We spoke again with Jim Tousignant, the founder and CEO of Ultimate Resort and the architect of his club’s bold move to acquire the assets of the bankrupt club, Tanner & Haley. In terms of the deal, Dec. 19th is the date for the final court approval of his offer and he hopes to close the transaction by the end of the year.

December 22 Deadline

Ultimate Resort set a deadline of Dec. 22nd to hear from Tanner and Haley members if they will accept the offer of membership in the new club. Tousignant is confident that several hundred of those members – possibly more than 500 – will accept the offer, but there is no minimum number that have to join for the transaction to close. The minimum member requirement was dropped by Tousignant during the final day of negotiations, as he faced a competitive bid from the team that launched the ultra-luxury club, Ciel.

In the deal, Ultimate Resort will acquire about 60 Tanner and Haley homes and take over about 87 leased properties for at least six to nine months. Tousignant wanted to be able to keep all member reservations on the books through April ‘07, hence the need for the leased homes. Over time, he intends to wind down many of those leases and replace those with acquired homes, as needed.

#2 by Member Size

When completed, the transaction will make Ultimate Resort the # 2 club in the industry by member size, up from the 6th slot. The deal will also mitigate the impact of what has been a very black eye for this young industry – nearly 900 Tanner and Haley members left without any chance of recovering their membership deposit.

We will get more details next week, but we’ve learned the membership offer from Ultimate Resort does provide membership deposit refund rights after five years, asuming those members are in good standing. On the surface it looks like an attractive offer: join the new club, pay market rates for annual dues, continue to tarvel, and after 5 years, get a membership deposit refund if you want to leave.

The deal is not without risks; Tousignant and his management team will have their work cut out for them. The first order of business will be to get hundreds of those Tanner and Haley members to join the new club and keep them happy over the next six months and beyond. The old Tanner and Haley was generous to a fault with members – from the guaranteed availability clause to picking up the cost of green fees for members when they golfed. In the end, those costs could not be sustained by the business. Expectations will have to be reset with these members.

Nearly 100 Homes in 20 Destinations

After the integration is complete, Tousignant is hoping that as the new #2 his club will more consistently be on the short-list of clubs that prospects are considering, along with Exclusive Resorts, Quintess, and Private Escapes. If all goes well, he should end up with close to 100 homes in over 20 locations – enough for prospects to realize that they can join and not have to wait for other new members to join for the club to get more homes.

Finally, Tousignant assured us, without providing numbers, that once the transaction is completed, his club will be one of the best capitalized in the industry, with a strong working capital position. We will check back after Dec 22nd to see how many Tanner and Haley members take the new membership offer. If the numbers are not what Tousignant hopes, then he will probably need to sell homes to “right-size” the portfolio relative to membership size and associated revenue.