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PerryM

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Door to Door DCs

I’ve been waiting for a DC that offered “Door to door” vacations*.

* A local limo picks up the family and luggage.

* A personal business jet (one of the new $2 M small ones) flys you to your destination and then a DC owned car, rental car, or limo is standing by. The reverse when going home.

If the DCs got into a Friday, Saturday, and Sunday AM and PM check-in, one jet can handle 6 owners each week.

Now that’s 6-star luxury that a Fractional or Timeshare or Condo-Hotel can’t touch.

* Of course at your destination the DC would have a membership in a private golf course and/or own yachts.

This will happen; there are too many folks with big bucks that want to be treated 1st class on vacation and will gladly pay for all of this.

P.S.
All of this is possible if they get away from Days of usage to Points. A Points Club can handle this with no problem - you buy the points you need and spend them how you see fit. Ownership of assets would be paramount here.

P.P.S.
We are on vacation in Las Vegas this week. It is embarrassing to fly now. Standing in line at the airport, with my shoes and belt in the plastic bucket has me wondering when will someone treat me with some respect on vacation - my government sure doesn't.

Our flight took off at 8 AM and we were at the airport at 6 AM parking the car a mile away, taking a run down bus to the airport, hauling the luggage to a Kiosk to wait for the folks ahead of me trying to figure out how to check in. The shuffling in lines, paying double for 1st class service only to get a breakfast that costs me $600 for the both of us.

I get no respect.
 
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smbrannan

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Assuming PerryM is right and BH is the best DC option on the market at the moment.

Is this a good time to buy into luxury real estate? Sitting up here in Canada and reading about the potential bursting of the US real estate bubble makes me worry about timing of an investment now.
 

PerryM

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New highs are already here...

I don’t believe a thing the Drive-By Media says anymore – they are politically driven to destroy our country – why; I have no idea.

I just did a Zillow search of our home in St. Louis and in the last month we are now tied for all time highs of our home. St. Louis is not a hot bed of real estate growth – it follow the US average. If I put up the curve of the our zip code, and Missouri we are now at all time highs. Only the US market has yet to finish it’s “Pause” and start to make all time highs.

I’ve already predicted the resort real estate market will come roaring back and break all records by year’s end, 12 months for the entire country. The Drive-Bys will continue to show negative stories and ignore what’s really happening.

If you want to wait a year and then jump in go right ahead. A 15% potential increase in real estate in resort areas is your only penalty.

Don’t rely on me or the Drive-By Media – use Zillow and figure this out yourself for your situation and level of comfort.
 

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Very few people will argue that the U.S. is not in the midst of a correction in real estate values. Real estate markets are local, however, and some markets are fairing much better than others. No one knows exactly how long the correction will last, how far prices will fall, or when they will recover.

Relating this sub-topic to the Bellehavens discussion: Bellehavens has at least a couple of factors which mitigate the risk of a steep decline in property values: 1) they own their homes, debt free (we all know how leverage can magnify the effects of a decline in property value), and 2) they are adding properties at a fairly rapid pace (doubling in size, from 11 to 22 properties in the near future) - presumably, the properties which are being added reflect the concurrent softness in the market, and are priced at reasonable (perhaps "bargain") levels.
 

PerryM

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Black holes...

My main “rub” with the DC industry (not BH) is that they pretend to be offering real estate when in fact they are simply allowing members to buy condos for their investors and then to pay rent to them.

This is false advertising, and on an industry wide basis. I know it’s not a flat out lie, but it is a deception – you the DC member own nothing and pay rent. This is the nursing home model – you “Buy” your condo, use it until you die, and your estate gets back a portion of the purchase price. You pay rent while occupying that condo/unit.

I wish the DC industry stopped pretending that real estate is involved with DC membership – it’s not. It's more in line with Disney timeshares - Right To Use with no residual value.

The secondary “rub” is the out of control use of leveraging – if something small should impact them they could find themselves in a real mess – no new members signing up, so existing owners are locked in and MFs that can’t handle the debt servicing.

