DC4MS

ClubLand

Destination clubs offer the use of multimillion-dollar houses around the world, without the burdens of ownership. Shane Mitchell goes undercover to investigate. PLUS A look at other trends and projects changing the vacation-home world.

From March 2007

http://www.travelandleisure.com/arti...ubland/?page=2

Groucho Marx once said, "I don’t care to belong to any club that will have me as a member." Frankly, I’m with Groucho—with a possible exception for destination clubs. After a freak accident trashed my family’s weekend home, resulting in frustrating battles with an AWOL contractor and a recalcitrant insurance adjuster, I started to flirt idly with the idea of dumping my bricks and mortar for the latest carefree-vacation real-estate concept.

The first destination club was launched in 1998, when Connecticut-based Private Retreats, subsequently renamed Tanner & Haley, enticed affluent buyers with the promise of multimillion-dollar houses in settings from Cabo to Cannes. Instead of owning a single property, members would share a portfolio of residences; in addition to a hefty one-time fee (generally refundable, at least in part, if a member leaves), there would be annual dues to cover upkeep, mortgages, homeowners’ association charges, housekeeping, and concierge services.

The concept’s originators speculated that investors would be willing to pay $200,000 or more for membership—far less than the cost of one luxury dwelling—even though their investment wouldn’t give them the equity stake they’d get with a fractional or condominium. They were right: The idea took off like a house on fire and continues to gather steam as more clubs enter the market. Some of these have aligned themselves with established travel brands like Abercrombie & Kent (Tanner & Haley) and Andrew Harper’s Hideaway Report (Parallel); there are also niche clubs that focus on golf, yachting, and fly-fishing. As competition has grown stiffer, other perks, such as alliances with private-jet companies, have been added.

Too good to be true? Maybe: last year, the destination-club industry suffered a series of highly publicized rollups and the bankruptcy of what was then the second-largest club. (Tanner & Haley filed for Chapter 11 protection in July 2006, and the group’s assets were purchased by another club, Ultimate Resort.)

So is the destination club really a viable alternative to second-home ownership? To find out, I’ve decided to play "prospective member," and contact four top outfits.

"It’s like joining a private country club," says David Tuverson, a membership director at Quintess (800/550-0324; Quintess, LRW - Life's Greatest Stories Are Waiting), the first of my undercover calls. This burgeoning destination club merged with Dream Catcher Retreats last September and just announced another partnership, with the Leading Residences of the World, an affiliate of the Leading Hotels of the World. Quintess, with 49 properties in 26 locales, has about 300 members and intends to cap ranks at one thousand. Quintess and Leading Residences also plan to develop ventures at Leading Hotels properties. (Imagine, someday, a condo apartment at Paris’s Hôtel de Crillon.) Tuverson tells me that the average Quintess house measures 4,000 square feet and is valued at around $4 million. He is quick to assure me of financial transparency and, as long as I agree to sign a nondisclosure statement, will make available the company’s balance sheet. Even so, I’ll be forking over $185,000 for basic membership, plus $14,500 in annual dues for the right to use properties for up to 15 days each year. Plus, it will be impossible to obtain mortgage financing.

My next question regards the shifting policy on a money-back guarantee. First- generation destination clubs offered a full refund to resigning members—one of the factors in Tanner & Haley’s collapse. Since then, the "get out" clause has come under serious scrutiny and most destination clubs now pledge actual assets (i.e., fully owned real estate) against debt obligations or possible liquidation. Presently, top clubs offer an 80 to 90 percent refund and are placing additional restrictions on the timing of departure. (Beware the "three in, one out" clause, stipulating that before a resigning member receives a refund, three new members must join.)

