Dear Owners,

As I present to you the Timeshare Board’s unanimously approved 2011 Timeshare Association budget, I want to address two different areas.  First, I will review the last few years in order to put the 2011 budget into perspective.  Secondly, I will compare and contrast The Manhattan Club with the newly constructed, Hilton on 57^th Street timeshare tower.

From an historical standpoint, the 2009 Manhattan Club Timeshare Association budget was the first annual budget to reflect nominal, year-over-year increases since the Timeshare Association’s maintenance charges transitioned upward due to the expiration of the Sponsor’s guarantee. That guarantee naturally provided many years of monetary support to the Timeshare Association’s operation. Therefore, for a couple of years after its expiration, sizeable, year-over-year budgetary increases were required in order to replace the guarantee’s subsidy. By the time the 2009 Timeshare Association budget was prepared, it was New York Urban Ownership Management, LLC’s (“NY Urban”) belief that the Timeshare Association’s maintenance fees had risen to the point where the Timeshare Association budget was self-sustaining.  Consequently, NY Urban stated in 2009 that it believed that subsequent Timeshare Association annual budgets could continue to contain projections for modest, year-over-year increases.  That was, in fact, the case for the 2010 Timeshare Association budget and will be the case for the 2011 Timeshare Association budget. The Manhattan Club Timeshare Association budget for 2011, projects a year-over-year increase in maintenance charges of 2.3%.  The foregoing translates into the following maintenance charges and per interval real estate taxes for 2011:         

It is certainly the intention of NY Urban to maintain this recent precedent of nominal, year-over-year budgetary increases for subsequent annual budgets.  Clearly, however, the country’s and New York’s economic environment, over these past two years, has been quite challenging.  Therefore, in order to reach this goal, NY Urban believes  that the recent operating hazards around which it has successfully navigated the Timeshare Association will provide it with the insight to address whatever financial headwinds The Manhattan Club Timeshare Association may face in the future.

As to my second point, many of you know that Hilton recently opened a newly constructed, 28-story timeshare suite tower on 57^th Street between 6^th and 7^th Avenues.  I thought it would be interesting to compare the total charges (excluding real estate taxes) which owners of those Hilton suites, which are similar in size and finishes / furnishings to those of The Manhattan Club, will pay for seven (7) days’ use for 2010 versus the maintenance charges established by the Timeshare Board’s for 2011 for Manhattan Club owners.  From a review of a November, 2009 New York Times article, The Hilton Offering Circular and The Hilton Grand Vacations 2010 Club Member Guide, in 2010 owners of (1) a studio suite will pay total charges of $1,758.29 (2) a one bedroom suite will pay total charges of $2306.70 and (3) a penthouse suite will pay total charges of $2884.15.  As I calculated the foregoing, I presumed 3 stays in a year - 2 nights, 2 nights and 3 nights - for that usage best reflects what The Manhattan Club owners’ use profile suggests.  This calculation is relevant, for at The Hilton on 57^th Street, if an owner books a stay of 3 nights or less, a daily cleaning fee of $85 will be collected at check in.  You, of course, understand that your maintenance charge includes full housekeeping service each day, regardless of your length of stay.  Hilton owners, on the other hand, if their stay is for 3 nights or less, will pay separately for housekeeping service. 

While I am unable to discern what the other costs are that cause Hilton’s owners’ 2010 charges to be as high as they are, I am pleased that the 2011 annual maintenance charges that Manhattan Club owners will pay compare as favorably as they do.  All the more interesting in light of the fact that both The Hilton on 57^th Street and The Manhattan Club employ staff members from the same union whose contract mandates annual wage and benefit increases of approximately 4%.

I also want to point out a budgetary requirement which The Manhattan Club has which differentiates it from The Hilton on 57^th Street. This budgetary imperative is represented by the capital expenditures mandated by (1) the age of the building in which The Manhattan Club is located, (2) the age of the series of “gut” renovations which created The Manhattan Club and (3) the average annual occupancy of over 90% which The Manhattan Club has enjoyed for many years.  The combination of these three factors, not applicable to Hilton’s newly constructed timeshare tower, requires constant monitoring by NY Urban in order to best assess where, when and how much money to spend in order to maintain the high quality of the totality of The Manhattan Club owner experience. For example, between 2008 and 2010, the Timeshare Association, in addition to furniture and carpet replacement, spent almost $1.5 million (1) upgrading its passenger and freight elevators and, (2) repairing and making “water tight” the building’s exterior and gutter system.  Throughout 2010, further infrastructure dollars will be spent on common area and back-of-the-house heating and air conditioning requirements as well as on the replacement / refurbishing of suite furniture, draperies and carpeting.  It is anticipated that the 2010 budgeted funds of approximately $2 million will be spent as described above. In 2011, we will begin in-room renovations directed at suite bathrooms and suite interiors, i.e., paint, wallpaper, and carpeting.  In addition, our corridors will also be addressed comprehensively to include fresh paint and new wallpaper, lighting, carpeting, and ceiling tiles.  This renovation will be the first phase of a four-phase project which will touch every suite and every corridor from floors 12 through 25.  These efforts, in addition to on-going replacement / refurbishment of furniture, however, will not require any infrastructure work, and therefore our budgeted expenditures for 2011 will be lower than the previous years in which infrastructure upgrade, as described above, was dominant.

It is a great source of pleasure for the staff of The Manhattan Club and NY Urban that The Manhattan Club has maintained its elevated level of occupancy year after year, for that is the best indication that our owners are enjoying their stays at The Manhattan Club.  It is our responsibility and our privilege to prospectively maintain the superior quality of our owners’ experience at The Manhattan Club.  We look forward to continuing to ensure that your stay at The Manhattan Club is everything you expect and all that you deserve. Thank you for your continued support.

Respectfully,

Joshua A. Wirshba

General Manager

Cc:     Allan Starr Esq.