Abercrombie & Kent Residence Club is poised to open its doors this fall. The new entrant to the destination club arena is fashioning itself as an equity club. We’ve seen that phrase thrown about over the years to describe a number of different configurations in which members retain an ownership interest of the club’s properties. Not surprisingly, there’s been a fair amount of confusion as to what “equity” really means. Here’s what you need to know about A&K’s new version of equity.

It’s not a security

BelleHavens and Crescendo, the two destination clubs that A&K purchased to form their new venture, followed an equity model. Crescendo was selling membership as a SEC certified Regulation-D security. A&K’s equity model is similar to BelleHavens’ structure. Members are indeed owners of the property portfolio, but the club is a not-for-profit, non-stock corporation.

Also, there is no built-in plan for the club to sell its real estate interests for profit. Rather, any potential dividends from the sale of a club property remain within the club for the purpose of buying other properties and expanding the portfolio. Abercrombie & Kent essentially serves as a management company, hired under contract by the club members to maintain the portfolio and handle day to day club operations.

Membership refunds can vary.

If a member leaves the club within five years of joining, they will receive 80 percent of the then-current value of membership, as long as it doesn’t exceed 100 percent of the value of the original deposit. After five years, if the value of a current membership exceeds 100 percent of the original deposit, the member receives their full deposit back plus 70 percent of the appreciation.



By tying deposit refunds to the then-current value of membership, A&K seems to be reinforcing the notion of an equity-based club. But since the value of membership is determined by the club, and not necessarily tied to the appreciation of the real estate portfolio, it would be wrong to think of the resignation policy as a formal return on an investment.

Members come first in a wind-down scenario.

While Abercrombie & Kent’s equity model does not offer the promise of potential profit as with a security-based equity model, it does provide a greater degree of asset protection. In the event of a wind-down scenario, members would be secured creditors and at the head of the line to receive any payout from the liquidation of properties.

While members may nominally own the properties, the purchase and sale of homes will be managed by the tightly controlled A&K brand. One of the biggest benefits of this equity model may be to club executives currently marketing the club to potential members and, perhaps, answering questions about the brand’s past association with the a club that eventually morphed into Tanner & Haley. This equity model, combined with A&K’s assurances that all of the club’s homes will be owned debt-free, will no doubt be used to provide an additional financial assurances.