A Free DC!

[PerryM]

I like BelleHavens since they are the ONLY DC that is equity based – you do own the club! They have an opportunity that folks should be aware of. Look at BelleHavens

Their new Traveler membership is designed for timeshare owners. It costs $100k to join, MFs of $8,500 per year and you get 15 nights of usage. You own 1/20 of a $2 M condo. They are upgrading to $2.75 M condos shortly.

That membership fee will rapidly escalate to $155k in no time (Just 8 memberships need to be sold) and you can then cash out and get 90% of the $55k increase or $49,500. That’s almost 9 years of FREE MFs!!! (There is a minimum holding period of 2 years I think)

This means that you can buy their Traveler membership, use it 9 years, and then sell and the total cost to you is $0,000,000.00 If you want to throw in the lost opportunity cost that’s up to you. If you do so, then do that on all your alternative uses of that money too.

I talked with Stan Bonnemort, the Director of Membership Sales, and he said that they would allow timeshare owners to postpone the 1st year of MFs as we use our current timeshares. They also are open to allowing 3 months to pay the membership fee at no cost.

This is something you might consider – free DC usage and the protection of 100% ownership in the DC.

If you do something or learn something I’d like to hear about it. The deadline to write a contract is June 15, 2007 and then you get 30 days additional to do Due Diligence – imagine that timeshare owners, 30 days to think it over.

Don't say you weren't given "Fair Warning". They are doubling their destinations and allowing you to stay at them for FREE.

Is this a great country or what? Free usage of $2 M condos.

Controversial political statement removed. ouaifer, Moderator

 

[Steamboat Bill]

This is something you might consider – free DC usage and the protection of 100% ownership in the DC.

If you do something or learn something I’d like to hear about it. The deadline to write a contract is June 15, 2007 and then you get 30 days additional to do Due Diligence – imagine that timeshare owners, 30 days to think it over.

Don't say you weren't given "Fair Warning". They are doubling their destinations and allowing you to stay at them for FREE.

Ok...Perry are you finally joining a DC?...it is FREE after all.

 

[PerryM]

Ok...Perry are you finally joining a DC?...it is FREE after all.

Going on vacation, starting Sunday, to Las Vegas and will ponder the thought.

 

[Steamboat Bill]

Going on vacation, starting Sunday, to Las Vegas and will ponder the thought.

See if you can visit the BelleHavens property in Las Vegas....I would be interested in your opinion.

http://www.bellehavens.com/details.php?id=63&tp=1

 

[PerryM]

Ohhh, I'll try that.

 

[Steamboat Bill]

Have anyone considered Ultimate Resorts?

It appears they also offer Equity Ownership....like BelleHavens

They bought T&H and now have 775 members and 105 homes!!!

Here are the key advantages of Ultimate’s Lifetime Membership:
Lifetime Membership can benefit you as the Club grows. All Lifetime Members can redeem their membership deposits for 80% of the then current membership fee. (For example, the current fee is $185,000. If you decide to redeem your membership after seven years when the fee is, say, $275,000, you would receive $220,000, a $35,000 gain on your original membership deposit.)

 

[puffpuff]

1. It takes 20 travelleer member ,each paying 100000, to purchase one home at 2,000,000. For eight new homes to be transferred to be wholly member owned, about 160 traveller member is needed. How long does this take - I guess at least 12-24 months.

2. Assume BH can achieve the goal, and entry fee becomes $150,000. Potential new member will have to compare with UR , which offers far more destinations, much cheaper cost per night ( UR offers 48 days for 220000 fee currently, while BH offers 21 days for about the same price currnetly. ( To be fair to BH, their properteis are about 25% better ) EVen at the entry level, BH only offers 15 days without family use for 100000 while UR offers 18 days with family use for abnout the same price ). If BH moves up the retail price to 150000 , will it price itself out for those who are mostly concern with vacation experience, and left itself holding onto a smaller "equity" conscious niche? If one is purely looking for vacation experience and no equity component, UR offers a far better value today.

