Financial Aspects of OlaBrisa Track 2
_The Value of an OlaBrisa Membership in the midst of The Great Stagnation
_Whether you understand the current world economic situation in terms of A Balance Sheet Recession (Richard Koos) or a New Normal (Bill Gross / Mohamed El-Erian) or The Great Stagnation (Tyler Cowen), the next fifteen to twenty years looks to be a time of high turbulence and anemic economic growth.
As anyone knows who has looked recently at the interest rate being paid on their money market account or their certificate of deposit, many investments now actually have a negative real rate of return. (As of February 2013, Bill Gross's estimate is that negative real interest rates are near -2%.)
In his February 2013 investment outlook, Bill Gross gave his (and PIMCO's) recommendations for the best financial strategy for this environment:
(1) Position for eventual inflation: the end stage of a supernova credit explosion is likely to produce more inflation than growth, and more chances of inflation as opposed to deflation...
(2) Get used to slower real growth: QEs and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico and Canada are candidates.
(3) Invest in global equities with stable cash flows that should provide historically lower but relatively attractive returns.
(4) Transition from financial to real assets if possible....: buy something you can sink your teeth into ....
(5) Be cognizant of property rights and confiscatory policies in all governments.
(6) Appreciate the supernova characterization of our current credit system. At some point it will transition to something else.
As the "New Normal" advances, we feel more and more convinced that membership in OlaBrisa is a prudent and productive use of our financial resources.
OlaBrisa not only gives us a pathway to obtain real assets outside the increasingly leveraged US and European economies; even more important, it is an asset that provides ongoing real life benefits -- increasing the quality of our lives and the lives of our family.
As a P4, if you feel that becoming part of OlaBrisa will improve the quality of your and your family's lives, and if you have financial resources you are seeking to invest / protect, then you are likely to find that moving forward with an OlaBrisa membership is a straightforward choice. [1]
As anyone knows who has looked recently at the interest rate being paid on their money market account or their certificate of deposit, many investments now actually have a negative real rate of return. (As of February 2013, Bill Gross's estimate is that negative real interest rates are near -2%.)
In his February 2013 investment outlook, Bill Gross gave his (and PIMCO's) recommendations for the best financial strategy for this environment:
(1) Position for eventual inflation: the end stage of a supernova credit explosion is likely to produce more inflation than growth, and more chances of inflation as opposed to deflation...
(2) Get used to slower real growth: QEs and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico and Canada are candidates.
(3) Invest in global equities with stable cash flows that should provide historically lower but relatively attractive returns.
(4) Transition from financial to real assets if possible....: buy something you can sink your teeth into ....
(5) Be cognizant of property rights and confiscatory policies in all governments.
(6) Appreciate the supernova characterization of our current credit system. At some point it will transition to something else.
As the "New Normal" advances, we feel more and more convinced that membership in OlaBrisa is a prudent and productive use of our financial resources.
OlaBrisa not only gives us a pathway to obtain real assets outside the increasingly leveraged US and European economies; even more important, it is an asset that provides ongoing real life benefits -- increasing the quality of our lives and the lives of our family.
As a P4, if you feel that becoming part of OlaBrisa will improve the quality of your and your family's lives, and if you have financial resources you are seeking to invest / protect, then you are likely to find that moving forward with an OlaBrisa membership is a straightforward choice. [1]
Structure of OlaBrisa Track 2 Memberships
OlaBrisa Track 2 Contributing Membership are organized in terms of three week long “sets” (named after wave sets..) -- combined with an optional pathway (Stage 2/3) to obtain full ownership of a home.
With their Track 2 contributing membership, OlaBrisa members receive the right to stay at OlaBrisa during one of nine 3-week sets each year for the twenty year term of the membership.
There are 9 sets to choose from.
These sets (with their dates) are:
- Set 1 -- last 2 weeks in Oct and 1st week of November
- Set 2 -- 2nd, 3rd, and 4th weeks in Nov
- Set 3 -- 1st three weeks of December
- Set 4 -- 1st 3 weeks in January – starting Jan 2
(Set 3 or 4 can also include holiday sets -- Christmas / New Years Holiday (Dec 22 – Jan 2) - Set 5 -- Last week in January and 1st two weeks in February (Todos Santos Art Festival)
- Set 6 -- Last two weeks in Feb and 1st week in March (Todos Santos Film Festival)
- Set 7 -- Last 3 weeks in March
- Set 8 -- 1st 3 weeks in April
- Set 9 -- Last week in April and 1st two weeks in May
Ability to Access Additional Bedrooms as You Need the Space
In typical usage, OlaBrisa Track 2 members use the master bedroom in the residence, and only use (and pay for) the second and third bedrooms when they have guests or family members staying with them. (The additional bedrooms cost $45/night for the 2nd bedroom and $60/night for the 3rd bedroom (casita)).
