# The “Gold Standard” evolves…



## PerryM (May 16, 2007)

To me there is but one DC to invest in – BelleHavens (I’ve not).  It is 100% “Transparent”, 100% debt free, 100% equity ownership, and 90% of CURRENT membership fees are returned to members wanting out (thus real estate appreciation is a part of their membership).

The Helium Report has a current article.

I applaud one DC for being forthcoming and totally “transparent” in their operations.  Hopefully their success will foster other’s to follow.


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## Steamboat Bill (May 16, 2007)

I too like the BelleHavens business plan and wish them all the best. I also think their 100% debit free strategy is the BEST in the DC industry and this indeed is the "gold standard"...but is not being copied by anyone else, including the granddaddy Exclusive Resorts.

A few thoughts:

1. I still think HCC offers the best "value" for TUGers that are used to the timeshare concept. Of course HCC is not 100% debit free, but the buy-in cost, annual dues, and cost per night are significantly cheaper than BelleHavens.

2. Does anyone besides me think their press release regarding future price increases sound weird??? "Beginning May 15, new members will have the option to choose from one of four Equity Membership plans, built to accommodate different travel profiles. BelleHavens has also announced its intention to increase their prices three times during 2007. Members who join before June 15th will enjoy the current pricing scheme, after which there will be a first price increase. After three new destinations are made available to members, the prices will increase again. And after five more destinations are available or under development, prices will increase for a third time."...this really sounds like a Westgate Orlando or Mexico timeshare sales pitch.

3. Lets review the cost per night for BelleHavens

Traveler - 15 nights, $100,000 buy-in, $8,500 annual dues = $5,000 yearly loss of opportunity costs + $8,500 = $13,500 per year / 15 nights = $900 per night. This is still triple the cost per night for HCC (but BelleHavens has $2m properties vs HCC $1m properties). There are NO holidays in this package.

Adventurer - 30 nights, $200,000 buy-in, $17,500 annual dues = $10,000 yearly loss of opportunity costs + $17,500 = $27,500 per year / 30 nights = $916 per night. 1 holiday week included.

4. The BellehHavens refund for unused nights is a nice feature...like getting Marriott points for trading in your timeshare...but as I have shown above...the cost per night to the member is $900 per night...why is the credit per night so LOW?

5. The BelleHavens 90% refund of current membership prices is a fantastic offer and should be copied by the entire DC industry.


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## Dave M (May 16, 2007)

Steamboat Bill said:


> I still think HCC offers the best "value" for TUGers that are used to the timeshare concept. Of course HCC is not 100% debit free, but the buy-in cost, annual dues, and cost per night are significantly cheaper than BelleHavens.


The concept of "value" is different for each of us. For example, the "buy-in cost, annual dues, and cost per night are significantly cheaper" for many (most?) timeshares than for my Marriott weeks, but I prefer the value I get from those Marriotts.  





> Does anyone besides me think their press release regarding future price increases sound weird???


I think it is refreshingly straightforward. Almost all developers increase prices over time. Unfortunately, the secret price points generally become known to us only when the developer says, "Buy before the end of this month because prices will increase June 1." I would much rather have the publicized info than to sit back and wait, expecting to get the same price six months from now.


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## PerryM (May 16, 2007)

*Apples and Oranges?*

Bill,

I think that comparing BelleHavens (BH) to any other DC requires a different set of calculations.  How do you account for real estate appreciation that it enjoys and others do not?

If anything the “Lost opportunity cost” applies to all other DCs but NOT to BH.  The cash tied up in HCC truly is ravished by inflation, and lost opportunity, but not BH.

So we need to account for this fact somehow – leaving it out of daily cost calculations is incorrect.  I’m not sure how we account for this but to use 10 year Buy-Use-Sell models which then has us guessing at prices 10 years from now.

I think a way to account for BH’s real estate appreciation is to forgive the effects of both inflation and lost opportunity costs.  If that’s the case then the results are completely different:

Traveler:
MF of $8,500 for 15 nights = $567 per night cost; with NO holidays.

