The Luxus Group, has been expanding its Luxus Vacation Properties fund to acquire 13 homes throughout North America. Investors in the fund have access to all these vacation homes.

The Fund

The fund started about a year and a half ago and is open to investors who live in the Canadian provinces of Alberta, Saskatchewan and British Columbia and any accredited investors across Canada.

Just like a venture capital fund or private equity fund, there's a hefty private placement memorandum for investors to wade through, which includes financial statements, offering details, risk analysis, and partnership agreement. The fund is run by a general partner, who overseas all the daily operations, and the individual investors are limited partners in the fund.

According to Steve Petasky, the managing partner, the idea behind the fund is a very simple one, and one we've heard before, of just expanding the concept of a group of friends getting together to buy a vacation home.

"We have 73 limited partners in our group and 87 total people that have made a formal investment (when you include partners that split equity and share the time)." Steve told SherpaReport "Nearly all the growth has been organic and we continue to add new homes and new partners" he continued.

As investors join the fund, over 91 percent of the investment goes towards the capital account and buys the homes and furnishings. The fund has an eleven and a half year life and will then start to sell the homes, at which time the limited partner investors receive 75% of any gains, with the general partner collecting the other 25%.

The Homes & Locations

The Luxus fund plans to raise about C$35m and buy 30 properties in 20 to 22 destinations. The 13 current homes are valued at an average of about C$1m - C$1.1m and are located in the following places:

• Maui x2
• Hawaii
• Scottsdale
• Palm Springs
• Cabo san Lucas
• New York City
• Orlando
• Canmore AB,
• Panorama BC,
• Kimberley BC,
• Vernon BC x2

All these homes are owned outright with no long-term debt or mortgages. Annual 3rd party appraisals are obtained for each of the home values and these are then used to set the share price for the fund.

The Vacations & Usage

There are three levels at which limited partners can buy into the fund. The entry-level "silver" investment is $147,000 and provides about 4 weeks of stays per year. For the C$246,000 of the highest "diamond" level an investor receives about 8 weeks of vacation time a year.

The fund allocates time in the homes on a points basis. Each investor receives a certain number of annual points based on their investment level, and the "points charge" for each home varies based on the seasonality for that particular home. The points charge also varies depending when the home is booked prior to travel. Reservations made between 90 and 365 days are charged at a regular points level. To reserve a home 12-16 months in advance requires a 25% points premium and homes reserved at short notice within 90 days of travel are given a 25% points discount.

Investors also have bonus days for very short term travel, within 30 days of their reservations, for instance a silver level investor will receive 7 days of bonus travel a year, in addition to their points allocation.

Services & Dues

Steve was very keen to emphasize that Luxus runs a "lean ship" and keeps its costs low. Unlike most of the destination clubs, Luxus doesn't have a local concierge at each of the home locations but does provide an in-house travel agent to organize all aspects of members' vacation plans. In addition members pay separately for cleaning the home after each stay. These lower services, coupled with essentially no financing costs and no leasing expenses, mean that the annual dues are also very low, with the highest level for 2009 set at C$8,300.

In keeping with its equity model the fund is totally transparent on all these operating costs. Steve told me that they reconciled annual operating costs and came on budget in 2008.

Even in the current economy, Steve said "no-one is looking to get out since they buy in knowing it's for the full term", this is quite a difference to many of the destination clubs which have seen their resignation lists increase due to the financial pressures of the current economy. If investors do wish to leave the terms are 1 in 1 out once the fund has reached its investor limit, and 2 in 1 out before the cap is reached.

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Luxus is basically an equity destination club similar in structure to Equity Estates and with many parallels to A&K Residence Club and M Private Residences. While many of these equity clubs are newer than the larger destination clubs they seem to be weathering the economic storm somewhat better.