Equity LifeStyle Properties Inc. (ELS) has acquired the Thousand Trails campground membership club and other assets of Privileged Access, a Frisco, Texas-based holding company owned by ELS President Joe McAdams.
ELS, a Chicago-based real estate investment trust (REIT) that had previously purchased Thousand Trails’ real estate assets in 2004, completed its acquisition of Thousand Trails’ campground membership business and other assets of Privileged Access on Aug. 14 for $2 million, according to an ELS press release.
Privileged Access is an RV and vacation membership business with nearly 128,000 members and 82 properties, most of which are affiliated with Thousand Trails and Outdoor World Corp. ELS owns or has an interest in 309 RV resorts and manufactured home communities in 28 states and British Columbia.
While Privileged Access will continue to maintain an office in Frisco, the acquisition will result in the loss of about 50 jobs at that location, while ELS’ Chicago staff will see a net increase of “about 15 to 20 employees,” McAdams said.
The transaction was made possible after ELS received favorable legal opinions regarding the qualification of campground membership contract income for REIT gross income test purposes.
McAdams told RVBusiness that the acquisition reflects the company’s continuing financial strength in the private park business at a time when the industry has suffered from rising fuel costs, falling consumer confidence and declining RV sales. ELS recently announced that it expects core property operating revenue for 2008 to increase by 3.5% to 4% over 2007 figures, assuming stable occupancy, with a 2.5% to 3% increase in net income.
But while McAdams succeeded in helping Thousand Trails to achieve its highest membership sales in the history of the company last year, he said it became increasingly difficult for Privileged Access to sustain this momentum during the current economic downturn. Thousand Trails’ year-to-date membership sales were down 27% at the time of the ELS acquisition compared to the same period last year, he said.
Privileged Access reported cash revenues of $39.99 million for the second quarter, down from $42 million a year earlier, with revenue of $70.99 million for the six months, down from $73.1 million a year earlier. The company also reported a net second quarter loss of $1.19 million, compared to a loss of $1.6 million a year earlier, with a loss of $2.16 million for the six months, compared to a net gain of $1 million a year earlier. The firm recorded 539,908 camper nights for the second quarter and 945,686 for the six months, respective declines of 4.9% and 4.8%, while its membership base declined by 4,078 to 127,910 members.
McAdams formed Privileged Access as a holding company for campground membership clubs in 2005 after stepping down as CEO of Ventura, Calif.-based Affinity Group Inc. (AGI).
McAdams hoped to use his campground membership club holdings to create the tiered membership programs that give people exactly what they want in terms of locations and amenities, an innovative concept for an industry that has traditionally used a one-size-fits-all approach. McAdams was also working to improve the facilities and amenities at Privileged Access parks and to expand his use of park models. But these initiatives ultimately required more capital than Privileged Access could produce, particularly in a down economy.
“I never really had the financial resources to do what I dreamed of doing with Privileged Access,” McAdams said. “But with ELS’s income, we will be able to do what I always wanted to do with Privileged Access.”
The transaction also enables McAdams to avoid potential conflicts of interest between ELS and Privileged Access. McAdams was appointed president of ELS on Jan. 1 and was required to step down from his positions as chairman, president and CEO of Privileged Access before becoming president of ELS.
ELS, for its part, will benefit from the marketing opportunities that result from its ability to expose its campground club members to other RV, park model and manufactured home resorts and communities in the ELS network, McAdams said.