC and Resort Promotions,Inc.(collectively, the"Gold Key Companies")relating to their operation of their vacation ownership business in Virginia Beach,Virginia and the Outer Banks,North Carolina(the"Gold Key Acquisition").We acquired management contracts,real property interests,unsold vacation ownership interests and other assets of the Gold Key Companies,adding six additional managed resorts to our resort network,in exchange for a cash purchase price of$167.5 million and the assumption of certain non-interest-bearing liabilities. At the closing of the Gold Key Acquisition,$6.2 million was deposited into an escrow account to support our obligations under a default recovery agreement,and is classified as restricted cash on our consolidated balance sheet. 45 Senior Credit FacilityAmendment On December 3,2015,we amended our Senior Credit Facility(as defined under"Liquidity and CapitalResources— Indebtedness—Senior Credit Facility')to provide for a$150.0 million incremental term loan(the"Incremental Term Loan"). We received$147.0 million in cash upon the closing ofthe Incremental Term Loan,which was issued with a 2.0%original issue discount. See"Liquidity and Capital Resources—Indebtedness—Senior CreditFacility"for a discussion of the Incremental Term Loan and the Senior Credit Facility. Subsequent Events On January 29,2016,we completed the acquisition of the vacation ownership business of Intrawest Resort Club Group from Intrawest Resorts Holdings,Inc.,through which we acquired management contracts,Vacation Interests notes receivable and other receivables,real property interests,unsold VOIs and other assets in exchange for$85.0 million in cash plus the assumption of certain non-interest-bearing liabilities(the"Intrawest Acquisition").The Intrawest Acquisition added nine managed resorts located in the United States,Canada and Mexico to our resort network. On February 24,2016,ourboard of directors announced that it formed a Committee of Independent Directors to explore strategic alternatives to maximize shareholder value.There can be no assurance that this exploration will result in any strategic alternatives being announced or consummated.We do not intend to discuss or disclose further developments during this process unless and until the board of directors has approved a specific action or otherwise determined that further disclosure is appropriate. See "Item 1A.Risk Factors—We are exploringpossible strategic alternatives;this process may not result in a transaction or other action that creates additional value for our stockholders, or any transaction or other action at all, and this process may be disruptive to our business." Critical Accounting Policies,Key Revenue and Expenses and Use of Estimates The discussion of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S.generally accepted accounting principles("U.S. GAAP"). Critical accounting policies are those policies that,in management's view,are most important in the portrayal of our financial condition and results of operations. The preparation of our financial statements requires us to make difficult and subjective judgments that affect the reported amounts of assets,liabilities,revenues and expenses,often as a result of the need to make estimates regarding matters that are inherently uncertain.The methods,estimates andjudgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements.On an ongoing basis,we evaluate our estimates and assumptions,including those related to revenue,bad debts,unsold Vacation Interests,net,Vacation Interests cost of sales, stock-based compensation expense and income taxes.These estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances.The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions or conditions,and the impact of such differences may be material to our consolidated financial statements. See "Note 2—Summary ofSignificant Accounting Policies"ofour consolidated financial statements included elsewhere in this annual report for further detail on these critical accounting policies.In addition, see "Note 2—Summary ofSignificant Accounting Policies"for detail on key revenue and expense items reported in our consolidated statement of operations and comprehensive income(loss). Segment Reporting For financial reporting purposes,we present our results of operations and financial condition in two business segments. The first business segment is hospitality and management services,which includes our operations related to the management of resort properties and Diamond Collections,revenue from our operation of the Clubs and the provision ofother services.The second business segment,Vacation Interests sales and financing,includes our operations relating to the marketing and sales of our VOIs,as well as our consumer financing activities related to such sales.While certain line items reflected on our statement of operations and comprehensive income(loss)fall completely into one of these business segments,other line items relate to revenues or expenses which are applicable to both segments.For line items that are applicable to both segments,revenues or expenses are allocated by management as described under"Note 2—Summary ofSignificant Accounting Policies"of our consolidated financial statements included elsewhere in this annual report,which involve significant estimates. Certain expense items(principally corporate interest expense,depreciation and amortization and provision for income taxes)are not,in management's view,allocable to either of these business segments as they apply to the entire Company.In addition,general and administrative expenses are not allocated to either of our business segments because historically management has not allocated these expenses(which exclude hospitality and management services related overhead that is allocated to the HOAs and Collection Associations)for purposes of evaluating our different operational divisions.Accordingly,these expenses are presented under corporate and other. 46 Management believes that it is impracticable to allocate specific assets and liabilities related to each business segment.In addition,management does not review balance sheets by business segment as part of its evaluation of operating segment performance. Consequently,no balance sheet segment reports have been presented. We also provide financial information for our geographic segments based on the geographic locations of our subsidiaries in"Information Regarding Geographic Areas ofOperation." Results of Operations In comparing our results ofoperations between two periods,we sometimes refer to "same-store"results. When referring to same-store results ofour hospitality and management services segment, we are referring to the results relating to management contracts with resorts in effect during the entirety ofthe two applicable periods. When referring to same-store results ofour Vacation Interests sales andfinancing segment, we are referring to the results relating to sales centers open during the entirety ofboth ofthe applicable periods. The following discussion includes(a)certain financial measures not in conformity with U.S.GAAP,specifically(i) management and member services expense excluding non-cash stock-based compensation expense and,for the yearended December 31,2014,excluding the non-cash benefit related to the contract renegotiation with Interval International,Inc. Interval International"),an exchange company,as discussed below;(ii)advertising,sales and marketing expense excluding non-cash stock-based compensation expense;and(iii)general and administrative expense excluding non-cash stock-based compensation expense and,for the year ended December 31,2015,excluding the cash charge related to the termination of the services agreement between JHJM and HMCS;and(b)a reconciliation of each such non-U.S.GAAP financial measure to the most directly comparable financial measure in accordance with U.S.GAAP.We exclude these items because management excludes them from its forecasts and evaluation of our operational performance and because we believe that the U.S. GAAP measures including these items are not indicative of our core operating results.The non-U.S. GAAP financial measures included in this annual report should not be considered in isolation from,or as an alternative to,any measure offinancial performance calculated and presented in accordance with U.S. GAAP. 47 Comparison ofthe Year EndedDecember 31,2015 to the Year EndedDecember 31,2014 Year Ended December 31,2015 Year Ended December 31,2014 Hospitality Vacation Hospitality Vacation and Interests and Interests Management Sales and Corporate Management Sales and Corporate Services Financing and Other Total Services Financing and Other Total In thousands) Revenues: Management and member services 165,169 $165,169 $ 152,201 $152,201 Consolidated resort operations 15,356 15,356 38,406 38,406 Vacation Interests sales,net of provision$0,$80,772,$0, 80,772,$0,$57,202,$0 and 57,202,respectively 624,283 624,283 532,006 532,006 Interest 78,989 1,330 80,319 66,849 1,549 68,398 Other 7,222 61,691 68,913 8,691 44,864 53,555 Total revenues 187,747 764,963 1,330 954,040 199,298 643,719 1,549 844,566 Costs and Expenses: Management and member services 34,293 34,293 33,184 33,184 Consolidated resort operations 14,535 14,535 35,409 35,409 Vacation Interests cost of sales 28,721 28,721 63,499 63,499 Advertising,sales and marketing 350,411 350,411 297,095 297,095 Vacation Interests carrying cost, net 39,671 39,671 35,495 35,495 Loan portfolio 1,410 9,478 10,888 1,303 7,508 8,811 Other operating 28,371 28,371 22,135 22,135 General and administrative 112,501 112,501 102,993 102,993 Depreciation and amortization 34,521 34,521 32,529 32,529 Interest expense 16,895 31,581 48,476 15,072 41,871 56,943 Loss on extinguishment of debt 46,807 46,807 Impairments and other write-offs 12 12 240 240 Gain on disposal ofassets 8) 8) 265) (265) Total costs and expenses 50,238 473,547 178,607 702,392 69,896 440,804 224,175 734,875 Income(loss)before provision for income taxes 137,509 291,416 (177,277) 251,648 129,402 202,915 (222,626) 109,691 Provision forincome taxes 102,170 102,170 50,234 50,234 Net income(loss) 137,509 $ 291,416 $ (279,447) $ 149,478 $ 129,402 $ 202,915 $ (272,860) $ 59,457 Consolidated Results Total revenues increased$109.4 million,or 13.0%,to$954.0 million for the year ended December 31,2015 from$844.6 million for the year ended December 31,2014.Total revenues for the year ended December 31,2015 did not include any consolidated resort operations revenue associated with our resorts in St.Maarten as a result ofthe St.Maarten Deconsolidation, as compared to$24.7 million from our resorts in St.Maarten for the year ended December 31,2014.Excluding the effect of the St.Maarten Deconsolidation,total revenues would have increased$134.1 million,or 16.4%,for the year ended December 31, 2015,as compared to the year ended December 31,2014. Total revenues in our hospitality and management services segment decreased by$11.6 million,or 5.8%,to$187.7 million for the year ended December 31,2015 from$199.3 million for the year ended December 31,2014. Total revenues in our Vacation Interests sales and fmancing segment increased$121.3 million,or 18.8%,to$765.0 million for the year ended December 31,2015 from$643.7 million for the year ended December 31,2014.Revenues in our corporate and other segment decreased$0.2 million,or 14.1%,to$1.3 million for the year ended December 31,2015 from$1.5 million for the year ended December 31,2014. Total costs and expenses decreased$32.5 million,or 4.4%,to$702.4 million for the year ended December 31,2015 from 734.9 million for the year ended December 31,2014.Total costs and expenses for the year ended December 31,2015 included a$14.9 million non-cash stock-based compensation charge and a$7.8 million cash charge in connection with the termination of 48 the services agreement between JHJM and HM&C,but did not include any consolidated resort operations expense associated with our resorts in St.Maarten as a result of the St.Maarten Deconsolidation.Total costs and expenses for the year ended December 31,2014 included the following cash and non-cash items: (i)a$46.8 million loss on extinguishment ofdebt,of which$16.6 million was non-cash;(ii)a$16.2 million non-cash stock-based compensation charge;and(iii)$22.0 million in consolidated resort operations expense associated with our resorts in St.Maarten.Excluding the effect of the St.Maarten Deconsolidation,total costs and expenses would have decreased$10.5 million,or 1.5%,for the year ended December 31,2015, as compared to the year ended December 31,2014. Hospitality and Management Services Segment Management and Member Services Revenue.Total management and member services revenue increased$13.0 million, or 8.5%,to$165.2 million for the year ended December 31,2015 from$152.2 million for the year ended December 31,2014. Management fees increased as a result of increases in operating costs at the resort level,which generated higher management fee revenue on a same-store basis from 107 cost-plus management agreements. In addition,we generated incremental management fee revenue from the five cost-plus management agreements acquired in the Gold Key Acquisition.Furthermore, effective January 1,2015,we completed the St.Maarten Deconsolidation,thus removing the revenues and expenses related to the two resorts in St.Maarten from our consolidated resort operations revenue and expense,respectively,while recognizing the management fee revenue associated with these resorts as management and member services revenue.Following the St.Maarten Deconsolidation,we recognized management fees with respect to such resorts of$3.2 million for the year ended December 31, 2015. Consolidated Resort Operations Revenue.Consolidated resort operations revenue decreased$23.0 million,or 60.0%,to 15.4 million for the year ended December 31,2015 from$38.4 million for the year ended December 31,2014. This decrease was primarily attributable to the St.Maarten Deconsolidation effective January 1,2015,which eliminated the consolidated resort operations revenue from these resorts from our consolidated financial statements.This decrease was partially offset by higher revenue from retail ticket sales operations and higher food and beverage revenues at certain restaurants that we own and manage. Other Revenue. Other revenue decreased$1.5 million,or 16.9%,to$7.2 million for the year ended December 31,2015 from$8.7 million for the year ended December 31,2014.This decrease was primarily attributable to the reversal ofa$1.1 million contingent liability associated with a previous business combination recorded during the year ended December 31, 2014. Management and Member Services Expense. Management and member services expense increased$1.1 million,or 3.3%,to$34.3 million for the year ended December 31,2015 from$33.2 million for the year ended December 31,2014.For comparison purposes,the following table presents management and member services expense for the year ended December 31, 2015 and December 31,2014(in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation and the non-cash benefit related to the contract renegotiation with Interval International,and such amounts as a percentage of management and member services revenue: Year Ended December 31, 2015 2014 Management and member services expense 34,293 $ 33,184 Less:Non-cash stock-based compensation 1,307) 1,613) Plus:Non-cash benefit related to the contract renegotiation 1,780 Management and member services expense excluding non-cash stock-based compensation and non-cash benefit related to the contract renegotiation 32,986 $ 33,351 Management and member services expense as a%of management and member services revenue 20.8% 21.8% Management and member services expense excluding non-cash stock-based compensation and non-cash benefit related to the contract renegotiation as a%of management and member services revenue 20.0% 21.9% In April 2014,we renegotiated our contract with Interval International,which relieved us from our obligation to repay the unearned portion of a marketing allowance to Interval International under the original contract and resulted in the release of this deferred revenue to the statement of operations and comprehensive income(loss)of$1.8 million as a reduction ofexchange company costs for the year ended December 31,2014.The decrease in management and member services expense(excluding the non-cash stock-based compensation charges and the non-cash benefit)as a percentage of management and member services 49 revenue was attributable to the increase in management and members services revenue discussed above as well as efficiencies gained in connection with bringing a previously outsourced call center to an in-house operated facility. Consolidated Resort Operations Expense. Consolidated resort operations expense decreased$20.9 million,or 59.0%,to 14.5 million for the year ended December 31,2015 from$35.4 million for the year ended December 31,2014.The decrease was primarily attributable to the St.Maarten Deconsolidation effective January 1,2015,which eliminated the consolidated resort operations expense from these resorts from our consolidated financial statements.This decrease was partially offset by higher retail ticket sales expense as a result ofhigher ticket sales. Vacation Interests Sales and Financing Segment Vacation Interests Sales,Net. Vacation Interests sales,net increased$92.3 million,or 17.3%,to$624.3 million for the year ended December 31,2015 from$532.0 million for the year ended December 31,2014.The increase in Vacation Interests sales,net,was attributable to a$115.9 million increase in Vacation Interests sales revenue,partially offset by a$23.6 million increase in our provision for uncollectible Vacation Interests sales revenue. The$115.9 million increase in Vacation Interests sales revenue during the year ended December 31,2015 compared to the year ended December 31,2014 was generated by sales growth on a same-store basis from 48 sales centers.The addition of five sales centers as a result of the Gold Key Acquisition did not have a material impact on Vacation Interests sales revenue for the year ended December 31,2015 as the acquisition was completed in October 2015 and the remainder of the year is traditionally a lower sales season in Virginia Beach,Virginia. Our volume per guest,or VPG(which represents Vacation Interests sales revenue divided by the number of tours) increased by$466,or 17.1%,to $3,198 for the year ended December 31,2015 from$2,732 for the year ended December 31, 2014 as a result of a higher average sales price per transaction and a higher closing percentage(which represents the percentage of VOI sales transactions closed relative to the total number of tours at our sales centers during the period presented).The number of tours increased to 229,782 for the year ended December 31,2015 from 220,708 for the year ended December 31, 2014.Our closing percentage increased to 15.0%for the year ended December 31,2015,as compared to 14.4%for the year ended December 31,2014.Our VOI sales transactions increased by 2,769 to 34,528 during the year ended December 31,2015, compared to 31,759 transactions during the year ended December 31,2014 and VOI average transaction size increased$2,297, or 12.1%,to$21,285 for the year ended December 31,2015 from$18,988 for the year ended December 31,2014.The increase in average sales price per transaction and the higher closing percentage(and as a result,higher VPG)were due principally to the continued focus on moving customer transactions towards a one-week equivalent sales price of$26,007 and the success of the hospitality driven sales and marketing initiatives,which are based upon the power ofvacations for happier and healthier living. Provision for uncollectible Vacation Interests sales revenue increased$23.6 million,or 41.2%,to$80.8 million for the year ended December 31,2015 from$57.2 million for the year ended December 31,2014.This increase was primarily due to higher gross Vacation Interests sales for the year ended December 31,2015,as compared to the year ended December 31,2014. In addition,this increase was attributable to a higher percentage offinanced sales and a change ofcertain portfolio statistics during the year ended December 31,2015,as compared to the year ended December 31,2014.The weighted average FICO score of loans written during the years ended December 31,2015 and 2014 were 754 and 755,respectively. The allowance for Vacation Interests notes receivable as a percentage of gross Vacation Interests notes receivable was 21.5%as of December 31,2015 and December 31,2014,as reflected on our consolidated balance sheets included elsewhere in this annual report. Interest Revenue.Interest revenue increased$12.2 million,or 18.2%,to$79.0 million for the year ended December 31, 2015 from$66.8 million for the year ended December 31,2014.The increase was attributable to our Vacation Interests sales and financing segment,and was comprised of a$17.4 million increase resulting from a larger average outstanding balance in the Vacation Interests notes receivable portfolio during the year ended December 31,2015,as compared to the year ended December 31,2014.This increase was partially offset by(i)a decrease of$1.7 million attributable to a reduction in the weighted average interest rate on the portfolio and(ii)a decrease of$3.7 million associated with the increased amortization of deferred loan origination costs.Amortization of deferred loan origination costs was higher during the year ended December 31, 2015 due to the increase in deferred loan origination costs during the last several years,primarily as a result of higher Vacation Interests sales revenue and a higher percentage of such revenue that is financed. Other Revenue.Other revenue increased$16.8 million,or 37.5%,to$61.7 million for the year ended December 31,2015 from$44.9 million for the year ended December 31,2014.During the year ended December 31,2015,we received an aggregate of$6.0 million in installments from our insurance carrier under our business interruption insurance policy for business profits lost during the period that the Cabo Azul Resort remained closed as a result of the damage suffered in Hurricane Odile. In addition,non-cash incentives increased$5.6 million to$24.1 million for the year ended December 31,2015 from$18.5 million for the year ended December 31,2014.Non-cash incentives as a percentage ofgross Vacation Interests sales 50 revenue increased to 3.4%for the year ended December 31,2015,as compared to 3.1%for the year ended December 31,2014 due to a higher utilization of non-cash incentives by Vacation Interests purchasers.Furthermore,closing cost revenue increased as a result of higher Vacations Interests sales revenue. Vacation Interests Cost ofSales. Vacation Interests cost of sales decreased$34.8 million,or 54.8%,to$28.7 million for the year ended December 31,2015 from$63.5 million for the year ended December 31,2014.This decrease was primarily attributable to changes in estimates under the relative sales value method including increases in the average selling price per point and a larger pool of low-cost inventory becoming eligible for capitalization in accordance with our IRAAs and other inventory recovery agreements during the year ended December 31,2015 as compared to the year ended December 31,2014. The decrease was partially offset by a$12.9 million increase in cost of sales related to an increase in Vacation Interests sales revenue and the$3.4 million impact of the Gold Key Acquisition in October 2015 on the relative sales value calculation. Vacation Interests cost of sales as a percentage of Vacation Interests sales,net decreased to 4.6%for the year ended December 31,2015 from 11.9%for the year ended December 31,2014. See "Note 2—Summary ofSignificantAccounting Policies—Vacation Interests Cost ofSales"ofour consolidated financial statements included elsewhere in this annual report for additional information regarding the relative sales value method. Advertising,Sales and Marketing Expense.Advertising sales and marketing expense increased$53.3 million,or 17.9%, to$350.4 million for the year ended December 31,2015 from$297.1 million for the year ended December 31,2014.For comparison purposes,the following table presents advertising,sales and marketing expense for the year ended December 31, 2015 and December 31,2014(in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation,and such amounts as a percentage of gross Vacation Interests sales: Year Ended December 31, 2015 2014 Advertising,sales and marketing expense 350,411 $ 297,095 Less:Non-cash stock-based compensation 2,440) 2,198) Advertising,sales and marketing expense excluding non-cash stock-based compensation 347,971 $ 294,897 Advertising,sales and marketing expense as a%of gross Vacation Interests sales 49.7% 50.4% Advertising,sales and marketing expense excluding non-cash stock-based compensation as a%of gross Vacation Interests sales 49.4% 50.0% The decrease in advertising,sales and marketing expense(excluding the non-cash stock-based compensation charges)as a percentage of gross Vacation Interests sales was primarily due to improved leverage of fixed costs through increased sales. Vacation Interests Carrying Cost,Net.Vacation Interests carrying cost,net increased$4.2 million,or 11.8%,to$39.7 million for the year ended December 31,2015 from$35.5 million for the year ended December 31,2014.This increase was primarily due to(i)additional maintenance fee expense related to inventory that we own,including inventory we recovered pursuant to our IRAAs;(ii)an increase in the utilization of member benefits during the year ended December 31,2015,as compared to the year ended December 31,2014;and(iii)higher operating expenses as a result of an increase in rental activity. This increase was partially offset by an increase in rental revenue due to(a)more occupied room nights and higher average daily rates;(b)an increase in revenue recognized in connection with sampler and mini-vacation packages;and(c)an increase in resort fees generated. Loan Portfolio Expense.Loan portfolio expense increased$2.1 million,or 23.6%,to$10.9 million for the year ended December 31,2015 from$8.8 million for the year ended December 31,2014.This increase was primarily attributable to higher operating expense resulting from a larger portfolio for the year ended December 31,2015,as compared to the year ended December 31,2014.This increase was partially offset by an increase in the amount of loan origination costs deferred pursuant to Accounting Standards Codification("ASC")310, "Receivables"("ASC 310").In accordance with ASC 310,we defer certain costs incurred in connection with consumer loan originations,which are then amortized over the life of the related consumer loans.An increase in the value of Vacation Interests notes receivable originated in the year ended December 31,2015 resulted in higher loan origination costs deferred relative to the year ended December 31,2014. Other Operating Expense. Other operating expense increased$6.3 million,or 28.2%,to$28.4 million for the year ended December 31,2015 from$22.1 million for the year ended December 31,2014.Non-cash incentives increased$5.6 million to 24.1 million for the year ended December 31,2015 from$18.5 million for the year ended December 31,2014.Non-cash incentives as a percentage of gross Vacation Interests sales revenue were 3.4%for the year ended December 31,2015 as compared to 3.1%for the year ended December 31,2014.This increase was due to a higher utilization of non-cash incentives by Vacation Interests purchasers. 51 Interest Expense. Interest expense increased$1.8 million,or 12.1%,to$16.9 million for the year ended December 31, 2015 from$15.1 million for the year ended December 31,2014.The increase was primarily attributable to higher average outstanding balances under securitization notes and Funding Facilities during the year ended December 31,2015,as compared to the year ended December 31,2014. See"Liquidity and Capital Resources—Indebtedness"for the definition of and further detail on these borrowings. Corporate and Other Interest Revenue. Interest revenue in our corporate and other segment decreased$0.2 million,or 14.1%,to$1.3 million for the year ended December 31,2015 from$1.5 million for the year ended December 31,2014. General andAdministrative Expense. General and administrative expense increased$9.5 million,or 9.2%,to$112.5 million for the year ended December 31,2015 from$103.0 million for the year ended December 31,2014.For comparison purposes,the following table presents general and administrative expense for the year ended December 31,2015 and December 31,2014(in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation and the cash charge in connection with the termination of the services agreement between JHJM and HM&C,and such amounts as a percentage of total revenue: Year Ended December 31, 2015 2014 General and administrative expense 112,501 $ 102,993 Less:Non-cash stock-based compensation 10,596) 11,701) Less: Charge related to the termination ofthe service agreement 7,830) General and administrative expense excluding non-cash stock-based compensation and charge related to the termination of the service agreement 94,075 $91,292 General and administrative expense as a%of total revenue 11.8% 12.2% General and administrative expense excluding non-cash stock-based compensation and charge related to the contract termination as a%of total revenue 9.9% 10.8% General and administrative expense for the year ended December 31,2015 also included$0.8 million in expenses related to the secondary offering of shares of our common stock by certain selling stockholders consummated in March 2015(the March 2015 Secondary Offering"). See"Liquidity and Capital Resources—Overview"for further detail on the March 2015 Secondary Offering.The decrease in general and administrative expense as a percentage of total revenue(excluding the non- cash stock-based compensation charges and charge relating to the termination of the service agreement)reflected the improved leverage offixed costs over a higher revenue base. Depreciation andAmortization.Depreciation and amortization increased$2.0 million,or 6.1%,to$34.5 million for the year ended December 31,2015 from$32.5 million for the year ended December 31,2014.This increase was primarily attributable to the addition ofassets such as(i)intangible assets acquired in connection with the Master Agreement that we entered into in January 2015 and tangible and intangible assets acquired in connection with the Gold Key Acquisition in October 2015;(ii)information technology related projects and equipment in 2015;and(iii)renovation projects at certain sales centers in 2015. Interest Expense.Interest expense decreased$10.3 million,or 24.6%,to $31.6 million for the year ended December 31, 2015 from$41.9 million for the year ended December 31,2014. Cash interest,debt issuance cost amortization and debt discount amortization relating to the 12.0%senior secured notes originally due in 2018(the"Senior Secured Notes")were 21.0 million lower for the year ended December 31,2015,as compared to the year ended December 31,2014 due to the redemption of the Senior Secured Notes on June 9,2014. See"—Loss on Extinguishment ofDebt"below for further detail on the redemption.The above decreases were partially offset by$9.3 million of cash interest,debt issuance cost amortization and debt discount amortization relating to the Senior Credit Facility recorded since May 9,2014,the date on which we closed the Senior Credit Facility,and the Incremental Term Loan completed in December 2015. See"Liquidity and Capital Resources— Indebtedness"for a further discussion of the Senior Credit Facility. Loss on Extinguishment ofDebt.Loss on extinguishment of debt was zero for the year ended December 31,2015 and 46.8 million for the year ended December 31,2014. On May 9,2014,we repaid all outstanding indebtedness under three inventory loans assumed in connection with previous acquisitions using a portion of the proceeds from the term loan portion of the Senior Credit Facility.Unamortized debt issuance cost on these inventory loans of$0.1 million was recorded as a loss on extinguishment ofdebt. 52 In addition,on May 9,2014,we terminated our previous revolving credit facility in conjunction with our entry into the Senior Credit Facility and recorded a$0.9 million loss on extinguishment of debt related to unamortized debt issuance costs. On June 9,2014,we redeemed the then-outstanding principal amount under the Senior Secured Notes using a portion of the proceeds from the term loan portion of the Senior Credit Facility.As a result,$30.2 million ofredemption premium,$9.4 million of unamortized debt issuance cost and$6.1 million of unamortized debt discount were recorded as a loss on extinguishment ofdebt. Income Taxes.Provision for income taxes was$102.2 million for the year ended December 31,2015,as compared to 50.2 million for the year ended December 31,2014.The increase was due to an increase in our income before provision for income taxes.There are numerous timing differences in our reporting of income and expenses for financial reporting and income tax reporting purposes,which include,but are not limited to,the use of the installment method of accounting for reporting of VOI sales and interest income,stock-based compensation expense and the utilization of our net operating loss cany forwards("NOLs"). 53 Comparison ofthe Year Ended December 31,2014 to the Year EndedDecember 31,2013 Year Ended December 31.2014 Year Ended December 31,2013 Hospitality Vacation Hospitality Vacation and Interests and Interests Management Sales and Corporate Management Sales and Corporate Services Financing and Other Total Services Financing and Other Total In thousands) Revenues: Management and member services 152,201 $152,201 $ 131,238 $131,238 Consolidated resort operations 38,406 38,406 35,512 35,512 Vacation Interests sales,net of provision of$0,$57,202,$0, 57,202,$0,$44,670,$0 and 44,670,respectively 532,006 532,006 464,613 464,613 Interest 66,849 1,549 68,398 55,601 1,443 57,044 Other 8,691 44,864 53,555 8,673 32,708 41,381 Total revenues 199,298 643,719 1,549 844,566 175,423 552,922 1,443 729,788 Costs and Expenses: Management and member services 33,184 33,184 37,907 37,907 Consolidated resort operations 35,409 35,409 34,333 34,333 Vacation Interests cost of sales 63,499 63,499 56,695 56,695 Advertising,sales and marketing 297,095 297,095 258,451 258,451 Vacation Interests carrying cost, net 35,495 35,495 41,347 41,347 Loan portfolio 1,303 7,508 8,811 1,111 8,520 9,631 Other operating 22,135 22,135 12,106 12,106 General and administrative 102,993 102,993 145,925 145,925 Depreciation and amortization 32,529 32,529 28,185 28,185 Interest expense 15,072 41,871 56,943 16,411 72,215 88,626 Loss on extinguishment ofdebt 46,807 46,807 15,604 15,604 Impairments and other write-offs 240 240 1,587 1,587 Gain on disposal of assets 265) (265) 982) (982) Gain on bargain purchase from business combinations 2,879) (2,879) Total costs and expenses 69,896 440,804 224,175 734,875 73,351 393,530 259,655 726,536 Income(loss)before provision for income taxes 129,402 202,915 (222,626) 109,691 102,072 159,392 (258,212) 3,252 Provision forincome taxes 50,234 50,234 5,777 5,777 Net income(loss) 129,402 $ 202,915 $ (272,860) $ 59,457 $ 102,072 $ 159,392 $ (263,989) $ (2,525) Consolidated Results Total revenues increased$114.8 million,or 15.7%,to$844.6 million for the year ended December 31,2014 from$729.8 million for the year ended December 31,2013.Total revenues in our hospitality and management services segment increased by$23.9 million,or 13.6%,to$199.3 million for the year ended December 31,2014 from$175.4 million for the year ended December 31,2013.Total revenues in our Vacation Interests sales and financing segment increased$90.8 million,or 16.4%,to 643.7 million for the year ended December 31,2014 from$552.9 million for the year ended December 31,2013.Revenues in our corporate and other segment were$1.5 million for the year ended December 31,2014 and$1.4 million for the year ended December 31,2013. Total costs and expenses increased$8.4 million,or 1.1%,to$734.9 million for the year ended December 31,2014 from 726.5 million for the year ended December 31,2013.Total costs and expenses for the year ended December 31,2014 included the following cash and non-cash items totaling$63.0 million: (i)a$46.8 million loss on extinguishment of debt,of which$16.6 million was non-cash and(ii)a$16.2 million non-cash stock-based compensation charge.Total costs and expenses for the year ended December 31,2013 included the following cash and non-cash items totaling$63.8 million: (i)a$40.5 million non-cash stock-based compensation charge,primarily attributable to immediately-vested stock options issued in connection with the consummation ofthe IPO during the year ended December 31,2013 (see"Note 21-Stock-Based Compensation"of our consolidated financial statements included elsewhere in this annual report for further detail on these stock options);(ii)a$15.6 54 million loss on extinguishment of debt,of which$7.5 million was non-cash;and(iii)a$10.5 million charge related to the final settlement of a lawsuit related to a dispute over certain parcels of land in Mexico(the"Alter Ego Suit"),$5.5 million of which was non-cash and represented the carrying value of our interest in these parcels that were transferred to the plaintiffupon settlement of the lawsuit,partially offset by a$2.9 million gain on bargain purchase from business combinations resulting from the July 24,2013 acquisition of management agreements for certain resorts from Monarch Owner Services,LLC,Resort Services Group,LLC and Monarch Grand Vacations Management,LLC for$47.4 million in cash(the"PMR Service Companies Acquisition"). Hospitality andManagementServices Segment Management and Member Services Revenue.Total management and member services revenue increased$21.0 million, or 16.0%,to$152.2 million for the year ended December 31,2014 from$131.2 million for the year ended December 31,2013. Management fees increased as a result of the inclusion of the managed resorts from the Island One Acquisition and the PMR Service Companies Acquisition for the entirety ofthe year ended December 31,2014,as compared to only a portion of the year ended December 31,2013,and increases in operating costs at the resort level,which generated higher management fee revenue on a same-store basis from 91 cost-plus management agreements.We also experienced higher revenue from our Club operations in the year ended December 31,2014,as compared to the year ended December 31,2013,due to additional members acquired as a result of the Island One Acquisition,as well as higher membership dues.The increases in management fee revenue and revenue from the Clubs were partially offset by the elimination of commissions earned on the fee-for-service management agreements with Island One,Inc.,which were terminated in conjunction with the Island One Acquisition on July 24,2013. Consolidated Resort Operations Revenue. Consolidated resort operations revenue increased$2.9 million,or 8.1%,to 38.4 million for the year ended December 31,2014 from$35.5 million for the year ended December 31,2013.The increase was primarily due to higher owner maintenance fee and assessment revenue recorded by our two resorts in St.Maarten,higher food and beverage revenues at certain restaurants that we own and manage and higher revenue from retail ticket sales operations acquired in the Island One Acquisition.These increases were partially offset by lower revenue as a result of the leasing ofcertain golf courses to a third party during the second half of 2013. Other Revenue.Other revenue was$8.7 million for each of the years ended December 31,2014 and 2013. Management and Member Services Expense.Management and member services expense decreased$4.7 million,or 12.5%,to$33.2 million for the year ended December 31,2014 from$37.9 million for the year ended December 31,2013.For comparison purposes,the following table presents management and member services expense for the years ended December 31,2014 and 2013 (in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation and the non-cash benefit related to a contract renegotiation with Interval International,and such amounts as a percentage of management and member services revenue: Year Ended December 31, 2014 2013 Management and member services expense 33,184 $ 37,907 Less:Non-cash stock-based compensation 1,613)860) Plus:Non-cash benefit related to a contract renegotiation 1,780 Management and member services expense excluding non-cash stock-based compensation and non-cash benefit related to a contract renegotiation 33,351 $ 37,047 Management and member services expense as a%of management and member services revenue 21.8% 28.9% Management and member services expense excluding non-cash stock-based compensation and non-cash benefit related to a contract renegotiation as a% ofmanagement and member services revenue 21.9% 28.2% See"—Comparison ofthe Year EndedDecember 31, 2015 to the Year Ended December 31, 2014"for further detail on the contract renegotiation with Interval International.The decrease in management and member services expense(excluding the non-cash stock-based compensation charges and the non-cash benefit)as a percentage of management and member services revenue was primarily attributable to increased recovery of our expenses incurred on behalf of the HOAs and the Collection Associations we manage and the elimination of the costs incurred under the fee-for-service agreements with Island One,Inc. that terminated in conjunction with the Island One Acquisition on July 24,2013. Consolidated Resort Operations Expense. Consolidated resort operations expense increased$1.1 million,or 3.1%,to 35.4 million for the year ended December 31,2014 from$34.3 million for the year ended December 31,2013.Consolidated 55 resort operations expense as a percentage ofconsolidated resort operations revenue decreased 4.5%to 92.2%for the year ended December 31,2014 from 96.7%for the year ended December 31,2013.This decrease was primarily due to the leasing of certain golf courses to a third party during the second halfof 2013,partially offset by higher operational expenses at our two resorts in St.Maarten,an increase in expenses associated with the retail ticket sales operations acquired in the Island One Acquisition and higher food and beverage expenses at certain restaurants that we own and manage. Vacation Interests Sales and Financing Segment Vacation Interests Sales,Net.Vacation Interests sales,net increased$67.4 million,or 14.5%,to$532.0 million for the year ended December 31,2014 from$464.6 million for the year ended December 31,2013.The increase in Vacation Interests sales,net,was attributable to a$79.9 million