Recent Destination Club News

[Buon Viaggio]

If the deposit were non-refundable then I would expect dues to be lower and the deposit would be lower but it would be a tough sell in this climate.

 

[TarheelTraveler]

I think the equity vs non-equity debate is really moot in terms of investment. I just look at my DC membership as the cost of accommodations and travel service. Don't need to own that especially with the bleak outlook on resort real estate. A membership in an equity club is really a small investment ($500K or $600K) anyway so we're not really talking about a lot of upside potential are we? Not sure if the equity model is any safer - I've had several real estate investment vehicles unravel in the past 3 years. Agree that there needs to be some sort of regulation and basic standards.

ER is not exactly a no-name company either.

I'm certainly not counting on making money off my DC membership (that's the concept behind the CR/EE style of DC), but over the long haul, it'd be nice for it to at least keep up with inflation.

The equity models vary pretty significantly as Kage points out, with different levels of risk. Since I don't want to get into some debate about which equity model is better, I'll just mention A&K, which I'm the most familiar with. With A&K, they receive a commission for selling a membership, and then the entire remaining balance goes into the capital account in the member's corporation which is used to buy houses. The houses owned by the members have zero debt. The houses are held in a non-profit Del. corporation which is owned 100% by the members. I would definitely consider that particular arrangement safer than the non-equity structure. While you can't remove all risk, there is a lot less that can go wrong when there is no debt, the members own the corporation, you can fire management if they're not doing the job, and you've got a larger name-brand sponsor as your manager.

 

[ClubsRDead]

There seems to be consensus among the members that I know that JT is toast and the club is going into bankruptcy for sure. Unless by some miracle his little survey is saving him but its hard to imagine the lender caring about that, especially since their deadline was Friday and the survey thing is today. I've received emails from a couple people that there is a member group forming so hopefully we can get some discussion going about what our options are, if any. I suspect if we were organized there might be something to do, ie buy some homes and continue a club under some fashion. I'm all for the no debt, equity, or whatever model you want to call it. If there was safety in the process, I'd contribute substantially - assuming or course we could get the right homes, in good places at a decent cost. Not knowing all the details of the homes that the lender has now, maybe they are it - or part of them, and maybe not.

I think the best thing for us all to do is keep an open mind and see what happens. Last time around as I recall, other clubs showed up with bids as did private entities. Some will want to just buy the deal cheap and liquidate, others might want to make us deals or operate it. Typically, we'll get tagged for much higher dues and some sort of deposit, so its hard to tell what the pulse of the membership will be I suspect if we all have to up again in the cash area.

 

[DestiFan]

I think post-11 there could be an interesting structure created with a small number of members. Not perfect, as the debt is not going away, but something that could be salvageable and agreeable to the Sr lender. Key will be partnering with another DC - will probably have to be equity based due to structure I have in mind. I will contact Equity Estates and gauge their interest. Would have to be outside their current fund, as any proposal would violate their prospectus in this scenario....too much debt. Capital Source will not want the homes, HOA fees, et. They will be amicable to proposals I believe, but will want someone at other end that has done this right so far...not a long list. EE may say they are not interested, but worth a try.

The key here, unfortunately in my mind, is Capital Source will not want members to leave without homes and debt going with them. Just my 2 cents.

 

[Leonardo]

lies, damn lies, and statistics

Not only is JT's 'member-owned conversion plan' ridiculous (and mis-named), so is his 'non-binding vote', especially since there will be no independant verification of the results.

Given JT's history and proclivity for 'stretching the truth', I can imagine the following scenario:

Only 100 people respond to the poll/vote, and 90 vote against it and only 10 vote in favor. The results are presented to the members and Capsource as "We polled all 1200 of our members, and only 90 (or less than 8% of members) were not in agreement with the conversion plan"

Sound familiar?

It would definitely appear that the only way to get a true member-owned plan is to have it go into BK, get rid of all the stock ownership, and have a member group buy the assets at a bargain price and hire independent management to run it, structured similar to A&K (maybe they'd even serve as managers!)...

If a member list is resurrected, please include me!

