1. S. J O R D A N
A S S O C I A T E S
Luxury destination Advisors
Destination Club White Paper Module:
CRISIS MANAGEMENT
HOW THE INDUSTRY IS RESPONDING TO THE
RECESSION/CREDIT CRUNCH.
June 2010
Prepared by:
Scott Jordan
tel.: 312-451-6210
scott@sjordanassociates.com
11 2 2 N . C l a r k S t . , S u i t e 3 6 0 3 , C h i c a g o , I L 6 0 6 1 0 • t e l e p h o n e : 3 1 2 - 4 5 1 - 6 2 1 0

2. - DISCLAIMER-
Opinions expressed are subject to change without notice. While all reasonable care has been taken to ensure that the information
contained herein is presented in good faith, and is not untrue or misleading at the time of publication, Jordan Associates Luxury
destination Advisors, makes no representation as to its accuracy or completeness and it should not be relied upon as such. The
information is supplied on the condition that the reader or any other person receiving the information will make his or her own
determination as to its suitability for any purpose prior to any use of the information. Neither Jordan Associates Luxury destination
Advisors nor any officer or employee of Jordan Associates Luxury destination Advisors accepts any liability whatsoever for any direct,
indirect, special or consequential damages or loss arising from any use of this report or their contents. This report may not be
reproduced, distributed, or published by any recipient for any purpose without the prior express consent of the publishers. Nothing
contained herein shall be construed as conferring by implication estoppel or otherwise any license or right under any patent, trademark,
or copyright of Jordan Associates Luxury destination Advisors or any third party. The value of the investments to which this report
relates and their income yields may go up or down. The information referred to in this report may not be suitable for private investors.
If you are in any doubt, seek advice from your investment advisor. This information is provided “as is’ and no representations or
warranties, either express or implied of accuracy, merchantability fitness for a particular purpose, or any other nature are made with
respect to this information or to any expressed views presented in this information.
- SOURCES -
The following sources were referenced for
information/data provided in the Destination Club White Paper.
ARDA
Crittenden Research
Fractional Life
Jones Lang LaSalle
Ragatz
The Reserve Collection
Sherpa Report
The Veras Group
Wall Street Journal
About Jordan Associates:
Jordan Associates is an advisor to the luxury travel industry including shared ownership, timeshare, hotels and resorts. Clients
include the leading hotelier in Canada, Bellstar Hotels & Resorts, and other hospitality brands. Jordan Associate’s
management team and collaborative partners include hospitality industry leaders in sales and marketing, management,
strategy, finance, operations, and development. Jordan Associates has offices in Chicago and Salt Lake City.
S . J o r d a n A s s o c i a t e s! Destination Club White Paper
2

3. “This game is part of the past Ray. It reminds of what was once good
and can be again.”
- Terrance Mann from the movie Field of Dreams
MEMBERSHIP SALES -
Abercrombie & Kent Residence Club.
DISTRESSED CLUBS.
• Reduced Equity Membership Pricing by 40% to reflect the changing real estate
Destination Clubs are pursuing a market. Annual dues remain the same and all Club benefits apply. The Club’s
variety of strategies to boost cash flow/ portfolio includes multi-million-dollar residences in the finest beach, mountain
sustain operations and preserve and golf destinations worldwide.
refundable deposits during the current
recession including targeting members
. One-Time Capital Contribution Annual Dues
from distressed/bankrupted clubs. In
an effort to “roll-up” dues paying 15-Night Annual Plan Was $225,000 Now $135,000 $17,000
members, prospective members 30-Night Annual Plan Was $390,000 Now $234,000 $29,000
oftentimes receive more favorable terms
than were offered to existing members 45-Night Annual Plan Was $495,000 Now $297,000 $42,000
due to the value of picking up much
needed cash flow. Most members from
bankrupted Clubs (even among “Value • Introduced a Two-Year Trial Membership for those who want an extended
Clubs” ~ upfront deposit less than opportunity to experience Club life before making a long-term commitment.
$100,000) prefer not to pay an upfront Trial Members pay normal Club dues plus a 10% premium that will be credited
deposit and risk another financial loss to their capital contribution if they later join as a permanent equity member.
(members of a major Destination Club,
Lusso, lost in excess of $350,000 when • Enhanced the Travel Credit Program to allow members to exchange nights
the Club declared bankruptcy in 2009). towards Abercrombie & Kent travel, from adventure cruises in the Galapagos,
to 22 new villas in Europe, African safaris, even once-in-a-lifetime experiences
Ultimate Escapes (U.S.) / like trips to Antarctica.
Everlands (U.S.)
