Philip Mekelburg: CEO & Co-Founder, Equity Estates

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Bio:

Philip has over 20 years of experience in business development, marketing, management and operations. After graduating from Cornell University, he worked as a corporate trainer and management consultant. His accomplishments include starting a fast-growing, new-to-market retail concept which he built up and sold within four years. The industry respected his novel approach and elected him president of their international association. Afterwards, Philip was hired as Director of Operations for a financial services firm where his work in channel sales garnered him praise, while expanding his knowledge and experience in marketing specialty finance products. He co-founded Equity Estates in 2006 and enjoys building a real estate portfolio that is also a smart investment that offers memorable experiences.

How did you get into the Hospitality/Finance industry?

I’ve always had a passion for it. My major at Cornell University was general business and had to lobby to take classes in the hotel school program. Not only did I enjoy some of the hotel management classes, I managed to talk my way into wine tasting and food and wine pairing classes that they offered. It helped that I held the positon of Steward of my fraternity with responsibility for a meal plan offering breakfast, lunch and sit down dinner for over 50 brothers.  If I had to think back further than that, I’d say I recall my childhood friends always congregated at the home with the ice pops in the freezer so I noticed and valued my mother’s efforts at stocking the goodies.  I do the same at home and for Equity Estates.

Tell us about Equity Estates. What inspired the idea and what is your vision for the company?

I loved what destination clubs had to offer- consistent high quality luxury homes, many destinations to explore, concierge support and daily housekeeping. However, I was dismayed at the economic perils and value of these same travel clubs—no financial transparency, no clear path to liquidity, and an overall misalignment between the members stroking six figure checks.  History has proven the Equity Estates model is the superior model to own and enjoy a portfolio of luxury vacation homes. Equity Estates was created to be smart and safe. We grew by double digits during the recession when more than half the destination clubs went out of business, taking their member’s money with them.  Since Equity Estates does a great job caring for people and luxury homes, we will continue our successful fund offerings and leverage our core competencies where it makes sense to do so.  Equity Estates sets the standard on how a luxury vacation home should be cared for and enjoyed.

What strategic partnerships/marketing strategies have you implemented that have attributed to Equity Estate's success?

Our best marketing strategy is to take great care of our investor members and deliver what we promise. When they are happy they refer others.  We have grown organically by having a fun and smart model people enjoy, so they refer their friends and business colleagues.  

We also forged a great global reciprocity relationship so our members can enjoy similar quality homes and service throughout the world.  We picked a partner who, like us, cares very much about access and availability. Others in the market think like hotel owners and want 90+% occupancy. We target 60% occupancy, which leaves enough availability to satisfy the investor members sharing the portfolio residences.  This is the best availability access offered in the industry and that means members don’t have to wait and plan for years to get what they want nor pay a premium for popular travel times.

What industry trends are you noticing and how do you capitalize on them?

Demand is growing to make memories while on vacation in a home (versus a hotel) where magic moments occur most easily.  Some of my fondest memories have occurred in the kitchen while we are in our PJs/bathrobes while preparing a meal (or watching it be prepared by a private chef ;-). It just can’t happen in the hotel lobby or restaurant.  The experience share in a luxury well equipped residence is unrivaled. This helps drive demand for getaway homes which is continuously increasing, especially among baby boomers.  Last year there were over 1 million vacation home sales, up 60% more than the year before and the highest since the National Association of Realtors began conducting the survey in 2003.  Once a smart high net worth person pencils out the economics of owning versus renting, while understanding the greater access and convenience, Equity Estates becomes the obvious pick.  Our model is designed to deliver long term collective asset ownership benefits and quality vacation experiences hard to find elsewhere.

Life Motto?

Enjoy what you do and who you do it with so that if you get hit by a bus at the end of the year you won’t die with too many regrets. I am constantly trying to balance Carpe Diem and long term responsibility.

Equity Estate's Motto?

Our tag line is a double entendre-- Appreciating Luxury Residences. That says it all.

Your greatest successes as Founder/CEO of Equity Estates? Most difficult moments-how you overcame them and what did you learn?

Successfully closing out our first fund and starting a second fund that is doing well added a couple of new feathers to the cap.  We celebrate every new multi-million dollar home we acquire which coincides with approximately every seven new investor members in Equity Estates.  I learned that taking the time to measure twice and cut once is the way to go. We invested a solid year of planning before launching this luxury residence fund concept not previously ever imagined and implemented successfully. Our agreements and model today is basically the same as it was when we launched in 2006, almost ten years ago. You know you have a solid model when it works and you don’t have to change it much as time goes on.

