# Timeshares vs. Destination Clubs, Fractionals, etc.



## travelguy (Sep 14, 2006)

I’m surprised that I haven’t seen more discussion on the growing alternatives to the traditional Timeshare such as Fractionals (a.k.a. “Shared Ownership” or “Residence Clubs”) and Destination Clubs.  I am currently considering a membership in a Destination Club as an alternative to, or addition to, timeshare ownership.  

_Here’s how I came to consider a Destination Club membership:_

*We have a collection of Timeshares:*
We’ve recently been reevaluating our travel strategies and assortment of timeshares.  We got started over 20 years ago with the purchase of two weeks of entry-level timeshares on Hilton Head Island and still use those two weeks as traders into higher quality resorts.  That was our “developer” timeshare purchase as there was no such thing as timeshare “resale” back then.  Years later, we purchased two additional weeks in Sea Pines Plantation on Hilton Head and recently purchased 15,000 Hilton Grand Vacation Club Points (all through resale).  We use or exchange all our current timeshare weeks.  The end result is that we have a broad range of timeshares in multiple locations with varying quality levels.

*Our travel patterns have changed:*
Our situation may be similar to many Tuggers that have been involved with timesharing for many years.  Our travel needs have evolved:
1.	We have more time to travel now.
2.	We have become accustomed to vacationing in better quality accommodations (a.k.a. spoiled).
3.	We have changed and added to the locations where we vacation.
4.	We have less time to play the “Exchange Game”.
5.	We do more business on vacation due to advances in technology and connectivity (internet, laptops, cell phones, Starbucks, etc.)
6.	We travel with family more often and need larger accommodations.

*My concerns about timeshare exchange companies:*
My observation is that quality exchanges are becoming more difficult.  (Yes, both weeks and points…let’s not have that discussion here!)  I’ve always been proud of the exchanges that I’ve achieved with RCI and SFX but I’m concerned that the process is requiring more time, more patience, greater pursuit and more compromise at a time when I’m becoming less compromising about my travel accommodation requirements.  I’ve been much more successful working within the HGVC (Hilton Grand Vacation Club) reservation system but I still don’t get everything that I want.

*It all started with a ski week:*
One vacation that is constant for us is a two week ski vacation in Colorado’s Summit County.  The strange thing is that none of our seven timeshares are located in a place where it actually snows!  I determined that I would resolve this oversight by adding several ski weeks to our timeshare portfolio.  I started looking at the eBay and TUG ads for ski weeks.  Let me make it clear that we are now spoiled with the quality of our stays at timeshares by Hilton, Marriott, Westin, Hyatt and the occasional Club Regina.  So our new ski weeks would need a similar pedigree.  I was unpleasantly surprised when I saw the resale pricing of prime ski season, 2bd, ski in/out timeshares from some of the aforementioned developers.  Needless to say, I didn’t purchase one.

*What about “Fractionals”?:*
We were at Beaver Creek last January and I was watching “Good Morning Vail” to get the ski conditions for the day’s skiing when I saw an interview of a developer of a new “Fractional” ownership resort in Vail.  It took me awhile to realize that he was describing what I call a “Timeshare”.  Then I realized that what he was selling cost over six figures and came with a personal “slope-side concierge”!  And since when did “timeshare” become a bad word?  It seems that the super high end interval ownership developers (Ritz-Carlton Club, Four Seasons, etc.) refer to their ownership as “Fractional” and never use the term “timeshare”.  I know these are great quality resorts from the feedback on this forum, the fractional company web sites, and the entries over in the Resort Reviews section.  It’s interesting that the #1 rated resort on TUG is “Four Seasons Residence Club Aviara”.  Maybe it should be RCUG instead of TUG??  Anyway, my consideration for “Fractional” ownership ended when I saw the prices (yes, the resale prices)!  Enough said about “Fractionals”.

*How I became aware of Destination Clubs:*
I was aware of Destination Clubs (DCs) but thought they were way outside my (our) budget and that I’d buy a vacation home if I wanted to spend that type of money for vacation accommodations.  Then, I became aware of an affordable DC from this thread http://www.tugbbs.com/forums/showthread.php?t=28527 started by PerryM and I started to investigate.  I quickly determined that the only DC that makes sense to me is High Country Club.  There is also plenty of information on DCs available at www.heliumreport.com.  

*Evaluating Destination Clubs vs. Timeshares:*
Until High Country Club (HCC), most of the DCs in the industry had membership fees in the $200K - $400K price range and yearly dues anywhere from $15K - $25K.  This made the DCs totally incomparable with timeshares.  However, HCC has an entry membership fee of $30K with yearly dues of $4,800 and you get 3 weeks access to any of their high end destinations.  This pricing is on par with the high end Westin, Marriot, Hyatt or Hilton timeshares which only buys you one week of travel a year.  If you break down the yearly dues to a weekly MF, you are still somewhat comparable keeping in mind that these are 2bd to 4bd homes.  The HCC weekly MF at $1,600 is slightly higher that the high end timeshares ranging form $1,000 - $1,500 but with HCC you have access to larger/nicer residences that are professionally decorated, well stocked, and they offer more amenities.  Also keep in mind that there are no Exchange Company membership fees or weekly exchange fees.  Three weeks of domestic RCI exchange fees adds another $500 to the yearly cost of the timeshares.

_As a result of the costs associated with DCs, my evaluation of DCs has been limited to High Country Club as the only DC that I believe is affordable for us._

*High Country Club info:*
First let me say that I’m not a member of HCC, don’t have any association with them and have no financial gain from HCC.  I’m simply looking for good feedback as I consider a membership with HCC.

The HCC portfolio consists of properties in the $800K - $1M range.  The properties range from 2 BR beachfront condo’s in 6 star resorts, 3-4 BR houses on beautiful golf courses, and 2-4 BR ski-in/ski-out condo’s/townhomes in some of the worlds best ski destinations, with all the amenities.  It appears that these are a step above even the high end timeshares.  The properties are professionally decorated and are fully stocked with everything their members would need from, flat screens TV’s, gourmet kitchens, DVD players, Xbox game systems, wireless internet access, pools (some private), hot tubs and the best locations.  They also offer concierge services to assist their members with planning their trips, set up tee times, schedule shuttle service to and from the airport, dinner reservations etc.

My quest for additional vacation weeks started with a ski week but my wife and I also love beaches and islands (Hawaiian and otherwise).  HCC currently has 23 properties in their portfolio and they seem to add them daily.  They have 14 Ski properties in Colorado, Utah, California and Vermont.  There are Beach properties in Florida, California, Mexico and Hawaii.  They also have a golf property in California, the seemingly required Orlando property and a New York property with a view of Times Square.  They also tell me that they intend to have properties in Deer Valley, Hilton Head Island, Costa Rica, Turks & Cacaos and Tuscany in the next couple months.

The HCC reservations system is online or by operator and appears to be simple and efficient.  You don’t have the hassle of exchanging weeks and have a more flexible reservation policy.  They still had tons of ski weeks available for the 2007 prime ski season when I inquired last week.

I know there has been great discussion on the longevity of the DC model due to a recent shake up in the industry.  I’ll just say that I’ve done significant due diligence on this topic with HCC and I’m satisfied that they are financially sound both currently and in their long term planning.  I applaud them for being forthcoming with financial & corporate information.

And the best thing of all about HCC, and maybe all DCs, is that there are……. NO HIGH PRESSURE SALES TACTICS!!!!  (Unfortunately, no fee gifts or trips either!).  It appears that this also keeps the marketing costs to a fraction of what timeshare developers spend.  Their website is www.highcountryclub.com . 

*The bottom line (finally):*
It appears that an affordable DC, like High Country Club, may be the next logical step in the process of assembling a value oriented, high quality vacation accommodation portfolio.  They appear to be competitively priced with higher end timeshares, have higher quality properties, more convenient reservations, great locations and better amenities.

Now if I could just get them to take some of my timeshare weeks as a trade-in…..

_Your Thoughts????_


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## Steamboat Bill (Sep 14, 2006)

I am also interested in this concept as the price is right for these type of accomidations. My only problem was the 3 week usage and I do not travel that much. If they had a 1-2 week usage at $1500-3000 MF then I would probably buy.


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## talkamotta (Sep 14, 2006)

WOW.... 
Thats alot to think about...

All of us are different, but you have  much in common with my family.  We are getting so spoiled.  (The one bedroom hotel room with 6 people in for a soccor tournament definitely doesnt work anymore).  We have come a long way baby.  Last week 2 of my kids asked if they could  join us at the Fairfield Flagstaff (2 bedroom).  They werent impressed, but it was ok.  That resort is nice but the location for so many things makes it perfect.  I will say right up front that you must be in a higher income bracket or have more money to spend on vacations that I do.  