This keeps costs affordable, since members pay only for additional space as it is used.
If members expect they are highly likely to use the additional bedrooms on a regular basis, it may make financial sense to purchase a second and/or third bedroom as a part of their set.
This keeps costs affordable, since members pay only for additional space as it is used.
If members expect they are highly likely to use the additional bedrooms on a regular basis, it may make financial sense to purchase a second and/or third bedroom as a part of their set.
Cost of Track 2 Contributing Memberships
The cost of an OlaBrisa contributing membership is based on the time of year for your stay, with (as you would expect) the mid and late winter membership sets being more costly.
We currently expect that the cost of membership for a one bedroom set will range from $31,000 to $55,000 based on which set you select. [2]
(Please contact us at [email protected] for more detailed pricing information and availability.)
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We currently expect that the cost of membership for a one bedroom set will range from $31,000 to $55,000 based on which set you select. [2]
(Please contact us at [email protected] for more detailed pricing information and availability.)
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_Benefit of being an early Track 2 member
_There are a number of benefits to
being an early Track 2 member of OlaBrisa.
- The first (and most important) benefit is the opportunity to start experiencing the benefits of OlaBrisa membership sooner rather than later;
- Early members get priority in their yearly choice of residence location (including proximity to friends);
- Early members will have priority for purchasing Stage 2 homes and for access to Stage 3;
- Early members also lock in the lowest price for a Track 2 contributing membership. [3]
Track 2 Contributing Membership includes Credits for Stage 2
The 3 stage structure of Track 2 at OlaBrisa is designed to provide OB Track 2 members with an easy, low risk option to expand the time they can enjoy at OlaBrisa from the initial three weeks a year in Stage 1 up to full time ownership in Stages 2 and 3. [4] [5]
To facilitate this, and in recognition of the role which the contributing members play in moving the entire OlaBrisa project forward, all Track 2 members will receive $15,000 in two credits which can be applied to the purchase of Stage 2 homes. The first credit is for $10,000 and can be used by the Track 2 member for the purchase of their own Stage 2 home. The second credit is for $5,000 and can be used by friends and family members for the purchase of a second Stage 2 home. To utilize the credits, members and their family and friends will need to commit to being full members of Stage 2 residences when they have the opportunity, based on the purchase priority list. All credits will be applied to the final payment due on a Stage 2 unit.
To facilitate this, and in recognition of the role which the contributing members play in moving the entire OlaBrisa project forward, all Track 2 members will receive $15,000 in two credits which can be applied to the purchase of Stage 2 homes. The first credit is for $10,000 and can be used by the Track 2 member for the purchase of their own Stage 2 home. The second credit is for $5,000 and can be used by friends and family members for the purchase of a second Stage 2 home. To utilize the credits, members and their family and friends will need to commit to being full members of Stage 2 residences when they have the opportunity, based on the purchase priority list. All credits will be applied to the final payment due on a Stage 2 unit.
Track 2 Membership Transfers / Re- sales
After OlaBrisa members have held a membership for 3 years, members will be able to transfer their memberships. (All such transfers will be done via OlaBrisa and will be charged a $300 transfer fee.) [6]
Track 2 Use / Rental of Sets
OlaBrisa sets can be used by family members / friends of members, provided that OlaBrisa is informed before the set begins.
After OlaBrisa has been in operation for 2 years, it will run a 3 year test of members being able to make their entire sets available for rent. All such rentals will be coordinated by OlaBrisa, subject to its operating rules. Based on the experience of this test and feedback from members, OlaBrisa will decide how / whether to continue the set rental program. [7]
After OlaBrisa has been in operation for 2 years, it will run a 3 year test of members being able to make their entire sets available for rent. All such rentals will be coordinated by OlaBrisa, subject to its operating rules. Based on the experience of this test and feedback from members, OlaBrisa will decide how / whether to continue the set rental program. [7]
Shared Ownership of OlaBrisa Track 2 Memberships
A number of people have asked whether it is possible to share a contributing membership among several friends, enabling, for example, two couples to come down for a three week set, with one couple using the 2nd bedroom / suite while sharing the kitchen and living room, or one couple using the entire unit for two weeks and the second couple using the entire unit for one week of the three week set.
