Luxury-Home Clubs

Luxury-Home Clubs Pitch Themselves as an InvestmentA million-dollar vacation home for a fraction of the price sounds good to anyone.So good that an entire industry has sprung up to put you in one. Companies like Exclusive Resorts LLC and Tanner & Haley Resorts (which includes two former Abercrombie & Kent Clubs) offer fancy houses in places like Vail and Cabo. Members pay a one-time deposit from $95,000 on up, plus various fees, then get a choice of those vacation digs for a few weeks a year.

One downside: Since you're not buying real estate, you don't profit if prices rise. Cash out of many of these clubs and all you get back is the deposit.Now, however, that's starting to change -- marking a shift in this booming business that complicates buyers' decisions.One new company, Crescendo, part of Private Residences of the World LLC in Roseville, Calif., lets buyers share 60% of any appreciation in the 36 or so properties in various locales it intends to buy. (It will have four available by year end.) It plans to sell all 36 in 10 to 12 years, then divvy up any gains among members, who typically invest $250,000 to $325,000. Crescendo itself keeps the other 40%. If there's a loss, management and club members share it equally.

Call it a real-estate bet combined with a vacation. (It's also literally a securities offering, with a private-placement memorandum listing pages of risks.) A more established rival, Private Escapes Destination Clubs LLC, plans to offer something similar next year.At first glance, it all sounds great. You don't even have to clean the gutters. But there are some big caveats. For starters, this could be a bad time to bet on property, given the run-up to-date. Crescendo is brand new and unproven. Exiting the clubs can be tricky. Also, the clubs might soon come into the sights of state regulators. (Currently they're largely unregulated.) How new rules might affect them is anybody's guess.

Not scared yet? Here are your options: Crescendo offers unlimited upside -- and a great deal of risk. It estimates that a member who puts in $295,000 would end up with $464,005 in 12 years if property values rise 7.5% annually. Or, they could lose big if management performs poorly or prices fall.Some more-established rivals also offer upside potential. In August, Tanner & Haley told members that if they had joined in, say, 2004 and quit in 2018, they could get a refund based on the 2018 deposit price (minus a transfer fee), instead of their original 2004 fee. But if the deposit price falls, members get the lower amount.

There's no downside risk at Private Escapes, but limited upside. It annually credits 18% of the appraised value of any real-estate gains to members of its higher-end club.With Exclusive Resorts, you know exactly what you're getting: a loss. It keeps 20% of your deposit when you quit. Yet it's also signed up 1,700 members -- more than all other clubs combined. Chief executive Donn Davis argues that his members are seeking vacations, not investments. "We don't think people are going to want to be on the slopes worrying if the Telluride real-estate market is going up or down."By Ron Lieber, WSJ Online

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U.S. Very Rich List Grows at Maddening Pace!

Very Rich list grows at fastest pace in a decade

All Financial Times News

The number of very rich people in the US grew last year at the fastest pace in at least a decade as their moves into international stockmarkets, real estate and alternative investments paid off.The number of households with $5m (€4m) or more in investable assets – excluding the family home – rose by 26 per cent to a record 930,000, according to a study by Spectrem Group. That is the biggest jump since Spectrem began its survey in 1996. The number of millionaires rose by 11 per cent, to a record 8.3m – the second biggest jump in the decade since they were surveyed.

The overall affluent market – households with $500,000 or more – rose by 7 per cent to a record 14m. This group fared the worst in the wake of the stockmarket collapse, with their numbers falling sharply from 2000. Last year was the first time their total passed that of their peak in 1999. Catherine McBreen, a managing director at Spectrem, said: "It's been a great couple of years for America's millionaires ... the stockmarket, which posted solid improvement in 2005, was one reason for the advance. However, for the wealthiest Americans it appears the increased use of international markets and alternative investments were key drivers of their improvement."

George Walper, president of Sprectrem, said the group had questioned respondents on their investments and returns, and also examined the returns of international markets and alternative investments to ensure the veracity of the results. In a sudden reversal of their longstanding affinity for their domestic market, US investors last year put more than $130bn into international mutual funds, more than three times the amount they put into US funds. Most overseas markets performed better than the US market, so their switch paid off.Hedge funds returned on average only slightly more than the US stockmarket last year, but investable real estate and some private equity investments returned more than this.

Affluent households, on average, held close to half their money in assets – stocks, bonds and alternative investments – and a larger than usual amount of cash, Spectrem said. The affluent reported a greater satisfaction with their financial advisers than in recent years, but this was still short of the highest level previously reported. Those who used advisers were shifting back to use full-service brokers as their main advisers. Copyright 2006 Financial Times

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Castles For Sale!

