The manager of several luxury vacation home funds has seen significant growth and interest over the last year. The new investors joining the latest Fund IV have allowed Equity Estates to buy several new homes, but they have also added a new investor waitlist to help balance the timing of adding well-chosen homes and investor access.
Equity Estates has opened a series of funds since its founding in 2006, raising in aggregate over $165 million and currently has Fund IV open to new investors.
“We’ve seen just extraordinary growth over the last year and are pacing to sell out fund IV in 2021,” said Sarah Cochran, EVP of Investor Relations.
Sarah ascribed this growth to a variety of factors:
1.More people are now looking to travel again and want a safe and secure option. Residence funds and destination clubs like Equity Estates offer standalone vacation homes, which provide space and privacy for investors and guests.
Sarah says she thinks the evidence is obvious, the preference is shifting to private vacation homes like the ones they offer.
2. The accumulated experience in buying luxury vacation real estate. “We have over 15 years of experience, and have learned how to play the game the right way,” says Philip Mekelburg, CEO and Founder.
The current environment for buying vacation homes is rather challenging. Investors know real estate is a good hedge against inflation, there are low levels of inventory in certain destinations, and everyone wants to get away. In addition, people of means have high disposable income, and low interest rates are further fueling the flames.
“One of our core competencies is buying right to increase the odds of making money when we sell, ten years later. Some homes need a little love and we add value by renovating. Not everyone has the stomach or skill for that,” says Philip, and adds “we know it will have a longer lead time for our investors to access and enjoy, but should offer a better investment return in the end.”
He puts it this way “there’s no substitute for patience and hard work.” Philip notes that once they identify a market, they “find the right local real estate expert or hunt directly for sellers.” And adds “sometimes we buy right away. Other times it may not happen for a decade. We maintain our relationships and keep tabs on the markets we care about.”
3.Managing availability. Equity Estates has always had a philosophy of having enough homes to target a 60% occupancy rate, which is roughly 210 days of occupancy per home each year. In other words, the homes are deliberately empty and under used 40% of the time by design. This model allows investors to access the times they want and provides space for impromptu vacations.
The combination of all these factors has also prompted the introduction of a waitlist for new investors. Equity Estates would rather take the time to find the right homes and have investors wait a little bit, than rush into unfavorable acquisitions.
In joining the waitlist, investors make a deposit of 30% of the capital contribution, and can enjoy unlimited last-minute travel to portfolio residences reserved within short notice for $600 per night. As each new residence is purchased, a group of waitlisted investors will be able to begin making reservations as far into the future as they would like.
Over the last 10 months Equity Estates has added 9 new residences. A few of these were purchased to fill out Fund III, but most were new purchases for Fund IV. The new additions have included:
1. Moonlight Basin, Big Sky, Montana
Equity Estates bought two brand new homes, one finished out Fund III and the other kicked off Fund IV. Both homes offer access to all the amenities at the Moonlight Basin Lake Lodge and other club benefits including golf. In the winter, skiers can enjoy 5,750 acres of terrain and over 30 ski lifts at Big Sky Resort.
Each of the homes is ski-in/ski-out and offers five bedrooms and six full bathrooms set in a contemporary design.
2. Napa Valley, California
The home in Napa is a 4,000-square-foot classic European, country-style residence, with gardens and grounds flowing into the surrounding vineyards. Josh Levy, EVP of Marketing, notes that Napa “is an investor favorite,” and says “this is an example of keeping eyes on the market, knowing we had investor demand,” and an example of “having the right real estate partners looking out for us.”
The home was remodeled, and welcomed its first investors last month.
3. Miami, Florida
This 4 bed, 5,000 sq ft art deco home is on an island in Biscayne Bay. “It offers the best of both worlds,” said Josh with access to South Beach and to downtown Miami. Features include a large private pool and a rooftop terrace with views of the Miami skyline. The home is opening to investors in a few weeks after being redecorated.
4. Cabo san Lucas, Mexico
This residence, commands sweeping views of the Sea of Cortez, and the marina at Puerto los Cabos. It will be the third home (across all the funds) that Equity Estates has added in Cabo.
“We have been looking for a long, long time,” notes Josh, adding “our investors have an insatiable demand for vacations in Cabo.”
This classic Cabo home offers a total of 13,000 sq ft of indoor/outdoor living space and an infinity edge pool with panoramic views.
“This is another home that we are adding value to by refurbishing the pool and patio and adding an additional room, prior to being available to investors," says Josh.
5. St John, USVI
Equity Estates already owns one home on St John in the Virgin Islands and is adding another in the bay next door. This large residence has six full bedrooms, each with en-suite full bath.