A couple of years ago, We went to an auction of some sort. It was for fractional units.  It was at the Grande Summit Lodge in PC, Utah.  Very nice resort. They were autioning off fractional units. One week per month for a full year. You got the good and the bad weeks.  The starting bid was at $55K for a 2 bedroom but I think with all the extra costs it would easily be $80K.  We were thinking of buying in leu of a condo to rent out.  The maintenance fees were around $700 per week (700 X 12).  At that time, the thought of buying 12 weeks at one time was a little overwhelming but maybe not so much in a couple of years when I retire (if I didnt already have 5 at the time).  My son looking for income property bought a condo closer into Salt Lake and rents his winter weeks out for $1500/wk and brings my grandchildren to visit me in the summer (works good for us).  His condo that he paid $165K is now worth $250K and he has had a great write off for the past 2 years.  

Looking back I dont regret my decision because:

1.  I dont want to be obligated to trade every week, I own.  Some of the timeshares I own I really do want to stay there.  I like different places to stay. I wouldnt mind staying 2 weeks at one of my favorite timeshares but that would be enough. 
2.  If I was interested in the rental business (oh wait a minute, I do have rentals) or have so much money invested. I want properties that I own by myself.  Im kind of a control freak, when it comes to an investment of that amount.  

I dont ski anymore even though I live 15 minutes from some of the best snow on Earth.   If I was going to buy several timeshares at the same place during prime time, I think I would opt to buy a condo in that area even if it stayed empty for half the year.  

This is an interesting thread, its always good to think about alternatives.  After all,  there was a time that owning a timeshare never would have crossed my mind.  I will look forward to see what  others have to say.


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## PerryM (Sep 14, 2006)

*Our dream...the "Virtual second home"*

Travelguy,

Great minds think alike!  We too have been looking at what I call the “Virtual second home”, one you own but don’t need to worry about.  One that allows you to visit weeks/months at a time in all parts of the country/world.

Here’s my conclusions so far:

*Fractional ownership:*
We own TrendWest/WM fractions in South Lake Tahoe which can be converted to usage inside the WM system.  This is not high end usage but what passes for 5-star timeshare usage.

*Condo Hotels:*
We own several that allow us to stay at them and receive rent when not there. *Trump has a fantastic one going up in Waikiki Beach and reservations start next week*.  This is an opportunity of a lifetime but we already own one on Maui.

*Destination Clubs:*
We were just a day away from selecting High Country but with the bankruptcy of the first club we decided that there were no laws to protect us and our investment – we passed.

*Residence Clubs:*
High end RCs like Ritz Carlton are fantastic but we would rather put that money into a condo hotel.  RCs are still fractional ownership, but real estate agents love to handle them.


*We decided on taking the absolute cheapest way to stay the longest time* at various places.  80% of our vacation portfolio is in TW and WM.  We exchange into Marriotts all the time and thus leverage our money and usage.  We can stay 6 months on Maui if we want, or spend the entire ski season in Steamboat, Whistler, South Lake Tahoe, or Park City.

*Conclusion:*
We own timeshares, fractionals, condo hotels and we are starting to fulfill our desire for our “Virtual second home”.  We retire in a few years and plan to be on the road, in 5-star resorts for at least 6 months out of the year with what we now own.

Good luck,


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## Steamboat Bill (Sep 14, 2006)

PerryM said:
			
		

> *Condo Hotels:*
> We own several that allow us to stay at them and receive rent when not there. *Trump has a fantastic one going up in Waikiki Beach and reservations start next week*.  This is an opportunity of a lifetime but we already own one on Maui.



Perry

What condo-hotels do you own? Do you like them?

I own a few studios at the Delta Whistler Village Suites. They are decent investments that produce a small positive income flow (if you can avoid a mortgage) but are NOT a home run like some real estate properties. But they are 100% headache free.

I would guess Trump would want $1000-$1500 per sq foot. Thus, a studio would be about $750,000 or MORE. I am not sure if this would be a good investment. Why do you classify it as a once-in-a-lifetime opportunity?


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## Malibu Sky (Sep 14, 2006)

FYI-------This is a e-mail I just received:


Greetings from The Residence Club at PGA West.  I wanted to touch base with you, and see if you were still interested in The Residence Club.

Please feel free to call me at anytime so I may update you on the status of sales.  I also want to assure you that despite the changing real estate market it has not effected our sales.  It has actually been a tremendous advantage for us being the desert's only high-end Equity Residence Club.  We have also found that compared to other high-end clubs throughout the world, The Residence Club at PGA WEST offers more luxurious homes, many added features and the best overall value for the price.

I also wanted to give you the opportunity to take advantage of our "Summer Incentive", owning one of the last Interests available in Phase One, priced at $259,000.  We have just a few Interests remaining.  Phase Two prices will start at $279,000 and ultimately Phase Three will sell out in the mid to high $300,000 range.  With the "Summer Incentive" our developer will take care of your first quarter Home Owners Dues, (valued at $3270.00)  This incentive is offered for those owners who can close in one of the last homes in Phase One and no later than October 2006.

Please call me as soon as possible if you would like to lock in an Interest in Phase One, (subject to availability, on a first come basis).  This requires a $10,000 refundable deposit to get started and will enable you to review the CC&R's, Rules & Regs, budgets, etc.  If you have not had the opportunity to preview the property as yet, let me know as soon as possible, so I can help arrange a discount at La Quinta Resort.

If you have friends or family that might be interested please let me know right away, so they might also receive Phase One pricing, and the "Summer Incentive".

If you have any questions or do not have further interest in our Club, please let me know.  I look forward to hearing from you at your earliest convenience.

Thank you,

Bambi Lynn Belchar
Sales Executive
The Residence Club at PGA West
bambi@residenceclubpgawest.com
(888)650-9200

http://www.residenceclubpgawest.com
http://www.destinationclub.com


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## djp (Sep 14, 2006)

Perry what is the standard split between management and owner of a condo hotel unit. 
Lets say the management rents it out for $400 per night 20 nights per month, making approx. $8,000 per month. What would be a good guess as to how much the owner of a condo hotel would receive? Half? More? Less?
I have thought abotu buying at a nice condo hotel with plans to retire (25-30 years away) there, after renting it out in the immediate. Any insight into this would be great.


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## PerryM (Sep 15, 2006)

Djp,

The standard split is 50/50.  However, this can be very deceiving.  Many resorts take 50% out and then charge you with housekeeping charges and front desk.  You need to investigate each resort and ask for the rental management agreement.

Unfortunately, many new hot projects don’t have the management agreement until the very last day of when you can back out of the agreement.  It’s too late then and you can be stuck with the management agreement until 80% of the condos are sold and even there the contract can go on for 5 years before the owners can get a new one.

Folks like Trump charge 10% of the gross rental income and that goes directly to Donald then you and the management company split 50/50 and then charges, like credit cards, can be taken out of your part.

The rental management agreement is a very critical document and you are under tremendous pressure to complete the transaction or lose your deposit.

I'd use the number of 40% as an average "cut".

Bill,

I sent you Donald’s condo hotel info by eMail.


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## myip (Sep 15, 2006)

*Trump Waikiki*



			
				PerryM said:
			
		

> .  *Trump has a fantastic one going up in Waikiki Beach and reservations start next week*.  This is an opportunity of a lifetime but we already own one on Maui.
> 
> 
> Good luck,



I am very interest in the Trump Waikiki.  I am trying to figure out whether it is justify to have a condotel.  The studio starting price is: $450,000, 1 bedroom $770,000.  1 bedroom+ Den: $1.4M, Two Bedroom: $1.5M, 2 Bedroom + Den $1.75M As of this week, no maintenace fees is set or the rental management agreement.  I am looking at the Studio. Can you really break even on it since the purchase price is high.

http://www.trumpwaikikihotel.com/beach_walk_map.php


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## PerryM (Sep 15, 2006)

*Can be done*

Myip,

The developer CAN NOT give you stats on rentals – it’s a real estate law.  What you need to do is to find resorts nearby and find their rental rates.  From the literature, the Trump is going to be a real 5-star on the beach – the only one and it has the Trump name.

So find the most expensive rental rates and it’s going to be occupied 90% of the time thru the year.  Then take 40% of that and that will tell you what your debt servicing should be.

Then use a mortgage calculator and work backwards to find your initial down payment – interest only mortgage.  It may turn out that you need to put 30% down and then the rental income equals your mortgage payment AND your MFs.


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## LAX Mom (Sep 15, 2006)

Thanks for all this interesting information! I hadn't heard of High Country Club but I'd like to know more. Previously, I wasn't too impressed with the expense of the desination clubs and thought there was too much risk involved.
I'll take a look at the link to the HCC site and learn more about it. 
Thanks!


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## caribbeansun (Sep 15, 2006)

I'm curious to know why people think that HCC's business model is sustainable.  Simply put the math doesn't work.

Lets assume that all they sell are their most expensive memberships for $60k which gets you 42 nights.  Maximum sales based on capacity (365/42) = 8.69 or 8 since you can't sell less than a full membership.  That represents a 92% occupancy rate which is astoundingly high IMO.

8 memberships x $60,000 = $480,000

Marketing material states that homes are worth $850,000

Okay, so what happened to the other $370,000?