In 2009, Ultimate Escapes announced an
exclusive agreement with members of including ensuring availability and Equity Estates (U.S.) /
the now defunct Everlands Club to join reassuring members of their deposit’s Hideaways Club (U.K)
Ultimate Escapes under preferred security. Clubs realized that retaining Equity Estates Fund I, LLC announced
membership terms. As part of the existing members takes priority over the formation of a strategic alliance with
strategic agreement, Everlands allocating valuable resources on The Hideaways Club, Europe’s largest
exclusively shared with Ultimate marketing in an effort to capture an Residence Fund. The two companies
Escapes a database of more than 500 elusive customer base. As a result of offer owner/members access to nearly
qualified prospects who expressed focusing on existing members, Clubs 30 vacation homes in 23 destinations
interest in Club membership. hoped to capture additional revenues creating the largest global portfolio of
from member upgrades and valuable residences available through an equity-
MEMBERSHIP SALES - referrals to friends and family. based model. Under the agreement
PROMOTIONS. terms, Equity Estates and The
STRATEGIC ALLIANCES TO Hideaways Club will each make nights
Clubs also offered membership plans at
ALLOW MEMBERS USE OF available for reciprocal use for travel
special prices/terms to prospective
RESPECTIVE CLUBS. beginning in 2010.
members new to the Destination Club
experience in a effort to capture Clubs engaged in reciprocity
agreements allowing Club members to Quintess, LRW (U.S.)/
deposits (allow Clubs to refund existing
use respective Club properties. The The Oyster Club (Ireland)
memberships under 3 in/1 out policies)
advantage of establishing reciprocity Quintess, LRW and The Oyster Club
and dues (fund operating expenses).
agreements over mergers/joint ventures announced in 2009 a strategic alliance to
Clubs such as Abercrombie & Kent
is if one Club declares bankruptcy it has allow members use of their respective
Residence Club and Quintess launched
limited impact on the viability of the Clubs. As a result of the alliance,
new programs to take Clubs on virtual
other Club. Reciprocity agreements are members of each Club have reciprocal
“test drives,” enabling members to get
valuable as long as the homes are of access to the homes of the other Clubs
the full experience without a large
equivalent size/quality as it broadens creating a choice of more than 90 luxury
upfront commitment.
the portfolio with limited capital vacation homes and experiences in
SUSPEND SALES & MARKETING
investment (fills location gaps in more than 50 destinations worldwide.
ACTIVITY – FOCUS ON
CORE MEMBERS. respective Clubs). Historically,
reciprocity deals are structured under a
Clubs are increasingly focused on
one-year renewable contract.
providing services to existing members
S . J o r d a n A s s o c i a t e s! Destination Club White Paper
3

4. The goal of many clubs is to stabilize operations by increasing dues and lowering
operating expenses while maintaining availability. Clubs are increasingly looking
towards a “zero-sum” business model whereby income equals expenses and no ad-
ditional memberships are needed to fund operations (building a base for growing
the Destination Club when economic conditions improve).
SECURE EQUITY CAPITAL/ assessment, members most likely will • Selectively liquidate assets by
INVESTMENTS (RETAIL/INST). ask the following questions: selling properties to members
Securing institutional capital in the • What options did the Club look who have visited the properties
current recession has been problematic at to cover budget shortfalls and and shown an affinity to
for most Clubs. An alternative strategy why did the Club choose the purchase.
is securing capital from existing assessment charge approach?
members (become shareholders of the
Club entity) versus pursuing • Is the assessment enough or is ALTER RESIGNATION POLICIES.
institutional investors who have been more capital needed? Clubs are evaluating whether to allow
negatively impacted by the credit crisis member controlled sales of Club
and largely rotated out of the real estate • Has the Club done everything to memberships to third parties. Select
sector. reduce operating costs? Clubs are empowering members to
resell their memberships (pricing not
Quintess, LRW (U.S.) • Is the Club providing controlled by the Club) while limiting
documentation on the usage of other financial provisions to third
Quintess, LRW secured a major equity
dues (pay down operating parties by fixing annual dues. Allowing
commitment in 2008 from a Forbes 400
expenses, debt etc.)? members to alter standard resignation
investor of over $210 million. The
transaction was the largest infusion of policies accelerates sales reducing the
• Will the Club place special number of members on resignation lists
capital announced for a luxury
assessments proceeds into a (jump the “resignation queue”).
Destination Club. The commitment will
protected “Escrow” account?
be used for the development of new
businesses, corporate mergers and The risks/opportunities involved with
acquisitions, and for real estate approving member controlled sales
REAL ESTATE ASSET SALES. include:
development projects.