3. Now let us look at the equity issue. Ultimate offers 80% , while BH offers 90% of membership fees on exit. While it can be said that UR is highly leveraged ( say 70%), while BH is not ( say 0%) , the reality is that both are highly leveraged. Why? BH is paying a high price to entice private equity investor group to front the money and finance the purchase of the 8-11 homes ahead of memberships coming in. Coporatre financers normally demand about 13% return annualized, a few up fron points, and on going goodies ( in theform of options , warrants etc). In this case, they put their hand in the MF. A part of the on going MF will be given to the management to keep them fat and to the investors forever as annuity in return for the risk that they take. This means that homes will be transferred to members not at todays cost but at a reasonsably inflated price at time of transfer ( the longer it takes, the bigger the price tag ). On top, a large part of the MF goes to pay the investor . Otherwise, it does not make sense for MF to be close to $566 ( $8500/15 days) a day to keep the house opetrating when it is debt free. The hard cost of keeping the house open per day is about $ 250, and there is a$300 per day premium to pay the management and their investors. At the end of day, investors are likely to walk away with 20% annualized yield one way or another for this deal. There is no free lunch. Members may hold the properties free and clear, but it will be at premium pricing, and more importantly, they will be held hostage to forever be paying a high MF ( double the normal) to pay for the investor's pre-fronting the money.

UR and others are financing their purchases, but financing is running today at about 8%, not 20% one has to pay private equity people. I sense that BH cannot get bank financing and have to turn to the private equity and private financerswhich demand a higher premium. If Banks can finance them , they would be much more competitive, and say, charge MF of $ 400 instead of $566 per day. The annual MF for traveller should be about $ 5000 and not $8500. Imagine what a compeitive advantage that would be - 100% owned, low MF - best of both worlds. I for one will line up to join.

I therefore may habor an erry feeling of a empty sense of "ownership". If there is true ownership, the MF should be about 50% of what they are charging. Someone is making money off the food chain - in this case, it is the managment team and the investors, and lots of it. And it is forever !

Eventually, if UR has lower cost of financing, the will be a better competitor on the open market. They will be able to pass more back to the consumer, as they already are doing, with lower price per night, free family use, special points that BH is unable to do. Size does count, and size favors UR.

I think that those who seize the "opportunity" now with BH may have a reasonable chance of seeing the membership price increase up a bit to attract those who buy into the "equity" thesis. I obviosly am not too overwhelmed at this junction, and I am still learning.

Perhaps a simple analogy is this.
You may be a McDonalds REstaurant franchise owner ( with BH) , but you have to use exclusive Mc Donalds cups, sppons, french fries that cost twice as much as open market price. Your bottom line is not that much better compare to a company own store ( UR) that hries you as a manager and gives you a bonus if the entire company does well. As far as the market place is concern, pricing for memebrship will be largely determined by the vacation experience proposition rather than by ownership equity proposition once the "equity " proposition is no longer enticing . Even if the equty portion is enticing, it should be a small facotr and not an overwhelming factor. Both BH or UR cannot overprice and have to stay compeitive within the market segment they are in, so the operator with larger economy of scale , efficiency, lower cost of funds, bwetter customer service and better marketing wins.

As far as safety is concern, BH also have the problem in that if they cannot execute the model of achiveing the sales target wtihin a reasonable period of time, .they will not be able to buy the homes at close to cost but to pay an ever increasing price regardless of market condition. This mayl backfire as their financing cost is doubel that of normal financing. This is a risk that cannot be ignored.

I have a gut feel that this effort by BH is a last resort breakout attempt to survive. I hope they do well.

As usual, I could be dead wrong, and please do not spare your bullets to shoot me down.



I am serioulsy looking at both models, and I welcome all thoughts .

 

[PerryM]

Assumptions...

<Snip>
I have a gut feel that this effort by BH is a last resort breakout attempt to survive. I hope they do well.

As usual, I could be dead wrong, and please do not spare your bullets to shoot me down.

Puff, many of your assumptions are wrong I believe.

There is NO comparison between BH and UR – BH owners own the condos, UR owners do not.

That one difference is all I need to know – this is what I want in a DC – a country club of condos where I am a part owner.