How is this sustainable?  What part of the marketing material isn't telling the whole story because it just doesn't make sense to me.  How are the marketing costs being paid?  What about admin costs?

Is there something blatant that I'm missing here?

I looked at their mf's as well and find them to be too low since there isn't any profit component that would also add to sustainability.

Annual dues = $9,600 x 8 = $76,800

Perry has used 8% of capex for his analysis I believe, I usually assume 10% with the extra used to build a replacement reserve:

Perry = $68,000
Mine = $85,000
Average = $76,500

I think it's reasonable to assume that there's nominal margin in the mf's to cover overheads.

My conclusion - this is the next T&H


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## PerryM (Sep 15, 2006)

*Too risky or too expensive*

Timeshares, for all their flaws, still represent ownership of real estate.  Either we have a deed that states we own 1/52 of a condo, or paperwork indicating we own a tiny part of the trust of the master deeds (like WM).  Some are RTU and it’s spelled out how many years we have access to the real estate.

ALL Destination Clubs (DC), with just 2 exceptions (BellHavens being one of them) do NOT have you owning ANYTHING.  You own a dream that can crumble like the pioneer DC and lose your entire investment as a worst case scenario.

I also could not make the “numbers” work with High Courntry.  If they buy $1 M homes and 8 to 10 folks “own” them then the membership fee needs to be $100,000 per member.  It’s half of that and I could not figure out how they could make the club work.  Well, the only way is to start leasing homes/condos and not buy them.

So because of what I learned on my excursion into DCs I found them very exciting but very risky; and for the amount of money they want only BelleHavens looked attractive at $200,000 membership fee that appreciates with real estate.

Most DCs ONLY allow the earliest members to participate in the real estate appreciation of the units that they own.  (This was used as a lure to attract investors)  Most don’t allow members to cash out and realize the appreciation of the underlying real estate in the club.


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## Steamboat Bill (Sep 15, 2006)

I purchased a Hotel/Condo studio unit at the Delta Whistler Village Suites in British Columbia, Canada. This is a very well managed property in a fantastic location.

Price = $142,000 Canadian dollars (exchange rate was about 1 CAD = 70c USD)

Income received = $6,500 after ALL HOTEL expenses in 2005

Real Estate Taxes = $3000

Accountant = $500

True NET PROFIT = $3,000

Because I have no mortgage, the return on investment (ROI) is 2.11%...not so good.

However, I am banking on capital appreciation of the property as the Olympics arrive in 2010. In addition, I bought the unit for a bargain as the same units were going for $200,000 in 2003.

A side unplanned event has been the strengthening of the Canadian dollar vs the US dollar (now $1 CAD = 85c USD) some people think it will be $1 CAD = $1 USD soon and I tend to agree with them.

One piece of advice a trusted real estate broker told me: "the high end hotel condo's like the Four Seasons, Westin, Pan pacific, etc. have lower ROI's than mid range properties like the Delta as they have higher staff expensed and have to keep replacing bed sheets, towels, furniture, etc to maintain their 5-star rating.

Thus, I do not see the Trump property as a great investment. Stick with a 5.5 % CD or a nice dividen paying stock.


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## PerryM (Sep 15, 2006)

Bill,

Your analysis sounds sound.  A person can easily use Zillow.com and get real estate appreciation at many locations for the past 10 years.  A person then needs to do a lot of detective work, find comparable rents, and then estimate what the rent will be at the new condo-hotel.  Occupancy rates can be found by doing research in local newspapers who keep track of this kind of data.  Call them and ask for the data.

Once that is done you can then form a business plan and determine the down payment needed to make the numbers work.  Hawaii has one of the highest real estate appreciations over 10 years that exist.


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## Steamboat Bill (Sep 15, 2006)

Here are a few more thoughts on condo/hotels.

Pros:
Revenue sharing, thus no real competition from other owners.
100% headache free....the checks get wired to the bank every month.
Can be a good , but not great, investement 

Cons:
You can't change a thing in your unit, even a picture. Thus, there is no real sense of ownership.
Limited usage (4 weeks per year, etc.) as there are restrictions and then your monthly revenue goes down when you use it.

I bought in Canada to have some international exposure for my assests. In fact, it has appreciated about 20% just in the strenght of the Canadian dollar vs US dollar. Of course, this could reverse and I am screwed.

Yes, I could have bought Canadian stocks, but I fell in love with Whistler and think it is one of the most beautiful palces in the world.


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## caribbeansun (Sep 16, 2006)

I purchased a 2BR unit at Castaways' Cove which is the condo/hotel part of the Reef Resort on Grand Cayman.  Some items unique to this property:

Hurrican Ivan - had to dig out foundation and start over again which delayed everything by at least a year.  The delay has seen the same unit increase in value by approx. 17%

US/Canadian exchange rate - dramatic improvement so our capex dropped considerably AND allowed us to finance a portion in Canada and lock in the best exchange rate we've seen in a very long time.  

Rents in US$ - This provides us with a reasonable hedge against future fluctuation of exchange rates on the operating cost side.

Management co - takes a 25% split on revenue but we pay all the expenses

I haven't drawn any conclusions on this as yet as it's too early, I'm not enamored with the interior design, size and finishes which are of a lower quality than I'd anticipated.  We are considering upgrading to their phase 4 units which are to be much bigger.  For my money it's the best location we can find I just don't know if I'm going to be happy in a unit that didn't meet my expectations.


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## PerryM (Sep 16, 2006)

*Hawaii is different in many ways*



			
				Steamboat Bill said:
			
		

> Here are a few more thoughts on condo/hotels.
> 
> Pros:
> Revenue sharing, thus no real competition from other owners.
> ...




With the new Trump there are NO occupancy restrictions - that's the law in Hawaii.  Want to live there 6 months and then rent 6 months - no problem.  You are right with decorating your unit - you can't if you are in the rental pool.  Many folks never enter the rental pool and use the unit for years then enter it into the rental pool.

Hawaii also makes NO distinction to a condo-hotel and a condo - they are identical in Hawaii.  This is a BIG difference to condo-hotels in Florida where you normally own "From the paint inwards" and someone else owns the wallboard outward to include the condo, building, lands, etc.  In Hawaii you own Fee Simple part of the entire resort.  (Well assuming its Fee Simple to begin with and not leasehold).

Intrawest starts their second round of reservations at Ka’anapali beach – this might be the last NEW whole ownership on Ka’anapali beach for decades to come.  Link: http://www.honuakai.com/ (we own there)


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## travelguy (Sep 18, 2006)

*TUG Special Offers*



			
				Steamboat Bill said:
			
		

> I am also interested in this concept as the price is right for these type of accomidations. My only problem was the 3 week usage and I do not travel that much. If they had a 1-2 week usage at $1500-3000 MF then I would probably buy.



You might try contacting HCC and ask them if they can accommodate you through one of their programs.  I've found them to be flexible and very straightforward.

For example, HCC continues to offer the Tug Special Offer originally posted by PerryM as follows:



			
				PerryM said:
			
		

> TUG Special Offers:
> 
> • You can buy a membership and NOT pay MF’s for 1 year. Since timeshare owners are always booked up 12 months out they realized that you could not use their DC and thus are allowing TUG members to buy and not pay MF’s for 12 months. Of course you can’t use the DC either but you can vacation in your timeshares and lock in a cheap price.
> 
> ...



The prices have changed since that original post.  An Affiliate membership costs $30K.  You can buy this now and not use it for 1 year.  After that year, you pay a MF of $4,800 for 3 weeks usage.   You also have the option to upgrade to a Private membership within 3 years for an additional $20K. The Private Membership gives you 6 weeks usage for the MF at that time (currently $8,400).

Bottom line is that HCC seems to work WITH its members for win/win situations.  Could be a hard adjustment for us timeshare types who are accustomed to the developers and exchange companies working AGAINST us.


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## travelguy (Sep 18, 2006)

*HCC & the Numbers*



			
				caribbeansun said:
			
		

> I'm curious to know why people think that HCC's business model is sustainable.  Simply put the math doesn't work.
> 
> My conclusion - this is the next T&H



Caribbeansun,

My experience so far with HCC is that they have been extremely forthcoming on this subject and transparent with their business plan and projections.  Prospective members can sign a non-disclosure agreement and receive the standard marketing info along with the company's 10 year projection.  The projection is detailed and includes all assumptions that contribute to the plan.  I also spent over an hour with the HCC CFO.  He answered all my questions and was totally open about their business, its potential and its liabilities.

I'll contact HCC today or tomorrow and ask them what I can post here in regard to their business plan, etc.  Here's a hint: Don't think purchase and payment  ...  Think leverage and cash flow!

As a prospective HCC member, I'm very interested to see what Tuggers have to say about the true HCC business plan.  Maybe they are the next T&H and I just don't see it.

I'll post whatever I can as soon as I get approval.


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## PerryM (Sep 18, 2006)

*Too risky for me*

Travelguy,

I too found HCC an interesting proposition; I just can’t seem to get the numbers to ever work out.  I never got an explanation from them that I could understand, it could be just me.

