# HCC Net Asset Test 2007



## Steamboat Bill (Apr 25, 2008)

HIGH COUNTRY CLUB COMPLETES ANNUAL NET ASSET TEST

I am pleased to announce that as of December 31, 2007, just as at year-end 2006, High Country Club is in compliance with the Net Asset Test. The Net Asset Test is designed to confirm that the Club’s assets are sufficient to meet its obligations, including the Membership Deposit Obligation in accordance with the terms and conditions of the Club’s Membership Agreement.

The Net Asset Test is calculated using:

Cash and cash equivalents, plus market value of real estate (if less than 24 months from the purchase date, cost may be used), plus deposits or other instruments for the acquisition of real estate, less secured debt = Net Assets Available to Satisfy Membership Deposit Obligations.

As of December 31, 2007, the Club’s Net Assets Available to Satisfy Membership Deposit Obligations exceeds its Membership Deposit Obligation.

Further proof of the Club’s compliance with the Net Asset Test is evidenced by the Agreed Upon Procedures report, which was prepared by its independent accountants, BKD, LLP. (Available for download here.)

The Net Asset Test will be performed by the club annually on December 31st, and future results of the Net Asset Test will be reported by April 30th of the following year.


Christian V. Kirschner
President & CEO
High Country Club Investments, LLC


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## BocaBum99 (Apr 25, 2008)

It's good to see what they use as a financial measure.

I would be more concerned with liquidation value of real estate, not "market value."  Market value can be a very poor indicator of ability to operate the Club depending on who does the appraisal and how cash is managed.  There should be a minimum cash balance required for operations.  And, there should be a minimum equity requirement as well.  Members are in essence providing 100% financing on the real estate, interest free.

And, I'd like to see an operating statement instead of a one time balance sheet.  It's very easy to cook a balance sheet with well timed one-time cash infusions.  Management fees, for instance, could be paid on January 15 for the entire year whereas owner maintenance fees could be collected in advance in Dec.  If expenses are timed properly, the cash balance could be artificially high, especially if cash accounting is used instead of accrual accounting.


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## caribbeansun (Apr 26, 2008)

I agree with Boca's comments - the procedures that were performed are rather meaningless as it excluded the entire liability side of the balance sheet other than debt secured by real estate - trade payables were ignored, operating lines of credit (if any) were ignored.  

Disposition costs of real estate weren't considered, no discussion or disclosure of how they determined that these appraisers were legitimate or what, if anything, they did to determine if the values arrived at were reasonable.

I don't know that I'd be feeling overly warm and fuzzy about this, not negatively either because at least they did something, just not any more secure.


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## RLG (Apr 26, 2008)

I agree with the prior statements pointing out the deficiencies in the stated "test".  Excluding other balance sheet items and providing no detail on how the "market values" were calculated makes it an uninformative piece of information.  Effectively, it's just an adjusted loan to value on the mortgage debt.  

However, suppose one accepted that the adjusted loan to value was the best measure of the club's solvency.  Doesn't anyone find it odd that they choose not to report the actual number but merely have their accountants confirm that it doesn't exceed *100%*?

FYI, Tanner & Haley would have been able to issue this kind of "good new" a few months before they filed for bankruptcy and the members lost 100% of their deposits.

Why does anyone take comfort from this kind of test?


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## Steamboat Bill (Apr 26, 2008)

RLG said:


> Why does anyone take comfort from this kind of test?



I am not sure if the proper word comfort is appropriate here.

HCC was the FIRST Destination Club to publically post that they passed a Destination Club Association Net asset test and then posted it online. It does not contain all their trade secrets as this is not released for obvious reasons.

We are still waiting for all the other clubs to follow and, remember that HCC is the LEAST expensive club to join. Heck, you could join Solstice Sky for $2m membership fee and not even get a sales brochure.

Destination Clubs are NOT timeshares or fractional ownerships...they are clubs, just like a golf club or a private gym, they are a fantastic lifestyle choice. Therefore, there should be different standards on how to measure transparency between the different products.

Yes, T&H cooked the books and I can only say that 100% of all my dealings with HCC has been very informative, very open, and very professional. I have never gotten a bad "vibe" from them ever.

Also, I have never met anyone from HCC or even visited their HQ, but I have visited about 5 or so of their properties and they are all impressive. I have also spoken with over a dozen HCC members and they all share my opinion that we all love our HCC membership.

If you look at Destination Clubs thur Timeshare eyes only, then you will never get it.


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## pwrshift (Apr 26, 2008)

Steamboat Bill said:


> I...If you look at Destination Clubs thur Timeshare eyes only, then you will never get it.


 
I agree with what Bill says and also congratulate HCC for at least taking the first step towards disclosure. DC's are very different from TS's. But they still cost good money to join ... sometimes a LOT of good money at the higher end. 

Timeshare eyes are used to paying good money to buy from public TS companies, and in many cases they own their public shares as well as their timeshare weeks. However, as all DC's are presently private companies, there won't be much more data coming unless you sign a non-disclosure agreement...and even then you might not find out how much each executive takes in income or the real value of the real estate, etc.

Just like the timeshare market changed and became more legitimized with the entry of Marriott, Starwood, Intrawest, Hilton, etc., I think the same thing will happen over the next few years in the destination club market, and at that time the timeshare eyes will take more comfort in parting with their good money. With millions of TS owners, the DC market would be very foolish to pretend they aren't interested in getting some of them to cross over to the other side.


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## Bourne (Apr 27, 2008)

pwrshift said:


> Just like the timeshare market changed and became more legitimized with the entry of Marriott, Starwood, Intrawest, Hilton, etc., I think the same thing will happen over the next few years in the destination club market, and at that time the timeshare eyes will take more comfort in parting with their good money. With millions of TS owners, the DC market would be very foolish to pretend they aren't interested in getting some of them to cross over to the other side.



My opinion differs on this subject...

I agree that an entry of a major hotel chain in the industry is imminent in the next few years. 

However, market segemnt will be different. They will not be looking for or be able to convert some timeshare owners to cross over to the other side. The reason why I say this is because...

1. The segment has to be comparabe in dollar terms. Even if it is, a TS owner may buy a $50K week at prime resorts but will balk at paying 200K for for weeks. 
2. Almost all comparisons of timeshares are done with HCC and HCC only. IMHO, HCC is a boutique model that is not mainstream to the DC industry. As each year passes, HCC's market share of the industry gets lower. 300 members out of 6000 is barely *5% of the market*.
3. The big money is in the 3 Mil segment. Not 5-6 and not 1-1.5. 3 Million. a sweet spot for middle class millionares who want the same as 100 Mil+ group but can live with a fractional. This is where the vaccum exists in the market. And the likes of Exclusive Resort, Ultimate Resorts and Quintess are cashing in. 

Hotel companies are good at mass market products. They will have to adapt to this segment to make a dent. And money is there.  Exclusive Resorts rivals Disney Vacation Club in sales.


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## Steamboat Bill (Apr 27, 2008)

Bourne said:


> Exclusive Resorts rivals Disney Vacation Club in sales.



For 2007:

Disney Vacation Club had $375m in sales and currently has 120,000 members

Exclusive Resorts had $300m in sales and currently has 3,300 members


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