# 4 New Equity Estates Owned Homes Closed



## DestiFan (Oct 16, 2010)

- Locations are Anguilla, Costa Rica, Snowmass and Scottsdale.  
- Post-transactions Club will have approximate 15% debt.  Not sure the Combination, but majority of homes bought were bought with 100% cash.
- Believe Maui and Napa are under contract for purchase 
- You guys gotta check out the Anguilla house www.rumpunchvilla.com

Hope everyone is well.  Going to Deer Valley this weekend to fish for some trout.


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## Kagehitokiri2 (Oct 17, 2010)

anguilla looks great obviously.

details on others? (or when theyll be online?)


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## willmyclubmakeit (Oct 17, 2010)

*anguilla*

deleted post


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## DestiFan (Oct 17, 2010)

Kagehitokiri2 said:


> anguilla looks great obviously.
> 
> details on others? (or when theyll be online?)



All were just closed in the past few weeks - I believe Snowmass, Anguilla and Scottsdale will come first.  Costa Rica will be last - the foreign purchases always lag on getting online.  They had Anguilla done awhile ago, but there is a long waiting period due to government regulations.  So that has taken longer to finish.  

Scottsdale is in Troon North.  I should remember on Snowmass... I think it was Capitol Peak Lodge, but I will verify.  Costa Rica is a beachfront home South of Tamarindo.


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## DestiFan (Oct 17, 2010)

willmyclubmakeit said:


> is this really the EE home as it shows other reservations on the site with the link?   Also was it purchased or leased?  Why are the EE members cheering so loud for others to join?  Are there inducements provided to bring in new members?   does EE need cash?  After my time on UE I have started to worry every time someone makes too good of a deal that there is some reason for it being too good. Is there any of this at EE?



The website is the EE home.  It has not been updated post-sale I believe.  As I mentioned above, the house was purchased.  

Regarding the other questions...I find it silly.  First, you know me.  You can email me or call me to ask me that question.  You don't need to write some cryptic message on the Tug Forum.  

Second, you asked for information on EE and I never even followed up to give it to you - that is how motivated I am to "cheer" for it.  I have never received a referral fee from the Club.   

Lastly, EE does not need cash.  They have had another record year of signings, currently have 15% debt to value on the real estate and are covering expenses with dues.  Need more proof - they just bought there recent houses with almost 100% cash b/c 80% of all capital contributed must go to real estate by prospectus.  

I was not on here to debate EE - just here to announce four new homes that I was excited about.  I need something to be excited about with UE in the dumper.  I don't have time to debate the EE pros/cons anymore.  If you don't believe in it...that is great - Join Duo or move on to VRBO or Demure or whatever.  Several UE members and Lusso members besides myself have joined and have had a great experience and feel confident in the financial strength of the Company.

Good Luck to all!


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## Kagehitokiri2 (Oct 17, 2010)

http://tugbbs.com/forums/showthread.php?t=130505

look forward to seeing costa rica.

bummer little nell snowmass was canceled/suspended.


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## Desties (Oct 17, 2010)

The Anguilla home is a stunner. 

I don't think that EE will have any problem filling the 60 slots that they're making available to UE refugees. The product is solid. Unfortunately, I've decided to go the "simplify, simplify, simplify" route and will likely just go down with the UE ship. 

I'm just puzzled about the locations. Anguilla? That's a 2-3 flight trek for most people. Snowmass seems like a decent choice but AFTER you have the less remote Vail or Breckenridge areas covered. 

As UE members, Scottsdale and Costa Rica always had some of the highest availability rates. 

Maybe I don't get it. Maybe it's better to have extraordinary homes in eclectic locations than settling for simply good-to-great homes in more popular locations. Maybe these are great deals. However, since the point of these properties is that they will be sold off in a decade, I figured that greater emphasis would be placed on finding more marketable destinations.


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## Kagehitokiri2 (Oct 17, 2010)

Desties said:


> Anguilla? That's a 2-3 flight trek for most people. Snowmass seems like a decent choice but AFTER you have the less remote Vail



EE should have tried negotiating with altamer 

flights >
http://en.wikipedia.org/wiki/Luis_Muñoz_Marín_International_Airport
+
http://en.wikipedia.org/wiki/Cape_Air

FS vail, after a price drop >
http://residences.fourseasons.com/private_residences/vail/your_private_residence/ownership_overview/


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## 3DH (Oct 18, 2010)

DestiFan said:


> Several UE members and Lusso members besides myself have joined and have had a great experience and feel confident in the financial strength of the Company.