Attracting institutional financing from a bank was another challenge we overcame. Post-recession lending is available to only the most conservative businesses unless you guarantee it personally and I am not a billionaire. Our operating agreements limit total debt to only 30% of the value of the portfolio and ours is actually closer to 15%.   That’s a very low loan to value for real estate. However, banks look at income compared to expense ratios in addition to loan to value.  Our model is structured like a cooperative whereby we collect only the money needed to take care of the concierge and property related costs with no profit. Our ratio is 1 to 1 and that does not meet the banks’ lending protocols. They couldn’t understand that we were not seeking profit from the annual dues like travel clubs do.  We kept pounding the pavement just to find a bank who would take the time to understand just how conservatively we are structured. I also had to get creative with the lending broker and addressing every contingency they were worried about.  

Finally, to keep growing during the tough times we let investor members finance part of their investment, and in turn, we purchased homes to add to the portfolio and borrowed an equal amount and still stayed within our conservative limits of no greater than 30% debt. This created a neutral cost effect while allowing us to grow and keep the sales coming in.  It was a creative solution that saved us during the worst economic years’ for our country in recent times.

Your advice to an aspiring entrepreneur

As you live the passion, hard work and stubbornness required to get your business off the ground and humming, don’t forget to make time for your loved ones and your health. It will be more fun later, when you reap the rewards from your hard work, if you have your health and family/friends to share it with.  This would be my advice for non-entrepreneurs too.  Also, unless your business is truly about saving lives, don’t act like it is, keep your perspective and enjoy what you do and who you do it with—keep a good sense of humor.  An executive coach taught me to give people a chance to change if they are not working well on your team, but if they don’t improve then change them out—he said, …“if you can’t change your people then change your people.”

Describe the ideal experience using Equity Estates.

Convenient, hassle free, and quality vacations make outstanding vacation memories. I actually bought a membership interest for my family and do personal travel with it like just like other members.  It’s awesome. 

How do you motivate your employees?

I am continuously learning more about how to best motivate our team. I believe in a fair and fun work environment as a starter.  The culture we strive for is the type that if you show up at work for some reason not in a great mood, someone will be around shortly to cheer you up- a small smile and a warm hello can go a long way.  We often discuss our role and need to care for our investor members and our homes.  It’s our job to be caring, proactive and detail oriented. These are also the qualities Horst Schulze looked for when staffing up the Ritz Carlton hotels.

An example of more motivating methods, we provide quarterly bonuses based on key performance indicators and feedback surveys. Most appreciated by our team members is that they get to take advantage of some down time in the properties on short notice.  If we would rent out these homes it would cost $1,500 to $4,000 per night pending the season and property…so that’s a motivating benefit!

One food and drink left on earth, what would you choose?

Well the practical side of me feels compelled to ask from some type of super food like Kale and clean water. Something’s gone horribly wrong if we have just one food and drink left. The more hedonistic side thinks I can manage life sipping aged Bordeaux’s with grilled rack of lamb and vegetables.

What literature is on your bed stand?

Vern Harnish’s Scaling up book and some Yoga book by wife left me as subtle hint for me to try it sometime with her at a yoga studio.

Role model - business and personal?

On a personal front-- my dad, who passed away two years ago was a treasure trove of hard work and integrity. He taught me a lot including the value of making decisions I can sleep with at night.

On a business front—Tim Trankina, was my boss at one time and now a business partner. He is the most street smart and well educated businessperson I know. He’ earned a JD, CPA, and MBA but is far from just book smart. His counsel is almost always spot on.

Current passion?

Taking Equity Estates to the next level and enjoying my family. I’m also staying fit a little better than I have before—it seems to take a little more effort now that I am north of 40.

Favorite travel destination?

Why have a favorite when there are so many to love? My favorite travel destination is more of a travel experience—surf and turf. One week in the Caribbean and another in the mountains during ski season.  Of course I have outgrown the back backing youth hostel surfing days for lodging and would prefer any Equity Estates property in these destinations.  Just as important as where to go is who to go with—the company can make or break a vacation.   

What's next for Equity Estates?

Heading into our 10th year, we will continue to lead the Luxury Residence Fund market by focusing on what we are good at—taking care of our homes and our people.

http://equityestatestravel.com/