Last month destination club Exclusive Resorts sent its "Year in Review" document to its 3,500 members. This included a section covering the clubs Net Asset test.

Reproduced below is the actual wording from the clubs own document, since this very clearly states how the calculation is made and the results of the calculation:

The Net Asset Test is designed to confirm that the value of our assets is sufficient to meet our obligations, including repaying all refundable Membership Deposits in accordance with the terms and conditions of our Club Membership Agreements. We operate the Club with the objective of being in compliance with the Net Asset Test at all times. We calculate this test and report the results quarterly to our Board of Directors and annually to our members.

To calculate the Net Asset Test, we add together the appraised fair market value of our real estate holdings with our cash holdings, and then subtract from this amount all secured debt and all refundable Membership Deposits. We then determine whether these assets exceed these liabilities on December 31 of each year. This test is not intended to be a liquidation analysis or a prediction of future conditions or results.

The numbers used in calculating the Net Asset Test are audited or determined by an expert, independent third-party. The fair market value of our real estate holdings was determined by CB Richard Ellis, one of the largest and most respected real estate appraisal companies in the world, under generally accepted appraisal standards. Our Board of Directors has instituted a formal process where Exclusive Resorts continuously updates our real estate appraisals. In fact, CB Richard Ellis conducted 75% of these updated appraisals during the past 60 days.

Our cash balances are determined by the actual cash and cash equivalents we have on hand; the amount of debt is all secured debt; and refundable Membership Deposits include the total amounts refundable under our Club Membership Agreements should 100% of our members elect to resign -all as reflected in our consolidated financial statements, which are audited by Ernst & Young, one of the big four national accounting firms.

We are pleased to report that as of December 31, 2008 - just as at previous year-end 2004, 2005, 2006, and 2007 - we are in compliance with the Net Asset Test, which we believe continues to demonstrate the strength and vitality of the Club.

In summary the calculation is :

  Real Estate at FMV
   + Cash
   - Secured Debt
   - Membership Deposits
   = Positive Amount

This is certainly a positive, reassuring statement by Exclusive Resorts. Given the way real estate valuations have been moving recently, it is good to see that 75% of the appraisals were done in the 60 days prior to the calculation.


This calculation is also stronger than that required by the Destination Club Association, where the Code of Conduct calls for member clubs to have "the financial resources necessary to meet at least 66.66 % of the aggregate amount payable to members upon termination as of December 31 of each year." Part of the downfall of some of the DCA members such as Lusso and High Country Club has probably come about because they skated too close to this 2/3 rule, rather than maintaining stronger asset backing.

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