Ditto!

And, you are correct, Snowmass property is in Capitol Peak. 

As to Snowmass -- I far prefer skiing there than Vail or Breckenridge. The summers are very quiet, but the proximity to both the Aspen and Eagle/Vail airports, as well as the shuttle (around Snowmass) & bus (to Aspen) systems are excellent!

New locations are scouted by means of member polling... Snowmass was the most popular ski destination in the survey. Costa Rica was the second most popular beach destination in the survey, and Anguilla was another which received many member votes.

We are quite excited, as well, about the new locations... only problem is trying to fit them into our already planned travels!


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## TarheelTraveler (Oct 18, 2010)

Nice home in Anguilla.  Other than the accessibility, I have heard very good things about the island.

What is the current owned versus leased count after these purchases?  Are any of these EE Lonestar purchases?


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## Desties (Oct 22, 2010)

I only caught the last 10-15 minutes of the 1st of the 2 webinars, so I was glad to be given access to a replay.

As impressed as I was with EE -- and both Adam and Rob -- I walked away with three questions that concern me.

I fleshed them out here. One is obviously my long-running concern that initial deposits are going up while Net Asset Value is likely going down. My new concerns after that call involve the likely difficulty of resigning toward the end of the club's tenure and what may be a pronounced exit strategy at the other side of 2021.


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## Kagehitokiri2 (Oct 22, 2010)

real estate prices? thats it? 

also, without getting into property quality/consistency (with consistency its more a question of degree, for pretty much every club.)  i have to disagree re locations. i actually have to give a lot of credit to EE members and management for appearing to be more credible travelers from my perspective, compared to the $15mm net worth members of the big clubs who havent been anywhere.

did they mention anything about what happens if they max out the debt cap? would be a big dues increase. thats my only issue. m private residences has the same issue. not sure about hideaways club.


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## travelguy (Oct 23, 2010)

Kagehitokiri2 said:


> did they mention anything about what happens if they max out the debt cap? would be a big dues increase.



Agreed.  We've talked about this in past posts w/o resolution IMO.

Also, previous statements from EE Execs that are conflicting on what expenses are paid from which member funds (deposits, annual dues).  Again, not resolved IMO.


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## Kagehitokiri2 (Oct 23, 2010)

i think response re sales expenses was not unreasonable. but i dont know whether members see everything in audited financials.

m private residences, luxus, and presumably rocksure are very clear on that. think it was m private residences that said something along the lines of itemization including "every lightbulb." 

http://tugbbs.com/forums/showthread.php?t=130505

edit >

interesting stuff (see archives for some longer ones)
http://equityestatesfund.com/blog


http://quintess.com/pdf/news-CrittendenReport_01 10.pdf


> leasing with an option to buy a five-bedroom property at The Grand Lodge with Talisker Club membership.


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## 3DH (Nov 4, 2010)

Desties said:


> I only caught the last 10-15 minutes of the 1st of the 2 webinars, so I was glad to be given access to a replay.
> 
> As impressed as I was with EE -- and both Adam and Rob -- I walked away with three questions that concern me.
> 
> I fleshed them out here. One is obviously my long-running concern that initial deposits are going up while Net Asset Value is likely going down. My new concerns after that call involve the likely difficulty of resigning toward the end of the club's tenure and what may be a pronounced exit strategy at the other side of 2021.



Hi Desties & others contemplating EE...

I know this is late, but I have finally had time to tackle this. While I am simply a member, I have spoken with the EE team and am posting my thoughts, along with their answers to a couple of your specific blog questions... hope this is helpful. (Sorry this is so lenghty and has taken me so long to post...)

Having gone through the Lusso failure we, along with a good number of other Lusso members, really put Equity Estates through the paces prior to investing with the fund after having lost the money in the standard Destination Club model. We carefully reviewed the financials, the offering memorandum, met one on one with management (whom we have found to be very forthcoming and always available!), participated in a number of calls, and spoke with other EE members. We determined that Equity Estates is clearly _not _a Destination Club but rather a fund that is governed by a very different set of standards. Rest assured, _we did ask these same questions_ that Desties poses. In fact, about 30 days ago we “Upgraded” our membership and made an additional capital contribution to add another 15 nights a year, after again putting EE management through the paces. 

