Equity Estates Fund III, announced today that they successfully welcomed over $8.5 million in new capital contributions from Residential Club Holdings, (RCH) members. RCH is made up of members from the old Abercrombie & Kent Private Residence Club, who for the past six years, had been cared for by Exclusive Resorts.
Equity Estates launched its third fund two years ago with a plan to raise about $40m and buy 10 to 12 luxury vacation homes. With this new influx of investors the fund is almost sold out, and the 41 families have taken about 20% of the 160 units in the fund. The investors will enjoy the homes for their family vacations for the next 10 years. Then starting in 2029, Fund III will start to sell its portfolio of homes and will return 100% of the initial investment and 80% of any profits to investors.
Equity Estates’ CEO and Founder, Philip Mekelburg, shared that he and his team are proud to claim over 20% of the investor members, across all their three funds, were previously members of other destination clubs. “It seems clear Equity Estates has become a port of safety for members of defunct vacation clubs” he stated.
He noted that the new, incoming members like the occupancy ratio of under 60%, meaning that the investors only occupy the homes 60% of the time. With a planned 40% vacancy rate, there is lots of open time on the calendar that is available for last minute vacations or weekend breaks.
“It is great to hear these new investors say they love the travel experience, but they initially bet on the wrong pony and Equity Estates is a better model,” shared Mekelburg, “They are choosing Equity Estates because we had the model right and aligned from the beginning, in 2006. That's why we made it through the recession and are still thriving.”
All the investors get a full annual audit report from RSM (formerly McGladrey) to show all commitments are being followed and the third party appraised value of the underlying real estate, owned by each Fund.
"Smart & Fun"
Mekelburg admits it is the travel experience that drives interest and the model gives investors comfort to write the check. He shares the comment that many investors think it is a “smart and fun model.” “If we do our job well, investors will get their initial contribution back and perhaps some surplus appreciation share,” he notes. Then continues “At the end of the day, we are just shepherds of their vacation home investment dollars, professionally caring for them for ten years and then hopefully returning more than they invested. We don’t get paid our promote portion until they get back every dollar they initially invested.”
This vacation home alternative is for accredited investors, offered via private placement. Equity Estates Fund I sold out in 2012, and Fund II sold out in 2016, and Fund III will sell out within the next few weeks. Equity Estates has collectively raised and effectively deployed over $100 million and delivered over 13,000 vacation experiences.