Frequently Asked Questions
General Information
| [-] Is LUSSO a timeshare or a fractional? |
It is neither of these. Timeshares and fractional ownership clubs are ways of purchasing access to a single destination for a specific week, or weeks, of the year. In order to maximize profit, the developer of a timeshare or fractional project sells out a large proportion of the capacity of the property. Timeshare and fractional owners may be able to gain access to other locations through an exchange system but these can be cumbersome and limiting. This structure can render it difficult for an owner in one location to visit another location, or to gain access to the property in his home location in excess of his base allotment of weeks.
In contrast, the operating structure of LUSSO allows its Members unlimited access to the entire portfolio of its residences, subject only to the reservation policies of the Club. It is able to do this by limiting the ratio of Members to residences (no greater than 5.5 Members per property—the lowest in the industry, whereas fractionals often approach 12:1 and timeshares 50:1) in order to deliberately underutilize each property and assure abundant availability. Additionally, LUSSO's homes will be considerably larger and typically more luxurious than any timeshare or fractional offering.
In contrast, the operating structure of LUSSO allows its Members unlimited access to the entire portfolio of its residences, subject only to the reservation policies of the Club. It is able to do this by limiting the ratio of Members to residences (no greater than 5.5 Members per property—the lowest in the industry, whereas fractionals often approach 12:1 and timeshares 50:1) in order to deliberately underutilize each property and assure abundant availability. Additionally, LUSSO's homes will be considerably larger and typically more luxurious than any timeshare or fractional offering.
| [-] What can I expect from a LUSSO home in terms of quality? |
LUSSO will own spacious private residences in some of the finest and most popular resort destinations around the world. The average value of the homes in the portfolio exceeds $3 million. Individual home values may range from $2 million to in excess of $4 million, depending on the destination. Residences will be handsomely appointed in a style reflective of their location and typically feature gourmet kitchens, beautifully appointed living and dining areas, state-of-the-art entertainment systems, high-speed Internet connectivity and, in many cases, private pools and spas. When we purchase property for LUSSO we are meticulous in our selection—is the home situated to maximize daytime sun exposure on the pool/patio area? Will you get the best vantage point for those city light and sunset views? We've thought of all these things and many more.
It is also important to realize that there can be a significant difference between a $3 million property and a $2.5 million property in the same destination, for example, true ski-in/ski-out versus a 10-minute walk or shuttle to the slopes or absolute ocean-front versus ocean view.
In addition to the value of the home, the Club invests in excess of $250,000 in furnishings and, at most U.S. properties, a luxury vehicle is provided with a value of around $60,000.
Finally, expect your LUSSO home to come complete with destination specific equipment for your use—golf clubs in Scottsdale, bicycles in Kiawah Island, golf carts in the Bahamas, etc.
It is also important to realize that there can be a significant difference between a $3 million property and a $2.5 million property in the same destination, for example, true ski-in/ski-out versus a 10-minute walk or shuttle to the slopes or absolute ocean-front versus ocean view.
In addition to the value of the home, the Club invests in excess of $250,000 in furnishings and, at most U.S. properties, a luxury vehicle is provided with a value of around $60,000.
Finally, expect your LUSSO home to come complete with destination specific equipment for your use—golf clubs in Scottsdale, bicycles in Kiawah Island, golf carts in the Bahamas, etc.
| [-] What does my membership entitle me to in addition to the use of Club properties? |
In addition to unlimited use of the LUSSO properties, Annual Dues cover the following:
- Pre-arrival grocery shopping service
- Personal concierge services
- Daily house keeping
- Use of resort and/or hotel amenities, where the Club is able to secure these
- Use of luxury vehicles
- Round trip airport transfers up to $300
(A maximum of four per year to metro destinations, unlimited for all other destinations.)
| [-] Are there any other benefits offered to Members? |
Absolutely. Wherever possible LUSSO will secure membership to local country clubs and will pay all monthly dues. We are also continually adding new partnerships as we develop the Club—for example, golf clubs through our affiliation with Callaway Golf.
