Recent Destination Club News

[Kagehitokiri2]

so, did ER sell the montage villa, or are they getting the rental income?
http://www.montageresidences.com/lagunabeach/residential-rentals.php
http://www.montageresidences.com/lagunabeach/seven-stickley.php
then again while i seem to recall hearing they owned at montage, not positive they arent/werent leases?

dont recall if any DCs have properties at villas del mar or espiritu del mar?
http://www.elitetraveler.com/news_d...piritu-be-mexicos-finest-private-fitness-club

http://ir.ultimateescapes.com/releasedetail.cfm?ReleaseID=460456

$3.75 million in member assessment fees earned in the fourth quarter of 2009 that were not earned in the prior-year quarter

Net loss for 2009 was $13.0 million

http://ir.ultimateescapes.com/secfiling.cfm?filingID=1144204-10-20598

All of the properties owned by us are subject to one or more mortgages.

We do not intend to levy an assessment fee in 2010 unless the majority of members vote in favor of any proposed assessment. We intend to seek to raise more equity in 2010...We have plans to spread out the collection of annual dues more evenly throughout the year.

at December 31, 2009 and 2008, there were 46 and 11 members, respectively, who had resigned.

$5,037,000 - Membership deposits to be refunded
seem to recall the PE resignation figure being ~60
dont know how many TH and reactivated have walked (no option to resign, right?)

1214 members
104 owned ($152.6mm value) (8 held for sale) + 37 leased (2 leased from keith)

$20,680,763 non-recurring revenue in 2009 (56% of $37,011,000 revenue) (EBITDA = $6,702,000)
$12,144,000 - assessment revenue in 2009
$5,719,763 - revenue from SAAC transaction

Other revenue was $2,817,000 in 2009...due to the cross reservation program fees in 2009 charged to Private Escapes for allowing their members to stay at our properties. This cross-reservation program ended effective September 15, 2009, when we acquired Private Escapes.

$123mm debt
$99mm capitalsource (secured)
$13.6mm various mortgages (from PE, incl one from keith)
$10mm shareholder note (secured)
$700k non-mortgage notes

comp
JT $316k (contract = $450k, increase 10% per year, $25K car, benefits)
RK $334k (contract = $375k, benefits)
CFO $261k (contract = $375k, benefits)
seem to recall details on benefits in original SAAC docs, and they really added up. paid vacation is 20 days.
board members $11k > $96k

UE owns 15% of "Villa Bugambilia, LLC, an entity which owns a property located in Mexico on which a condominium is being constructed"

re conference call - 16 minutes and 1 caller

 

[ClubsRDead]

Was it just me, or did the one and only person asking questions seem like a "plant" so JT could propel a rosy outlook of the industry?

 

[UnhappyInCT]

Note 3 to the financial statements summarizes how close UE is to going under (or to putting another gun to the head of the members)...

NOTE 3 – LIQUIDITY

Our consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to
a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As shown in the
accompanying consolidated financial statements, the Company incurred net losses of $12,965 and $23,222 during the years ended December 31,
2009, and 2008, respectively. As of December 31, 2009 and December 31, 2008, the Company's current liabilities exceed its current assets by
approximately $33 million and $9 million, respectively. In addition, although we have completed the refinancing of our CapitalSource revolving
loan facility (Note 2), we may not be able to meet certain covenants under the revolving loan agreement in the future (see Note 7). We have also
experienced a decrease in new membership sales and existing member upgrades over the last six months of 2008 and throughout 2009.The above factors, among others, indicate that we may encounter a liquidity event which may cause us to be in default of our loan covenants.

Our management has taken steps to increase cash flow in order to cover 2010 operational expenses through, if necessary, the sale of selected
club properties, and closely monitoring and reducing operating expenses. In addition, the Company is actively seeking to raise additional
working capital.

The items discussed above raise substantial doubts about our ability to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and reclassification of recorded asset amounts or the amounts and classification of liabilities that might
be necessary, should we be unable to continue as a going concern.

 

[wilkes591]

Is this new info?