BH has a 10% “Restocking fee” and UR has a 20%. BH has a guaranteed price increase and UR does not. This is a big deal to me – a guaranteed price increase that I get 90% of. BH can’t plug it that way, that would get them into trouble with the SEC.

BH DOES NOT leverage! They have a company that’s sole function is to scout for new locations, buy them (probably financed) and then turn them over to BH for CASH. BH pays 100% of the sales price and there is NO leveraging. This is something I’m looking for and UT does not do this – they leverage. However, I am not up to speed on UT and may take the time in the next week to investigate them.

The money you pay to BH in membership fees go into an escrow account until enough members can be found to buy the new condo. During that time there is an oversaturation of 1 condo upon the BH inventory – but NO leveraging.

I’ve only looked at BH a few days – I could have some facts wrong, be unaware of the facts, or just got them wrong. I don’t recommend anyone invest in BH – I am not at this moment. The deadline of June 15 then gives you 30 more days to do your due diligence.

Guessing that BH is making a last ditch breakout attempt is not borne out by any of the facts that I see. I see a company that believes the Drive-By Media has tried to break the real estate market but failed and folks will start to realize there was no bubble busted – only the Drive-Bys attempt at destroying the economy – why I have no idea.

 

[puffpuff]

Perhaps you can help me understand why the MF of BH is almost the same as that of an leveraged club like UR if the properties of BH are debt free? MF for BH should be 50% reduced .

BH management and financers are being handsomely rewarded by being paid inflated sales price for the properties they fronted, and a on going annuity from a piece of the MF that the members are paying each month. This is a sweet deal for the investors .

Yes the members technically owns the property free and clear,but for this privilege, they are being handcuffed to pay a much higher MF in return. ownership comes with an very expansive on-site manager as part and partial of the deal plus a significant cash drain akin to be payiing royalty for life to the ifinancer. This is what motivates the investors to finance - they get their front money back plus profit once the homes are transferred to the members, and from that point on, a perpectual income stream without doing more work. A sweet deal indeed.

Perhaps I am not seeing the real benefit of "ownership" in reality terms.

The BH guarantee of increasing from 100000 to 125000 only happens once on June 15th. Thereafter further increase is dependent on sales performance. Well one guarantee is better than none, so based on 90% of 125,000, you still have one year of free MF paid for if you need to back out after 24 months. That is the minimum upside.

Looking forward to your comments as you get more into it. If BH is good, I may enroll. Thanks.

 

[PerryM]

Perhaps you can help me understand why the MF of BH is almost the same as that of an leveraged club like UR if the properties of BH are debt free? MF for BH should be 50% reduced .

BH management and financers are being handsomely rewarded by being paid inflated sales price for the properties they fronted, and a on going annuity from a piece of the MF that the members are paying each month. This is a sweet deal for the investors .

Yes the members technically owns the property free and clear,but for this privilege, they are being handcuffed to pay a much higher MF in return. ownership comes with an very expansive on-site manager as part and partial of the deal plus a significant cash drain akin to be payiing royalty for life to the ifinancer. This is what motivates the investors to finance - they get their front money back plus profit once the homes are transferred to the members, and from that point on, a perpectual income stream without doing more work. A sweet deal indeed.

Perhaps I am not seeing the real benefit of "ownership" in reality terms.

The BH guarantee of increasing from 100000 to 125000 only happens once on June 15th. Thereafter further increase is dependent on sales performance. Well one guarantee is better than none, so based on 90% of 125,000, you still have one year of free MF paid for if you need to back out after 24 months. That is the minimum upside.

Looking forward to your comments as you get more into it. If BH is good, I may enroll. Thanks.

Going on vacation to Las Vegas, today, and hope to get answers next week from BH.

 

[Bourne]

At this point, I can punch lots of holes in BH's new plan but let me throw out my biggest concerns.

The price is going up by 55% in the near future. The company says that the money is solely used for buying properties. Hmmm... The cost for exisiting portfolio of properties is $2.0M. BH says that it is now moving into $2.75 mil... range as it has increased the prices. That is either a smoke screen or disaster in the making.

