# "Equity" Destination Club



## hipslo (Feb 2, 2007)

Hi, I am an owner of several ski weeks at Marriott Mountainside, which I purchased (resale) with the idea of stringing together several weeks (currently I own three but may be purchasing 1 to 3 more over the next few years) in order to emulate fractional ownership of a ski in/ ski out condo.  4 to 6 consecutive ski weeks is more than enough for me (in retirment, which is still years away - for now I rent out most of the weeks), and worlds better and more affordable than buying a comparable condo outright.  The quality of the units at MS are also just fine for me.

I have recently begun to look at destination clubs as another alternative, either in addition to or in lieu of my current plan.  For me they dont seem to work as well because I couldnt get as many conecutive ski season weeks as with the Marriott program, even for much more money.  However, its been an education as I have started to learn about the various different options, some of which are really intriguing.

One option I have been looking into with some real interest is the Crescendo program.  While I have only just started scratching the surface from a due diligence standpoint, as I understand it, this program actually offers an equity interest in the underlying real estate portfolio, which has a finite life of, I think, 10 years.  Owners need to be accredited investors and acquire shares in the REIT that owns the property.  So, after 10 years (I think I have this right but not sure), the portfolio is sold and the owners are supposed to get back their initial deposit plus 60% of any appreciation.  (I supopose if the value goes down there is also risk of loss, but that would be the case with any real estate investment).  

Does anyone know anything more about this program?  The only info I have comes from articles and reviews in the Helium Report.  But, all things being equal, this sounds a bit like a no brainer - access to a portfolio of properties for vacations, just like the non-equity clubs, plus ownership and potential appreciation.  Apparently the CEO/ founder is someone who was involved with the design of the Marriott and the Disney vacation club programs.

Any thoughts would be appreciated.  The buy in numbers are quite steep, but if this really could be viewed as a hybrid real estate investement/ destination club, then myabe they're really not so steep.

Would appreciate any thoughts or info.


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## Steamboat Bill (Feb 2, 2007)

Two comments:

1. Assembling a Marriott MS may be harder than you think as you would need to book the weeks back-to-back and if you get skunked one week...that could cause a problem. Have you lookied into the Marriott Lake Tahoe Fractionals?

2. Crecendo looks proomising, but they only have about 70 members and the buy in fee is $350,000 and the MF is $23,500 per year. I know there are a few positive reviews on Helium Report, but I have no experience with them. Tehy also only have 7 properties and none in Utah or Colorado.


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## hipslo (Feb 2, 2007)

Steamboat Bill said:


> Two comments:
> 
> 1. Assembling a Marriott MS may be harder than you think as you would need to book the weeks back-to-back and if you get skunked one week...that could cause a problem. Have you lookied into the Marriott Lake Tahoe Fractionals?
> 
> 2. Crecendo looks proomising, but they only have about 70 members and the buy in fee is $350,000 and the MF is $23,500 per year. I know there are a few positive reviews on Helium Report, but I have no experience with them. Tehy also only have 7 properties and none in Utah or Colorado.



Thanks, I appeciate the feedback.  On the Marriott side, I am not too concerned about the ability to book back to back.  I use a combination of the 13 month rule with my ownership of a cheap, off season week at Fairway Villas to get a jump on reservations and then place the consecutive reservations all at once.  So far it has worked flawlessly.  I guess if I ever hit a snag as to a particular week I could always rent it from an owner and rent out my extra week to cover the cost.  I did look at Tahoe but much prefer Park City, in general.

On Cresecendo, I agree that it is still early stage and they dont have many properties yet, but what really intrigues me is the equity ownership component.  If they are able to execute this effectively, it begins to look almost more like a real estate investment in a diversified portfolio of high end resort properties, which hopefully will enjoy some appreciation over the long term, with the side benefit of relatively low cost usage (I think around $500 per night for 2.5m properties, based on the current level of MF and the number of usage days, if I am understanding correctly), in lieu of the cash flow that would ordinarily be enjoyed in the form of dividends.  So, provided the value is there in the real estate down the road, the cost could ultimately be anywhere from $500 per night, assuming zero appreciation, to zero, assuming  a cerain rate of appreciation that I have not yet tried to calculate, to a negative per night cost, if the rate of appreciation is high enough.  Of course, if the value falls, the cost per night could be much, much higher - but in the same manner, an investment in a more traditional REIT could also lose money.  I also have not yet tried to factor in present value concepts.