Adventurer:
MF of $17,500 for 30 nights = $584 per night with ONE holiday week.

I think BH is giving “Fair Warning” to folks with future price increases.  During the past year or so there has been a “Buyer’s Market” and that could be coming to an end.  There is nothing wrong with the stock market or real estate market – just the slurs thrown out by the Drive-By Media in their effort to spread doom and gloom to every corner of our capitalistic country.

P.S.
BH's condos/homes are $2 M each - that needs to be accounted for also.


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## Steamboat Bill (May 16, 2007)

ok a few clarifications are needed:

1. My concept of "value" in this thread is limited only to the Destination Club industry...not timeshares or fractional ownership.

2. I agree with PerryM that (if everything goes as planned) we should offset the lost opportunity costs with the future price increases at BelleHavens. Therefore, the cost per night of BelleHavens is really within the reach of "higher end" timeshare owners like Marriott ski weeks, Harborside, St Johns, etc. Remember that you are buying 15 nights or 30 nights with a Destination Club vs 7 nights in a timeshare. So any comparisons will have to double or quadruple the timeshare cost.

3. Bellehavens lowest cost per night is $567 and offers $2m properties vs HCC $300 per night (estimated) for $1m properties.

This NEW plan by BelleHavens and their expansion to 22 destinations (vs current 11) is HUGE news for TUG and the Destination Club industry. In my opinion, BelleHavens is closing the gap (and may even improved) the offerings by HCC.

My question now is: How many TUGers will buy?


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## PerryM (May 16, 2007)

*If one can do it...*

We really need to “normalize” the entire DC industry – something that The Helium report should be doing.

Is HCC’s $1 M condo at $300/night equal to BH’s $2 M condo at $600 per night?  Is 1 BMW M3 = 4 Toyota Camrys?  These are hard questions that probably need the raw data massaged and presented many different ways.

*So if BelleHavens can do this at timeshare relative prices why can’t the rest of the DC industry?*

We have all our vacation time booked this year and next – we won’t be buying a DC for a while – unless something unbelievable comes along.  By unbelievable that means a “Throw away” investment might be in order.  E.g. HCC starts another club and offers attractive terms and incentives.  There is certainly a market for the condos costing $800k and 10 owners and 100% cash paid for and 90% return on CURRENT membership fees.  The question is how much greed needs to be exchanged for market share?


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## puffpuff (May 16, 2007)

The DC industry is facing upcoming regulations to ensure that the refundable portion of the mebership fee is secured by asset on an ongoing bases. Hawaii already has some kind of legistlation on the drawing board from what I understand. Clubs will have to make sure that their equity is sufficient. So far with apprecaiting resort locations, this is not a problem.  Most DC that are highly leveraged such as HCC will be able to meet it provided that property price continues to go up and they are able to use part of the appreciation for the secuity calculations. Clubs that are leveraged will not be able to offer part to members a carrot of appreciating membership fee to entice them to join in order not to jeopodise their securitized equity ratio. Those DC that are not leveraged, like Bellehaven ,on the other hand, will not be in joepody, and in fact, is explotiing this potential member benefit to increase membership. I think it is a good move, perhaps one of a few moves they can make to increase membership numbers in view of their limited residences. 

 On the other hand, becuase of the debt free strategy, ramping up will take some time and much slower. Will members sacrifice their enjoyment short term ? The value conscious one will, but those members that want immedate graditficiation  will rather go to ER where all the pieces are there ( but no upside in membership fee appreciation) they  will have a more difficult time scaling up as someone has to front the money to buy new homes ahead of membership coming in. In view of Exclusive Resorts domination at the top end, Ultimate Resort's domination in the middle end , and HCC in the low end so far, Bellehaven's move is in my view represent a do or die type strategy before the industry further consolidates into only a few big players over time. 