Though the number of castles sold worldwide is minuscule compared to the overall real estate market, it has increased in recent years, thanks to the rising wealth of buyers, increased visibility--there are several castle-specific Web sites out there--and general enthusiasm for real estate.

There is a surprising range of castle options to choose from these days. They can be age-old or spanking-new, in New Jersey or South Africa, and have turret-high or relatively affordable prices.

In fact, depending on the exact location, the size and the level of restoration, smaller castles can be purchased for as little as $1 million--easily the cost of a two-bedroom condo in Manhattan. Slightly grander castles will fetch somewhere between $2.5 and $5 million, says castle expert Alexander V.G. Kraft, chief executive of Sotheby's International Realty France.

He teases his American friends: "Why don't you sell your garage in London or New York and buy a castle in France instead?"

Of course, the price tags can be much bigger for historically significant, fully restored properties, particularly if they come with vast amounts of land. Consider the 10,000-plus square foot Villa Castiglione in Capri, Italy (pictured above). Resting on nearly seven acres perched on a cliff above the sea, the seven-bedroom Camelot is currently on the market for $38 million.

Kraft estimates that a few hundred castles are up for sale around the world--often quietly, to protect owners' privacy.

And what qualifies as a castle has altered over time. During the Middle Ages, a castle was specifically a fortified structure, largely built to defend nobles against hostile intrusions. Today, the term encompasses a broader range of ornamental homes, from manors to mansions to chateaux.

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The World's Top 20 Billionaires

Where the Billionairs live in the US. The size of the circle indicates the amount of wealth.

New York -
The 20 richest people in the world have a combined net worth of $439 billion, up $5 billion from last year. That accounts for 17% of the total wealth of the 793 billionaires on our list. To make it into the top 20, you’d need to have a net worth of at least $15.7 billion, inching up slightly over last year’s $15.5 billion.
At the top: Bill Gates, co-founder of software giant Microsoft (nasdaq: MSFT - news - people ), who remains the world’s richest man for record 12th straight year. This year, the gap widened between him and the world’s second richest, famed investor Warren Buffett, who controls Berkshire Hathaway (nyse: BRKA - news - people ).
The richest newcomer is Christy Walton, the widow of one of the heirs of Sam Walton, founder of Wal-Mart Stores (nyse: WMT - news - people ). Another new face is Roman Abramovich, the 39-year-old Russian oil baron turned investor. Returning to the top ten is Li Ka-shing, the owner of a massive conglomerate in Hong Kong.
Other members: a Mexican investor who chose to favor local telecom holdings over giant MCI (nasdaq: MCIP - news - people ), the heiress to the L'Oréal fortune, and the head of the largest steel company, Mittal Steel (nyse: MT - news - people ), who recently launched a hostile takeover bid for his closest rival. Overall, Americans continue to dominate the list, with ten members.

Click here to see the 20 richest people in the world.

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Wealthy Families Expect Home Values to Climb

Wealthy Families Expect Home Values to Climb

By James R. Hagerty From The Wall Street Journal Online

Even amid signs of a housing-market slowdown, most wealthy people expect the value of their primary homes to continue rising over the next five years, according to a survey sponsored by PNC Financial Services Group Inc.

The Pittsburgh banking company said 65% of those surveyed expect the value of their homes to rise by at least 10% over the next five years, and 31% expect an increase of more than 20% during the same period. Only 7% expected a decline.The survey was conducted online by Harris Interactive Inc. this fall among 1,485 adults with annual incomes of $150,000 or more, if employed, and assets available for investment of at least $500,000 (among those employed) or at least $1 million (among those retired). PNC is active in financing commercial real estate, but has only a small presence in the home-mortgage market.

Over the past five years, the average U.S. home price has increased by more than 50%, and prices have more than doubled in many cities. But even a rise of 10% over the next five years would be welcomed by many who fear the boom of the past few years will lead to a slump.In recent months, the housing market has shown signs of slowing as inventories of unsold homes pile up. "The party may be over for those who have been flipping houses and using real estate to get rich quick," said Nicholas Buss, research director for PNC's real-estate division. "But, in general, established wealthy Americans haven't been speculative buyers, and they remain solidly confident in the long-term value of their real estate holdings."

Dean Baker, a Washington economist who is a longstanding bear on home prices, said the survey shows many people are unrealistic about the outlook. Mr. Baker, co-director of the Center for Economic and Policy Research, noted that interest rates are rising, income growth is slow, and "we're building homes faster than we ever did before." Even so, Mr. Baker said, "this bubble has gone on way longer than I expected."The survey found that New Englanders were the most cautious about housing. Only one in 10 New Englanders expected a rise of more than 20% over five years, and 18% predicted a decline. In Florida, by contrast, half of those responding expected an increase of more than 20%.

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