For those of us who remember Everlands (and it was only a year ago!), it was a destination club with an intriguing website, a strong ecological vision, and an initial membership deposit of $1M. Its residences were exotic and appealing: small salmon fishing lodges in Alaska - the multi-suite Rockefeller residence at The Point at Saranac Lake in Upstate New York, the boutique Hotel Endsleigh in Devon, England where the Duke and Dutchess of Cornwall vacationed, Lone Mountain Ranch in Big Sky, Montana - and these were just a few! These Everlands residences all had an air of wildness that intrigued and attracted a certain type of outdoors person, whose sense of wonder was enhanced through travel, who never tired of exploring what was beyond the next mountain, beyond the next cloud.

Unfortunately, back on earth, one of Everlands’ largest real estate underwriters was Lehman Brothers, and when Lehman filed for bankruptcy in 2008, there was not much that Everlands could do, or sell, or buy after that. And, until this past week, not much was heard about them… until October 15th.

It was then that Ultimate Escapes announced an exclusive agreement with Everlands, where Everlands members will be offered a chance to join Ultimate Escapes under preferred membership terms. Also, as part of the strategic agreement, Everlands will also share with Ultimate Escapes a database of more than 500 qualified prospects that had expressed interest in Everlands club membership.

"Though the Everlands properties were unique,” said Jim Tousignant, “they were really not what Ultimate members generally were seeking, even if they had been available. They were small bed and breakfasts and some hunting lodges, small hotels – in that vein. What we were interested in, when the opportunity arose, was in helping their members, who had put substantial money down to join a club, then the club, due to economic circumstances, was finally not there for them at all. We had known that Everlands was looking for an appropriate partner for its members. There are about 50 members, and no assets."

“So we decided to work with the members to provide them what we provide all our members: great vacation experiences in exceptional places, many in the great outdoors. What we are hoping for is allowing the Everlands vacation experience to meld with the Ultimate Escapes experience, each benefiting from the other. In addition, the Everlands ideal of environmental stewardship underscores our “Smart Home,” “Green Home” technologies, allowing us to become even better known for our eco-friendly and socially responsible vacation experiences.”

Over and above the strategic agreement, just one of the many Jim Tousignant has forged in recent months, is a sense of collective and healthful strength that Tousignant sees as a consequence of the Everlands agreement. “Granted this is not a LARGE deal, but it is a helpful one for our industry. And it is one that helps a certain segment of the shared residence population. We want to reach out, as we have with other clubs, to members who had a club once and now do not, through no fault of their own. We feel it is good for our club, but more importantly, it is good for the industry.”

Arlington, VA, October 29, 2009 – Secure America Acquisition Corporation (NYSE Amex: HLD, HLD.U, HLD.WT) (“Secure America” or the “Company”) announced today that it has closed its business combination with Ultimate Escapes Holdings, LLC following yesterday’s approval of all of the proposals related to the business combination and the amendment of certain terms of its warrants at Secure America’s special meeting of stockholders and warrantholders. Secure America has changed its name to Ultimate Escapes, Inc., and its common stock, warrants and units continue to trade on the NYSE Amex under the same ticker symbols HLD, HLD.WT, and HLD.U, respectively. However, it is anticipated that, on Friday, October 30, 2009, the Company’s common stock, warrants and units will begin trading under the new ticker symbols UEI, UEI.WT, and UEI.U, respectively, on the NYSE Amex.

 

“The closing of this transaction is an important milestone in the evolution of Ultimate Escapes and the entire destination club industry,” stated Jim Tousignant, President and CEO of Ultimate Escapes. “As the only pure-play public, luxury destination club company in the world, we are excited about the growth opportunities that lie ahead in this highly attractive segment of the luxury leisure market and are well positioned to take this business to the next level.”

Jim Tousignant realizes he is rewriting the destination club industry rule book, regarding the future implications and the present trends of the destination club industry. Given the significant nature of this deal, he knew he was in process of defining the nature, business structure and the culture of future clubs, both equity and non-equity based. Recently, he expanded on these ideas in detail.

What were the most complicated problems you had to overcome when completing this deal?

“We had two complex issues to overcome: a brutal economy and the complicated nature of the two year merge process relating to the acquisition of Private Escapes. And with regard to completing the acquisition of Private Escapes, people began thinking, "Why is this taking so LONG?" Well, the simple answer is… some transactions take LONGER than others! But both this deal and the SPAC deal closed within nearly a month of each other. In both cases, we set a new standard for the industry. So, patience pays off as it always does in the long run."

