The Hideaways Club offer lifestyle and property investment – but it’s not a timeshare
Hovering just below the radar within vacation home property investment is the destination club. The concept has been at the fringes of investment for some time, and it’s received its share of bad press – some of it deserved. Destination clubs are meant to provide investors with a diverse, low-risk portfolio of second homes without the hassles or economic and political dangers of owning a single property in a single location. As a bonus, investors get private access to a variety of five-star properties.
It’s been a bumpy ride for the relatively new property concept. Some of the most prominent (largely American) clubs include Exclusive Resorts, Quintess, Dream Catcher Retreats and Private Escapes. Others like Ultimate Escapes, Portofino and Private Retreats – one of the first on the destination club bandwagon – have all filed for some sort of bankruptcy. But the highlight, or lowlight, was the spectacular implosion of High Country Club in 2009, replete with lawsuits, finger-pointing, accusations of fraud and 375 seething investors out more than US$7 million.
“They were definitely the remnants of timeshare, and you got usage but not ownership. I would not join a scheme like that. We turned the model on its head and put all the properties in a fund that is in its entirety owned by the members of the fund,” says Mike Balfour, chair of The Hideaways Club, an accountant by training and the founder of Fitness First. Working out of offices in London, Hong Kong and Singapore, the Club’s current funds are the Classic Collection, which comprises a growing portfolio of villa properties in Majorca, Croatia, Thailand, South Africa and Switzerland among others, and the City Collection launching in May of this year. That will operate in premium urban centres such as Milan, New York, Paris, Miami and London, expanding to 120 over the next three years. Each of Hideaway’s properties comes with a dedicated local concierge that completes the lifestyle element. The properties, which the Club sources itself, guarantee spacious accommodations to suit families with kids to amuse and friends on a city break alike.
However Balfour concedes a degree of reeducation is needed. In this post-2008 Bernie Madoff world, “funds” and “schemes” are dirty words and “timeshare” has long been reduced to punchline status. “New concepts have to be explained. Our role is not a sales role. It’s an explaining role. It’s a very transparent model. All we’re doing is professionally buying a great number of luxury properties all over the world. Those properties are owned by a company, and when a member joins he buys a share in that company. It’s just like if you bought a share in any company on the stock exchange.” Balfour emphasises there is a maximum number of shares each member can buy, the properties are debt-free, wholly owned by members with veto power over what the company purchases and the fund’s board is made up of impartial Financial Services Commission representatives.
HC certainly isn’t the only travel investment club out there, but it’s one of a handful based outside the United States. Balfour insists that many of those negative perceptions stem from clubs not practising what they preach – or at least what we assume they’re preaching. As an example, Hong Kongbased LuxLife references investor equity, but, Balfour points out, demands “an ‘entry fee’. There is no corporate structure, no corporate governance, no equity share. It’s a usage scheme, not an equity scheme … We offer ownership, security and capital appreciation. They allude to it but it’s nothing more than old timeshare.”
A pressing concern could stem from the potential for an imbalance between investors seeking to cash out and the number buying. Without enough new buyers to cover buyout costs, outgoing investors could be left in the cold, an issue Balfour admits is valid. “Very simply we would create a queue. However you have to ask yourself what is the likelihood of that happening,” he explains. “With 150 members joining the Classic fund each year and about 5 to 8 leaving it, there would have to be a change in circumstances of enormous proportions for that to happen. If such a change did occur, and it would have to be an economic meltdown, then I would suggest we would all be suffering far more pressing problems than our Hideaways investment.” That’s another way of saying that losing even the premium membership fee would hurt less than being forced to sell one property at fire sale prices – as is happening now in Spain. “There are risks with anything but the degree of risk is minimal.”
Top tier memberships run ?250,000 with an annual fee. That’s pricey but Balfour believes the fee offers more value for money than single property ownerships and is worth its weight for simplifying vacation plans for the kind of overwhelmed professionals that make up its membership. “We started [the business] by looking at the inefficiencies of second home ownership,” which includes maintenance, obligations, endless fees, legalities – all done remotely. The goal is for owners to have no surprises, and as an investment there is indeed a return in the form of capital appreciation on the fund (6 percent annually for the last three years) and individual cash savings. But more than that, there’s no vacationing in the same spot every year. “It’s a lifestyle investment and a family asset,” Balfour enthuses. “Why own one property when [you] can own a hundred?”