In any event, I have requested the prospectus, and it ought to make for interesting reading, anyway.  If nothing else, the concept seems pretty innovative, though its probably not exactly right for me, at least at this point in time.

I would also love to hear whether anyone else has any thoughts or has had any experience, whether or not first hand, with this program.


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## hipslo (Feb 2, 2007)

Well I just called Cresecendo for information and was required to sign a confidentiality agreement before they will discuss anything with me, so I can now understand that even if anyone has any info, we are unlikely to be hearing about it on this forum!  I suppose now that I think about it that I shouldnt be surprised about the confidentiality requirement, given that this is a private placement securities offering.


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## Steamboat Bill (Feb 2, 2007)

If Crescendo was only $500 per night, I would reccomend you consider joining over HCC as the properties average $2.8m. However my math came up with a different number per night.

Here is how I calculate $ per night of Timeshares vs destination clubs.

Total buy-in price @ 5% is your "lost opportunity cost" + yearly MF = true yearly cost / days of usage = $ per night.

There are other formulas, but this one makes the most sense to me and I have used in in all my previous posts.

$350,000 @ 5% = $17,500 + $23,500 (MF) = $41,000 yearly cost / 35 nights of useage = $1,171.

At these prices, I would lean toward Exclusive Resorts as they are more established, but Crescendo offers a possible investement where you may get some dividend....I remain skeptable.

I still think High Country Club is the Destination Club champion for providing the most value at around $300 per night....which is cheaper than a Marriott MS ski week.


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## Steamboat Bill (Feb 2, 2007)

Here is my math comparing HCC to a Marriott ski week:

Assume a 5% lost opportunity cost for all initial purchase prices. Divide this by the total nights of usage to get the lost opportunity cost per night.

Assume the annual dues divided by the nights of usage equals the annual cost per night per year.

Assume the total cost per night = lost opportunity cost per night + annual cost per night

HCC affiliate membership:
$30,000 purchase price, $4,800 annual dues, 21 nights usage, 2-4 bedrooms
Cost per night = $71 + $229 = $300 per night

Ski week (Marriott SummitWatch / Mountainside)
$30,000 purchase price (resale), $950 annual dues, 7 nights usage, 2 Bedroom
Cost per night = $214 + $136 = $350 per night


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## caribbeansun (Feb 2, 2007)

Hipslo - I suggest you take a look at Bellehavens which has recently altered their programs as well and provides some equity protection with a 90% refund rate based on prevailing membership rates at the time of cashing out.

The one flaw with the resale Marriott piece is of course the lack of participation in any real estate appreciation - your capital is a sunk cost that you may never recover or may recover a small percentage as the project ages - this also opens you up to special assessments down the road.


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## Steamboat Bill (Feb 2, 2007)

Bellhavens seems to be a potential good deal vs Exclusive Resorts.

I am still sticking with HCC as their price per night is only $300.


Bellhavens:
$200,000 @ 5% = $10,000 + $17,500 MF = $27,500 / 30 nights = $916 per night

They also give a $275 credit for unused nights.....thanks but no thanks!


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## hipslo (Feb 2, 2007)

Steamboat Bill said:


> If Crescendo was only $500 per night, I would reccomend you consider joining over HCC as the properties average $2.8m. However my math came up with a different number per night.
> 
> Here is how I calculate $ per night of Timeshares vs destination clubs.
> 
> ...




If the Cresecendo equity appreciation feature is indeed "real" (which of course remains to be seen), then it seems to me your model for cost of Crescendo is only accurate if we assume zero appreciation over 10 years.  If we assume 8.3% appreciation per year, on average, over 10 years (which could be high, low, or spot on, no real way to predict), then on exit the 60% share of that appreciation zeroes out the 5% opportunity cost, so that cost per night would then still be $500.  If appreciation averages higher than that, the per night cost would go down; if lower, the cost goes up.  Bottom line, there is no real way to predict, but there is at least an equity "flavor" to the program, which I still find kind of intriguing.


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## hipslo (Feb 2, 2007)

Steamboat Bill said:


> Here is my math comparing HCC to a Marriott ski week:
> 
> Assume a 5% lost opportunity cost for all initial purchase prices. Divide this by the total nights of usage to get the lost opportunity cost per night.
> 
> ...