Membership Economics
| [-] Are Members subject to assessments? |
The Club has an explicit policy whereby Members are never subject to assessments.
| [-] What evidence do I have to show for my membership? |
Your Membership Agreement, which you execute when you join the Club, is a binding contract between the Club and yourself, clearly evidencing your membership in the Club, your rights and the mutual obligations between you and the Club. Membership deposits are recognized in the Club's balance sheet as a liability and the only obligation that the Club may enter into that would rank senior to these is secured debt used in the acquisition of real estate.
| [-] What is my membership deposit used for and how do I know my money is secure? |
Around 80% of your membership deposits are used for the acquisition of real estate and other assets. The remaining funds are used for the operations of LUSSO and may be used for distributions to investors, subject to restrictions in the timing of these which are designed to protect the interests of Members.
| [-] What happens if I want to resign my membership? |
A membership may be resigned at any time after 18 months of membership, at which point the membership would be sold back to the Club for 100% of the original amount paid. Memberships may not be sold to a third party, although they may be handed down to an heir or may be transferred to a family member during your lifetime.
| [-] If I decided to resign my membership, how do I know my membership deposit will be refunded? |
If the Club is not yet at full capacity, members will be redeemed on a "three in, one out" basis. This means that, from the point of your indication that you wish to resign, LUSSO can admit two more new Members and then the funds from the third new Member will be used to refund your membership deposit. After full capacity, your membership deposit will be funded by the recruitment of a new Member or from the Club's operating assets. In both instances, LUSSO will always refund your membership deposit no later than nine months of your resignation notice.
Property Usage
| [-] How often can I use the homes? |
As a LUSSO Unlimited Member, you may use the homes as often as you wish, subject to the reservation policies of the Club. There is no annual limit on how much you may use the properties. LUSSO 21 Members may use the homes 21 days each year.
| [-] How do I know which homes are available, when? |
Our online reservation system makes it simple to look at your options. Or if you prefer, your personal Member Services Representative is always available to check availability for you. We also continually update all Members when new homes and destinations have been added to the portfolio.
| [-] How flexible and accommodating is the Club's reservation policy? |
Our reservation policies and membership structure have been developed to provide Members with the ability to plan far ahead or to travel at a moment's notice; and our industry-low Members to property ratio of 5.5:1 is expected to yield an extraordinarily low property occupancy rate.
| [-] I have school-age children so all of my travel is likely to be during higher traveled periods. | |
| Will the Club be able to accommodate my needs? |
All Members are guaranteed one Holiday Period reservation every year, through our priority reservation policy. Once the priority groups have made their reservations, for most Holiday Periods significant availability will remain and any Member may reserve any available dates, even if they fall during a holiday week. To reduce the likelihood of excessive demand during Holiday Periods, we limit the number of Members with school-age children.
Furthermore, the prime weeks of summer during which you are also likely to wish to travel, are not subject to any restriction in terms of your ability to make reservations (with the exception of the Independence Day holiday). Finally, there is the Availability Guarantee that once annually, outside of Holiday Periods, assures you of the vacation style of your choice.
Furthermore, the prime weeks of summer during which you are also likely to wish to travel, are not subject to any restriction in terms of your ability to make reservations (with the exception of the Independence Day holiday). Finally, there is the Availability Guarantee that once annually, outside of Holiday Periods, assures you of the vacation style of your choice.
| [-] As a Member, can I include guests in my travel? |
Absolutely. One of the key benefits to a LUSSO membership is that you no longer need to worry about securing additional hotel suites to travel with family or friends. We encourage our Members to travel with guests and certainly have room in our properties to accommodate large parties. We also offer Members the opportunity to specify how they would like sleeping accommodations configured for their visit, including the provision of baby cribs and equipment at all locations.
Furthermore, you can gift two weeks each year to a family member over the age of 25, without the primary Member or spouse accompanying them.
Furthermore, you can gift two weeks each year to a family member over the age of 25, without the primary Member or spouse accompanying them.
Club Economics and Strategy
| [-] How secure is my membership deposit? |
As with any destination club, the security of membership deposits is initially dependent on the Club's ability to re-market your membership at a higher value. Only in the event that a membership deposit cannot be re-marketed does the security of the deposit become dependent on the assets of the Club. Since most of the membership deposits received are invested in real estate, the security of membership deposits is inherently tied to real estate values. This is the case with all destination clubs, including those that only offer to refund a portion of your membership deposit.
One important feature of the Club's commitment to the financial security of membership deposits is DepositTrust® . The Club commits that all of its real estate interests will be held by subsidiary LLCs owned 100 percent by the Club and pledges all of its ownership in these LLCs to a Trust set up to benefit the Members. This provides Members a secured position. The Trust also provides that the Members themselves may assume control of the Trust if they so desire. In addition each Member's Membership Agreement contains a commitment that 85 percent of member deposits are either used for Club Property purposes or held in cash.
We have capitalized the Club and carefully assembled our business plan to minimize the risk of any membership deposit loss at any time, even if a "worst case scenario" were to occur and the Club was unable to continue to sell memberships. We have built in limitations with our investors such that no distributions will be paid to any investors until the Club has demonstrated a strong track record of membership sales and is operating at above a break-even level of cash flow (comparing all cash needs to the sum of Annual Dues being received from Members).