Leveraging has a horrible mirror image – it can quickly destroy the investment. The entire industry has set itself up for a possible implosion – just like the US stock market did leading up to the crash of 1929. The US government felt it was perfectly ok for stock market “investors” to put up only 5% cash and margin/leverage 95%. Uncle Sam sat back on that one, will it sit by on this one? Of course they will.

There is no “Magic Bullet” that could save them – just one club near bankruptcy buying another club at bankruptcy. NO consumer laws to protect the members just the investors and creditors. A cascading failure could turn the entire DC into a black hole that sucks up even BH.

I don't think that the DC industry depicts these cases.
 
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smbrannan

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When you terminate your membership/ownership @ 90% of the current price, what happens to the other 10%?

I see two possibilities:

a) the mgmt company collects it as profit, or

b) it stay in the club for the benefit of the remaining members.
 
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Elsway

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When you terminate your membership/ownership @ 90% of the current price, what happens to the other 10%?

I see two possibilities:

a) the mgmt company collects it as profit, or

b) it stay in the club for the benefit of the remaining members.

The 10% covers sales and marketing costs. Without sales and marketing, these clubs could not exist. And without resale incentives, we would have no way of getting our deposits back (given the 3 in 1 out policy for deposit refunds).

Ultimate Resorts budgets their sales and marketing expense at 20% of deposit revenue. Another area where BH seems to excel.
 

travelguy

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Wisdom vs. Voice?

I have a policy that once I sign a NDA I stop commenting on the subject - I don't want the nuisance lawsuits threatened to stop my further comment on the subject. So if I ever get to that point I will stop posting on BH.


Business plans seem to come in two flavors - the one the creditors get (the real one) and the one the investors get - one that has the fine print "Subject to change without notice". Its fun to read business plans but I find that they can taint your view of the offering. It's just like being bullish on a stock - you can't short it if the opportunity presents itself. These are just personal views.

The historical, verifiable facts provided by a CPA are really the only facts that can be used to further guess what the future will be like for the firm. I'm sure the NDA is required to see them.

Perry,
Are you saying that you are willing to risk making a $100K investment without signing a NDA and looking at the hard numbers just so you can still post on the net? :eek:

If so, you get the prize for the most dedicated TUG poster ever!!
 

PerryM

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Perry,
Are you saying that you are willing to risk making a $100K investment without signing a NDA and looking at the hard numbers just so you can still post on the net? :eek:

If so, you get the prize for the most dedicated TUG poster ever!!

No, of course not.

What I am saying is that I will attempt to get as much info from public sources as possible and then if I make it thru that info sign the NDA. But once I do, I stop posting about BH - all together. I will comment on our experience but facts and figures I will defer to others. That's how I handle NDA and don't get into trouble.
 

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My main “rub” with the DC industry (not BH) is that they pretend to be offering real estate when in fact they are simply allowing members to buy condos for their investors and then to pay rent to them.

This is false advertising, and on an industry wide basis. I know it’s not a flat out lie, but it is a deception – you the DC member own nothing and pay rent. This is the nursing home model – you “Buy” your condo, use it until you die, and your estate gets back a portion of the purchase price. You pay rent while occupying that condo/unit.

I wish the DC industry stopped pretending that real estate is involved with DC membership – it’s not. It's more in line with Disney timeshares - Right To Use with no residual value.

I don't think that this is true; I bought a membership in Private Escapes Platinum, and they were quite clear that what I was buying was a 'right to use' the properties. I did not buy it thinking that it was an investment, but more on the lines of 'prepaid vacations', so in that way, yes, it is more like a supercharged timeshare. I bought so that I could have access to a collection of $1.5 - $2M homes without the hassles of vacation home ownership or the hassles, uncertainty, and inconsistent quality associated with renting private homes. Previously, at one point I owned 5 homes, and the hassle factor was incredible; it seemed that I was constantly on the phone with the caretakers, dealing with broken water heaters, etc. I am more than happy to get no 'ROI' on my deposit; I simply included that lost opportunity cost in my calculations of per night costs in determining whether it made sense to me.