increase in Vacation Interests sales revenue,partially offset by a$12.5 million increase in our provision for uncollectible Vacation Interests sales revenue. The$79.9 million increase in Vacation Interests sales revenue during the year ended December 31,2014 compared to the year ended December 31,2013 was generated by sales growth on a same-store basis from 46 sales centers due to an increase in the number oftours and an increase in our VPG,as well as the revenue contribution from our sales centers acquired in connection with the Island One Acquisition for the entirety of the year ended December 31,2014,as compared to only a portion ofthe year ended December 31,2013. VPG increased by$306,or 12.6%,to$2,732 for the year ended December 31,2014 from$2,426 for the year ended December 31,2013.The number of tours increased to 220,708 for the year ended December 31,2014 from 207,075 for the year ended December 31,2013. Our closing percentage remained relatively flat at 14.4%for the year ended December 31, 2014,as compared to 14.5%for the year ended December 31,2013. Our VOI sales transactions increased by 1,804 to 31,759 during the year ended December 31,2014,compared to 29,955 transactions during the year ended December 31,2013 and VOI average transaction size increased$2,217,or 13.2%,to$18,988 for the year ended December 31,2014 from$16,771 for the year ended December 31,2013.The increase in average sales price per transaction while maintaining a consistent closing percentage and the resulting increase in VPG,was due principally to a change in our focus on selling larger point packages and the success of the sales and marketing initiatives implemented in association with this strategy. Sales incentives increased$8.9 million,or 79.9%,to$20.0 million for the year ended December 31,2014 from$11.1 million for the year ended December 31,2013.As a percentage of gross Vacation Interests sales revenue,sales incentives were 3.4%for the year ended December 31,2014,compared to 2.2%for the year ended December 31,2013.The amount we record as sales incentives in each reporting period is reduced by an estimate of the amount of such sales incentives that we do not expect customers to redeem.During the first half of 2013,we completed the process of collecting adequate data regarding historical usage of our sales incentives provided under a program implemented in December 2011,and,based upon such data, the amount recorded as sales incentives for this period was reduced,and our Vacation Interests sales revenue was increased,by 3.2 million relating to the expiration,and expected future expiration,of sales incentives provided to customers prior to the six months ended June 30,2013.No such reduction of sales incentives relating to prior periods was recorded for the year ended December 31,2014.Due to the ongoing success of the program implemented in December 2011,usage of sales incentives continued to trend upward,resulting in an increase in sales incentives recorded for the year ended December 31,2014,as compared to the year ended December 31,2013.Excluding the$3.2 million reduction for the year ended December 31,2013, sales incentives as a percentage of gross Vacation Interests sales revenue were 3.4%for the year ended December 31,2014 compared to 2.8%for the year ended December 31,2013. Provision for uncollectible Vacation Interests sales revenue increased$12.5 million,or 28.1%,to$57.2 million for the year ended December 31,2014 from$44.7 million for the year ended December 31,2013,primarily due to the increase in Vacation Interests sales revenue and an increase in the percentage of financed Vacation Interests sales for the year ended December 31,2014,as compared to the year ended December 31,2013.The allowance for Vacation Interests notes receivable as a percentage of gross Vacation Interests notes receivable was 21.5%as of December 31,2014,as compared to 21.3%as of December 31,2013. Interest Revenue.Interest revenue increased$11.2 million,or 20.2%,to$66.8 million for the year ended December 31, 2014 from$55.6 million for the year ended December 31,2013.The increase was comprised of a$15.6 million increase resulting from a larger average outstanding balance in the Vacation Interests notes receivable portfolio during the year ended December 31,2014,as compared to the year ended December 31,2013.This increase was partially offset by(i)a decrease of 1.6 million attributable to a reduction in the weighted average interest rate on the portfolio and(ii)a decrease of$3.5 million associated with the amortization ofdeferred loan origination costs.Amortization of deferred loan origination costs increased during the year ended December 31,2014 due to the increase in deferred loan origination costs during the last several years, primarily as a result of higher Vacation Interests sales revenue and a higher percentage of such revenue that is financed. Other Revenue.Other revenue increased$12.2 million,or 37.2%,to$44.9 million for the year ended December 31, 2014 from$32.7 million for the year ended December 31,2013.Non-cash incentives increased$9.2 million to$18.5 million 56 for the year ended December 31,2014 from$9.3 million for the year ended December 31,2013.The increase was primarily due to higher gross Vacation Interests sales revenue for the year ended December 31,2014,as compared to the year ended December 31,2013 and a$3.2 million reduction of sales incentives recorded for the year ended December 31,2013 resulting from the expiration,and expected future expiration,of sales incentives we provided to customers.Excluding the$3.2 million reduction in sales incentives for the year ended December 31,2013,non-cash incentives as a percentage of gross Vacation Interests sales revenue were 3.1%for the year ended December 31,2014,as compared to 2.5%for the year ended December 31,2013.This increase was due to the ongoing success of the sales incentive program implemented in December 2011,which usage has continued to trend upward resulting in an increase in sales incentives recorded.In addition,other revenue increased for the year ended December 31,2014,as compared to the year ended December 31,2013,due to higher closing fee revenue resulting from the increase in the number of VOI transactions closed. Vacation Interests Cost ofSales. Vacation Interests cost ofsales increased$6.8 million or 12.0%,to$63.5 million for the year ended December 31,2014 from$56.7 million for the year ended December 31,2013.This increase consisted ofan$8.6 million increase related to an increase in Vacation Interests sales revenue,partially offset by a$1.8 million decrease resulting from changes in estimates under the relative sales value method.These changes related to a larger average selling price per point,partially offset by a smaller pool of low-cost inventory becoming eligible for capitalization in accordance with our IRAAs during the year ended December 31,2014 as compared to the year ended December 31,2013.Vacation Interests cost of sales as a percentage ofVacation Interests sales,net decreased to 11.9%for the year ended December 31,2014 from 12.2%for the year ended December 31,2013. Advertising,Sales andMarketing Expense.Advertising sales and marketing expense increased$38.6 million,or 15.0%, to$297.1 million for the year ended December 31,2014 from$258.5 million for the year ended December 31,2013.For comparison purposes,the following table presents advertising,sales and marketing expense for the years ended December 31, 2014 and 2013 (in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation,and such amounts as a percentage of gross Vacation Interests sales: Year Ended December 31, 2014 2013 Advertising,sales and marketing expense 297,095 $ 258,451 Less:Non-cash stock-based compensation 2,198) 2,105) Advertising,sales and marketing expense excluding non-cash stock-based compensation 294,897 $ 256,346 Advertising,sales and marketing expense as a%of gross Vacation Interests sales 50.4% 50.7% Advertising,sales and marketing expense excluding non-cash stock-based compensation as a%of gross Vacation Interests sales 50.0% 50.3% The decrease in advertising, sales and marketing expense(excluding the non-cash stock-based compensation charges)as a percentage of gross Vacation Interests sales was primarily due to improved leverage of fixed costs through increased sales. Vacation Interests Carrying Cost,Net.Vacation Interests carrying cost,net decreased$5.8 million,or 14.2%,to$35.5 million for the year ended December 31,2014 from$41.3 million for the year ended December 31,2013.This decrease was primarily due to(i)an increase in revenue due to an increase in the number of,and the average price of,sampler programs Sampler Packages")sold,as a result of our increased focus on selling higher-priced Sampler Packages;(ii)more occupied room nights and higher average daily rates;and(iii)an increase in rental revenue attributable to the inclusion ofVOIs available for rent from the Island One Acquisition completed on July 24,2013.This decrease was partially offset by(a)additional maintenance fee expense related to delinquent inventory recovered pursuant to IRAAs no longer eligible for capitalization, during the year ended December 31,2014,as compared to the year ended December 31,2013;(b)higher operating expenses as a result of a rise in rental activity;and(c)an increase in additional maintenance fees expense incurred related to the inventory acquired in the Island One Acquisition. Loan Portfolio Expense.Loan portfolio expense decreased$0.8 million,or 8.5%,to$8.8 million for the year ended December 31,2014 from$9.6 million for the year ended December 31,2013.This decrease was primarily attributable to an increase in the amount of loan origination costs deferred pursuant to ASC 310.In accordance with ASC 310,we defer certain costs incurred in connection with consumer loan originations,which are then amortized over the life of the related consumer loans.An increase in the value of Vacation Interests notes receivable originated in the year ended December 31,2014 resulted in higher loan origination costs deferred relative to the year ended December 31,2013. Other Operating Expense. Other operating expense increased$10.0 million,or 82.8%,to$22.1 million for the year ended December 31,2014 from$12.1 million for the year ended December 31,2013.Non-cash incentives increased$9.2 million to$18.5 million for the year ended December 31,2014 from$9.3 million for the year ended December 31,2013.This 57 increase was primarily due to higher gross Vacation Interests sales revenue for the year ended December 31,2014,as compared to the year ended December 31,2013 and a$3.2 million reduction of sales incentives recorded for the year ended December 31,2013 resulting from the expiration,and expected future expiration,of sales incentives we provided to customers. Excluding the$3.2 million reduction in sales incentives for the year ended December 31,2013,non-cash incentives as a percentage of gross Vacation Interests sales revenue were 3.1%for the year ended December 31,2014 as compared to 2.5%for the year ended December 31,2013.This increase was due to the ongoing success of the sales incentive program implemented in December 2011,which usage has continued to trend upward resulting in an increase in sales incentives recorded. Interest Expense.Interest expense decreased$1.3 million,or 8.2%,to$15.1 million for the year ended December 31, 2014 from$16.4 million for the year ended December 31,2013.The decrease was primarily attributable to our principal pay down of securitization notes and Funding Facilities bearing higher interest rates and their replacement with those bearing lower interest rates,partially offset by higher interest expense due to higher average outstanding balances under securitization notes and Funding Facilities during the year ended December 31,2014,as compared to the year ended December 31,2013. See Liquidity and Capital Resources—Indebtedness"for the definition of and further detail on these borrowings. Corporate and Other Other Revenue.Total revenue in our corporate and other segment increased$0.1 million,or 7.3%,to$1.5 million for the year ended December 31,2014 from$1.4 million for the year ended December 31,2013. General andAdministrative Expense.General and administrative expenses decreased$42.9 million,or 29.4%,to$103.0 million for the year ended December 31,2014 from$145.9 million for the year ended December 31,2013.For comparison purposes,the following table presents general and administrative expense for the years ended December 31,2014 and 2013(in thousands),both on a U.S. GAAP basis and excluding the non-cash stock-based compensation and the charge related to the final settlement of the Alter Ego Suit,and such amounts as a percentage of total revenue: Year Ended December 31, 2014 2013 General and administrative expense 102,993 $ 145,925 Less:Non-cash stock-based compensation 11,701) 37,044) Less: Charge related to the final settlement of the Alter Ego Suit 10,508) General and administrative expense excluding non-cash stockbased compensation and the charge related to the final settlement of the Alter Ego Suit 91,292 $ 98,373 General and administrative expense as a%of total revenue 12.2% 20.0% General and administrative expense excluding non-cash stockbased compensation and the charge related to the final settlement of the Alter Ego Suit as a%of total revenue 10.8% 13.5% For the years ended December 31,2014 and 2013,general and administrative expense included$11.7 million and$37.0 million,respectively,of non-cash stock-based compensation charges related to stock options issued in connection with,and since,the consummation of the IPO.In addition,during the year ended December 31,2013,there was a$10.5 million charge 5.5 million of which was non-cash)related to the final settlement of the Alter Ego Suit.Excluding these non-cash and other charges,general and administrative expense decreased 7.2%for the year ended December 31,2014,as compared to the year ended December 31,2013,primarily due to increased recovery of our expenses incurred on behalf ofthe HOAs and the Collection Associations we manage. Depreciation andAmortization.Depreciation and amortization increased$4.3 million,or 15.4%,to$32.5 million for the year ended December 31,2014 from$28.2 million for the year ended December 31,2013.This increase was primarily attributable to the addition of depreciable and amortizable assets in connection with the Island One Acquisition and the PMR Service Companies Acquisition(both completed on July 24,2013),information technology related projects in 2014 and equipment and renovation projects at certain sales centers in 2014. Interest Expense.Interest expense decreased$30.3 million,or 42.0%,to$41.9 million for the year ended December 31, 2014 from$72.2 million for the year ended December 31,2013. Cash interest,debt issuance cost amortization and debt discount amortization relating to the Senior Secured Notes were$30.5 million lower for the year ended December 31,2014 due to the consummation ofthe tender offer in August 2013,which resulted in the repurchase of Senior Secured Notes in an aggregate principal amount of$50.6 million(the"Tender Offer")and the redemption of the Senior Secured Notes on June 9, 2014.Cash and paid-in-kind interest and debt issuance cost amortization in connection with an acquisition loan(which we entered into on May 21,2012 in connection with a business combination and repaid in full on July 24,2013)were$7.4 million lower due to their inclusion in a majority of the year ended December 31,2013,whereas no such cash and paid-in-kind interest 58 and debt issuance cost amortization was recorded in the year ended December 31,2014.Cash and paid-in-kind interest and debt issuance cost amortization in connection with another acquisition loan(which we entered into on July 1,2011 in connection with a business combination and repaid in full on July 24,2013)were$5.8 million lower due to their inclusion in a majority of the year ended December 31,2013,whereas no such cash and paid-in-kind interest and debt issuance cost amortization was recorded in the year ended December 31,2014.Furthermore,cash interest and debt issuance cost amortization relating to three inventory loans(previously entered into in connection with various acquisitions)was$1.8 million lower due to their payoffon May 9,2014.The above decreases were partially offset by$17.2 million of cash interest,debt issuance cost amortization and debt discount amortization relating to the Senior Credit Facility recorded since May 9,2014,the date on which we closed the Senior Credit Facility. Loss on Extinguishment ofDebt.Loss on extinguishment of debt was$46.8 million for the year ended December 31, 2014 and$15.6 million for the year ended December 31,2013. See"—Comparison ofthe Year EndedDecember 31, 2015 to the Year Ended December 31, 2014—Loss on extinguishment ofDebt"for further detail on the 2014 transactions. On July 24,2013,we repaid all outstanding indebtedness under two acquisition loans(previously entered into in connection with certain acquisitions)using the proceeds from the IPO.The unamortized debt issuance cost on both acquisition loans and the additional exit fees paid totaling$4.9 million were recorded as loss on extinguishment of debt. In addition,on August 23,2013,unamortized debt issuance cost associated with the Senior Secured Notes and the call premium paid upon the completion ofthe Tender Offer,totaling$8.5 million,were recorded as loss on extinguishment of debt. On October 21,2013,we redeemed notes issued under a previous securitization transaction completed in 2009 using proceeds from borrowings under the Conduit Facility.The unamortized debt issuance costs and debt discount totaling$2.2 million were recorded as a loss on extinguishment of debt. Impairments and Other Write-offs. hnpairments and other write-offs were$0.2 million for the year ended December 31, 2014 and$1.6 million for the year ended December 31,2013.The impairments for the year ended December 31,2013 were attributable to the write down of a parcel of real estate acquired in connection with a previous business combination completed in 2012 to its net realizable value based on a third-party appraisal and the write off of obsolete sales materials. Gain on Disposal ofAssets. Gain on disposal of assets was$0.3 million for the year ended December 31,2014 and$1.0 million for the year ended December 31,2013.The gain on disposal of assets recorded for the year ended December 31,2013 was primarily attributable to the sale of real estate at certain European locations recorded during the year ended December 31, 2013. Gain on Bargain Purchasefrom Business Combinations. Gain on bargain purchase from business combinations was zero for the year ended December 31,2014,compared to$2.9 million for the year ended December 31,2013.The gain on bargain purchase from business combinations recorded for the year ended December 31,2013 was attributable to the fair value ofthe assets acquired,net of the liabilities assumed,in the PMR Service Companies Acquisition in 2013,which exceeded the purchase price due primarily to the fact that the assets were purchased as part of a distressed sale. Income Taxes.Provision for income taxes was$50.2 million for the year ended December 31,2014,as compared to$5.8 million for the year ended December 31,2013.The increase was due to an increase in our income before provision for income taxes.There are numerous timing differences in our reporting of income and expenses for financial reporting and income tax reporting purposes,which include,but are not limited to,the use of the installment method ofaccounting for reporting of VOI sales and interest income,stock-based compensation expense and the utilization of our NOLs. 59 Liquidity and Capital Resources Overview.We had$290.5 million and$255.0 million in cash and cash equivalents as of December 31,2015 and 2014, respectively.Our primary sources of liquidity have historically been cash from operations and the financings discussed below. We used cash of$80.3 million and$44.4 million during the years ended December 31,2015 and 2014,respectively,for i)acquisitions of VOI inventory pursuant to our IRAAs and in open market and bulk VOI inventory purchases;(ii)capitalized legal,tide and trust fees related to the recovery of inventory;and(iii)construction of VOI inventory.Of these total cash amounts(which do not reflect our acquisition of inventory in the Gold Key Acquisition or the subsequent repurchase of inventory during the fourth quarter of 2015 in accordance with a related default recovery agreement),$18.2 million and$1.3 million were used for the construction of VOI inventory during the years ended December 31,2015 and 2014,respectively, primarily related to construction of new units at the Cabo Azul Resort located in San Jose Del Cabo,Mexico. Between November 2014 and December 31,2015,we repurchased our common stock in the open market and in privately negotiated transactions in accordance with our Stock Repurchase Program. See"Item 5.Market For Registrant's Common Equity,Related Stockholder Matters and Issuer purchases ofEquity Securities"for further detail regarding the Stock Repurchase Program. In connection with the March 2015 Secondary Offering,certain selling stockholders sold an aggregate of 7,502,316 shares of our common stock in an underwritten public offering. We did not sell any stock in the offering and did not receive any proceeds from the offering.We purchased from the underwriter 1,515,582 of the shares sold by the selling stockholders in the offering at$32.99 per share(the same price per share at which the underwriter purchased shares from the selling stockholders), for a total purchase price of$50.0 million. The following table summarizes stock repurchase activity under the Stock Repurchase Program(cost in thousands): Average Price Per Shares Cost Share From inception through December 31,2014 642,900 $ 16,077 $25.01 For the year ended December 31,2015(a) 5,713,554 163,545 $28.62 Total from inception through December 31,2015(a) 6,356,454 (b) $ 179,622 $28.26 a) Includes the purchase of 1,515,582 shares from the underwriter for$50.0 million in the March 2015 Secondary Offering at a price of$32.99 per share. b) Shares of our common stock repurchased by us pursuant to the Stock Repurchase Program.As ofDecember 31,2015,4,134,071 of the repurchased shares previously held in treasury have been retired. The Senior Credit Facility limits our ability to make restricted payments,including the payment ofdividends or expenditures for stock repurchases.As ofDecember 31,2015,the available basket for restricted payments,including purchases under our Stock Repurchase Program,was$3.5 million,subject to change based on our future financial performance. In September 2014,Hurricane Odile,a category 4 hurricane,inflicted widespread damage on the Baja California peninsula,particularly in San Jose Del Cabo,in which the Cabo Azul Resort,one of our managed resorts,is located.Hurricane Odile caused significant damage to the buildings as well as the facilities and amenities at the Cabo Azul Resort,including unsold Vacation Interests and property and equipment owned by us;however,we believe we have sufficient property insurance coverage so that damage caused by Hurricane Odile on our unsold Vacation Interests,net and property and equipment,net will not have a material impact on our financial condition or results of operations related to these assets.During the year ended December 31,2015,we received$5.0 million in proceeds from our insurance carrier for property damage resulting from Hurricane Odile.These proceeds are classified as cash flows from operating activities in our consolidated statement of cash flows for the year ended December 31,2015 due to the fact that these proceeds covered damage caused to our unsold Vacation Interests,which is an income-generating operating activity. In addition,we have filed a claim under our business interruption insurance policy forbusiness profits lost during the period that the Cabo Azul Resort remained closed as a result of the damage suffered in Hurricane Odile.During the year ended December 31,2015,we received an aggregate of$6.0 million from our insurance carrier related to such claim,which was recognized as other revenue in the consolidated statement of income and comprehensive income(loss)and classified as cash flows from operating activities in our consolidated statement of cash flows for the year ended December 31,2015.The Cabo Azul Resort and the on-site sales center reopened on September 1,2015. Cash Flows From Operating Activities. During the year ended December 31,2015,net cash provided by operating activities was$175.9 million and was the result of net income of$149.5 million and non-cash revenues and expenses totaling 60 195.7 million,offset by other changes in operating assets and liabilities that resulted in a net credit of$169.3 million.The significant non-cash revenues and expenses included(i)$80.8 million in the provision for uncollectible Vacation Interests sales revenue;(ii)$46.1 million in deferred income taxes,primarily related to current favorable tax law regarding recognition of income from financed Vacation Interests sales and the utilization of our NOLs; (iii)$34.5 million in depreciation and amortization;(iv)$14.9 million in stock-based compensation expense;(v)$12.7 million in amortization of capitalized loan origination costs and portfolio discounts(net of premiums);(vi)$6.2 million in amortization of capitalized financing costs and original issue discounts;(vii)$1.2 million in loss on foreign currency exchange;(viii)$0.5 million in unrealized loss on derivative instruments;and(ix)$0.1 million in loss on investment injoint venture,offset by$0.9 million in excess tax benefits from stock-based compensation and$0.5 million in gain on mortgage repurchases. During the year ended December 31,2014,net cash provided by operating activities was$121.3 million and was the result of net income of$59.5 million and non-cash revenues and expenses totaling$191.3 million,offset by other changes in operating assets and liabilities that resulted in a net credit of$129.4 million.The significant non-cash revenues and expenses and non-cash and cash loss on extinguishment of debt included(i)$57.2 million inthe provision for uncollectible Vacation Interests sales revenue;(ii)$46.8 million of loss on extinguishment of debt(which included$30.2 million of redemption premium paid in cash using the proceeds from the Senior Credit Facility and$16.6 million of non-cash write-off of unamortized debt issuance costs and debt discount);(iii)$32.5 million in depreciation and amortization;(iv)$24.4 million in deferred income taxes,primarily related to current favorable tax law regarding recognition of income from financed Vacation Interests sales and the utilization of our NOLs;(v)$16.2 million in stock-based compensation expense;(vi)$8.9 million in amortization of capitalized loan origination costs and portfolio discounts(net of premiums);(vii)$5.3 million in amortization of capitalized financing costs and original issue discounts;(viii)$0.4 million in loss on foreign currency exchange;(ix) 0.2 million in impairments and other write-offs;and(x)$0.2 million in unrealized loss on post-retirement benefit plan,offset by(a)$0.6 million in gain on mortgage repurchases and(b)$0.3 million in gain from disposal of assets. During the year ended December 31,2013,net cash used in operating activities was$2.2 million and was the result of net loss of$2.5 million and non-cash revenues and expenses totaling$149.5 million,partially offset by other changes in operating assets and liabilities that resulted in a net credit of$149.2 million.The significant non-cash revenues and expenses included(i) 44.7 million in the provision for uncollectible Vacation Interests sales revenue;(ii)$40.5 million in stock-based compensation expenses;(iii)$28.2 million in depreciation and amortization;(iv)$15.6 million in loss on extinguishment of debt;(v)$7.1 million in amortization of capitalized financing costs and original issue discounts;(vi)$6.0 million in amortization of capitalized loan origination costs and portfolio discounts(net ofpremiums);(vii)$5.5 million in non-cash expense related to the Alter Ego Suit;(viii)$3.3 million in deferred income taxes,primarily related to the Island One Acquisition;(ix)$1.6 million in impairment and other write-offs;(x)$0.9 million in unrealized loss on post-retirement benefit plan;and(xi)$0.2 million in loss on foreign currency exchange;offset by(a)$2.9 million in gain on bargain purchase from business combinations and(b)$1.0 million in gain from disposal of assets. For the years ended December 31,2015,2014 and 2013,a vast majority ofthe net credit in changes in operating assets and liabilities was attributable to the increase in Vacation Interest notes receivable.A significant portion of our Vacation Interest sales revenue is financed and a substantial portion of the new consumer loans are monetized through our conduit and securitization financings and results in an increase in cash flows from financing activities. Cash Flows Used in InvestingActivities. During the year ended December 31,2015,net cash used in investing activities was$203.7 million,comprised of(i)$167.4 million related to the purchase of assets in connection with Gold Key Acquisition; ii)$9.0 million used to purchase intangible assets,primarily associated with the acquisition of intangible assets pursuant to the Master Agreement;(iii)$26.3 million used to purchase property and equipment,primarily associated with information technology related projects and equipment and renovation projects at certain sales centers;and(iv)$1.5 million related to the investment in the joint venture in Asia,offset by$0.6 million in proceeds from the sale of assets in our European operations. During the year ended December 31,2014,net cash used in investing activities was$17.1 million,comprised of$18.0 million used to purchase property and equipment,primarily associated with the information technology related projects and equipment and renovation projects at certain sales centers,offset by$0.9 million in proceeds from the sale of assets in our European operations. During the year ended December 31,2013,net cash used in investing activities was$58.1 million,comprised of(i)$47.4 million paid in connection with the PMR Service Companies Acquisition and(ii)$15.2 million used to purchase property and equipment,primarily associated with the expansion of our global headquarters,renovation projects at certain sales centers and information technology related projects and equipment,offset by(a)$3.9 million in proceeds from the sale of assets in our European operations and(b)$0.6 million in cash and cash equivalents acquired in connection with the Island One Acquisition. In addition to the$47.4 million cash consideration paid in the PMR Service Companies Acquisition,we assumed$0.5 million of liabilities in that transaction.The fair value of the assets acquired was$52.6 million based on a valuation report,resulting in a gain on bargain purchase of$2.9 million and a deferred tax liability of$1.7 million stemming from the difference between the treatment forfinancial reporting purposes as compared to income tax return purposes related to the intangible assets acquired. 61 In addition to the$73.3 million fair value of DRII stock transferred as consideration in the Island One Acquisition,we assumed 21.8 million of liabilities in that transaction.The fair value of the assets acquired,excluding goodwill,was$81.9 million based on a valuation report,resulting in goodwill acquired of$30.6 million and a deferred tax liability of$17.4 million stemming from the difference between the treatment for financial reporting purposes as compared to income tax return purposes related to the intangible assets acquired. Cash Flows From Financing Activities. During the year ended December 31,2015,net cash provided by fmancing activities was$63.8 million. Cash provided by financing activities consisted of(i)$649.2 million from the issuance ofdebt under our securitization notes and Funding Facilities;(ii)$147.0 million in proceeds from the Incremental Term Loan portion ofthe Senior Credit Facility;(iii)$2.9 million from proceeds from the exercise of stock options;and(iv)$0.9 million in excess tax benefits from stock-based compensation,offset by(a)$515.7 million payments on securitization Notes and Funding Facilities;(b)$163.5 million for the repurchase of our common stock;(c)$18.1 million for repayments on Senior Credit Facility;(d)a$13.8 million decrease in cash in escrow and restricted cash;(e)$13.0 million for repayments on Notes payable; f)$11.7 million for payments on debt issuance costs;and(g)$0.3 million in payments for derivative instrument. During the year ended December 31,2014,net cash provided by financing activities was$104.9 million. Cash provided by financing activities consisted of(i)$466.3 million from the issuance of debt under our securitization notes and Funding Facilities;(ii)$442.8 million in proceeds from the term loan portion of the Senior Credit Facility;(iii)an$9.4 million decrease in cash in escrow and restricted cash;(iv)$3.4 million in proceeds from the exercise of stock options;and(v)$1.1 million from the issuance of notes payable.These amounts were offset in part by cash used in fmancing activities consisting of(a)$404.7 million in connection with the redemption of our Senior Secured Notes(including$30.2 million of redemption premium paid in cash using proceeds from the Senior Credit Facility);(b)$348.5 million in repayments on our securitization notes and Funding Facilities;(c)$30.7 million in repayments on notes payable;(d)$16.1 million for the repurchase of our common stock;(e) 15.9 million ofdebt issuance costs;and(f)$2.2 million in repayments on the term loan portion of the Senior Credit Facility. During the year ended December 31,2013,net cash provided by financing activities was$80.0 million. Cash provided by financing activities consisted of(i)$552.7 million from the issuance of debt under our securitization notes and Funding Facilities;(ii)$204.3 million in proceeds from the IPO,net of related costs;(iii)$15.0 million from the issuance ofdebt under our previous revolving credit facility;and(iv)$5.4 million from issuance of notes payable.These amounts were offset in part by cash used in financing activities consisting of(a)$427.5 million in repayments on our securitization notes and Funding Facilities;(b)$137.2 million in repayments on notes payable;(c)$56.6 million in repayments on the Senior Secured Notes, including redemption premium;(d)a$38.6 million increase in cash in escrow and restricted cash;(e)$15.0 million in repayment ofborrowings under our previous revolving credit facility;(f)$10.3 million for the repurchase of outstanding warrants to purchase shares of DRC common stock;(g)$10.0 million of debt issuance costs;and(h)$2.0 million inpayments related to early extinguishment of notes payable. 62 Indebtedness-The following table presents selected information on our borrowings as of the dates presented below(dollars in thousands): December 31, December 31,2015 2014 Gross Amount Weighted ofVacation Average Interests Notes Borrowing/Principal Interest Receivable Funding Principal Balance Rate Maturity Collateral Availability Balance Senior Credit Facility 574,666 5.5%5/9/2021 $ 25,000 $ 442,775 Original Issue discount related to Senior Credit Facility 4,735) 2,055) Notes payable-insurance policies 4,586 2.4% Various 4,286 Notes payable-other 164 5.0% Various 326 Total Corporate Indebtedness 574,681 25,000 445,332 Diamond Resorts Trust Series 2015-2(1) 172,583 3.1%5/22/2028 180,090 Diamond Resorts Owner Trust Series 2014-1(1)140,256 2.6%5/20/2027 151,096 247,992 Diamond Resorts Trust Series 2015-1(1) 126,776 2.8%7/20/2027 133,860 Diamond Resorts Owner Trust 2013-2(1) 84,659 2.3%5/20/2026 94,065 131,952 DRI Quorum Facility and Island One Quorum Funding Facility(1)45,411 4.6% 12/31/2017 45,270 54,589 (2) 52,315 Diamond Resorts Owner Trust Series 2013-1(1) 30,681 2.0%1/20/2025 34,091 42,838 Conduit Facility(1) 22,538 2.8%4/10/2017 24,200 177,462 (2) Diamond Resorts Owner Trust Series 2011(1) 12,073 4.0%3/20/2023 12,752 17,124 Original issue discount related to Diamond Resorts Owner Trust Series 2011 103) 156) Diamond Resorts Tempus Owner Trust 2013(1) 7,884 6.0% 12/20/2023 13,353 17,143 Total Securitization Notes and Funding Facilities 642,758 688,777 232,051 509,208 Total 1,217,439 688,777 $ 257,051 $ 954,540 1)Non-recourse indebtedness 2)Borrowing/funding availability is calculated as the difference between the maximum commitment amount and the outstanding principal balance;however,the actual availability is dependent on the amount of eligible loans that serve as the collateral for such borrowings. Senior Credit Facility. On May 9,2014,we and DRC entered into a credit agreement(the"Senior Credit Facility Agreement")with Credit Suisse AG,acting as the administrative agent and the collateral agent for various lenders.The Senior Credit Facility Agreement originally provided for a$470.0 million Senior Credit Facility(including a$445.0 million term loan, issued with 0.5%of original issue discount and having a term of seven years and a$25.0 million revolving line of credit having a term of five years).Borrowings pursuant to the Senior Credit Facility bear interest,at our option,at a variable rate equal to LIBOR plus 450 basis points,with a one percent LIBOR floor applicable only to the term loan portion of the Senior Credit Facility,or an alternate base rate plus 350 basis points and mature on May 9,2021. On December 22,2014,we entered into a First Amendment to the Senior Credit Facility Agreement,which allowed the accelerated use of restricted payments for our stock repurchase program(the"First Amendment").On December 3,2015,we entered into a Second Amendment and First Incremental Assumption Agreement(the"Second Amendment")to the Senior Credit Facility Agreement.The Second Amendment provides for an additional$150.0 million Incremental Term Loan that bears the same interest rate and terms as described for the original term loan above.We received$147.0 million in proceeds upon the closing of the Incremental Term Loan,which was issued with a 2.0%original issue discount. See"Note 16- Borrowings"of our consolidated financial statements included elsewhere in this annual report for other significant terms and covenant requirements of the Senior Credit Facility. As indicated in"Note 16-Borrowings"of our consolidated financial statements included elsewhere in this annual report, covenants in the Senior Credit Facility Agreement requiring us to prepay outstanding amounts under the term loan using a portion of our excess cash flows,and covenants limiting our ability to incur indebtedness,to make certain investments and to pay dividends or make other equity distributions and purchase or redeem capital stock and the financial covenant compliance that is triggered by having more than 25%of the revolving credit commitment outstanding at the end of any quarter,are determined by reference to Adjusted EBITDA for us and our restricted subsidiaries. Covenants included in the Notes Indenture that governed the Senior Secured Notes were similarly determined by reference to Adjusted EBITDA for us and our restricted 63 subsidiaries.As of December 31,2015,all of our subsidiaries were designated as restricted subsidiaries,as defined in the Senior Credit Facility Agreement. Adjusted EBITDA for us and our restricted subsidiaries is derived from our Adjusted EBITDA,which we calculate in accordance with the Senior Credit Facility Agreement as our net income(loss),plus: (i)corporate interest expense;(ii) provision(benefit)for income taxes;(iii)depreciation and amortization;(iv)Vacation Interests cost of sales;(v)loss on extinguishment of debt;(vi)impairments and other non-cash write-offs;(vii)loss on the disposal of assets;(viii)amortization of loan origination costs;(ix)amortization of net portfolio premiums;and(x)stock-based compensation expense;less(a)gain on the disposal of assets;(b)gain on bargain purchase from business combination;and(c)amortization of net portfolio discounts.Adjusted EBITDA is a non-U.S. GAAP financial measure and should not be considered in isolation from,or as an alternative to net cash provided by(used in)operating activities or any other measure of liquidity,or as an alternative to net income(loss),operating income(loss)or any other measure of financial performance,in any such case calculated and presented in accordance with U.S. GAAP.Provided below is additional information regarding the calculation ofAdjusted EBITDA for purposes of the Senior Credit Facility Agreement. Corporate interest expense is added back because interest expense is a function of outstanding indebtedness,not operations,and can be dependent on a company's capital structure,debt levels and credit ratings.Accordingly,corporate interest expense can vary greatly from company to company and across periods for the same company;however,in calculating Adjusted EBITDA,interest expense related to lines of credit secured by the Vacation Interests notes receivable generated in the normal course of selling Vacation Interests is not added back to net income(loss)because this borrowing is necessary to support our Vacation Interests sales and fmance business. Loss on extinguishment of debt includes the effect of write-offs of capitalized debt issuance costs and original issue discounts due to payoffor substantial modifications of the terms of our indebtedness.While the amounts recorded by us with respect to these events include both cash and non-cash items,the entire amounts are related to financing events,and not our ongoing operations.Accordingly,these amounts are treated similarly to corporate interest expense and are added back to net income in our Adjusted EBITDA calculation. Vacation Interests cost of sales is excluded from our Adjusted EBITDA calculation because the method by which we are required to record Vacation Interests cost of sales pursuant to ASC 978,"Real Estate-Time-Sharing Activities"("ASC 978")(a method designed for companies that,unlike us,engage in significant timeshare development activity)includes various projections and estimates,which are subject to significant uncertainty.Due to the cumulative"true-up"adjustment required by this method,as discussed below,this method can cause major swings in our reported operating income. Pursuant to ASC 978,if we review our projections and determine that our estimated Vacation Interests cost of sales was higher(or lower)than our actual Vacation Interests cost of sales for the prior life of the project(which,for us,goes back to our acquisition of Sunterra Corporation in 2007),we apply the higher(or lower)Vacation Interests cost of sales retroactively.In such a case,our Vacation Interests cost of sales for the current period will be increased(or reduced)by the entire aggregate amount by which we underestimated(or overestimated)Vacation Interests cost of sales over such period(reflecting a cumulative adjustment extending back to the beginning of the current period).For additional information regarding how we record Vacation Interests cost of sales,see "Note 2—Summary ofSignificant Accounting Policies—Vacation Interests Cost of Sales"of our consolidated financial statements included elsewhere in this annual report. Vacation Interests sales revenue does not accrue until collectability is reasonably assured,and is not subject to cumulative adjustments similar to those required in determining Vacation Interests cost of sales pursuant to ASC 978.As a result,Vacation Interests sales revenue is included in the calculation ofAdjusted EBITDA,even though Vacation Interests cost of sales is excluded from such calculation. Stock-based compensation expense is excluded from our Adjusted EBITDA calculation because it represents a non-cash item.We calculate our stock-based compensation expense utilizing the Black-Scholes option pricing model that is dependent on management's estimate of the expected volatility,the average expected option life,the risk-free interest rate,the expected annual dividend per share and the annual forfeiture rate.A small change in any of the estimates could have a material impact on the stock-based compensation expense.Accordingly, stock-based compensation expense can vary greatly from company to company and across periods for the same company. In addition to covenants contained in the Senior Credit Facility Agreement,financial covenants governing the Conduit Facility and the Diamond Resorts Tempus Owner Trust 2013 Notes issued on November 20,2013 with a face value of$31.0 million(the"Tempus 2013 Notes")are determined by reference to measures calculated in a manner similar to the calculation of Adjusted EBITDA. Adjusted EBITDA is not only used for purposes of determining compliance with covenants in our debt-related agreements,but our management also uses our consolidated Adjusted EBITDA: (i)for planning purposes,including the 64 preparation of our annual operating budget;(ii)to allocate resources to enhance the financial performance of our business;(iii) to evaluate the effectiveness ofour business strategies;and(iv)as a factor for determining compensation for certain personnel. However,Adjusted EBITDA has limitations as an analytical tool because,among other things: Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures; Adjusted EBITDA does not reflect changes in,or cash requirements for,our working capital needs; Adjusted EBITDA does not reflect cash requirements for income taxes; Adjusted EBITDA does not reflect interest expense for our corporate indebtedness; although depreciation and amortization are non-cash charges,the assets being depreciated or amortized will often have to be replaced,and Adjusted EBITDA does not reflect any cash requirements for these replacements; we make expenditures to replenish VOI inventory(principally pursuant to our IRAAs and in connection with our strategic acquisitions),and Adjusted EBITDA does not reflect our cash requirements for these expenditures or certain costs of carrying such inventory(which are capitalized);and other companies in our industry may calculate Adjusted EBITDA differently than we do,limiting its usefulness as a comparative measure. We encourage investors and securities analysts to review our U.S. GAAP consolidated financial statements included elsewhere in this annual report on Form 10-K,and investors and securities analysts should not rely solely or primarily on Adjusted EBITDA or any other single fmancial measure to evaluate our liquidity or financial performance. The following tables present Adjusted EBITDA as calculated in accordance with,and for purposes of covenants contained in,the Senior Credit Facility Agreement,reconciled to each of(i)our net cash provided by(used in)operating activities and(ii) our net income(loss)for the years ended December 31,2015,2014 and 2013. Year Ended December 31, 2015 2014 2013 in thousands) Net cash provided by(used in)operating activities 175,894 $ 121,314 $ (2,158) Provision for income taxes 102,170 50,234 5,777 Provision for uncollectible Vacation Interests sales revenue(a) 80,772)57,202)44,670) Amortization of capitalized financing costs and original issue discounts(a) 6,233) 5,337) 7,079) Non-cash expense related to the Alter Ego Suit(a)5,508) Deferred income taxes(b) 46,146)24,424) 3,264) Excess tax benefits from stock-based compensation(c) 922 Loss on foreign currency(d) 1,210) 362) 245) Gain on mortgage purchase(a) 515 621 111 Unrealized loss on derivative instruments(e) 462) Unrealized loss on post-retirement benefit plan(f)171) 887) Loss on investment injoint venture(a) 122) Corporate interest expense(g) 31,581 41,871 72,215 Change in operating assets and liabilities excluding acquisitions(h) 169,278 129,449 149,178 Vacation Interests cost of sales(i) 28,721 63,499 56,695 Adjusted EBITDA-Consolidated 374,136 $ 319,492 $ 220.165 a) Represents non-cash charge or gain. b) For the years ended December 31,2015 and 2014,represents the deferred income tax liability arising from differences between the treatment of income and expenses for financial reporting purposes as compared to income tax return purposes.For the year ended December 31,2013,represents the deferred income tax liability arising from the difference between the treatment for financial reporting purposes as compared to income tax return purposes, primarily related to the Island One Acquisition and the PMR Service Companies Acquisition. c) Represents the amount of excess tax benefit that arises when stock-based compensation recognized on our tax return exceeds stock-based compensation recognized in our consolidated statement of operations and comprehensive income loss). 