A Residence Club so exclusive you cannot get in

Thus, I was intrigued to come across Cuvee Ventures, a residence club so exclusive you cannot join. No, I am not kidding; Cuvee is one of the most exclusive entities in the Residence Club niche and their business model, part-real estate investment trust (REIT) and part hedge fund keeps the vast majority of us out, just as the principals and investors desire.

Over lunch at the Denver Athletic Club I had the pleasure of meeting the founder and managing director, Larry Mueller and his most gracious PR representative and daughter, Emily Mueller.  The interview, part Q&A as well as conversational was enlightening and intriguing and the Cuvee model will demand questions concerning the business model of the residence club for years to come.

 

Joseph Sobin (JS): Larry, how did you conceive and create the Cuvee Ventures and Cuvee Escapes model of business?

 

Larry Mueller (LM): After many years in the computer business and like many affluent persons having invested with the assistance and advice of money managers an epiphany came about concerning the diversification of my investments. While my returns with the smartest private bankers were adequate, I wanted to diversity into what I refer to as “Lifestyle Assets”. Literally taking the Residence Club model yet operating it as an investment to achieve a lifestyle benefit as well as capital appreciation for its members/investors.

 

JS: The Residence Clubs promote their membership as an investment in a lifestyle.

 

LM: It is and it can be costly. For a fee ranging from a few thousand dollars to hundred’s of thousands of dollars you too can have access to luxury vacation homes worldwide and you even have the added expense of paying annual dues. From some back of the napkin math I realized if I went the traditional residence club route I would incur an approximate 15% loss on my capital per year in return for 21 nights of usage in the luxury homes. I knew there had to be a better option.

 

JS: For many Residence Club members beyond the accounting, it’s a lifestyle decision, just as we buy a car and we all know it will depreciate as we roll it off the lot unless it’s a vintage 300 SL Gullwing or similar.

 

LM: That is true, however I knew it could be done differently. That is why I created Cuvee Ventures. Our members are also our investors. Thus, our members/investors are equity partners in our real estate portfolio. Their investment in Cuvee is associated with true bricks and mortar assets which the members/investors have the option to use 30 nights a year. After their initial investment, there are no annual dues, margin calls, or additional fees for maintaining or managing the properties. In addition our members/investors enjoy all the amenities of the investment including passing through tax advantages such as depreciation and sharing in the profits after our 5-8 year hold cycle.

 

JS: Larry, let me provide full disclosure, I am a real estate broker licensed in Colorado and resort real estate during the last few years have not been the most astute investment yet you are mentioning profits.

 

LM: Joseph, you are a native New Yorker, right? As you may know all the Residence Clubs started buying apartments in Manhattan in Times Square and within a few residence/hotel hybrid buildings. Well, at Cuvee we too purchased an apartment in New York. Yet we engaged a different strategy; one based on return-on-investment coupled with location and amenities. Thus, we acquired a condominium at 15 Central Park West, one of the most successful new apartment houses of the last decade designed by Robert A.M. Stern and developed by the Zeckendorf family. We witnessed the who’s who of New York buying in the building from financial CEO’s to A-list celebrities to wealthy foreign nationals. Granted, our investment was not inexpensive but we did OK.

 

JS: Just OK, I know New York real estate, what is your version of OK.

 

LM: We purchased the 3 bedroom/3.5 bathroom with full unobstructed Central Park and Hudson River views during pre-construction for $6.5 million or just shy of $3,000 per square foot. We added some additional capital concerning furnishing, original art work and design. Over the years of ownership our members/investors resided in the unit and we also rented the flat via our Cuvee Escapes division. To make a long story short, we sold the unit last year in a bidding war between four buyers for $13.9 million, just shy of $6,000 per square foot. Thus, our members/investors generated an approximate 82% return on their investment AND had the luxury of residing in one of the finest post-war apartment houses in the ultimate location on Manhattan Island.

 

JS: I have to ask, I know the common area fees, monthly maintenance and taxes associated with 15 Central Park West are in the thousands per month?

 

LM: Yes, however via our Cuvee Escapes division, we also rented the unit to non-member/investors for an average of $5,000/night. Thus, the monthly maintenance charges and real estate taxes were a non-issue as the capital generated from transient rentals not only covered expenses, it also generated positive cash-flow as we had no debt on the property. Conservative yes; and some would argue we could have generated a larger return if we leveraged. I believe our members/investors were very pleased with the 82% return as mentioned.       

 

JS: So far as I understand you have a unique model concerning the acquisition of real estate for the members/investors use. Thus if we can discuss what makes Cuvee different? Plans for future growth and so forth.