The secondary “rub” is the out of control use of leveraging – if something small should impact them they could find themselves in a real mess – no new members signing up, so existing owners are locked in and MFs that can’t handle the debt servicing.

I don't know about other clubs, but PE buys its properties 50% down, 50% mortgaged, so the leveraging is not 'out of control'; there is plenty of room for huge declines in property values before deposits are in jeopardy... but since you (Perry) think that "the resort real estate market will come roaring back and break all records by year’s end" that shouldn't be a concern!
 

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I’ve been waiting for a DC that offered “Door to door” vacations*.

* A local limo picks up the family and luggage.

* A personal business jet (one of the new $2 M small ones) flys you to your destination and then a DC owned car, rental car, or limo is standing by. The reverse when going home.

If the DCs got into a Friday, Saturday, and Sunday AM and PM check-in, one jet can handle 6 owners each week.

Now that’s 6-star luxury that a Fractional or Timeshare or Condo-Hotel can’t touch.

* Of course at your destination the DC would have a membership in a private golf course and/or own yachts.

This will happen; there are too many folks with big bucks that want to be treated 1st class on vacation and will gladly pay for all of this.

P.S.
All of this is possible if they get away from Days of usage to Points. A Points Club can handle this with no problem - you buy the points you need and spend them how you see fit. Ownership of assets would be paramount here.

I don't think Destination Clubs want to increase their exposure to physically depreciating assets such as vehicles.

One thing I have noticed is that a few of the clubs have partnered with credit card companies and offer members the advantage of using their card to cover membershi deposits and annual dues. I am aware of at least two clubs that offer double credit card reward points. Given that deposits range above $200+, you will have plenty of reward points which you can exchange for air travel, rental cars, etc... You won't have access to a private jet, but most people won't want to pay the very high prices associated with this privilege.

I am aware of one DC club provides a SUV at each of its U.S. houses - for the use of guests during their stay.

Most of the clubs have concierge services which you can use to arrange for customized travel, etc...
 

smbrannan

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I’ve been waiting for a DC that offered “Door to door” vacations*.

* A local limo picks up the family and luggage.

* A personal business jet (one of the new $2 M small ones) flys you to your destination and then a DC owned car, rental car, or limo is standing by. The reverse when going home.

It's already here, or damn close to - yellowstoneclubworld.com
 
S

Steamboat Bill

Just for fun...I logged into VRBO to see what rental homes for typical DC locations are.

Quite honestly, I found the web site poorly laid out and I grew tired of scrolling thru hundreds of offers to find the gem.

DC certainly eliminate that hassle.

Also, several DC offer private jet charters, yachts, door to door service, private massages, etc. But be prepared to pay dearly for it!!!
 

PerryM

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Just for fun...I logged into VRBO to see what rental homes for typical DC locations are.

Quite honestly, I found the web site poorly laid out and I grew tired of scrolling thru hundreds of offers to find the gem.

DC certainly eliminate that hassle.

Also, several DC offer private jet charters, yachts, door to door service, private massages, etc. But be prepared to pay dearly for it!!!

VRBO was sold by the original founders about 6 months ago. They did what many successful start up companies do - sit on their butts and wait for someone to buy them out.

That's happened and hopefully the new owners will spend a few bucks and make it a fun place to use. The existing setup uses 10+ year old programming techniques that were used with vacuum tube computers.

P.S.
I'm just guessing, and that's all it is, but comparable DC units can be found for a fraction of the MF's paid to the DC. I did an in-depth comparison to timeshares about 3 years ago and I was amazed what you could get for bargain-basement prices.
 
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vineyarder

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DC Per night cost vs. Comparable Rentals

P.S.
I'm just guessing, and that's all it is, but comparable DC units can be found for a fraction of the MF's paid to the DC.

I looked at rental homes vs. DCs before joining; here's what I found... the per night cost for the DC is based upon my actual numbers, with 42 nts/yr usage and the deposit I paid, dues I pay, etc., so the rate would be higher for someone joining now, vs. 2 years ago...