We all know this. What has changed nothing. So they got your money, my money, and other's members money. You made a choice to write them off and walk away from your deposit, I just made a different choice.

I would rather use them until the end with as little of my addition capital as possible. If you did not notice UE did just raise in March over $5 Million from members who volunteered to pay an extra year in dues for additional reservation days and other benefits. I was not one, however it will keep the company afloat.

I think you are under estimating how foolish some member's are with money or how much some member's enjoy the life style and are willing to pay for it or how some member's have so much capital that this is just a drop in a bucket to them.

So be unhappy in CT and a player hater, while I am happy travel with my friends and family until the end.

I hope some thing else can make you happy, other then me and all the other member lose our deposits and travel opportunities we pay for. Yes, JT benefits from my travels, so what. I got bigger fish to fry.

 

[Kagehitokiri2]

im at a loss re the deposit > stock conversion. shouldnt it be dropping their deposit liabilities?

will be interesting to see exact number for new non-recurring in Q1. (and %)

 

[wilkes591]

All that matter's

is CASHFLOW to UE. They need capital and need to reduce expenses. I would say they have enough until the end of July or August, base on the burn rate and the additional capital from the members in March.

How did they get $7 million in new deposits in 2009? How stupid and blind can people be?

 

[Desties]

The Call

The 16 minute conference call was one of the shortest that I've heard in a long time.

No, I don't think the lone analyst asking a question was a plant. It's just that you're not exactly going to have Morgan Stanley or Piper Jaffray covering a company as tiny as Ultimate Escapes.

During the call it was mentioned that just $3 million and change of its debt matures this year, so unless I'm missing something I don't see default risk until next year (and I'll naively cross my fingers, hoping for general industry improvement by then). So I think the litigation risk is a bigger threat than its debt coverage.

And the warning is pretty standard boilerplate EXCEPT for the "going concern" remark. That's no fun.

Still, there will be a members call next week, so hopefully we'll have more questions answered then.

 

[wilkes591]

CapSource is going to lose alot more money then me!

Except for payments required on the sale of a mortgaged property, no principal payments are due until maturity on April 30,
2011, except required cash payments of $2 million on December 31, 2009, $3 million prior to June 30, 2010 (which have both been paid as of
March 31, 2010) and $5 million prior to December 31, 2010. As described above, we are currently in negotiations with CapitalSource which
may require us to increase the repayment obligations due by June 30, 2010 and December 31, 2010. If we exercise one or both of the extension
options, cash payments are required of $5 million on each of June 30, 2011, December 31, 2011, June 30, 2012 and December 31, 2012

Is that $5 Mill on 12/31/2010 for interest?

How do you raise $9 million and pay $4 million in fees?

I hope you are right!

 

[Kagehitokiri2]

perhaps its a matter of the real estate market. as long as it stays down, capsource probably doesnt really want to take ownership and have to sell/etc.

 

[AKTHUE]

Capsource fees and control

capsource probably doesnt really want to take ownership and have to sell/etc.

As long as Capsource gets another fee for every modification and for waiver of every convenant violation, and as long as they can convince an appraiser or auditor that they have enough security for their loan, they can keep playing the modification and waiver game.

However at some point the music will stop, and Capsource will take control, and at that point Capsource will have to make the decisions based on the highest recovery for their loan balance - whether they are better off operating a club or selling property. They will likely be better off selling property. JT's last maneuver could be to file for BK the day before Capsource forecloses, but then the BK court or trustee will control.

We will probably all get to see this kabuki theater later this year.

 

[wilkes591]

You think CapSource wants to Foreclosure?

I can tell you one thing I am witnessing first hand. The Real Estate market will be hit hard in the next few months. We are processing more foreclosures now for clients then ever before. The wave is coming and it is a big one. I doubt Capsource will be able to get $50 million through forced sales of Real Estate in vacation markets.

I hope Capsource realizes the market conditions and continue soaking up the payments until the market turns and who knows by then UE might have a chance.

 

[Kagehitokiri2]

when do we get Q1?

How did they get $7 million in new deposits in 2009?

