Good question. And we would not be surprised if you are confused, especially since we are starting to see ‘equity’ or ‘appreciation’ creep into the sales lingo.

But it’s not so easy, since ‘equity clubs’ look like an investment, and if so, are subject to some SEC overight – similar to what you would see in other investment products. And there are some minimum requirements that a potential ‘member’ (which really means investor) has to meet: accreditation requires a personal net worth of $1MM, or annual income of at least $200K for the last two years.

At Helium Report, we are going to be stringent on this topic – our definition of an “equity club” means that the club has to provide the opportunity for members to participate in the appreciation of the underlying real estate assets.

By that definition, there is currently only one club that operates that way – Crescendo – and it is structured, as you would expect, as a REIT (real estate investment trust). If you qualify, you are able to invest in the REIT that owns the homes, and as well get access to the homes.

Now let’s talk about the clubs that are clearly ‘non-equity clubs’ – they are membership clubs that offer access to homes, and no investment or real estate appreciation opportunity. These clubs form the bulk of the current industry and include the usual suspects: Tanner & Haley, Exclusive Resorts, Quintess, Ultimate Resort and Dream Catcher Retreats. These clubs have very important product/service differences, but are fundamentally structured the same way.

There is one tweak to the basic ‘non-equity’ model that we know about and are still trying to figure out if we like it. Richard Keith, the founder of Private Escapes, firmly believes that members should participate in the appreciation of the club’s real estate. He is providing a ‘loyalty’ program that offers a credit of about 18% of the real estate appreciation to members in the form of an expense credit which can be applied in part to membership dues, as well as travel and vacation expenses. According to the club, assuming conservative real estate appreciation assumptions, this could be about a $3,700 credit to each member each year – seems meaningful, but is it enough to make you choose that club over another?

There is one club – BelleHavens – that aggressively markets itself as an ‘equity club’, and we are trying to figure out what this really means. On their website, they define it as:

“The members of BelleHavens are the owners of the Club and because BelleHavens wholly owns and holds title to all Club properties, members enjoy the protection of having real assets backing their exclusive membership.”

Frankly, we must be missing something. The concept that your refundable membership deposit should be backed by real estate assets is integral to all of the clubs, and does not provide any real real estate appreciation. We are not sure what BelleHavens means here – but we hope to talk to management soon and see if we can clarify.

Summary
Virtually all the clubs are membership, non-equity, and they want to be that way. They don’t want to be REITs, investment products or timeshares – all of which have different rules and regulations. You make not like the fact that you are “parking your money in someone else’s garage,” but it is the way it works for now.