The barrier to entry  in this industry is higher than most people think  becuase of the number of homes neccessary to be accumulated before members will feel comfortable to join. Its not only a matter of money but also a matter of syncronous execution in multiple locations with choice properties at a value that make sense. The marketing cost of a membership is very high because of the lack of consumer education in this young industry. One can throw a lot of money out and the yield may continue to be low for sometime to come until the mass public reaches an infllcation point.  Smaller Clubs that have limited memberhsip and funding  will survive over time only if they can stay alive and well positioned now and watch their cash flow. The industry is in an incubation period. Smaller clubs that spend a lot of money on market may find themselves educating for the benefit of bigger clubs. 

ER has spend a lot of money educating the public on this industry. As the industry grows, it will help all. They are reaping the benefit at the top end. right now, and no doubt this will continue to grow .  I think the mid tier ( $200000 joinging range) and the lower end ( $100000 or below) is where the mass consumer action will be in time to come . Financial stablity aside, the DC  model in my view is far superior to high end time share in terms of service, ease of use, and value product. They will be competing with high end timeshare and fractionals. At the end of the day, most DC members also are timeshare holders to a certain degree , especially if they have home resort they like to visit year after year ( in which case time share is the most cost effecitve in my view, better than DC).

Clubs like Belleheaven, Portofino, Private Escapes are facing formidable challenges to seperate themselves from the thos who are more established in their niches. I hope they can make it. 

All thoughts are welcome.


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## PerryM (May 16, 2007)

*$1 DC in the future?*

The DC industry is so highly leveraged that a cascading failure is a possibility.

The DC industry needs to reign in the credit card and start paying cash.  This is NOT like the timeshare industry where the owners actually own the resort.  Comparing a DC to a timeshare is a folly – the timeshare is normally backed by a deed a DC is backed with a promise, over the phone, from one of those loveable salesreps.

As I said, I view DC’s as a “Throw away” investment – one where its demise is no big deal. So if “Investing” $60k or $200k or $700k is just a “Throw away” investment, then a DC is for you.  (BelleHavens not included)

At some point the DC industry will join the local banking industry – they will keep the folks who make and install signs in business.  Our local banks get bought by each other so often that it’s just a joke of an industry – we do our banking via the internet.

Timeshare owners are so used to being protected by real estate laws that many investments can have them making assumptions that are not valid.  In the DC world there are NO laws that I’m aware of to protect folks.  Even then those laws will be bought and paid for by the DC industry – there are not enough citizens with big bucks to offset the money paid for by the DC industry.

There could be the case where a DC's members just buy out the DC for $1 and then address that debt service with increased MFs.


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## puffpuff (May 16, 2007)

I agree with you that prudence is the best policy. Bellehaven give back 90% of memebrship fee at the then-current fee structure on resigning, while Ultimate Resort gives back 80% on the same formula. But Ultimate has a larger membership base, a larger number of homes, and seems to be financially stronger?


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## Steamboat Bill (May 16, 2007)

Puff

I thought you were a member of HCC....are you now considering another DC or are you still interested in Murano?


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## puffpuff (May 16, 2007)

Steamboat Bill said:


> Puff
> 
> I thought you were a member of HCC....are you now considering another DC or are you still interested in Murano?


I am a member of HCC, but am also considering other DC ptions to add. HCC properties are kind of small and great for 2-6 people . Sometimes I need bigger place for families - thus the reason for consideration. I am still interested in Murano as well, as it forms another part of our overtravel considerations.


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## Steamboat Bill (May 16, 2007)

puffpuff said:


> I am a member of HCC, but am also considering other DC ptions to add. HCC properties are kind of small and great for 2-6 people . Sometimes I need bigger place for families - thus the reason for consideration. I am still interested in Murano as well, as it forms another part of our overtravel considerations.



Are you Puff Daddy...aka Sean John Combs?


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## puffpuff (May 16, 2007)

Steamboat Bill said:


> Are you Puff Daddy...aka Sean John Combs?


No I am not , and I dont know Puff Daddy.


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## Bourne (May 17, 2007)

PerryM said:


> To me there is but one DC to invest in – BelleHavens (I’ve not).  It is 100% “Transparent”, 100% debt free, 100% equity ownership, and 90% of CURRENT membership fees are returned to members wanting out (thus real estate appreciation is a part of their membership).
> 
> The Helium Report has a current article.
> 
> I applaud one DC for being forthcoming and totally “transparent” in their operations.  Hopefully their success will foster other’s to follow.