2009
$7,052,000 membership fees
$60,000 upgrade fees

2008
$3,650,000 membership fees
$409,000 upgrade fees

http://viavid.net/vvdce/U298432/E000073CE.asx
"our sales pipeline, mark, is probably the highest its been in the last 18 months" (oct 15 2008 > apr 15 2010)
(mark argentino @ craig hamilton capital )

UE did just raise in March over $5 Million from members who volunteered to pay an extra year in dues for additional reservation days and other benefits.

so instead of having to "upgrade" for more nights

 

[AKTHUE]

UE 2009 Membership fees could be misleading

2009
$7,052,000 membership fees
$60,000 upgrade fees

2008
$3,650,000 membership fees
$409,000 upgrade fees

I found the $7 million in membership fees to be surprising, too.

Then I realized - this is not the cash flow, it is accrual accounting. UE states that it recognizes the non-refundable portion of membership fees over 18 months, and the refundable balance over 10 years. Further, UE trumpeted their growth in homes, members and revenues as a result of the PE merger. So... the difference in the 2009 and 2008 numbers is not so much how many new members they sold each year, but how much of the member deposit they recognized as revenue, and how many new members they got from PE from which to recognize revenue. It doesn't really indicate any large number of new membership sales.

Member intiation fees not yet recognized and overall deposits also went up due to counting the PE members.

A cautionary note in the 10K filing:

On the balance sheet, the amount of membership receivables went from 639,000 to 3,264,000 -- UE reinstated all the suspended members and invoiced them - and maybe recognized that as revenue. How many of them are actually paying? Members are supposed to prepay the membership fee, so why is there such a big receivable?

 

[Kagehitokiri2]

indeed, lots of fun stuff.

i broke out non-recurring in my first post. (56% in 2009.) i think that sums it up, without having to figure out how they break down recurring.

im most confused by deposit liability. i thought the point of stock conversion was to reduce it. i didnt really get that from the docs.

re paying - big question is how many TH and reactivated walked. (because they cant resign, right?) they did say renewal rate dropped in 2009 (for 2010?) in the call. dont remember numbers. and when they say "resigned" what does that mean - added to list, or cleared the list?

(and of course sales, which they are trying very hard to make sure it cant be figured out via other data.)

 

[AKTHUE]

Deposit Liability

im most confused by deposit liability. i thought the point of stock conversion was to reduce it. i didnt really get that from the docs.

(and of course sales, which they are trying very hard to make sure it cant be figured out via other data.)

Maybe the deposit liability went up because they added deposits owed to members that came in via the PE merger. It seems dishonest to claim all this revenue and member growth due the PE merger, when that merger was signed in 2007 and it was really just a delay in closing.

I am cofused about one other point. UE recognizes the REFUNDABLE part of the member deposit as revenue over 10 years, meanng 10% per year. And they mention a membership redemption assurance program, which reduces the amount of the membership to be refunded until it is reduced to zero after 10 years, to justify recognizing the revenue, I think. But aren't members entitled to a refund of the membership (or 80%) forever? Does the refund right really go away after 10 years? Or does it just change from a refund to a resale of the membership? This feels like an accounting gimmick.

 

[Kagehitokiri2]

pretty sure it does go away 10 years after member joined. IIRC its stated in membership docs and financials.

IIRC EndofDays, TarheelTraveler, etc discussed this accounting issue, but dont recall the conclusions.

 

[TarheelTraveler]

I found the $7 million in membership fees to be surprising, too.

Then I realized - this is not the cash flow, it is accrual accounting. UE states that it recognizes the non-refundable portion of membership fees over 18 months, and the refundable balance over 10 years. Further, UE trumpeted their growth in homes, members and revenues as a result of the PE merger. So... the difference in the 2009 and 2008 numbers is not so much how many new members they sold each year, but how much of the member deposit they recognized as revenue, and how many new members they got from PE from which to recognize revenue. It doesn't really indicate any large number of new membership sales.

Member intiation fees not yet recognized and overall deposits also went up due to counting the PE members.

