More than half of Dream Catcher Retreats’ 104 members, including three on vacation in homes, dialed in to a member conference call held by Scott Anderson, CEO, last Thursday.

Helium Report was invited to listen to a recording of the call, which was conducted in the same fashion as an investor update for a publicly traded company. Instead of speaking with a dozen analysts, Scott Anderson addressed more than 50 members in real-time, providing assurances of Dream Catcher Retreats’ fiscal soundness and fielding questions for more than twenty minutes.

Some highlights from the call:

Financial transparency and strength

Anderson (photo, right) reiterated the club’s contract with members stating 80% of the membership deposit will always be secured by real estate, homes under construction or cash, even after bank debt. Citing “ample resources…to fulfill member deposit obligations,” Andersen offered to provide access to the destination club’s balance sheet to interested members.

When asked about the business model, Andersen asserted the firm is cash flow positive, but noted the club may not look good from a GAAP (Generally Accepted Accounting Procedures and Policies) perspective since deposits are recorded as liabilities.

Minimal leasing

Anderson indicated the club leases only 5 of its 20 homes, with 75% of its portfolio either owned or with an equity investment in the destination. He provided three reasons for leasing: (1) allow members to enjoy a destination while a home is under construction, (2) test a location to gauge interest, or (3) real estate values do not fit their models. Anderson pointed to Palisades Creek, Idaho as a test destination which Dream Catcher found less popular than expected and La Quinta, California as one where the club waited to enter the market at the right price point.

Club growth and possible industry consolidation

“No member has resigned and there is no member on our resignation list,” stated Anderson during the call. He hinted at a slowdown in new member sales given Tanner & Haley’s recent bankruptcy filing. Anderson also alluded to possible consolidation in the industry, but said Dream Catcher would only consider steps if a merger “enhances both [members’] club experience and the financial stability of the club.”

Helium Report Perspective

We’re impressed with Scott Anderson’s candor during the call. Dream Catcher Retreats has been the leader in financial transparency and disclosure. In April, we commented on the direct approach the club takes in their membership materials by bringing the topic of membership deposit risk to the forefront and inviting prospective members to examine their books.

As an industry best practice, Helium Report recommends a low ratio of leased homes (less than 30%) to ensure sufficient real estate assets to protect member deposits. Dream Catcher meets that measure and commits to a “longer term goal [of] 80% owned and 20% leased.” In contrast, we calculated Tanner & Haley leased 65% of its homes, which the club claims was a key factor leading to its Chapter 11 bankruptcy filing.

Anderson provided a forecast of “12 new homes expected next year,” which implies 72 new members in 2007 when factoring in the 6:1 member-to-home ratio. Helium Report believes Dream Catcher Retreat’s commitment to conservative fiscal management and strong corporate governance gives the destination club a solid foundation for future growth. Indeed, when asked by a member about the lack of availability of yachts, Anderson explained that such assets do not appreciate, which runs counter to the firm’s investment philosophy.