I agree with the formula here, and agree as well that HCC seems to be a great value.  I dont think it would work well for me though, in that I'd like to be able to string together 4-6 consecutive weeks at the same property, and it doesnt seem that there would be any way to reliably do that with HCC, even as an owner of multiple interests.  Otherwise I think I would be all over HCC.


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## hipslo (Feb 2, 2007)

caribbeansun said:


> Hipslo - I suggest you take a look at Bellehavens which has recently altered their programs as well and provides some equity protection with a 90% refund rate based on prevailing membership rates at the time of cashing out.
> 
> The one flaw with the resale Marriott piece is of course the lack of participation in any real estate appreciation - your capital is a sunk cost that you may never recover or may recover a small percentage as the project ages - this also opens you up to special assessments down the road.



I will take a look at Bellehavens, as I am not yet familiar with it.  

As far as the lack of any real estate appreciation on Marriott, while I am aware that is the conventional wisdom, I am not entirely convinced that it will be borne out over time.  Based on my numbers, at MS, weeks are currently trading at a DISCOUNT to underlying real estate value (if purchased resale), for a comparable condo.  The location of the property can not be replicated in Park City, in my estimation.  I am able to rent my excess weeks with no problem and generate respectable, cash flow positive returns.  Given all of those things, if there were to be some modest appreciation over time I would not be shocked.  I would be pretty surprised if the weeks didnt at least more or less hold their value over time.  Of course I could be wrong, but I will at least by then have had the use of the property for 20 years or more, with a relatively modest (compared to the cost of a comparable condo) capital outlay.  Of course I wouldnt get the real estate upside of that condo purchase in the meantime, but since the cost of entry is about 1/10 of the cost of a comparable condo, and I get to use it every year for 1/3 or more of the heart of the ski season, and I dont have all that capital tied up in a condo or have the management headaches, in my book its a reasonable tradeoff.  

These have been very interesting discussions, and I am very grateful to Bill for starting this forum, as these topics have been of interest to me for some time.  Its nice to have a place of our own to have thse discussions.  Keep up the good work!


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## hipslo (Feb 2, 2007)

hipslo said:


> I agree with the formula here, and agree as well that HCC seems to be a great value.  I dont think it would work well for me though, in that I'd like to be able to string together 4-6 consecutive weeks at the same property, and it doesnt seem that there would be any way to reliably do that with HCC, even as an owner of multiple interests.  Otherwise I think I would be all over HCC.



By the way the average cost I have paid for my MS weeks to date has been less than the 30k used in your example.


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## Steamboat Bill (Feb 2, 2007)

hipslo said:


> By the way the average cost I have paid for my MS weeks to date has been less than the 30k used in your example.



Those days may be over as Marriott is ROFRing most MS properties for under $30k....you may get a SW, but not a MS.

But if you want to assume a $28k sale (I have never seen lower) then that shaves about $14 off the per day average....$336 per night.

I still think MS is a great property and is a great buy (I actually tried to buy one and ended up buying Westgate Park City instead as I liked it better)....but they both pale in comparison to HCC's Deer Valley property that they recently bought for about $850k.


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## hipslo (Feb 2, 2007)

Steamboat Bill said:


> Those days may be over as Marriott is ROFRing most MS properties for under $30k....you may get a SW, but not a MS.
> 
> But if you want to assume a $28k sale (I have never seen lower) then that shaves about $14 off the per day average....$336 per night.
> 
> I still think MS is a great property and is a great buy (I actually tried to buy one and ended up buying Westgate Park City instead as I liked it better)....but they both pale in comparison to HCC's Deer Valley property that they recently bought for about $850k.



Mine was lower - though I agree not so much so that it makes a difference.  (Until a few days ago there were a few more out there listed for less than  30, though they have since sold - dont know whether Marriott exercised ROFR or not, though)

HCC bought a ski in/ ski out, 2 bedroom condo at Deer Valley for 850k?!  I wasnt aware there was such a thing?!  Sounds like a fire sale, unless I'm missing something.


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## caribbeansun (Feb 2, 2007)

I suspect the founders of HCC had their own portfolio of properties that they transferred into HCC for a nice profit - afterall the initial stake had to come from somewhere.



hipslo said:


> HCC bought a ski in/ ski out, 2 bedroom condo at Deer Valley for 850k?!  I wasnt aware there was such a thing?!  Sounds like a fire sale, unless I'm missing something.