A cautionary note in the 10K filing:

On the balance sheet, the amount of membership receivables went from 639,000 to 3,264,000 -- UE reinstated all the suspended members and invoiced them - and maybe recognized that as revenue. How many of them are actually paying? Members are supposed to prepay the membership fee, so why is there such a big receivable?

Lots of good points/questions are being raised.

It would be interesting to know what portion of the $7M relates to new membership sales versus the recognition of revenue from the existing deposits (I suspect now mostly from the PE side), which we all know is not cash flow, just removing a liability from the books. I certainly didn't read every word of the 10-K, but I didn't see anything that breaks down member sales or member number changes. Seems like it would be a good question to ask about on the member call. It seems like prior filings (maybe they were in connection with the offerings) were more informative.

Also would be worth asking about the increase in membership receivables. AKTHUE's explanation seems the most logical, but if so, I wonder how much of that "asset" is actually collectible.

In reference to AKTHUE's question, IIRC, didn't the membership redemption assurance program reduce the amount the member was entitled to on liquidation (rather than a resale of the membership)? In other words, the deposit return is amortized down to zero over 10 years if the club is liquidated.

 

[Kagehitokiri2]

btw IIRC this is another thing they broke down more in past financials.. (deposits etc)

In reference to AKTHUE's question, IIRC, didn't the membership redemption assurance program reduce the amount the member was entitled to on liquidation (rather than a resale of the membership)? In other words, the deposit return is amortized down to zero over 10 years if the club is liquidated.

huh. guess i dont remember at all.

 

[TarheelTraveler]

A couple of additional questions/thoughts:

1. Loan Covenants - "We incurred net losses of $13.0 million and $23.2 million during the year ended December 31, 2009 and the year ended December 31, 2008, respectively."

"Covenants in the revolving credit facility include obligations to maintain either a restricted cash balance of not less than six months of debt service or a debt service coverage ratio of 1.25 to 1, to maintain a leverage ratio between debt and consolidated net worth of no more than 3.5 to 1, to comply with specified ratios of number of club properties to club members, to have a net loss of no more than $10 million in fiscal 2009 and $5 million in fiscal 2010, and to have net income in each year thereafter (as adjusted in each year for the non-refundable portion of new member initiation fees not yet recognized in income and, in 2009, for non-cash stock-based compensation), and to maintain a consolidated debt ratio of no more than 80%. "

Is CapitalSource waiving these covenants or is there something that I'm missing? I assume that they're better off waiving the loan covenants.

2. I don't think I understood the bolded part before in the discussions on DC4MS (or if I did, I forgot): "Club members who resign may receive a partial redemption of their membership fee. We provide assistance to club members who resign by using commercially reasonable efforts to resell a resigned club members’ membership, and upon such resale, the resigning club member generally receives 80% of the proceeds of sale and we retain the remainder as a transfer fee. In the event we are unable to resell a resigning club members’ membership after an agreed period of time, we have certain arrangements with such club members to provide a partial redemption of their membership fee (excluding the initiation fee), based on a sliding scale that declines to zero over a 10 year period."

Looks like that comes into play in either liquidation or if they are unable to resell the membership.

3. I was trying to get a rough idea of the cash flow based on the 10-K. Assuming 2010 is like 2009 (which, of course, is a big assumption but I'm not sure what else you do), the Club has inflows of 14.9M in dues and 98K in interest income. Although not entirely clear, the 10-K suggests another 2.8M in revenue in 2009 mostly came from PE from the cross-reservation program which ended. So not including another assessment (12.1M last year) and based on a stable membership, there would be about 15M coming in plus an inflation adjustment to dues, so maybe that gets you to 16M. I did not include sales revenue, as it's not clearly deliniated in the 10-K (between new monies and recognition of deposits on the books), and I'm not sure how much you can count on it in this environment.

On the cost side, there were $11M in property operating costs less some for the PE cross-reservation program (the 10-K says there was a 1.1M increase primarily from this program on the expense side). 3.5M in lease costs. 3.0M in salaries (excluding non-cash compensation). 3.5M in general administration. 10M in interest expense. There was also 1.2M in advertising and 479K in sales commissions, but let's take that off the table and assume that sales cover those expenses.