65 d) Represents net realized losses on foreign exchange transactions settled at unfavorable exchange rates and unrealized net losses resulting from the devaluation of foreign currency-denominated assets and liabilities. e) Represents the effects of the changes in mark-to-market valuations of derivative assets and liabilities. f) Represents unrealized loss on our post-retirement benefit plan related to a collective labor agreement entered into with the employees ofour two resorts in St.Maarten;this plan was transferred to the St.Maarten HOAs during the quarter ended September 30,2015 in connection with the St.Maarten Deconsolidation. g) Represents corporate interest expense;does not include interest expense related to non-recourse indebtedness incurred by our special-purpose subsidiaries that was secured by our VOI consumer loans. li) Represents the net change in operating assets and liabilities excluding acquisitions,as computed directly from the statements of cash flows.Vacation Interests cost of sales is included in the net changes in unsold Vacation Interests, net,as presented in the statements of cash flows. i) We record Vacation Interests cost ofsales using the relative sales value method in accordance with ASC 978,which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method,we rely on complex,multi-year financial models that incorporate a variety of estimated inputs.These models are reviewed on a regular basis,and the relevant estimates used in the models are revised based upon historical results and management's new estimates. Year Ended December 31, 2015 2014 2013 in thousands) Net income(loss) 149,478 $ 59,457 $ (2,525) Plus:Corporate interest expense(a) 31,581 41,871 72,215 Provision for income taxes 102,170 50,234 5,777 Depreciation and amortization(b) 34,521 32,529 28,185 Vacation Interests cost of sales(c) 28,721 63,499 56,695 Loss on extinguishment ofdebt(d)46,807 15,604 Impairments and other non-cash write-offs(b) 12 240 1,587 Gain on the disposal of assets(b) 8) 265) 982) Gain on bargain purchase from business combinations(b)(e) 2,879) Amortization of loan origination costs(b) 12,635 8,929 5,419 Amortization of net portfolio premium(discounts)(b) 78 11) 536 Stock-based compensation(1) 14,948 16,202 40,533 Adjusted EBITDA-Consolidated 374,136 $ 319,492 $ 220,165 a) Corporate interest expense does not include interest expense related to non-recourse indebtedness incurred by our special- purpose subsidiaries that is secured by our VOI consumer loans. b) These items represent non-cash charges/gains. c) We record Vacation Interests cost of sales using the relative sales value method in accordance with ASC 978,which requires us to make significant estimates which are subject to significant uncertainty.In determining the appropriate amount of costs using the relative sales value method,we rely on complex,multi-year financial models that incorporate a variety of estimated inputs.These models are reviewed on a regular basis,and the relevant estimates used in the models are revised based upon historical results and management's new estimates. d) For the year ended December 31,2014,represents(i)$30.2 million of redemption premium paid on June 9,2014 in connection with the redemption of the outstanding Senior Secured Notes using proceeds from the term loan portion of the Senior Credit Facility and(ii)$16.6 million of unamortized debt issuance costs and debt discount written off upon the extinguishment of the Senior Secured Notes,our previous revolving credit facility and three inventory loans(previously entered into in connection with various acquisitions).For the year ended December 31,2013,represents(1)$6.1 million ofredemption premium paid on August 23,2013 in connection with the Tender Offer and$2.4 million of the unamortized debt discount and debt issuance cost associated with the Senior Secured Notes,(2)$4.9 million of the unamortized debt issuance cost written off and the additional exit fees paid upon the extinguishment oftwo acquisition loans(previously entered into in connection with certain acquisitions)on July 24,2013 using the proceeds from the IPO;and(3)$2.2 million ofthe unamortized debt discount and debt issuance cost written off on October 13,2013 upon the redemption of notes issued under a previous securitization transaction completed in 2009 using proceeds from borrowings under the Conduit Facility. 66 e) Represents the amount by which the fair value of the assets acquired net of the liabilities assumed in the PMR Service Companies Acquisition exceeded the purchase price. f) Represents the non-cash charge related to stock-based compensation expense. Historically,our business has depended on the availability of credit to finance the consumer loans we have provided to our customers for the purchase of their VOIs.Typically,these loans have required a minimum cash down payment of 10%of the purchase price at the time of sale;however,selling,marketing and administrative expenses attributable to VOI sales are primarily cash expenses and often exceed the buyer's minimum down payment requirement.Accordingly,the availability of financing facilities for the sale or pledge of these receivables to generate liquidity is a critical factor in our ability to meet our short-term and long-term cash needs.We have historically relied upon our ability to sell receivables in the securitization market in order to generate liquidity and create capacity on our Funding Facilities. The terms ofthe consumer loans we seek to finance are generally longer than the Funding Facilities through which we seek to finance such loans.While the term of our consumer loans is typically ten years,the Funding Facilities typically have a term of less than three years.Although we seek to refinance conduit borrowings in the term securitization markets,we generally access the term securitization markets at least on an annual basis,and rely on the Funding Facilities to provide incremental liquidity between securitization transactions.Thus,we are required to refinance the Funding Facilities every one to two years in order to provide adequate liquidity for our consumer finance business. Between January 1,2013 and December 31,2015,we completed six securitization transactions with a total face value of 959.6 million.Although we completed these securitization and Funding Facilities transactions,we may not be successful in completing similar transactions in the future.We require access to the capital markets in order to fund our operations and may, in the implementation of our growth strategy,become more reliant on third-party financing. If we are unable to continue to participate in securitization or renew and/or replace our Funding Facilities on acceptable terms,our liquidity and cash flows would be materially and adversely affected. Conduit Facility. Our amended and restated Conduit Facility agreement provides for a$200.0 million facility with a maturity date ofApril 10,2017.The Conduit Facility is renewable for 364-day periods at the election of the lenders upon maturity.The overall advance rate on loans receivable in the portfolio is limited to 88%of the aggregate face value ofthe eligible loans.The Conduit Facility bears interest at either LIBOR or the commercial paper rate(having a floor of 0.50%)plus a usage-fee rate of 2.25%,and had a non-usage fee of 0.75%. See"Note 16—Borrowings"of our consolidated financial statements included elsewhere in this annual report for further details on the Conduit Facility. Quorum Facility. On September 30,2015,pursuant to a First Amendment to the Amendment and Restated Loan Sale and Servicing Agreement,we amended the Quorum Facility to increase the aggregate minimum conunitted amount from$80.0 million to$100.0 million and to extend the term of the agreement to December 31,2017,provided that Quorum Federal Credit Union may further extend the term for additional periods by written notice.As of December 31,2015,the weighted average advance rate was 86.2%and the weighted average interest rate was 4.6%. Securitization Notes. In addition to the Conduit Facility and Quorum Facility,we generally sell or securitize a substantial portion ofthe consumer loans we generate from our customers through securitization financings. See"Note 16—Borrowings" ofour consolidated financial statements included elsewhere in this annual report for further details on the securitization notes. Notes Payable Notes Payable primarily consist of unsecured notes to finance premiums on our insurance policies. See Note 16—Borrowings"of our consolidated financial statements included elsewhere in this annual report for further detail on these borrowings. Future Capital Requirements. Over the next 12 months,we expect that our cash flows from operations and the borrowings under the Funding Facilities and the Senior Credit Facility will be available to cover the interest payments due under our indebtedness and fund our operating expenses and other obligations,including any purchases of common stock under our stock repurchase program. See"Liquidity and Capital Resources—Overview"for further detail on the stock repurchase program. Our future capital requirements will depend on many factors,including the growth of our consumer financing activities, the expansion of our hospitality management operations and potential acquisitions.Our ability to secure short-term and long- term financing in the future will depend on a variety of factors,including our future profitability,the performance of our consumer loan receivable portfolio,our relative levels of debt and equity,our credit ratings and the overall condition of the credit and securitization markets.There can be no assurances that any such financing will be available to us.If we are unable to secure short-term and long-term financing in the future or if cash flows from operations are less than expected,our liquidity and cash flows would be materially and adversely affected,we may be required to curtail our sales and marketing operations and we may not be able to implement our growth strategy. 67 Deferred Taxes. As of December 31,2015,we had available$137.8 million of unused federal NOLs,$159.1 million of unused state NOLs,and$113.0 million of foreign NOLs with expiration dates from 2021 through 2033 (except for certain foreign NOLs that do not expire)that may be applied against future taxable income,subject to certain limitations.As a result of the IPO and the resulting change in ownership,our federal NOLs are limited under Internal Revenue Code Section 382. State NOLs are subject to similar limitations in many cases. We expect the rate at which we pay cash taxes to be substantially less than the statutory tax rate for the foreseeable future. Commitments and Contingencies.From time to time,we or our subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business. See "Item 3.Legal Proceedings." Off-Balance SheetArrangements.As of December 31,2015,we did not have any off-balance sheet arrangements(as defined in Item 303(a)(4)of Regulation S-K). Contractual Obligations. The following table presents obligations and commitments to make future payments under contracts and under contingent commitments as of December 31,2015 (in thousands): Less than More than Contractual Obligations Total 1 year 1-3 years 3-5 tears 5 years Senior Credit Facility,including interest payable $ 740,948 $ 31,607 $ 74,353 $ 73,056 $ 561,932 Securitization notes and Funding Facilities, including interest payable(1) 706,234 154,598 258,068 108,524 185,044 Notes payable,including interest payable 4,801 4,801 Purchase obligations 3,913 3,913 Operating lease obligations 45,316 15,461 19,276 6,426 4,153 Total 1,501,212 $ 210,380 $ 351,697 $ 188,006 $ 751,129 1)Assumes certain estimates for payments and cancellations on collateralized outstanding Vacation Interests notes. Our accrued liabilities in the consolidated balance sheet included elsewhere in this annual report include unrecognized tax benefits.As of December 31,2015,we had gross unrecognized tax benefits of$77.7 million.At this time,we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore,such amounts are not included in the contractual obligations table above. Information Regarding Geographic Areas ofOperation. See "Note 26—SegmentReporting"of our consolidated financial statements included elsewhere in this annual report for our geographic segment information. Recently Issued Accounting Pronouncements See "Note 2—Summary ofSignificantAccounting Policies—Recently IssuedAccounting Pronouncements"ofour consolidated financial statements included elsewhere in this annual report for a discussion of the recently issued accounting pronouncements that impact us. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Inflation. Inflation and changing prices have not had a material impact on our revenues,income(loss)from operations, and net income(loss)during any of our three most recent fiscal years;however,to the extent inflationary trends affect short- term interest rates,a portion of our debt service costs,as well as the rates we charge on our consumer loans,may be affected. Interest Rate Risk We are exposed to interest rate risk through our variable rate indebtedness,including the Conduit Facility and the Senior Credit Facility.We have attempted to manage our interest rate risk through the use of derivative financial instruments.For example,we are required to hedge 90%of the outstanding note balance under the Conduit Facility. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions.To manage exposure to counterparty credit risk in interest rate swap and cap agreements,we enter into agreements with highly rated institutions that can be expected to fully perform under the terms of such agreements. At December 31,2015,our derivative fmancial instruments consisted of an interest rate swap agreement,which did not qualify for hedge accounting.Interest differentials resulting from our derivative financial instruments are recorded on an accrual basis as an adjustment to interest expense. 68 To the extent we assume additional variable rate indebtedness in the future,any increase in interest rates beyond amounts covered under any corresponding derivative financial instruments,particularly if sustained,could have an adverse effect on our results of operations,cash flows and financial position.We cannot assure that any hedging transactions we enter into will adequately mitigate the adverse effects of interest rate increases or that counterparties in those transactions will honor their obligations. Additionally,we derive net interest income from our consumer fmancing activities to the extent the interest rates we charge our customers who finance their purchases of VOIs exceed the variable interest rates we pay to our lenders.Because our Vacation Interests notes receivable generally bear interest at fixed rates,future increases in interest rates may result in a decline in our net interest income. As ofDecember 31,2015,49.1%of our borrowings,or$597.2 million,bore interest at variable rates.However,all of our variable-rate borrowings require a minimal interest rate floor when LIBOR is below certain levels.Assuming the level of variable-rate borrowings outstanding at December 31,2015,and assuming a one percentage point increase in the 2015 average interest rate payable on these borrowings,we estimate that our interest expense would have increased and pre-tax income would have decreased by$1.9 million for the year ended December 31,2015. Foreign Currency Translation Risk In addition to our operations throughout the U.S.,we conduct operations in international markets from which we receive,at least in part,revenues in foreign currencies.For example,we receive Euros and British Pounds Sterling in connection with operations in our European managed resorts and European VOI sales and Mexican Pesos in connection with our operations in Mexico.Because our financial results are reported in U.S.dollars, fluctuations in the value of the Euro,British Pound Sterling and Mexican Peso against the U.S.dollar have had,and will continue to have,an effect,which may be significant,on our reported financial results.In addition,in connection with the IntrawestAcquisition in January 2016,we expanded our international operations by acquiring VOI sales operations and management contracts at six resorts in Canada. See"Item 7.Management's Discussion andAnalysis ofFinancial Condition and Results ofOperations—Overview"for further discussion related to the Intrawest Acquisition. A decline in the value of any of the foreign currencies in which we receive revenues,including the Euro,British Pound Sterling,Mexican Peso or Canadian dollar,against the U.S.dollar will tend to reduce our reported revenues and expenses, while an increase in the value of any such foreign currencies against the U.S.dollar will tend to increase our reported revenues and expenses.Variations in exchange rates could affect the comparability ofour financial results between financial periods; however,since sales of Vacation Interests in our North American and Caribbean resorts,a majority of which are to customers in the U.S.and Canada and are transacted in U.S.dollars,have historically accounted for more than 90%of our consolidated Vacation Interests sales revenue,and management and member services revenue is similarly concentrated,we do not expect the variations in exchange rates to have a material impact on our financial results. For additional information on the potential impact of exchange rate fluctuations on our financial results,see"Item IA. Risk Factors—Fluctuations inforeign currency exchange rates may affect our reported results ofoperations." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See"Audited Consolidated Financial Statements"commencing on page F-1 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A.CONTROLS AND PROCEDURES Disclosure Controls and Procedures We carried out an evaluation,under the supervision and with the participation of our management,including our Chief Executive Officer and ChiefFinancial Officer,of the effectiveness of our disclosure controls and procedures(as such term is defined in Rules 13a-15(e)and 15d-15(e)under the Exchange Act)as of the end of the period covered by this report.Based on such evaluation,our Chief Executive Officer and ChiefFinancial Officer have concluded that,as of the end of such period,our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,processed,summarized and reported accurately and within the time frames specified in the SEC's rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,as appropriate to allow timely decisions regarding required disclosure. 69 Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting,as defined in Rules 13a-15(f)and 15d-15(f)under the Exchange Act.Our management assessed the effectiveness of our internal control over financial reporting as ofDecember 31,2015. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission(COSO)in Internal Control-Integrated Framework 2013).Based on this assessment,our management concluded that,as of December 31,2015,our internal control over financial reporting was effective.The effectiveness of our internal control over financial reporting as of December 31,2015 has been audited by our independent registered public accounting firm,as stated in its attestation report which is included herein. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting(as such term is defined in Rules 13a-15(f)and 15d-15 f)under the Exchange Act)during the quarter ended December 31,2015 that have materially affected,or are reasonably likely to materially affect,our internal control over financial reporting. Inherent Limitations on the Effectiveness ofControls Our management does not expect that our disclosure controls and procedures or our internal control over fmancial reporting will prevent or detect all errors and all fraud.A control system,no matter how well conceived and operated,can provide only reasonable,not absolute,assurance that the objectives ofthe control system are met.Further,the design of a control system must reflect the fact that there are resource constraints,and the benefits of controls must be considered relative to their costs.Due to the inherent limitations in a cost-effective control system,no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud,ifany,within our company have been detected. These inherent limitations include the realities thatjudgments in decision-making can be faulty and that breakdowns can occur due to simple error or mistake.Controls can also be circumvented by the individual acts of some persons,by collusion of two or more people,or by management override of the controls.The design ofany system of controls is based in part on certain assumptions about the likelihood of future events,and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.Projections of any evaluation of controls effectiveness to future periods are subject to risks.Over time,controls may become inadequate due to changes in conditions or deterioration in the degree of compliance with policies and procedures. 70 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Diamond Resorts International,Inc. Las Vegas,Nevada We have audited Diamond Resorts International,Inc. and Subsidiaries'internal control over financial reporting as of December 31,2015,based on criteria established inInternal Control-IntegratedFramework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Diamond Resorts International, Inc. and Subsidiaries' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,included in the accompanying Item 9A,Management's Annual Report on Internal Control Over Financial Reporting.Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists,and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion. Acompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityy of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.Acompany's internal control over financial reporting includes those policies and procedures that(1)pertain to the maintenance ofrecords that,in reasonable detail,accurately and fairly reflect the transactions and dispositions ofthe assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use,or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because ofchanges in conditions,or that the degree of compliance with the policies or procedures may deteriorate. In our opinion,Diamond Resorts International,Inc.and Subsidiaries maintained,in all material respects,effective internal control over financial reporting as of December 31,2015,based on the COSO criteria We also have audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the consolidated balance sheets of Diamond Resorts International,Inc.and Subsidiaries as of December 31,2015 and 2014,and the related consolidated statements of operations and comprehensive income(loss),stockholders'equity,and cash flows for each of the three years in the period ended December 31,2015 and our report dated February 29,2016 expressed an unqualified opinion thereon. s/BDO USA,LLP Las Vegas,Nevada February 29,2016 71 ITEM 9B.OTHER INFORMATION As previously disclosed,we and our indirect wholly-owned subsidiary,Diamond Resorts Kona Development,LLC(the Kona Buyer"),entered into the Kona Agreement with the Kona Seller,an affiliate of Och-Ziff Real Estate,related to the development by the Kona Seller ofa new resort on property to be acquired by the Kona Seller located in Kona,Hawaii. On February 25,2016,we entered into a First Amendment to the Kona Agreement(the"Kona Amendment")with the Kona Buyer and the Kona Seller,extending the Feasibility Period and the Termination Outside Date,each as defined in the Kona Agreement,to June 30,2016 and July 7,2016,respectively.The description of the Kona Amendment set forth above is qualified in its entirety by reference to the full text of the Kona Amendment,which is attached as Exhibit 10.66 to this annual report on Form 10-K and is incorporated herein by reference. 72 PART III ITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to the information to be set forth under the captions Proposal No.1—Election of Directors," "—Nominees,""—Other Continuing Directors,""Executive Officers," "Governance of the Company"and"Section 16(a)Beneficial Ownership Reporting Compliance"in our definitive proxy statement in connection with our 2016 Annual Meeting of Stockholders(the"2016 Proxy Statement"),which will be filed with the Securities and Exchange Commission no later than 120 days after December 31,2015 pursuant to Regulation 14A. ITEM 11.EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the information to be set forth under the captions Executive Compensation"and"Director Compensation"in the 2016 Proxy Statement. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the information to be set forth under the captions Security Ownership of Certain Beneficial Owners and Management"and"Equity Compensation Plan Information"in the 2016 Proxy Statement. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the information to be set forth under the captions Certain Relationships and Related Transactions"and"Director Independence"in the 2016 Proxy Statement. ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated by reference to the information to be set forth under the caption Proposal No.3—Ratification of Appointment of Independent Registered Public Accounting Firm—Independent Auditor Fees" in the 2016 Proxy Statement. 73 PARTIV ITEM 15.EXHIBITS,FINANCIAL STATEMENT SCHEDULES a) Documents filed as part of this Annual Report 1. Consolidated Financial Statements See the consolidated financial statements required to be filed in this Form 10-K commencing on page F-1 hereof. 2. Exhibits Exhibit Description 2.1 Asset Purchase Agreement,dated as of October 24,2011,among Pacific Monarch Resorts,Inc.,Vacation Interval Realty,Inc.,Vacation Marketing Group,Inc.,MGV Cabo,LLC,Desarrollo Cabo Azul, S.de R.L.de C.V.,Operadora MGVM S.de R.L.de C.V.,and DPM Acquisition,LLC(incorporated by reference to Exhibit 10.1 to Diamond Resorts Corporation's Current Report on Form 8-K filed on October 28,2011**) 2.2 Asset Purchase Agreement,dated as of August 14,2015,by and among Diamond Resorts Corporation,Ocean Beach Club,LLC,Gold Key Resorts,LLC,Professional Hospitality Resources,Inc.,Vacation Rentals,LLC and Resort Promotions,Inc. (incorporated by reference to Exhibit 2.1 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on November 4,2015***) 3.1 Amended and Restated Certificate of Incorporation of Diamond Resorts International,Inc. (incorporated by reference to Exhibit 3.1 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 3.2 Amended and Restated Bylaws of Diamond Resorts International,Inc. (incorporated by reference to Exhibit 3.2 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 4.1 Form of Common Stock Certificate of Diamond Resorts International,Inc. (incorporated by reference to Exhibit 4.1 to Diamond Resorts International,Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 9,2013****) 10.1 Purchase Agreement,dated as of April 30,2010,by and between Diamond Resorts Finance Holding Company and DRI Quorum 2010 LLC(incorporated by reference to Exhibit 10.11 to Amendment No. 1 to Diamond Resorts Corporation's Registration Statement on Form S-4 filed on May 2,2011**) 10.2 Indenture,dated as of April 1,2011,by and among Diamond Resorts Owner Trust 2011-1,Diamond Resorts Financial Services,Inc.and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.7 to Diamond Resorts Corporation's Annual Report on Form 10-K filed on March 30,2012**) 10.3 Note Purchase Agreement,dated as of April 21,2011,by and between Diamond Resorts Owner Trust 2011-1 and Diamond Resorts Corporation,and confirmed and accepted by Credit Suisse Securities(USA)LLC incorporated by reference to Exhibit 10.8 to Diamond Resorts Corporation's Annual Report on Form 10-K filed on March 30,2012**) 10.4 Second Amended and Restated Registration Rights Agreement,dated as ofJuly 21,2011,by and among Diamond Resorts Parent,LLC and the parties named therein(incorporated by reference to Exhibit 10.6 to Diamond Resorts Corporation's Current Report on Form 8-K filed on July 26,2011**) 10.5* Seventh Amended and Restated Indenture,dated as of January 20,2016,among Diamond Resorts Issuer 2008 LLC,as issuer,Diamond Resorts Financial Services,Inc.,as servicer,Wells Fargo Bank,National Association, as trustee,as custodian and as back-up servicer,and Credit Suisse AG,New York Branch,as Administrative Agent 10.6 Fifth Amended and Restated Sale Agreement,entered into on February 5,2015 and dated as of January 30, 2015,among Diamond Resorts Depositor 2008 LLC and Diamond Resorts Issuer 2008 LLC(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on February 9,2015***) 10.7 Fifth Amended and Restated Purchase Agreement,entered into on February 5,2015 and dated as of January 30,2015,among Diamond Resorts Finance Holding Company and Diamond Resorts Depositor 2008 LLC(incorporated by reference to Exhibit 10.3 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on February 9,2015***) 10.8 Lease,dated as of January 16,2008,by and between H/MX Health Management Solutions,Inc.and Diamond Resorts Corporation(incorporated by reference to Exhibit 10.15 to Amendment No. 1 to Diamond Resorts Corporation's Registration Statement on Form S-4 filed on May 2,2011**) 74 10.9 Terms of Engagement Agreement for Individual Independent Contractor,dated as of June 2009,by and between Praesumo Partners,LLC and Diamond Resorts Centralized Services USA,LLC,as amended by the Extension Agreement,effective as ofJune 1,2010,by and between Praesumo Partners,LLC and Diamond Resorts Centralized Services Company,successor to Diamond Resorts Centralized Services USA,LLC,and the Amendment to Extension Agreement,dated as of January 1,2011,by and between Praesumo Partners, LLC and Diamond Resorts Centralized Services Company,successor to Diamond Resorts Centralized Services USA,LLC(incorporated by reference to Exhibit 10.16 to Amendment No. 1 to Diamond Resorts Corporation's Registration Statement on Form S-4 filed on May 2,2011**) 10.10 Third Extension Agreement,dated as of August 20,2014,by and between Praesumo Partners,LLC and Diamond Resorts Centralized Services Company,successor to Diamond Resorts Centralized Services USA, LLC(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on August 22,2014***) 10.11 Fourth Extension Agreement,dated August 5,2015,among Diamond Resorts Centralized Services Company and Praesumo Partners,LLC(incorporated by reference to Exhibit 10.1 to Diamond Resorts International, Inc.'s Current Report on Form 8-K filed on August 11,2015***) 10.12 Marketing Agreement,dated as of April 30,2010,by and between Diamond Resorts International Marketing, Inc.and Quorum Federal Credit Union(incorporated by reference to Exhibit 10.1 to Diamond Resorts Corporation's Quarterly Report on Form 10-Q filed May 15,2012**) 10.13 First Amendment to Marketing Agreement,dated as ofApril 27,2012,by and between Diamond Resorts International Marketing,Inc.and Quorum Federal Credit Union(incorporated by reference to Exhibit 10.2 to Diamond Resorts Corporation's Quarterly Report on Form 10-Q filed May 15,2012**) 10.14 Lease Agreement between 1450 Center Crossing Drive,LLC and Diamond Resorts Corporation for rental of office building(incorporated by reference to Exhibit 10.3 to Diamond Resorts Corporation's Quarterly Report on Form 10-Q filed August 14,2012**) 10.15 Amended and Restated Loan Sale and Servicing Agreement,dated as of December 31,2012,by and among DRI Quorum 2010 LLC,Quorum Federal Credit Union,Diamond Resorts Financial Services,Inc.and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.37 to Diamond Resorts Corporation's Annual Report on Form 10-K filed on April 1,2013**) 10.16 First Amendment to Amended and Restated Loan Sale and Servicing Agreement,dated as of September 30, 2015,among DRI Quorum 2010 LLC,as seller,Diamond Resorts Financial Services,Inc.,as servicer,Wells Fargo Bank,National Association,as back-up servicer,and Quorum Federal Credit Union,a federally chartered credit union,as Buyer(incorporated by reference to Exhibit 10.1 to Diamond Resorts International, Inc.'s Current Report on Form 8-K filed on October 5,2015***) 10.17 Sale Agreement,dated as of January 23,2013,by and between Diamond Resorts Seller 2013-1,LLC and Diamond Resorts Owner Trust 2013-1 (incorporated by reference to Exhibit 10.1 to Diamond Resorts Corporation's Current Report on Form 8-K filed on January 29,2013**) 10.18 Indenture,dated as of January 23,2013,by and among Diamond Resorts Owner Trust 2013-1,Diamond Resorts Financial Services,Inc. and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.2 to Diamond Resorts Corporation's Current Report on Form 8-K filed on January 29,2013**) 10.19 Exchange Agreement,dated as of July 17,2013,by and among Diamond Resorts International,Inc.,Diamond Resorts Parent,LLC and the members of Diamond Resorts Parent,LLC party thereto(incorporated by reference to Exhibit 10.4 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 10.20 Redemption Agreement,dated as ofJuly 17,2013,by and between Cloobeck Diamond Parent,LLC and the members of Cloobeck Diamond Parent,LLC party thereto(incorporated by reference to Exhibit 10.5 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 10.21 Director Designation Agreement,dated as of July 17,2013,by and among Diamond Resorts International,Inc. and the stockholders party thereto(incorporated by reference to Exhibit 10.6 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 10.22 Stockholders'Agreement,dated as of July 17,2013,by and among Diamond Resorts International,Inc.and the stockholders party thereto(incorporated by reference to Exhibit 10.7 to Diamond Resorts International, Inc.'s Quarterly Report on Form 10-Q filed on August 8,2013***) 10.23 First Amendment to Stockholders' Agreement,dated as of August 11,2014,by and among Diamond Resorts International,Inc. and the stockholders party thereto(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on August 13,2014***) 10.24+ Form of Directors'Indemnification Agreement(incorporated by reference to Exhibit 10.46 to Diamond Resorts International,Inc.'s Registration Statement on Form S-1 filed on June 14,2013****) 10.25+ Diamond Resorts International,Inc. 2013 Incentive Compensation Plan(incorporated by reference to Exhibit 10.48 to Diamond Resorts International,Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 9,2013****) 75 10.26+ Form of Stock Option Award Agreement(incorporated by reference to Exhibit 10.49 to Diamond Resorts International,Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 9,2013****) 10.27+ Form of Restricted Stock Award Agreement(incorporated by reference to Exhibit 10.50 to Diamond Resorts International,Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 9,2013****) 10.28+ Diamond Resorts International,Inc.Employee Stock Purchase Plan(incorporated by reference to Exhibit 10.51 to Diamond Resorts International,Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 9,2013****) 10.29+ Diamond Resorts International,Inc. 2015 Equity Incentive Compensation Plan(the"2015 Equity Incentive Plan")(incorporated by reference to Exhibit 10.6 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.30+ Form of Non-Qualified Stock Option Agreement under the 2015 Equity Incentive Plan(incorporated by reference to Exhibit 10.7 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.31+ Form of Restricted Stock Agreement under the 2015 Equity Incentive Plan(incorporated by reference to Exhibit 10.8 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.32+ Form of Restricted Stock Unit Agreement under the 2015 Equity Incentive Plan(incorporated by reference to Exhibit 10.9 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.33+ Form of Non-Employee Director Deferred Stock Agreement under the 2015 Equity Incentive Plan incorporated by reference to Exhibit 10.10 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.34+ Diamond Resorts International,Inc.Bonus Compensation Plan(incorporated by reference to Exhibit 10.11 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.35 Credit Agreement,dated as of September 11,2013,by and among Diamond Resorts Corporation,as borrower, Diamond Resorts International,Inc.,the lenders party thereto and Credit Suisse AG,as administrative agent, and the exhibits and schedules thereto(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on September 17,2013***) 10.36 Second Amendment and First Incremental Assumption Agreement to the Credit Agreement,dated as of December 3,2015,among Diamond Resorts International,Inc.,Diamond Resorts Corporation,Credit Suisse AG,Cayman Islands Branch,as administrative agent and collateral agent,and the lender entities party thereto incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8- K filed on December 8,2015***) 10.37 Indenture,dated as of September 20,2013,by and among Diamond