 

[Leonardo]

I think post-11 there could be an interesting structure created with a small number of members. Not perfect, as the debt is not going away, but something that could be salvageable and agreeable to the Sr lender. Key will be partnering with another DC - will probably have to be equity based due to structure I have in mind. I will contact Equity Estates and gauge their interest. Would have to be outside their current fund, as any proposal would violate their prospectus in this scenario....too much debt. Capital Source will not want the homes, HOA fees, et. They will be amicable to proposals I believe, but will want someone at other end that has done this right so far...not a long list. EE may say they are not interested, but worth a try.

The key here, unfortunately in my mind, is Capital Source will not want members to leave without homes and debt going with them. Just my 2 cents.

DestiFan - My guess is that A&K would be a more likely partner/manager, given their overall size and scope of experience across the hospitality sector. It could be operated as a separate, non A&K branded club with simply management outsourced to A&K, or it would even be possible that the Elite club could be merged with A&K IF there was sufficient member contributions to meet their model or a temporary variant of it... and then Signature and Premier could be A&K levels to compete in the now-vacant lower market, again assuming that there was sufficient member capital contributed to truly make it member-owned...

Yes, we end up paying for the homes twice, but at least the second time it should be at a good discount! And, of course, that would be the case in any member-owned plan...

 

[ClubsRDead]

DestiFan - My guess is that A&K would be a more likely partner/manager, given their overall size and scope of experience across the hospitality sector. It could be operated as a separate, non A&K branded club with simply management outsourced to A&K, or it would even be possible that the Elite club could be merged with A&K IF there was sufficient member contributions to meet their model or a temporary variant of it... and then Signature and Premier could be A&K levels to compete in the now-vacant lower market, again assuming that there was sufficient member capital contributed to truly make it member-owned...

Ah, spoken like a true AK or Fortress executive, huh? And just what percentage of "mgmt fee" does AK charge? I know what I have heard the papers state, but what is the actual number since there are really mortgages, so people say, on some of the homes, and the fact that the club, at least today, is not break even?

You mention paying for homes "again," yeah - many of us are still a tad bitter about our association with you and having written large checks thinking there was solidity behind it - only to find AK ran from the last BK and now numerous of us are tied up in an endless lawsuit. In my opinion, regardless of what culpability AK may or may not have had, and outside of whether or not you have the best club in the world now -- quite the chicken *bleep*'s and didn't step to the pump during the TH fall, and haven't done one thing for a member of since.

The fact that the model has some debt still and they NEVER state that is troubling, has a 80% refund (odd, if equity - don't you get it all?), has been selling primarily dues only memberships forever now, what a year or so of the "trial offer" that never expired doesn't exactly give me comfort. AK may be great for worldwide travel but there's nothing impressive about their club mgmt, they've taken smaller homes and clubs like JT did from others and merged a hundred or so now dues only members together and never really sold anything or added new people with new cash since.

And, from everything we learned during our last experience, Geoff Kent screwed us once already, so why in the world would be pay him ANYTHING here? Where has he been with one of his emails or webcasts saying how sorry he is and what he would like to do in order to help us now? Yes, maybe him sucking the millions he did out of the club originally was it's downfall? Think of it this way -- AK charges a "licensing fee," - yet to be determined by the Courts or not, of around 20% -- which breaks TH. They all admit, it was "too much." Not the sole reason our club failed, but certainly a painful button. Now, they charge even more and promise sustainability?

And why "only the ELITE" club members? What the hell is wrong with the others? They weren't necessarily "lower level" people or the dregs of society, in most cases - just early or first adopters. And lower clubs to compete in a lower market? What market? There's NO market for memberships right now, isn't that pretty obvious? Unless someone is willing to make "dues only" even cheaper which means bankruptcy comes even faster.

I assume anyone with compelling knowledge, who followed the TH sale and now subsequent demise of JT understands the real estate picture a little...most of the homes sold to JT were "private retreats" over distinctive retreats, and if course most of the homes from PE were "premier." So what you're discussing is the term "cherry pick."

I would definitely vote NO to any AK run, managed or proposed entity regardless of the financial "deal" they make, and especially if they make a really sweet one. They were in the crapper themselves when they did a deal with us last time and profited handsomely while the club suffered, then they left like a one night stand from a fat chick and never looked back or tried to make it right. I would also discourage anyone from considering it based on history, but thats just me.