Accordingly, based on this rough math, the costs of running the portfolio and club are probably in the 27-31M range, and incoming dues are something like 16M. For those who are more financially adept, what am I missing?

Based on the 10-K, cash typically comes from one of the following sources: equity capital, member sales (new deposits and upgrades), dues and borrowing. Borrowing obviously just adds to the debt, and while it may be a short-term solution, it seems like it would just add to a long-term problem IMHO. Member sales are starting to kick in across the industry, but not at anywhere near pre-2008 levels, so I'm not sure that is a good source right now, and to the extent that you take those deposits to spend on operating shortfalls (rather than real estate or the pay down of principal on debt), you again just add to a long-term problem IMHO. Equity capital is tough to find these days based on the prior UE offerings and in general.

An obvious source of revenue is from the members again, but do the UE members on here think that it is a viable source, given the 2009 assessment and RAP conversion program that brought in a good amount of dollars from members but didn't go so well from a stock price standpoint?

It would be nice if UE could refinance the debt at a lower rate or get some debt forgiven from CapSource. Are those likely possibilities based on what you're hearing?

Obviously, expenses could likely be cut some more, which would help some.

I've got to give JT credit for always being creative, so I wouldn't be surprised by anything, but what other options am I missing?

 

[Kagehitokiri2]

incoming dues are something like 16M

i got the same thing ($16,330,237) by breaking out non-recurring >

$20,680,763 non-recurring revenue in 2009 (56% of $37,011,000 revenue)
$12,144,000 - assessment revenue in 2009
$5,719,763 - revenue from SAAC transaction

Other revenue was $2,817,000 in 2009...due to the cross reservation program fees in 2009 charged to Private Escapes for allowing their members to stay at our properties. This cross-reservation program ended effective September 15, 2009, when we acquired Private Escapes.

An obvious source of revenue is from the members again, but do the UE members on here think that it is a viable source, given the 2009 assessment and RAP conversion program that brought in a good amount of dollars from members but didn't go so well from a stock price standpoint?

We do not intend to levy an assessment fee in 2010 unless the majority of members vote in favor of any proposed assessment. We intend to seek to raise more equity in 2010...We have plans to spread out the collection of annual dues more evenly throughout the year.

UE did just raise in March over $5 Million from members who volunteered to pay an extra year in dues for additional reservation days and other benefits.

comp
2009 $5,149,000 + $6,604,000 stock
2008 $7,250,000 + $2,169,000 stock

 

[TarheelTraveler]

Three additional news items:

http://www.marketwatch.com/story/ul...-destinations-2010-04-20?reflink=MW_news_stmp

UE "announced the addition of the new five-star Waldorf Astoria Orlando to the Club's growing portfolio of spectacular vacation destinations. The partnership will allow members of Ultimate Escapes to vacation at Waldorf Astoria Orlando as part of their destination club membership...."

http://www.sherpareport.com/destination-clubs/quintess-tour-club-0410.html

"The luxury destination club Quintess, LRW has has entered a reciprocal agreement with its newly launched sister club THE TOUR CLUB. Quintess, LRW members will have access to new destinations that include:

The Resort at Pelican Hill, Newport Coast, California
Sage Valley Golf Club, Graniteville, South Carolina
Atlanta National Golf Club, Atlanta, Georgia
TPC Jasna Polana, Princeton, New Jersey

At the Resort at Pelican Hill, rated by Golf Magazine as a "Premier Resorts 2010 Top Newcomer," members stay in richly appointed two-bedroom villas. Sage Valley, ranked as #6 of America's greatest golf retreats by Golf Digest, offers members four-bedroom cottages that epitomize Southern charm and luxury. At Atlanta National, one of Georgia's most respected private clubs offering world-class golf, members stay in either a four-bedroom lodge overlooking the 8th or 12th hole, or the five-bedroom villa overlooking the 17th green. Nestled in the beautiful hills of Princeton, NJ, TPC Jasna Polana offers the opportunity to stay in one of the two former private residences on the estate...."