Everyone has a different standard. In my mind, Exclusive Resort model is the gold standard. 

The reason behind my anology is that I do not see DC as an investment. If I consider it as an investment, I should not be buying into a DC. The logic used is similar when looking for a new home. The best places to live in may not give you the maximum real estate appreciation. 

Like other boutique DCs, Bellhavens has a unique model. However, given the current environment, I do not believe this model can succeed in the long term without a few changes. Not sustain but succeed. The 10 home 50 member clubs will find it hard to grow when the members would demand more choices. 

To resolve this chicken and egg situation, Bellhaven's founding company is putting its own money to double the number of available homes. i.e. 11 more. The catch is that the price of buying into the club would increase from 20-50%.  Does that mean Bellhavens would move from buying $2M to $3M range of properties within the next few months. NO. What it means is that, the extra money is going towards paying down the funds that the developer put down for the new homes. With interest.  

The "investment" based club just did a few things...
_Leveraged the money(developer 's) to buy new properties. 
Implemented a staggered "buy in" price structure. 
Dependent on new members to sign up to pay down the leveraged amount for business viability. _

Sounds like a regular DC to me. Downside is that I would be more comfortable with putting my money in a DC that has 2500 memebers and 300+ properties rather than 10 properties and 50 members. I would rather have 80% of my money back than a promise of 90% of the existing price. 

At the end, the DCs that can create a breadth(number of locations) and depth(number of properties at those locations) in their portfolio are the one's that will survive. Because at the end, the prospective member is not looking for an investment. They are looking for a extended portfolio of locations/homes to vacation at.


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## Steamboat Bill (May 17, 2007)

Bourne said:


> I would be more comfortable with putting my money in a DC that has 2500 memebers and 300+ properties rather than 10 properties and 50 members. I would rather have 80% of my money back than a promise of 90% of the existing price.
> 
> At the end, the DCs that can create a breadth(number of locations) and depth(number of properties at those locations) in their portfolio are the one's that will survive. Because at the end, the prospective member is not looking for an investment. They are looking for a extended portfolio of locations/homes to vacation at.



I also agree with your statement because I "really" wanted to join Exclusive Resorts...but balked at the $1,400 per night expense. This is indeed the "gold standard" and is the 800 pound DC Gorilla.

I finally settled and bought into High Counrty Club as it offers me the "best bang for the buck" and actually costs me LESS than either my DVC or Westgate Park City timeshares when calculated on an expense per day. My HCC costs me about $300 per night.

I look at my timeshares as pre-paid vactions with a possibility of selling for more than what I paid and thus, profit from my original purchase. So far so good with all my timeshare purchases as the all have gone up in value since I bought them.

I decided to join HCC as a purely vacation club without regard to investment or trying to make a profit. The way I look at it is that if I can lock in $300 per night costs to stay in $1m condos/townhomes/houses in fantastic locations...who cares if I ever make money selling it as I will never want to sell.

BelleHavens has an appealing business plan, but with only 11 homes (11 more announced), it has a LONG way to go to take business from Exclusive Resorts or Ultimate Resorts or even HCC. I do, wish them the best and hope they grow to 500 members and 50 properties or more. Then I may consider joining them. At that time, ER will probably have 8,000 members and 1,000 homes and HCC will have 1,500 members and 175 homes...etc.


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## PerryM (May 17, 2007)

*Gold does mean Gold*



Bourne said:


> <snip>
> Everyone has a different standard. In my mind, Exclusive Resort model is the gold standard.
> 
> 
> ...




Great questions – I just talked with BelleHavens, here are their answers:

Their old pricing model has been replaced with a new structure:

Traveler - $100k 20 of them per condo
Adventurer - $200k 10 of them per condo
Voyager - $300k 7 of them per condo
Explorer - $400k 5 of them per condo

As the price goes up so do the price of the condos they buy – there is NO financing at all.

Right now they buy a $2 M condo and as the price goes up they will move to $2.75 M condos.

