Thought Leaders: Adam Capes and Philip Mekelburg of Equity Estates

Discussions with leaders who are helping share the future of our industry

“It’s important, especially in this day and age, to know first what Equity Estates is NOT,” says Adam Capes, co-founder and President of Equity Estates. “It is NOT a destination club! Nor is it a REIT – a real estate investment trust. Rather, it is a Luxury Residence Fund."

“Prior to my helping create Equity Estates, I had a lot of experience – as a salesperson and as a member at another destination club – and saw firsthand the two problems that kept coming up in the first-generation models: availability and financial security. Members wanted access they could not have, and they wanted their deposits financially secure. Because our members own the portfolio of residences, we function with nearly no debt. And since we have strict covenants in our operating agreement and a low member to property ratio, neither of these problems have surfaced.”

Adam Capes and his business partner, CEO Philip Mekelburg, created Equity Estates nearly three years ago, and due to its unique structure, has continued to grow. “Actually, the recession has proved invaluable to us, as people who are interested in our club are those who understand our business model, one that’s NOT based on constant member sales. This is a good thing, as those clubs who have BK’d were based on constant outside selling, changes in the model without member agreement, and surprising assessments levied after the members had paid their dues. Our model and methods are quite different, in that our members own a diversified global portfolio of multi-million dollar private homes averaging around $3 million each. Our members can reserve any of these homes, with no fixed weeks or nightly minimums."

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The "capital contribution rate" (they actually don’t have deposits) for a full membership interest is currently $375,000. They also offer Executive Membership Interests (half interests) for $197,500. A full membership interest includes 30 nights of usage per year. An Executive Membership (one-half interest) includes 15 nights of usage per year. The maximum stay at one location is 18 consecutive nights. Nights can be reserved on short notice, or as far in advance as an owner member wants.

The fund will have 300 full memberships with 43 to 50 homes in highly sought-after resort and metropolitan destinations. They are long-term, buy and hold managers. Beginning in 2021, they plan on selling all the homes and distributing the proceeds. However, membership interests can be redeemed anytime after a 24-month hold on a one in one out basis.

Equity Estates is thriving, with one aspect surprising to both Adam and Phillip. “It is a pleasant surprise hearing the stories our owner members tell us,” says Philip, “ … about how grateful they are when talking about their individual family experiences. Some of our members have told us that with Equity Estates it is easier to convince their teenagers to travel with them, and how great it is to have their kids, sometimes distant in every day life, warm to the family once again.”

Because of the state of the economy and the black eye garnered by many destination clubs, those potential members and others who contact Equity Estates seem very different in tone and attitude than earlier. According to Adam, there are two varieties of people who call: “one is the serious person who has done all the due diligence about our group, and have called us because they know the problems with other clubs and models, and the second are people who don’t know us at all, had heard it was a good way to travel, and want all kinds of information. It is an interesting dichotomy.”

“Yes,” Philip comments, “which really says something about the industry. There are far more people who do not know anything about our industry than know about it. We eat and sleep the second home alternative or shared residence industry, but there are millions still to be educated about the experience and investment, and those who know the experience do not want to lose it by going back to renting hotel rooms. Even with the recent problems some companies have faced, we sense these to be a rough spot in a largely smooth, ever evolving road.”