willmyclubmakeit

UE does provide the audited financial statements and I have them but this information is of course received under NDA. I think some KPI's could be shared by the DCs if they wanted which would not show the deposits as bullet proof (which I do not think is a reasonable expectation) but at least would allow the member/prospective member to understand better the level of risk and how it changes over time.

vineyarder

So, the question is... did you choose your name before or after reviewing the audited financial statements?

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willmyclubmakeit

both unfortunately (although pre merger as I have not seen post-merger #s).

Sandman

I got the statements as well and felt confident in them (and the conversations with financial folks at the company - since even being a financial guy, this industry is quite different) to join based on that info. Also saw post-merge projections which of course look very good but are only projections. I think the combined entity is very strong on a member payout basis at present. We'll see what the future holds but I think a continued market downturn would not be traumatic to most DC's; complete collapse of the RE market on the other hand would be...

adhominem

DC Skeptic makes some excellent points that all prospective DC members should consider.

The "guarantee" that many clubs provide is simply their word. If they, through events either within or outside of their control, have financial issues their guarantee may not mean much.

Regarding the Net Asset Test, in my opinion a brief letter from an accountant saying that there are sufficient assets to cover liabilities doesn't mean much either. I would want to see the details - properties owned, appraisals (so I could confirm whether I thought they were accurate), liens on a per property basis, whether carrying costs and costs of sale were deducted, etc. Also, whether the company is cashflow neutral or positive without any new membership sales.

In addition to a real guarantee that your deposit is secure, the other missing piece is liquidity. The fact that you cannot control when (if) you can "sell" your membership back to the club is a dealbreaker for me.

willmyclubmakeit

U/E's guarantee is a bit better than its word because you at least have some preferential interest but behind the banks providing mortgages on the properties so key is the loan to value ratio (and cash flow/resources of UE)...which I hope is good.

ChicagoMark

To be clear here-to get a big 4 CPA firm to sign off on your financials as being presented in accordance with GAAP (Generally accepted accounting principles) you must be solvent. The CPA firms won't attach their names to the financial statements of a shaky clubs due to liability issues in our ever litigious society. Ask your CPA what they're willing to sign off on-they'll tell you that they won't put pen to paper without material evidence in hand that supports their opinion.

One person would like to review appraisals-Pardon? Are you in fact a licensed, trained appraiser? Absent your being a dedicated real estate investor/professional and spending material time and effort in 50 individual markets-how would you have any idea of just how good or bad the appraisals are? Happy to have the CPA firm do that for us.

All properties need to be evaluated on the basis of an orderly sale-not an absolute auction to the highest bidder the day after tomorrow. Taking a price in isolation of a foreclosure or a forced sale-(which probably has not been maintained properly) doesn't give you a meaningful comparison for most if not all well maintained and furnished properties.

caribbeansun

Financial statements can still have an audit opinion attached to them even if the entity isn't solvent - that fact would be disclosed in the financial statement notes. An audit report is nothing more than an expression of an opinion that the financial statements are materially correct. They can be materially correct and still be bad statements.

You don't have to be an appraiser to review them - an appraisal isn't written for a licensed appraiser, they are written for the layman so that they can understand the value of the subject property.

Orderly liquidation value is likely the most relevant measurement criteria for an entity of this nature.

ChicagoMark

At the end of the day-I'm very comfortable with having one of the big 4 CPA firms-(or should I say final 4?) express an unqualified opinion on club finances.

In American accounting an unqualified opinion means that the statements are materially correct in the opinion of the auditors without any further explanation, aka weasel words or footnotes buried elsewhere in the statements.

Here's a good link if any of you are a hopeless insomniacs and really want to go into a deep coma like sleep.

Auditor's report - Wikipedia, the free encyclopedia

caribbeansun

Materially correct does not equal solvent, that was my point.

If you ignore the notes you can easily miss important information.

Just because a CPA firm (big 4 or not) expresses an unqualified opinion does not mean the entity is any more or less financially secure and to represent it as such is an oversimplification and factually incorrect.