Resorts Tempus Owner Trust 2013,as issuer,Diamond Resorts Financial Services,Inc.,as Servicer,and Wells Fargo Bank,National Association,as indenture trustee and back-up servicer(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on September 26,2013***) 10.38 Sale Agreement,dated as of September 20,2013,by and among Diamond Resorts Tempus Seller 2013,LLC, as seller,Diamond Resorts Tempus Owner Trust 2013,as issuer,and their respective permitted successors and assigns(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on September 26,2013***) 10.39 Omnibus Amendment,dated as of October 18,2013,by and among Diamond Resorts Issuer 2008 LLC,as Issuer;Diamond Resorts Corporation,Diamond Resorts Holdings,LLC and Diamond Resorts International, Inc.,as Performance Guarantors;Diamond Resorts Depositor 2008 LLC,as Depositor;Diamond Resorts Financial Services,Inc.,as Servicer;Wells Fargo Bank,National Association,as Indenture Trustee,Custodian and Back-Up Servicer;Credit Suisse AG,New York Branch,as Administrative Agent and a Funding Agent; GIFS Capital Company,LLC,as Conduit;and Diamond Resorts Finance Holding Company,as Seller incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8- K filed on October 24,2013***) 10.40 Omnibus Amendment No.2,dated as of September 26,2014,by and among Diamond Resorts Issuer 2008 LLC,as Issuer;Diamond Resorts Corporation,Diamond Resorts Holdings,LLC and Diamond Resorts International,Inc.,as Performance Guarantors;Diamond Resorts Depositor 2008 LLC,as Depositor,Diamond Resorts Financial Services,Inc.,as Servicer;Wells Fargo Bank,National Association,as Indenture Trustee, Custodian and Back-Up Servicer;Credit Suisse AG,New York Branch,as Administrative Agent and a Funding Agent;GIFS Capital Company,LLC,as Conduit;and Diamond Resorts Finance Holding Company, as Seller(incorporated by reference to Exhibit 10.3 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on November 4,2014***) 10.41 Omnibus Amendment dated June 26,2015,among Diamond Resorts Issuer 2008 LLC,as issuer,Diamond Resorts Depositor 2008 LLC,as depositor,Diamond Resorts Corporation,Diamond Resorts Holdings,LLC, and Diamond Resorts International,Inc.,each in its capacity as performance guarantor,Diamond Resorts Finance Holding Company,as seller,Diamond Resorts Financial Services,Inc.,as servicer,Wells Fargo Bank, National Association,as trustee,as custodian and as back-up servicer,GIFS Capital Company,LLC,as a conduit,and Credit Suisse AG,New York Branch,as administrative agent(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on July 2,2015***) 76 10.42 Omnibus Amendment No. 2,dated July 1,2015,among Diamond Resorts Issuer 2008 LLC,as issuer, Diamond Resorts Depositor 2008 LLC,as depositor,Diamond Resorts Corporation,Diamond Resorts Holdings,LLC,and Diamond Resorts International,Inc.,each in its capacity as performance guarantor, Diamond Resorts Finance Holding Company,as seller,Diamond Resorts Financial Services,Inc.,as servicer, Wells Fargo Bank,National Association,as trustee,as custodian and as back-up servicer,GIFS Capital Company,LLC,as a conduit,and Credit Suisse AG,New York Branch,as administrative agent(incorporated by reference to Exhibit 10.13 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on August 5,2015***) 10.43 Sale Agreement,dated as ofNovember 20,2013,by and between Diamond Resorts Seller 2013-2,LLC,as Seller,and Diamond Resorts Owner Trust 2013-2,as Issuer,and their respective permitted successors and assigns(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 26,2013***) 10.44 Indenture,dated as of November 20,2013,by and among Diamond Resorts Owner Trust 2013-2,as Issuer, Diamond Resorts Financial Services,Inc.,as Servicer,and Wells Fargo Bank,National Association,as Indenture Trustee and Back-up Servicer(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 26,2013***) 10.45 Credit Agreement,dated as of May 9,2014,by and among Diamond Resorts Corporation,Diamond Resorts International,Inc.,the lenders party thereto and Credit Suisse AG,as administrative agent and collateral agent, including forms of Security Agreement and Guarantee Agreement and other exhibits and schedules thereto incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8- K filed on May 15,2014***) 10.46 First Amendment to Credit Agreement,dated as of December 22,2014,by and among Diamond Resorts Corporation,Diamond Resorts International,Inc.,the lenders party thereto and Credit Suisse AG,as administrative agent and collateral agent(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on December 30,2014***) 10.47 Sale Agreement,dated as of November 20,2014,by and between Diamond Resorts Seller 2014-1,LLC and Diamond Resorts Owner Trust 2014-1 (incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 21,2014***) 10.48 Indenture,dated as of November 20,2014,by and among Diamond Resorts Owner Trust 2014-1,Diamond Resorts Financial Services,Inc. and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 21, 2014***) 10.49 Sale Agreement,dated as of July 29,2015,by and between Diamond Resorts Seller 2015-1,LLC and Diamond Resorts Owner Trust 2015-1 (incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on August 3,2015***) 10.50 Indenture,dated as of July 29,2015,by and among Diamond Resorts Owner Trust 2015-1,Diamond Resorts Financial Services,Inc.and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on August 3,2015***) 10.51 Sale Agreement,dated as of November 17,2015,by and between Diamond Resorts Seller 2015-2,LLC and Diamond Resorts Owner Trust 2015-2(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 19,2015***) 10.52 Indenture,dated as of November 17,2015,by and among Diamond Resorts Owner Trust 2015-2,Diamond Resorts Financial Services,Inc.and Wells Fargo Bank,National Association(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on November 19, 2015***) 10.53+ Master Agreement,dated as of January 6,2015,by and among Diamond Resorts International,Inc.,Diamond Resorts Corporation,Hospitality Management and Consulting Service,L.L.C., Stephen J. Cloobeck,Cloobeck Companies,LLC,JHJM Nevada I,LLC and,solely for limited purposes stated therein,Nevada Resort Properties Polo Towers Limited Partnership(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on January 6,2015***) 10.54 Membership Interest Purchase Agreement,dated as of January 6,2015,by and among Diamond Resorts Corporation,Cloobeck Companies,LLC and Chautauqua Management,LLC(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on January 6, 2015***) 10.55 Assignment and Assumption Agreement,dated as of January 6,2015,by and among Diamond Resorts Corporation,JHJM Nevada I,LLC and Nevada Resort Properties Polo Towers Limited Partnership incorporated by reference to Exhibit 10.3 to Diamond Resorts International,Inc.'s Current Report on Form 8- K filed on January 6,2015***) 10.56+ Employment Agreement,dated as of January 1,2015,by and between Hospitality Management and Consulting Service,L.L.C.and David F.Palmer(incorporated by reference to Exhibit 10.41 to Diamond Resorts International,Inc.'s Annual Report on Form 10-K filed on February 26,2015***) 77 10.57+ Employment Agreement,dated as of January 1,2015,by and between Hospitality Management and Consulting Service,L.L.C.and C. Alan Bentley(incorporated by reference to Exhibit 10.42 to Diamond Resorts International,Inc.'s Annual Report on Form 10-K filed on February 26,2015***) 10.58+ Employment Agreement,dated as of January 1,2015,by and between Hospitality Management and Consulting Service,L.L.C.and Howard S.Lanznar(incorporated by reference to Exhibit 10.43 to Diamond Resorts International,Inc.'s Annual Report on Form 10-K filed on February 26,2015***) 10.59+ Employment Agreement,dated as of January 1,2015,by and between Hospitality Management and Consulting Service,L.L.C.and Steven F.Bell(incorporated by reference to Exhibit 10.45 to Diamond Resorts International,Inc.'s Annual Report on Form 10-K filed on February 26,2015***) 10.60+ Employment Agreement,dated May 19,2015,by and between Diamond Resorts International Marketing,Inc. and Michael Flaskey(incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.61+ First Amendment to Employment Agreement,dated May 20,2015,by andbetween Hospitality Management and Consulting Service,L.L.C.and David F.Palmer(incorporated by reference to Exhibit 10.2 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.62+ First Amendment to Employment Agreement,dated May 20,2015,by and between Hospitality Management and Consulting Service,L.L.C.and C.Alan Bentley(incorporated by reference to Exhibit 10.3 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.63+ First Amendment to Employment Agreement,dated May 20,2015,by and between Hospitality Management and Consulting Service,L.L.C. and Howard S.Lanznar(incorporated by reference to Exhibit 10.4 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.64+ First Amendment to Employment Agreement,dated May 20,2015,by and between Hospitality Management and Consulting Service,L.L.C. and Steven F.Bell(incorporated by reference to Exhibit 10.5 to Diamond Resorts International,Inc.'s Current Report on Form 8-K filed on May 26,2015***) 10.65 Agreement for the Purchase and Sale of Property,dated as of July 28,2015,by and between Hawaii Funding LLC,Diamond Resorts Kona Development,LLC and Diamond Resorts International,Inc. (incorporated by reference to Exhibit 10.1 to Diamond Resorts International,Inc.'s Quarterly Report on Form 10-Q filed on November 4,2015***) 10.66* First Amendment to Agreement for the Purchase and Sale ofProperty,dated as of February 25,2016,by and between Hawaii Funding LLC,Diamond Resorts Kona Development,LLC and Diamond Resorts International,Inc. 21.1* Subsidiaries of Diamond Resorts International,Inc. 23.1* Consent ofBDO USA,LLP 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a)under the Securities Exchange Act of 1934,as amended 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a)under the Securities Exchange Act as of 1934,as amended 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101*The following materials from Diamond Resorts International,Inc.'s Annual Report on Form 10-K for the year ended December 31,2015,formatted in XBRL(Extensible Business Reporting Language): (i)the Consolidated Balance Sheets,(ii)the Consolidated Statements of Operations and Comprehensive Income Loss),(iii)the Consolidated Statements of Stockholder's Equity,(iv)the Consolidated Statements of Cash Flows;and(v)Notes to the Consolidated Financial Statements,furnished herewith. Filed herewith. Indicates a management contract or compensatory plan or arrangement. Commission tile number 333-172772. Commission file number 001-35967. Commission file number 333-189306. 78 SIGNATURES Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. DIAMOND RESORTS INTERNATIONAL,INC. Date: February 29,2016 By: s/DAVID F.PALMER David F.Palmer President and Chief Executive Officer(principal executive officer) Date: February 29,2016 By: s/C.ALAN BENTLEY C.Alan Bentley Executive Vice President and Chief Financial Officer principal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf ofthe registrant and in the capacities indicated and on the 29th day of February 2016. 79 Signature Title s/David F.Palmer David F.Palmer President,Chief Executive Officer(principal executive officer) and Director s/C.Alan Bentley C.Alan Bentley Executive Vice President and Chief Financial Officer(principal financial officer) s/Lisa M. Gann Lisa M.Gann Senior Vice President and Chief Accounting Officer(principal accounting officer) s/Stephen J. Cloobeck Stephen J.Cloobeck Chairman of the Board s/Lowell D.Kraff Lowell D.Kraff Vice Chairman of the Board s/David J.Berkman David J.Berkman Director s/Richard M.Daley Richard M.Daley Director s/Jeffrey W.Jones Jeffrey W.Jones Director s/Hope S.Taitz Hope S.Taitz Director s/Zachary Warren Zachary Warren Director s/Robert Wolf Robert Wolf Director 80 INDEX TO FINANCIAL STATEMENTS PAGE NUMBER Audited Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31,2015 and 2014 F-3 Consolidated Statements of Operations and Comprehensive Income(Loss)for the years ended December 31,2015,2014 and 2013 F-4 Consolidated Statement of Stockholders'Equity for the years ended December 31,2015, 2014 and 2013 F-5 Consolidated Statements of Cash Flows for the years ended December 31,2015,2014 and 2013 F-6 Notes to the Consolidated Financial Statements F-9 F-1 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Diamond Resorts International,Inc. Las Vegas,Nevada We have audited the accompanying consolidated balance sheets of Diamond Resorts International, Inc. and Subsidiaries (the Company")as ofDecember 31,2015 and 2014 and the related consolidated statements ofoperations and comprehensive income loss), stockholders'equity,and cash flows for each of the three years in the period ended December 31,2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. In our opinion,the consolidated financial statements referred to above present fairly,in all material respects,the financial position of Diamond Resorts International,Inc. and Subsidiaries at December 31,2015 and 2014,and the results of its operations and its cash flows for each ofthe three years in the period ended December 31,2015,in conformity with accounting principles generally accepted in the United States ofAmerica. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Diamond Resorts International,Inc.and Subsidiaries'internal control overfinancial reporting as ofDecember 31,2015 and 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO)and our report dated Febniary 29,2016,expressed an unqualified opinion thereon. s/BDO USA,LLP Las Vegas,Nevada February 29,2016 F-2 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31,2015 and 2014 In thousands,except share data) 2015 2014 Assets: Cash and cash equivalents 290,510 $ 255,042 Cash in escrow and restricted cash 98,295 68,358 Vacation Interests notes receivable,net of allowance of$165,331 and$130,639, respectively 622,607 498,662 Due from related parties,net 42,435 51,651 Other receivables,net 55,786 59,821 Income tax receivable 147 467 Deferred tax asset 577 423 Prepaid expenses and other assets,net 100,647 86,439 Unsold Vacation Interests,net 358,278 262,172 Property and equipment,net 95,361 70,871 Assets held for sale 1,672 14,452 Goodwill 104,521 30,632 Other intangible assets,net 222,190 178,786 Total assets 1,993,026 $ 1,577,776 Liabilities and Stockholders'Equity: Accounts payable 15,144 $ 14,084 Due to related parties,net 54,778 34,768 Accrued liabilities 221,662 134,680 Income taxes payable 346 108 Deferred income taxes 92,829 47,250 Deferred revenues 119,720 124,997 Senior Credit Facility,net ofunamortized original issue discount of$4,735 and$2,055, respectively 569,931 440,720 Securitization notes and Funding Facilities,net of unamortized original issue discount of$103 and$156,respectively 642,758 509,208 Derivative liabilities 146 Notes payable 4,750 4,612 Total liabilities 1,722,064 1,310,427 Commitments and contingencies(see Note 18) Stockholders'equity: Common stock$0.01 par value per share;authorized-250,000,000 shares;issued 71,928,002 and 75,732,088 shares,respectively 719 757 Preferred stock$0.01 par value per share;authorized-5,000,000 shares Additional paid-in capital 381,475 482,732 Accumulated deficit 31,024) 180,502) Accumulated other comprehensive loss 20,151) 19,561) Subtotal 331,019 283,426 Less:Treasury stock at cost;2,222,383 and 642,900 shares,respectively 60,057) 16,077) Total stockholders'equity 270,962 267,349 Total liabilities and stockholders'equity 1,993,026 $ 1,577,776 The accompanying notes are an integral part of these consolidated financial statements. F-3 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(LOSS) For the years ended December 31,2015,2014 and 2013 In thousands,except per share data) 2015 2014 2013 Revenues: Management and member services 165,169 $ 152,201 $ 131,238 Consolidated resort operations 15,356 38,406 35,512 Vacation Interests sales,net ofprovision of$80,772,$57,202 and 44,670,respectively 624,283 532,006 464,613 Interest 80,319 68,398 57,044 Other 68,913 53,555 41,381 Total revenues 954,040 844,566 729,788 Costs and Expenses: Management and member services 34,293 33,184 37,907 Consolidated resort operations 14,535 35,409 34,333 Vacation Interests cost of sales 28,721 63,499 56,695 Advertising,sales and marketing 350,411 297,095 258,451 Vacation Interests carrying cost,net 39,671 35,495 41,347 Loan portfolio 10,888 8,811 9,631 Other operating 28,371 22,135 12,106 General and administrative 112,501 102,993 145,925 Depreciation and amortization 34,521 32,529 28,185 Interest expense 48,476 56,943 88,626 Loss on extinguishment ofdebt 46,807 15,604 Impairments and other write-offs 12 240 1,587 Gain on disposal of assets 8) 265) 982) Gain on bargain purchase from business combinations 2,879) Total costs and expenses 702,392 734,875 726,536 Income before provision for income taxes 251,648 109,691 3,252 Provision for income taxes 102,170 50,234 5,777 Net income(loss)149,478 59,457 2,525) Other comprehensive income(loss): Currency translation adjustments,net of tax of$0 2,466) 3,545) 2,543 Post-retirement benefit plan,net of tax of$0 1,893 171 2,064) Other 17) 10) 77 Total other comprehensive(loss)income,net of tax 590) 3,384) 556 Comprehensive income(loss) 148,888 $ 56,073 $ (1,969) Net income(loss)per share: Basic 2.05 $ 0.79 $ 0.04) Diluted 1.98 $ 0.77 $ 0.04) Weighted average common shares outstanding: Basic 72,881 75,466 63,704 Diluted 75,479 76,947 63,704 The accompanying notes are an integral part ofthese consolidated financial statements. F-4 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS'EQUITY For the years ended December 31,2015,2014 and 2013 in thousands,except share data) Common Accumulated Less: Stock Common Additional Other Treasury Total Shares Stock Par Paid-in Accumulated Comprehensive Stock at Stockholders' Outstanding Value Capital Deficit (Loss)Income Cost Equity Balance as ofDecember 31,2012 54,057,867 $ 541 $ 155,027 $ (237,434) $16,733) $ - $ (98,599) Issuance of common stock in the IPO, net ofrelated costs 16,100,000 161 204,171 204,332 Issuance of common stock in the Island One Acquisition 5,236,251 52 73,255 73,307 Repurchase ofoutstanding warrants 10,346) 10,346) Stock-based compensation 64,284 1 41,087 41,088 Net loss for the year ended December 31,2013 2,525) 2,525) Other comprehensive income(loss): Currency translation adjustments,net of tax of$0 2,543 2,543 Unrealized loss on post-retirement benefit plan,net oftax of$0 2,064) 2,064) Other 77 77 Balance as ofDecember 31,2013 75,458,402 755 463,194 239,959) 16,177) 207,813 Exercise ofstock options 227,500 2 3,353 3,355 Stock-based compensation 46,186 16,185 16,185 Common stock repurchased under the Stock Repurchase Program 642,900) 16,077) 16,077) Net income for the year ended December 31,2014 59,457 59,457 Other comprehensive income(loss): Currency translation adjustments,net oftax of$0 3,545) 3,545) Post-retirement benefit plan,net oftax of$0 171 171 Other 10) 10) Balance as ofDecember 31,2014 75,089,188 757 482,732 180,502) 19,561) (16,077)267,349 Exercise ofstock options 188,495 2 2,937 2,939 Stock-based compensation 141,490 1 14,408 14,409 Excess tax benefits from stock-based compensation 922 922 Common stock repurchased under the Stock Repurchase Program 5,713,554) 163,545) (163,545) Retirement oftreasury stock 41) (119,524) 119,565 Net income for the year ended December 31,2015 149,478 149,478 Other comprehensive income(loss): Currency translation adjustment,net of tax of$0 2,466) 2,466) Deconsolidation of St.Maarten post- retirement benefit plan,net oftax of 0 1,893 1,893 Other 17) 17) Balance as of December 31,2015 69,705,619 $ 719 $ 381,475 $ (31,024) $ (20,151) $ (60,057) $ 270.962 The accompanying notes are an integral part of these consolidated financial statements. F-5 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31,2015,2014 and 2013 In thousands) 2015 2014 2013 Operating activities: Net income(loss)149,478 $ 59,457 $ (2,525) Adjustments to reconcile net income(loss)to net cash provided by(used in) operating activities: Provision for uncollectible Vacation Interests sales revenue 80,772 57,202 44,670 Amortization of capitalized financing costs and original issue discounts 6,233 5,337 7,079 Amortization ofcapitalized loan origination costs and net portfolio discounts 12,713 8,918 5,955 Depreciation and amortization 34,521 32,529 28,185 Stock-based compensation 14,948 16,202 40,533 Excess tax benefits from stock-based compensation 922) Non-cash expense related to Alter Ego Suit 5,508 Loss on extinguishment of debt 46,807 15,604 Impairments and other write-offs 12 240 1,587 Gain on disposal of assets 8) 265) 982) Gain on bargain purchase from business combinations,net of tax 2,879) Deferred income taxes 46,146 24,424 3,264 Loss on foreign currency exchange 1,210 362 245 Gain on mortgage repurchase 515) 621) 111) Unrealized loss on derivative instruments 462 Unrealized loss on post-retirement benefit plan 171 887 Loss on investment injoint venture 122 Changes in operating assets and liabilities excluding acquisitions: Cash in escrow and restricted cash 16,137) 3,256 4,901) Vacation Interests notes receivable 216,954) (158,842) (128,803) Due from related parties,net 18,581 2,580 11,568) Other receivables,net 3,726 5,412) 5,853) Prepaid expenses and other assets,net 10,044 16,823) 6,534) Unsold Vacation Interests,net 59,611) 22,784 7,131 Accounts payable 1,374 288) 6,446) Due to related parties,net 23,084 8,413)20,842) Accrued liabilities 70,527 17,628 13,119 Income taxes receivable and payable 558 1,402) 1,247 Deferred revenues 4,470) 15,483 14,272 Net cash provided by(used in)operating activities 175,894 $ 121,314 $ (2,158) The accompanying notes are an integral part of these consolidated financial statements. F-6 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS-Continued For the years ended December 31,2015,2014 and 2013 In thousands) 2015 2014 2013 Investing activities: Property and equipment capital expenditures 26,325) $ (17,950) $ (15,150) Purchase of intangible assets 8,993) Investment injoint venture in Asia 1,500) Purchase of assets in connection with the Gold Key Acquisition,net of cash acquired of$66 167,434) Purchase of assets in connection with the PMR Service Companies Acquisition 47,417) Cash acquired in connection with the Island One Acquisition 569 Proceeds from sale of assets 567 850 3,933 Net cash used in investing activities 203,685)17,100)58,065) Financing activities: Changes in restricted cash 13,817) 9,363 38,645) Proceeds from issuance of Senior Credit Facility 147,000 442,775 Proceeds from issuance of revolving credit facility 15,000 Proceeds from issuance of securitization notes and Funding Facilities 649,159 466,325 552,677 Proceeds from issuance of notes payable 1,113 5,357 Payments on Senior Credit Facility 18,109) 2,225) Payments on revolving credit facility 15,000) Payments on Senior Secured Notes,including redemption premium 404,683)56,628) Payments on securitization notes and Funding Facilities 515,728) (348,454) (427,472) Payments on notes payable 13,003)30,721) (137,220) Payments of debt issuance costs 11,706)15,852) 9,996) Excess tax benefits from stock-based compensation 922 Proceeds from issuance of common and preferred stock,net of related costs 204,332 Repurchase of outstanding warrants 10,346) Common stock repurchased under the Stock Repurchase Program 163,545)16,077) Payments related to early extinguishment of notes payable 2,034) Proceeds from exercise of stock options 2,939 3,355 Payments for derivative instrument 316) Net cash provided by financing activities 63,796 104,919 80,025 Net increase in cash and cash equivalents 36,005 209,133 19,802 Effects of changes in exchange rates on cash and cash equivalents 537) 1,167) 173 Cash and cash equivalents,beginning of period 255,042 47,076 27,101 Cash and cash equivalents,end of period 290,510 $ 255,042 $ 47,076 The accompanying notes are an integral part of these consolidated financial statements. F-7 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued For the years ended December 31,2015,2014 and 2013 In thousands) 2015 2014 2013 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash interest paid on corporate indebtedness 24,954 $ 55,208 $ 62.956 Cash interest paid on securitization notes and Funding Facilities 16,761 $ 15,068 $ 16.597 Cash paid for taxes,net of cash tax refunds 2,903 $ 3,094 $ 1.245 Purchase ofassets in connection with the Gold Key Acquisition(2015),the Island One Acquisition and the PMR Service Companies Acquisition(2013): Fairvalue of assets acquired 111,722 $ 134,404 Gain on bargain purchase recognized 2,879) Goodwill acquired 73,879 30,632 Cash paid 167,500) 47,417) DRII common stock issued 73,307) Deferred tax liability 19,140) Liabilities assumed 18,101 $ 22,293 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Insurance premiums financed through issuance of notes payable 13,141 $ 10.599 $ 11.480 Assets held for sale reclassified to unsold Vacation Interests,net 12,488 $ Unsold Vacation Interests,net reclassified to property and equipment 5.995 $ Unsold Vacation Interests,net reclassified to assets held for sale 4,254 $ 9,758 Information technology software and support financed through issuance of notes payable 472 $ The accompanying notes are an integral part of these consolidated financial statements. F-8 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 —Background,Business and Basis of Presentation Business and Background On July 24,2013,Diamond Resorts International,Inc. ("DRII')closed the initial public offering(the"IPO")of an aggregate of 17,825,000 shares of its common stock at the IPO price of$14.00 per share. In the IPO,DRII sold 16,100,000 shares of common stock,and Cloobeck Diamond Parent,LLC("CDP"),in its capacity as a selling stockholder,sold 1,725,000 shares of common stock.The net proceeds to DRII were$204.3 million after deducting all offering expenses. DRII was incorporated as a Delaware corporation on January 11,2013 to effect the Reorganization Transactions(defined below)and consummate the IPO.Immediately prior to the consummation of the IPO,Diamond Resorts Parent,LLC("DRP") was the sole stockholder of DRII.In connection with,and immediately prior to the completion ofthe IPO,each member of DRP contributed all of its equity interests in DRP to DRII in return for shares of common stock of DRII.Following this contribution,DRII redeemed the shares of common units held by DRP and DRP was merged with and into DRII,with DRII being the surviving entity.The Company refers to these and other related transactions entered into substantially concurrently with the IPO as the"Reorganization Transactions." DRII is a holding company,and its principal asset is the direct and indirect ownership of equity interests in its subsidiaries,including Diamond Resorts Corporation("DRC"),which is the operating subsidiary that has historically conducted the business described below. Except where the context otherwise requires or where otherwise indicated,references in the consolidated fmancial statements to "the Company"refer to DRP prior to the consummation of the Reorganization Transactions,and DRII,as the successor to DRP,following the consummation of the Reorganization Transactions,in each case together with its subsidiaries, including DRC. The Company operates in the hospitality and vacation ownership industry,with a worldwide resort network of 379 vacation destinations located in 35 countries throughout the world,including the continental United States("U.S."),Hawaii, Canada,Mexico,the Caribbean,Central America, South America,Europe,Asia,Australia,New Zealand and Africa(as of January 31,2016).The Company's resort network includes 109 resort properties with approximately 12,000 units that are managed by the Company and 250 affiliated resorts and hotels and 20 cruise itineraries,which the Company does not manage and do not carry the Company's brand,but are a part of the Company's resort network and,through THE Club and other Club offerings(the"Clubs"),are available for its members to use as vacation destinations. The Company's operations consist oftwo interrelated businesses:(i)hospitality and management services,which includes operations related to the management of the homeowners associations(the"HOAs")for resort properties and eight multi-resort trusts and one single-resort trust(collectively,the "Diamond Collections"),operations of the Clubs,food and beverage venues owned and managed by the Company and the provision of other hospitality and management services and(ii)vacation interests VOIs"or"Vacation Interests")sales and fmancing,which includes marketing and sales of VOIs and consumer financing for purchasers of the Company's VOIs.Historically,we have derived a majority of the Company's total revenue and net income from the vacation interests sales and fmancing segment. Through December 31,2014,hospitality and management services also included operations of two properties located in St.Maarten for which a wholly-owned subsidiary of the Company functioned as the HOA.Effective January 1,2015,the Company assigned the rights and related obligations associated with assets it previously owned as the HOA for these properties to newly created HOAs(the"St.Maarten HOAs"). Since then,the Company has had no beneficial interest in the St.Maarten HOAs,except through its ownership of VOIs,but continues to serve as the manager of the St.Maarten HOAs pursuant to customary management services agreements.As a result,the operating results and the assets and liabilities of the St.Maarten properties were deconsolidated from the Company's consolidated financial statements effective January 1,2015(with the exception of all employee-related liabilities including the post-retirement benefit plan,which were transferred to the St. Maarten HOAs during the quarter ended September 30,2015,and cash accounts,the majority of which is expected to be transferred to the St.Maarten HOAs during the quarter ending March 31,2016)(the"St.Maarten Deconsolidation"). On October 16,2015,the Company completed its acquisition of substantially all of the assets ofOcean Beach Club,LLC, Gold Key Resorts,LLC,Professional Hospitality Resources,Inc.,Vacation Rentals,LLC and Resort Promotions,Inc. collectively,the"Gold Key Companies")relating to their operation of their vacation ownership business in Virginia Beach, Virginia and the Outer Banks,North Carolina(the"Gold Key Acquisition").The Company acquired management contracts, real property interests,unsold vacation ownership interests and other assets of the Gold Key Companies,adding six additional managed resorts to the Company's resort network,in exchange for a cash purchase price of$167.5 million and the assumption of certain non-interest-bearing liabilities.At the closing ofthe Gold Key Acquisition,an additional$6.2 million was deposited F-9 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued into an escrow account to support the Company's obligations under the Default Recovery Agreement,which is treated as restricted cash in the accompanying consolidated balance sheet. See"Note 8-Prepaid expenses and other assets"for further detail on the Default Recovery Agreement. Basis ofPresentation Except where the context otherwise requires or where otherwise indicated,the consolidated financial statements and other historical financial data included in this annual report on Form 10-K are(i)those ofDRP and its subsidiaries through July 24, 2013,after giving retroactive effect to the Reorganization Transactions and(ii)those of DRII and its subsidiaries after July 24, 2013. The Company has reclassified the amount of cash collected on overnight rental operations(the"Rental Trust Cash Accounts")on its balance sheet as ofDecember 31,2014 from cash in escrow and restricted cash to cash and cash equivalents. The Company concluded that the majority of the Rental Trust Cash Accounts ultimately belong to the Company,and are available for general corporate use. Consequently,the Company reclassified$12.6 million to cash and cash equivalents as of December 31,2014 to conform to the current year presentation. In addition,the Company revised its statements of cash flows for the years ended December 31,2014 and 2013 to reflect these reclassifications. In addition,the Company reclassified certain amounts related to changes in cash in escrow and restricted cash from cash flows from fmancing activities to cash flows from operating activities in its statements of cash flows for the years ended December 31,2014 and 2013 to conform to the current period presentation.The revisions and impact on the previously-issued balance sheet and statements of cash flows are not material. Note 2 —Summary of Significant Accounting Policies Significant accounting policies are those policies that,in management's view,are most important in the portrayal of the Company's financial condition and results ofoperations.The methods,estimates and judgments that the Company uses in applying its accounting policies have a significant impact on the results that it reports in the financial statements. Some of these significant accounting policies require the Company to make subjective and complex judgments regarding matters that are inherently uncertain.Those significant accounting policies that require the most significant judgment are discussed further below. Principles ofConsolidation—The accompanying consolidated financial statements include all subsidiaries ofthe Company.All significant intercompany transactions and balances have been eliminated from the accompanying consolidated financial statements. Use ofEstimates—The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles("U.S. GAAP")requires the Company to make difficult and subjective judgments that affect the reported amounts of assets,liabilities,revenues and expenses,often as a result ofthe need to make estimates regarding matters that are inherently uncertain.The methods,estimates and judgments that the Company uses in applying its accounting policies have a significant impact on the results that the Company reports in its financial statements.On an ongoing basis,the Company evaluates its estimates and assumptions,including those related to revenue,bad debts,unsold Vacation Interests,net,Vacation Interests cost of sales,stock-based compensation expense and income taxes.These estimates are based on historical experience and various other assumptions that management believes are reasonable under the circumstances.The results of the Company's analyses form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions or conditions,and the impact of such differences may be material to the Company's consolidated financial statements. Significant estimates are also used by the Company to record a provision for uncollectible Vacation Interests notes receivable.This provision is calculated as projected gross losses for originated Vacation Interests notes receivable,taking into account estimated VOI recoveries.The Company applies its historical default percentages based on credit scores of the individual customers to its Vacation Interests notes receivable population and evaluates other factors such as economic conditions,industry trends,defaults and past due agings to analyze the adequacy of the allowance.If actual Vacation Interests notes receivable losses differ materially from these estimates,the Company's future results of operations may be adversely impacted. Significant estimates were used by the Company to estimate the fair value ofthe assets acquired and liabilities assumed in the acquisition of certain assets in connection with the Gold Key Acquisition.These estimates included projections of future cash flows derived from sales ofVOIs,member relationship lists,management services revenue and rental income. Additionally,the Company made significant estimates of costs associated with such projected revenues including but not limited to recoveries and discount rates.The Company also made significant estimates which include: (i)allowance for loan F-10 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued and contract losses and provision for uncollectible Vacation Interests sales revenue;(ii)estimated useful lives of property and equipment;(iii)estimated useful lives of intangible assets acquired;(iv)estimated costs to build or acquire any additional Vacation Interests,estimated total revenues expected to be earned on a project,related estimated provision for uncollectible Vacation Interests sales revenue and sales incentives,estimated projected future cost and volume of recoveries of VOIs, estimated sales price per point and estimated number of points to be sold used to allocate certain unsold Vacation Interests to Vacation Interests cost of sales under the relative sales value method(See "Vacation Interests Cost ofSales"below for further detail on this method);and(v)the valuation allowance recorded against deferred tax assets.It is at least reasonably possible that a material change in one or more of these estimates may occur in the near term and that such change may materially affect actual results. In addition,significant estimates are used by the Company to estimate compensation expense related to employee and non-employee stock options issued by the Company under the Diamond Resorts International,Inc.2013 Incentive Compensation Plan(the"2013 Plan")and the Company's 2015 Equity Incentive Compensation Plan(the"2015 Plan").The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of the stock options granted to its employees(including,from an accounting perspective,non-employee directors in their capacity as such)and employees and independent contractors of HM&C through December 31,2014 and Mr.Lowell D.Kraff,the Vice Chairman of the Board of Directors of the Company(with respect to the stock-based compensation issued to him in connection with the IPO)("Non- Employees").The expected volatility is calculated based on the historical volatility of the stock prices for a group of identified peer companies for the expected term of the stock options on the grant date(which is significantly greater than the volatility of the S&P 500®index as a whole during the same period)due to the lack of historical trading prices for the Company's common stock.The average expected option life represents the period oftime the stock options are expected to be outstanding at the issuance date based on management's estimate using the simplified method prescribed under the SEC StaffAccounting BulletinTopic14: Share-Based Payment("SAB 14")for employee grants and the contractual term for Non-Employee grants.The risk- free interest rate is calculated based on U.S.Treasury zero-coupon yield,with a remaining term that approximates the expected option life assumed at the date of issuance.The expected annual dividend per share is 0%based on the Company's expected dividend rate. See"Note 21—Stock-Based Compensation"for further detail on the Company's stock options issued under the 2013 Plan and the 2015 Plan. Management andMember Services Revenue Recognition—Management and member services revenue includes resort management fees charged to the HOAs and the Diamond Collections,as well as revenues from the Company's operation of the Clubs.These revenues are recorded and recognized as follows: Management fee revenues are recognized in accordance with the terms of the Company's management contracts. Under the Company's management agreements, the Company collects management fees from the HOAs and Diamond Collection's non-profit members associations (the "Collection Associations"), which are recognized as revenue ratably throughout the year as earned.The management fees the Company earns are included in the HOAs' and Diamond Collections'operating budgets which,in turn,are used to establish the annual maintenance fees owed by each owner of VOIs. The Company charges an annual fee for membership in each of the Clubs. In addition to annual dues associated with the Clubs,the Company also earns revenue associated with the legacy owners of deeded intervals at resorts that the Company acquired in its strategic acquisitions exchanging the use of their intervals for points membership in the Clubs,which requires these owners to pay the annual fees associated with Club membership, and the Company generally encourages holders of these deeded intervals to exchange the use of their intervals for points memberships in the Clubs.The Company also earns reservation protection plan revenue,which is an optional fee paid by customers when making a reservation to protect their points should they need to cancel their reservation,and through the Company's provision of other travel and discount related benefits as well as call center services provided to the HOAs and the Diamond Collections. Management and member services revenue also included commissions received under the fee-for-service agreements it had with Island One,Inc.from July 2011 until July 2013,when the Company completed the acquisition of all of the equity interests of Island One,Inc.and Crescent One,LLC in exchange for$73.3 million in shares of the Company's common stock the"Island One Acquisition"). All of these revenues are allocated to the hospitality and management services business segment. F-11 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Consolidated Resort Operations Revenue Recognition—Consolidated resort operations revenue consists ofthe following: The Company functioned as an HOA for its properties located in St.Maarten through December 31,2014. Consolidated resort operations revenue included the maintenance fees billed to owners and the Diamond Collections in connection with the St.Maarten resorts,which were recognized ratably over the year.In addition, the owners were billed for capital project assessments to repair and replace the amenities of these resorts,as well as assessments to reserve the potential out-of-pocket deductibles for hurricanes and other natural disasters.These assessments were deferred until the refurbishment activity occurred,at which time the amounts collected were recognized as consolidated resort operations revenue with offsetting expense recorded under consolidated resort operations expense. See"Consolidated Resort Operations Expenses"below for further detail.All operating revenues and expenses associated with these properties were consolidated within the Company's financial statements,except for intercompany transactions,such as maintenance fees for the Company's owned inventory and management fees for the owned inventory,which were eliminated.Revenue associated with these properties historically constituted a majority of the Company's consolidated resort operations revenue.Effective January 1, 2015,however,in conjunction with the St.Maarten Deconsolidation,the consolidated resort operations revenue from the St.Maarten