FORT COLLINS – The founder of a once-thriving luxury vacation club in Fort Collins that ultimately ended in bankruptcy is again taking the plunge into providing high-end vacation experiences. This time the business model focuses on members owning the assets.

Richard Keith, who eventually signed up 450 members of Private Escapes before the club merged with Florida-based Ultimate Resorts in 2007 to become Ultimate Escapes, has launched Lifestyle Asset Group.

Keith said the new company, located at 1200 S. College Ave., aims to avoid the pitfalls that eventually brought down Ultimate Escapes, mainly by replacing the club membership model with a member ownership model.

With Lifestyle Asset Group, Keith said, members are part of an LLC that buys and owns the vacation properties debt-free.

“Having a debt and members without any collateral were all epiphanies of what not to do,” he said. “This is a completely 180-degree-different model.”

Keith said he and his three partners – Karla Jones, Ed Powers and Tommy Robinson – own nothing in the new model and function only as managers of the assets.

Long history of entrepreneurship

Keith has a long history of entrepreneurship in Northern Colorado, starting AppleOne Employment Services of Colorado in 1991. He sold the company in 1996 to Corestaff Services and then co-founded Center Partners, a call center business, in 1997.

In 1999, Keith sold Center Partners to the London-based WPP Group but continued as an executive with the company, heading up its call center services division. In 2002, Keith’s Center Partners success was recognized with the Ernst and Young Entrepreneur of the Year Award for the Rocky Mountain Region.

In 2003, he founded Private Escapes Destination Clubs, which was acquired by Ultimate Resorts in 2009. Keith was a high-level executive in Ultimate Escapes – the new club’s name after the merger – until his resignation in October 2010.

Keith is candid about the demise of Ultimate Escapes, a merger that seemed like a good opportunity for club members in 2007 when the real estate market was still hot and the economic crash of late 2008 was hardly more than a distant rumble.

Although a letter of intent to merge was signed in 2007, it took another two years to complete the deal. In September 2009, Keith said Private Escapes became an 8 percent minority partner in Ultimate Escapes, in a real estate market that was dramatically different than in 2007.

By the summer of 2010, Ultimate Escapes was operating at a loss and a last-minute attempt to merge with another vacation company fell through. The Fort Collins office of Ultimate Escapes was quietly closed in an attempt to stem losses, but on Sept. 20, 2010, the company went into voluntary Chapter 11 bankruptcy, declaring debts of between $100 million and $500 million and assets of less than $50 million. Those who plunked down between $100,000 and $300,000 for lifetime access to Ultimate Escapes’ vacation properties were left in the lurch.

Although the bankruptcy is still proceeding in the U.S. Bankruptcy Court in Delaware, Keith said any hope of restructuring under Chapter 11 is unlikely. It is probably headed toward a Chapter 7 asset liquidation.

Avoiding mistakes

Keith said he resigned from Ultimate Escapes on Oct. 1, and immediately began planning another luxury destination model that would avoid the mistakes of Ultimate Escapes.

“I said, ‘What have we learned from this industry to create a far safer model?’ We took four months to create this product and right out of the gate the No. 1 concern was how do we mitigate the risk?”

Keith said under the Lifestyle Asset Group model, members join an LLC to purchase and own a luxury property with an average value of $2.5 million. Each member makes a one-time contribution of $300,000 and has a one-eighth ownership in that property.

Each LLC will have a seven-year life, after which the property will be sold and the proceeds divided among its owners. Keith said seven years was chosen because it is the average length of time most people maintain a membership in a private club and also the amount of time it takes to fully emerge from an economic downturn.

Keith said the club intends to eventually sign up 200 members to own 24 luxury properties. The company’s properties now include a mansion in Charleston, S.C.; the Blue Sky Lodge in Deer Valley, Utah; and a residential community in Cabo San Lucas, Mexico.

Lifestyle Asset Group opened its Fort Collins office in November but only took its product public in late March. Keith said the timing for a new vacation ownership model and for picking up luxury properties in a still-cool real estate market couldn’t be better.

He cited an American Express-Harrison Group study that predicts a jump in high-end consumer spending in 2011 and property values that are as much as 40 percent lower than they were in early 2008.

“We think the timing is good on both levels,” he said.