Turks & Caicos

PE Platinum = 3 bedroom oceanfront estate villa at the Somerset (http://www.thesomerset.com/); I'm going there over Xmas - rate for similar rental unit = $2700/nt; my total PE cost = $501 per night.

Abaco

PE Platinum = 3 bedroom oceanview Cliff House at Ritz-Carlton Winding Bay (these are now selling for 2.7M incl tax); rents for $2400/nt, my total PE cost $501 per night.

NYC

Trump Tower, large Park view 1 bedroom (~1000 sq ft); rents for $1710 per night, PE cost $501 per night.

These are the only 3 properties where the identical units can be rented, but similar cost difefrentials exist for most of the other properties, albeit with the additional uncertainty of the quality of the rental property. But based on these differentials, the cost savings are incredible; at least for an early adopter & high user; savings of up to $2200 PER NIGHT or >$15K per week! Using my travel patterns of about 42 nights usage per year, the savings adds up quickly; if we use the average differential of $1770 per night over the course of the year, I've saved $74,000 vs. renting the same accomodations! So even if we take a doomsday approach and assume that the entire DC industry will implode (as you suggest), after 2.5 years of high usage, even if I lost my whole deposit, I would still come out slightly ahead; and if it took 5 years and then I lost my whole deposit, I'd be ahead by over $200K! Of course, most people might not stay in a comparable rental; they'd rent something much less opulent... But for those of us who do prefer to stay in very high-end accomodations, the right DC can be a great deal, albeit not an investment.
 

PerryM

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I looked at rental homes vs. DCs before joining; here's what I found... the per night cost for the DC is based upon my actual numbers, with 42 nts/yr usage and the deposit I paid, dues I pay, etc., so the rate would be higher for someone joining now, vs. 2 years ago...

Turks & Caicos

PE Platinum = 3 bedroom oceanfront estate villa at the Somerset (http://www.thesomerset.com/); I'm going there over Xmas - rate for similar rental unit = $2700/nt; my total PE cost = $501 per night.

Abaco

PE Platinum = 3 bedroom oceanview Cliff House at Ritz-Carlton Winding Bay (these are now selling for 2.7M incl tax); rents for $2400/nt, my total PE cost $501 per night.

NYC

Trump Tower, large Park view 1 bedroom (~1000 sq ft); rents for $1710 per night, PE cost $501 per night.

These are the only 3 properties where the identical units can be rented, but similar cost difefrentials exist for most of the other properties, albeit with the additional uncertainty of the quality of the rental property. But based on these differentials, the cost savings are incredible; at least for an early adopter & high user; savings of up to $2200 PER NIGHT or >$15K per week! Using my travel patterns of about 42 nights usage per year, the savings adds up quickly; if we use the average differential of $1770 per night over the course of the year, I've saved $74,000 vs. renting the same accomodations! So even if we take a doomsday approach and assume that the entire DC industry will implode (as you suggest), after 2.5 years of high usage, even if I lost my whole deposit, I would still come out slightly ahead; and if it took 5 years and then I lost my whole deposit, I'd be ahead by over $200K! Of course, most people might not stay in a comparable rental; they'd rent something much less opulent... But for those of us who do prefer to stay in very high-end accomodations, the right DC can be a great deal, albeit not an investment.


Thanks for the input.

Does the cost per night of the DC include a Lost Opportunity Cost? This is where it must be accounted for - when you compare renting versus tieing up that money for the same period of time.

Or, as I like better, take the same membership fee and assume you could pull out 5% per year from the DOW, account for the 20% loss on the membership fee and add in the yearly MF plus 5% additional on it.

Then figure out how many vacations you can take for free by not buying that DC membership. After that, you can compare straight renting versus membership in a DC.

Thanks again,
 

vineyarder

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Yup, lost opportunity costs included in analysis

Does the cost per night of the DC include a Lost Opportunity Cost? This is where it must be accounted for - when you compare renting versus tieing up that money for the same period of time.

Or, as I like better, take the same membership fee and assume you could pull out 5% per year from the DOW, account for the 20% loss on the membership fee and add in the yearly MF plus 5% additional on it.