If 8 folks buy a $800,000 condo then each person pays $100,000.  I just don’t see how it can be any other way.  The other item that has me worried is that the member has NO ownership of anything – zip.  If the HCC folks decide to close shop and liquidate the properties I don’t see where the members have any protection.  In the case of the founding Destination Club – they are in bankruptcy court with little protection for the members.

If the DC industry sponsors legislation that protects the investment of their members, I’ll reconsider.  Until then I’d rather put the money into something safer.

I’m not challenging HCC, there were very forthcoming with information and seems to want to tap the high end timeshare market.  However timeshares offer ownership and DCs don’t, with just one or two exceptions, and HCC is not one of them.


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## caribbeansun (Sep 18, 2006)

I'm glad to hear that they are forthcoming and open.  However, even trustworthy people do make mistakes.  I would say that just because somebody tells you their ideas it doesn't make them good ideas it just means you know what you're in for.

If a DC's business plan includes leverage and the assumption that debt payments will be made out of future membership sales what they are creating is a model dependent on future sales just to meet their ongoing obligations on those debt instruments.  That can seriously undermine the financial viability of the organization and in turn the security of your deposit very quickly should membership sales lag from projections.  

Further, unless they can increase their membership deposit amounts much more than the actual cost of future properties there  must be a sizable deficit/debt with no manner of repayment.  Keep in mind it's only supposed to be the 20% they don't refund when you leave that is really their's to spend.  Sounds like they've lost sight of the fact that there is a real obligation to the membership to me.

Alternatively they are going to carve out a portion of their annual dues to make debt payments which again if future membership sales don't keep pace it has special assessments and big mf increases written all over it.

Maybe I'm missing something here but to me this model  isn't sustainable in the long run.



			
				travelguy said:
			
		

> Caribbeansun,
> 
> My experience so far with HCC is that they have been extremely forthcoming on this subject and transparent with their business plan and projections.  Prospective members can sign a non-disclosure agreement and receive the standard marketing info along with the company's 10 year projection.  The projection is detailed and includes all assumptions that contribute to the plan.  I also spent over an hour with the HCC CFO.  He answered all my questions and was totally open about their business, its potential and its liabilities.
> 
> ...


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## JLB (Sep 19, 2006)

Y'all are certainly living in the stratosphere!

My impression of full-ownership is that it is a win-win-win situation.  The sales department wins when they sell it to you.  The resort management wins when they bill you for maintenance.  The rental department wins when they take 50% of what you let them rent for you. 

Such a deal. 

 

Fractionals are similar, only on a fractional scale.   

JMHO.


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## taffy19 (Sep 19, 2006)

I have to agree with JLB.  I would much rather buy a condo outright even if it is not at a fancy resort project.  They will be much easier to sell if the need comes up suddenly.  Association fees are a lot better too.

Timeshares have been around for many years and cost a fraction of these prices but still you have to take a beating, most of the time, when you have to sell but it is not such a large amount.  If you buy them re-sale like most people do here, you can't go wrong so wait until these new developments come on the market too.   

Renting one of the Trump condos sounds a lot better to me than owning one.  JMHO.


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## taffy19 (Sep 19, 2006)

*The Timeshare Beat*

Today's Timeshare Beat's headline mentions that the Ritz-Carlton Club is building the first fractional property ownership in Hawaii. Club residence prices start at $300,000 per interest. Why not buy one or two of these?   

On the other hand, I read today that housing construction in the USA fell to a three-year low! When will the top of the market hit the timeshare developers? If I were in the market for a re-sale timeshare, I would wait a little bit longer as I expect to find some of the choice timeshares at the best resorts coming back on the market not too long from now and the same for the ones that cost $300,000 to purchase.

For $300,000 you can own a condo outright in many areas in Mexico right on the beach but no longer in the tourist areas. The Puerto Vallarta area is still booming and prices have risen rapidly this year because financing is available now from US lenders for vacation homes or condos. 

We love reading about the real estate market in other countries. Our single boat neighbor in our marina just bought in Panama at one of the most beautiful beaches you can imagine.  :whoopie:  He showed us some of the pictures and his house appreciated already so much since he bought it only recently. The country is stable and very friendly towards American retirees. You may still find a good buy here but not much longer once it has been discovered by fellow Americans or Europeans like in Mexico.

There is so much to read about real estate outside the country and especially in Mexico.


I love Hawaii but buying a condo hotel in Maui sounds too risky to me if the economy really turns south. What worries me too is that the island is getting so overbuilt and congested.  Maui is ruining it for everyone!


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## caribbeansun (Sep 20, 2006)

Full ownership makes sense provided you purchase in an area that has long-term appreciation potential and your rentals can cover your carrying costs.  On the rental point the investment in a condo/hotel is a better play in the sense you can normally rent these by the week or day and get a much higher rental rate than a stand alone condo or house which requires considerably more involvement by the owner and investment of time on the maintenance side as well getting the place rented.

ie. Castaways - gross rent for 4 high season weeks = $13,580.

Discount due to less than full occupancy - say 30% vacant - gross rent reduced to $9,506

Resort share = 25% of gross -- net rent = $7,129.50

Costs will be comparable to a stand alone condo ie. strata, insurance, cleaning etc.

Safe to say that's a lot more than you can rent a stand alone condo and yes of course the rates drop in the summer as does occupancy but by and large it should work out over the course of a year.  I'll report back in a years time and let you know.


Fractionals are a completely different thing entirely and IMO not an investment.  I view them as the purchase of a block of timeshare weeks - there's insufficient data to determine if the capital investment in a fractional will have any appreciation or not.  I suspect they will not and in fact I suspect they will suffer a decline comparable to a timeshare week if not worse due to an implied liquidity discount as a result of the small buyer pool that may exist.  I hope I'm wrong for the sake of those that bought fractionals.



			
				JLB said:
			
		

> Y'all are certainly living in the stratosphere!
> 
> My impression of full-ownership is that it is a win-win-win situation.  The sales department wins when they sell it to you.  The resort management wins when they bill you for maintenance.  The rental department wins when they take 50% of what you let them rent for you.
> 
> ...


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## caribbeansun (Sep 20, 2006)

These new developments you're referring to are the DC's?  If so they'll never be available resale since the resale piece is part of the business model so decline in value will not occur unless the club reduces their buy-in price which I don't really see happening.

If you are referring to condo/hotels that isn't going to happen either because unlike TS and fractionals you are actually buying something of value, meaning real estate.  So yes, real estate values will go up and they will go down but over the longer term they trend upwards.  Will they appreciate at a lower or better rate than alternative investments - historically they've appreciated slower however that rate of return likely is more indicative of the relative risk of the investment.



			
				iconnections said:
			
		

> Timeshares have been around for many years and cost a fraction of these prices but still you have to take a beating, most of the time, when you have to sell but it is not such a large amount.  If you buy them re-sale like most people do here, you can't go wrong so wait until these new developments come on the market too.
> 
> Renting one of the Trump condos sounds a lot better to me than owning one.  JMHO.


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## PerryM (Sep 20, 2006)

*Local real estate agents form the market*

Let’s face it, in addition to 50 times the work needed to sell a timeshare condo, the *local real estate agents nearby view it as a cancer in their area *– and thus affect the resale value too.  Find a nearby real estate agent, close to your timeshare, and march in there and demand your mud week be listed in the MLS  will have them rolling on the floor – you made their day.

Expensive, holiday, weeks that command $50k+ will have them scratching their heads and a $300k quarter share fractional will have them pulling out the sales contract.  It’s all a matter of money and commission to them.

Some fractionals do initially decrease in value, march in the real estate office with a Marriott, Ritz-Carlton, or St. Regis will have the real estate agent brewing up a coffee latte or breaking out some wine – they want your business.  This means that instead of finding your buyer over the internet or eBay you have a professional real estate agent hawking your fractional or expensive holiday week - in the area where folks see the resort.

There are many stories of Ritz-Carlton owners making gains on par with the local real estate market.  Marriott fractionals don’t seem to keep up as well, and St. Regis blows away everything.

*Condo-hotels:*
Condo-hotels really need to be broken into two subgroups:
Florida type CHs and condo type CHs.

*Florida type CHs* sell “From the paint inwards” – i.e. you own everything in your CH up to the paint on the walls.  After that, the building, elevators, grounds, beach, etc is owned by the developer.  This is why CHs go for about 75% the cost of a traditional condo.

*Condo type CHs* are sold in Hawaii and some developers, like Trump, have the CH owner just a traditional condo owner with the hotel aspects added.  Here the CH sells for exactly the same, and even more, than a comparable condo that does not allow short term renting (nightly).

Conclusion:
If you can get your unit, timeshare or fractional, into the local MLS and have brokers hawking your unit you can do much better than normal timeshare weeks sold over eBay.  That local real estate agent has an impact on resales.


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## caribbeansun (Sep 27, 2006)

I'm guessing they didn't give you permission to post any details?



			
				travelguy said:
			
		

> I'll contact HCC today or tomorrow and ask them what I can post here in regard to their business plan, etc.  Here's a hint: Don't think purchase and payment  ...  Think leverage and cash flow!
> 
> I'll post whatever I can as soon as I get approval.


