Quintess, Leading Residencies of the World has just announced that it has formed Quintess, LRW Future Fund 1 — a $125 million fund earmarked for new home development. Helium Report got a chance to speak with Ben Addoms, founder and EVP of Membership Development for Quintess, LRW. “We assume 25 to 35 new homes will become available to members over a 12 to 36 month timeframe,” said Addoms. “Within 18 months we expect more than 75 percent of all new Quintess homes to be new construction undertaken by the club to meet the specific needs of our members.”

Quintess created a different entity to develop the properties, separate from the destination club that will eventually buy the finished homes. However, the fund’s structure is such that the club holds a controlling stake.

“The Club is buying the properties at cost plus the cost of capital, so it is in effect buying below market,” said Addoms. “This means both better quality homes and better member deposit liability coverage, and ultimately more attractive investor returns.” Addoms told us that the Club will have use of the homes as soon as the certificate of occupancy is issued. Quintess will acquire the homes at a debt-to-equity ratio of 1:2, which is typical for the club. Fund investors will get a 10% return on their capital, while the club will be guaranteed the ability to buy the homes it wants, where it wants them, designed to its specifications.

In late 2006 Quintess acquired Dream Catcher Retreats and partnered with Leading Hotels of the World to build Quintess to a 300-member club with homes averaging $4 million in value. Quintess is currently the third largest destination club after Exclusive Resorts and Ultimate Resort, and is followed closely by Private Escapes.

Helium Report Perspective

Tighter relationships with real estate developers are becoming common in the destination club industry. Helium Report recently highlighted the relationship between BelleHavens and Banyan Properties, another case of a destination club building a pipeline of properties earmarked for future growth. As Quintess and the other market leaders find innovative ways to grow, it brings pressure to all other clubs. We’ve highlighted the “grow or die” challenge of smaller clubs before; this is another example of how the leaders hope to pull away from the pack.

To gain a deeper understanding of the destination club industry, download the Helium Report Decision Guide to Destination Clubs here.