Yes, my per night cost does includes lost opportunity cost, using the 5% interest figure that Bill used in his analysis. I did not include an amortization of 20% of the membership deposit, as my deposit is 100% refundable, based upon when I joined... I used my actual deposit and my actual dues structure, which are based on when I joined, so as I mentioned, the per night cost for someone joining now would be higher...

Then figure out how many vacations you can take for free by not buying that DC membership. After that, you can compare straight renting versus membership in a DC.

That's just another way of skinning the cat, but OK; If I didn't join PE and I just spent my MF + 5% interest on the deposit each year, it would pay for 5.6nights in a similar home at the Somerset on Turks & Caicos each year (vs 42 nights or more within the destination club). Even if I spent the deposit, rather than just using the interest (i.e. I assumed that it was 100% certain that membership deposits in DCs will never be returned, as they will all go belly-up), I would have enough to pay for my 42 nights the first year, 31 nights the 2nd year, and then less than 6 nights a year thereafter. So if I get 2 years use at 42 nights a year, then lose my deposit entirely, I am still ahead of renting by 11 nights worth. If my DC went belly-up after 4 years, I would have gotten 97 more nights in comparable accomodations over 4 years vs. just renting, even spending the entire deposit! So even if the deposit is 'thrown-away' as you suggest, and the time-frame is quite short (i.e. 2 - 4 years), the numbers are still favorable if you use it enough!
 

PerryM

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Great, but why?

Yes, my per night cost does includes lost opportunity cost, using the 5% interest figure that Bill used in his analysis. I did not include an amortization of 20% of the membership deposit, as my deposit is 100% refundable, based upon when I joined... I used my actual deposit and my actual dues structure, which are based on when I joined, so as I mentioned, the per night cost for someone joining now would be higher...



That's just another way of skinning the cat, but OK; If I didn't join PE and I just spent my MF + 5% interest on the deposit each year, it would pay for 5.6nights in a similar home at the Somerset on Turks & Caicos each year (vs 42 nights or more within the destination club). Even if I spent the deposit, rather than just using the interest (i.e. I assumed that it was 100% certain that membership deposits in DCs will never be returned, as they will all go belly-up), I would have enough to pay for my 42 nights the first year, 31 nights the 2nd year, and then less than 6 nights a year thereafter. So if I get 2 years use at 42 nights a year, then lose my deposit entirely, I am still ahead of renting by 11 nights worth. If my DC went belly-up after 4 years, I would have gotten 97 more nights in comparable accomodations over 4 years vs. just renting, even spending the entire deposit! So even if the deposit is 'thrown-away' as you suggest, and the time-frame is quite short (i.e. 2 - 4 years), the numbers are still favorable if you use it enough!


Great!

Now, how can we find out how the investors of the DC make their money. If we can demonstrate where the investors make a nice fat profit and the renters (DC members) enjoy discounted rental rates, then we can better understand how this alliance works.


If there is a symbiotic relationship that makes sense (cents?) Then its up to the DC management not to blow the working relationship and make both parties winners.

But, if the DCs rent for much less than similar same whole-ownership units why are the investors throwing away that money? Or, why not have a DC where you buy a membership and not use it and they just send you a fat check every month - your part of the rentals on VRBO? I keep seeing things that just don't make any sense.
 
S

Steamboat Bill

I think the way "vineyarder" justifies his decision to join a destination club mirrors the same opinions of most DC members (including myself).

Joining a destination club is not necessarily the "best use" of money as many people can do better with other vehicles like stocks, bonds, REITS, business developments, etc. However, joining a destination club fills a certain need for families that can afford the cost....a reliable, hassle-free method to travel on family vacations at very nice locations.

Many DC members have had vacation homes that they bought with the dream of visiting it often and getting a nice return on investment. My father bought a water front home in Duck Key, Florida for about $80k 30 years ago and it is now worth about $1.8m and our family has spend MANY days there. I could have bought a house in the keys and continued the family tradition, but I really wanted variety of locations and quite honestly want to feel like a guest while I am on vacation. When I travel, I am not concerned with things that may need fixing, painting, repairs, cleaning, etc and simply relax and enjoy the trip. That alone is worth "a lot" to me.