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## Steamboat Bill (Feb 2, 2007)

hipslo said:


> HCC bought a ski in/ ski out, 2 bedroom condo at Deer Valley for 850k?!  I wasnt aware there was such a thing?!  Sounds like a fire sale, unless I'm missing something.



Technically you are correct...Black Bear Lodge is about 150 feet to the slopes and is located about 75 feet from the exclusive Stein Erickson Lodge.

The normal 2 bedroom room rentals on www.deervalley.com are $870 per night and holidy are $1270 per night....thus at $300 a night I feel HCC offers me a real bargain.

http://www.deervalley.com/lodging/details.jsp?method=area&id=sl4

http://www.highcountryclub.com/destinations/Deer_Valley.asp


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## hipslo (Feb 2, 2007)

Steamboat Bill said:


> Technically you are correct...Black Bear Lodge is about 150 feet to the slopes and is located about 75 feet from the exclusive Stein Erickson Lodge.
> 
> The normal 2 bedroom room rentals on www.deervalley.com are $870 per night and holidy are $1270 per night....thus at $300 a night I feel HCC offers me a real bargain.
> 
> ...




The property looks great, and I agree the value really does seem to be there.  If I weren't looking for 4 to 6 consecutive weeks at a single property, with ski in/ ski out access, I would be looking very closely at HCC.


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## PerryM (Feb 3, 2007)

*Timeshares still beat DCs - at least for me*

DC’s are just a few years old – there is NO real track record to safely invest any money.  There are NO consumer protection laws that I’m aware of to protect the investor.  90% of the DC’s don’t allow you to participate in real estate appreciation.  There are no deeds with your name on them to tuck away in your safe-deposit box.

In essence you are at the mercy of folks you only hear over the phone and their great stories they tell.

To me timeshares are a much safer investment (if you can call them an investment).

However, I must admit, that if I had stumbled across HCC 2 weeks earlier we would be owners today.  So I do have an interest.

I really don’t see why the DC’s don't do it right and just limit 8 members per residence and pay 100% cash and the deeds are placed in a master trust that the members own.  Limit the exit price to 80% of the current membership fee on a 2 in /1 out basis and the founding owners will make a fat profit.  They make money when a member exits and add on a nice finders fee for new residences, and the MF's provide a constant stream of profit.

Start with $1 M residences and the membership fee would be $125,000 and MF would be 8% of that or $10,000 per year and this would give you 45 days of usage a year set on some equitable distribution of usage.

The concept is so simple yet all the DC’s seem to be missing the mark completely.  Someone will eventually do the above and instantly dominate the DC field – until then I see no DC that we will currently invest in.

P.S.
At time passes many resort areas will pass laws against DCs or the HOA of a resort will do so.  This could have a great dampening effect on DCs.


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## Steamboat Bill (Feb 3, 2007)

I tend to agree with Perry on the risk of DC vs TS, but it is a risk I am willing to take.

Yes, I wish there was a DC like the one he describes, but none exist.....yet.

HCC is the closest (IMHO) and the Private Membership for $50,000 and $8,400 MF for 45 nights of use is actually MUCH cheaper than Perry's wish, but there is no deed and there is no opportunity for capital appreciation.

I also disagree that "Many resort areas will pass laws against DCs" in fact, many developments are giving DCs like Exclusive Resorts a cheaper rate than the general public because they tend to buy ten or more units at pre-construction prices. There have been a handful of locations that have banned DCs and those are primarily when a DC bought a property in a residental community vs the typical vaction communities.

For me, at least right now, is the fact that DC can provide great value and great accomidations for my family vacations....much better than 99% of TS.


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## hipslo (Feb 3, 2007)

PerryM said:


> DC’s are just a few years old – there is NO real track record to safely invest any money.  There are NO consumer protection laws that I’m aware of to protect the investor.  90% of the DC’s don’t allow you to participate in real estate appreciation.  There are no deeds with your name on them to tuck away in your safe-deposit box.
> 
> In essence you are at the mercy of folks you only hear over the phone and their great stories they tell.
> 
> ...