BH provides 90% of existing prices for an exit from the club. The previous posts detail the potential % margin for members. Keep in mind that these exist for existing members also. Shoud they choose to exit, they cash into the profit too. Does that mean the exisiting properties appreciated from $2.0 mil to $2.75 mil overnight to cover for those potential expenses.

IMHO, it is a last ditch attempt by BH to break out into a growth phase. It is leveraging money to do so. Should it work out, things would be fine otherwise we have a period of stagnant growth or a potential merger.

 

[travelguy]

The dark side of BH?

Lot's of excitement about making money with Bellehavens but not much discussion on how their business model actually works. I raised these questions before and don't believe I've seen anyone answer them:

1. HOW do they make money?
2. WHO's making the money?

Has anyone seen a P&L, Balance sheet, cash flow statement, and/or projection?

It's great that the members "own" the properties but Bellehavens also has a list of heavy hitting "Investors" and a stacked board of directors (It appears that the "Investors" control the board.)

Included in the Investors is a VC firm that actually makes the following statement:
"Their model is unique from most venture capital or private equity firms in that they not only invest in and help capitalize the companies they work with, but then take an active management role with the companies to help set strategy, build the organization, and lead execution."
How is this different than any other VC in the world?? They ALL take control!

Again, I've spent no time investigating other than a quick look at Helium and the Bellehavens web site. Has anyone here done some due diligence on their business model on the management and investment side?

 

[Elsway]

As has been suggested, investors in Bellhavens expect a return on their investment - and it is not obvious that the company's business plan provides for a return on invested capital.

Perhaps this link will help demystify the issue:

http://www.bellehavens.com/documents/AnnualDuesDemystified.pdf

According to the linked document: annual dues cover the following:

Fixed home costs (29%), variable home costs (19%), the Bellehavens team (includes senior management compensation) (19%), Belleadventures (12%), capital reserve (8%), general and administrative (4%), and...Management fees (9%).

Management fees, according to the document are intended to "provide an appropriate profit to the management entity.

So, if each property has the equivalent of ten members, each paying annual dues of $8,500 - the gross dues per property are $85,000. The all in cost of servicing these ten members is 91% of $85,000 - and the management company pockets a profit of $7,650.

This may not seem like a large profit, but consider the profits if/when Bellehavens has a few hundred properties under management. (300 X 7,650 = $2,295,000). Profits will grow depending on the rate at which dues are increased and the rate at which Bellehavens adds new members (and properties).

And, the business is self funding. There will not be a need to increase equity funding.

The original investors invested a chunk of cash to buy the initial properties and set up the company's infrastructure. They now earn a 9% profit margin on a growing revenue base, in perpetuity.

 

[PerryM]

<snip>
The price is going up by 55% in the near future. The company says that the money is solely used for buying properties. Hmmm... The cost for exisiting portfolio of properties is $2.0M. BH says that it is now moving into $2.75 mil... range as it has increased the prices. That is either a smoke screen or disaster in the making.

Just checked into the Marriot Grand Chateau in Las Vegas - at NOON!!! We are here for a week and I will be talking with the BH sales guy on Monday and ask these very questions.

Till then...

P.S.

I'm making a list of questions to ask...the ones posted here will be asked. If you have more please ask them before Monday at 9 am PDT and I will incorporate them.

 

[Elsway]

Back in December, Bellehavens announced that they had received an equity investment from Hunt Realty Corporation (owned by billionaire Ray Hunt) and Sentry Financial. They did not disclose the exact investment amount.

I went searching and found the information. The investment was $5 million.

http://www.mwcn.org/dealflow/DealFlowBook2006-small.pdf?PHPSESSID=f2f9efe5c04fe5169f4d0fec25e48ad5

The investment seems to have been entirely growth capital. There is no indication that any of the money went to the venture capital firm which founded Bellehavens (Banyan Properties, LLC).

For now, I am going to assume that Banyan has sunk about $5 million into Bellehavens which, combined with the December 2006 investments, suggests that equity investors have sunk about $10 million into Bellehavens (enough to fund the purchase of 5 homes at $2 million each).