Again, no offense to those who are there and seem to be happy -- but we from the TH side of life know where AK management stands when the going gets tough -- just about the same place that JT is -- no where near you or helping you get a recovery.

 

[DestiFan]

DestiFan - My guess is that A&K would be a more likely partner/manager, given their overall size and scope of experience across the hospitality sector. It could be operated as a separate, non A&K branded club with simply management outsourced to A&K, or it would even be possible that the Elite club could be merged with A&K IF there was sufficient member contributions to meet their model or a temporary variant of it... and then Signature and Premier could be A&K levels to compete in the now-vacant lower market, again assuming that there was sufficient member capital contributed to truly make it member-owned...

Yes, we end up paying for the homes twice, but at least the second time it should be at a good discount! And, of course, that would be the case in any member-owned plan...

I am not suggesting there is one solution here. All things that help members will be great in my mind.

If possible, let's try not to crush any of the options right now. I understand people have bias against all the different clubs, but bashing any of them won't help anything right now.

 

[Leonardo]

Ah, spoken like a true AK or Fortress executive, huh?

I am most definitely not an A&K or Fortress executive, but coming from the PE side rather than the T&H/UR side, I completely forgot about the bad experiences T&H members had with A&K. If that degree of animosity is prevalent throughout that (large) sector, then obviously A&K wouldn't work as a management partner (though in this case the members would have the ability to axe A&K or whomever as management). But in any case, the concept is for outsourced management that is only beholden to a 100% member-elected board of directors; I suggested A&K only because of their size and experience, but I am sure that there are plenty of other possibilities (but not being in the hospitality industry I don't know the names off-hand).

BTW, if you re-read my comments regarding elite being merged into A&K, it is simply based on the comparable value of the homes in the two portfolios, which is why signature and premier would presumably have to be separate entities... There was no implication whatsoever that premier or signature members are 'dregs of society' (and if you look at my profile I am Signature, not elite). And I was not discussing a 'cherry-pick' strategy, just maintaining the current three tier stratification within UE... although if the new entity is 100% member owned, then cherry-picking isn't bad, as it just means we are leaving Capsource with the less desireable homes!

 

[Leonardo]

I am not suggesting there is one solution here. All things that help members will be great in my mind.

If possible, let's try not to crush any of the options right now. I understand people have bias against all the different clubs, but bashing any of them won't help anything right now.

I am certainly not bashing EE; I am very impressed with them! I just wonder about their ability to manage such a big club given their current size...

 

[DestiFan]

I am certainly not bashing EE; I am very impressed with them! I just wonder about their ability to manage such a big club given their current size...

I don't know if this would work for them b/c it would have to be a separate fund. I just want to ask the question. I know they won't do it in fund I - can't happen by prospectus.

On the cherry picking of homes or club levels....people better get used to this. It is going to happen and it will be a real problem for the groups not chosen. Remember, the entity is structured divided on purpose. Cap Source is not here to protect anything but it's principal balance at this point. Who's club level gets disadvantaged will not be top of mind.

Monday will be interesting. Love the fact our Club level Board of Advisors are in constant contact with all of us....just like the assessment. Don't they represent us? Well, one person did try to represent us last time and got threatened with suit like many of us "rogue" members....glad some of us were rogue.

 

[ClubsRDead]

And I was not discussing a 'cherry-pick' strategy, just maintaining the current three tier stratification within UE... although if the new entity is 100% member owned, then cherry-picking isn't bad, as it just means we are leaving Capsource with the less desireable homes!

One can assume that cherry picking doesn't put Capital Source where they want to be or they'd have sold higher end (or upper appraisal) homes already.

My point was merely this, don't take it personal - please - is that AK could have done the right thing then, meaning during TH, and could still do it now - they should be buying the WHOLE damn thing if they are committed to the industry, at market price - homes, everyone, everything and showing they care about a problem that they helped to create. I still have my original AK books and marketing propoganda and they certainly claimed to be the first and the authority...until times got tough, then they bailed and left about 500+ of us hanging in the wind. With the big Fortress money behind them its unreal to me they havent made their presence known in this process. The only thing I have seen them "do" in the industry was when they sent their short term president down to one of JT's "destination club meetings" and they all glad handed each other, talking about financial transparency, claiming sales were going out the roof, etc. And we're all where, now?