If you are comfortable with it that's great.

jyc

If done right, an audit would not give an "unqualified opinion" if they thought there was a near term (i.e. 6 month) liquidity issue. They would give a "going concern" opinion which is different. So auditors would give a diff opinion for liquidity not necessarily solvency which is a different thing. As is, most companies have negative shareholders equity so effectively the majority are not solvent.

Either way - I agree that DC's view that it is buyer beware and that they will share on an "as needed to get someone to join basis" is annoying and for them a failed business strategy.

DC's need immediately to get off of it. The potential of this biz will always be in the future if they keep up this lame disclosure.

listliver

I am strongly considering joining a DC next week. My big lingering concern is the security of the deposit money. We do pretty well financially but if we lost $400,0000 that would be a very significant loss for the family. This is more money then I owe on my house and I will feel like an idiot for not paying off my house. Not to mention my wife would likely leave me...

My questions are: 1. should the potential loss of my deposit keep me up at night (I am considering Quintess and Lusso)?

2. For those that already belong to a DC, has the experience been as great as promised? Has it been life changing? We have a couple of elementary school age kids. I would like to join to spend more time with the family.

Any help or context you can supply would be very appreciated.

TravelGuy

I'd strongly suggest bringing your wife into the financial decision to join a DC. Trust is paramount in a marriage but I've found that preemptive explanations help to buffer post-traumatic emotions.

$400K is a lot of money for MOST people to lose. (However, some of us have seen paper losses bigger than this in the recent equities market). You should certainly do all the due diligence that you need to feel comfortable with your $400K deposit. Only then should you join the DC and resolve to sleep well at night. Another option is to join at a lower membership level or a less expensive club.

As great as promised? - YES, and them some (for me with High Country Club)
Life Changing? - That's pretty strong. If you don't currently travel much then it is potentially "Life Changing". For those of us who were frequent luxury travelers before DCs, I'd characterize the experience as "Life Upgrading".

P.S. Welcome the the forum!

caribbeansun

Next week - What's the rush?

If you have deep seated concerns about your deposit and losing it would have a significant negative impact on your financial situation then you might be better advised to consider an "introductory" DC where much less capital is at risk and if it all when up in smoke you could continue on without too much difficulty.

If you are losing sleep over a vacation plan then what are you really accomplishing? Vacation are suppose to conjure up positive feelings not feelings of dread.

Joining a DC to spend time with your kids is kinda backwards isn't it? You either make the time or you don't. If you are going to use the capital in a DC to guilt yourself into spending time with your kids you may need to resolve the kid issue first before putting money in a DC. Perhaps I've misread your post on this point...

3DH

Welcome to the forum, listliver...

The potential loss of deposit is a real concern with any club, however, take a look at the structure in place with any potential club regarding "shut down" procedures... it will be in the fine print, but should answer your questions. (Rather than tout my own club here, I will leave it at that... )

As to the travel experiences, you will find that a DC truly offers all of the comforts of home while you are on vacation -- with the help of a knowledgeable concierge who can assist with any needs or wishes you might have to make any trip especially memorable! Would we change things... absolutely not! We have grown accustomed to traveling on a whim (with unlimited days, it IS possible!), as well as planned vacations with friends and family. Good luck with your decision -- exceptional travel awaits!

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"Boutique" is better! Another extremely satisfied LUSSO member!

willmyclubmakeit

I fully agree re: the experience at UE since we joined in 2007, but as my screen name suggests, I do not think you will ever take the risk out of the deposit--as you would not out of any real estate or investment purchase--so you just need to get comfortable enough for your family (and extent of deposit to your net worth) and understand the specifics of the club and its finances as best as possible and either jump in and enjoy or watch others swimming from the pool deck.

ChicagoMark

Join either of one of those fine clubs through their preview programs first-it limits your financial risk, and gives you an opportunity to get your wife on board with the plan and for everyone to experience how it works. Given the serious consequences you've described to your marriage in the event something not being perfect here-that is a safer way to go.