All skeptics should consider the fact that these equity investors will lose their entire investment should Bellehavens ever files for chapter 11 bankruptcy. The "new-money" investors (Hunt and Sentry) have undoubtedly performed a high level of due diligence and have (apparently) concluded that Bellehavens has a sound business plan.

As is apparent thoughout this forum, there are two aspects to the analysis of a destination club: 1) Does it offer enough value to consumers ?, and 2) Is it offering too much value, ergo endangering its long term survival (and our deposits).?

I am still performing due diligence on Bellehavens (I am also looking at Exclusive Resorts and Ultimate Resorts), but I am gradually becoming more comfortable with their (apparently sound) approach to this business. I think they offer good value, but not so much that the risk of joining is unacceptable.

 

[PerryM]

Questions to ask

Questions to ask:

1) What’s with the $2.75 M new homes and the old $2 M homes?
2) MS’s are 8%, the industry average. Why not half of that since no loans are being serviced?
3) 5 to 1 full memberships to condo, seems low compared to rest of industry.
4) What’s the difference between BH and UR?
5) Right now you have 65 members and 11 homes – how fast do you plan to sell new memberships and then acquire new homes?
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?
7) Just who and how do the investors of BH make money and how much?
8) If the Club should go belly up, who get's what in what order?

---- Added questions from later posts -----

9) How are the current dues prices related to higher condo acquisition costs?
10) Please explain how the management company is related to BH and if the members can vote a new company in.


Please add to the list. I'd like each question to be short enough where I can jot down an answer while the sales guy is on the phone.

 

[Elsway]

It appears that people are making the assumption that BelleHavens will be increasing the purchase price of new homes in direct proportion to the increase in membership deposits. This may be the case, eventually, but the numbers tell a more intricate story...

The Helium Report suggests that clubs should be managed for a 70% occupancy rate. Member-to-home ratios membership are useless measures because plans vary significantly - some memberships entitle members to as few as 14 days, while others entitle members to 40+ days.

A 70% occupancy rate translates into approximately 255 occupied nights per year. BelleHavens offers a membership play (Adventurer) which includes 30 nights. So, a 70% occupancy rate equals 8.5 Adventurer memberships. At current prices ($200,000), 8.5 memberships yields deposit revenue of $1.7 million. Yet, the company has been buying houses valued at $2 million. The difference between $1.7 million and $2 million is only possible because the company's equity investors have contributed startup capital. Equity investors have been subsidizing the purchase of real estate.

Going forward (post June 16), membership deposits will increase to $225,000 (for an Adventurer membership, 30 nights)...and 8.5 memberships will yield $1.912 million per home. Ergo, Bellehavens can continue to purchase $2 million homes, but the equity investors will be footing less of the bill.

Eventually membership dues will increase further - perhaps to $275K, at which point a 70% occupancy rate translates into $2.337 million. At this point, presumably, the company's overall portfolio of assets will have appreciated to the point where most of the homes are valued at more than $2 million. The company will then choose which of the two variables they should manipulate in order to be attractive to new members. They can either 1) begin to upgrade their homes, purchasing successfully more valuable homes, or 2) lower their target occupancy rates, thereby making accessibility more attractive.

Persons who are familiar with Exclusive Resorts believe that ER's high occupancy rates offsets many of the advantages associated with their high quality (high cost) real estate portfolio. i.e. the homes are great, but they aren't usually available when you want them...

 

[puffpuff]

Questions to ask:

1) What’s with the $2.75 M new homes and the old $2 M homes?
2) MS’s are 8%, the industry average. Why not half of that since no loans are being serviced?
3) 5 to 1 full memberships to condo, seems low compared to rest of industry.
4) What’s the difference between BH and UR?
5) Right now you have 65 members and 11 homes – how fast do you plan to sell new memberships and then acquire new homes?
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?
7) Just who and how do the investors of BH make money and how much?
8) If the Club should go belly up, who get's what in what order?


Please add to the list. I'd like each question to be short enough where I can jot down an answer while the sales guy is on the phone.

What right does BH , being 100% owned by members, is able to "breakloose" from the management contract with banyan ( I am assuming there must be one in place at this time) and select another management firms if the majority of members of BH decide to do so. ? Does banyan or management team have direct or indirect majority control of BH ?