Discuss the SPAC deal and its consequences

“With the SPAC deal especially, we generated both excitement - and controversy - as the outcomes set a new standard in the industry. The long-term consequence of this transaction (Ultimate Escapes going public) is that ALL the clubs must now ensure greater financial transparency and disclosure than in the past. This means that every DC — from the Ritz Carlton Destination Club to Exclusive Resorts to Quintess - who all generally provide members with some level of financial information - will likely have to do much more in the future, including audited financial information and other disclosures for prospective members. This high level of financial transparency and disclosure sets us apart from the others: we are the only publicly traded destination club, with audited financials and other detailed material disclosures available for all to see, whereas the other private clubs, at this juncture, provide limited financials and little if any other material public disclosures. This may change in the future."

You have mentioned that the Ultimate Escapes model defined third generation thinking. Can you explain this further?

“The transparency difference is the one most apparent right now, but the Ultimate Escapes business model has always been different from the others. One of the main differences is that we sell lifetime memberships and charge a membership fee – and we earn into income 100% of the one-time membership fee over the first ten years of a member’s lifetime membership. We do not believe in the 1st generation (100% refund) or 2nd generation (80% refund) membership DEPOSIT model – where members “loan” the club money and the club has a contractual obligation to repay all or most of the membership deposit back when the member resigns. Our obligation is to provide a lifetime of memorable vacation experiences and to use reasonable commercial efforts to resell a resigning member’s lifetime membership, for which they will receive 80% of the resale proceeds received.

To date, we have seen these 1st and 2nd generation models not working financially, either for the members or the clubs. The 1st generation 100% deposit refund model was first offered by Private Retreats in 1998 and eventually led to the well publicized bankruptcy of Tanner & Haley in 2006, as a result of being unable to earn any portion of the initial membership deposit into income. Tanner & Haley did not earn a single penny of profit in more than seven years of club operations, even with over $300 million of membership deposits received from almost 1,000 club members. They also were not able to attract the necessary private equity capital to capitalize the business properly, given the 1st generation business model not showing a profit. Investors (and many potential members) were not comfortable with a business model that assumed future profits would somehow come from future “real estate appreciation."

The 2nd generation business models, adopted by most clubs including Exclusive Resorts, Quintess, High Country Club, Lusso, and many others, generally retained only 20% of the initial membership deposit into income as a “non-refundable initiation fee” and treated the remaining 80% as a refundable membership deposit, which over time created huge member liabilities on the club’s balance sheet that did not go away. Again, while somewhat better than the 1st generation 100% refund membership deposit model, the 2nd generation 80/20 model still did not generate any positive operating income, and again made it difficult, if not virtually impossible, to attract private or public equity capital, as well as difficult to attract lenders and increasingly savvy prospective members.”

So, Ultimate's third generation model was created to make the destination club a more profitable entity than in the past?

“Ultimate Escapes' 3rd generation business model was created to make a viable, profitable and sustainable business model for members, equity investors and lenders. We wanted investors and lenders to be comfortable in investing and lending capital to the club, as well as provide prospective club members with confidence in joining our club, as well as provide existing club members with a sustainable membership that is owned for a lifetime as a true intangible asset. This means that Ultimate Escapes club members can resell their lifetime membership in the future generally at 80% of the future resale value of that membership interest. This is really no different from buying a house, car, plane, boat, etc., except the asset is more intangible than tangible. I never understood how other 1st and 2nd generation clubs, based on a 80-100% refundable membership deposit structure, would actually make any money and provide a financially stable club for their members. And without financial stability, how could they be successful in the long-term?

A simpler way to look at the inherent flaws in the 1st or 2nd generation business models is this: from each membership dollar received, it generally costs 60-75 cents to purchase or lease club properties, as well as cover the entire cost of sales, marketing, member services, property home maintenance, etc. These 1st and 2nd generation clubs can only realize about 20 cents income on every dollar. I can't understand how those early business models were ever created to make a profit. This, more than any other factor, is what separates Ultimate Escapes from every other club from a business model point of view: Ultimate is structured to be profitable in order to provide long-term viability for our members, and now has successfully gone public. In the future, successful clubs will likely avoid the failed 1st and 2nd generation membership deposit refund models and embrace Ultimate Escapes’ 3rd generation membership fee/resale model. As they say, “success leaves clues”.”