I have tried renting homes on the internet including vrbo and others....but finding the "gems" is not as easy as it sounds.

I have also traded timeshares via II and that is not as easy during prime times.

The one thing I can say about Destination Clubs (with my experience as a member limited to HCC) is getting a reservation at the location and time I want is very painless....let me repeat that....very painless!

Thus, joining a destination club, is part of a biger picture, the enjoyment of life, family bonding, and making smart money management decisions. Sure, you can save money staying in a Motel 6, but joining a destination club saves you money as compared to reserving 2-3 hotels rooms at the Ritz or Four seasons. In fact, joining a destination club is probably cheaper than buying most high end timeshares when you compare the cost per night and factor in the size of the units.
 

travelguy

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Joining a destination club is not necessarily the "best use" of money as many people can do better with other vehicles like stocks, bonds, REITS, business developments, etc. However, joining a destination club fills a certain need for families that can afford the cost....a reliable, hassle-free method to travel on family vacations at very nice locations.

I absolutely agree. This is why I believe a great strategy is to find the Destination Club that best meets your TRAVEL needs with the minimum investment. (This has meant a DC without Equity participation thus far). Take any cash left over from this purchase and make the best "real-world" investment to get a greater ROI than a travel property investment.


I have tried renting homes on the internet including vrbo and others....but finding the "gems" is not as easy as it sounds.

I have also traded timeshares via II and that is not as easy during prime times.

The one thing I can say about Destination Clubs (with my experience as a member limited to HCC) is getting a reservation at the location and time I want is very painless....let me repeat that....very painless!

Thus, joining a destination club, is part of a biger picture, the enjoyment of life, family bonding, and making smart money management decisions. Sure, you can save money staying in a Motel 6, but joining a destination club saves you money as compared to reserving 2-3 hotels rooms at the Ritz or Four seasons. In fact, joining a destination club is probably cheaper than buying most high end timeshares when you compare the cost per night and factor in the size of the units.

Ditto!! Well said.
 

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BHs answers to my questions

A while back I submitted the following questions I finally got some answers:

1) New condos will average $2.75 M and old ones at $2 M – how does BH handle this?
A) Going forward we are targeting a value range of $2M to $3M. We plan to acquire 3 to 5 bedroom residences in primary resort destinations and this range will allow us to spend up when needed. Members will expect a consistent level of home quality, furnishings and amenities across the portfolio.

2) MF’s are 8%, the industry average. Why not half of that since no loans are being serviced?
A) I’ve found that the majority of the industry is not charging enough in annual dues to cover the fixed and variable costs required to manage a large portfolio of members and homes. While we don’t have debt service requirements, we are one of the only clubs that budgets for capital reserves and our current level of annual dues are sufficient to operate the Club’s portfolio of residences.

3) 5 to 1 full memberships to condo, seems low compared to rest of industry.
A) Looking at the member to property ratio alone really doesn’t mean anything; you must also look at the total number of days the club provides to members. In our case, we offer our Explorer Membership that provides 60 days of usage so we require a lower ratio to keep our occupancy level in check.

4) What’s the difference between BelleHavens and Ultimate Resorts?
A) There are several differences, the biggest being our equity model that provides superior asset protection and appreciation potential. We also provide more flexibility with how our members can use the club e.g. a credit for unused nights, flexible 3rd party usage, a modest fee for additional nights, singe day reservations in the Short Notice Window, etc. I also believe that Ultimate has exposed itself to a significant amount of risk from all of the debt obligations they’ve taken on with the Tanner & Haley acquisition.

5) Right now you have 65 members and 11 homes – how fast do you plan to sell new memberships and then acquire new homes?
A) We’re currently welcoming approximately one new member each week and I anticipate this will continue, if not accelerate as the year progresses. We plan on adding our next three homes to the portfolio in the next 3-4 months. We are conservatively planning on bringing online one new home each quarter for the next 12 to 18 months.