 

[Kagehitokiri2]

removedddddd

 

[ClubsRDead]

what does "removed" mean? Did I say something inappropriate?

 

[Leonardo]

what does "removed" mean? Did I say something inappropriate?

It just means Kage posted something, then decided to remove the posting, but since you cannot actually delete the posting, you can just edit it to 'removed' or 'x' (since there must be at least one character in the post).

 

[ClubsRDead]

Alright, thanks. For some reason I was thinking Kage is / was a "moderator" and had editable rights.

On that note, who "owns" THIS site? Are we anticipating UE to try to "buy" it too in order to quiet it down? Not that he could, I don't Jim or Rich are going to have a lot of discretionary income for awhile.

I am guessing Scherer is wishing he had his site back right now versus his 16k shares of UE stock that is probably worth around $4k now, if anything.

 

[BetterClient]

Have to credit Jimmy T! His picture is now in my dictionary next to the words, audacity, chutzpah, and coercion.

Let's wait until the Thursday before filing bankruptcy to spring this surprise on the members-and let's give them no chance to digest this, rather let's try to force feed them a plan that keeps me on the job!

I would be all for the club going member owned. That means we would own it all, and would hire professional management to run the properties. There would be no need for excessive sales and general administrative expenses.

Let's file for chapter 11, get management tossed out, do a $30MM assessment to fix the balance sheet, renegotiate the debt terms with CapSource, discharge the subordinated liabilities, convert our membership redemption liabilities into common stock-and continue to travel.

Honestly we need Jimmy's vision and leadership like a bald guy needs a comb.

 

[Kagehitokiri2]

I am guessing Scherer is wishing he had his site back right now versus his 16k shares of UE stock that is probably worth around $4k now, if anything.

yeah, he should have spent a fortune defending against a SLAPP lawsuit...

 

[Jack1234]

yeah, he should have spent a fortune defending against a SLAPP lawsuit...

It might be the best asset UE owns!

 

[ClubsRDead]

I would be all for the club going member owned. That means we would own it all, and would hire professional management to run the properties. There would be no need for excessive sales and general administrative expenses.

Let's file for chapter 11, get management tossed out, do a $30MM assessment to fix the balance sheet, renegotiate the debt terms with CapSource, discharge the subordinated liabilities, convert our membership redemption liabilities into common stock-and continue to travel.

.

I couldn't agree more. This process is somewhat silently being run around right now from some of the communications I have received. I think the plan is within the next week (assuming he files) to do a "contact" of some sort with the members. I agree we need to renegotiate with CapSource or even better find a lender or private equity to replace them. I suspect we can get their price down some during the CH11 and the reality should hit them soon what the homes are really worth if they have to go to liquidation. Regarding any member redemptions / liabilities - I think they all have to go away with the bankruptcy and any new dollars become real equity in the new entity. I am highly confident this can be done cheaper and better than any agreement with A&K or another club because they all have high operating costs and we don't need to be paying sales, marketing or anything related to increasing their brand identity. We did that already at TH and it got us no where.

 

[Kagehitokiri2]

but if there is no member communication, arent we going to see a lot of people handing JT more money...

wait a minute - why would capsource even allow that?

 

[AKTHUE]

but if there is no member communication, arent we going to see a lot of people handing JT more money...

wait a minute - why would capsource even allow that?

It is in CapSource's best interest if JT can raise more money from members, because a portion of that money will go to CapSource to pay accrued interest and maybe some fees for restructuring the debt, and maybe some payment to reduce principal, but CapSource won't have to write anything down. So CapSource is aligned with JT's interest here, so long as they don't have the fund operations very long.

If JT can't raise money, any other investor will demand that CapSource restructure, forgiving some of the debt or converting it to equity, or if there is no investor, CapSource may end up with the property.

Members are still better off not agreeing to JT's plan. Even if JT has succeeded in preventing members from organizing as a group, I don't believe that very many of them will give him any more money at this juncture. He's lost credibility.