That said, I forwarded these specific questions onto the Executive team and quickly got a response (which I will paste below)- which is consistent with what we understood to be factual. There have been modest capital contribution increases- and former Lusso, UE, and other DC members have been able to capitalize on special “refugee” only incentives to reduce their capital contribution rate. The homes being purchased really are different and better -- not bigger nor gaudier, but better located, better appointed, and likely better positioned to be of greater value in 2021 or beyond, which, given the fund's model is obviously to our benefit. 

We personally love both Anguilla and Costa Rica, having traveled to both locations in the past. Obviously, so do the other EE members... that is why these were both voted highly in the fall 2009 member survey. We will likely get to both in 2011, if American Airlines will cooperate in scheduling! It’s all in the eyes of the beholder, but I’ve never thought of Costa Rica as “eclectic”. Anguilla has the #1 rated beach (Shoal Bay Beach) in the world on it according to Conde Nast. PM me if you would like to learn more about what we think and what our experiences have been like both with management, homes, concierge, etc.

The following are the questions that *Desties* had posted on the blog, and answers I received from the EE management:



			
				Desties said:
			
		

> 1. If real estate prices have generally fallen over the past few years, why are the initial deposits inching higher every year?
> 
> This is important. The club claims that just 5 members have resigned, and all were cashed out at higher prices than their initial deposits (since they receive 100% of what a new member is paying at the time and that has increase over any rolling 24-month period).
> 
> ...




Owner members in Equity Estates Fund I, LLC do not make deposits but rather capital contributions to purchase a piece of the company. They own a membership interest in return for their investment. An investment in the fund is typically a long-term investment.  Supply and demand are driving pricing more than market value or NAV.  NAV alone underestimates the value for the following reasons:  1) this is a unique collection of homes that is difficult to replicate, 2) with 80% going into real estate, there will always be a premium paid to enjoy such a portfolio, and 3) there is significant value received each year on the delta between the annual dues, when viewed on a nightly basis, versus market rates to rent similar properties (call is a “vacation dividend”) with concierge services and support.  There are many real estate funds that you can invest in on an NAV basis.  However, there is simply no peer for this type of investment where you can enjoy and personally benefit from the investment.

The management team at Equity Estates feels the membership interests are appropriately priced in today’s market based on increasing demand.  The fund has grown by 50% each year since inception, and expects to beat that growth rate this year.  More and more people (including over 100 UE members) are seriously considering investment in the fund, which has extremely limited supply in the sense that it’s the only luxury residence fund of its kind in the U.S.  If the capital contribution rate was mispriced based on the laws of supply and demand, no one would be investing.

The peak of the luxury real estate market in most North American destinations generally occurred between 2004 and 2007- the period when most traditional Destination Clubs were building their arsenal of homes.  Equity Estates Fund I only purchased one home prior to 2008 (New York City 3br) and one home in 2008 (Turks and Caicos).  It purchased Telluride and Hilton Head in 2009 and expects to end this year with 6 new homes acquired.  So, while two of the ten homes are down slightly (single digits) based on appraisals, the other 80% have been purchased this year or last year, arguably at or near the bottom of the market.  Today, the fund is able to purchase remarkable ocean front and ski in/out, for example, residences at its same target average price point of $3M and obtain assets that in 2005 or 2006 would have been priced 30-50% higher. These unique assets should fare better, than say a 2nd or 3rd row beach home, over the holding period from both an experiential and investment perspective. There simply is not any new beachfront being created. Long-term this should bode well for those making capital contributions today, as the fund is well positioned to see annual appreciation that at least matches historical inflation rates of 3%, which over the next 11 years or so would return roughly 100% of capital contribution rates made today.  Of course, if the portfolio grows at 5% or 7% per year on average (even if it’s flat or down in the short-term), this will yield greater returns for owner members over the long-term.

The few members who have redeemed early have received 92.5% of the current contribution at the time back, which in each case has yielded roughly 100% return of their investment.



			
				Desties said:
			
		

> 2. Won't it get harder to get out in the future?
> 
> Right now, cashing out is pretty easy. The club has great homes, friendly management, and pose a great high-end value proposition. However, resigning won't be so easy in a few years. Let's say you want to get out in five years. Who wants to pay for a club that will liquidate in 5 years, especially if real estate prices don't recover and they are deep in the hole with their initial investment deposits?
> 
> Yes, the club isn't going to fold come 2021. It has five years to liquidate its portfolio, and members may also vote to keep the club going in a new form. That still creates uncertainty. Unless luxury vacation real estate takes off by the latter half of this decade, getting out won't be easy.