OlaBrisa is fine with such sharing, subject to several provisions designed to make the operation of OlaBrisa as simple and fair as possible.
In order to minimize administrative overhead, OlaBrisa will have one official contributing member for each three week set. As far as OlaBrisa is concerned, this contributing member is responsible for all expenses and costs related to the set. The contributing member will collect fees and costs from their friends on whatever basis they work out.
In such a situation, the contributing member will need to work out clear agreements with their friends governing the sharing of costs, fees, and the use of the unit during the three week set. OlaBrisa will be glad to provide templates for agreements, etc. which will assist with this.
The contributing member will be responsible for informing OlaBrisa management of all friends that will be sharing the contributing membership, and will provide OlaBrisa a copy of the agreements they have with their friends. Each year, the contributing member will inform OlaBrisa in advance of the beginning of their set regarding the details of who will be using the unit, which dates they will be there, etc.
Since the amount of maintenance and wear and tear on the units and the common areas is related to the number of people using the facilities, if a unit will be used by more than four adults and/or four children during a three week set, there will be a maintenance fee of $100 for each adult or child above this number. These additional fees will be paid prior to the beginning of the three week set.
OlaBrisa is fine with such sharing, subject to several provisions designed to make the operation of OlaBrisa as simple and fair as possible.
In order to minimize administrative overhead, OlaBrisa will have one official contributing member for each three week set. As far as OlaBrisa is concerned, this contributing member is responsible for all expenses and costs related to the set. The contributing member will collect fees and costs from their friends on whatever basis they work out.
In such a situation, the contributing member will need to work out clear agreements with their friends governing the sharing of costs, fees, and the use of the unit during the three week set. OlaBrisa will be glad to provide templates for agreements, etc. which will assist with this.
The contributing member will be responsible for informing OlaBrisa management of all friends that will be sharing the contributing membership, and will provide OlaBrisa a copy of the agreements they have with their friends. Each year, the contributing member will inform OlaBrisa in advance of the beginning of their set regarding the details of who will be using the unit, which dates they will be there, etc.
Since the amount of maintenance and wear and tear on the units and the common areas is related to the number of people using the facilities, if a unit will be used by more than four adults and/or four children during a three week set, there will be a maintenance fee of $100 for each adult or child above this number. These additional fees will be paid prior to the beginning of the three week set.
_Track 2 Annual Maintenance Fees
_Track 2 Members will pay an annual maintenance fee which will cover the cost of the ongoing upkeep / repair of OlaBrisa and which will also cover the cost of providing housekeeping services, free morning coffee / smoothies, and free morning "rejuvenation" yoga / tai chi sessions during each set. This fee will also include a budgeted cost for our community support projects. [8]
Notes
1] Value of Ob Membership. Since OlaBrisa is primarily a life investment, not a financial investment, the value of an OlaBrisa membership is fundamentally based on the potential it has to improve you and your family's long term quality of life. In this the value of a membership is similar to the use value you obtain in purchasing a car. The main financial consideration with regard to an OlaBrisa membership, therefore, really is whether you can afford it -- whether you can include an OlaBrisa membership in your life without undercutting your ability to afford other key aspects of your life.
While we realize this, many of us still need to have some comparison between the cost of an OlaBrisa membership and other options we might consider.
In terms of alternative uses of money, the comparison is dramatic. As of January 23, 2013, the 10-year Treasury yield is 1.86%, while the 30-year Treasury yield is just 3.04%. Corporate bond yields continue to be around 3%, the lowest level since 1955.
If the scenario of the Great Stagnation / continuing deflating global credit bubble continues to play out, then just on a financial basis, the relative advantage of investing in OlaBrisa and enjoying the benefits of OlaBrisa membership will continue to increase, since the alternative is to keep the cash in a cd, making (if you invest $30,000) $600 a year (before paying taxes) to spend improving the quality of your life.
Another type of comparison is with other real estate investments. This sort of comparison is difficult, since the available comparison is with large time share resorts located around Cabo San Lucas. These resorts do not have OlaBrisa's focus on enabling P4 living. They also are not located in Todos Santos. (With the land use plan that comes the Pueblo Magico designation, it is highly unlikely that any typical resorts will ever be built in Todos Santos.)
Given this, one possible (rough) comparison one might make is with a typical resort like the Club Cascadas de Baja resort in Cabo San Lucas. (Club Cascadas has over 100 units.)