 

[Kagehitokiri2]

no no, why wouldnt capsource require debt paydown.. direct to them.

 

[ClubsRDead]

Members are still better off not agreeing to JT's plan. Even if JT has succeeded in preventing members from organizing as a group, I don't believe that very many of them will give him any more money at this juncture. He's lost credibility.

I would guess that CapSource is way past thinking JT is going to be salvage himself. The "plan" he presented wasn't even a "plan," rather a plea. Five options, yet he is only focused on what that wipes out the subordinate debt to him. His entire presentation hinged on raising about $30MM and only giving CapSource $10MM, barely enough to cover past due interest, break up fees and replenish his required reserve account.

I also would speculate from the amount of emails UE has sent out today regarding this "mandatory non binding necessary must do, you won't be held to it" poll that the numbers haven't come in the way he had hoped they would. And even if they had, if you were CapSource, why would you believe anything "non binding."

Best thing for us is to reorganize, refinance, take control. I disagree that a merger with another club, even one that claims to be "equity" is the right answer because it appears we already have too many members and not enough homes. Scaling the business to cover operating costs and provide basic services is all I need. I've never been to one of their fancy offices, like the one in CO they just closed. Was having that space necessary? For years TH had a KC office and a CT office, why? Because McGrath lived in CT? And then Jim added FL to the mix. It's not like members or the public come there for anything. In fact the most visitors either of our clubs have got over the past couple of years has probably been lawyers and restructuring firms. I'm not real sure that paying their rent is a good use of our member dues when half the houses I go to have plenty of necessary maintenance to be performed.

I think tomorrow, certainly by mid-week will be the tell-tale of the situation.
Anyone who wants to PM me emails / contact info I will get you on a member communication list that is starting regarding alternatives. Remember, we don't have to agree to any plan that may come up during the next several weeks or even be presented to a creditors committee. Frankly, we all jumped the gun too quick with JT and I think that was a function of our committee not having many options and wanting cheap travel themselves. That group as I recall was almost all members, who knows what this one will be. Then they all had "real" cash losses of deposit, I don't believe that to be the case this time as I haven't talked to anyone yet (mainly old TH people I know) who paid real deposits. True, PE folks hadn't "lost" theirs (yet) in a bankruptcy like we already have, but you had to see the writing on the wall with the 100% refund model. Bottom line, end of day -- a lot of clubs may come to us with options but I think we're smarter this time and do what is best for ourselves and I, personally, am not paying some dues only BS with Quintess or ER, or paying partial deposit discounts to go have even more availability problems. And I sure won't go to AKRC because I paid, personal check, over $500K to their name and it blew up on me. So lets hope this group who is trying to make this work out is actually successful. Otherwise, just liquidate it and we can get on with our lives and quit waking up in these nightmares.

 

[DestiFan]

This process of converting to a member owned Club is going to be a lot more problematic than people are thinking....

1) Cap Source does not own all the debt - just most of it. There are many properties held in other entities that have separate debt associated with them - including many of the foreign properties.

2) Members will not want all the properties - wait to you see some of the HOA dues and maintenance requirements (this is one of the big issues) - but Cap Source will want to get rid of those properties first b/c they will be most onerous. In addition, what members think are the best properties - are some of the most marketable.

3) The equity needed to salvage this deal will be significant with the amount of people likely to drop completely. At that point, it may be cheaper to join an EE or a AKRC or just start something from scratch (I understand the bad blood at AKRC - but not all will have had that bad blood). The newco, almost anyway you slice it, will have a lot of debt in a restructuring.

4) The money JT says is due is HIS version of the story - anyone here think there may be a few more claims out there? Salaries, trade payables, HOAs, etc. I bet we owe more than the number that was released to us.

5) The ongoing maintenance, service needs, legal, etc. is going to be very expensive. A lot of locations, ongoing refresh needs, jurisdictional obligations, etc. It can be done, but it will require full-time staff and supervision.

The good news is Chapter 11 should proceed slowly. There will be time to sort a lot of this out. Also, if someone did buy this stock or do the RAP conversion - you may want to look into that with Counsel. Just a thought.