Perry as I understand the Cresecendo program (my understanding is at this point admittedly limited), it sounds pretty similar to what you describe, except that the cost of the properties are closer to 2.8m, and the dues and buy in are proportionately scaled upwards.  Perhaps its only a matter of time before this model, or something similar  (bellehaven seems similar as well, though with less expensive properties, and lower buy in cost) is replicated for lower cost (850k to 1m) properties.  In any event, these seem to be exciting times for an industry in its infancy, it will be interesting to watch and see how things develop as time goes by.  For the moment I am sticking with my consecuitve Mountainside weeks plan, but down the road may supplement it with one of these clubs, for vacations other than skiing, once I have more time to devote to travel.  Presumably by then the industry will have matured and I'll have a clearer sense of what I'm getting into.  (Of course, by then cost of entry will likekly be much higher, Bill is no doubt right about that, but given my own situation and the many years before I anticpate being able to take full advantage of any of these plans, there is not much I can do about that, unfortuanetly).


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## PerryM (Feb 3, 2007)

*I need my sleep*

I just posted, on another thread, a new brochure published by the FTC and ARDA, link:  http://www.tugbbs.com/forums/showthread.php?t=40099

The DC industry has no equivalent of ARDA (Which is developer biased) and certainly no advice from the FTC.

I can’t stress loud enough that the “Blue Sky” scenarios painted by the DC salesreps are the same bilge spewed by the timeshares salesreps – we all know that timeshare developers are less than forthcoming as to how their timeshares really work.

Relying on someone on the phone to handle your $50k investment is something I, personally would not do.  When the price of HCC was about $20k and you got 80% of the CURRENT membership fee, I considered that a risk that I would not lose a single second of sleep over.  $50k and the average DC’s membership of $300k would have me worried all the time.

Someday the DC industry will be as stable as the timeshare industry (I can’t believe I just said that) – at that time there could be large companies who buy thousands of residences and this will make for an industry that can compete with timeshares.

Until then, I need more convincing or another shot at an investment that would not keep me awake at night.

Just imagine a large company, like Marriott, that decided that they could easily attract 1,000 members right off the bat and they could have all 1,000 signed up in 1 year – those 1,000 members would equate to 125 $1 M condos around the globe.

There is no real “Barrier to entry” for the DC – no huge construction loans, no 5 year plans – just take $10 M and get 10 residences and easily attract 80 owners – takes 1 month.  Then add another 920 owners in the next year.


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## hipslo (Feb 9, 2007)

Steamboat Bill said:


> Those days may be over as Marriott is ROFRing most MS properties for under $30k....you may get a SW, but not a MS.




I am curious as to any specific info you might have on the current state of affairs on rofr at MS.  Since my last post I was able to get another week under contract for (slightly) less than 30k and I now have my fingers crossed.  I got one of my weeks for 26.5 but that was close to a year ago now.


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## PerryM (Feb 9, 2007)

*Rofr Rofr*



hipslo said:


> I am curious as to any specific info you might have on the current state of affairs on rofr at MS.  Since my last post I was able to get another week under contract for (slightly) less than 30k and I now have my fingers crossed.  I got one of my weeks for 26.5 but that was close to a year ago now.




I have no information but observations:

SW has no ROFR and no week 7 Platinum Plus - Bronze weeks can be bought direct from Marriott for $1,500 and are lockoffs that trade extremely well.  Since no ROFR SW is generally cheaper.

The ROFR should be the first thing done by the seller even before escrow opens - no need to waste everyone's time if Marriott will step in.  Buyer pays $95 for the ROFR at MS.  So an answer should have come back already - someone has it - closing agent or seller.


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## hipslo (Feb 9, 2007)

PerryM said:


> I have no information but observations:
> 
> SW has no ROFR and no week 7 Platinum Plus - Bronze weeks can be bought direct from Marriott for $1,500 and are lockoffs that trade extremely well.  Since no ROFR SW is generally cheaper.
> 
> The ROFR should be the first thing done by the seller even before escrow opens - no need to waste everyone's time if Marriott will step in.  Buyer pays $95 for the ROFR at MS.  So an answer should have come back already - someone has it - closing agent or seller.



I agree.  We havent opened escrow yet.  I prepared the contract, sellers have signed and sellers have requested rofr waiver (this was just requested yesterday via email).   Contract provides that once Marriott waives (assuming they do), and Seller signs deed and delivers to escrow agent, I then deposit 1k into escrow and we proceed.  So, we dont yet know what's up with rofr, and nothing further will happen until we do.


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