resorts was eliminated from the Company's consolidated statements ofoperations and comprehensive income(loss). See"Note 1—Background,Business and Basis ofPresentation"for further detail on this transaction. The Company also receives: food and beverage revenue at certain resorts whose restaurants the Company owns and operates; lease revenue from third parties to which the Company outsources the management of its golfcourse and food and beverage operations at certain resorts; revenue from providing cable,telephone and technology services to HOAs;and other incidental revenues generated at the venues the Company owns and operates,including retail and gift shops, spa services,safe rental and ticket sales. Through December 31,2013,consolidated resort operations revenue also included greens fees and equipment rental fees at certain golf courses owned and operated by the Company at certain resorts prior to outsourcing the management ofthese golf courses. All of these revenues are allocated to the hospitality and management services business segment. Vacation Interests Sales Revenue Recognition—With respect to the Company's recognition of revenue from Vacation Interests sales,the Company follows the guidelines included in Accounting Standards Codification("ASC")978,"Real Estate- Time-Sharing Activities"("ASC 978").Under ASC 978,Vacation Interests sales revenue is divided into separate components that include the revenue earned on the sale of the VOI and the revenue earned on the sales incentive given to the customer as motivation to purchase the VOI.Each component is treated as a separate transaction but both are recorded in Vacation Interests sales line of the Company's statement of operations and comprehensive income(loss).In order to recognize revenue on the sale of VOIs,ASC 978 requires a demonstration of a buyer's commitment(generally a cash payment of 10%of the purchase price plus the value of any sales incentives provided).A buyer's down payment and subsequent mortgage payments are adequate to demonstrate a commitment to pay for the VOI once 10%of the purchase price plus the value ofthe incentives provided to consummate a VOI transaction has been covered.The Company recognizes sales ofVOIs on an accrual basis after(i)a binding sales contract has been executed;(ii)the buyer has adequately demonstrated a commitment to pay for the VOI;(iii)the rescission period required under applicable law has expired;(iv)collectibility of the receivable representing the remainder of the sales price is reasonably assured;and(v)the Company has completed substantially all of its obligations with respect to any development related to the real estate sold(i.e.,construction has been substantially completed and certain minimum project sales levels have been met).Ifthe buyer's commitment has not met ASC 978 guidelines,the Vacation Interests sales revenue and related Vacation Interests cost of sales and direct selling costs are deferred and recognized under the installment method until the buyer's commitment is satisfied,at which time the remaining amount ofthe sale is recognized.The net deferred revenue is recorded as a reduction to Vacation Interests notes receivable on the Company's balance sheet.Under ASC 978,the provision foruncollectible Vacation Interests sales revenue is recorded as a reduction ofVacation Interests sales revenue. Vacation Interests Sales Revenue,Net—Vacation Interests sales revenue,net is comprised of Vacation Interests sales,net of a provision for uncollectible Vacation Interests sales revenue.Vacation Interests sales consist of revenue from the sale of points,which can be utilized for vacations at any of the resorts in the Company's network for varying lengths of stay,net of an amount equal to the expense associated with sales incentives.A variety of sales incentives are routinely provided as sales tools. F-12 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Sales centers have predetermined budgets for sales incentives and manage the use of incentives accordingly.A provision for uncollectible Vacation Interests sales revenue is recorded upon completion of each financed sale.The provision for uncollectible Vacation Interests sales revenue is calculated based on historical default experience associated with the customer's Fair Isaac Corporation("FICO")score.Additionally,the Company analyzes its allowance for loan and contract losses quarterly and makes adjustments based on current trends in consumer loan delinquencies and defaults and other criteria,if necessary.All of the Company's Vacation Interests sales revenue,net is allocated to the Vacation Interests sales and financing business segment. Interest Revenue—The Company's interest revenue consists primarily of interest earned on consumer loans.Interest earned on consumer loans is accrued based on the contractual provisions of the loan documents. Interest accruals on consumer loans are suspended at the earliest of(i)the customer's account becoming over 180 days delinquent,or(ii)the completion of cancellation or foreclosure proceedings. If payments are received while a consumer loan is considered delinquent,interest is recognized on a cash basis. Interest accrual resumes once a customer has made six timely payments on the loan and brought the account current.All interest revenue is allocated to the Vacation Interests sales and fmancing business segment,with the exception of interest revenue earned on the Company's bank account balances,which is reported in corporate and other. Other Revenue—Other revenue includes(i)collection fees paid by owners when they bring their maintenance fee accounts current after collection efforts have been made by the Company on behalf of the HOAs and Collection Associations; ii)closing costs paid by purchasers on sales of VOIs;(iii)revenue associated with certain sales incentives given to customers as motivation to purchase a VOI(in an amount equal to the expense associated with such sales incentives),which is recorded upon recognition of the related VOI sales revenue;(iv)late/impound fees assessed on consumer loans;(v)loan servicing fees earned for servicing third-party portfolios;(vi)commission revenue earned from certain third-party lenders that provide consumer fmancing for sales of the Company's VOIs in Europe;and(vii)revenue recognized when customers'non-refundable deposits are forfeited upon the customers'failure to close on VOI transactions.Revenues associated with item(i)above are allocated to the Company's hospitality and management services business segment.Revenues associated with the remaining items above are allocated to the Company's Vacation Interests sales and financing business segment. Management and Member Services Expense—Substantially all direct expenses related to the provision of services to the HOAs(other than for the Company's St.Maarten resorts,for which the Company functioned as the HOA through December 31, 2014)and the Diamond Collections are recovered through the Company's management agreements and,consequently,are not recorded as expenses.The Company passes through to the HOAs and the Collection Associations certain overhead charges incurred to manage the resorts. In accordance with guidance included in ASC 605-45,"Revenue Recognition-Principal Agent Considerations,"reimbursements from the HOAs and the Collection Associations relating to pass-through costs are recorded net of the related expenses.These expenses are allocated to the hospitality and management services business segment. Expenses associated with the Company's operation of the Clubs include costs incurred for outsourced(prior to December 31,2015)and in-house call centers,annual membership fees paid to a third-party exchange company on behalf of members of the Clubs,as applicable,and administrative expenses.These expenses are allocated to the hospitality and management services business segment. Between January 1,2013 and July 24,2013,management and member services expenses also included costs incurred under the fee-for-service agreements with Island One,Inc.This arrangement was terminated in conjunction with the Island One Acquisition. These expenses are allocated to the hospitality and management services business segment. Consolidated Resort Operations Expense—Through December 31,2014,with respect to the two resorts located in St. Maarten,the Company recorded expenses associated with housekeeping,front desk,maintenance,landscaping and other similar activities,which were recovered by the maintenance fees recorded in consolidated resort operations revenue.In addition,for these two properties,the Company also billed the owners for capital project assessments to repair and replace the amenities of these resorts,as well as assessments to reserve the potential out-of-pocket deductibles for hurricanes and other natural disasters.These assessments were deferred until the refurbishment activity occurred,at which time the amounts collected were recognized as consolidated resort operations revenue with offsetting expense recorded under consolidated resort operations expense.The Company's expense associated with the St.Maarten properties historically constituted a majority of the Company's consolidated resort operations expense.Effective January 1,2015,however,in conjunction with the St.Maarten Deconsolidation,the consolidated resort operations expense from the St.Maarten resorts was eliminated from the Company's consolidated statements of operations and comprehensive income(loss). See"Note 1—Background,Business and Basis of Presentation"for further detail on the St.Maarten Deconsolidation.Furthermore,consolidated resort operations expense includes the costs related to food and beverage operations at certain resorts whose restaurants the Company operates directly. F-13 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Similarly,the expenses ofoperating spas and retail and gift shops are included in consolidated resort operations expense.These expenses are allocated to the hospitality and management services business segment. Through December 31,2013,consolidated resort operations expense also included costs at certain golf courses owned and operated by the Company at certain resorts prior to outsourcing the management of these golf courses. Vacation Interests Cost ofSales—At the time the Company records Vacation Interests sales revenue,it records the related Vacation Interests cost of sales.The Company records Vacation Interests cost of sales using the relative sales value method in accordance with ASC 978.This method,which was originally designed more for developers oftimeshare resorts,requires the Company to make a number of projections and estimates,which are subject to significant uncertainty. In order to determine the amounts that must be expensed for each dollar of Vacation Interests sales with respect to a particular project,the Company is required to prepare a forecast of sales and certain costs for the entire project's life cycle.These forecasts require the Company to estimate,among other things,the costs to acquire(or if applicable,build)additional VOIs,the total revenues expected to be earned on the project(including estimations of sales price per point and the aggregate number ofpoints to be sold),the proper provision for uncollectible Vacation Interests sales revenue,sales incentives,and the projected future cost and volume of recoveries of VOIs.Then,these costs as a percentage of Vacation Interests sales are determined and that percentage is applied retroactively to all prior sales and is applied to sales within the current period and future periods with respect to a particular project.These projections are reviewed on a regular basis,and the relevant estimates used in the projections are revised(if necessary)based upon historical results and management's new estimates.The Company requires a seasoning of pricing strategy changes before such changes fully affect the projections,which generally occurs over a six-month period.If any estimates are revised,the Company is required to adjust its Vacation Interests cost of sales using the revised estimates,and the entire adjustment required to correct Vacation Interests cost of sales over the life ofthe project to date is taken in the period in which the estimates are revised.Accordingly,small changes in any of the numerous estimates in the model can have a significant financial statement impact,both positively and negatively,due to the retroactive adjustment required by ASC 978. See"Unsold Vacation Interests, net"below for further detail.All ofthese costs are allocated to the Vacation Interests sales and financing business segment. Advertising, Sales andMarketing Costs—Advertising,sales and marketing costs are expensed as incurred,except for costs directly related to VOI sales that are not eligible for revenue recognition under ASC 978,as described in"—Vacation Interests Sales Revenue Recognition"above,which are deferred along with related revenue until the buyer's commitment requirements are satisfied.Advertising,sales and marketing costs are allocated to the Vacation Interests sales and financing business segment.Advertising expense recognized was$10.3 million,$7.3 million and$6.2 million for the years ended December 31,2015,2014 and 2013,respectively. Vacation Interests Carrying Cost,Net—The Company is responsible for paying annual maintenance fees and reserves to the HOAs and the Collection Associations on its unsold VOIs.Vacation Interests carrying cost,net also includes amounts paid for delinquent maintenance fees related to VOIs eligible for recovery pursuant to the Company's inventory recovery and assignment agreements("IRAAs")except for amounts that are capitalized to unsold Vacation Interests,net. See"Note 6— Transactions with Related PartiesInventory Recovery andAssignment Agreements"for further detail on IRAAs. To offset the Company's gross Vacation Interests carrying cost,the Company rents VOIs controlled by the Company to third parties on a short-term basis.The Company also generates revenue on sales of sampler programs("Sampler Packages"), which allow prospective owners to stay at a resort property on a trial basis.This revenue and the associated expenses are deferred until the vacation is used by the customer or the expiration date,whichever is earlier.Revenue from resort rentals and Sampler Packages is recognized as a reduction to Vacation Interests carrying cost,with the exception of revenue from the Company's European sampler product,which has a duration ofthree years and is treated as Vacation Interests sales revenue. Vacation Interests carrying cost,net is allocated to the Vacation Interests sales and fmancing business segment. Loan Portfolio Expense—Loan portfolio expense includes payroll and administrative costs of the finance operations and credit card processing fees.These costs are expensed as incurred,with the exception of Vacation Interests notes receivable origination costs,which are capitalized and amortized over the term ofthe related Vacation Interests notes receivable as an adjustment to interest revenue using the effective interest method in accordance with guidelines issued under ASC 310, Receivables"("ASC 310").These expenses are allocated to the Vacation Interests sales and fmancing business segment,with the exception of a portion ofexpenses incurred by the in-house collections department,which are allocated to the hospitality and management services business segment. Other Operating Expenses—Other operating expenses include credit card fees incurred by the Company when customers remit down payments associated with a VOI purchase in the form of credit cards and also include certain sales incentives given to customers as motivation to purchase VOIs,all of which are expensed as the related Vacation Interests sales revenue is recognized.These expenses are allocated to the Company's Vacation Interests sales and financing business segment. F-14 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued General and Administrative Expense—General and administrative expense includes payroll and benefits,legal,audit and other professional services,costs related to mergers and acquisitions,travel costs,technology-related costs,corporate facility expense.In addition,general and administrative expense includes recovery of the Company's expenses incurred on behalf ofthe HOAs and the Diamond Collections the Company manages in accordance with the Company's management agreements.In accordance with guidance included in ASC 605-45,"Revenue Recognition-Principal Agent Considerations,"recovery from the HOAs and the Collection Associations is recorded net of the related expense.General and Administrative expense is not allocated to the Company's business segments,but rather are reported under corporate and other. Depreciation and AmortizationThe Company records depreciation expense in connection with depreciable property and equipment it purchased or acquired,including buildings and leasehold improvements,furniture and office equipment,land improvements and computer software and equipment. In addition,the Company records amortization expense on intangible assets with a finite life acquired by the Company,including management contracts,member relationships,distributor relationships and others.Depreciation and amortization expense is not allocated to the Company's business segments,but rather is reported in corporate and other. Interest Expense—Interest expense related to corporate-level indebtedness is reported in corporate and other. Interest expense related to the Company's securitizations and consumer loan financings is allocated to the Vacation Interests sales and financing business segment. Stock-based Compensation Expense—The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation"("ASC 718").The Company measures stock-based compensation awards using a fair value method and records the related expense in its consolidated statements of operations and comprehensive income(loss). See"Note 21—Stock-Based Compensation"for further detail on the Company's stock-based compensation awards. Income Taxes—The Company is subject to income taxes in the U.S. (including federal and state)and numerous foreign jurisdictions in which the Company operates.The Company records income taxes under the asset and liability method,whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis,and attributable to operating loss and tax credit carry forwards.Accounting standards regarding income taxes require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if,based on the available evidence,it is more likely than not that such assets will not be realized.Accordingly,the need to establish valuation allowances for deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold.This assessment considers,among other matters,the nature, frequency and severity of current and cumulative losses,forecasts of future profitability,the reversal of existing taxable temporary differences,the duration of statutory carry forward periods,the Company's experience with operating loss and tax credit carry forwards not expiring unused,and tax planning alternatives. The Company recorded a deferred tax asset for its net operating losses,a portion of which the use thereof is subject to limitations.As a result of uncertainties regarding the Company's ability to utilize such net operating loss carry forwards,the Company maintains a valuation allowance against the deferred tax assets attributable to these net operating losses. Accounting standards regarding uncertainty in income taxes provide a two-step approach to recognizing and measuring uncertain tax positions.The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on examination,based solely on the technical merits.The second step is to measure the tax benefit as the largest amount which is more than 50%likely ofbeing sustained on examination.The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits,which may require periodic adjustments and which may not accurately anticipate actual outcomes. Cash and Cash Equivalents—Cash and cash equivalents consist of cash,money market funds,and all highly-liquid investments purchased with an original maturity date of three months or less. Cash in Escrow and Restricted Cash—Cash in escrow consists ofdeposits received on sales of VOIs that are held in escrow until the legal rescission period has expired.Restricted cash consists primarily of reserve cash held for the benefit ofthe secured note holders including the prefunding account and cash collections on certain Vacation Interests notes receivable that secure collateralized notes. Vacation Interests notes receivable andrelated allowance—The Company accounts for Vacation Interests notes receivable in accordance with ASC 310.Vacation Interests notes receivable include mortgages receivable for the financing ofpreviously sold intervals and contracts receivable for the financing of points. Vacation Interests notes receivable that the Company originates or acquires are recorded net of(i)deferred loan and contract costs;(ii)the discount or premium on the acquired mortgage pool;and(iii)the related allowance for loan and contract losses.Loan and contract origination costs incurred in connection with providing financing for VOIs are capitalized and F-15 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued amortized over the term of the related Vacation Interests notes receivable as an adjustment to interest revenue using the effective interest method.Because the Company currently sells VOIs only in the form ofpoints,the Company originates contracts receivables,and is not currently originating any new mortgages.The Company records a sales provision for estimated mortgage and contracts receivable losses as a reduction to Vacation Interests sales revenue.This provision is calculated as projected gross losses for originated Vacation Interests notes receivable,taking into account estimated VOI recoveries.If actual Vacation Interests notes receivable losses differ materially from these estimates,the Company's future results of operations may be adversely impacted. The Company applies its historical default percentages based on credit scores ofthe individual customers to its originated and acquired Vacation Interests notes receivable population and evaluates other factors such as economic conditions,industry trends,defaults and past due agings to analyze the adequacy of the allowance.Any adjustments to the allowance for Vacation Interests notes receivable loss are recorded within Vacation Interests sales revenue. The Company charges off Vacation Interests notes receivable upon the earliest of(i)the customer's account becoming over 180 days delinquent or(ii)the completion of cancellation or foreclosure proceedings.Once a delinquent customer has brought the account current following the event leading to the charge-off and makes six timely payments,the charge-off is reversed.A default in a customer's initial payment(after unsuccessful collection efforts)results in a cancellation of the sale.All collection and foreclosure costs related to delinquent loans are expensed as incurred. The Vacation Interests notes receivable acquired in connection with the Company's strategic acquisitions are each accounted for separately as an acquired pool of loans.Any discount or premium associated with each pool of loans is amortized using an amortization method that approximates the effective interest method. Duefrom RelatedParties, Net and Due to Related Parties, Net—Amounts due from related parties,net,and due to related parties,net consist primarily of transactions with HOAs or Collection Associations for which the Company acts as the management company. See"Note 6—Transactions with Related Parties"for further detail.Due to the fact that the right of offset exists between the Company and the respective HOAs and Collection Associations,the Company evaluates amounts due to and from each HOA and Collection Association at each reporting period to present the balances as either a net due to or a net due from related parties in accordance with the requirements of ASC 210,`Balance Sheet Offsetting." Assets Heldfor Sale—Assets held for sale are recorded at the lower of cost or their estimated fair value less costs to sell and are not subject to depreciation. Sale ofthe assets classified as such is probable,and transfer ofthe assets is expected to qualify for recognition as a completed sale,generally within one year of the balance sheet date. See"Note 13Assets Heldfor Sale"for further information. Unsold Vacation Interests,Net—Unsold VOIs are valued at the lower of cost or fair market value.The cost of unsold VOIs includes acquisition costs,hard and soft construction costs(which are comprised of architectural and engineering costs incurred during construction),the cost incurred to recover inventory and other carrying costs(including interest,real estate taxes and other costs incurred during the construction period).The costs capitalized for recovered intervals differ based on a variety of factors,including the method of recovery and the timing of the original sale or loan origination.Costs are expensed to Vacation Interests cost of sales under the relative sales value method described above.In accordance with ASC 978,under the relative sales value method,cost of sales is calculated as a percentage of Vacation Interests sales revenue using a cost-of-sales percentage ratio of total estimated development costs to total estimated Vacation Interests sales revenue,including estimated future revenue and incorporating factors such as changes in prices and the recovery of VOIs(generally as a result of maintenance fee and Vacation Interests notes receivable defaults). In accordance with ASC 978,the selling,marketing and administrative costs associated with any sale,whether the original sale or subsequent resale of recovered inventory,are expensed as incurred,except for the direct selling costs which are deferred and recognized under the installment method until the buyer's commitment is satisfied,at which time the remaining amount ofthe sale is recognized. In accordance with ASC 978,on a quarterly basis,the Company recalculates the total estimated Vacation Interests sales revenue and total estimated costs.The effects of changes in these estimates are accounted for as a current period adjustment so that the balance sheet at the end of the period of change and the accounting in subsequent periods are as they would have been if the revised estimates had been the original estimates.These adjustments can be material. In North America,the Company capitalizes all maintenance fees and assessments paid to the HOAs and the Collection Associations related to the IRAAs into unsold Vacation Interests,net for the first two years of a member's maintenance fee delinquency.Following this two-year period,all assessments and maintenance fees paid under these agreements are expensed in Vacation Interests carrying cost,net until such time that the inventory is recovered.No entry is recorded upon the recovery of the delinquent inventory. F-16 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued In Europe,the Company enters into informal inventory recovery arrangements similar to those in North America with the majority ofthe HOAs and the Collection Association for the European Collection.Accordingly,the Company capitalizes all maintenance fees and assessments paid to the HOAs and the Collection Association for the European Collection related to the inventory recovery arrangements into due from related parties-net for the first two years of a member's maintenance fee delinquency.Following this two-year period,all assessments and maintenance fees paid under these arrangements are expensed in Vacation Interests carrying cost,net until such time that the inventory is recovered.Once the delinquent inventory is recovered,the Company reclassifies the amounts capitalized in due from related parties,net to unsold Vacation Interests,net. Goodwill—Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.The Company does not amortize goodwill,but rather evaluates goodwill for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit,as defined in ASC 350,"Intangibles—Goodwill"("ASC 350"),is below the carrying amount. Goodwill is tested using a two-step process.The first step of the goodwill impairment assessment,used to identify potential impairment,compares the fairvalue of a reporting unit with its carrying amount,including goodwill("net book value").Ifthe fair value of a reporting unit exceeds its net book value,goodwill of the reporting unit is considered not impaired; thus,the second step of the impairment test is unnecessary.If net book value of a reporting unit exceeds its fair value,the second step ofthe goodwill impairment test will be performed to measure the amount of impairment loss,if any.The second step ofthe goodwill impairment assessment,used to measure the amount of impairment loss,if any,compares the implied fair value of reporting unit goodwill,which is determined in the same manner as the amount of goodwill recognized in a business combination,with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill,an impairment loss is recognized in an amount equal to that excess. Intangible assets—Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Management contracts have estimated useful lives ranging from five to 25 years.Membership relationships and distributor relationships have estimated useful lives ranging from three to 30 years.Marketing easement rights,rights to develop inventory and rental agreements have estimated useful lives of 20 years, 14 years and fouryears,respectively. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.If the sum of the estimated future cash flows expected to result from the use and eventual disposition of an asset is less than its net book value,an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset. Foreign Currency Translation—Assets and liabilities in foreign locations are translated into U.S.dollars using rates of exchange in effect at the end of the reporting period.Income and expense accounts are translated into U.S. dollars using average rates ofexchange.The net gain or loss is shown as a translation adjustment and is included in other comprehensive income(loss)in the consolidated statements of operations and comprehensive income(loss).Holding gains and losses from foreign currency transactions are also included in the consolidated statements of operations and comprehensive income(loss). Other Comprehensive Income(Loss)—Other comprehensive income(loss)includes all changes in equity from non-owner sources such as foreign currency translation adjustments and,through September 30,2015,changes in accumulated obligation under the Company's defined benefit plan at its St.Maarten resorts.The defined benefit plan was deconsolidated from the Company's consolidated financial statements in the quarter ended September 30,2015 in connection with the St.Maarten Deconsolidation.The Company accounts for other comprehensive income(loss)in accordance with ASC 220, "Comprehensive Income." Recently Issued Accounting Pronouncements In May 2014,the Financial Accounting Standards Board("FASB")issued Accounting Standards Update("ASU")No. 2014-09, "Revenue from Contracts with Customers,"which supersedes most of the current revenue recognition requirements ASU No.2014-09").The core principle of this guidance is that an entity will be required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.New disclosures about the nature,amount,timing and uncertainty of revenue and cash flows arising from contracts with customers will also be required.Entities must adopt the new guidance using one of two retrospective application methods.The Company will adopt ASU No.2014-09 as of its quarter ending March 31, 2018.The Company is currently evaluating the standard to determine the impact of the adoption ofthis guidance on its financial statements. In January 2015,the FASB issued ASU No.2015-01, "Income Statement—Extraordinary and Unusual Items"("ASU No. 2015-01"),which eliminates from U.S. GAAP the concept of extraordinary items.Extraordinary items are events and F-17 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued transactions that are distinguished by their unusual nature and by the infrequency of their occurrence.ASU No.2015-01 simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration.ASU No.2015-01 is effective for annual periods and interim periods within those annual periods beginning after December 15,2015. The Company will adopt ASU No. 2015-01 as of its quarter ending March 31,2016.The Company believes that the adoption of this update will not have a material impact on its financial statements. In February 2015,the FASB issued ASU No. 2015-02,"Consolidation" ("ASU No.2015-02"),which is intended to respond to stakeholders'concerns about the current accounting guidance for certain legal entities.The amendments update the analysis of consolidation for limited partnerships,contractual fee arrangements and investment funds,as well as include additional guidance on the effect of related parties.The amendments in ASU No. 2015-02 are effective for public business entities for fiscal years,and for interim periods within those fiscal years,beginning after December 15,2015.Early adoption is permitted,including adoption in an interim period.The amendments in ASU No. 2015-02 may be applied retrospectively or using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year ofadoption.The Company will adopt ASU No.2015-02 as of its quarter ending March 31,2016.The Company is currently evaluating the standard to determine the impact of its adoption on its financial statements. In April 2015,the FASB issued ASU No. 2015-03, "Interest-Imputation of Interest"("ASU No. 2015-03"),which is intended to simplify the presentation of debt issuance costs.The amendments in ASU No.2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,consistent with debt discounts.The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU No.2015-03.ASU No.2015-03 is effective for annual periods,and interim periods within those annual periods,beginning after December 15,2015.The Company will adopt ASU No.2015-03 as of its quarter ending March 31,2016.The Company believes that the adoption of this update will result in a reclassification between assets and liabilities but will have no other impact on its financial statements. In April 2015,the FASB issued ASU No.2015-05,"Intangibles-Goodwill and Other-Internal-Use Software"("ASU No. 2015-05"),which provides guidance to customers about whether a cloud computing arrangement includes a software license and,if so,how the software license element of the arrangement should be accounted for by the customer.ASU No.2015-05 is effective for annual periods,and interim periods within those annual periods,beginning after December 15,2015.The Company will adopt ASU No. 2015-05 as of its quarter ending March 31,2016.The Company believes that the adoption of this update will not have a material impact on its financial statements. In September 2015,the FASB issued ASU No.2015-16, "Business Combinations-Simplifying the Accounting for Measurement-Period Adjustments" ("ASU No. 2015-16"),which requires that an acquirer in a business combination recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.ASU No 2015-16 also requires that the acquirer record,in the current period's financial statements,the effect on earnings of changes in depreciation,amortization or other income effects,if any,as a result of the change to the estimated amounts,calculated as if the accounting had been completed at the acquisition date.ASU No.2015-16 is effective for fiscal years beginning after December 15,2015,including interim periods within those fiscal years.The amendments in ASU No.2015-16 should be applied prospectively to adjustments to provisional amounts that occur after the effective date,with earlier application permitted for financial statements that have not been issued.The Company will adopt ASU No.2015-16 as of its quarter ending March 31,2016.The Company believes that the adoption of this update will not have a material impact on its financial statements. In November 2015,the FASB issued ASU No.2015-17, "Income Taxes-Balance Sheet Classification of Deferred Taxes"("ASU No.2015-17"),which eliminates the current requirement for an entity to present deferred income tax assets and liabilities as current and noncurrent in a classified balance sheet.Instead,entities will be required to classify all deferred tax assets and liabilities as noncurrent.The amendments in ASU No.2015-17 are effective for public business entities for fiscal years,and for interim periods within those fiscal years,beginning after December 15,2016.The amendments may be applied prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented.The Company will adopt ASU No.2015-17 as of its quarter ending March 31,2017.The Company believes that the adoption ofthis update will not have a material impact on its financial statements. In January 2016,the FASB issued ASU No. 2016-01, "Financial Instruments-Recognition and Measurement of Financial Assets and Financial Liabilities"("ASU No.2016-01").The amendments in ASU No.2016-01 require changes to the measurement and presentation of certain equity investments,as well as to the disclosures pertaining to these equity investments. The amendments in ASU No.2016-01 are effective for public business entities for fiscal years,and for interim periods within those fiscal years,beginning after December 15,2017.The new guidance permits early adoption of certain provisions in the Update.The Company will adopt ASU No.2016-01 as of its quarter ending March 31,2018.The Company is currently evaluating the standard to determine the impact of the adoption of this guidance on its financial statements. F-18 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued In February 2016,the FASB issued ASU No.2016-02,"Leases"("ASU No.2016-02").The new standard establishes a right- of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.Leases will be classified as either finance or operating,with classification affecting the pattern of expense recognition in the income statement. The new guidance is effective for fiscal years, and for interim periods within those fiscal years,beginning after December 15, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements,with certain practical expedients available.The Company is currently evaluating the standard to determine the impact ofthe adoption of this guidance on its financial statements. Note 3 —Concentrations of Risk Credit Risk—The Company is exposed to on-balance sheet credit risk related to its Vacation Interests notes receivable. The Company offers financing to the buyers of VOIs and bears the risk of defaults on promissory notes delivered to it by buyers of VOIs.If a buyer of VOIs defaults,the Company generally attempts to resell such VOIs by exercise of a power of sale.The associated marketing,selling,and administrative costs from the original sale are not recovered,and such costs must be incurred again to resell the VOIs.Although in many cases the Company may have recourse against a buyer ofVOIs for the unpaid price,certain states have laws that limit the Company's ability to recover personal judgments against customers who have defaulted on their loans.The Company has generally not pursued this remedy. The Company maintains cash,cash equivalents,cash in escrow,and restricted cash with various financial institutions. These financial institutions are located throughout North America,Europe and the Caribbean.A significant portion of the Company's cash is maintained with a select few banks and is,acconlingly,subject to credit risk.Periodic evaluations ofthe relative credit standing of financial institutions maintaining the deposits are performed to evaluate and mitigate,if necessary, any credit risk. Availability ofFunding Sources—The Company has historically funded Vacation Interests notes receivable and unsold Vacation Interests with borrowings through its financing facilities and internally generated funds.Borrowings are in turn repaid with the proceeds received by the Company from repayments of such Vacation Interests notes receivable.To the extent that the Company is not successful in maintaining or replacing existing financings,it may have to curtail its sales and marketing operations or sell assets,thereby resulting in a material adverse effect on the Company's results of operations,cash flows and financial condition. Geographic Concentration—Portions of the Company's consumer loan portfolio are concentrated in certain geographic regions within the U.S.The deterioration of the economic condition and financial well-being of the regions in which the Company has significant loan concentrations could adversely affect the results of operations for its consumer loan portfolio business.The credit risk inherent in such concentrations is dependent upon regional and general economic stability.which affects property values and the financial well-being of the borrowers.As of December 31,2015 and 2014,the Company's loans to California residents constituted 33.3%and 32.4%,respectively,ofthe consumer loan portfolio.No other state or foreign country concentration accounted for more than 10.0%of the portfolio. Interest Rate Risk—Since a significant portion of the Company's indebtedness bears interest at variable rates,any increase in interest rates beyond amounts covered under the Company's derivative financial instruments,particularly if sustained,could have an adverse effect on the Company's results of operations,cash flows and financial position. The Company derives net interest income from its financing activities because the interest rates it charges its customers who finance the purchase oftheir VOIs exceed the interest rates the Company pays to its lenders. Since the Company's customer receivables generally bear interest at fixed rates,increases in interest rates will erode the spread in interest rates that the Company has historically obtained. During the years ended December 31,2015,2014 and 2013,the Company entered into a series of interest rate cap and swap agreements to manage its exposure to interest rate increases,all of which except the December 2015 Swap(discussed below)were terminated by December 31,2015. On December 11,2015,as required by the Company's$200.0 million conduit facility that was most recently amended on July 1,2015(the"Conduit Facility"),the Company entered into an interest rate swap agreement to manage its exposure to fluctuations in interest rates,effective December 15,2015(the"December 2015 Swap").The December 2015 Swap has a notional amount of$20.5 million and is scheduled to mature on December 20,2025.The Company pays interest at a fixed rate of 2.38%based on a floating notional amount in accordance with a