When I cold-call Solstice (877/727-5535; Solstice Collection), managing director Mark Cibik spends over an hour explaining the financial ins and outs of destination clubs before he even begins telling me how pretty the houses are. "This is a big purchase," he says. "People shouldn’t take it lightly; don’t just get caught up in the sexiness of joining." Cibik admits that Solstice lacks a colorful promotional brochure; instead, he promises me a third party-audited financial statement and a full refund option, valid after two years of membership. The starting price: $535,000, plus dues and surcharges for the right to use 10 properties (one of them a 90-foot yacht) for 14 days each year, with additional "space-available" usage for an unlimited number of days.

And what about those pretty houses? Nothing remains constant in the real estate market except the old saying, Location, location, location. Know what $4 million gets you on Maui these days? Hint: the Pacific won’t be visible from your front door. Solstice has some tempting stand-alone residences, such as a fresco-filled apartment in Florence and a two-story flat on the Île St.-Louis in Paris. But most clubs opt for the safety of cookie-cutter developments. On the plus side, resorts offer value-added services—spa, golf, tennis, pools, restaurants, security—that would be prohibitively expensive for a club to provide independently.

Steve Healy of Ultimate Resort (877/955-1900; Ultimate Resort Luxury Destination Club) mentions that among his company’s 100 properties are houses at three Baja California developments: Palmilla, Esperanza, and Cabo del Sol. He answers my initial inquiry about membership by saying, "You couldn’t have called at a better time." (During our conversation, he juggles several calls.) He is also a little eager to suggest that the club might go into a "waiting list phase" soon. Healy explains that the application requires background and credit checks and personal and professional references. While my application is being reviewed, I will be allowed to talk to members about their experiences. Among the clubs I’ve called, Ultimate Resort is the only one to suggest I "test-drive" a residence—but not, Healy is quick to add, during a holiday. If I like what I see, a basic membership will be $125,000 with $10,000 in annual dues; this entitles me to 14 days at club properties.

Joining doesn’t guarantee I’ll be staying in my dream house, however, especially during major holidays. Tiered membership means there is no level playing field—some entry-level plans black out holidays. With Exclusive Resorts (866/863-2688; Exclusive Resorts - Luxury Destination Club & Private Vacation Homes), at 2,500 members the largest club, Elite status ($425,000) guarantees four advance reservations; Affiliate members ($225,000) receive only two. The more you pay, the more choices you’ll have during Christmas week. At the moment, Exclusive Resorts has 300 residences, and more than 100 will be added over the next two years, including estates in Tuscany, Anguilla, and Maui.

Among all the clubs I contact, Exclusive Resorts has the most eager sales pitch. After my initial call, I am passed to Peter Hannesson, a regional director based in New York City, who overnights me a large portfolio containing a contract, extensive financial data, and a persuasive DVD of interviews with satisfied members. He offers to make the four-hour drive to my home upstate to take me out to dinner and discuss the benefits of joining. (Later, he even sends me a Christmas card.) Finally, when we talk terms, Hannesson extends a $15,000 discount voucher. If I had an American Express Centurion Card, my discount would be $32,000, plus a bonus of one million Membership Rewards points. (Note: American Express, which has partnered with Exclusive Resorts on various offerings, is the publisher of Travel+Leisure.)

So: Deal or no deal? Despite being assured by sales representatives that a new generation of time-starved people craves bonding experiences in fabulous locations, I still wonder whom destination clubs are really targeting. The super-wealthy don’t share homes. Couples don’t need that much square footage. Independent travelers rarely sit still in one place. Dropping my role as a potential member, I seek straight answers from industry boosters. Jim Tousignant, CEO of Ultimate Resort, suggests that those accustomed to leasing jets and Jags will find the concept appealing. "Owning a multimillion-dollar home means always working on your property," he explains. "We see consumers who think it’s great not to have to worry about the costs of ownership." Michael Beindorff, COO of Exclusive Resorts, says, "This is not designed to be an investment, it’s supposed to be a lifestyle return." I may remain an antisocial skeptic who actually prefers to vacation in the same weather-beaten cottage every year, but sumptuous destination clubs continue to attrac