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## travelguy (Sep 27, 2006)

caribbeansun said:
			
		

> I'm guessing they didn't give you permission to post any details?



Not only did HCC give me permission, they sent additional detailed information about their business plan that I'll try to consolidate and post soon.  Some of it is in spreadsheet form and I'll have to convert it for posting.  I've been on run (working to support my travel habit) and too busy to get to this but I will post this info in the next several days.


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## PA- (Sep 27, 2006)

travelguy said:
			
		

> ...
> _Your Thoughts????_



I'm not familiar with this particular travel club, but in general, I think they promise more than they deliver, and when the house of cards folds, you own nothing.  I suspect the same will be the case with High Country.  

I'd want to get independently verifiable statements of how many owners there are, proof of how many condos they own (and what percentage they own), etc.  Information that they're unlikely to share.  I'd like to know how they get paid.  I'd want to talk to a random owner (not one they select) and go through the system looking for reservations.  

I'd have a lot of due diligence for this type of outfit; more so than a deeded timeshare.


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## Laura7811 (Sep 28, 2006)

We just bought from High country last week. The member director was very forth coming with information about properties owned verses leased.  The reservation system is very easy to use and all the properties are listed.

We decided to join this club, because it was affordable for us. The  properties in CA are all pretty close to us.

As we use the club I can let all know more.....


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## Steamboat Bill (Sep 28, 2006)

Laura7811 said:
			
		

> We just bought from High country last week. The member director was very forth coming with information about properties owned verses leased.  The reservation system is very easy to use and all the properties are listed.
> 
> We decided to join this club, because it was affordable for us. The  properties in CA are all pretty close to us.
> 
> As we use the club I can let all know more.....




wow..that is great news...I am looking forward to your reviews.


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## taffy19 (Sep 28, 2006)

PerryM said:
			
		

> *Condo type CHs* are sold in Hawaii and some developers, like Trump, have the CH owner just a traditional condo owner with the hotel aspects added.  Here the CH sells for exactly the same, and even more, than a comparable condo that does not allow short term renting


Condo hotels are very attractive with the hotel aspects added to the premises but the maintenance fees must be so much higher too for the owner.  If you can afford it then there is no problem but if you hope to rent it out to cover the maintenance fees but it doesn't rent out as well as you had hoped for, then you are stuck with the high maintenance fees.  Yes, the real estate will appreciate so you have at least that which is better than with a timeshare condo but you are making a much bigger investment too.  Why are hotels doing this?  They are shifting the risk to the condo buyer.  JMHO.

I love that they are building all these condo hotels so I can rent there one day and the more there are available the better it will get for the renter.


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## caribbeansun (Sep 29, 2006)

The maintenance fees are considerably lower than for a comparable TS ie. Reef Resort mf's are approx $1,200/year while the mf's on Castaway Cove are about 50% of that.



			
				iconnections said:
			
		

> Condo hotels are very attractive with the hotel aspects added to the premises but the maintenance fees must be so much higher too for the owner.  If you can afford it then there is no problem but if you hope to rent it out to cover the maintenance fees but it doesn't rent out as well as you had hoped for, then you are stuck with the high maintenance fees.


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## VVTrader (Sep 30, 2006)

*Different web site*

Here's a site on fractionals/destination clubs I thought might be interesting for Tuggers.

http://luxuryfractionalguide.com


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## travelguy (Oct 10, 2006)

*The Numbers on High Country Club*

I finally found the time to post the High Country Club (HCC) business plan. The following is information on their business model based upon information they sent me, my discussions with them, and information I’ve gathered from Destination Club (DC) industry sources.

_Here’s my disclaimer – I have assembled the following information for my own decision making and have posted it here for review only. I cannot be sure of its accuracy and you should contact High Country Club directly to confirm this information before taking any action based upon it._

*The current HCC statistics:*
Time in business: 10+ months.
Members: 160+ (Includes all member types)
Rank of DC in terms of members: 4
Total properties available: 17
Additional properties under contract: 8
Properties leased: 2 (1 in Beaver Creek which does not allow DC ownership)
Average property cost: $775,000 (including furnishing & closing costs)
Reservation days per member: 36 annually
Member to property ratio: 8:1 average
Membership fee: $55,000 average (“Affiliate” membership fee is $30,000)
Annual Dues: $9,000 average (“Affiliate” annual dues are $4,800)
Note: “Affiliate” members have half the reservation days of other members and are considered ½ member for property usage, membership fee and annual dues purposes.

*The BIG Question:*
The BIG question for the newbie DC business is …… _are DCs a business model that allow for long term profitability and growth or are they a pyramid type business that will inevitably collapse and cause financial loss to their members?_

The bankruptcy of Tanner & Haley (T&H) and the loss suffered by its 874 members has been discussed on this forum before so I won’t go into it in depth. I’ve done due diligence on several of the more affordable DCs and they do not have the two issues that doomed T&H; a majority of leased properties and unlimited usage by members. The DCs that I’ve talked to are open, frank, professional and seem to care about the current and future state of the DC industry (very un-timeshare like of them!).

*The HCC business model:*
The HCC biz model is based upon a county club type organization that provides the use of travel properties to its members for a fee. Some other DCs seem to primarily use their members as the resource for the capitalization of its assets (properties) with the benefit for members being the use of travel properties. HCC is also based on a cash flow business model that stresses efficiency of its operations and value oriented purchases of luxury properties that have great potential for appreciation. The HCC investors make their profit primarily by the appreciation of the properties instead of the fees of the members. HCC also keeps its fees low by leveraging appreciated properties for cash instead of getting cash from the members. In this way, members actually participate in the equity appreciation of the properties without spending the exorbitant fees charged by the few DCs that offer so-called asset appreciation participation. (Leveraged cash from appreciated properties = cash for HCC = lower fess and dues for members). Simply put, the difference may be that HCC sees its cash as cash flow while some other DCs see their cash as equity.

*The HCC numbers:*
Following are business numbers that I’ve summarized from the HCC projections and my discussions with their CFO. You can contact them directly for their unabridged 10 year projections and other financial information.

*Property Purchase Costs:*
_Purchase _
Property cost ................. $ 750,000 
Property furnishing costs .... $ 25,000 
Property down payment ... ($ 225,000 ) 
Mortgage balance ............ $ 550,000 
Property cost includes appliances, built-ins & closing costs
Down payment now @ 30%; will increase as club grows

_Mortgage Payment _
Total payment ................. $ 46,148 per year / per property
Mortgage @ 30 year term, interest @ 7.5% (actually lower now)

_Property Maintenance_ 
Direct property costs ........ $ 25,740 per year / per property
Includes taxes, HOA, utilities, insurance, maintenance, cleaning, etc.

The properties are valued at an average of $850,000 even though many do not cost HCC that amount. They save substantial costs on property purchases by buying some properties @ a preconstruction discount of 20%. Preconstruction properties also appreciate in value by the time the property is constructed and mortgage payments are due. Additional savings on property purchases are due to the commercial real estate background of the company and the multiple purchases they are able to make due to the fast growth of the company.

_Property Use by Members:_ 
Members per property: ................ 8
Property use per member: .......... 36 days average
Member usage %: .................... 79%

HCCs financial model is based on an 8 to 1 member to property ratio but that number can be pushed lower in busy travel times and higher in slower times which helps availability (this is achieved by planning to bring new properties online for use during peak usage periods). They constantly monitor the reservation system to ensure that members have availability all of the time. In their short time of operation they have found that people are using about 80% of their available days which even at an 8 to 1 ratio provides a 79% occupancy rate. 

Note that the 36 days of use per member is higher than the other DCs that I talked to which averaged closer to 30 days per member. I suspect that is because of HCCs “Affiliate” plan which is really a half-priced, half-use membership where members are more likely to use most of their 21 days as opposed to the standard HCC and other DC membership which averages about 40-45 days of use.

*Membership Fees and Dues Allocation:*
_Membership Fees_ 
Members per property ............................ 8
Membership fee ........................... $ 55,000 average
Membership fee per property ........ $ 440,000 
The membership fee will increase to a max of $80,000 as the club grows.

_Membership Fee Allocation _
Property down payment ............... $ 225,000 
Property furnishing costs ............... $ 25,000 
Property allocation of member fee .. $ 250,000 
Operating cost allocation of fee ..... $ 190,000 per property

_Annual Dues_ 
Members per property ............................. 8
Annual dues .................................. $ 9,000 average
Annual dues per property ............... $ 72,000 
The annual dues will increase to $10.200. Current annual dues are restricted to CPI + 2% per year

_Annual Dues Allocation_ 
Property mortgage payment ........... $ 46,148 
Direct property costs .................... $ 25,740 
Property allocation of annual dues ... $ 71,888 
Operating cost allocation of dues ........ $ 112 per property
This is actually very conservative projection as the projected mortgage rate is 7.5% while it is currently closer to 6.5%

_Allocation to Operating Expense_ 
Member fee allocation per property .. $ 190,000 
Members per property ............................... 8
New Members for Operating Expense .......... 88
Yearly new member requirement to meet operating expenses. Operating expenses are estimated by me based on my conversations with the HCC CFO and a review of their projections.

