Ultimate Resort has just acquired another destination club, Ventures Equity. The acquisition adds 6 new homes, with an average value of about $3m each, to Ultimates highest level "Elite" club.
Ventures Equity Vacation Club had been founded in 2005 and had a total of 8 homes, but had less than 20 members. Equity destination clubs can be very appealing to member/investors, since they offer a lifestyle investment that provides a variety of fabulous vacation homes along with potential increases in the value of their equity ownership. However, somewhat paradoxically, equity based clubs can find it very hard to add new members because they are restricted under SEC regulations as to the type of marketing that they can do. In a nutshell they are restricted to talking to only "accredited investors" and their biggest challenge is having the channels to find these "accredited investors".
Like several of the equity based clubs, Ventures Equity had set out to have a finite lifetime and then would sell its homes and return the proceeds of the sales plus some appreciation back to members. Our take is that the club found it hard to add enough members - because of the marketing issues noted above - and decided that the members would be better served by being part of a larger club.
We spoke to Sheryl Hunter who was the General Manager of Ventures Equity and is also the General Counsel of boutique residential developer BVG Incorporated, which was the parent company of Ventures Equity. Sheryl confirmed the comments above on the marketing of equity destination clubs and also noted that when people buy into equity destination clubs they are making both a right brain and left brain decision. The emotional right brain looks forward to the wonderful concierge serviced vacations, with friends and family. The analytical left side has to crunch the numbers to work out the return on the investment. Ventures Equity found that 90% of their conversations with prospective members were focused on the expected returns and very little was on the lifestyle aspects of joining the club. Overall this combination of marketing challenges, coupled with prospective members focus on ROI, was slowing down the joining rate and so the club decided to look for a partner.
The Ventures Equity members will be joining Ultimate Resorts Elite level club which has homes with an average value of about $3.0m. Only a couple of Ventures members decided not to transfer across as part of this transaction. Overall Ultimate Resort currently has about 85 homes in 25 destinations.
Ultimate is also close to finalizing its merger with Private Escapes and this is now expected to close in the second quarter of this year. The new combined club will have three membership tiers and more than 140 homes in nearly 50 different locations, making it the most diverse destination club.
The 6 homes that Ultimate is acquiring are in:
- Key West, Florida
- Indian Rocks Beach, Florida
- Lake Las Vegas, Nevada
- Trump Tower, New York, New York (pictured right)
- Scottsdale, Arizona
- Beaver Creek, Colorado (pictured above)
Three of these locations, Key West and Indian Rocks in Florida and Lake Las Vegas are new destinations for Ultimate Resort and its members, while the club already has homes in the other three locations.