Developments - February 2020 - 38

FINANCE

'Capital Light,' an
Increasingly Common
Phrase in Timeshare -
But What Exactly Is It?
BY TOM BALAMES

M
Tom Balames has been the managing member of
Accelerated Assets since its inception in 2000. He is
actively involved in the identification and acquisition
of timeshare-related real estate as an equity and
capital-light developer in partnership with branded
timeshare operators. His email is tbalames@
acceleratedassets.com.

38 - Developments

any of today's leading, branded
timeshare companies are
increasingly turning to thirdparty capital partners, such as
Accelerated Assets, to reduce or simply better
time the equity capital investment required
to build new resorts, add sales and marketing
locations, and ultimately implement more
capital-efficient growth strategies.
Due to the "light(er)" amount of capital
required by the brands in these arrangements, we refer to this strategy as capital
light. It's worth noting that this hasn't
always been the case, and in fact, for most
of the industry's existence, companies used
in-house capital and resources to fund
expansion and extend credit to consumers.
Fast forward to the recession of 2008 when
capital markets dried up, and the timeshare
industry was cut off from its normal external financing sources and forced to create a
new, less capital-intensive model to navigate
future economic speed bumps.
Thus, the dawn of the now often-used
fee-for-service (FFS) and just-in-time
(JIT) development options. Both of these
strategies were deployed to help timeshare
companies continue to expand through new
real estate acquisition and development, but
in a way that allowed for lower equity capital investment and greater free cash-flow
generation from the sale of inventory.
Specifically, in an FFS arrangement, a
third-party capital-light developer purchases
a targeted real estate project-using their
own equity-and is the borrower on any

related debt financing. The capital-light
developer then enters into an FFS agreement,
agreeing to pay the branded timeshare
company a sales and marketing fee to sell,
market, and manage the property on their
behalf. As developed inventory is marketed
and sold, the capital-light developer will
retain the related consumer receivables, often
utilizing the branded timeshare partner as
servicer of the portfolio.
In a JIT structure, the capital-light
developer purchases a targeted real estate
project-using its own equity-and is the
borrower on any related debt financing. The
developer then enters into a JIT agreement
with the branded timeshare company to sell
units comprising the real estate based on the
annual sales budgets of the branded timeshare
company to better align the timing of capital
spend. In both scenarios, the timeshare
company has access to the inventory needed
to meet sales budgets, while limiting their own
capital spend, and the third-party developer
is afforded a more predictable and often
more attractive return on their investment.
More recently, the industry has started to see
timeshare companies look not only at real
estate acquisition for capital light but also at
consumer receivables to increase upfront cash
flow from the sale of timeshare and to create
more stability in income projections.
Typical Capital-Light Strategies
FFS development shifts the entirety of
the capital spend onto the capital-light
partner for the life of the transaction, thus