This allocation of member fees and dues is different than what some of the other DCs claim. HCC takes a portion of the membership fee and uses it as cash for operations instead of using it all as down payment on property. The mortgages are then supported by the annual fees as payments are due. This allows them to use cash efficiently for cash flow instead of charging higher fees to allow a greater down payment from the initial membership fee. Note that HCC disputes the claims of other DCs on the amount of membership fees that other DCs use for down payments. Also note that HCC will pay a larger percentage of down payment on new properties as the club grows and cash flow increases.

*The need for sales:*
I believe that HCC and most DC’s need to keep selling memberships to stay in business with maybe the exception of Exclusive Resorts (membership fee of $425,000!). Because of HCCs strategy of outsourcing property management functions and the efficiencies mentioned above, they can sell for much less. When HCC levels out its pricing at approximately $80,000, it would need to sell approximately 6 memberships per month to generate enough cash to pay property mortgages and fund operations. Through the first 10 months of operations HCC is averaging about 15 memberships per month. The best sales tool is member referrals so as HCC is able to build its customer base it also increases its ability to build its sales pipeline. 

*The destination club exit strategy:*
Another concern for DC club members is what is in the future of DCs as these clubs mature. Here are some of the exit strategies that have been mentioned to me by the DCs: 

Continue the status quo with the DC generating profits for investors as properties become paid off.
Sell or merge with another DC for greater efficiency of operations and economy of scale for property developments.
Sell to a large travel related conglomerate (ex: Hyatt, Hilton, etc.) which will allow a top tier of destinations for them.
*Property equity vs. no-equity:*
There has been some conversation on these forums about investment in equity based travel properties including DCs with memberships participating in the appreciation of the properties or shared ownership of the properties. For the record, I make my living by investment in commercial properties and equities (stocks) and have total control over all of them. I personally don’t consider travel an “investment” that I want to participate in. I just want to travel without having to worry about my R.O.I. and the ownership associated headaches of a travel property. I’d rather pay the low membership fee and low annual fees of a DC like HCC instead of paying 3 or 4 times as much in an equity sharing DC. I’ll invest the saved money into the investment vehicle of my choice instead of having some DC investment manager tell me how much I made on a shared property. (IMHO)

*Consumer protection for DC members:*
To protect consumers and make sure that DC’s are operating responsibly, the largest 7 DC’s have gotten together to form the Destination Club Association (“DCA”). While the DCA best practices are still being developed, the rules will focus on financial management, to make sure DC’s can fulfill their commitments to consumers, and consumer disclosures, so consumers understand exactly what they are buying and the inherent risks. The DCA regulations would have uncovered the Tanner and Haley situation years ago. HCC is actively participating in the organization of the DCA.

*The security of membership fees:*
Upon termination of membership, HCC members get an 80% refund of their membership fee on a two-in one-out basis so the cash doesn’t really need to be on hand to pay it since they money coming in for the 2 new memberships (at what should be a higher price than the refunded membership) will more than cover the refund. This actually gives the DC the advantage of buying back a low cost membership at 80% of the selling price and then reselling the same membership at 100% of the new, higher price. This creates a win/win situation for both the DC and member requesting the termination of membership. 

Even without the need for cash on-hand for the reimbursement of membership terminations, the HCC 10 year projections show a ratio of assets to refundable membership fees at 145% at the end of the first year due to the initial capital investment. A ratio of 100% or higher would mean that HCC should be able to refund all members 80% of their membership fees in the event of total failure of the business. This ratio never dips below 100% thereafter. This sounds great for security purposes, but I believe this ratio is somewhat unimportant as long as HCC can refund the routine membership terminations and has sufficient cash flow to sustain and grow the business. I don’t believe that many businesses, let alone DCs, would survive a catastrophic event where all its customers/members asked for refunds and/or stopped doing business with it. (What would happen to your timeshare if everyone stopped buying, paying their dues and tried to sell?)

In addition to this, the 80% refund will be addressed more as the Destination Club Association finalizes the regulations for the industry but there will be a financial assurance provision that will hold DC’s to a net asset calculation to give comfort to members that they will get their money back. Note that many other DCs have a three-in one-out refund policy.

*Final analysis:*
IMHO, All businesses have certain assumptions in their business plan in order for them to be successful. HCC appears to have assumptions that are in line with typical business operating standards. Those business assumptions are:

HCC relies on strategies of efficiency in both property purchase and operations to keep costs low.
HCC utilizes its property availability to maximum potential without inconveniencing its members.
HCC generates sufficient cash flow to allow it to continue to purchase desirable properties as membership increases.
HCC must continue to make sales at a reasonable rate.
HCC uses membership fees AND annual dues to make property payments.
HCC should be able to refund routine membership terminations without jeopardizing cash flow.
HCC has a sufficient asset to refundable membership fee ratio to protect members in case of the failure of the business.
HCC, like most DCs, has good exit options that should potentially benefit its members.
HCC pricing is based on growing the company quickly so they can charge a premium for their product. The value of their product is between $75 and $100K and right now they are offering it to people for half of that. 

I still haven’t pulled the trigger on a HCC purchase. Any thoughts?

F.Y.I. - HCC contact information is at www.highcountryclub.com .


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## Steamboat Bill (Oct 10, 2006)

travelguy said:
			
		

> I still haven’t pulled the trigger on a HCC purchase. Any thoughts?



What are you waiting for?

Thanks for one of the BEST posts on DC properties. I too have investigated all the MORE expensive resorts.

One issue I have with HCC is their overpenetration of Colorado ski properties. It would be nice to see them more diversified into Utah, Montana, California ski resorts.

Also, even at the lowest affiliate level, I do not see myself using the properties for 28 days or so. If I was retired (or did not have kids) I would join HCC ASAP.


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## taffy19 (Oct 11, 2006)

They have Mammoth Mountain which is one of the best ski areas in California! They have snow as early as November and it may last till the 4th of July. Sometimes.  

If I had to start all over again, I would seriously consider this type of vacation deal rather than buying many different timeshares. If you divide the days into the yearly fees, your vacation is very reasonable and you are staying at very nice places too. You get quality vacations and you risk less than what they sell timeshares for in Mexico that are completely worthless and certainly after 25 years but many people still buy there today for more money than they are asking here. A single week at many Marriott resorts cost you almost the same or more but maintenance fees are less but it is only for one single week or may be two if you lock off your unit. You just hope that these destination clubs will be able to pay the high mortgage payments.

What I don't understand is that if they keep selling more memberships, how do they do not get a problem eventually with too many people trying to get the same accommodations? This is what happened with timeshares too when not every deed was accounted for. We own at a resort where this took place and the State of California had to come in to clean it up.


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## Steamboat Bill (Oct 11, 2006)

Here is my math on Affilliate HCC:

Lost opportunity of $30,000 @ 5% = $1500 - $450 (taxes) = $1050 per year

MF = $4800 per year

$1050 + $4800 = $5850 per year true cost of HCC

If you use it the maximum 21 days then = $278.57 per day
If you only use it 14 days then = $417.85 per day
If you only use it 7 days then = $835.71 per day

Compared to a Marriott or Westgate Park City TS that costs about $30,000 and $900 MF for one week in a 2 BDR = $278.57 PER DAY

The real difference is the HCC offers HOMES vs the Marriott/Westgate 2 BDR condos. It is funny that the cost per day is EXACTLY the same.

The only caveat is to get maximum value from HCC, you MUST use it 3 weeks per year. Even the two weeks per year is a pretty good deal when you consider the quality of the homes.

That said, if they ever offer a Junior Affiliate member with a buy-in for $20,000 and MF of $3,000 and only 14 days useage.....I would probably join.


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## Steamboat Bill (Oct 11, 2006)

Here is the real sticking point for me regarding the Affiliate membership:

Holiday weeks:
The Affiliate membership has NO holiday week feature. You can reserve 2 weeks of usage with 12 month reservations and the third week must be used at 90 days or less. 12 month reservations and 90 day reservations start on a Saturday.

The Private membership allows you to book ONE holiday week per year. Holiday weeks are the weeks containing federal holidays. Spring break is 4 weeks in March and are defined two years ahead as to which weeks they are. Holiday weeks start on a Friday night for 7 nights. You can book any holiday week you want but then must wait 2 years before booking the same exact holiday week. E.g. you book Christmas week in Whistler then next year you can book New Years week in Whistler then 4th of July week the year after than somewhere else and then back to Christmas week in Vail or Whistler if you want.


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## taffy19 (Oct 11, 2006)

It seems to make more sense if you are retired and can vacation any time of the year or are very flexible with your work so you can use all your allotted vacation days too.  In that case, you don't have to travel during holidays either when airfares are at a premium too.

