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At some time during the early 1980's, Mr. Dixon
learned of beachfront property located in Encinitas,
California, a town north of San Diego. The property
consisted of two contiguous parcels of land (the Moonlight
Beach Property). An old beach house, servants' quarters,
and a detached garage stood on one parcel. The other
parcel, consisting of approximately 17,000 square feet, was
vacant. Mr. Dixon believed that he could develop the
property by constructing a complex of six villas and other
amenities on the vacant parcel, and by remodeling the beach
house into a luxury duplex.
Initially, Mr. Dixon envisioned selling the six
villas in so-called time-share units. However, based on
discussions with lawyers and accountants who did not
believe that the project could qualify under California
laws regulating the sale of time-share units, Mr. Dixon
decided to change the structure of the project and to use
a "membership approach", under which a limited partnership
or nonprofit corporation would purchase the six villas and
would sell club memberships to the public. This structure
was similar to the time-share approach in that each club
membership would entitle its holder to use the club's
facilities for a certain number of days per year. An
integral part of the project was that the entire cost of
acquiring and developing both parcels of property would be
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Last modified: May 25, 2011