Gold Standard:
It used to mean that something tangible, like Gold or real estate, backed up a currency, or in this case real estate.  I like the Gold Standard to refer to a DC that actually has the members owning the condos.

BelleHavens is a “C” corporation that owns ALL the condos/homes in the club.  The members own ALL the shares in BelleHavens.  No other DC offers this.


BelleHavens is NOT financing the new condos - an affiliate corporation is charged with this duty.  They then turn the deeds over to BelleHavens and BelleHavens pays the company for 100% of the real estate.


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## puffpuff (May 17, 2007)

PerryM said:


> Great questions – I just talked with BelleHavens, here are their answers:
> 
> Their old pricing model has been replaced with a new structure:
> 
> ...


As I understand it, the affiliate coorporation is buying the homes ahead of time ( when there are insufficient members to justify buying at this time)  and will be turning over the deed to Bellehaven at a profit. Bellehaven members are thus getting the homes at the then prevailing market price plus some kind of margin to compensate the affiliate for fronting the money to purchase the homes ahead of members coming in. 

Some one has to make some money somewhere along the food chain. 

Qeustion is - other than Exclusive, would you feel more comforatble with Ultimate Resort with more homes now, or Belle Haven with potentially more home coming on line. Both offers appreciation on membership fees, and pricing are similar.


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## PerryM (May 17, 2007)

If I were to proceed with BelleHavens I’d ask how the purchased condos appraise to.  If the company finding these condos/homes is good a negotiating then there would be NO reason for a profit to be paid for – just good negotiating skills making a great profit.  But I would want to know just how much "padding" is involved.

BelleHavens is the ONLY DC that provides for 100% ownership equity – so for me to buy something else would have me buying a “Throw Away” DC – one, like HCC a year ago, where I would not worry if they go out of business.


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## travelguy (May 17, 2007)

puffpuff said:


> Some one has to make some money somewhere along the food chain.



Great point.  Now I admit that I've spent a total of about 3 minutes investigating Bellehavens but I have some questions.  

1. How do they make money?
2. Who's making the money?

Has anyone seen a P&L, Balance sheet, cash flow statement, and/or projection?

It's great that the members "own" the properties but Bellehavens also has a list of heavy hitting "Investors" and a stacked board of directors (It appears that the "Investors" control the board.)

Included in the Investors is a VC firm that actually makes the following statement:
"Their model is unique from most venture capital or private equity firms in that they not only invest in and help capitalize the companies they work with, but *then take an active management role with the companies to help set strategy, build the organization, and lead execution*."  
How is this different than any other VC in the world??  They ALL take control!

Again, I've spent no time investigating other than a quick look at Helium and the Bellehavens web site.  Has anyone here done some due diligence on their business model on the management and investment side?


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## travelguy (May 17, 2007)

*Bellehavens vs. High Country Club*

Following is a comparison of Bellehavens membership to High Country Club membership:

                  BELLEHAENS              

Membership -  "Voyager"                   
Days of use -          45                          
Deposit -            $300,000 (now)              
Annual fee -          $25,500                     
Prop. Equity -      Upon exit                      
Deposit refund -   90% (3in-1out)             
Home Value -         $2 Million                
Properties -           11                          
Unique Locations -    Vegas, Jackson Hole, Bahamas                   


                  HIGH COUNTRY CLUB

Membership -       "Private"
Days of use -      45
Deposit -           $60,000
Annual fee -        $8,400
Prop. Equity -         none
Deposit refund -        80% (2in-1out)
Home Value -                  $850,000
Properties -                     28
Unique Locations - Maui, Tuscany, Colorado Ski(7), New England, California Ski, Turks & Caicos, Costa Rica 

Analysis:

Difference in Deposit is $240,000. A low-yielding investment @6% = $14,400/year return.
Difference in Annual fee is $17,100.

Bellehavens membership provides property equity participation but only when I cash in my membership and they have nicer homes.

High Country Club membership provides me with $240,00 less RISK, $31,500 in CASH savings per year, almost three times the locations, an easier membership exit @ 2in-1out instead of 3in-1out, and a Destination Club with more momentum.