 

LM: Go for it.

 

JS: It seemed during the boom years all the Residence Clubs acquired via purchase or lease similar homes in the perceived hottest resorts and destinations. What about Cuvee?

 

LM: At present we have seven properties within our portfolio including residences in Hawaii, Los Cabos, New York City at the new Jean Nouvel designed building (aka 100 11th Avenue) in the West Cheslea neighborhood as well as holdings in the Vail Valley including Penthouses at The Ritz-Carlton Bachelor Gulch and Arrabelle in Lionshead. While we purchase based on Location, Location and Location we believe the specific properties we acquire enhance our proprietary investment criteria benefiting our members/investors including usage, capital appreciation and rental demand by affluent travelers.

 

JS: Can you share any thoughts on future acquisitions?

 

LM: While I cannot be too specific, yet based on our investment criteria and contribution from our members/investors we are looking at acquisitions in Napa Valley, Aspen, Italy including the Amalfi Coast, Florence and Tuscany and potentially Southeast Asia. Besides our paramount criteria of equity appreciation coupled with a premier location and design, we also consider what the future “in-demand” destinations are as we are continually looking forward concerning travel trends not backward.

 

JS: Assuming brokers may be reading this, any additional insights?

 

LM: We usually at minimum consider three bedrooms and three bathrooms. Most of our residences are in the 4-5 bedroom size providing ample space for extended families and smaller groups yet also being intimate enough for a couple or small family.

 

JS: From your marketing materials I noticed your collection of residences each offer a unique design aesthetic, can you explain?

 

LM: We pride ourselves on procuring local artists to enhance each of our residences to be complementary to its location. Back in the day every Ritz-Carlton from Manhattan to San Juan had Old-English Horse prints and chintz fabrics. Times have changed and our interiors reflect the location and environment. Thus our Vail Valley properties have beautiful handmade fireplaces and western oriented custom-made furnishings and local, authentic art. Our Hawaii residences bring about the natural splendor and native culture with antiques from Indonesia, innovative ocean-embracing corner-less architecture and outdoor lanai showers in each bedroom. We enhance every property with detailed trim, finishes, faux wall coverings, hand-painted tiles, state-of-the-art entertainment systems. We believe the interior design should embrace the local culture and provide an overall experience which will exceed both our members and our rental client's expectations.

JS: I assume this experience also extends to services provided by CurveeEscapes, your rental division?

 

LM: Of course. We offer full service to our members and guests from the moment of touchdown; we do have a relationship with a private jet service as well, in their destination. In Manhattan we have a specific car/driver we use exclusively. We offer upon arrival meal service, thus our locally procured private chefs will work with our concierge division to track a tail number of flight arrival to insure when the guest arrive their meal is prepared and presented sans reheating. Yet many of our investors and guests enjoy partaking in the local experience, thus in New York we will secure a table at Per Se and when we have our Napa location secured, we will have a table at The French Laundry. In Beaver Creek we have a personal relationship with Spago, thus dinner reservations for Christmas Eve, not an issue.

 

JS: What have been some of the more unusual requests for clients on the concierge-side of the business?

 

LM: One client in the entertainment business requested a baby-grand piano in the residence, done. Another wanted a scene wanted the scene from the Broadway play Somewhere in Time to surprise his wife on their 10-year anniversary. My personal favorite, our concierge took the initiative to have roses delivered at breakfast for a client’s wife on Valentine’s Day knowing the client forgot this most special day.

 

JS: How would your concierge know the client forgot about Valentine’s Day?

 

LM: Each member of Cuvee has access to a personal concierge who retains a file on each client including their preferences, birthdays, anniversaries and so forth. Concerning Valentine’s Day, in years past the client called to arrange a special meal, spa service of similar. As we did not hear from the client, yet knew he and his wife were in residence in Vail, we connected the dots and had roses waiting for the wife when she was seated at breakfast. Our concierges are proactive, not reactive as we build long-term relationships with our clients. Anything less and we would not be Cuvee.

JS: Let me wrap this up by asking about philanthropy and your future in Denver. Any insights?

 

LM: On philanthropy we support not only Denver based organizations, we strive to support organizations where our homes are located as well as honoring requests from our members. Here in Denver we support the Boys and Girls Club. Last year we generated $47,000. This year at our “Flight to Luxury” event, our target is to generate $100,000, In Cabo we support a local non-profit providing support and care for children with cancer. We truly embrace the concept of “giving back” as do our members. We have all been fortunate and successful and when the opportunity arises to give-back, we are there.

 

 

JS: Larry, Emily…thank you for your time and insights.