The High Cost of the Proposed Ultimate Escapes Member Owned Option

By: Destination Club News
Date: December 17, 2010

Just over three months ago, luxury destination club Ultimate Escapes announced that they were in crisis. CEO Jim Tousignant would introduce a partially member owned option that would allow members the ability to convert their membership into shares of the company. The plan would ask for between $15 million and $30 million from members that would largely go towards paying down the interest payments on their near $100 million loan with lender CapitalSource. We identified multiple problems that we saw with the plan and members echoed those sentiments, voting down the proposal by a two to one margin. Even after being rejected, Ultimate Escapes and restructuring firm CRG Partners would continue to pursue a member owned option for weeks following.

Court documents have revealed how much CRG Partners spent on the member owned option, clocking in at well over 150 hours specifically on tasks related to converting to a partially member-owned structure, totaling just under $80,000 in fees. Not included in these figures is the amount of time spent by Ultimate Escapes executives such as Robert Glinka, Phil Callaghan, and others working on the various member owned plans. 

Documents show that CRG, in tandem with Ultimate Escapes executives and representatives at CapitalSource, continually reviewed, revised, edited, discussed, and presented various iterations over several weeks, charging as much as $675 per hour.

The mounting legal and consulting fees are more evidence that members of Ultimate Escapes likely will never see any of the refundable membership deposits paid to the club repaid to them. Despite this loss, many Ultimate Escapes members are moving on. Demeure, DUO by Quintess, Second Home Destinations, and Equity Estates have all absorbed members of the now bankrupt club.

Anecdotally, several of the Ultimate Escapes members that we have spoken with have expressed that they still remain interested in the destination club concept, but are taking themselves out of the mix at present, monitoring the sector to find a new club that fits their travel needs and financial requirements.

If you would like assistance on purchasing a destination club membership, request a copy of our Destination Club Guide. We will help you sort through the various information in the industry and help find the club best for your unique travel and financial situation.