Crescendo New York

I just thought that I would do a post on our Crescendo New York experience for those that are interested.

We are doing a long weekend up in New York with my wife's parents and brother. We had several summer birthdays to celebrate, so when we got there, a birthday cake, banners, balloons, incredible bouquet of flowers, spread of food, champagne and other drinks were waiting. Beautifully set up by the destination host who has been very attentive to the extent we needed anything. We hosted a neighbor, her family, and college friend and had a great cocktail party without any of the work as soon as we walked in. We had asked our concierge to make reservations for a great Brazilian steakhouse and Italian restaurants for our two nights out. When I asked my college buddy who lives in New York what he would have recommended, he actually said the same two places before I told him where are reservations were.

The Crescendo New York residence is amazing. Pictures don't do it justice, but that has been the case every time. It's a 2BR/2 Bath, about 1400 sq. ft., 20-25 foot ceilings in the living/dining room with soaring windows, incredible views of the Upper East Side and Central Park from the 25th floor, hardwood floors, Viking kitchen appliances, washer/dryer, fireplace, beautiful furnishings, two balconies, great movie and video game selections, three LCD/DVD systems, fully stocked with every thing that you might need, etc.

Great trip.

http://www.crescendoresidences.com/manhattan205.html

double height ceiling/windows in living room, plus balconies = *thumbsup*

IMHO much better than most destination clubs' NYC properties, other than >

Exclusive Resorts - 2BRs in Trump
Ciel - possibly in Time Warner?

Just Curious

What are these going for?

dated, but as of 12/4/06 >

http://www.heliumreport.com/archive...ate-resorts-and-announces-new-ownership-plans

Other plans include a new, lower entry-point Family plan at $225,000 (15-20 nights usage; $13,500 annual dues)

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Crescendo is a destination club with shared equity(actually an REIT) 8 $2.8MM homes, and 68+ members.

http://www.tugbbs.com/forums/showthread.php?t=49030

What are the rules for a member to exit Crescendo?


Richard

i believe 1 in 1 out when full, so perhaps 3 in 1 out currently?

Since when did somebody define $225,000 as a "lower entry-point Family plan"?

This still works out to be in the range of $1,300 per night when you factor in 5% lost opportunity of deposit and annual dues.

total opportunity cost depends on what the equity return is.

i believe bellehavens is the only cheaper equity club, at $125K / $9K for 15 nights and 90% refund of then current value. their homes are worth $2MM.

based on annual fee alone >
crescendo would be $675 @ 20 nights
bellehavens would be $600 @ 15 nights

Because the equity return has NOT stood the test of time and nobody knows (for sure) what the return (if any) will be, I think lost opportunity of the deposit money factored at 5% should be included into the "cost per night", especially if someone is going to deposit $225,000. This alone will add an additional $562 EXTRA per night for a 20 night plan.

im sorry, i did not mean to give the impression that i was disagreeing with your analysis.

it is indeed bellehavens and not crescendo that indicates on their site what the next deposit increases will be when the next 3 and 5 properties are made available.

crescendo might have that information for members though.

also http://www.heliumreport.com/archives/658-crescendo-real-estate-portfolio-appreciates-8-8-in-2006

Kagehitokiri said:

im sorry, i did not mean to give the impression that i was disagreeing with your analysis.

it is indeed bellehavens and not crescendo that indicates on their site what the next deposit increases will be when the next 3 and 5 properties are made available.

crescendo might have that information for members though.

also http://www.heliumreport.com/archives/658-crescendo-real-estate-portfolio-appreciates-8-8-in-2006

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You have to be an 'accredited investor' to get the info from crescendo.

I don't think it's fair to assume a 5% cost of capital, when you do get appreciation. If I remember correctly (I talked to so many clubs at the time). The management owns 40% of the entity, with the members owning 60%. But, all the members get paid back their deposits first, before it splits 60-40.

I could almost align on any cost of capital you choose, but zero. If real estate goes up 3% a year, then you should assume a 1.8% (60% of 3%) appreciation. (or subtract that from the 5% you are assuming is the opportunity lost)

Otherwise, you give no benefit to Bellehavens and Crescendo for being equity clubs. I've already made $12,500 if I resigned today from by Bellehaven's membership. I bought in at 100K, it's now 125K and I would get 90% back. So I've got a 12.5% appreciation my first year.

Please do your calculation and see what my cost per night is with 12.5% appreciation. 15 nights. 100K invested. $8500 yearly mf. (At least this would be my cost per night for the first year. (I don't expect 12.5% apprecitation every year)

Neil

'accredited investor' =

http://www.sec.gov/answers/accred.htm

a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;

a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year

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?

Any appreciation brings the cost per night down significantly. As a prior poster linked to, the 8.8% last year was great. The great foreign appreciation more than made up for the not so great domestic appreciation. I guess it's good to have a diversified portfolio.