Is there crossover of management between senior management staff of BH vs Banyan .? ( possible conflict of interest)

Since BH will be 100% owned by members, will members have majority control , or who is going to be on board of directors of BH to set policies and select management team for running of BH in a a way that is dictated by its members?

Who sets the operating expense and budget on behalf of BH and to what degree that BH members have to be bind by it.

If the income does not cover the operating expesne of BH, what is goign to happen to the properites? Will they be foreclosed in the worse case senerio?


I am just throwing questions out. Please use your best judgement accordingly.

 

[PerryM]

My understanding, and I’m on vacation without the BH documentation in front of me, is that:

Traveler $100,000 membership * 20 owners = $2 M
Adventurer $200,000 membership * 10 owners = $2 M
Voyager $300,000 membership * 7 owners = $2.1 M
Explorer $400,000 membership * 5 owners = $2 M

A condo can be made up of any combination of the above but it MUST total $2 M. (Ok, the $100k difference in Voyager could be a zinger here)

The members who join place their membership fees into an escrow account until $2 M is raised and then they get shares in BH which represent the proportion they are due. In the mean time they temporarily oversaturate the existing situation when reservations are made.

As to the proportionality of buying more expensive condos and raising the fees – I am guessing they are linked, but I will now add this question to my list:

9) How are the current dues prices related to higher condo acquisition costs?

Puff,
I’m just assuming that the members have no say as to the management company and that a HOA does not exist. But I will put down another question:

10) Please explain how the management company is related to BH and if the members can vote a new company in.

11) What documents/information can you supply BEFORE any nondisclosure documents are signed that will help with "Transparency" of your operations?

 

[travelguy]

Not Enough ROI for the Investors

As has been suggested, investors in Bellhavens expect a return on their investment - and it is not obvious that the company's business plan provides for a return on invested capital.

Perhaps this link will help demystify the issue:

http://www.bellehavens.com/documents/AnnualDuesDemystified.pdf

According to the linked document: annual dues cover the following:

Fixed home costs (29%), variable home costs (19%), the Bellehavens team (includes senior management compensation) (19%), Belleadventures (12%), capital reserve (8%), general and administrative (4%), and...Management fees (9%).

Management fees, according to the document are intended to "provide an appropriate profit to the management entity.

So, if each property has the equivalent of ten members, each paying annual dues of $8,500 - the gross dues per property are $85,000. The all in cost of servicing these ten members is 91% of $85,000 - and the management company pockets a profit of $7,650.

This may not seem like a large profit, but consider the profits if/when Bellehavens has a few hundred properties under management. (300 X 7,650 = $2,295,000). Profits will grow depending on the rate at which dues are increased and the rate at which Bellehavens adds new members (and properties).

And, the business is self funding. There will not be a need to increase equity funding.

The original investors invested a chunk of cash to buy the initial properties and set up the company's infrastructure. They now earn a 9% profit margin on a growing revenue base, in perpetuity.

I do not believe that this ROI is nearly enough for this type of investor to be playing in this game. If the BH members really do "own" the properties, the investors are making a huge gamble with no assets to show for it and too great a risk for the mediocre (in the world of VCs) return on their investment! There must be something else!?

 

[travelguy]

Investors, Management & Transparency

10) Please explain how the management company is related to BH and if the members can vote a new company in.

Perry,

More important may be the relationship of the investors of BH (a.k.a. Board of directors) and the management company. I assume that they may be the same. Anyway, I would be somewhat concerned if the investor with majority control can change management at will (and possibly the biz model, cost to members, etc.).

Your question # 11 should be about "Transparency". Are they willing to provide the documents you need to do the responsible due diligence for this type of investment?

I still haven't seen anyone post if they have received the BH P&L, Balance sheet, cash flow statement, tax returns and projections for the next 3-10 years (including cash flow projection).

Also important is the tax strategy that BH uses in relation to IRS codes and the members portion (benefits AND liability) since the members "own" the properties. I'm not a tax attorney but know that this is a huge issue and High Country Club fully disclosed their tax strategy, with accountant and IRS comments, in their investment package. Fortunately, this is not something that those of us DC members without property equity have to worry about!