Real estate asset sales are oftentimes the
only option when Club operating • Members may “low ball” their
INCREASE ANNUAL DUES AND expenses exceed dues (negative cash memberships creating a fire sale
CUT OPERATING EXPENSES. flow), institutional/retail investor that would not encourage future
capital unavailable, and lenders sales or allow members who are
The goal of many Clubs is to stabilize
reluctant to extend capital to refinance listing membership at higher
operations by increasing dues and
properties. However, the downside is prices to exit the Club.
lowering operating expenses while
selling houses tightens availability for
maintaining availability. Clubs are o Available option would be
existing members. Clubs have the
increasingly adopting a “zero-sum”
option of increasing availability under to allow members to sell
business model whereby income equals
this scenario by lowering member their memberships at 80% of
expenses and no additional
nights-per-property, spreading out what they paid and the
memberships are needed to fund
reservations, and rolling over nights Club does not take the
operations (build a base for growing the
into future years. customary 20% (non-
Destination Club when economic
refundable deposit).
conditions improve). Existing members
Property liquidation considerations:
are resistant to “doubling-down” on • Members may be exposed to
Club dues wherein the original signed • Sell properties that have the litigation on the sale (allowing
membership terms have been
most value versus cannibalizing member controlled sales could
suspended or severely modified by a
real estate inventory by selling create a structured investment
“capital call.” However for Clubs in
multiple lower value properties. which could open SEC
distress, members are willing to pay
“security” issues).
additional dues versus witnessing their • Offer discounted memberships
Clubs go bankrupt and face the
(can devalue the position of M Private Residences
dilemma of paying a deposit to another
existing members) versus selling (Calgary AB)
Club to maintain their travel lifestyle.
properties to fill the void while Up until March 31st of 2008, M Private
waiting for real estate to recover. Residences instituted a new resignation
For Clubs evaluating the decision to
increase dues/levy a special policy for members that provided
S . J o r d a n A s s o c i a t e s! Destination Club White Paper
4

5. “One hundred percent of this charge is slated to pay for the operational costs of
the club. We think it’s a one-time measure to deal with an absurd market measure.
There is a false understanding in the industry of operating solely on annual dues;
sales are necessary in even the best of times.”
! ! ! ! ! ! ! ! - Jim Tousigant - CEO, Ultimate Escapes
additional liquidity. Club effectively
created a market for its shares and RESTRUCTURE PRICING, STRUCTURE, AND MEMBERSHIP PLANS.
allowed members to sell their shares on M Private Residences (Canada).
a 1 in/1 out basis (previously the Club Club had a sister management company, Teger Resorts, which was absorbed into
ran a 2 in/1 out model). Under the new the Club to keep overall management costs low during the recession. The Club
platform, when members resigned from saw a drop in the average value of its homes and so M Private lowered share
the Club they joined a resignation list. prices. B Share prices were reduced from CN$250,000 to CN$210,000 (21 days of
Prospective members put in an offer for usage). At the same time the Club raised its annual dues to make sure they
the class of shares/price they wanted to covered the Club’s ongoing operating expenses.
buy. The first person on the resignation
list with that share class decided In the fall of 2008, the Club decided to move from a “for-profit” to a “non-for-
whether they wanted to accept the offer. profit” structure due to the challenges associated with selling memberships.
If the first person on the list decided the Under the previous “for-profit” model, M Private Residences owned the real
offer was too low, then the second estate and paid fees to the management company for sales and marketing and
person on the list could decide if they management services. This model was deemed unsustainable due to the
wanted to accept the offer. If no-one on recession/credit crisis. Management moved to the “non-for-profit” model, which
the list accepted the offer, then the does not rely on membership sales and dues cover operational/administrative
prospective Member decided if they costs to sustain the Club in the near term. Members are now owners of M Private
wanted to raise their offer and the Residence Inc., a Canadian “non-for-profit” corporation that owns all the M
process would start over again. Private homes and the board is made up entirely of shareholders of the Club.
FINANCIAL RESTRUCTURING.
RENTAL INCOME.
Clubs renegotiated mortgage interest
To raise cash flow Clubs offered rentals during non-peak seasons subordinate to
rates, deferred upcoming payments,
existing Member reservations. As membership sales start to grow in the future as
reduced principal payments, and
the recession eases/ends, the use of rental agreements would decrease as well.
attempting to extend “term” loans to
reduce debt payment obligations with
lenders.
DELAYED CLUB LAUNCH.
Botiga (UK).
