The destination club industry may be out of its infancy, but while mergers are becoming increasingly common, there are still new clubs entering the mix. Blending the destination club model with real estate ownership, Atlanta-based Equity Estates is one club aiming to capture the boutique end of the market. Similar to the model offered by Crescendo and BelleHavens, two destination clubs with equity models, Equity Estates offers members a stake in potential real estate appreciation along with plenty of leisure time at luxury homes. “We set out to build a model that combined the best of destination clubs with the best of second home ownership,” said Philip Mekelburg, CEO and managing member of Equity Estate.

The club functions as a Regulation D exempt security, as defined by the Securities and Exchange Commission. Members are essentially owners. They buy shares of a limited liability company called Equity Estates Fund I. The fund holds the real estate, so shareholders therefore effectively own the homes. In order for an individual to invest, they must be an accredited investor, which the SEC defines as someone with at least $1 million in assets or $200,000 in yearly income ($300,000 for a couple).

The fund will sell up to 300 full shares and currently has 40 owner-members. A full share costs $325,000, but members can also purchase a half share. Mekelburg notes that some families have purchased more than one share. Annual dues on a full share are $16,500 which covers taxes and maintenance on homes.

A full share secures 30 nights of use each year at the club’s homes, though a full shareholder can have no more than 23 nights booked at any one time. The club allows unaccompanied guest usage and there are no minimum night requirements at any of the properties, which include homes in seven locations. Properties range in value from $1 million to $6 million and are in destination club stronghold locales like Los Cabos, Deer Valley and Turks and Caicos. Each member has a personal concierge to aid them with travel arrangements and help with the requisite pre-arrival tasks like stocking the refrigerator and booking massage appointments.

The distinguishing factor for this club, said Mekelburg, is its ownership structure. The club plans to close the fund in 2021 and sell off all of the real estate. At that point, member-owners will get back their initial investment and an 80 percent share of any real estate appreciation. Mekelburg is, not surprisingly, bullish in regards luxury real estate in the long term, despite any current hiccups in the market. He said that big picture demographic trends of retiring baby boomers and the attractiveness of the U.S. market to foreign buyers bode well for high-end real estate investments.

For members who need to get out of the club early, there is an exit option. Members are locked into ownership for the first 24 months following their investment, but can sell their share after that time period if they wish. The club has a one-in, one-out policy for members, and sellers will be refunded the current asking price of their share minus a 7.5 percent transfer fee upon leaving. The fund also shares audited summary financial statements with owners and makes owner submitted trip reviews available to members.

Helium Report Take:

On the continuum of destination clubs, Equity Estates is still a small player, with homes in just seven locations. But plans to add as many as 12 properties to its portfolio this year are in the works, and Tuscany and San Francisco are among the locales currently being eyed. While the prospect of big time real estate appreciation is no doubt an attractive selling point for the club, any club member should note that capturing those returns is more than a decade away. The club’s financial structure and backing are supremely important, but so are immediate tangibles like service, home location and ease of booking a reservation. When considering any destination club it’s important to do your homework. For a list of due diligence questions and other points to consider, download our Decision Guide to Destination Clubs.