What do you want the Ultimate Escapes legacy to be, now that the deal is completed?

“At the end of the day, what we in the industry must remember are a few simple things - create a compelling vacation experience that people LOVE, and operate a business model that balances the needs of the members with the needs of the business, including the need to make a profit. If we can achieve those two objectives, the positive energy will keep us alive and alert. On vacation, a club member or a potential member does forget about product forms, SPACS, business models, mergers, economics, all the stuff you learned in business school. The truly memorable vacation experience maintains itself – it has a generativity, a continuous magic, that will keep our industry alive and well for many years into the future. And, as I see it, more new clubs will form in the future, and existing clubs will change and modify their structures, based on solid business fundamentals and club models that work, creating entities that generate a necessary profit potential. We happen to have been the first to do so many things in a different way, but we will certainly not be the last.”

 

The announcement came as a big surprise to an industry recently by traumatized by surprises: that Ultimate Escapes, the second largest Destination Club in the world, was being purchased by Secure America, a SPAC (Special Purpose Acquisition Company), and because of this, soon would become the first publicly traded destination club in existence. In addition to this surprise, came another: in order to close the deal, the acquisition of Private Escapes, another destination cub that was in a 2 year merge process, had to be completed. Last week, this deal was done, paving the way for the SPAC purchase of Ultimate Escapes.

Jim Tousignant recently spoke with me about the changes his company has gone through and where it hopes to go in the future.

What is a SPAC, and how does it work with Ultimate Escapes?

SPACs are common entities outside the shared residence industry that pool investors money, and find relevant companies to invest in. If they don’t find anything, money is given back to investors. Ultimate is the first destination club that has ever been looked at by a SPAC, and that is because we are the second largest with first rate potential for greater growth in the near future.

How did Private Escapes fit into all this?

This acquisition of PE came as a two year process - a labor of love actually, as we knew if we could get it done it would help us, help the industry and most of all, enhance the member vacation experience. It started out as a merger, ended up as an acquisition.

With acquiring PE, we are including 49 new residences, bringing in 50M in luxury resort real estate assets, 16 new club destinations and 387 new club members. It is good for us and good for the industry. Through this process, Rich Keith and I ended up being very good friends, and I think he will be a great company Chairman. He has the ability to travel extensively, and is extremely experienced in luxury real estate negotiation and acquisition. And it must be remembered, he is one the few, FEW people who started a successful destination club when there was no rule book to go by. He did it himself, which is commendable.

What are some of the positive consequences of the Secure America deal?

As regards Secure America, this is a good deal for everyone, and the processes are what many have been wanting for years - Financial transparency, quarterly disclosure statements of where the money stays and where it goes. Further, ours will become a publicly traded company, everything will be out on the table. This type of product demands it, and we will provide it.

Also, with the Secure America deal, we can expand our business as never before. As an example, we are looking at an equity-based club dimension, where the members could indeed buy equity in our company by purchasing our stock. That would be a totally new concept in the industry, and one that we THINK could be a real success.”

What do you think separates Ultimate’s model from the rest of the pack?

I am glad you say “pack” because I think our success lies in that we are a business model that HUNTS: hunts for other business, for other avenues of revenue, for other companies with whom we can strategically liaise so we and they can be more substantially monetized, so our brands can have deeper root systems, with more depth, and more breadth.

Also, you have to know that the first generation DC model just does not work anymore: 3 in, 1 out, 20% of the membership deposit returned to the business while 80% goes back to the member, well, it has been proved it won’t work. You can’t make a profit or even break even with 20% going back into the business. We have gone through a complicated year, and with the unpopular, though necessary, member assessment, we had to reactivate confidence building in our members, and had to reassure suspended members that they could come back without ill will. And in our conference calls, we attempted to answer over all member questions, and these were not simple yes/no’s! I have heard that other clubs on conference calls do not entertain Q&A's because they are just too hard to deal with! But I think we must deal with member concerns when they come up. We would not have a club if we did not have satisfied members!

Are there other deals you are looking at in the near future?

Of course, more deals are over the next set of mountains, and we are there to hunt and incorporate the best ones into our club. No club can survive unless it hunts for business. Lessons learned from this economy is that you can’t depend ONLY on membership acquisition to remain profitable. You also can’t depend ONLY on real estate increasing in value.

We also know there are other products out there that are competitive with ours – this is why we want to provide the best choices for our members. If we can keep them content with OUR choices, and be available to answer all questions any time, then our members will be content and we will have won the day.