http://www.luxist.com/2010/04/13/the-design-of-the-villa-vacation-part-1/

""The Villa vacation experience is a good value, because it can create the best memories," said Charlie Stephenson, Director of A&K Villas Europe, " and a great way of seeing Europe in a leisurely, elegant and often in a multi-generational way. Yes, we had a standstill in 2009, but we did not deflate. But this year, 2010, we are up dramatically! Since January 2010, our volume has increased about 25%."
...
"Both the American and our European Villa guests often travel in groups: with nannies, grandparents, in-laws, and children's friends -- so they are always are very appreciative of the expansive nature of our Villas,"comments Charlie."If a family stays with us once, they will never want to stay in a hotel again. We have child friendly properties, professional child care people and nannies, child friendly touring ideas and holidays. And no child is confined to a hotel room and with us, they can make all the noise they want to! Some of our villas have Nanny apartments also."

""But our services move beyond children! We can of course hire private chefs, sail and yacht charters. A&K is, after all, a high end travel company so from these Greek villas, or from any of our villas, we can put together one day to five day tours of areas fairly close by. For example, if you are staying in a Villa in Venice, we can arrange a trip to Dubrovnik, which is right across the Adriatic. or, if you stay at one of our Villas at St. Emilon, we can do a vineyards/wine cave tour, no problem. This differentiates us from many other high end villa rental companies, and probably one of the reasons for our continued success."

Another variable for the continued villa rental success may be the deflation of many of the high end destination clubs that bankrupted in the past few years: Solstice, The Lusso Collection, High Country Club, to name a few. Members of those clubs sampled the life of high end residences and villas, and became acclimated to exceptional space, location and amenity."

 

[Desties]

UE - Waldorf in Orlando

I hate to look a gift Waldorf-Astoria in the mouth, but I just checked the rates on the "deluxe rooms" that are being made available through the program and they can be booked directly for as little as $161. That's a bad deal, even if were made available to the PE Legacy members.

I see the allure, especially for UE folks who have a lot of unused nights or want to gift them to a relative, but it's still not a very compelling value proposition.

 

[Kagehitokiri2]

removed...

 

[TarheelTraveler]

I hate to look a gift Waldorf-Astoria in the mouth, but I just checked the rates on the "deluxe rooms" that are being made available through the program and they can be booked directly for as little as $161. That's a bad deal, even if were made available to the PE Legacy members.

I see the allure, especially for UE folks who have a lot of unused nights or want to gift them to a relative, but it's still not a very compelling value proposition.

http://www.sherpareport.com/destination-clubs/waldorf-astoria-orlando-ultimate-escapes-0410.html

"The hotel will be part of the Ultimate Collection, a selection of over 130 luxury hotels around the world. Ultimate Escapes members can use up to 7 nights per year to stay in suites at the Waldorf Astoria or other hotels in the collection.

Ultimate Escapes already has a large 4 bedroom, 4 bathroom home in Orlando. Robin Spindell of Ultimate Escapes told SherpaReport "We are booked solid in our Orlando home so this should help members have much more access to this popular destination.""

Desties' post and the quote above made me wonder about this program. Do you get a suite as noted by the SherpaReport or a deluxe room at the Waldorf Astoria as noted by Desties?

I'm not a big fan of the hotel programs (including my own club's), but I guess if you've got extra nights to burn, it's another option.

 

[Desties]

Well

The press release has it as "deluxe rooms and suites" that will be available:

http://finance.yahoo.com/news/Ultimate-Escapes-Adds-New-prnews-1225778276.html?x=0&.v=1

I'm guessing the club level may determine the actual exchange, though the "deluxe suites" can be booked for as little as $200-ish. The primo Waldorf Astoria Suite was as cheap as $675.

The home is in Reunion -- and it's a Signature-level property and very nice. Orlando is a hub of cheap property rentals, but it's important to have a presence there given how popular it is.