One thing you can say about timeshares is that they have proven themselves to be successful for many timeshare owners since they have been around for many years and the industry is still going strong.   You do not get the real estate appreciation when you buy from a developer unless you have owned it for many years and even that is not guaranteed.  You do a lot better if you buy re-sale so can at least break even or make a profit when you sell.  If the destination club gives you a guarantee of at least 80% of your original investment back then what do you have to worry about?   

Your vacations at very nice accommodations at prime locations are worth a lot of satisfaction too especially if you can share with family and friends.  Money is not everything.


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## Laura7811 (Oct 11, 2006)

I've been a member of HCC for less than a month. one of the things we like best is, you don't have to make all of your reservations 7 days, you can use  days at a time 60 days out. That works well for us, having 2 teenagers at home.  

My husband and I bought now because we thought the price was right. And it should get easier to plan when those kids are off to college.....

Also, they wrote into my contract that we can upgrade our membership within 2 years a todays prices........


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## travelguy (Oct 11, 2006)

Steamboat Bill said:
			
		

> What are you waiting for?



I’m an entrepreneur which makes me suspicious and paranoid by nature. 

Actually, I’m used to doing deep analysis on complex commercial property investment which is why you see the over-analysis of DCs and HCC in particular. I was concerned by the issues raised by others on the forum and needed to run the numbers to see if this made sense.



> Thanks for one of the BEST posts on DC properties. I too have investigated all the MORE expensive resorts.



I've looked at Private Escapes and had good discussions with them.  They have more amenities with their properties and some different policies than HCC but they also charge more ($105,000) and charge a daily fee in addition to the annual fees.  My thoughts are that if HCC is solid financially and I can get the travel property access I want with HCC, why pay more?  I’ve ruled out the rest of the DCs because I don’t want to pay that much for a DC (remember that this started as an alternative for luxury timeshares). 



> One issue I have with HCC is their overpenetration of Colorado ski properties. It would be nice to see them more diversified into Utah, Montana, California ski resorts.



WHAT!  Who would want to ski anywhere but Summit County and Eagle County??!! 

Remember that these are commercial real estate guys from Denver that started with good deals on ski properties in the areas they knew.   I believe that you will see them continue to expand into other ski areas.  I’m a big skier and I’m excited to see they have added properties in Mammoth, CA, Deer Valley, UT and Stowe, VT.  Their future plans are for Jackson Hole, WY, Park City, UT, Vail, CO, and Whistler, BC.  I’m also a beach bum so I’m pleased with their new destinations in Hilton Head and the Florida beaches.  My wife is sold on HCC just because they added a villa in Tuscany, Italy.




> Also, even at the lowest affiliate level, I do not see myself using the properties for 28 days or so. If I was retired (or did not have kids) I would join HCC ASAP.



You should talk to them about this.  They seem to have creative solutions to most issues with prospective members.  As an example, see the first post in this thread for the TUG special membership conditions.


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## mjs (Oct 11, 2006)

Doug,
Make sure you look at their reservation area.  You will see that all prime time(winter, and most of summer) books up 12 months out.  If you want a particular property, remember there is only ONE house(not   multiple villas etc), and many people trying to get that house during a certain time period. I think it might be booked seconds after the first opportunity like some Marriott timeshares etc.
Mark


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## travelguy (Oct 11, 2006)

iconnections said:
			
		

> If I had to start all over again, I would seriously consider this type of vacation deal rather than buying many different timeshares.


My plan is to sell several of my timeshares and focus on using the DC in place of them.  This is part of our plan to upgrade the quality and size of our travel accommodations



> _You just hope that these destination clubs will be able to pay the high mortgage payments.
> 
> What I don't understand is that if they keep selling more memberships, how do they do not get a problem eventually with too many people trying to get the same accommodations? This is what happened with timeshares too when not every deed was accounted for. We own at a resort where this took place and the State of California had to come in to clean it up_.



One of the biggest differences that I’ve found between the DCs and timeshares is the ability to get detailed financial information.  The calculations in my long thread illustrate the point that I received all the detailed financial information and projections as a prospective member.  I don’t own any timeshares that would give me that type of information as a deeded owner.

As I conclude in the long post, HCC should have no trouble paying the mortgages in the future.  Also, the ratio of accommodations to members does not get worse as membership grows.  The capacity of accommodations is not static as it is in your timeshare example.  The DC purchases more properties as membership grows.  The HCC ratio is a new property for every 8 new members.  The Private Escapes ratios it 6.5 members per property.  Theoretically, this gives the club unlimited growth potential.


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## travelguy (Oct 11, 2006)

*HCC Property Availability*



			
				mjs said:
			
		

> Make sure you look at their reservation area.  You will see that all prime time(winter, and most of summer) books up 12 months out.  If you want a particular property, remember there is only ONE house(not   multiple villas etc), and many people trying to get that house during a certain time period. I think it might be booked seconds after the first opportunity like some Marriott timeshares etc.



I’m not a member of HCC so I don’t have the ability to access their reservation system.  I know that Laura7811 is a HCC member and has made good comments about the reservations system but has not said anything specifically about availability.  I assume that you have access to the HCC reservations system?  Are you a member or is there some other way to get into the HCC reservations system?

When I talked to HCC in mid-September, they gave me specific availability by week and by property for the 2007 ski season.  There was tons of availability at that point, including Holiday weeks.  I asked about ski week availability because my experience in timesharing has been that good ski weeks are always the hardest to book.  

Also, Private Escapes tells me that they have a 42-44% occupancy rate because they purchase properties at the rate of 6.5 to 1.  If availability is your most important issues, they may be a good alternative to HCC.  Keep in mind that you pay double the membership fee and daily fees with PE.

HCC also explains that they are purchasing multiple properties in resorts that will serve multiple purposes.  For example, on Hilton Head Island, they have a 3bd/3ba house in Sea Pines on the Sea Marsh golf course with a private, heated outdoor pool.  The second property in Hilton Head may be a smaller condo on the beach.  They have already done this type of dual property purchasing in Beaver Creek, Breckenridge and Keystone (Colorado).

And hey, I figure after 25+ years of timesharing that I’m much better at advanced travel planning and reservations than the average DC member!  I’m used to space banking and exchanging two years ahead!


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## Steamboat Bill (Oct 11, 2006)

travelguy said:
			
		

> And hey, I figure after 25+ years of timesharing that I’m much better at advanced travel planning and reservations than the average DC member!  I’m used to space banking and exchanging two years ahead!




Hahahahahahahahaha.....this quote is golden!


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## Laura7811 (Oct 12, 2006)

The last time I checked, there is alot of availability in CO for ski season at HCC. Alot of the holidays are gone. but thats ok with us we already had our winter plans in place before we bought.

The first think we did was book  summer for HI, the property there looks gorgeous.

I so far like the reservation system. Like you said timeshare people have no problem planning.......


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## PerryM (Oct 12, 2006)

*Trump to build Condo-Hotel in Baja Mexico*

This sounds like a great opportunity – here is the link: http://www.condohotelcenter.com/condo-hotels/non-us/trump-baja.htm

The prices are VERY attractive.


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## Cookie121 (Oct 12, 2006)

*Don't use condohotelcenter.com*

I have had a bad experience with condohotelcenter.com website and do not recommend anyone  use their services. 

They may offer something as free, but have hidden costs. I also found the owner to be very rude and unprofessional.


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## caribbeansun (Oct 13, 2006)

It's certainly an interesting if not risk free model that HCC is working under.

Having them leverage the properties essentially allows the members to leverage their ownership which they otherwise wouldn't be able to do since they have no right to the underlying properties.  

The members get a lower entry point, the developer seems to possibly pocket the equity built up over time which are being paid for by the members - not saying this isn't okay given that the developer is assuming the risk there needs to be some reward.

It seems to me that the alternative is to purchase one of the more expensive DC's at say $200,000 - borrow personally the extra $100,000+ and make the payments yourself and keep the 80% of the $100,000+ loan after it's paid off.

This model puts your initial capital at risk in some respects more than the other clubs but then again you have less at risk so that's perhaps an acceptable trade off.

I'm ususally not adverse to the use of leverage but for some reason it bothers me in this scenario.  I think the piece that causes the concern is that this model depends heavily on continuing sales whereas the debt free models mean there are much lower potential overheads to be covered off by the members.

What does appeal to me is the fact that they are forcing a bundle of services on you ie. concierge, travel planning, etc that they have had to build a support team to provide and as a result compound into the annual fees.

I'll have to give this some more thought before commenting further.


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## PerryM (Oct 13, 2006)

*DC's are just too immature for our consideration at this time*

I, personally, love the idea of Destination Clubs (DC) – they offer the advantages of timeshares, hassle free ownership, and real estate appreciation (only 1 out of 25 do this now).

Because there are no consumer protections built in, they are ripe for abuse and just incompetence.  When the founding DC is in bankruptcy court that should be all the warning consumers need to realize that the entire industry could implode in a short period of time.

We will consider a DC if:

•	100% equity based – ALL membership fees are used to buy real estate that deed goes into a master trust – NO renting and those rents must be paid from yearly maintenance fees.