pre-determined amortization schedule,and receives interest based on one-month floating LIBOR.The December 2015 Swap did not qualify for hedge accounting. See"Note 16— Borrowings"for further detail on the Conduit Facility. F-19 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued As of December 31,2015,the fair value of the December 2015 Swap was calculated to be$0.1 million based on a valuation report provided by a counterparty.The fair value was recorded as a derivative liability with an offsetting charge tointerestexpense. Note 4 —Cash in Escrow and Restricted Cash The nature of selected balances included in cash in escrow and restricted cash includes: Securitization andFunding Facilities collection and reserve cash—prefunding and reserve cash held for the benefit of secured note holders and cash collections on certain Vacation Interests notes receivable that secure collateralized notes.The Conduit Facility and the$100.0 million loan sale facility with Quonim Federal Credit Union(the"Quorum Facility")are collectively referred to as the"Funding Facilities." See "Note 16—Borrowings"for further detail on the Conduit Facility and the Quorum Facility. As of December 31,2014, Securitization and Funding Facilities collection and reserve cash included$4.4 million related to the future funding of Vacation Interests notes receivable associated with the issuance of$260.0 million of investment-grade rated securities in a securitization transaction completed on November 20,2014(the"DROT 2014-1 Notes"). $4.4 million was released to the Company's unrestricted cash account in January 2015. Securitization and Funding Facilities collection and reserve cash as of December 31,2015 did not include any such amount. Cash in escrow and restricted cash consisted of the following as of December 31 ofeach of the following years(in thousands): 2015 2014 Securitization and Funding Facilities collection and reserve cash 50,943 $ 39,784 Collected on behalf of St.Maarten and other HOAs 18,626 15,970 Escrow 13,423 9,830 Deposits related to Vacation Interests notes receivable servicing agreements 10,680 Bonds and deposits 883 882 Other 3,740 1,892 Total cash in escrow and restricted cash 98,295 $ 68,358 In connection with the Gold Key Acquisition,the Company deposited$6.2 million into an escrow account in connection with required buyouts,upgrade fees and defaulted inventory purchases related to pre-closing Gold Key consumer receivables retained by the seller,and is treated as restricted cash. Note 5 —Vacation Interests Notes Receivable and Allowance The Company provides financing to purchasers of VOIs at North American and St.Maarten sales centers that is collateralized by their VOIs.Eligibility for this financing is principally dependent upon the customers'FICO credit scores and other factors based on review of the customer's credit history.As of December 31,2015,the Vacation Interests notes receivable bore interest at fixed rates ranging from 6.0%and 18.0%.The terms of the Vacation Interests notes receivable range from two years to 15 years and may be prepaid at any time without penalty.Vacation Interests notes receivable originated by the Company within the last five years have a term of 10 years.The weighted average interest rate of outstanding Vacation Interests notes receivable was 14.6%and 14.8%as of December 31,2015 and 2014,respectively. The Company charges off Vacation Interests notes receivable upon the earliest of(i)the customer's account becoming over 180 days delinquent or(ii)the completion of cancellation or foreclosure proceedings.Once a delinquent customer has brought the account current following the event leading to the charge-off and makes six timely payments,the charge-off is reversed.A default in a customer's initial payment(after unsuccessful collection efforts)results in a cancellation of the sale.All collection and foreclosure costs related to delinquent loans are expensed as incurred.Vacation Interests notes receivable from 91 to 180 days past due as ofDecember 31,2015 and 2014 were 2.5%and 2.0%of gross Vacation Interests notes receivable,respectively. The Vacation Interests notes receivable,net balance includes deferred origination costs related to Vacation Interests notes receivable originated by the Company,net of the related allowance.Vacation Interests notes receivable origination costs incurred in connection with providing fmancing for VOIs are capitalized and amortized over the estimated life of the Vacation Interests notes receivable,based on historical prepayments,as a decrease to interest revenue using a method that approximates the effective interest method.Amortization of deferred loan and contract origination costs charged to interest F-20 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued revenue was$12.6 million, $8.9 million and$5.4 million for the years ended December 31,2015,2014 and 2013, respectively. Gross Vacation Interests notes receivable-securitized were collateralized against the Company's various borrowings included in"Securitization notes and Funding Facilities"in the accompanying consolidated balance sheets. See"Note 16- Borrowings"for further detail. Gross Vacation Interests notes receivable consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Vacation Interests notes receivables-securitized 688,777 $ 552,400 Vacation Interests notes receivables-non-securitized 81,014 56,377 Total Vacation Interests notes receivable 769,791 $ 608,777 Vacation Interests notes receivable,net consisted of the following as of December 31 of each of the following years in thousands): 2015 2014 Vacation Interests notes receivable,originated 744,532 $ 567,564 Vacation Interests notes receivable,purchased 25,259 41,213 Vacation Interests notes receivable,gross 769,791 608,777 Allowance for loan and contract losses 165,331) 130,639) Deferred profit on Vacation Interests transactions 1,780) 1,625) Deferred loan and contract origination costs,net 15,546 12,253 Inventory value of defaulted mortgages that were previously purchased 4,152 9,587 Premium on Vacation Interests notes receivable,net-purchased 229 309 Vacation Interests notes receivable,net 622,607 $ 498,662 Deferred profit on Vacation Interests transactions represents the revenues less the related direct costs(sales commissions,sales incentives,cost of sales and allowance for loan losses)related to sales that do not qualify for revenue recognition under ASC 978. See"Note 2-Summary ofSignificant Accounting Policies"for a description of revenue recognition criteria. Inventory value of defaulted mortgages that were previously purchased represents the inventory underlying mortgages that have defaulted.Upon recovery of the inventory,the value is transferred to unsold Vacation Interests,net. The following reflects the contractual principal maturities of originated and acquired Vacation Interests notes receivable for each of the following years(in thousands): 2016 65,710 2017 68,169 2018 71,997 2019 76,605 2020 81,810 2021 and thereafter 405,500 769,791 Activity in the allowance associated with Vacation Interests notes receivable consisted of the following for the years ended December 31 (in thousands): 2015 2014 Balance,beginning ofyear 130,639 $105,590 Provision for uncollectible Vacation Interests sales(a) 80,380 56,970 Write offs,net 45,688) 31,921) Balance,end of year 165,331 $130,639 F-21 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued a)The provision for uncollectible Vacation Interests sales shows activity in the allowance for loan and contract losses associated with Vacation Interests notes receivable and is exclusive ofASC 978 adjustments related to deferred revenue. A summary of the credit quality and aging consisted of the following as of December 31 of each of the following years(in thousands): As of December 31,2015 FICO Scores Current 31-60 61-90 91-120 121-150 151-180 Total 799 75,647 $ 751 $ 193 $ 338 $ 204 $ 287 $ 77,420 700-799 397,264 7,589 3,497 2,938 1,879 2,533 415,700 600-699 213,818 8,444 3,653 3,893 2,841 2,100 234,749 600 19,393 1,700 881 333 533 465 23,305 No FICO Scores 16,677 674 490 320 286 170 18,617 722,799 $ 19,158 $ 8,714 $ 7,822 $ 5,743 $ 5,555 $ 769,791 As of December 31,2014 FICO Scores Current 31-60 61-90 91-120 121-150 151-180 Total 799 56,005 $ 487 $ 215 $ 190 $ 143 $ 155 $ 57,195 700-799 305,636 4,276 1,338 1,396 1,335 1,050 315,031 600-699 178,550 6,313 2,687 2,034 1,891 1,674 193,149 600 19,992 1,833 895 545 406 450 24,121 No FICO Scores 17,262 817 449 361 230 162 19,281 577,445 $ 13,726 $ 5,584 $ 4,526 $ 4,005 $ 3,491 $ 608,777 The Company captures FICO credit scores when each loan is underwritten.The"No FICO Scores"category in the table above is primarily comprised of customers who live outside of the U.S. Note 6 -Transactions with Related Parties Duefrom Related Parties,Net,and Due to Related Parties,Net Amounts due from related parties,net and due to related parties,net consist primarily of transactions with HOAs or Collection Associations for which the Company acts as the management company.Due from related parties,net,transactions include(i)management fees for the Company's role as the management company;(ii)certain expenses reimbursed by HOAs and Collection Associations;and(iii)the recovery of a portion of the Company's Vacation Interests carrying costs,management and member services,consolidated resort operations,loan portfolio and general and administrative expenses that are incurred on behalf of the HOAs and the Collection Associations according to a pre-determined schedule approved by the board of directors at each HOA and Collection Association.Due to related parties,net,transactions include(i)the amounts due to HOAs and Collection Associations under the IRAAs that the Company enters into regularly with certain HOAs and similar agreements with the Collection Associations,pursuant to which the Company recaptures VOIs,either in the form of vacation points or vacation intervals,and may recover the underlying inventory at a later date;(ii)the maintenance fee and assessment fee liability owed to HOAs and Collection Associations for VOIs owned by the Company(generally this liability is recorded on January 1 of each year for the entire amount of annual maintenance and assessment fees,and is relieved throughout the year by payments remitted to the HOAs and the Collection Associations;these maintenance and assessment fees are also recorded as prepaid expenses and other assets in the accompanying consolidated balance sheets and amortized ratably over the year);(iii)cleaning fees owed to the HOAs for room stays paid by the Company's customers or by a Club on behalf of a member where the frequency of the cleans exceed those covered by the respective maintenance fees;and(v)miscellaneous transactions with other non-HOA related parties. Amounts due from related parties and due to related parties,some of which are due on demand,carry no interest.Due to the fact that the right of offset exists between the Company and the respective HOAs and Collection Associations,the Company evaluates amounts due to and from each HOA and Collection Association at each reporting period to reduce the receivables and the payables on each party's books of record.Any remaining balances are then reclassified as either a net due to or a net due F-22 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued from related parties for each HOA and Collection Association in accordance with the requirements of ASC 210,"Balance Sheet Offsetting." Due from related parties,net consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Amounts due from HOAs and Collection Associations 42,393 $ 51,207 Amounts due from other 42 444 Total due from related parties,net 42,435 $ 51,651 Due to related parties,net consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Amounts due to HOAs and Collection Associations 54,686 $ 34,732 Amounts due to other 92 36 Total due to related parties,net 54,778 $ 34,768 Inventory Recovery andAssignmentAgreements The Company entered into IRAAs with substantially all HOAs for its managed resorts in North America and similar arrangements with all ofthe Collection Associations and a majority of its European managed resorts,pursuant to which it recaptures VOIs,either in the form of points or intervals,and brings them into its inventory for sale to customers.Under these agreements,the Company is required to pay between 30%and 100%of the annual maintenance and assessment fees to the HOAs and the Collection Associations for any VOIs that have become eligible for recovery. Generally,these agreements automatically renew for additional one-year terms unless expressly terminated by either party in advance of the agreement expiration period. Such agreements contain provisions for the Company to utilize the VOIs associated with such maintenance fees and to reclaim such VOIs in the future. Generally,the agreements provide for an initial June 30 settlement date and adjustments thereafterfor owners that become current subsequent to the June 30 settlement date. Management Services Included within the amounts reported as management and member services revenue are revenues from resort management services provided to the HOAs and the Collection Associations,which totaled$105.5 million,$96.2 million and$81.1 million for the years ended December 31,2015,2014 and 2013,respectively. See"Note 1-Background,Business and Basis of Presentation"above for detail of these services performed. Hospitality Management and Consulting Service,LLC("HM&C")Management Services Agreement(the "HM&C Agreement") HM&C was beneficially owned and controlled by Stephen J.Cloobeck,the Company's Chairman of the Board,and David F.Palmer,the Company's President and Chief Executive Officer,until the consummation of the HM&C Acquisition(as defined and discussed below),effective as of January 1,2015.Pursuant to the HM&C Agreement,HM&C has provided two categories of management services to the Company:(i)executive and strategic oversight ofthe services that the Company provides to HOAs and the Collection Associations through the Company's hospitality and management services operations,for the benefit of the Company,the HOAs and the Collection Associations;and(ii)executive,corporate and strategic oversight of the Company's operations and certain other administrative services.Prior to the HM&C Acquisition,pursuant to the HM&C Agreement,HM&C was entitled to receive(a)a lump sum annual management fee for providing HOA management services; b)a lump sum annual management fee for providing corporate management services;(c)a lump sum annual incentive payment based on performance metrics determined by the Compensation Committee of the Company's Board of Directors, subject to certain minimum amounts set forth in the HM&C Agreement;and(d)reimbursement of HM&C's expenses incurred in connection with its activities under the HM&C Agreement. HM&CAcquisition On January 6,2015,the Company entered into a Membership Interest Purchase Agreement(the"Purchase Agreement"), whereby it acquired from an entity controlled by Mr. Cloobeck and an entity controlled by Mr.Palmer(which entities owned95%and 5%of the outstanding membership interests of HM&C,respectively)all of the outstanding membership interests inHM&C in exchange for an aggregate purchase price of$10,000(the"HM&C Acquisition"),which is recorded as goodwill on F-23 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued the Company's consolidated balance sheet.As a result of the HM&C Acquisition,effective January 1,2015,transactions between the Company and HM&C were fully eliminated from the Company's consolidated balance sheet,as HM&C became a wholly-owned subsidiary of the Company. MasterAgreement Concurrent with the Company's entry into the Purchase Agreement,on January 6,2015,the Company entered into a MasterAgreement(the"Master Agreement")with Mr. Cloobeck,HM&C,JHJM Nevada I,LLC("JHJM")and other entities controlled by Mr. Cloobeck or his immediate family members.Pursuant to the Master Agreement,the parties made certain covenants to and agreements with the other parties,including: (i)the termination,effective as of January 1,2015,of the services agreement between JHJM and HM&C(the"JHJM Agreement");(ii)the conveyance to the Company of exclusive rights to market timeshare and vacation ownership properties from a prime location adjacent to Polo Towers on the"Las Vegas Strip,"pursuant to the terms of an Assignment and Assumption Agreement;(iii)Mr. Cloobeck's agreement to various restrictive covenants,including non-competition,non-solicitation and non-interference covenants;and(iv)Mr. Cloobeck's grant to the Company of a license to use Mr. Cloobeck's persona,including his name,likeness and voice. In connection with the transactions contemplated by the Master Agreement,the Company paid Mr. Cloobeck or his designees$16.5 million and incurred$0.3 million in expenses related to this transaction.Of these amounts,$7.8 million was recorded as general and administrative expense in connection with the JHJM Agreement and$9.0 million was capitalized as marketing easement rights and other intangible assets. See"Note 12—Other Intangible Assets,Net'for further detail on the intangible assets acquired. In addition,in light of the termination ofthe services agreement between JHJM and HM&C and the existence of a director designation agreement dated July 17,2013,the Company agreed in the Master Agreement that,at least through December 31,2017,so long as Mr. Cloobeck is serving as a member ofthe board of directors of the Company,he will continue to be the Chairman of the Board and,in such capacity,will receive annual compensation equal to two times the compensation generally paid to other non-employee directors,and he,his spouse and children will receive medical insurance coverage. Aircraft Leases In January 2012,the Company entered into an aircraft lease agreement with N702DR,LLC,a limited liability company of which Mr.Cloobeck is a beneficial owner and a controlling party.Pursuant to this lease agreement,the Company leases an aircraft from N702DR,LLC and paid N702DR,LLC$2.4 million for each of the years ended December 31,2015,2014 and 2013.In addition,pursuant to the Master Agreement described above,the Company agreed not to terminate this aircraft lease agreement until at least December 31,2017,subject to certain termination provisions in the aircraft lease agreement. In connection with the Company's lease of another aircraft from Banc of America Leasing&Capital,LLC,Mr. Cloobeck entered into a guarantee in favor of Banc of America Leasing&Capital,LLC.Pursuant to this guarantee,Mr. Cloobeck guarantees the Company's lease payments and any related indebtedness to Banc ofAmerica Leasing&Capital,LLC.In connection withthis aircraft lease,and pursuant to this lease agreement,the Company paid Banc ofAmerica Leasing&Capital, LLC$1.2 million for each of the years ended December 31,2015,2014 and 2013,respectively.The Company did not compensate Mr. Cloobeck for providing these guarantees;however,pursuant to the Master Agreement described above,the Company agreed to indemnify and hold harmless Mr. Cloobeck and each of his affiliates from any and all amounts that Mr. Cloobeck is required to pay under the guarantee in favor of Banc of America Leasing&Capital,LLC.In exchange,Mr. Cloobeck agreed to comply with all the covenants and agreements set forth in the guarantee for so long as Mr. Cloobeck or any of his affiliates is subject to the guarantee. Guggenheim Relationship Pursuant to an agreement with the Company,DRP Holdco,LLC(the"Guggenheim Investor"),a significant stockholder of the Company,had the right to nominate two members to the Company's Board of Directors,subject to certain security ownership thresholds.Zachary Warren,a principal of Guggenheim Partners,LLC("Guggenheim"),an affiliate ofthe Guggenheim Investor,serves as a member of the Company's Board of Directors as a nominee of the Guggenheim Investor.B. Scott Minerd,also a principal of Guggenheim,served as a member of the Company's Board of Directors until his resignation effective July 28,2015.Mr Minerd's resignation did not involve a disagreement on any matter relating to the Company's operations,policies,or practices. Affiliates of Guggenheim are currently lenders under the Conduit Facility,the senior secured credit facility originally entered into on May 9,2014 and subsequently amended on December 22,2014 and December 3,2015(the"Senior Credit Facility")and the$64.5 million securitization transaction completed on April 27,2011 (the"DROT 2011 Notes"). See"Note 16 Borrowings"elsewhere in this report for further details on these borrowings. In addition,an affiliate of Guggenheim was an investor in the Company's 12.0%senior secured notes originally due 2018(the"Senior Secured Notes")that were redeemed on June 9,2014. F-24 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued March 2015 Secondary Offering On March 10,2015,Cloobeck Diamond Parent,LLC(an entity beneficially owned and controlled by Mr. Cloobeck),the Guggenheim Investor and Best Amigos Partners,LLC(an entity beneficially owned and controlled by Lowell D.Kraff,theViceChairmanoftheBoardofDirectorsoftheCompany)(collectively,the"Selling Stockholders")consummated the sale of an aggregate of 6,700,000 shares of common stock of the Company in an underwritten public offering.On March 20,2015,the Selling Stockholders sold an additional aggregate of 802,316 shares of the Company's common stock to the underwriter pursuant to the underwriting agreement in connection with the underwriter's exercise of its over-allotment option.These transactions are collectively referred to as the"March 2015 Secondary Offering."The Company did not sell any stock in the March 2015 Secondary Offering and did not receive any proceeds from the offering.The Company purchased from the underwriter 1,515,582 shares sold by the Selling Stockholders in the March 2015 Secondary Offering at$32.99 per share(the same price per share at which the underwriter purchased shares from the Selling Stockholders)for a total purchase price of 50.0 million.The Company incurred$0.8 million in expenses related to the March 2015 Secondary Offering,including registration,filing and listing fees,printing fees and legal and accounting expenses,which are included in general and administrative expenses in the accompanying consolidated statements ofoperations and comprehensive income(loss). Praesumo Agreement In June 2009,the Company entered into an Engagement Agreement for Individual Independent Contractor services with Praesumo Partners,LLC,a limited liability company of which Mr.Lowell D.Kraff,the Vice Chairman of the Board of Directors of the Company,is a beneficial owner and a controlling party.Pursuant to this engagement agreement,Praesumo provides Mr.Kraff as an independent contractor to the Company to provide,among other things,acquisition,development and finance consulting services.In August 31,2015,the Company entered into a fourth extension agreement that extends the agreement through August 31,2016.In consideration of these services provided pursuant to this agreement,the Company paidtoPraesumoPartners,LLC,in the aggregate,$1.8 million, $1.7 million and$2.0 million,in fees and expense reimbursements during the years ended December 31,2015,2014 and 2013,respectively.These amounts do not include certain travel-related costs paid directly by the Company. Luumena Mr.Kraff was also a beneficial owner of Luumena,LLC,which provided digital media services.The Company paid Luumena,LLC$0.2 million during the year ended December 31,2013.The Company terminated its contract with Luumena during the year ended December 31,2013.Effective January 1,2014,Mr.Kraff no longer had any beneficial ownership inLuumena,LLC. Technogistics Mr.Kraff was also a beneficial owner of Technogistics,LLC,which provided direct marketing services.The Company paid Technogistics,LLC$1.6 million during the year ended December 31,2013.Effective January 1,2014,Mr.Kraff no longer had any beneficial ownership in Technogistics,LLC.The Company terminated its contract with Technogistics,LLC effective January 1,2015. Trivergance Business Resources Mr.Kraff was also a beneficial owner ofTrivergance Business Resources,LLC.Commencing on January 1,2013, Trivergance Business Resources,LLC began providing promotional,product placement,marketing,public relations and branding services to the Company,including the development of a new consumer marketing website.The Company paid Trivergance Business Resources,LLC$1.0 million during the year ended December 31,2013.Effective January 1,2014,Mr. Kraffno longer had any beneficial ownership in Trivergance Business Resources,LLC. Mackinac Partners Since September 2008,Mr. C.Alan Bentley has served in various officer capacities,including as Executive Vice President,and as a director,of certain subsidiaries of DRP. In January 2013,Mr.Bentley was named Executive Vice President and ChiefFinancial Officer.Through December 30,2014,Mr.Bentley was also a partner of Mackinac Partners,LLC,a financial advisory firm that provides consulting services to the Company.Effective December 31,2014,Mr.Bentley withdrew as a partner of Mackinac Partners,LLC.The services provided by Mackinac Partners,LLC to the Company include advisory services relating to mergers and acquisitions,capital formation and corporate finance. In addition to these services, which Mackinac Partners,LLC provided at hourly rates,Mackinac Partners,LLC also provides to the Company strategic advisory services of one of its managing partners at a rate of$0.2 million for each three-month period during the term.For the F-25 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued years ended December 31,2014 and 2013,the Company paid fees and expense reimbursements to Mackinac Partners,LLC of 1.8 million and$2.2 million,respectively. Katten Muchin Rosenman LLP Mr.Howard S.Lanznar,who joined the Company as the Executive Vice President and ChiefAdministrative Officer in September 2012,was a partner of the law firm ofKatten Muchin Rosenman LLP("Katten")until August 31,2014 and is currently Of Counsel at the firm.Katten renders legal services to the Company.During the years ended December 31,2014 and 2013,the Company paid to Katten fees of$3.4 million and$7.0 million,respectively.Additionally,Richard M.Daley,who is a member of the Board of Directors of the Company,is Of Counsel at Katten. Note 7 —Other Receivables,Net Other receivables,net,consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Club dues receivable,net 25,028 $ 27,160 Receivables related to Sampler Packages,net 14,723 17,516 Interest receivables associated with Vacation Interests notes receivable 7,919 6,382 Rental receivables and other resort management-related receivables,net 2,737 3,972 Insurance claims receivables 1,262 342 Tax refund receivables 2,070 Other receivables 4,117 2,379 Total other receivables,net of allowances of$12,300 and$10,052,respectively 55,786 $ 59.821 The allowance for doubtful accounts relates primarily to receivables for Club dues and Sampler Packages.The Company considers factors such as economic conditions,industry trends,defaults and past due agings to analyze the adequacy ofthe allowance.Any adjustments to the allowance are recorded within management and member services revenue orvacation interest carrying cost,net of the Company's consolidated statement ofoperations and comprehensive income(loss). Note 8 —Prepaid Expenses and OtherAssets,Net The nature of selected balances included in prepaid expenses and other assets,net,includes: Deferred commissions—commissions paid to sales agents related to deferred revenue from sales of Sampler Packages, which allow purchasers to stay at a resort property on a trial basis.These amounts are charged to Vacation Interests carrying cost,net as the associated revenue is recognized. Vacation Interests purchases in transit—purchases of Vacation Interests from third parties for which the titles have not been officially transferred to the Company.These Vacation Interests purchases in transit are reclassified to unsold Vacation Interests,net,upon successful transfer of title. In connection with the Gold Key Acquisition,the Company recorded$15.5 million in prepaid expenses and other assets with an offsetting amount in accrued liabilities related to required buyouts,upgrade fees and defaulted inventory purchases related to pre-closing Vacation Interests notes receivables retained by the seller(the Default Recovery Agreement"),pursuant to which the Company is required to purchase any Vacation Interests notes receivable that are more than 90 days past due and thus obtains the rights to recover the underlying VOIs. Prepaid maintenancefees—prepaid annual maintenance fees billed by the HOAs at the resorts not managed by the Company on unsold Vacation Interests owned by the Company,which are charged to expense ratably over the year. Prepaid member benefits and affinity programs—usage rights of members ofthe Clubs can be exchanged for a variety of products and travel services,including airfare,cruises and excursions.Prepaid usage rights are amortized ratably over the year. F-26 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Prepaid expenses and other assets,net,consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Debt issuance costs,net 26,738 $ 20,826 Deferred commissions 17,109 18,492 Vacation Interests purchases in transit 29,323 20,058 Other inventory or consumables 4,767 4,067 Prepaid maintenance fees 3,843 3,317 Prepaid member benefits and affinity programs 2,689 4,362 Prepaid insurance 2,670 2,764 Prepaid sales and marketing costs 2,601 2,393 Deposits and advances 2,635 3,186 Other 8,272 6,974 Total prepaid expenses and other assets,net 100,647 $ 86,439 With the exception of Vacation Interests purchases in transit and deposits and advances,prepaid expenses and other assets are amortized as the underlying assets are utilized.Debt issuance costs incurred in connection with obtaining funding for the Company have been capitalized and are being amortized over the lives of the related funding agreements as a component of interest expense using a method which approximates the effective interest method.Amortization of capitalized debt issuance costs included in interest expense was$5.8 million,$4.6 million and$5.8 million for the years ended December 31,2015,2014 and 2013,respectively. See"Note 16—Borrowings"for more detail. Note 9 —Unsold Vacation Interests,Net Unsold Vacation Interests,net consisted of the following as ofDecember 31 of each ofthe following years(in thousands): 2015 2014 Completed unsold Vacation Interests,net 298,782 $230,137 Undeveloped land 35,974 24,326 Vacation Interests construction in progress 23,522 7,709 Unsold Vacation Interests,net 358,278 $262,172 F-27 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued Activity related to unsold Vacation Interests,net,consisted of the following for the years ended December 31 of each of the following years(in thousands): 2015 2014 Balance,beginning of year 262,172 $298,110 Vacation Interests cost of sales 28,721) 63,499) Purchases in connection with acquisitions 26,481 Inventory recovery 21,112 20,691 Construction in progress 18,175 3,474 Open market and bulk purchases 9,020 7,973 Capitalized legal,title and trust fees 15,609 5,601 Loan default recoveries related to business combinations 22,413 4,268 Transfers from(to)assets held for sale 12,488 4,254) Effect of foreign currency translation 2,810) 3,590) Transfer construction in progress to property and equipment 5,995) Impairment of inventory 181) Other 2,339 426) Balance,end ofyear 358,278 $262,172 See"Note 2-Summary ofSignificantAccounting Policies"for discussion on unsold Vacation Interests,net. Included in completed unsold Vacation Interests,net above is certain property at the Cabo Azul Resort located in San Jose Del Cabo,Mexico with a cost basis of$5.7 million,which is subject to an agreement that grants a third-party an option to purchase the property.This property was classified as assets held for sale as of December 31,2014 but no longer qualified as such as of December 31,2015. Similarly,undeveloped land above includes vacant land in Orlando,Florida and Kona,Hawaii that no longer qualified as assets held for sale as of December 31,2015. In connection with the Gold Key Acquisition,the Company acquired$26.5 million in unsold Vacation Interests,net based on a preliminary appraisal. See"Note 24Business Combinations"for further details. At December 31,2015,Vacation Interests construction in progress includes costs related to construction ofunits at the Cabo Azul Resort located in San Jose Del Cabo,Mexico and the development of a new resort in Kona,Hawaii. See "Note 18- Commitments and Contingencies"for additional information regarding the development of the new resort in Kona,Hawaii. Loan default recoveries related to business combinations represent the recovered inventory underlying defaulted Vacation Interests notes receivable that were acquired in connection with the Company's business combinations. Note 10-Property and Equipment,Net Property and equipment,net consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Land and improvements 20,219 $ 19,335 Buildings and leasehold improvements 60,281 44,320 Furniture and office equipment 21,845 19,248 Computer software 46,231 33,465 Computer equipment 19,146 15,641 Construction in progress 2,522 271 Property and equipment,gross 170,244 132,280 Less accumulated depreciation 74,883) 61,409) Property and equipment,net 95,361 $ 70,871 Depreciation expense related to property and equipment was$16.2 million,$13.2 million and$11.2 million for the years ended December 31,2015,2014 and 2013,respectively. F-28 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Property and equipment are recorded at either cost for assets purchased or constructed,or fair value in the case of assets acquired through acquisitions.The costs of improvements that extend the useful life of property and equipment are capitalized when incurred.These capitalized costs may include structural costs,equipment,fixtures and floor and wall coverings.All repair and maintenance costs are expensed as incurred. Buildings and leasehold improvements are depreciated using the straight-line method over the lesser of the estimated useful lives,which range from four to 40 years,or the remainder of the lease terms.Furniture,office equipment,computer software and computer equipment are depreciated using the straight-line method over their estimated useful lives,which range from three to seven years. In connection with the Gold Key Acquisition,the Company acquired property and equipment valued at$15.3 million based on a preliminary appraisal. See"Note 24—Business Combinations"forfurther details. Note 11—Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.As required by ASC 350,the Company does not amortize goodwill,but rather evaluates goodwill by reporting unit for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below the carrying amount.The Company performed its annual evaluation of potential impairment of goodwill as required in the ordinary course of business during the fourth quarter of 2015.The Company assessed various qualitative factors and determined that the fair values of its reporting units were not below their respective carrying value.As such,the Company concluded that the first and second steps ofthe goodwill impairment tests were unnecessary.See "Note 2—Summary ofSignificantAccounting Policies"for further detail on the Company's policy related to goodwill impairment testing. The changes in the carrying amount of goodwill are as follows(in thousands): Hospitality and Management Vacation Interests Services Sales and Financing Total Company Balance as of December 31,2014-Island One Acquisition $ 30,165 $467 $ 30,632 Goodwill acquired during the year ended December 31,2015: Gold Key Acquisition 13,777 60,102 73,879 HM&C Acquisition 10 10 Total goodwill acquired during the year ended December 31,2015 13,787 60,102 73,889 Balance as of December 31,2015 43,952 $ 60,569 $ 104,521 See"Note 6—Transactions with Related Parties—HM&CAcquisition"for further detail on the HM&C Acquisition and Note 24—Business Combinations"for further detail on the Gold Key Acquisition Note 12—Other Intangible Assets,Net Other intangible assets,net consisted of the following as of December 31,2015(in thousands): Gross Carrying Accumulated Net Book Cost Amortization Value Management contracts 226,515 $ (58,278) $ 168,237 Member relationships and the Clubs 55,866 39,298) 16,568 Rental agreements 15,800 823) 14,977 Rights to develop inventory 11,600 173) 11,427 Marketing easement rights 8,717 436) 8,281 Distributor relationships and other 5,096 2,396) 2,700 323,594 $ (101,404) $ 222,190 F-29 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Other intangible assets,net consisted of the following as of December 31,2014(in thousands): Gross Carrying Accumulated Net Book Cost Amortization Value Management contracts 201,997 $ (45,218) $ 156,779 Member relationships and the Clubs 55,784 36,789) 18,995 Distributor relationships and other 4,851 1,839) 3,012 262,632 $ (83,846) $ 178,786 Under the terms of the Master Agreement entered into by the Company on January 6,2015,the Company acquired certain rights from Mr.Cloobeck and entities controlled by Mr. Cloobeck,which were recorded by the Company as intangible assets. See "Note 6—Transactions with Related Parties"for more detail regarding the Master Agreement and related transactions. Intangible assets purchased under the Master Agreement consisted of the following(dollars in thousands): Weighted Average Useful Life Based on Appraisal Marketing easement rights 20 8,717 Other intangibles 3 266 8,983 In connection with the Gold Key Acquisition,which was completed on October 16,2015,the Company recorded the following intangible assets(dollars in thousands): Weighted Average Based on PreliminaryUsefulLifeAppraisal Management contracts 20 25,300 Rental agreements 4 15,800 Rights to develop inventory 14 11,600 Member relationships 6 360 53,060 See "Note 24Business Combinations"for more detail regarding the Gold Key Acquisition. Amortization expense for other intangible assets was$18.3 million,$19.3 million and$17.0 million for the years ended December 31,2015,2014 and 2013,respectively. As of December 31,2015,the estimated aggregate amortization expense for intangible assets was expected to be$20.7 million,$19.8 million,$19.4 million,$18.6 million and$15.3 million for the years ending December 31,2016 through 2020, respectively,and an aggregate$128.4 million for the remaining lives of these intangible assets. The Company did not identify any impairment of its intangible assets for the years ended December 31,2015,2014 or 2013. See "Note 2—Summary ofSignificant Accounting Policies"for further detail on the Company's policy related to impairment evaluation of the Company's intangible assets. Note 13—Assets Held for Sale Assets held for sale are recorded at the lower of cost or their estimated fair value less cost to sell and are not subject to depreciation. Sale of the assets classified as such is probable,and transfer ofthe assets is expected to qualify for recognition as a completed sale,generally within one year of the balance sheet date. F-30 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Assets held for sale consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Points equivalent of unsold units and resorts in Europe 1,518 $ 997 Certain units in San Jose Del Cabo,Mexico 154 5,855 Vacant land in Orlando,Florida 4,000 Vacant land in Kona,Hawaii 3,600 Total assets held for sale 1,672 $ 14,452 The points equivalent of unsold units and resorts in the Company's European operations as of December 31,2015 and December 31,2014 were either held for sale or pending the consummation of sale.The proceeds related to assets pending the consummation of sale are expected to be paid in full by May 2017 and the Company will retain title to the properties until the full amounts due under the sales contracts are received.According to guidance included in ASC 360, "Property,Plant,and Equipment,"the sales will not be considered consummated until all consideration has been exchanged.Consequently,the assets pending consummation of sale will continue to be included in assets held for sale until all proceeds are received. As of December 31,2015,'a vast majority ofthe completed units in San Jose Del Cabo,Mexico and vacant land in Orlando,Florida and Kona,Hawaii no longer qualified as assets held for sale and were included in unsold Vacation Interests, net. Note 14—Accrued Liabilities The Company records estimated amounts for certain accrued liabilities at each period end.The nature of selected balances included in accrued liabilities of the Company includes: Liabilityfor unrecognized tax benefit—See "Note 17—Income Taxes"for further detail. GoldKey inventory recovery agreement liability—In connection with the Gold Key Acquisition,the Company recorded 15.5 million in prepaid expenses and other assets with an offsetting amount in accrued liabilities in accordance with the Default Recovery Agreement. See "Note 8—Prepaid Expenses and Other Assets"for further detail. Subsequent to the closing of the acquisition and through December 31,2015,$3.1 million has been paid under this agreement. Accrued escrow liability—deposits in escrow received on Vacation Interests sold. Accrued operating lease liabilities—difference between straight-line operating lease expenses and cash payments associated with any equipment,furniture,or facilities leases classified as operating leases. Accrued exchange companyfees-estimated liability owed to Interval International for annual dues related to exchange services provided to the Company. Accrued liability related to acquisitions—contingent liability associated with an earn-out clause in connection with a business combination completed in 2012.This liability was subsequently reduced after a negotiated settlement was reached and the reduced amount was paid in full in June 2015. F-31 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued Accrued liabilities consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Liability for unrecognized tax benefit 75,706 $ 23,857 Accrued payroll and related 37,154 32,925 Accrued marketing expenses 24,885 14,953 Accrued commissions 22,774 17,496 Accrued other taxes 15,525 15,526 Gold Key inventory recovery agreement liability 12,371 Accrued insurance 7,795 5,703 Accrued professional fees 4,336 2,300 Accrued escrow liability 3,784 3,005 Accrued operating lease liabilities 3,309 3,503 Accrued exchange company fees 2,131 2,169 Accrued liability related to acquisitions 2,428 Other 11,892 10,815 Total accrued liabilities 221,662 $ 134,680 Note 15-Deferred Revenues The Company records deferred revenues for payments received or billed but not earned for various activities. DeferredSampler