When you combine DepositTrust®, the Club's business model, and the contractual commitment to financial security and disclosure—including a semi-annual financial report to Members showing, among other things, the extent to which the Club's net assets cover the Club's liability to repay member deposits and the uses to which we have put the membership deposits that we have received—you have the best financial assurance package in the destination club industry.
One important feature of the Club's commitment to the financial security of membership deposits is DepositTrust® . The Club commits that all of its real estate interests will be held by subsidiary LLCs owned 100 percent by the Club and pledges all of its ownership in these LLCs to a Trust set up to benefit the Members. This provides Members a secured position. The Trust also provides that the Members themselves may assume control of the Trust if they so desire. In addition each Member's Membership Agreement contains a commitment that 85 percent of member deposits are either used for Club Property purposes or held in cash.
We have capitalized the Club and carefully assembled our business plan to minimize the risk of any membership deposit loss at any time, even if a "worst case scenario" were to occur and the Club was unable to continue to sell memberships. We have built in limitations with our investors such that no distributions will be paid to any investors until the Club has demonstrated a strong track record of membership sales and is operating at above a break-even level of cash flow (comparing all cash needs to the sum of Annual Dues being received from Members).
When you combine DepositTrust®, the Club's business model, and the contractual commitment to financial security and disclosure—including a semi-annual financial report to Members showing, among other things, the extent to which the Club's net assets cover the Club's liability to repay member deposits and the uses to which we have put the membership deposits that we have received—you have the best financial assurance package in the destination club industry.
| [-] Does the company limit the amount of debt it can use to finance the acquisition of property? |
Yes. On average, the Company will strive to employ approximately 50% debt in its property purchases. This is a blended average that the Company strives to achieve across its entire portfolio.
| [-] Given the acquisition cost of its properties and the level of service it provides, how does the company |
| make money on an ongoing basis? |
First and foremost, the Club is operated for the benefit of its Members. The Company itself is able to remain profitable, and incentivized to deliver a superior product to the Club Members, through minimizing the amount of debt (thereby minimizing its recurring "debt service") and amortizing its fixed costs over a broad portfolio of properties. Annual Dues are designed to cover the ongoing cash requirements of the Club with only a relatively small annual profit to the Company. Returns to shareholders in the Club derive from both a share in the annual profits once the Club is fully established and anticipated appreciation in the underlying real estate portfolio over the longer term.
| [-] Does the club have a limit on the number of memberships it will sell? |
Yes. The Club has a strict limit on the number of memberships it will sell. This limit is driven by two principal factors. First, the Club will not exceed a Member to property ratio of 5.5:1. This policy ensures ample availability for each of its Members. Second, the Club limits the number of memberships it will sell per geographic region to account for regional travel habits. This policy ensures distributed use of Club properties. Finally, the Club will "sell out" when it reaches 550 Members, at which point memberships will only become available upon the resignation of an existing Member.
| [-] I'm aware of at least one similar club that does not have a cap on its membership - explain to me why |
| LUSSO's membership cap is a good thing? |
In addition to the response to the previous question, our membership cap enables us to "cherry pick" properties in each location rather than (if we had no cap on membership) needing to buy "in bulk" and compromising quality. LUSSO's plan is to have 550 Members, 100 properties and around 25 locations. A Club aiming perhaps at say 5,500 members (so 10 times the size of LUSSO), let's call it Big Residence Club (BRC), will probably have around 900 properties (since they need to maintain a members: properties ratio of around 6:1) but they are highly unlikely to have 250 locations (i.e. 10x the number of LUSSO locations)—they will simply have more property (but no better a ratio) in a similar number of locations to LUSSO.
So in any particular destination we will need at most six or seven properties while we estimate BRC will need in excess of 25 properties. We believe we will be able to be more selective in choosing prime properties. Our aim is for our Members to be indifferent as to which property they are accommodated in due to our highly selective property acquisition process.
So in any particular destination we will need at most six or seven properties while we estimate BRC will need in excess of 25 properties. We believe we will be able to be more selective in choosing prime properties. Our aim is for our Members to be indifferent as to which property they are accommodated in due to our highly selective property acquisition process.
| [-] Who are the people behind LUSSO? Why should I trust them to manage the Club effectively? |
We have an investor base, management team and advisory board with a broad range of skills including the real estate and hospitality industry. But we intentionally do not recruit exclusively from the hospitality arena because this business is a new paradigm and requires a broader range of input. We value excellent skills, new ideas and fresh mind sets as much as we do hospitality experience, believing that a blend of the two will result in the most efficient operation of the Club and maximize the service level for our Members. Members are also involved in determining the direction of the Club.