The only two clubs that I looked at seriously were Crescendo and Bellehavens, because I wanted to have equity like most members here and to bring the cost per night down. In the end, my wife said she liked the Crescendo's houses a little better. She didn't say this, but I would suspect it's the extra $1M used for the purchase price. On the non-equity side, it seems like Quintess has some great properties.

if worldwide private residences expands well, like with four seasons residences etc (and that seems to be what theyre going for in several places) theyll also provide a very interesting equity offering, because they do not have annual fees. one thing that is unclear though is whether you just get 5 weeks, or whether you can have additional space available use beyond that. and the member to home ratio is high at 10:1.

Although I almost always agree with Steamboat Bill, I don't think it's fair to assign a 0% for real estate appreciation, especially over a longer period of time. My thought in joining was that despite a likely real estate dip in the short term, over the next 15 years, I would be shocked if you didn't end up with at least 5% appreciation, particularly in the luxury real estate market with less sensitive buyers, increasing demand from the retiring baby boomers, and limited great locations. Maybe you even pick up some properties in the dip.

I suspect that Exclusive Resorts, for example, would not be in the business if they didn't think that they would be making money from all those deposits used for real estate that they own. I believe that the initial 20% non-refundable portion of the membership deposit mostly just covers marketing/sales costs. It's really a nice model (for them) that they keep any appreciation on the underlying assets.

especially at their acquisition prices, considering they buy in bulk..

TarheelTraveler said:

It's really a nice model (for them) that they keep any appreciation on the underlying assets.

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It's a lot more than a nice model.. it's ingenious... Let's see

Option 1: buy lots of low income housing and rent it out to low lifes that you hope pay the rent.. or

Option 2: Buy nice homes in nice neighborhoods that don't cash flow and then you pray for appreciation... or

Option 3: Buy a billion dollars worth of multi million dollar homes and rent them out for positive cash flow to wealthy individuals. Get a 30% appreciation over the next 5-8 years and bank $300 Million.

It's pissing me off that I didn't think of it first...

i think there are a couple potential destination club niches left unfilled at the moment, but one is simply higher scale than the current max ($10MM single family / ~$30MM multifamily)

and with such properties you dont have to worry as much about typical market forces. but of course the startup capital.. ciel launched with $60MM of property, yellowstone club world probably even more, dont remember how they timed it. as i think helium report said, it helps to be a billionaire

Option 1: buy lots of low income housing and rent it out to low lifes that you hope pay the rent.. or

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or be like the japanese guy in hawaii buying and giving away expensive homes to homeless (with the neighbors claiming hes just trying to lower values more so he can buy more property) of course he denies that, but its very possible

TarheelTraveler said:

Although I almost always agree with Steamboat Bill, I don't think it's fair to assign a 0% for real estate appreciation, especially over a longer period of time.

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The main reason I wanted to assign no value to the appreciation is that (for most clubs) you must sell to get that appreciation back. I have not read all the contracts for every club, thus I am only making a generalization.

I am simply looking at "cash flow" required to join a destination club. I like assigning a 5% lost appreciation to the buy-in fee and add this to the annual dues and divide by the number fo nights used. If a club pays yearly real estate appreciation, then I would also add that in as a credit.

This is similar to buying a stock that pays a dividend vs a stock that has capital appreciation only. A dividend paying stock that also appreciates in value is the BEST.

In a perfect destination club, we would all get some type of yearly real estate appreciation credit, but most do not offer that. Besides, the club would have to sell their properties or refinance every year to satisfy this expense.

Steamboat Bill said:

The main reason I wanted to assign no value to the appreciation is that (for most clubs) you must sell to get that appreciation back. I have not read all the contracts for every club, thus I am only making a generalization.

I am simply looking at "cash flow" required to join a destination club. I like assigning a 5% lost appreciation to the buy-in fee and add this to the annual dues and divide by the number fo nights used. If a club pays yearly real estate appreciation, then I would also add that in as a credit.

This is similar to buying a stock that pays a dividend vs a stock that has capital appreciation only. A dividend paying stock that also appreciates in value is the BEST.

In a perfect destination club, we would all get some type of yearly real estate appreciation credit, but most do not offer that. Besides, the club would have to sell their properties or refinance every year to satisfy this expense.

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I agree that a cash dividend would be substantially better but what Bellehavens and Crescendo offer is substantially better than other clubs. I'd invite you to look at it like a bond specifically a zero coupon bond. (I think that is the name of it) In a zero coupon bond you dont get the interest until you sell or until the bond hits maturity.

It wouldn't be any different than a government bond that my parents bought for my daughter. It has a 1000 value, but only if I hold it to maturity.

I just don't think you can be accurate assigning a 5% lost cash to the nightly cost for the equity clubs. You do a great disservice when you do that and then compare against other clubs.

To do it accurately for Bellehavens and Crescendo, you might take a 10 year stint, assume some appreciation percent per year, and then see what it comes out to per night. It will lower the nightly cost dramatically versus what you are thinking it is.

And more importantly, it lowers the cost even more dramatically vs the other clubs. It's one of the main reasons I bought into Bellehavens.

portofino club now has some kind of annual credit, like private escapes tried. cant find the actual details, although i thought i saw them somewhere.

also ultimate resort has a refund of 80% of then current, forgot about that.
starts at $125K / $10K for 14 nights.

a review (taken with a grain of salt of course) of crescendo on helium report states

the next 10 years (the stated fund timeframe)

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is that indeed the case?

i know worldwide private residences does have a 10 year timeframe. in its case its also more like a standard maturity, since if you redeem before then, after at least 3 years, you pay a 12% transfer fee.