Equity Estates should be viewed as a long-term investment, with a specified liquidity date of 2021 for those who want to cash out then.  That said, the fund has demonstrated significant year over year growth of 50% each year during one of the most challenging economies (recessions) in recent history.  As the fund continues to grow virally (through referrals and former DC members), it is anticipated that it will be closed in the next few years with 300 full member equivalents (could be more than 400 families).  At that point, all new referrals and those who have grown interested will have to join a wait list to purchase a membership interest from a redeeming member, who can set the rate.  So, again supply and demand will dictate value, and a family may join with 5 years left knowing that there will likely be a successor fund created for all members not interested in redemption beginning in 2021.



			
				Desties said:
			
		

> 3. How messy will the cashing out process be?
> 
> As noted earlier, the club doesn't have to sell off its owned homes come November of 2021. It can elect to delay the process if the property resale climate is unfavorable.
> 
> Further compounding matters is that many of its homes are in eclectic locations. Anguilla and Costa Rica aren't exactly booming markets. I don't know if those properties are purchased or leased, but if they are among the 10 owned homes it may make the selling process hairier.




Regarding the cashing out process, you either love or hate the idea of owning a diversified portfolio or luxury real estate.  Management surveys owner members’ destination desires and analyzes other players in the market and other luxury real estate trends before making investments.  Costa Rica is under contract and Anguilla is owned.  Both destinations were near the top in the annual survey of members most desired new destinations.  Management purchased there precisely because they aren’t in booming markets, and they were able to buy spectacular homes at value prices.  Management believes in Warren Buffett’s theory on investing:  “Be fearful when others are greedy and greedy when others are fearful.”  There’s plenty of fear in the luxury real estate markets today, which should bode well for Equity Estates owner members long-term.



			
				Desties said:
			
		

> Now, these are just the three questions that I feel need to be answered with convincing responses. You may have some of your own, and obviously you're going to want to ask them if you are about to make a serious six-figure investment in a destination club.




Hopefully, this will be of, help to some of you... please feel free to message me if you have other questions, as I lurk here, but can certainly miss posts -- as they seem to move quickly at times!!!


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## Kagehitokiri2 (Nov 4, 2010)

nice to see some constructive feedback again. thumbs up to *3DH* for making it happen.


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## Desties (Nov 5, 2010)

Agreed. Thanks, 3DH.

I did speak to Adam several days ago. I wasn't entirely satisfied with his responses, but I walked away still impressed with EE as the class of this troubled niche.


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## Kagehitokiri2 (Nov 5, 2010)

Desties said:


> Agreed. Thanks, 3DH.
> 
> I did speak to Adam several days ago. I wasn't entirely satisfied with his responses, but I walked away still impressed with EE as the class of this troubled niche.



i guess i can give them the benefit of the doubt that some of their behavior on DC4MS.com simply reflects a lack of understanding of the medium.

and re debt cap, as i updated in linked thread - besides luxus and rocksure with no debt, AK is only club with a cap where the cap is actually low - 5%. so while i can disagree with their discussion of it, its not unique, like i concluded re lease ratios.


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## Jack1234 (Nov 5, 2010)

Thanks 3DH for taking the time to post those answers.  Can't wait to try out a few of those locations myself!


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## Kagehitokiri2 (Nov 15, 2010)

EE anguilla in charity auction >
http://www.charitybuzz.com/categories/7/catalog_items/216542

includes up to 8 first class flights
says not valid for holiday weeks



> ...Headlined by Grammy award-winning singer-songwriter Sheryl Crow...
> 
> ...considered to be among the top annual fundraising events in New York City, attended by more than 1,200 corporate executives, Board Members and their guests...Past supporters have included Chevy Chase, Steely Dan, Glenn Frey, Joe Walsh, John Fogerty and Counting Crows.
> 
> ...The Live Auction will be led by C. Hugh Hildesley of Sotheby's Auction House.



hopefully this will actually have marketing results..

and one of the hideaways exchanges >
http://www.charitybuzz.com/categories/7/catalog_items/216956


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## Kagehitokiri2 (Nov 29, 2010)

so when will costa rica and maui be online?



TarheelTraveler said:


> six bedroom home in Kapalua in Maui, Hawaii that Capes identified as one of the best properties in the destination club industry when we spoke with him today



i see cabo is finally done, so no more beachfront rental.


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