 

[PerryM]

Smaller bites..

Perry,

More important may be the relationship of the investors of BH (a.k.a. Board of directors) and the management company. I assume that they may be the same. Anyway, I would be somewhat concerned if the investor with majority control can change management at will (and possibly the biz model, cost to members, etc.).

Your question # 11 should be about "Transparency". Are they willing to provide the documents you need to do the responsible due diligence for this type of investment?

I still haven't seen anyone post if they have received the BH P&L, Balance sheet, cash flow statement, tax returns and projections for the next 3-10 years (including cash flow projection).

Also important is the tax strategy that BH uses in relation to IRS codes and the members portion (benefits AND liability) since the members "own" the properties. I'm not a tax attorney but know that this is a huge issue and High Country Club fully disclosed their tax strategy, with accountant and IRS comments, in their investment package. Fortunately, this is not something that those of us DC members without property equity have to worry about!

How can I break "Transparency" down to a few simple questions?

To me Transparency has been the mortgages that must be serviced and who gets first dibs the any assets. In this case that would be the arrangement of who gets what in what order - a question I am already going to ask.

Beyond that the business plan is just a "Wish List" of things to do. I guess I could get the P&L and minutes of official meetings if they exist.

So I need a few questions that would be answered in a few sentences to get anything from those questions. I will ask what documents are provided with the $3k deposit but undoubtedly non disclosure documents are signed to get those.

P.S.
I will add the question:
#11 What documents/information can you supply BEFORE any nondisclosure documents are signed that will help with "Transparency" of your operations?

 

[travelguy]

How can I break "Transparency" down to a few simple questions?

Perry,
Sorry I didn't answer in Question form (just kidding )

To me Transparency has been the mortgages that must be serviced and who gets first dibs the any assets. In this case that would be the arrangement of who gets what in what order - a question I am already going to ask.

Beyond that the business plan is just a "Wish List" of things to do. I guess I could get the P&L and minutes of official meetings if they exist.]

The biz plan tells me a lot about the people I'm about to invest with. I often find that the math doesn't add up (sometimes literally). The biz plan tells me if the "plan" has any chance to succeed and if it makes sense. It also tells me if the company has thought out the problems that make companies fail, like cash flow and exit strategy. Most importantly, it lets me know if the company has done their own due diligence and if the plan is realistic. If the biz plan looks suspicious and/or if the management can't answer questions about the plan, RUN!

So I need a few questions that would be answered in a few sentences to get anything from those questions. I will ask what documents are provided with the $3k deposit but undoubtedly non disclosure documents are signed to get those.

P.S.
I will add the question:
#11 What documents/information can you supply BEFORE any nondisclosure documents are signed that will help with "Transparency" of your operations?

Why wouldn't you sign a NDA? I wouldn't even consider making this type of cash investment without these docs. If they won't show you these docs with a NDA, RUN!

 

[PerryM]

NDA = "Mums the word"

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Why wouldn't you sign a NDA? I wouldn't even consider making this type of cash investment without these docs. If they won't show you these docs with a NDA, RUN!

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.

 

[Elsway]

I do not believe that this ROI is nearly enough for this type of investor to be playing in this game. If the BH members really do "own" the properties, the investors are making a huge gamble with no assets to show for it and too great a risk for the mediocre (in the world of VCs) return on their investment! There must be something else!?

According to BH documents, the company can increase annual membership fees at a rate which is up to CPI +5%. I would assume that operating leverage will kick in and margins will improve. Management fees, currently 9% of revenue, will probably increase over time. This is a very high quality cash flow stream - stable growth.

What would you pay for a company that had $2.5 million of net cash flow, growing at CPI+, in perpetuity? Many would argue that such a company would be worth more than $25mm. Assuming the equity investors have invested $10mm - and assuming the company is worth $25mm in five years -the equity investors will have earned 150% over five years.

Over time, I would expect Bellehavens to find additional ways to capture revenues from their clients. With an affluent, well-traveled clientele - there should be plenty of cross selling opportunities.