Developments - February 2020

Table of Contents for the Digital Edition of Developments - February 2020

UP FRONT: New Decade, New Improvements
FIRST WORD: ARDA's Priorities for 2020
AROUND ARDA: Meet Elizabeth Baker, ARDA's Newest Staff Member
FACES FROM THE FRONTLINES: ARDA Fall Conference Wrap-Up
MEETINGS: WIN's Pinktober Event Raises Nearly $15,000 for Breast Cancer Research
TRUSTEE SPOTLIGHT: Sam Pontius, Timeshares Only and Fidelity Real Estate
VIP SPOTLIGHT: Mike Samet (Trustee) and Chris Clark (Chairman's League), Digital-Ignite
KEEPING PACE WITH DISRUPTION
PARTNER SHOWCASE: Capital Vacations: Filling an Industry Void with Sales Solutions and Resort Management
CREATING UNIQUE WORK-LIFE BALANCE BENEFITS TO ATTRACT AND RETAIN EMPLOYEES
BRANDS MATTER – AND MUST EVOLVE TO SURVIVE
‘CAPITAL LIGHT,’ AN INCREASINGLY COMMON PHRASE IN TIMESHARE – BUT WHAT EXACTLY IS IT?
ACCEPTING CRYPTOCURRENCY PAYMENTS: PROS AND CONS FOR BUSINESSES TODAY
HONORING THE SELF-OPINION OF OTHERS
AROUND THE INDUSTRY
MEMBER UPDATES: ARDA's Trustee and Chairman's League Members and New Corporate Members
LAST WORD: We are ARDA Strong
Developments - February 2020 - Cover1
Developments - February 2020 - Inside
Developments - February 2020 - 1
Developments - February 2020 - 2
Developments - February 2020 - 3
Developments - February 2020 - 4
Developments - February 2020 - 5
Developments - February 2020 - UP FRONT: New Decade, New Improvements
Developments - February 2020 - 7
Developments - February 2020 - FIRST WORD: ARDA's Priorities for 2020
Developments - February 2020 - 9
Developments - February 2020 - AROUND ARDA: Meet Elizabeth Baker, ARDA's Newest Staff Member
Developments - February 2020 - 11
Developments - February 2020 - FACES FROM THE FRONTLINES: ARDA Fall Conference Wrap-Up
Developments - February 2020 - 13
Developments - February 2020 - 14
Developments - February 2020 - 15
Developments - February 2020 - MEETINGS: WIN's Pinktober Event Raises Nearly $15,000 for Breast Cancer Research
Developments - February 2020 - 17
Developments - February 2020 - 18
Developments - February 2020 - 19
Developments - February 2020 - TRUSTEE SPOTLIGHT: Sam Pontius, Timeshares Only and Fidelity Real Estate
Developments - February 2020 - 21
Developments - February 2020 - VIP SPOTLIGHT: Mike Samet (Trustee) and Chris Clark (Chairman's League), Digital-Ignite
Developments - February 2020 - 23
Developments - February 2020 - KEEPING PACE WITH DISRUPTION
Developments - February 2020 - 25
Developments - February 2020 - 26
Developments - February 2020 - 27
Developments - February 2020 - 28
Developments - February 2020 - 29
Developments - February 2020 - PARTNER SHOWCASE: Capital Vacations: Filling an Industry Void with Sales Solutions and Resort Management
Developments - February 2020 - 31
Developments - February 2020 - 32
Developments - February 2020 - 33
Developments - February 2020 - CREATING UNIQUE WORK-LIFE BALANCE BENEFITS TO ATTRACT AND RETAIN EMPLOYEES
Developments - February 2020 - 35
Developments - February 2020 - BRANDS MATTER – AND MUST EVOLVE TO SURVIVE
Developments - February 2020 - 37
Developments - February 2020 - ‘CAPITAL LIGHT,’ AN INCREASINGLY COMMON PHRASE IN TIMESHARE – BUT WHAT EXACTLY IS IT?
Developments - February 2020 - 39
Developments - February 2020 - ACCEPTING CRYPTOCURRENCY PAYMENTS: PROS AND CONS FOR BUSINESSES TODAY
Developments - February 2020 - 41
Developments - February 2020 - HONORING THE SELF-OPINION OF OTHERS
Developments - February 2020 - 43
Developments - February 2020 - AROUND THE INDUSTRY
Developments - February 2020 - 45
Developments - February 2020 - 46
Developments - February 2020 - 47
Developments - February 2020 - 48
Developments - February 2020 - 49
Developments - February 2020 - 50
Developments - February 2020 - 51
Developments - February 2020 - 52
Developments - February 2020 - 53
Developments - February 2020 - 54
Developments - February 2020 - 55
Developments - February 2020 - 56
Developments - February 2020 - 57
Developments - February 2020 - 58
Developments - February 2020 - 59
Developments - February 2020 - MEMBER UPDATES: ARDA's Trustee and Chairman's League Members and New Corporate Members
Developments - February 2020 - 61
Developments - February 2020 - 62
Developments - February 2020 - 63
Developments - February 2020 - LAST WORD: We are ARDA Strong
Developments - February 2020 - Cover3
Developments - February 2020 - Cover4
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