With property prices continuing to fall
in 2009, luxury Destination Club,
Botiga, delayed the purchase of its first
group of homes. Botiga commenced
operations in 2007 and had originally
planed to build a global portfolio of
homes including individual residences,
member-only boutique hotels, and
operations in urban locations all within
4-6 hour flying time from London.
Diamante Residences
(Calgary, Alberta)
Diamante started its launch program in
the summer of 2008, but due to financial
market turmoil decided not to move
forward.
S . J o r d a n A s s o c i a t e s! Destination Club White Paper
5

6. CLUB ACTIONS.
Ultimate Escapes (2nd largest Destination Club by members, Escapes for one share of SAAC common stock valued at
1,300, created by a merger of Ultimate Resort and Private $7.94 per share, implying an equity value of approximately
Escapes in 2008 ~ $200 million valuation). $57.0 million.
Ultimate Escapes undertook staff layoffs and cut salaries in Ultimate Escapes members entitled to receive up to an
the 2009 (competing Destination Club and industry leader aggregate of 7,000,000 earn-out units in Ultimate Escapes
Exclusive Resorts announced a 10% reduction in its (each unit exchangeable for one share of common stock in
workforce to rein in operational costs). In addition to staff Secure America) based on meeting certain performance
reductions, the Club also reduced its mortgage interest on targets:
some properties, and made significant cuts in marketing
and overhead costs. • Up to 3.0 million in additional units of Ultimate
Escapes, if Adjusted EBITDA in 2010 or 2011 is
Ultimate sought a $22 million assessment from members between $23.0 million and $27.0 million.
($15-18,000 per Member) equal to about a year’s dues to
keep the business going and cover operational expenses. • Up to 4.0 million additional units of Ultimate
The assessment was designed to cover heavy losses in real Escapes, if Adjusted EBITDA in 2011 or 2012 is
estate values and a sharp decline in new membership sales between $32.0 million and $45.0 million.
experienced by the Club. The assessment was to allow
Ultimate Escapes to operate through tough times and Quintess, LRW (Leading Residences Of The World) – 2nd
preserve member deposits. Largest Destination Club By Real Estate Value With Over
$250 Million In Owned Real Estate And 3rd Largest
“One hundred percent of this charge is slated to pay for the Destination Club By Members With Over 500.
operational costs of the Club. We think it’s a one-time
measure to deal with an absurd market measure. There is a The Quintess, LRW management team recognized the
false understanding in the industry of operating solely on impact of the economic recession and developed a
annual dues; sales are necessary in even the best of times.” comprehensive plan in the 4th quarter of 2008 to address it
Jim Tousigant - CEO. working with members individually, in small groups, and
through conference calls as well as with its investors to
Members who did not pay the special assessment were ensure long-term stability and growth (allow the Club to
previously suspended from utilizing the Club. In August of operate independent of sales activity).
2009, Ultimate Escapes lifted the suspension so the Club
could again reap the dues it was forfeiting under the Of interest:
suspension. Newly reactivated members were charged
outstanding dues and any unpaid assessment charges (if • The Club trimmed operating expenses in 2009 by 35%.
member selected payment plan - interest deducted from the
redemption proceeds upon a reactivated member’s • Asked members through a Club-wide vote to pay higher
resignation). dues and fees and approve certain changes to the terms
of their membership to reflect current conditions.
Members who supported the original assessment received 3
"enrichments" as sweeteners for the deal: from 3 to 7 • Added new members in 2009 (very limited) and planned
additional nights annually for 3 years, upon resignation to seek consolidated opportunities that would advance
receive 90% of the current value of the deposit (up from the Club’s position of strength in the industry.
80%), and participation in the Club’s Assessment
Repayment Plan. Members who reactivated did not receive • Planned on capitalizing on very favorable real estate
the first two “enrichments.” opportunities in places that members enjoyed most.
Ultimate Escapes – Secure America Acquisition • Annual equity commitment from a private investor
Corporation Signs Definitive Agreement for Business (contracted for next eight years) to cover real estate
Combination with Ultimate Escapes Holdings, LLC. acquisitions while utilizing non-refundable part of
upfront deposits to fund the Club’s sales and marketing
In September of 2009, Ultimate Escapes announced a operations.
business combination with Secure America Acquisition
Corporation (SAAC), homeland security business. Secure
America would make a minimum $20.0 million contribution
to Ultimate Escapes in exchange for 4,687,500 units of
Ultimate Escapes, based on a $186 million valuation of
Ultimate Escapes. After the closing of the transaction,
members of Ultimate Escapes would be eligible to exchange
each of their approximately 7,178,841 units of Ultimate
S . J o r d a n A s s o c i a t e s! Destination Club White Paper
6