Packages revenue-sold but unused trial VOIs.The Company generates revenue on sales of Sampler Packages.This revenue is recognized when the purchaser completes a stay at one of the Company's resorts or the trial period expires,whichever is earlier. Such revenue is recorded as a reduction to Vacation Interests carrying cost included in the Company's consolidated statements of operation and comprehensive income(loss)in accordance with ASC 978(with the exception of the Company's European sampler product,which has a duration of three years and,as such,is treated as Vacation Interests sales revenue). Club deferred revenue-annual membership fees in the Clubs billed to members(offset by an estimated uncollectible amount)and amortized ratably over a one-year period. Accrued guest deposits-amounts received from guests for future rentals,which are recognized as revenue when earned. Deferredmaintenance and reserve fee revenue-maintenance fees billed as ofJanuary first of each year and earned ratably over the year for the two resorts in St.Maarten where the Company functioned as the HOA through December 31, 2014. In addition,the owners were billed for capital project assessments to repair and replace the amenities or to reserve the potential out-of-pocket deductibles for hurricanes and other natural disasters.These assessments were deferred until the refurbishment activity occurred,at which time the amounts collected were recognized as consolidated resort operations revenue,with an equal amount recognized as consolidated resort operations expense.Deferred maintenance and reserve fee revenue decreased by$7.6 million from December 31,2014 to December 31,2015 due to the St.Maarten Deconsolidation. Deferred revenues consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 Deferred Sampler Packages revenue 66,285 $ 64,403 Club deferred revenue 43,890 40,044 Accrued guest deposits 6,631 6,482 Deferred maintenance and reserve fee revenue at our St.Maarten resorts 7,552 Other 2,914 6,516 Total deferred revenues 119,720 $ 124,997 F-32 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Note 16—Borrowings Senior Credit Facility On May 9,2014,the Company entered into the Senior Credit Facility Agreement,which originally provided for a$470.0millionSeniorCreditFacility(including a$445.0 million term loan,issued with 0.5%of original issue discount and having atermofsevenyearsanda$25.0 million revolving line of credit having a term of five years).Borrowings pursuant to the Senior Credit Facility Agreement bear interest,at the Company's option,at a variable rate equal to LIBOR plus 450 basis points(with a one percent LIBOR floor applicable only to the term loan portion)or an alternate base rate plus 350 basis points. The Company used the proceeds ofthe term loan portion of the Senior Credit Facility,as well as$5.4 million of cash on hand,to fund the$418.9 million redemption amount for the outstanding Senior Secured Notes,including the applicable redemption premium and accrued and unpaid interest up to(but excluding)the June 9,2014 redemption date,and to repay all outstanding indebtedness,together with accrued interest and fees,under three inventory loans(previously entered into in connection with various acquisitions).In conjunction with the Company's entry into the Senior Credit Facility Agreement,the Company also terminated its previous revolving credit facility,under which no borrowings were then outstanding. See below for the definition of and further detail on these retired borrowings. On December 22,2014,the Company entered into a First Amendment to the Senior Credit Facility Agreement(the"FirstAmendment"),which allowed the Company to accelerate its use of restricted payments for its stock repurchase program. On December 3,2015,the Company entered into a Second Amendment and First Incremental Assumption Agreement(the"Second Amendment")to the Senior Credit Facility Agreement.The Second Amendment provides for a$150.0 million incremental term loan that bears the same interest rate and terms as described for the original term loan above.The Company received$147.0 million in proceeds upon the closing of the Incremental Term Loan,which was issued with a 2.0%original issue discount. Other significant terms of the Senior Credit Facility include: (i)quarterly amortization payments of$1.5 million commencing in March 2017;(ii)an excess cash flow sweep that varies depending on the Company's secured leverage ratio which represents the ratio of(1)secured total debt to(2)Adjusted EBITDA for the most recent four consecutive fiscal quarters for which financial statements have been delivered);the Company is required to pay 50%of its excess cash flow(as defined in the Senior Credit Agreement)if the secured leverage ratio is greater than 2.0:1,25%of its excess cash flow if the secured leverage ratio is greater than 1.5:1,but equal to or less than 2.0:1,and there is no excess cash flow sweep due when the secured leverage ratio is equal to or less than 1.5:1;(iii)a soft call provision of 1.01 until June 3,2016;(iv)no ongoing maintenance financial covenants for the term loan,and a financial covenant calculation required on the revolving line of credit if outstandingloansundertherevolvinglineofcreditexceed25%of the commitment amount as of the last day of any fiscal quarter;(v)the availability of additional incremental borrowings subject to meeting a required secured leverage ratio;and(vi)the Company's ability to make restricted payments,including the payment of dividends or share repurchases,up to the remaining portion of the cash flows that is not used to amortize debt pursuant to the excess cash flow provision described above. At December 31,2015,the outstanding principal balance under the term loan(including the Incremental Term Loan)was 574.7 million,and no principal balance was outstanding under the revolving line of credit.At December 31,2015,the Company was in compliance with all of the Senior Credit Facility covenants. Conduit Facility On February 5,2015,the Company entered into an amended and restated Conduit Facility agreement that extended the maturity date of the facility to April 10,2017.The Conduit Facility is renewable for 364-day periods at the election of the lenders upon maturity.The overall advance rate on loans receivable in the portfolio is limited to 88%of the aggregate face value of eligible loans.The Conduit Facility originally bore interest at LIBOR or the commercial paper rate(having a floor of 0.50%) plus a usage-fee rate of 2.75%,and has a non-use fee of 0.75%.In connection with the amendment to the Conduit Facility agreement that was entered into on June 26,2015("the June 2015 Amendment"),the usage-fee rate was reduced to 2.25%. The June 2015 Amendment also provides,among other things,(i)that,at any time the outstanding note balance has been reduced to zero in connection with the delivery of a prepayment notice,the first borrowing thereafter must include a minimum of 250 timeshare loans and(ii)for the inclusion oftimeshare loans that have been executed through the utilization ofelectronic signature and electronic vaulting and management services. In accordance with the requirements ofthe July 2015 Amendment,the Company posted a reserve payment in the amount of 0.4 million against the derivative instruments associated with the Conduit Facility.This reserve payment was refunded to the Company upon the Completion of the DROT 2015-1 Notes(see definition below)in which more than 75%of the outstanding balance under the Conduit Facility was repaid using the proceeds from such securitization or other financing. F-33 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued The Conduit Facility is subject to covenants,including as to the maintenance of specific financial ratios.As of December 31,2015,the Company was in compliance with all of these covenants. Securitization Notes OnApril 27,2011,the Company issued the DROT 2011 Notes,which mature on March 20,2023 and carry an interest rate of 4.0%.The net proceeds were used to pay off in full the$36.4 million then-outstanding principal balance under the Conduit Facility,to pay down$7.0 million of the Quorum Facility,to pay requisite accrued interest and fees associated with both facilities,and to pay certain expenses incurred in connection with the issuance of the DROT 2011 Notes,including the funding of a reserve account required thereby. On January 23,2013,the Company issued the DROT 2013-1 Notes with a face value of$93.6 million(the"DROT 2013-1 Notes").The DROT 2013-1 Notes mature on January 20,2025 and carry a weighted average interest rate of 2.0%.The net proceeds were used to pay off the$71.3 million then-outstanding principal balance under the Conduit Facility and to pay expenses incurred in connection with the issuance ofthe DROT 2013-1 Notes,including the funding of a reserve account required thereby. On September 20,2013,the Company issued the Diamond Resorts Tempus Owner Trust 2013 Notes with a face value of 31.0 million(the"Tempus 2013 Notes").The Tempus 2013 Notes bear interest at a rate of 6.0%per annum and mature on December 20,2023. On November 20,2013,the Company completed a securitization transaction involving the issuance of$225.0 million of investment-grade rated securities(the"DROT 2013-2 Notes")that included a$44.7 million prefunding account.The DROT 2013-2 Notes consisted of two tranches of vacation ownership loan-backed notes that included$213.2 million of Class A tranche notes and$11.8 million of Class B tranche notes.The interest rates for the Class A tranche notes and the Class B tranche notes are 2.3%and 2.6%,respectively.The overall weighted average interest rate is 2.3%.The initial proceeds were used to pay off the 152.8 million then-outstanding principal balance,accrued interest and fees associated with the Conduit Facility,terminate the two interest rate swap agreements then in effect,pay certain expenses incurred in connection with the issuance ofthe DROT 2013-2 Notes,and fund related reserve accounts(including the prefunding account)with any remaining proceeds transferred to the Company for general corporate use.As of December 31,2014,cash in escrow and restricted cash included$23.3 million related to the prefunding account,all of which was released to the Company's unrestricted cash account in January 2014. On November 20,2014,the Company completed the DROT 2014-1 Notes that included a$51.8 million prefunding account.The DROT 2014-1 Notes consisted of two tranches ofvacation ownership loan-backed notes that included$235.6 million of Class A tranche notes and$24.4 million of Class B tranche notes.The interest rates for the Class A tranche notes and the Class B tranche notes are 2.5%and 3.0%,respectively.The overall weighted average interest rate is 2.6%. The initial proceeds were used to pay off the$141.3 million then-outstanding principal balance plus accrued interest and fees associated with the Conduit Facility,pay certain expenses incurred in connection with the issuance of the DROT 2014-1 Notes and fund related reserve accounts(including the prefunding account)with the remaining proceeds transferred to us for general corporate use.As ofDecember 31,2014,cash in escrow and restricted cash includes$4.4 million related to the prefunding account,all of which was released to the Company's unrestricted cash account in January 2015. On July 29,2015,the Company completed a securitization involving the issuance of investment-grade rated$170.0 million DROT 2015-1 Notes(the"DROT 2015-1 Notes").The interest rates for the$158.5 million Class A tranche notes and the$11.5 million Class B tranche notes are 2.7%and 3.2%,respectively.The overall weighted average interest rate is 2.8%.The advance rate for this transaction is 96.0%.The proceeds from the DROT 2015-1 Notes were used to repay all ofthe outstanding balance plus accrued interest under the Conduit Facility,as well as to pay debt issuance cost related to the DROT 2015-1 Notes,with the remaining proceeds transferred to the Company for general corporate use,and the reserve payment described above was refunded to the Company. On November 17,2015,the Company completed a securitization involving the issuance of investment-grade rated$180.0 million DROT 2015-2 Notes(the"DROT 2015-2 Notes").The interest rates for the$159.4 million Class A tranche notes and the 20.6 million Class B tranche notes are 3.0%and 3.5%,respectively.The overall weighted average interest rate is 3.1%.The advance rate for this transaction is 96.0%.The proceeds from the DROT 2015-2 Notes were used to repay all ofthe outstanding balance plus accrued interest under the Conduit Facility,as well as to pay debt issuance cost related to the DROT 2015-2 Notes with the remaining proceeds transferred to the Company for general corporate use.The DROT 2015-2 Notes initially included 33.6 million related to the future funding of Vacation Interests notes receivable,all of which was released to the Company's unrestricted cash account by December 31,2015. F-34 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Quorum Facility The Company's subsidiary,DRI Quorum 2010,LLC,entered into a Loan Sale and Servicing Agreement,dated as of April 30,2010 with Quorum Federal Credit Union as purchaser.On September 30,2015,pursuant to a First Amendment to the Amendment and Restated Loan Sale and Servicing Agreement,the Company amended the Quorum Facility to increase the aggregate minimum committed amount from$80.0 million to$100.0 million and to extend the term of the agreement to December 31,2017,provided that Quorum Federal Credit Union may further extend the term for additional periods by written notice. In connection with the Island One Acquisition completed on July 24,2013,the Company assumed the loan sale agreement entered into by a subsidiary of Island One,Inc.on January 31,2012 with Quorum that provides for an aggregate minimum$15.0 million loan sale facility(the"Island One Quorum Funding Facility").The Island One Quorum Funding Facility provides for a purchase period of three years(which was subsequently extended to December 31,2017)at a variable program fee of the published Wall Street Journal prime rate plus 6.0%,with a floor of 8.0%.The loan purchase commitment is conditional upon certain portfolio delinquency and default performance measurements.As of December 31,2015,the weighted average advance rate Quorum Facility and the Island One Quorum Funding Facility was 86.2%and the weighted average interest rate was 4.6%. Notes Payable During the year ended December 31,2015,the Company issued three unsecured notes to(mance premiums on certain insurance policies.Two ofthe unsecured notes matured in February 2016 and each of these two notes carried an interest rate of 2.7%per annum.The third unsecured note is scheduled to mature in October 2016 and carries an interest rate of 2.4%per annum.In addition,the Company purchased certain software licenses during the year ended December 31,2014,with annual interest-free payments due for the next three years,and this obligation was recorded at fair value using a discount rate of 5.0%. F-35 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued The following table presents selected information on the Company's borrowings as of the dates presented below(dollars in thousands): December 31, December 31,2015 2014 Gross Amount of Vacation Weighted Interests Average Notes Borrowing/Principal Interest Receivable as Funding Principal Balance Rate Maturity Collateral Availability Balance Senior Credit Facility 574,666 5.5% 5/9/2021 $ 25,000 $ 442,775 Original Issue discount related to Senior Credit Facilities 4,735) 2,055) Notes payable-insurance policies 4,586 2.4% Various 4,286 Notes payable-other 164 5.0% Various 326 Total Corporate Indebtedness 574,681 25,000 445,332 Diamond Resorts Owner Trust Series 2015-2(1) 172,583 3.1% 5/22'2028 180,090 Diamond Resorts Owner Trust Series 2014-1(1) 140,256 2.6% 5/20/2027 151,096 247,992 Diamond Resorts Owner Trust Series 2015-1(1) 126,776 2.8% 7/20/2027 133,860 Diamond Resorts Owners Trust 2013-2(1) 84,659 2.3% 5/20/2026 94,065 131,952 Quorum Facility(1) 45,411 4.6% 12/31/2017 45,270 54,589 (2) 52,315 Diamond Resorts Owner Trust 2013-1(1)30,681 2.0% 1/20/2025 34,091 42,838 Conduit Facility(1) 22,538 2.8% 4/10/2017 24,200 177,462 (2) Diamond Resorts Owner Trust 2011(1) 12,073 4.0% 3/20/2023 12,752 17,124 Original issue discount related to Diamond Resorts Owner Trust Series 2011 103) 156) Diamond Resorts Tempus OwnerTrust 2013(1) 7,884 6.0% 12/20/2023 13,353 17,143 Total Securitization Notes and Funding Facilities 642,758 688,777 232,051 509,208 Total 1,217,439 688,777 $ 257,051 $ 954,540 1)Non-recourse indebtedness 2)Borrowing/funding availability is calculated as the difference between the maximum commitment amount and the outstanding principal balance;however, the actual availability is dependent on the amount ofeligible loans that serve as the collateral for such borrowings. Borrowing Restrictions and Limitations All of the Company's borrowing under the Senior Credit Facility,securitization notes and the Conduit Facility contain various restrictions and limitations that may affect the Company's business and affairs.These include,but are not limited to, restrictions and limitations relating to its ability to incur indebtedness and other obligations,to make investments and acquisitions,pay dividends and repurchase shares of the Company's common stock.The Company is also required to maintain certain financial ratios and comply with other financial and performance covenants.The failure of the Company to comply with any of these provisions,or to pay its obligations,could result in foreclosure by the lenders of their security interests in the Company's assets,and could otherwise have a material adverse effect on the Company.The Company was in compliance with all ofthe financial covenants as of December 31,2015. The anticipated maturities ofthe Company's borrowings under the Senior Credit Facility,securitization notes,Funding Facilities and notes payable are as follows(in thousands)and do not include the use of any proceeds from potential debt or equity transactions during 2016 to pay down borrowings: F-36 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued Due in the sear ending December 31: 2016 142,590 2017 166,786 2018 81,981 2019 62,943 2020 45,440 2021 and thereafter 722,537 Total contractual obligations 1,222,277 Unamortized original issue discounts,net 4,838) Total borrowings as of December 31,2015 1,217,439 Liquidity Historically,the Company has depended on the availability of credit to finance the consumer loans that it provides to its customers for the purchase of their VOIs.Typically,these loans require a minimum cash down payment of 10%ofthe purchase price at the time of sale.However, selling,marketing and administrative expenses attributable to VOI sales are primarily cash expenses and often exceed the buyer's minimum down payment requirement.Accordingly,the availability of financing facilities for the sale or pledge ofthese receivables to generate liquidity is a critical factor in the Company's ability to meet its short-term and long-term cash needs.The Company has historically relied upon its ability to sell receivables in the securitization market in order to generate liquidity and create capacity on its Funding Facilities. Note 17-Income Taxes The components of the provision for income taxes are summarized as follows as of December 31 of each of the following years(in thousands): 2015 2014 2013 Current: Federal 1,039 $ State 2,114 393 138 Foreign 926 1,560 2,375 Total current provision for income taxes 4,079 1,953 2,513 Deferred: Federal 40,424 18,227 8,964 State 3,950 4,365 2,859 Foreign 8,838) 2,839 5,518) Total deferred provision for income taxes before change in valuation allowance 35,536 25,431 6,305 Increase(decrease)in valuation allowance 8,013 1,007) 3,041) Total deferred provision for income taxes 43,549 24,424 3,264 Unrecognized tax benefit 54,542 23,857 Provision for income taxes 102,170 $ 50.234 $ 5.777 Income before income taxes is comprised of the following as of December 31 of each ofthe following years(in thousands): 2015 2014 2013 Domestic 271,441 $ 121,039 $ 4,599 Foreign 19,793)11,348) 1,347) Income before income taxes 251,648 $ 109,691 $ 3,252 F-37 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued The reconciliation between the statutory provision for income taxes and the actual provision for income taxes is shown as follows for the years ended December 31 for each of the following years(in thousands): 2015 2014 2013 Income tax expense at U.S.federal statutory rate of 35% 88,077 $ 38,393 $ 1,138 State tax expense,net offederal effect 5,343 3,083 1,315 Tax impact of contributed entities 7,877 Stockbased compensation issued to non U.S.recipients 566 219 435 Income)loss of pass-through entities not taxed at corporate entity level 714) 111) 1,142 Tax impact of non-U.S.disregarded entities 1,119) 286) Rate differences between U.S.and foreign tax jurisdictions 2,807 1,649 2,046 Deferred balance adjustments 5,381 390) Permanent differences 978 3,746 3,441) Tax effect ofgain on bargain purchase from acquisitions 1,018) Change in valuation allowance 8,013 1,007) 3,041) Other 2,900) Provision for income taxes 102,170 $ 50,234 $ 5,777 The company's deferred tax assets and liabilities are as follows as of December 31 of each ofthe following years(in thousands): 2015 2014 Allowance for losses 66,743 $ 54,247 Deferred profit 18,282 22,349 Net Operating Loss carryover 80,832 124,674 Accrued expenses and prepaid assets 31,655 22,740 Minimum tax credit 77,918 25,733 Other 35,836 18,177 Total gross deferred tax assets 311,266 267,920 Valuation allowance 65,893) 60,044) Total net deferred tax assets 245,373 207,876 Installment sales 243,434 193,106 Intangible assets 32,372 14,072 Unsold Vacation Interests adjustments 53,764 47,525 Other 8,055 Total deferred tax liability 337,625 254,703 Net deferred tax liability 92,252) $ 46,827) ASC 740,"Income Taxes"("ASC 740")requires that the tax benefit of net operating losses,temporary differences and credit cavy forwards be recorded as an asset to the extent that management assesses that realization is"more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carry forward period,including the reversal of existing taxable temporary differences.The Company maintains a valuation allowance against its deferred tax assets in foreign jurisdictions,including its branch operations in St.Maarten.Due to the Company's history of operating losses in those locations,management believes that realization of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not and,accordingly,has provided a valuation allowance. As ofDecember 31,2015,the Company had available$137.8 million ofunused federal net operating loss("NOLs")carry forwards,$159.1 million of unused state NOLs,and$113.0 million offoreign NOLs,with expiration dates from 2021 through 2033(except for certain foreign NOLs that do not expire)that may be applied against future taxable income subject to certain limitations. F-38 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued As a result ofthe IPO and the resulting change in ownership,the Company's ability to use its federal NOLs will be limited under Internal Revenue Code Section 382. State NOLs are subject to similar limitations in many cases. No deferred tax liabilities have been provided for U.S.taxes on the undistributed earnings(if any)of foreign subsidiaries as of December 31,2015,2014 and 2013.Those earnings have been and are expected to be indefinitely reinvested in the foreign subsidiaries.The amount of unrecognized deferred tax liability has not been determined as it is impracticable at this time to determine the amount. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in the Company's fmancial statements.ASC 740 prescribes a recognition threshold and measurement attribute for the fmancial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.The evaluation of a tax position in accordance with ASC 740 is a two- step process.The first step is recognition:the Company determines whether it is"more-likely-than-not"that a tax position will be sustained upon examination,including resolution ofany related appeals or litigation processes,based on the technical merits of the position.In evaluating whether a tax position has met the"more-likely-than-not"recognition threshold,the Company presumes that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information.The second step is measurement:a tax position that meets the"more-likely-than-not"recognition threshold is measured to determine the amount ofbenefit to recognize in the financial statements.The tax position is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement.The adoption ofASC 740 did not result in a material impact on the Company's financial condition or results of operations. The following table summarizes the activity related to the Company's unrecognized tax benefits(in thousands): Amount Balance as of December 31,2013 Increases related to tax positions taken during the current period 23,857 Balance as of December 31,2014 23,857 Increase related to tax positions taken during a prior period 4,125 Increases related to tax positions taken during the current period 49,753 Balance as of December 31,2015 77,735 The gross amount of the unrecognized tax benefit as of December 31,2015 that,ifrecognized,would affect the Company's effective tax rate was$0.4 million. The Company's continuing practice is to recognize potential interest and/or penalties related to income tax matters in income tax provision.The Company has accrued$0.7 million for the payment ofinterest in the accompanying balance sheet and statement of operations and comprehensive income(loss). It is reasonably possible that the unrecognized tax benefit will increase during the next twelve months,and an estimate of the range is impracticable. The Company operates in multiple tax jurisdictions,both within the U.S.and outside of the U.S.The Company is no longer subject to income tax examinations by tax authorities in its major taxjurisdictions as follows: Tax Jurisdiction Tax Years No Longer Subject to Examination United States 2011 and prior United Kingdom 2012 and prior Spain 2011 and prior Note 18—Commitments and Contingencies LeaseAgreements The Company conducts a significant portion of its operations from leased facilities,which include regional and global administrative facilities as well as off-premise booths and tour centers near active sales centers.The longest of these obligations extends into 2025.Many of these agreements have renewal options,subject to adjustments for inflation.In most cases,the Company expects that in the normal course of business,such leases will be renewed or replaced by other leases.Typically, these leases call for a minimum lease payment that increases overthe life of the agreement by a fixed percentage or an amount based upon the change in a designated index.All of the facilities lease agreements are classified as operating leases. In addition, F-39 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued the Company leases equipment under both long-term and short-teen lease arrangements,which are generally classified as operating leases. Rental expense recognized for all operating leases during the years ended December 31,2015,2014 and 2013 totaled 25.2 million,$21.8 million and$21.1 million,net ofsublease rental revenue of$0.8 million,$0.8 million and$0.8 million, respectively. As ofDecember 31,2015,future minimum lease payments on operating leases were as follows(in thousands): Year ending December 31: 2016 15,461 2017 11,184 2018 8,092 2019 3,624 2020 2,802 2021 and thereafter 4,153 45,316 Contractual Obligations The Company has entered into various contractual obligations primarily related to construction of new units at the Cabo Azul Resort in San Jose Del Cabo,Mexico,as well as relating to sales center remodeling,property amenity improvement and corporate office expansion projects.The total remaining commitment was$3.9 million as ofDecember 31,2015. Hurricane Odile In September 2014,Hurricane Odile,a category 4 hurricane,inflicted widespread damage on the Baja California peninsula,particularly in San Jose Del Cabo,in which the Cabo Azul Resort,one of the Company's managed resorts,is located. Hurricane Odile caused significant damage to the buildings as well as the facilities and amenities at the Cabo Azul Resort, including unsold Vacation Interests and property and equipment owned by the Company.During the year ended December 31, 2015,the Company received$5.0 million in proceeds from its insurance carrier for property damage resulting from Hurricane Odile.Management believes the Company has sufficient property insurance to cover the costs incurred by the Company in excess of$5.0 million when the insurance claim is ultimately settled. In addition,the Company has filed a claim under its business interruption insurance policy forbusiness profits lost during the period that the Cabo Azul Resort remained closed as a result for the damage suffered in Hurricane Odile.During the year ended December 31,2015,the Company received an aggregate of$6.0 million in installments from its insurance carrier related to such claim,which was recognized as other revenue in the consolidated statement of operations and comprehensive income loss).The total claim remains under negotiation with the insurance carrier and any further payments will also be recorded in the periods in which they are received.The Cabo Azul Resort and the on-site sales center reopened on September 1,2015. Kona Agreement On July 28,2015,the Company entered into an agreement for the purchase and sale ofproperty,which was amended on February 25,2016(as amended,the"Kona Agreement")with Hawaii Funding LLC(the"Kona Seller"),an affiliate of Och-Ziff Real Estate.The Kona Agreement relates to the development by the Kona Seller of a new resort,which is expected to consist of 144 units,on property located in Kona,Hawaii to be acquired by the Kona Seller.Pursuant to the Kona Agreement,the Company has agreed to purchase all of the units,subject to the satisfaction of specified conditions including a period of assessment suitability and feasibility,by both parties,of the property for its intended use.The total financial commitment under the Kona Agreement is expected to be finalized in the second quarter of2016,with the first delivery ofunits expected in the first half of 2017 continuing through mid-2018,which is subject to various conditions precedent and rights of the parties. Litigation Contingencies From time to time,the Company or its subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business.The Company evaluates these legal proceedings and claims at each balance sheet date to determine the degree of probability of an unfavorable outcome and,when it is probable that a liability has been incurred,the Company's ability to make a reasonable estimate of loss.The Company records a contingent litigation liability when it determines that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. F-40 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Note 19—Fair Value Measurements ASC 820, "Fair Value Measurements"("ASC 820"),defines fairvalue,establishes a framework for measuring fair value in accordance with U.S.GAAP,and expands disclosures about fair value measurements.ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: Level 1:Quoted prices for identical instruments in active markets. Level 2:Quoted prices for similar instruments in active markets;quoted prices for identical or similar instruments in markets that are not active;and model-derived valuations whose inputs or significant value drivers are observable. Level 3:Unobservable inputs used when little or no market data is available. As of December 31,2015,the only assets and liabilities of the Company measured at fair value on a recurring basis was the December 2015 Swap.As of December 31,2015,the fair value of the December 2015 Swap was based on valuation reports provided by counterparties and was classified as Level 3,based on the fact that the credit risk data used for the valuations were not directly observable and could not be corroborated by observable market data.The Company's assessment ofthe significant inputs to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. See Note 3—Concentrations ofRisk"for further detail on the Company's derivative instruments. The following table summarizes the information regarding the Company's derivative instruments as of the dates presented below(in thousands): December 31,2015 December 31,2014 Total Estimated Total Estimated Carrying Value Fair Value Carrying Value Fair Value Liabilities: Interest rate swap agreement(a) $ 146 $ 146 $ Total Liabilities 146 $ 146 $ a)Values associated with the December 2015 Swap are presented under the derivative liabilities category of the accompanying consolidated balance sheet. As of December 31,2015,Vacation Interests notes receivable had a balance of$622.6 million,net of allowance.The allowance for losses against the Vacation Interests notes receivable is derived using a static pool analysis to develop historical default percentages based on FICO credit scores to apply to the mortgage and contract population.The Company evaluates other factors such as economic conditions,industry trends and past due aging reports in order to determine the adjustments needed to true up the allowance,which adjusts the carrying value of Vacation Interests notes receivable to management's best estimate of collectability.As a result of such evaluation,the Company believes that the carrying value of the Vacation Interests notes receivable approximated its fairvalue at December 31,2015.These financial assets were classified as Level 3,as there is little market data available. As of December 31, 2015, the borrowings under the Senior Credit Facility (excluding the Incremental Tenn Loan) were classified as Level 2 and the Company believes the fair value of the Senior Credit Facility approximated its carrying value at such dates due to the fact that the market for similar instruments remained stable since May 2014,when the Company entered into the Senior Credit Facility.As ofDecember 31,2015,the borrowings under the Incremental Term Loan were classified as Level 2 and the Company believes the fair value of the Incremental Term Loan approximated its carrying value at such date due to the fact that it was recently issued and,therefore,measured using other significant observable inputs. As of December 31,2015,all ofthe Company's notes issued in its securitization transactions except the Tempus 2013 Notes were classified as Level 2.The Company believes the fair value of these borrowings,which was determined with the assistance of an investment banking firm, approximated similar instruments in active markets.The Tempus 2013 Notes were classified as Level 2.The Company believes the fair value ofthe Tempus 2013 Notes approximated their carrying value due to the fact that the market for similar instruments remained stable since September 2013,the issuance date ofthe Tempus 2013 Notes.Consequently, the Tempus 2013 Notes were classified as Level 2 as ofDecember 31,2015.See"Note 16—Borrowings"for further detail on these borrowings. F-41 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued As ofDecember 31,2015,the Quorum Facility and a loan sale agreement that the Company assumed in connection with a previous business combination were classified as Level 2 based on an internal analysis performed by the Company utilizing the discounted cash flow model and the quoted prices for identical or similar instruments in markets that are not active. As of December 31,2015,the fair value of all other debt instruments was not calculated,based on the fact that they were either due within one year or were immaterial. As of December 31,2014,the Company had no assets or liabilities measured at fair value on a recurring basis. As of December 31,2014,Vacation Interests notes receivable had a balance of$498.7 million,net of allowance.The allowance for loan and contract losses against the Vacation Interests notes receivable is derived using a static pool analysis to develop historical default percentages based on FICO scores to apply to the mortgage and contract population.The Company evaluates other factors such as economic conditions,industry trends and past due aging reports in order to determine the adjustments needed to true up the allowance,which adjusts the carrying value of Vacation Interests notes receivable to management's best estimate of collectability.As a result of such evaluation,the Company believes that the carrying value of the Vacation Interests notes receivable approximated its fair value at December 31,2014.These financial assets are classified as Level 3 as there is little market data available. As ofDecember 31,2014,the borrowings under the Senior Credit Facility approximated its carrying value at such date due to the fact that it was recently issued and,therefore measured using other significant observable inputs. As of December 31,2014,all ofthe Company's notes issued in the securitization transactions except the Tempus 2013 Notes were classified as Level 2.The fair value of these borrowings was determined with the assistance ofan investment banking firm, which the Company believes approximated similar instruments in active markets. The Company believes the fair value of the Tempus 2013 Notes approximated their carrying value due to the fact that the market for similar instruments remained stable since September 2013,the issuance date of the Tempus 2013 Notes. As of December 31,2014,the Quorum Facility and the Island One Quorum Funding Facility were classified as Level 2 based on an internal analysis performed by the Company utilizing the discounted cash flow model and the quoted prices for identical or similar instruments in markets that are not active. As of December 31, 2014,the fair value of all other debt instruments was not calculated,based on the fact that they were either due within one year or were immaterial. In accordance with ASC 820,the Company also applied the provisions of fair value measurement to various non-recurring measurements for the Company's financial and non-financial assets and liabilities and recorded the impairment charges.The Company's non-financial assets consist of property and equipment,which are recorded at cost,net of depreciation,unless impaired,and assets held for sale,which are recorded at the lower ofcost or their estimated fair value less costs to sell. The carrying values and estimated fair values of the Company's financial instruments as of December 31,2015 were as follows(in thousands): Total Carrying Estimated Fair Estimated Fair Estimated Fair Value Value Value(Level 2) Value(Level 3) Assets: Vacation Interests notes receivable,net 622,607 $ 622,607 $ 622,607 Total assets 622.607 $ 622,607 $ 622,607 Liabilities: Senior Credit Facility 569,931 $ 569,931 $ 569,931 $ Securitization notes and Funding Facilities,net 642,758 638,420 638,420 Notes payable 4,750 4,750 4,750 Total liabilities 1,217,439 $ 1,213,101 $ 1,213,101 $• F-42 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued The carrying values and estimated fair values ofthe Company's financial instruments as of December 31,2014 were as follows(in thousands): Total Carrying Estimated Fair Estimated Fair Estimated Fair Value Value Value(Level 2) Value(Level 3) Assets: Vacation Interests notes receivable,net 498,662 $ 498,662 $ 498,662 Total assets 498,662 $ 498,662 $ 498,662 Liabilities: Senior Credit Facility 440,720 $ 440,720 $ 440,720 $ Securitization notes and Funding Facilities,net 509,208 512,706 512,706 Notes payable 4,612 4,612 4,612 Total liabilities 954,540 $ 958,038 $ 958,038 $ Note 20—Stock Repurchase Program On October 28,2014,the Company's Board of Directors authorized a stock repurchase program allowing for the expenditure of up to$100.0 million for the repurchase ofthe Company's common stock(the"Stock Repurchase Program").The Stock Repurchase Program was originally announced on October 29,2014 and has no scheduled expiration date.On July 28, 2015,the Company's Board of Directors authorized an additional$100.0 million for expenditures under the Stock Repurchase Program.The Senior Credit Facility limits the Company's ability to make restricted payments,including the payment of dividends or expenditures for stock repurchases,subject to specified exceptions based upon the Company's excess cash flow sweep determined in accordance with the Senior Credit Facility.As of December 31,2015,the amount available to repurchase stock as permitted by the Senior Credit Facility was$3.5 million. The following table summarizes stock repurchase activity under the Stock Repurchase Program(cost in thousands): Average Price Per Shares Cost Share From inception through December 31,2014 642,900 $ 16,077 $ 25.01 For the year ended December 31,2015(a) 5,713,554 163,545 $ 28.62 Total from inception through December 31,2015(a) 6,356,454 (b) $ 179,622 $ 28.26 a)Includes the purchase of 1,515,582 shares from the underwriter for$50 million in the March 2015 Secondary Offering at the price of 32.99 per share. b)Shares of common stock repurchased by the Company pursuant to the Stock Repurchase Program.As ofDecember 31,2015, 4,134,071 ofthe repurchased shares held in treasury at the average price of$28.92 per share had been retired. Note 21—Stock-Based Compensation On July 8,2013,the Board of Directors ofthe Company approved the 2013 Plan,which authorized the issuance of Company's common stock for awards,including restricted stock,RSUs,stock options,deferred stock or stock appreciation rights,to officers,employees,consultants,advisors and directors ofthe Company(collectively,the"Eligible Persons"). OnMay 19,2015,the Company held its annual meeting of stockholders,at which the Company's stockholders approved the 2015 Plan.The 2015 Plan is a broad-base plan under which 8,500,000 shares ofthe Company's common stock are authorized for issuance for awards,including restricted stock,RSUs,stock options,deferred stock or stock appreciation rights, to the Eligible Persons.As of December 31,2015,7,174,940 shares remained available for issuance as new awards under the 2015 Plan. On July 18,2013,the Company granted to the former holders ofDiamond Resorts Parent,LLC(DRII's predecessor) Class B common units("BCUs")non-qualified stock options,which were immediately vested,exercisable for an aggregate of 3,760,215 shares of common stock,at an option price of$14.00 per share,in part to maintain the incentive value intended when the Company originally issued those BCUs to these individuals and to provide an incentive for such individuals to continue providing service to the Company.The grantees ofthese immediately vested options include Messrs. Cloobeck,Kraff,Palmer, Bentley,Lanznar and two employees of the Company.Through December 31,2014,Messrs. Cloobeck,Palmer,Bentley and F-43 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Lanznar were not employed or compensated directly by the Company,but were rather employed or independently contracted and compensated by HM&C. See"Note 6—Transactions with Related Parties"for further detail on the HM&C Agreement. In addition,between July 18,2013 and December 31,2014,the Company issued additional non-qualified stock options, exercisable for an aggregate of 4,408,100 shares of common stock,to Eligible Persons(including employees of HM&C),each at an option price equal to the market price on the applicable grant date.25%of the shares issuable upon the exercise of such non-qualified stock options vested immediately on the grant date and the remaining 75%vest in equal installments on each of the first three anniversaries of the grant date.All of these options expire ten years from the grant date. On May 19,2015,the Company issued additional non-qualified stock options,exercisable for an aggregate of 1,067,000 shares of common stock,to Eligible Persons,each at an option price equal to the market price on the applicable grant date. 25% of the shares issuable upon exercise of such non-qualified stock options vest in equal installments on each ofthe first four anniversaries of the grant date.All of these options expire ten years from the grant date. The Company accounts for its stockbased compensation issued to its employees and non-employee directors(in their capacity as such)in accordance with ASC 718.For a stock-based award with service-only vesting conditions,the Company measures compensation expense at fair value on the grant date and recognizes this expense in the statement of operations and comprehensive income(loss)over the expected term during which the employees(including,from an accounting perspective, non-employee directors in their capacity as such)of the Company provide service in exchange for the award. Through December 31,2014 and prior to the Company's acquisition of HM&C in January 2015,the Company accounted for its stock-based compensation issued to employees and independent contractors ofHM&C in accordance with ASC 505-50, Equity-Based Payments to Non-Employees"("ASC 505").In addition,stock-based compensation issued to Mr.Kraff in connection with the IPO has been accounted for in accordance with ASC 505.Employees and independent contractors of HM&C through December 31,2014 and Mr.Kraff(with respect to the stock-based compensation issued to him in connection with the IPO)are collectively referred to as the"Non-Employees,"and the stock-based compensation issued to the Non- Employees are collectively referred to as the"Non-Employee Grants."Pursuant to ASC 505,the fair value of an equity instrument issued to Non-Employees is initially measured on the grant date by using the stock price and other measurement assumptions and subsequently remeasured at each balance sheet date as(and to the extent)the relevant performance is completed.With respect to the stock-based compensation issued to Mr.Kraff in connection with the IPO,his performance of services was considered completed at the grant date. Effective January 1,2015,the Company acquired all of the outstanding membership interests in HM&C,which became a wholly-owned subsidiary of the Company.As employees ofHM&C became employees of the Company following the HM&C Acquisition,all unvested stock options issued to employees of HM&C were converted to employee grants from an accounting perspective on January 1,2015. As a result of the HM&C Acquisition,compensation cost attributable to unvested options issued to employees of HM&C was remeasured as if the unvested options were newly granted on January 1,2015,and the portion ofthe newly measured cost attributable to the remaining vesting period is being recognized as compensation cost prospectively from January 1,2015. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of the stock options granted to its employees(including from an accounting perspective,non-Employee directors in their capacity as such)and Non-Employees. The expected volatility is calculated based on the historical volatility of the stock prices for a group of identified peer companies for the expected term of the stock options on the grant date(which is significantly greater than the volatility of the S&P 500®index as a whole during the same period)due to the lack of historical trading prices of the Company's common stock.The average expected option life represents the period of time the stock options are expected to be outstanding at the issuance date based on management's estimate using the simplified method prescribed under the Securities and Exchange Commission(the"SEC")SAB 14 for employee grants and the contractual terms for Non-Employee grants.The risk-free interest rate is calculated based on the U.S.Treasury zero-coupon yield,with a remaining term that approximates the expected option life assumed at the date of issuance.The expected annual dividend per share is 0%based on the Company's expected dividend rate. The fair value per share information,including related assumptions,used to determine compensation cost for the Company's non-qualified stock options consistent with the requirements ofASC 718 and ASC 505,consisted of the following as of December 31,of each of the following years: F-44 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued 2015 2014 2013 Company Non- Company Non- CompanyEmployeesEmployeesEmployeesEmployeesEmployees Weighted average fair value per share 10.2 $14.9 $ 8.1 $ 8.9 $7.5 Expected stock price volatility 45.7% 52.8% 52.8% 49.8% 52.9% Expected option life(years) 5.91 6.00 6.00 9.13 6.51 Risk-free interest rate 1.7% 1.7% 1.7% 2.4% 1.8% Expected annual dividend yield Stock option activity related to stock option grants issued to the employees of the Company during the year ended December 31,2015 was as follows: Company Employees Weighted- Average Weighted- Remaining Average Contractual Aggregate Options Exercise Price Term Intrinsic Value In thousands) (Per Share) Years) (In thousands) Outstanding at January 1,2015 7,868 $ 15.02 8.8 $ 101,336 Granted 1,117 $ 32.05 Exercised 188) $ 15.59 Forfeited 31) $ 23.79 Outstanding at December 31,2015 8,766 $ 17.20 7.9 $ 72,840 Exercisable at December 31,2015 6,219 $ 14.62 7.6 $ 67,756 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been realized by the option holders had all option holders exercised their options on December 31,2015.The intrinsic value of a stock option is the excess of the Company's closing stock price on that date over the exercise price,multiplied by the number ofshares subject to the option. The following table summarizes the Company's unvested stock option activity for the year ended December 31,2015: Company Employees Weighted-Average Options Exercise Price In thousands) Per Share) Unvested at January 1,2015 2,536 $ 16.37 Granted 1,117 $ 32.05 Vested 1,075) $ 17.32 Forfeited 31) $ 23.79 Unvested at December 31,2015 2,547 $ 23.51 RestrictedStock,RSUs and Deferred Stock Between July 18,2013 and December 31,2014,the Company issued restricted stock to certain non-employee members of the Board of Directors of the Company,which vest equally on each ofthe first three anniversary dates from the grant date. On May 19,2015,the Company issued restricted stock to certain employees of the Company(which vest equally on each of the first four anniversaries ofthe grant date)and non-employee members of the Board of Directors of the Company(which vest equally on each of the first 12 quarterly anniversaries of the grant date). In addition,on May 19,2015,the Company issued RSUs to certain employees of the Company(which conditionally vest equally on each of the first four anniversaries of the grant date and fully vest on the fourth anniversary date of the grant date when certain service and performance conditions are met)and to certain non-employee members of the Board of Directors of the Company who elected to receive RSUs in lieu of restricted stock for services rendered(which vested equally on each of the first 12 quarterly anniversaries ofthe grant date). F45 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Furthermore,on May 19,2015,the Company issued deferred stock to certain non-employee members of the Board of Directors of the Company who elected to receive deferred stock in lieu of cash for services rendered.The deferred stock were fully vested on the grant date.All restricted stock,RSUs and deferred stock issued on May 19,2015(the"Stock Unit Issuances")were valued at$32.69 per share(the closing stock price of the Company's common stock on such date). The following table summarizes the activity related to the Stock Unit Issuances during the year ended December 31, 2015: Restricted Stock Restricted Stock Units Deferred Stock Weighted-Weighted-Weighted-Shares Average Average Average In Exercise Price Units(In Exercise Price Units(In Exercise Price thousands) (Per Share) thousands) (Per Share) thousands) (Per Share) Unvested at January 1,2015 44 $ 16.92 Granted 157 $ 32.69 86 $ 32.69 12 $ 32.72 Vested/Converted to common stock 25) $ 21.19 8) $ 32.69 12) $ 32.72 Forfeited 16) $ 28.36 Unvested at December 31,2015 160 $ 30.58 78 $ 32.69 32.72 Stock-based Compensation Expense The following table summarizes the Company's stock-based compensation expense for the years ended December 31, 2015,2014 and 2013 (in thousands). 2015 2014 2013 Non-employee stock option grants 7,619 $ 32,940 Company employee grants 13,623 7,681 7,218 Non-employee director grants 1,325 902 375 Total 14,948 $ 16,202 $ 40,533 The tax benefits recognized from stock-based compensation expense were$5.3 million,$5.8 million and$14.7 million for the years ended December 31,2015,2014 and 2013,respectively. In accordance with SAB 14,the Company records stock-based compensation expense to the same line item on the statement of operations and comprehensive income(loss)as the grantees'cash compensation.In addition,the Company records stock-based compensation expense to the same business segment as the grantees'cash compensation for segment reporting purposes in accordance with ASC 280,"Segment Reporting." The following table summarizes the effect of the stock-based compensation expense for the years ended December 31. 2015 and 2014(in thousands): Year Ended December 31,2015 Year Ended December 31,2014 Vacation Vacation Hospitality Interest Hospitality Interest and Sales Corporate and Sales Corporate Management and and Management and and Services Financing Other Total Services Financing Other Total Management and member services 1,307 $ — $ — $ 1,307 $ 1,613 $ — $ — $ 1,613 Advertising,sales and marketing 2,440 2,440 2,198 2,198 Vacation Interests carrying cost,net 232 232 267 267 Loan portfolio 373 373 423 423 General and administrative 10,596 10,596 11,701 11,701 Total 1,307 $ 3,045 $ 10,596 $14,948 $ 1,613 $ 2,888 $ 11,701 $16,202 F-46 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued The following table summarizes the effect of the stock-based compensation expense for the year ended December 31, 2013(in thousands): Vacation Hospitality Interest and Sales Corporate Management and and Services Financing Other Total Management and member services 860 $ — $ — $ 860 Advertising,sales and marketing 2,105 2,105 Vacation Interests carrying cost,net 208 208 Loan portfolio 316 316 General and administrative 37,044 37,044 Total 860 $ 2,629 $ 37,044 $40,533 The following table summarizes the Company's unrecognized stock-based compensation expense as of December 31, 2015(dollars in thousands): Restricted Restricted Deferred Options Stock Stock Units Stock Total Unrecognized stock-based compensation expense $ 20,093 $ 3,968 $ 2,247 $149 $ 26,457 Weighted-average remaining amortization period in yew) 1.4 2.3 2.4 0.4 1.6 Note 22—Accumulated Other Comprehensive Income(Loss) The components of accumulated other comprehensive income(loss)are as follows: Cumulative Translation Post-retirement Adjustment Benefit Plan Other Total Balance,December 31,2012 16,714) $ 19) $ (16,733) Period change 2,543 2,064)77 556 Balance,December 31,2013 14,171) 2,064)58 16,177) Period change 3,545) 171 10) 3,384) Balance,December 31,2014 17,716) 1,893)48 19,561) Period change 2,466) 1,893 17) 590) Balance,December 31,2015 20,182) $ 31 $ (20,151) The Company has not tax-effected the cumulative translation adjustment since deferred taxes on unremitted foreign earnings are not provided(see"Note 17—Income Taxes).The balance as of December 31,2014 related to the post-retirement benefit plan,net of tax,was reduced to zero as of December 31,2015 due to the St.Maarten Deconsolidation. See "Note 1— BackgroundBusiness andBasis ofPresentation"for further detail on the St.Maarten Deconsolidation. Note 23—Net income(loss)per share The Company calculates net income per share in accordance with ASC Topic 260, "Earnings Per Share."Basic net income loss)per share is calculated by dividing net income for common stockholders by the weighted-average number of common shares outstanding during the period.Diluted net income(loss)per common share is calculated by dividing net income by weighted-average common shares outstanding during the period plus potentially dilutive common shares,such as stock options and restricted stock. Dilutive potential common shares are calculated in accordance with the treasury stock method,which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value.The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. For the year ended December 31,2015,0.5 million shares underlying stock options were excluded from the net income per share computation,as their effect would be antidilutive under the treasury stock method. F-47 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued For the year ended December 31,2013,0.2 million and a de minimis amount of shares underlying stock options and restricted stock were excluded from the net loss per share computation,as their effect would be antidilutive due to the net loss reported by the Company. There were no antidilutive stock options or restricted stock for the year ended December 31,2014. The table below sets forth the computation of basic and diluted net income(loss)per share as of December 31 of each of the following years(in thousands,except per share amounts): 2015 2014 2013 Computation of Basic Net Income(Loss)Per Share: Net income(loss)149,478 $ 59,457 $ 2,525) Weighted average shares outstanding 72,881 75,466 63,704 Basic net income(loss)per share 2.05 $ 0.79 $ 0.04) Computation of Diluted Net Income(Loss)Per Share: Net income(loss)149,478 $ 59,457 $ 2,525) Weighted average shares outstanding 72,881 75,466 63,704 Effect of dilutive securities: Restricted stock and RSUs(a)24 14 Options to purchase common stock 2,574 1,467 Shares for diluted net income per share 75,479 76,947 63,704 Diluted net income(loss)per share 1.98 $ 0.77 $ 0.04) a)Includes unvested dilutive restricted stock and RSUs that are subject to future forfeitures. Note 24—Business Combinations On October 16,2015,the Company completed the Gold Key Acquisition and acquired five management contracts,real property interests,unsold vacation ownership interests to sell to existing members and potential customers and other assets, adding six additional managed resorts to the Company's resort network and new owner-families to the Company's owner base, in exchange for a cash purchase price of$167.5 million and the assumption of certain non-interest-bearing liabilities.At the closing ofthe Gold Key Acquisition,$6.2 million was deposited into an escrow account to support the Company's obligations under the Default Recovery Agreement,and is classified as restricted cash on the Company's balance sheet.The Company assumed$15.5 million ofcontingent consideration in connection the Default Recovery Agreement,which was recorded as accrued liabilities,with an offsetting amount in prepaid expense and other assets. The Company accounted for the Gold Key Acquisition as a business combination in accordance with ASC 805,"Business Combinations" ("ASC 805").As of December 31,2015,the acquisition was recorded based on a preliminary appraisal; accordingly,provisional amounts were assigned to the assets acquired and liabilities assumed.The preliminary appraisal was developed in accordance with the Company's policies,which were also the basis for the valuation of previous business combinations. Since the purchase price exceeded the fair value of identifiable assets,the Company recorded$73.9 million in goodwill in accordance with ASC 805,which is primarily attributable to expected synergies from the operations acquired in connection with the Gold Key Acquisition and the Company's existing operations. F-48 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed from the Gold Key Companies at the acquisition date based on the appraisals as of October 16,2015(in thousands): Based on Preliminary Appraisal Consideration: Cash 167,500 Fair value oftotal consideration transferred 167,500 Recognized amounts of identifiable assets acquired and liabilities assumed as of October 16,2015: Cash and cash equivalents 66 Restricted cash 47 Due from related parties,net 766 Other receivables,net 69 Prepaid expenses and other assets,net 15,904 Unsold Vacation Interests 26,481 Property and equipment 15,329 Other intangible assets 53,060 Total assets 111,722 Liabilities assumed 18,101 Total identifiable net assets 93,621 Goodwill 73,879 Acquired intangible assets consist of the following(dollar amounts in thousands): Weighted Average Based on Preliminary Useful Life in Years Appraisal Management contracts 20 25,300 Rental agreements 4 15,800 Rights to develop inventory 14 11,600 Member relationships 6 360 Total acquired intangible assets 53,060 These notes to the consolidated financial statements do not present supplemental pro forma information to include revenue and earnings of the Gold Key Companies for all periods presented,as the assets acquired and additional earnings generated in connection with the Gold Key Acquisition are not deemed significant to the Company's consolidated financial statements. Note 25—Employee Benefit Plans The Company has a qualified retirement plan(the"401(k)Plan")with a salary deferral feature designed to qualify under Section 401(k)of the Internal Revenue Code of 1986,as amended. Subject to certain limitations,the 401(k)Plan allows participating U.S.employees to defer up to 60.0%of their eligible compensation on a pre-tax basis.The 401(k)Plan allows the Company to make discretionary matching contributions ofup to 50.0%of the first 6.0%of employee compensation. During the years ended December 31,2015,2014 and 2013,the Company made matching contributions to its 401(k)Plan of$3.3 million,$2.2 million and$1.8 million,respectively. In addition,the Company has a self-insured health plan that covers substantially all of its full-time employees in the U.S. The health plan uses employee and employer contributions to pay eligible claims.To supplement this plan,the Company has a F-49 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued stop-loss insurance policy to cover individual claims in excess of$0.3 million.At December 31,2015,2014 and 2013,the Company accrued$3.5 million,$2.7 million and$2.6 million,respectively,for claims that have been incurred but not reported. This accrual is calculated as the higher of(i)estimated accrual based on Company's historical experience of claim payments and lag period between the service dates and claim payment dates or(ii)two times the average monthly claims paid by the Company during the past fiscal year.The following table sets forth for each of the years ended December 31,2015 and 2014,respectively, the amount of claims incurred during such period,changes in accruals during such period for claims incurred during prior periods,and the amount of payments made in such period(in thousands): Balance as ofDecember 31,2013 2,572 Claims incurred during the current year 16,141 Change in accruals for claims incurred during prior years 2,118) Payments made 13,913) Balance as ofDecember 31,2014 2,682 Claims incurred during the current year 18,145 Change in accruals for claims incurred during prior years 2,094) Payments made 15,195) Balance as of December 31,2015 3,538 During the years ended December 31,2015,2014 and 2013,the Company recorded$24.5 million,$20.6 million and$19.6 million,respectively,in expenses associated with its health plans. With certain exceptions,the Company's European subsidiaries do not offer private health plans or retirement plans.The government in each country offers national health services and retirement benefits,which are funded by employee and employer contributions. In 1999,the Company entered into a collective labor agreement with the employees at its resorts in St.Maarten,where the Company functioned as the HOA through December 31,2014(the"Collective Labor Agreement").The Collective Labor Agreement provides for an employee service allowance to be paid to employees upon their termination,resignation or retirement.The employee service allowance was accounted for as a defined benefit plan(the "Defined Benefit Plan")in accordance with the requirements of ASC 715,"Compensation—Retirement Benefits."During the quarter ended September 30, 2015,the Defined Benefit Plan was deconsolidated from the Company's consolidated financial statements in conjunction with the St.Maarten Deconsolidation. See"Note 1—BackgroundBusiness and Basis ofPresentation"for further detail on the St. Maarten Deconsolidation. Note 26—Segment Reporting Business Segment The Company presents its results ofoperations in two business segments: (i)hospitality and management services,which includes operations related to the management of resort properties and the Diamond Collections,operation of the Clubs, operations of the properties located in St.Maarten for which the Company functioned as the HOA through December 31,2014, food and beverage venues owned and managed by the Company and the provision of other services and(ii)Vacation Interests sales and financing,which includes operations relating to the marketing and sales of Vacation Interests,as well as the consumer financing activities related to such sales.While certain line items reflected on the statement of operations and comprehensive income(loss)fall completely into one of these business segments,other line items relate to revenues or expenses that are applicable to more than one segment.For line items that are applicable to more than one segment,revenues or expenses are allocated by management. Such allocations involve significant estimates. Certain expense items(principally corporate interest expense,depreciation and amortization and provision for income taxes)are not,in management's view,allocable to either of these business segments,as they apply to the entire Company. In addition,general and administrative expenses(which exclude hospitality and management services related overhead that is recovered from the HOAs and the Collection Associations)are not allocated to either of these business segments because,historically,management has not allocated these expenses for purposes of evaluating the Company's different operational divisions.Accordingly,these expenses are presented under corporate and other. F-50 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued Management believes that it is impracticable to allocate specific assets and liabilities related to each business segment. In addition,management does not review balance sheets by business segment as part of their evaluation of operating segment perfonnance.Consequently,no balance sheet segment reports have been presented. The following table presents revenues,income before provision for income taxes,interest revenue and interest expense for the Company's reportable segments for the periods presented below(in thousands): For the Years Ended December 31, 2015 2014 2013 Revenues: Hospitality and management services 187,747 $ 199,298 $ 175,423 Vacation Interests sales and financing 764,963 643,719 552,922 Corporate and other 1,330 1,549 1,443 Total revenues 954,040 $ 844,566 $729,788 Income before provision for income taxes Hospitality and management services 137,509 $ 129,402 $ 102,072 Vacation Interests sales and financing 291,416 202,915 159,392 Corporate and other 177,277) 222,626) 258,212) Income before provision for income taxes 251,648 $ 109,691 $ 3,252 Interest Revenue: Hospitality and management services Vacation Interests sales and financing 78,989 66,849 55,601 Corporate and other 1,330 1,549 1,443 Total interest revenue 80,319 $ 68.398 $ 57,044 Interest Expense: Hospitality and management services Vacation Interests sales and financing 16,895 15,072 16.411 Corporate and other 31,581 41,871 72,215 Total interest expense 48,476 $ 56,943 $ 88,626 Geographic Segment The geographic segment information presented below is based on the geographic locations of the Company's subsidiaries. The Company's foreign operations include its operations in Austria,the Caribbean,England,France,Greece,Ireland,Italy, Malta,Mexico,Portugal,Scotland and Spain.No individual foreign country represents 10%or more of the Company's total revenues or long-term assets presented.The following table reflects total revenue and assets by geographic area for the years ended on,or as of,the dates presented below(in thousands): For the Years Ended December 31, 2015 2014 2013 Revenue United States 886,721 $ 731,171 $ 610,116 Foreign 67,319 113,395 119,672 Total Revenues 954,040 $ 844,566 $729,788 F-51 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued As of December 31, 2015 2014 Vacation Interests notes receivable,net United States 621,244 $496,691 Foreign 1,363 1,971 Total Vacation Interests notes receivable, net 622,607 $498,662 Unsold Vacation Interests,net United States 277,563 $ 198,869 Foreign 80,715 63,303 Total unsold Vacation Interests,net 358,278 $262,172 Property and equipment,net United States 84,408 $ 59,038 Foreign 10,953 11,833 Total property and equipment,net 95,361 $ 70,871 Goodwill United States 104,521 $ 30,632 Foreign Total goodwill 104,521 $ 30,632 Other intangible assets,net United States 218,990 $ 174,021 Foreign 3,200 4,765 Total other intangible assets,net 222,190 $ 178,786 Total long-term assets,net United States 1,306,726 $ 959,251 Foreign 96,231 81,872 Total long-term assets,net 1,402,957 $ 1,041,123 Note 27-Loss on Extinguishment of Debt On May 9,2014,the Company repaid all outstanding indebtedness under three inventory loans previously entered into in connection with certain acquisitions using a portion ofthe proceeds from the term loan portion ofthe Senior Credit Facility. The unamortized debt issuance costs on these inventory loans were recorded as a loss on extinguishment of debt. In addition,on May 9,2014,the Company terminated its previous revolving credit facility in conjunction with its entry into the Senior Credit Facility and recorded the unamortized debt issuance costs as a loss on extinguishment of debt. On June 9,2014,the Company redeemed all outstanding principal amount under the Senior Secured Notes using a portion of the proceeds from the term loan portion of the Senior Credit Facility.As a result,$30.2 million of redemption premium,$9.4 million of unamortized debt issuance cost and$6.1 million unamortized debt discount were recorded as a loss on extinguishment of debt. On July 24,2013,the Company repaid all outstanding indebtedness under two acquisitions loans previously entered into in connection with certain acquisitions using the proceeds from the IPO.The unamortized debt issuance cost on these acquisition loans and the additional exit fees paid were recorded as loss on extinguishment of debt. In addition,on August 23,2013,the Company completed the Tender Offer and a pro rata portion of the unamortized debt issuance cost associated with the Senior Secured Notes and the call premium paid upon the completion of the Tender Offer were recorded as loss on extinguishment of debt. F-52 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued On October 21,2013,the Company redeemed all notes issued under a previous securitization transaction completed in 2009 using proceeds from borrowings under the Conduit Facility.The unamortized debt issuance costs and debt discount were recorded as a loss on extinguishment of debt. Loss on extinguishment of debt consisted of the following as of December 31 of each ofthe following years(in thousands): Year Ended December 31, 2015 2014 2013 Senior Secured Notes 45,767 $ 8,443 Previous revolving credit facility 932 Three inventory loans previously entered into in connection with certain acquisitions 108 Two acquisition loans previously entered into in connection with certain acquisitions 4,940 Redemption of notes issued under a previous securitization transaction completed in 2009 2.201 Miscellaneous notes payable 20 Total loss on extinguishment ofdebt 46,807 $ 15.604 Note 28—Impairments and Other Write-offs The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value amount of the asset may not be fully recoverable. Impairment and other write-offs consisted of the following as of December 31 of each of the following years(in thousands): 2015 2014 2013 Write down of a parcel of real estate acquired in connection with a previous business combination to its fair value based on a market appraisal 1,200 Write off of abandoned inventory projects 181 Write off of sales materials due to obsolescence 10 307 Write down of two European resorts held for sale to their fair value based on accepted offers 80 Write off of abandoned information technology projects previously capitalized 12 19 Write off of slow moving consumables inventory 30 Total impairments and other write-offs 12 $240 $ 1,587 Note 29—Quarterly Results(Unaudited) The following tables present the Company's unaudited quarterly results($in thousands except share data).The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.The operating results for any quarter are not necessarily indicative of results for any future period. F-53 DIAMOND RESORTS INTERNATIONAL,INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued Three Months Ended Year Ended March 31, June 30, September 30, December 31, December 31, 2015 2015 2015 2015 2015 Revenues 197,520 $ 231,502 $ 251,389 $ 273,629 $ 954.040 Income before provision for income taxes $ 45,500 $ 64,329 $ 62,307 $ 79,512 $ 251,648 Net income 25,975 $ 36,870 $ 36,897 $ 49,736 $ 149,478 Net income per share—basic 0.35 $ 0.50 $ 0.51 $ 0.70 $ 2.05 Net income per share—diluted 0.34 $ 0.49 $ 0.49 $ 0.68 $ 1.98 Three Months Ended Year Ended March 31, June 30, September 30, December 31, December 31, 2014 2014 2014 2014 2014 Revenues 181,225 $ 209,014 $ 221,965 $ 232,362 $ 844,566 Income(loss)before provision(benefit)for income taxes 26,057 $ (2,074) $ 46,460 $ 39,248 $ 109,691 Net income(loss) 14,010 $ (2,731) $ 26,304 $ 21,874 $ 59,457 Net income(loss)per share—basic 0.19 $ (0.04) $ 0.35 $ 0.29 $ 0.79 Net income(loss)per share—diluted 0.18 $ (0.04) $ 0.34 $ 0.28 $ 0.77 Note:The sum ofthe net income(loss)per share for the four quarters differs from annual net income(loss)per share due to the required method of computing the weighted average shares in interim periods. Note 30—Subsequent Events On January 29,2016,the Company completed its acquisition ofthe vacation ownership business of Intrawest Resort Club Group from Intrawest Resorts Holdings,Inc.,through which the Company acquired management contracts,Vacation Interests notes and other receivables,real property interests,unsold VOIs and other assets in exchange for$85.0 million in cash plus the assumption of certain non-interest-bearing liabilities(the"Intrawest Acquisition").The Intrawest Acquisition added nine managed resorts located in the United States,Canada and Mexico to the Company's resort network. Due to the fact that the initial accounting for the Intrawest Acquisition is incomplete,the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed are not yet available. F-54 FgiX V.3 d- 4c.,. znnk n,:v i rnr v 1a'. i Si41 i 14, f.:,.'• iii : e aha H,.‘• 4„, s 1:,,,,",:,,14 II o- 4 1 4 A 6 I-1 ' ' r•" it ,L, 1`9 a. We e:' Planning Dept. Exhibit February 25, 2019 719 FFR 9P Pm 19 ^3 Dear Mayor Kim, irk TZt-14- 's l 1 S We are writing to ask for your help. We own a beautiful ocean-front condominium at the Kona Reef located at the corner of Ali'i Drive and Kahakai Road in Kailua Kona. Unfortunately, for the past several years, there has been an unkempt deteriorating concrete structure located next to the Kona Reef on Ali'i Drive. Diamond Resorts International (DRI) is the owner/developer of the structure and has recently requested a fourth 5-year extension on its SMA Use Permit Number 388 to complete construction of a proposed 6,500 square foot retail/commercial space with 48 2-bedroom condominium units. The original permit was granted back in 1998. Construction was initiated and then halted shortly thereafter, leaving what has subsequently become a dilapidated partially-completed concrete monstrosity on the main thoroughfare in Kailua Kona. I have attached several recent photographs in case you are unfamiliar with the structure. In addition to being an eyesore, the abandoned construction project poses numerous potential safety, security, and environmental risks. Instead of highlighting the natural beauty of Hawai'i, the current structure brings to mind the abandoned, partially-completed resorts along beach fronts of third world countries. Although we find the current structure to be an eyesore that attracts undesirable activities, we believe that DRI has no intention of moving forward with construction and, if it did,the resultant structure could have disastrous consequences to our neighborhood. We base our opinion on the following: 1. There has been virtually no progress since the original SMA Use Permit was issued back in 1998 21 years ago). 2. Approval of the most recent (third) 5-year time extension request was granted to DRI in 2014 and required DRI to make several off-site improvements to Alii Drive and Kahakai Road which have not been started. 3. There reportedly have been changes to the original site plans which could significantly increase crowding, traffic congestion, and parking issues along Ali'i Drive and Kahakai Road. 4. When asked, DRI would not provide a start date for construction nor any assurance to nearby residents that the construction project would be completed within the requested 5-year extension period. As a result, we have submitted a letter to Mr. Michael Yee at the County of Hawai'i Planning Department respectfully requesting that the HI Planning Department deny DRI's current request for another 5-year extension. Instead of"rubber stamping" yet another time extension, we believe that the County of Hawai'i should force DRI to remedy the current situation. Mr. Mayor,we would greatly appreciate your support in denying DRI's request for another 5-year extension and forcing it to clean up its mess. DRI has many options such as (1) applying for a new permit based upon current and updated construction plans that could be thoroughly evaluated by the Planning Department to determine the potential impact on present-day Kailua Kona; (2) demolishing the current concrete structure and restoring the land to its beautiful natural state; or(3) selling the property to another developer who could transform the land into an attractive, revenue-generating business that 123560 would benefit instead of detract from the community. Since acquiring the property in 2013, DRI has done nothing except to apply for time extensions that allow it to further delay action -this time until 2024. We sincerely hope that you will support our efforts to eliminate this eyesore on Ali'i Drive that Kailua Kona taxpayers, residents, and visitors have been forced to endure for years. We will be on island March 24-31 and would be pleased to give you or members of your staff a perimeter tour of the structure during that time if you are interested. We think you will agree that is it time to clean up this property! Please feel free to contact us at (505) 220-1274 or jaruffn@q.com if you would like to meet or would like additional information. Thank you for your consideration. Sincerely, Judith "Heidi" Ruffner, Ph.D. Eric Schindwolf Owners, Kona Reef D8 Front of DRI construction project viewed from AIi'i Drive, Kailua Kona (2/20/19) itosti 41';4'44iff rigirk a 1 F .?`++rL d ''.':6010"04,...,*^ J.`.Y,`V',9,0a'Y's. ?.ah.,. fa-°""r1/4' `m. r .(r`l xsp2 s mik a, f. r v „5 An endless barbed-wire construction fence, concrete blocks, debris, trash, weeds, etc. are readily visible from Ali'i Drive. Front of DRI construction project viewed from AIi'i Drive, Kailua Kona (2/20/19) 1 4 x;" ,l as ',A1t0'w'-''''a'b'`x 5..y` ,, ` .' ,. 4 ¢k , ''''* rs "` " " krt-I+ , x ti it 4 fr_ a „ r,. __ 4.. k.a • ti.. IA!4*4,101 44 .1 i alb e. )?/:/ ' il/4( \ W4.1110.4.. 404. i Oftitti,• .•I Of.Air 40JP. ' A., ito••.••..4. jito 11;1144 411111;1 #1. 410411" 11101011411,01P400”. • , '':It/i1110 C, , ' it* .' `{ ' i 1 .#4'. • -..mow. ni 9107.9 4" V. ., ..4 k i` 4i'4CI4 —. MIA 1.11,, Front of construction site showing more concrete blocks, debris, weeds, flaking paint, etc. Yellow "Caution" cones suggest that DRI is aware of potential trespassing issues. South side of DRI construction project viewed from Kahakai Road, Kailua Kona (2/20/19) 4pda1{ 7 0 1/ A concrete wall, barbed-wire construction fence, rotting wooden posts, weeds, trash, graffiti, etc. run the length of Kahakai Road. The presence of numerous parked cars suggests that there are already parking issues from nearby resorts. South side of DRI construction project viewed from Kahakai Road, Kailua Kona (2/20/19) 411 R S. P The gate to an inner, taller fence has recently been opened, indicating that trespassing and vagrancy are likely occurring. agull' 1 111 riDoublefencingwithbarbed-wire looks more like a prison than a resort community. South side of DRI construction project viewed from Kahakai Road, Kailua Kona (1/18/2019) z I r 3 A.e` y` v * ‘c ars c. •:;.,,,- ,. k,:,',‘,10-.7. V r lam. l'''''''' L a.r wall Graffiti is a common occurrence and has been collecting at the site for years. West side of DRI construction project viewed from Kahakai Road, Kailua Kona (2/20/19) iiia 1 } P- I41: 1111 i wr , t,.i. „„:,..,i,:,... ...s. 4.. . Even the manicured landscaping from Hale Kona Kai cannot hide the concrete bunker and rotting wooden posts from DRI's construction site. J1JJtCt Reef 1119EFEB ?7 Prl 95 . L. 1175-5888 Alii Drive I Kailua-Kona.Hawaii 96740 Teti`i%IT••f> ;"S f -. kat Ar:( 'i" RAW/mi. Michael Yee, Director Planning Department County of Hawaii 101 Puahi Street Subject: Annual Report and Special Management Area Use Permit No.388 Amendment Request TMK 7-5-018:11 r., The Kona Reef Homeowners Association opposes the grant of yet another 5-year extension of the. permit to Diamond Resort International to construct a 4-story condominium/commercial project on the subject property for the following reasons: A.)This project started more than 21 years ago. Several 5-year extensions to complete construction have been granted to various entities for different reasons, however,the current developer appears no closer to completing construction. During this time,the site has become an ever worsening eyesore,ablightonthebeautyofKailua-Kona. B.)An ever increasing population of homeless persons in Kailua-Kona cause this seemingly abandoned property to be a target for infiltration and crime. C.) Because the projected costs for completion have ballooned to$30 million or more,the developer is considering development of not only the(48)2-bedroom condominiums, but"lock off' units which can be rented to an additional separate party of four. Added to the six potential occupants in the base unit and the parking requirements necessitated by separate parties,the need for parking doubles to a minimum of 96 parking stalls while only 82 are proposed. Given that staff will also need parking,the buildout of this project will without doubt cause an additional requirement for off street parking not provided in this proposal. Since the developer,Diamond Resort International, has not been forthcoming to the Planning Department regarding the resulting density if the property is developed as described above,the request for extension should not be approved without a full and truthful construction plan in place. D.) Since Diamond Resort International is a timeshare developer,and occupancy of these developments are historically at 90%or higher,the density and parking shortage will be unabated year round if developed as proposed. Should the Planning Department actually approve a five year extension,the Director, if within his power to do so, should impose a time frame for completion of a series of initial steps to assure that this project is completed within the extension period granted with assurances that the more than obvious density problems are resolved. Please feel free to be in touch with me if you have any questions regarding the Kona Reef Homeowners Association concerns. Sincerely, Mai Lieu Planning Dept. President Kona Reef Home Owners Association Exhibit 20 Palani Court,Suite 215 74-5620 Palani Road ) Kailua-Kona, HI 96740 123540 7g 010 07n&090 75-5888 Alii m 16.` :-.-.' E-33 Drive P L,\tr,. ;;' ; . 7 t 04i y tt , , ,;: 6,_: {-j ir1 1 . int.,, Mr. CI CI Michael Yee, March 8, 2Q1*11.7)14!. Planning Director IP.'11.. 107 dua#sr St. 17,-;r i,;(2 c Hilo HI 96720 7,...,4* 7-8-010 e tau" Deny 5 -Time 0 for t e T Dear Mr. Yee, We molest:that kawaii Cow/1yPiat-misubmittedbyDRI's attorn Departmstit 1« Y, manaka Asato Law Firm, that the current owneerr of theandandpermitee, DPM Acquisition LLC dba Diamond Rmother5-year extension to complete construction of theesorts International, be givene'er husband.I . proposed project. For 16Zed, a neighboring condominium owned and now reside overtr. ths riveeintersection. codWe complex, located directlyso of a year t Konahavenodesiretocontinuelookingatorexposeour cai s guests wh int six months a year to this incomplete structure and co ant sixand why whoYyourdepartmentletsthisprojectremainincomplete unocyesore. cupied, Help usnearedforyearafteryear. We know of no other projectJrisland. occupied, and1ofthissizeandmagnitudeon e have read and studied the research provided b theWith "Heidi" Ruffner,_I:I D: and EricY Kona Reef Owners,nt you a letter askin S€ ir!d' IIw f Reef D$i who alsoIr.the reasons that they expressed rquest.the their leEALSOARESTRONGLYOPPOSEDTOTHIS per to you ROPOSIDRESPECTFULLYREQUESTTHATYOUROFFICEDEEDNY FIVTHEE YEARREQTIME EXTENSION QUESTankyouforyourconsiderationofourrequest. 1NebellownerisandguestshereattheKonaReefandn eve we speak for the majorifyneighbors. pectfully, Planning Dept.I9Y and Dennis Lidquist Exhibit 21 123796