6) Right now your residences cost $2 M. What would the appraised value be on the day you accept and pay for a $2 M home? Is it $2 M or is there a finders fee in there?
A) Historically, members have been paying $2M for a home valued at $1.7M. The $300K gross margin is used to cover sales & marketing, repay financing costs, and to provide a 10% to 15% profit to investors. Once the homes are transferred to the Club, they are owned free of all the debt and any appreciation accrues to the Club and its underlying members.

7) Just who and how do the investors of BH make money and how much?
A) See the attached overview for more information. The business model is based on a margin that earned when real estate is sold to the Club and via a management fee that is built into the annual dues.

8) If the Club should go belly up, who get's what in what order?
A) Because BelleHavens owns all of the real estate free of the debt, the members are the first and only people in line to receive the proceeds.

9) How are the current dues prices related to higher condo acquisition costs?
A) The current dues are budgeted appropriately to manage and maintain a portfolio of $2M residences. The annual dues are anticipated to increase for incoming members as the value of real estate continues to escalate.

10) Please explain how the management company is related to BH and if the members can vote a new company in.
A) BelleHavens, Inc. and Banyan Properties, LLC are two separate companies. There is a legally binding contract in place that outlines Banyan Properties’ fiduciary responsibilities as the Club’s managers but Banyan can be replaced based on a member vote.
 

puffpuff

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A while back I submitted the following questions I finally got some answers:

1) New condos will average $2.75 M and old ones at $2 M – how does BH handle this?
A) Going forward we are targeting a value range of $2M to $3M. We plan to acquire 3 to 5 bedroom residences in primary resort destinations and this range will allow us to spend up when needed. Members will expect a consistent level of home quality, furnishings and amenities across the portfolio.

2) MF’s are 8%, the industry average. Why not half of that since no loans are being serviced?
A) I’ve found that the majority of the industry is not charging enough in annual dues to cover the fixed and variable costs required to manage a large portfolio of members and homes. While we don’t have debt service requirements, we are one of the only clubs that budgets for capital reserves and our current level of annual dues are sufficient to operate the Club’s portfolio of residences.

3) 5 to 1 full memberships to condo, seems low compared to rest of industry.
A) Looking at the member to property ratio alone really doesn’t mean anything; you must also look at the total number of days the club provides to members. In our case, we offer our Explorer Membership that provides 60 days of usage so we require a lower ratio to keep our occupancy level in check.

4) What’s the difference between BelleHavens and Ultimate Resorts?
A) There are several differences, the biggest being our equity model that provides superior asset protection and appreciation potential. We also provide more flexibility with how our members can use the club e.g. a credit for unused nights, flexible 3rd party usage, a modest fee for additional nights, singe day reservations in the Short Notice Window, etc. I also believe that Ultimate has exposed itself to a significant amount of risk from all of the debt obligations they’ve taken on with the Tanner & Haley acquisition.

5) Right now you have 65 members and 11 homes – how fast do you plan to sell new memberships and then acquire new homes?
A) We’re currently welcoming approximately one new member each week and I anticipate this will continue, if not accelerate as the year progresses. We plan on adding our next three homes to the portfolio in the next 3-4 months. We are conservatively planning on bringing online one new home each quarter for the next 12 to 18 months.

6) Right now your residences cost $2 M. What would the appraised value be on the day you accept and pay for a $2 M home? Is it $2 M or is there a finders fee in there?
A) Historically, members have been paying $2M for a home valued at $1.7M. The $300K gross margin is used to cover sales & marketing, repay financing costs, and to provide a 10% to 15% profit to investors. Once the homes are transferred to the Club, they are owned free of all the debt and any appreciation accrues to the Club and its underlying members.

7) Just who and how do the investors of BH make money and how much?
A) See the attached overview for more information. The business model is based on a margin that earned when real estate is sold to the Club and via a management fee that is built into the annual dues.

8) If the Club should go belly up, who get's what in what order?
A) Because BelleHavens owns all of the real estate free of the debt, the members are the first and only people in line to receive the proceeds.

9) How are the current dues prices related to higher condo acquisition costs?
A) The current dues are budgeted appropriately to manage and maintain a portfolio of $2M residences. The annual dues are anticipated to increase for incoming members as the value of real estate continues to escalate.