I've chosen to save the quarter-mil and make $31,500 cash instead of the possibility of property appreciation.


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## PerryM (May 17, 2007)

*What I really would rather have...*



travelguy said:


> Following is a comparison of Bellehavens membership to High Country Club membership:
> 
> BELLEHAENS
> 
> ...




With 10 members per condo, I personally would rather buy into a Co-op with $100k for a $1 M condo and pay $8k per year in MF and get 5 weeks of usage, 1 would be a holiday week.  I get 100% real estate appreciation and can exit with a 1 in/1 out rule.

There is NO reason why that can't happen, even with a for-profit company supplying the legal documents and handling the maids.


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## Steamboat Bill (May 17, 2007)

PerryM said:


> With 10 members per condo, I personally would rather buy into a Co-op with $100k for a $1 M condo and pay $8k per year in MF and get 5 weeks of usage, 1 would be a holiday week.  I get 100% real estate appreciation and can exit with a 1 in/1 out rule.
> 
> There is NO reason why that can't happen, even with a for-profit company supplying the legal documents and handling the maids.



I would also add to your list a DC with 25 or MORE locations. One you find that...let us know so I can sign up.


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## PerryM (May 17, 2007)

Steamboat Bill said:


> I would also add to your list a DC with 25 or MORE locations. One you find that...let us know so I can sign up.



I'd settle for just 5, myself:
1) Maui
2) Park City
3) Orlando
4) New York
5) Cabo


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## puffpuff (May 17, 2007)

for five locations, 50 people is needed, and each agree with the short list whcih in and of iteself is not easy because of wide diversity in poplulation.  I am not sure how plausible  this is without significant marketing effort. 

Yes the up side is the appreciation. It will take a full time acquistion person and coordinator to set this up at the minimum , together with legal and administrative matters. 

Entry into the DC business is high in my view at this time when the predominant struggle is customer education.  Tuggers here represent the cutting edge of vacationers and early adopters. Perhaps this boutique type co-op model will be workable as time goes  on and the poplulation at large is more knowledgable. So far, HCC , Ultimate, and ER are the most efficient operators. How long will they survive remains to be seen.


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## PerryM (May 17, 2007)

*Retirement homes - the first DCs?*

From the first instant I read about DC’s I liked the concept – country club ownership of condos.  However the DC market seems to have taken a different approach – renting.  That’s what HCC and all but BelleHavens and a few others do – rent; there is NO ownership.

I don’t rent my house or cars or TVs – I own them.  My hope is that the DC industry will swerve away from renting to ownership.  That probably is already too late and something else will have to be invented to offer ownership benefits and no responsibilities (like cutting the grass).

So any effort to fight the renting trend is probably futile.  The DC industry is just 5 years old and timeshares are but 50, so there will be a lot of new, creative, ways to share ownership of real estate.

We (our family) have primarily settled on whole ownership (with our condo-hotels) and timeshares.  Each offers things we like, both are ownership oriented.

The DC industry has basically adopted the retirement home model – “buy” your apartment/condo pay monthly rent and then you get back a percentage of the original purchase price at the "end".


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## puffpuff (May 17, 2007)

PerryM said:


> From the first instant I read about DC’s I liked the concept – country club ownership of condos.  However the DC market seems to have taken a different approach – renting.  That’s what HCC and all but BelleHavens and a few others do – rent; there is NO ownership.
> 
> I don’t rent my house or cars or TVs – I own them.  My hope is that the DC industry will swerve away from renting to ownership.  That probably is already too late and something else will have to be invented to offer ownership benefits and no responsibilities (like cutting the grass).
> 
> ...


you are right Perry. For non-equity based DC , it really comes down to a  leveraged real estate play with  no money down by the operators. They  are banking on the appreciatio n over time plus paydown of debt by members over time to make it worthwhile for them to "babysit" the members until the whole portfolio pays itself off free and clear ( perhaps 15 years down the road), at which time the club becomes an annuity for its owners. 

Perhaps its time to consider investement ( not membership)  in HCC?


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