Crescendo just published their yearly returns, and investors saw their properties gain more than 8.8 percent in value last year. Crescendo is a destination club that offers an equity interest in the properties it manages for its members. The key to portfolio appreciation is geographic diversification in one of the highest appreciating classes of real estate. Founded in 2004, Crescendo recently underwent its first round of property appraisals, which, according to president and industry veteran Joe Mitchell, proves the merits of the company’s approach to vacation home ownership.

“The 2006 gains in our property values confirm Crescendo’s financial strategy of portfolio diversification, and our owners are beginning to see the benefits,” said Mitchell. “We’re pleased that, despite very uneven properties markets in the U.S., the overall Crescendo portfolio significantly outperformed the national averages.” Although U.S properties performed above the club’s expectation, Mitchell says that it is in the international portion of the home portfolio that has experienced the largest growth. “International properties saw dramatic increases in value, easily counterbalancing the slower rates of increase of our U.S. homes.”

Since Crescendo is a registered security, the club is actually offering investment opportunities with membership benefits. Crescendo’s investors own a portfolio of luxury residences in premier destinations around the world. Current destinations include Punta Cana in the Dominican Republic, Los Cabos, Lake Tahoe, New York City, Scottsdale, Sun Valley, Punta Mita, and Mauna Lani on Hawaii’s Big Island.

Helium Report Perspective

Crescendo is a destination club model that combines real estate equity investing with luxury vacationing, attempting to deliver both financial and lifestyle rewards. The portfolio appreciation should come as a signal of management skills, but their international portfolio left us wondering how the exchange rate fluctuation is factored in their growth number. We asked Mitchell to explain. “To date,” said Mitchell, “Crescendo has only acquired properties in countries where real estate purchases are customarily transacted in U.S. dollars.” According to Crescendo, the results are currently “immune” to currency risks and exchange rate fluctuations. We have also learned from Crescendo that the appreciation of the U.S.-only properties was 2.9% for 2006.

Crescendo’s portfolio includes five residences in the U.S. and three abroad, of which two are in Mexico. Given the appreciation of the domestic properties, the international ones must have performed very well. Helium Report benchmarked Crescendo’s growth rate to a few other national and international parameters.

S&P 500 returned 10.8% in 2006, according to published data. Domestic Real Estate Investment Trusts (REITs), a more accurate point of reference for real estate-based portfolios, have shown pretty consistent high returns, with the Morgan Stanley REIT Index (now called MSCI US REIT Index) reaching 36% yearly return, the Dow Jones Equity REIT Total Return Index 29%, and Vanguard REIT ETF 23%.

In order to benchmark the international portfolio performance we looked at Global Office Cap Rate Trends (shown in graph below), which has registered a performance below 6% for global assets. Crescendo’s performance appears strong under this metric.

As a pioneer in the “investment” Destination Club, Crescendo is the club to keep an eye on to evaluate the validity of the equity business model. Helium Report recommends you consider destination club membership as a lifestyle investment rather than a financial investment. If you are debating whether a destination club is right for you, please download our extensive guide here.