•	Master trust under the control of an independent entity like a bank trust department – safeguards keep the management team from getting to those deeds unless a vote of the membership authorizes it.

•	80% - 90% returned when a member leaves and that is based on the CURRENT net worth of the deeds in the master trust.  This allows for real estate appreciation.

•	Maintenance Fees fixed at 8% - 10% of the current membership cost which is based on the new units cost.

•	2 in 1 out for selling your membership back to the DC, if this can't be done within 6 months then automatic liquidation of the DC occurs - no one wants to buy in anymore.

•	100% of the liquidation value of the deeds in the master trust would be disbursed to existing members if certain triggers are tripped – like a bankruptcy, unethical management tactics, etc.

•	Independent CPA firms do yearly audit and report to the membership.

•	A HOA is established that runs the DC and hires the management company.

•	Consumer protection laws aimed at DC to insure all the above takes place

I doubt that we will be buying a DC within 5 year since the industry is headed down a completely different path.  Only one, Bellehavens, has equity ownership but even that doesn’t have safeguards to protect the members from an out-of-control management team.

Until then, timeshares, fractionals, and condo-hotels seem to meet our vacation/retirement needs.

Conclusion:
*DCs are just too immature as an investment - speculation better describes the current state of DCs.*


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## Steamboat Bill (Oct 14, 2006)

This thread and the previous thread by PerryM a few months ago really got me thinking about HCC, so I called them to ask a bunch of questions. I have NOT signed a NDA or received the detailed reports like travelguy has.

I spoke for over one hour with Heath Kirschner, VP of Sales and I was very impressed with the information he shared with me.

I will post more info as I organize all my paper notes, but here is my early impressions:

1. The High Country Club is the REAL DEAL and I predict they will soon (within 18-24 months) become the #2 largest DC in the world. This is only my guess, but they are already #4 and are growing fast.

2. The gold standard for the DC industry is Exclusive Resorts (the #1 player), but their minimal buy-in is $225,000 and $10,500 MF for 15 day use and that is for a "handicaped" membership (no holidays). If you have $425,000 and $27,500 for 45 day use, this is definately the club for you. 

3. Comparing ER and HCC, the ER buys properties in the $3-4 million range while HCC buys in the $800k range. This translates into a lower fees for HCC, while maintaining wonderful properties. Thus, HCC are using a similar business model as ER, but focusing on properties that cost 1/4 the ones ER is going after. In addition, ALL MEMBERSHIPS in HCC are treated as EQUALS. Unlike ER, thre is no discrimination with HCC between membership categories.

4. I believe the HCC is rewarding the early adopters and have already raised prices by 100% and cut a few nice features. One year ago, the affiliate membership cost $15,000, plus $4200 MF, and had a equity plan to refund 80% of the CURRENT price. Current prices are $30,000, plus $4800, and a non equity that refunds 80% of your buy-in price. Thus, the earliest 50 members have already made a $9,000 PROFIT if they sell now. I am sure the prices will increase about every 6 months or so as membership grows.

5. The only bad news is that they will NOT honor the price PerryM negoiated a few months ago....bummer.

6. I received a temporary p/w and there are many resorts still available during the ski season and a few even for christmas and new years. When I checked for June-August, 2007, there was a TON of properties available. They are planing on adding 7-9 properties by the end of the year and this will reduce the number of members per house dramatically.

I will post more in a day or two as I organize the info....


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## travelguy (Oct 14, 2006)

*High Country Club Availability*

At the advice of MJS, I got a temporary pass to the HCC reservation system to review availability. Like Steamboat Bill, I found plenty of availability.

*Here are some examples of availability:*

_Ski properties_
Jan – 16 weeks available
Feb – 7 weeks available (3 on President’s week!!)
Mar – 8 weeks available

_Playa del Carmen, Mexico_
Jan to May – 5 weeks available
Fall/Winter 2007 – totally available

_Waikoloa, Hawaii_
Jan to May – 3 weeks available
Fall/Winter 2007 – totally available

*New properties*
There are also many new properties that will become available for use within the next 90 days. These additional properties should increase capacity to the point where availability should not be a problem at all.

Aspen/Snowmass, Colorado
Winter Park, Colorado 
Deer Valley, Utah
Hilton Head, South Carolina
New York, New York 
Nuevo Vallarta, Mexico
Orlando, Florida
Rosemary Beach, Florida
Stowe, Vermont
Turks & Caicos, BVI

It’s interesting to note that HCC intends to have special reservation options for the New York property that will allow 3 day or 4 day reservations instead of a full week. They will also allow reserving 2 consecutive weeks at the Tuscany properties for an extended trip to Europe.

HCC says most properties do not get booked until approximately 6 months prior. Note that the HCC availability is better that the clubs and exchange companies that I’m currently using (Hilton Grand Vacation Club, RCI and SFX)!

And as I’ve said before, as a timeshare guy, I’m much better at advanced travel planning and reservations than the average DC member. I know that I’ll get the reservations that I want. 

You can contact HCC and get a pass to review the reservations system for yourself.


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## caribbeansun (Oct 14, 2006)

[FONT=&quot]Deleted and move to separate thread found  here
 [/FONT]


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## Steamboat Bill (Oct 15, 2006)

I think some of the confusion about Destination Clubs like High Country Club is that they are different from owning real estate and owning a timeshare.

Think of DCs as a membership to a gated golf club or fancy hotel resort. You pay an initiation fee, yearly fees, and then get to use the club facilities. You do NOT own the club property, you just get to use it.

Therefore, comparing a DC to a TS or a condo will lead to false conclusions.

I have been investigating several DCs and think they represent the next "great thing" in travel.

Here is some data for HCC

8 members per house x $50,000 = $400,000.

8 members MF x $8400 = $67,200 per year

They are buying $800,000 houses. If they put $300,000 down and finance $500,000 @ 6%, the yearly fees are about $30,000, add in taxes of $10,000, cleaning fees. HOA, etc and the yearly cost is about $60,000.

Thus, this business model can work. Once the house is paid off, or even sold, I assume the profits go to the owners of the DC, not the members, as long as another (possible less expensive) property is added.


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## travelguy (Oct 16, 2006)

Steamboat Bill said:
			
		

> I have been investigating several DCs and think they represent the next "great thing" in travel.


 
I agree with your statement although I would add the words "affordable luxury".

DCs are the next "great thing" in affordable luxury travel!


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## PerryM (Oct 16, 2006)

*Buying a Marriott from Marriott makes more sense (Cents)*

Perhaps there needs to be two different types of Destination Clubs (DC), one for equity and one for non-equity which I’ll just call lease.  Right now 95% of DCs are DC-Lease, only BelleHavens is DC-equity.

I’ve described in detail how a DC-equity would work, what about a *DC-lease*, how would it work:

The membership fee would be 100% applied towards buying 50% of a condo/home up front.  In the case of HCC their $800,000 unit means that $400,000 is paid for with cash and the maintenance fees (MF) service the debt on the remaining $400,000 loan.  The bank will take the $400,000 paid as collateral and if the club defaults - bye-bye condo/home.

When a member wants out, the 2 in/1 out rule applies and *80% of the ORIGINAL membership fee is returned*.

A conventional 30 year mortgage on $400,000 at 7% is $2,662 per month for 30 years, at that time the unit belongs to the club.  $2,662 * 12 = $31,944 per year for debt service.

If 10 members split the $400,000 then that is $40,000 membership fee, of which 80% must be returned when the member leaves or $32,000 must be semi-liquid to pay exiting members.  Each member gets 5 weeks of usage per year.

If we use the standard 8% of the current membership fee that means that $3,200 per member per year * 10 members = $32,000 in MFs.

*Well we have a problem since $31,944 is required to service the loan*.  *Hence HCC charges $8,400 on the $50,000 membership fee which is 16.8% *and that makes sense since 8% is needed to make the mortgage payments and 8% for running the club and making the management company a profit.

Well $8,400 for *5 weeks of usage is $1,680 per week in MF *of which half goes to paying the mortgage leaving $840 per week – this is right in line with a Marriott timeshare.

But wait, $840 per week of your annual dues goes to someone else to pay off a loan that you have nothing to do with, but are held responsible if a default occurs.  30 years is a LONG time and if management should make a few mistakes, the mortgage must be paid or it will be liquidated and the HCC documents indicate that only 60% of the original membership fee is available for distribution back to the members - that's a MAXIMUM of 60% in the best case scenario - which bankruptcy could result in just a fraction of this.

I just don’t like the idea that my MFs are being used to pay off half the original value of a condo for the Principals in the DC.  Throw in 5% appreciation (each year compounding) for 30 years ($400,000 becomes $1,646,454) and we’re talking about a lot of profit for that management company and I’m paying for it and ultimately held responsible for it, yet I get no financial benefit from it.

*Heck, I’d rather buy a new Marriott, at pre-construction pricing, and make out like a bandit compared to the same money in a DC.*

*To me, the DC-equity model sounds much safer and equitable than the DC-lease model *that HCC favors.  (If I were in their shoes I’d favor it too)


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