NeilGoBlue said:

I just don't think you can be accurate assigning a 5% lost cash to the nightly cost for the equity clubs. You do a great disservice when you do that and then compare against other clubs.

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First of all….I don’t think any of my “guess-estimates” are doing a “disservice” as I am trying to be objective with determining the “true” cost to join a destination club. Second….I really like the BelleHavens concept as it represents the “closest” destination club to reflect the potential benefits (profit) of buying your own vacation home.

I simply look at it this way:

How much do I have to spend to join the club, how much lost opportunity costs does my membership represent, and how much are the annual dues. Once I figure out how much I “HAVE” to spend every year, I divide that by the number of nights I can use to get the average cost per night.

BelleHavens has an interesting feature to allow your original membership deposit to grow in value, and that may represent a “HUGE” amount of money, but this money will “ONLY” be given back to me after I resign from the club. I am sure, that money will be great to get when I resign from the club (versus losing 80% like most DCs), but I still need to pay for the club fees as long as I am a member. I prefer to think of this as a “future bonus” and can only be calculated at the end of your membership in the club.

BelleHavens 15 night package

Cost to join = $125,000 + Annual dues = $9,000

For me to join BelleHavens, I need to take $125,000 out of my investment portfolio to join the club. This money is needed immediately and must be taken away from some type of investment I already own (unless I am foolish enough to finance the club dues). I use a very conservative 5% as this is a significant amount of money and would be generating some type of return if I did not join a destination club. Then I need to pay $9,000 per year in annual dues.

Thus, the lost 5% opportunity of joining BelleHavens is $6,250 EVERY year + $9,000 in ANNUAL dues = $15,250 per year I MUST allocate to join BelleHavens.

This averages $1,016 per night and MUST be spent each and every year I am a member….there is no getting around this as far as I can see.

Now if I ever decide to resign from the club in 5-10 years, I “should” get back 90% of the “then-current value” of the membership deposit. Who knows what that number will be….it may be the same, slightly higher, much higher, or even possibly lower.

Just for fun, I will assume the dues in 5 years is $200,000...thus, I hit a home run and will get back $180,000 which represents an $80,000 profit. This $80,000 profit over 5 years would be equal to $16,000 per year or $1,066 per night and will offset all the costs for me to join this club over the past 5 years…hooray!

However, I would “HAVE” to spend $76,250 over the past 5 years in lost opportunity and annual dues….in other words, I am spending this money “NOW”

If the membership dues rises to the level I guessed at, joining the club and enjoying 5 years of vacations would be FREE. In fact, BelleHavens would end up paying me about $50 per day to go on vacation. But the only way, my trips would be free, is for me to cash in my membership.

NeilGoBlue said:

I don't think it's fair to assume a 5% cost of capital, when you do get appreciation. Otherwise, you give no benefit to Bellehavens and Crescendo for being equity clubs. I've already made $12,500 if I resigned today from by Bellehaven's membership. I bought in at 100K, it's now 125K and I would get 90% back. So I've got a 12.5% appreciation my first year.

Please do your calculation and see what my cost per night is with 12.5% appreciation. 15 nights. 100K invested. $8500 yearly mf. (At least this would be my cost per night for the first year. (I don't expect 12.5% apprecitation every year)

Neil

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I will agree...that you got a fantastic deal...at least on paper.

Hopefully this will continue and you will get a nice check if you ever decide to resign. But if the club continues to impress, I am sure there will be no reason to resign.

But just like the stock market, after you buy low, you MUST sell high to LOCK in your gain. Just because a stock doubles or triples, it only represents a paper gain until you sell. That is the same concept with BelleHavens. This is not a critque, just an observation.

I wish I joined Exclusive Resorts when they first started, just like I wish I bought (and kept) Google stock.

Bill,

I think we are on the same wave lenght.. i'm just factoring in the exit strategy while you are not..

ER, I believe is 80% of what you paid. Bellehavens is 90% of the current membership pricing (which is directly reflective of the value of the real estate). I know this makes the calculation exponentially complicated but if you don't somehow, someway factor that in... It will skew the nightly costs dramatically..

$375K / $35K 60 nights (now 45 nights)
i believe original deposit (now $460K) / current annual for ER's top plan. with 5% added, its $54K per year, about $1K per night.

they created the base plan more recently, i believe starting at $195K (now its $240K) for 15 nights. with current annual and 5% that would be more like $1600 per night.

bill, how would you calculate worldwide private residences? like $300K X .15? that would end up $45K per year, or $1300/night.

also, i guess it would be conservative to not include the unlimited space available use of some clubs into the equation because its not guaranteed? although that changes with lusso, portofino, and ciel, because they do allow more advanced reservations, and just vary the time frames, as opposed to say high country club and solstice which set ~90 day etc windows for that use.