In February 2012, Redweek.com (one of the major web sites for the resale of timeshare units) listed a non equity 2 bedroom / 2 bath one week unit for resale which has five years of time remaining at Club Cascadas de Baja for $6,500. (This is an average of $1,300 per year for the remaining years). Because there is no car sharing at Club Cascadas, you would need to rent a car during your stay, which will typically cost $200 per week. There is also a $888 annual maintenance fee per week.
Based on this, the comparative "cost" of a 20 year membership at Club Cascadas de Baja for 3 weeks each year is $140,000. (If you purchased three weeks at a new timeshare project in Cabo, your comparative cost (including car rental) would be less -- probably around $60-70,000)
Another approach is to compare the cost of an OlaBrisa contributing membership with the cost of renting a house in Todos Santos for a similar period. (This gets you to Todos Santos, but without the connection with other P4s that is the primary focus of OlaBrisa).
As of February 2012, 2 bedroom 2 bath houses in Todos Santos with a pool typically rent for $350 / night. Houses with 2 bedroom / 2 baths without a pool and not near the beach typically rent for $700 per week. Since there is no car sharing, you would need to rent a car to get back and forth, which would typically cost another $600 for the three weeks of your stay. Assuming that these costs stay constant, the comparative "cost" over 20 years for this option would range from $159,000 to $54,000. If you would like to make your own comparison, you can review available Todos Santos rentals at sites such as http://www.todossantos.cc/vacation-rentals and http://baja.com/vacation-rentals/ .
These are obviously very rough comparisons; however, they do provide some indication that the cost of an OlaBrisa participating membership is certainly not more than the cost of a typical resort membership in Cabo or the cost of renting a small house in Todos Santos, and in fact the cost of an OlaBrisa contributing membership is likely to be considerably less.
The main point of course, is that in addition to having a lower comparative "cost", OlaBrisa is a unique project, located in Todos Santos, not in Cabo, it has 24 homes, not over 100, and is specifically designed to enhance P4 Living.
If, like most Track 2 members, you plan to expand the amount of time you enjoy at OlaBrisa through the purchase of a stage 2 home, and if you envision of making this opportunity available to family members and/or close friends, then the $15,000 of credits which come with a Track 2 membership and which can be applied to the purchase of stage 2 homes provide another source of financial return from a Track 2 contributing membership.
Again, however, in considering whether an OlaBrisa contributing membership is right for you, the decision really is whether you feel including OlaBrisa will improve the quality of your life. If you feel OlaBrisa will do this, and if the decision doesn't put you at significant financial risk, then it really is an easy choice.
[2] Cost of Track 2 Ob membership. The $55,000 cost includes the $12,500 cost of the holiday set. Members purchasing set 3 or set 4 will have priority to purchase the holiday set.
[3] Early Track 2 Members Lock in Prices. Track 2 OlaBrisa initial prices are good for the later of 180 days from the date when memberships are first made available for purchase or the date when the first 100 memberships have been purchased; after this time, prices may be increased, based on demand.
[4] Priority to Purchase Stage 2 - use of credits. OlaBrisa expects that the opportunity to purchase stage 2 homes will be made available on a prioritized basis, with the priority based on the order in which members become contributing members of OlaBrisa and upon the number of other members which each member has recruited. OlaBrisa Members will have the ability to enable up family members / friends to purchase a second Stage 2 homes at the same time as the member's purchase, enabling the use of both credits.
[5] Decision to Move Forward with Stage 2. The decision whether (and how) to proceed with Stage 2 of OlaBrisa will be based on a number of factors, including the experienced gained with the first stage of OlaBrisa, the economic conditions at that time, and the level of interest / demand for Stage 2 residences.
[6] Track 2 Transfers. The reason for this three year holding provision is to minimize the impact of people purchasing memberships as a speculative investment instead of actually committing to make OlaBrisa successful.
[7] Track 2 Rental of Sets. The main criteria for evaluating the set rental program is whether sets can be rented without affecting the special experience OlaBrisa has for its members. (This may require, for example, that only a defined % of homes can be rented each set, so the number of renters is not noticeable.)
[8] Track 2 Maintenance Fees. We currently expect the OlaBrisa Track 2 maintenance fee to be $45 per month. Once OlaBrisa is built, the maintenance fees for Track 2 members will not be increased at a rate higher than a three-year moving average of the annual rate of inflation in Mexico without a majority vote approval of all the OlaBrisa Track 2 contributing members.