Rob V

I'm sorry to hear about your experience DC Skeptic. I believe that you raise some very valid points. If a DC is holding a significant number of properties purchased pre downturn, and which are leveraged, the economic risk is real vis a vis the debt to member deposit ratio.

On the flip side there is another scenario playing out that has a host of positives. What if the DC had no debt, had not purchased property 3-5 years ago, was in full new property acquisition mode with all cash in hand in this buyers market, had a 1 in 1 out exit providing 92.5% of the current member price, and gave up 80% of the ownership in the real estate to its members?

A true equity model providing the same hassle free concierge and "memorable experience" creation that is the hallmark of DC's enables these "owner's" (members) to have the best possible protection against downside risk; actual ownership of leverage free real estate.

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Rob Vaka
Vice President, Investor Relations
Equity Estates

DC Skeptic

In a nutshell, I joined with all the questions and concerns I left with. I wanted asset coverage, positive cash flow and financial disclosure. They didn't materialize and I left. Three conclusions: (A) the product must be priced right and by that I mean it can at the very least stay afloat on an operating cash flow basis without relying on new member deposits, (B) the financials should be logical, thorough, timely and readily available, and (C) you have to see how you can get out and have confidence that your deposit is "money good".

The model you describe certainly seems closer to the mark than what I had, but is undoubtedly much more expensive than what I had. While I think the offering should be priced to cover the concerns raised, I am not sure I would pay that higher price. That is why I will probably stay outside of the DC model for now.

But your proposition does raise a good point. I joined a club that seemed too good to be true. It was. For a low cost I was essentially taking alot of equity risk with my deposit. Not equity in that I had real estate appreciation upside, but equity risk in the sense that if it went bankrupt I would lose alot of my money. An equity model seems to be more upfront with the actual risk the member is taking.

Kagehitokiri

where are ~$3MM+ (for example) having the same issues as below that?

miami does not equal miami beach etc.

re vegas, last i recall citycenter was doing fine. im sure palazzo condos will sell out immediately. even palms place (opened a few months ago) sold out quickly.

if RE is the only concern, then one could restrict their choices to quintess ($4MM) and/or solstice ($6.5MM).

TarheelTraveler

There are several clubs with models that IMHO make no economic sense. There is no way to make the numbers work. Either the deposit is too low, the dues are too low, and/or the properties are too expensive. The economic model should not be hopefully we'll get bought out or be large enough to do an IPO. At least most DCs seem to be making positive strides in the right direction and some of the upstarts have had the benefit of hindsight and the mistakes that other DCs have made.

NeilGoBlue

DC Skeptic,

I agree with everything you have said and I have tried to say it in the past that way.. but you did it much more effectively.

Kudos!

Kagehitokiri

now that we know DC Skeptic was discussing PE, do any PE members have any comments/responses to the discussion of that club specifically?

vineyarder

I wish that I could contribute more to the discussion, but I am not sure what info I have been given is confidential is which info is not. It certainly would be nice if someone from UE management would respond...

One thing I do feel comfortable commenting on is that I have been told that the enterprise value of the new entity (UE) is > 1.0 (i.e. net worth is now positive).

__________________
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Living in a vacuum sucks!

caribbeansun

It does beg the question of what kind of financial situation UR was in to agree to merge with an entity as messed up as PE based on what has been said here - all of the issues mentioned by Skeptic would have been pretty obvious during their due diligence phase.

pwrshift

This is what I don't like about 'private' DC's -- you can't say anything because of the non-disclosure and the DC doesn't contribute and say anything (even though they read these posts).

Kagehitokiri

to be honest, i guess im confused because DC Skeptic's opinion of/statements regarding PE's financial situation seems so completely different from some of the PE members here.

DC Skeptic

I am not opining on PE's financial situation and I know nothing of the post-merger UE financials. I originally responded to the hypothetical question as to whether falling real estate prices would hurt DCs. I argued "yes" and explained how I saw that happening.

My issue was not and is not the financials per se. My problem was the burden was always on me to go digging for them and any other info I needed. When I identified an issue management was always extremely responsive even if we did not always wind up in agreement. But for me, I joined with certain expectations as to quality and timeliness of financial disclosure which I believed management shared, as well as certain financial metrics. What I found was that I seemed to be in a small minority of members who had such ongoing financial disclosure requirements. Given that and competitive concerns, management did not move to the level of ongoing disclosure I had joined expecting. I did not expect the club to change how it did business just for me so from my perspective we had a parting of ways.

Let me be very clear. I am not maligning their financials or their business model. It just didn't work for me. These clubs are very dynamic by nature and are operating in virtually unprecedented difficult markets (both real estate and economy). So I need to know what is going on as it happens without having to come looking for answers whenever my concerns escalate. I am clearly a minority. I choose to no longer play. It does not mean my views are right for you but they are for me.

Kagehitokiri

i will clarify with some quotes.

real quick, also just wanted to say i strongly agree with some of your general destination/property points in this post. > Falling Real Estate Prices

that is what i was referring to.

many would likely be surprised by the due diligence done by some posters here, and who regularly posts here, etc.

DC Skeptic

The first issue can be addressed definitively with new management and the answer will be true right up to the point where they change their minds (see the problem?). But really, the calculation was just a reference point in terms of how to quantify the benefit one gets by putting a deposit at risk.

The no confidence comment ties in directly to my previous post: you simply never really know the current financial state of the club. It is very easy for me to paint a picture of how this goes wrong; in fact that was essentially my first post. So absent the protections I needed it was a risk I was not willing to take. Please understand, if the answers today to all my issues were proven to be acceptable to me, that doesn't really change what could happen tomorrow, and as currently structured, I would not see a problem until it was too late. So yes, I still have no confidence that the club survives eight years.

Kagehitokiri

ah, i see what you are saying. i had misunderstood previously.

caribbeansun

I beg to differ - there's at least one other but the NDA would prevent me from identifying which DC that is.

Kagehitokiri

that RENTS to the public, or allows nonmember use of plan nights?

and i do not lump DCs and rental brokers (onekey included) together.

LTTravel

ER, Lusso, Quintess, HCC, do not allow rental to non members as far as I know.
DHH has a non member trial but that is not a rental.
UE has a "short term limited membership" but I don't think you could count that as renting to the public. The prices are so high that I don't know how many they have sold. I don't know about the others.