10) Please explain how the management company is related to BH and if the members can vote a new company in.
A) BelleHavens, Inc. and Banyan Properties, LLC are two separate companies. There is a legally binding contract in place that outlines Banyan Properties’ fiduciary responsibilities as the Club’s managers but Banyan can be replaced based on a member vote.
2. The amount of reserve set aside is very small compare to the 8% that they charge.

4. Ultimate bought over the entire Tanner and Halley portfolio at 40 % below market. Its a steal. On top of they inherited 650 members that are bound for the next 8 years so as not to losse their initial fee) . The monthly cash flow is very strong as a result of the 800+ members currently of MF coming in. I see UR financae as very strong. with debt ratio under 40% as a result of these purcahses. Ultimate also gives you 80% of then current membership due because of the tremendous high book value and equity they have built up as a result of this purchase. Most importantly, they dont have to front marketing for 600 members, and at about $5000 a crack, it works out to $3000000 already.I see UR in a sweet spot at this time,and I think anyone interested to join a DC should consider UR seriously at this time because of the value offered relative to other DCs.
 

Bourne

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I still see an issue with Point 1 & 6.

Long story short, lets assume 10 new members join.

1. Based on BH's business model, the properties are already in the hole by 15% when they are transferred to the club and would historically take ~3-4 years to break even. ( 5% annual growth and sale/closing costs included )

2. If the new members decide to cash on to the profit and try to leave, BH would have to cough up the money that does not exist in the first place. Atleast, they are in the hole by 15% of 2.75 mil i.e. 410K

3. However,if the existing members try to cash out, BH would still have to honor the current price point i.e. the one based on $2.75 mil. However, the underlying property based on the equity model is still only worth $1.7 mil. Do the math.

IMHO, BH is trying to promise too much and is moving into unchartered territory. The new business model is way more riskier than any DC out there. It would not be a DC where I would put my money into.
 
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PerryM

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I still see an issue with Point 1 & 6.

Long story short, lets assume 10 new members join.

1. Based on BH's business model, the properties are already in the hole by 15% when they are transferred to the club and would historically take ~3-4 years to break even. ( 5% annual growth and sale/closing costs included )

2. If the new members decide to cash on to the profit and try to leave, BH would have to cough up the money that does not exist in the first place. Atleast, they are in the hole by 15% of 2.75 mil i.e. 410K

3. However,if the existing members try to cash out, BH would still have to honor the current price point i.e. the one based on $2.75 mil. However, the underlying property based on the equity model is still only worth $1.7 mil. Do the math.

IMHO, BH is trying to promise too much and is moving into unchartered territory. The new business model is way more riskier than any DC out there. It would not be a DC where I would put my money into.

I'm assuming that the old properties have appreciated at 5% a year for the past 2 years and what was $1.7 M is now $1.9 M. Add another 2 years (minimum time that must be spent in club) and you get $2.1 M and close to a break even on the old $2 M condos.

The new ones coming in at $2.75 will be bought for 85% of that or $2.3 M and after 2 years are $2.6 M.

I just don't get a feeling of impending doom here. Just a company trying to be forthright on how they operate and back up what they offer with assets.

They offer 90% of the current membership fee to exit and that would be 90% of the unit or $2.5 M. Additionally it's 3 in/1 out so there should be no problems that I can see.
 
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Bourne

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I do not see an issue with the 3-1 out policy. It is even better than the 2-1 policy that is a standard in the industry.

However, the issue I have is with the 90% of existing price ($2.75M) i.e. 2.5 mil as an exit policy. How can you factor in a potential payout of $2.5 mil on a property that you bought a few months back for $2.0 mil which infact costs $1.7 mil. Remember, BH is a equity based model.

All other DC's pay out less than what they took in. Or an amount lesser than the underlying value. BH is promising more than the underlying value. That is my major concern.

The potential payout may cloud one's judgement but the risk is greater. It is not at the same level as T&H but it is more riskier than any DC plan out there.
 
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