Montage Resort

Ten + Points for Successful Vertical Fractional Real Estate Development

Everyone seems to have to have a top ten list for this and a top five list for that. And so do I. In fact I have penned numerous articles on fractional real estate ownership, trying to zero in on the very most important components for success in the growing niche of vacation home ownership. As with any recipe, the ingredients vary with the chef. Perhaps one chocolate cake has more sugar, another more layers and some come straight out of a box.

Whatever the mixture, opinions differ on just the right measurements. The latest identifiers for success come from Dave and Emille Ellingson owners of the Meriwether Ranch, a working Cattle Ranch in Southwest Montana which offers rolling lots for single family vacation ranches. The offering will soon include vertical fractionals: vertical- meaning that it fits specific parameters.

Just what are these “rules” for success in a vertical fractional market?

1. It is located in a superb area for the primary activity. Ski resorts should have the finest slopes; diving resorts, the finest seas; golf properties, the ultimate in links; fly-fishing resorts the ultimate in clear streams.

2. The vertical fractional should then be in the primo location within that general area. If you want to experience the finest wines, a fractional property in the Napa Valley makes sense. If you are an art lover, perhaps an urban property is the way to go. If diving is your passion, Nevis is a pristine environment.

3. Go with a credible developer. You want to make sure they are in it for the long haul, have had previous success and are sensitive to the environment around them.

4. Goods and services should be reasonably available. Of course it is quite fine to be in a remote locale, but you shouldn’t have to drive forever and a day to get supplies in and/or out.

5. Fractionals are primarily purchased are convenience and value. The area should literally teem with expensive luxurious properties and the quality of the fractional property should match or exceed those around it.

6. The season for the primary activity should not be brief. A window of excellent weather on a north country lake or two weeks of cool ocean breezes in a jungle do not lend themselves to a successful venture or investment in this particular market.

7. Don’t get in on the tail end of the market. To win in the fractional world be the first “on your block” or close to it.

8. Marketing is of prime importance so have access to past and repeat customers. Those who already have an affinity with the area are your best bet to talk with.

9. If you do not have proximity to a commercial airport, make sure you have a decent jet approve private strip available. Your owners will undoubtedly be busy people who will not want to waste their precious relaxation time coming and going to their property.

10. Another terrific attribute is to have a wonderful, rich history to tell or a story to relate. Did Hollywood movie stars come to escape the pace of stardom? Do football heroes return for their golf vacations year after year? Did pirates lose pieces of eight among the reefs?

11. Finallybecause this list needed more than ten items to clearly make its statement, make sure you create a plausible use plan that matches the owners’ utilization of the Club component of the property. If they cannot use their purchase they will never be happy. And they will let others know of their disappointment. This 11th guideline is perhaps the most important for a vertical niche fractional property.

If you are thinking of getting involved in this exciting segment of real estate, do your research and ask yourself if your property will pass the 11 point test!

Carl G. Berry RRP is co-Chairman of Star Resort Group. He has more than 30 years of resort and urban development experience. Founded in 1978 Carl’s company, California Resorts, Inc. (dba Resort Development & Advisors), is the market leader in urban share projects such as The Manhattan Club in NYC, San Francisco Suites and Powell Place City Shares in San Francisco. Mr. Berry is a co-founder of The World’s Finest Resorts (now part of RCI’s Registry Collection). He has served as Chairman of the American Resort Development Association (ARDA) and and is a member of the Red Flight, Recreational Development Council of ULI. http://www.carlgberry.com

Tags: fractional real estate, real estate development, resort development, vacation home, vacation ownershipfractional real estate, real estate development, resort development, vacation home, vacation ownership

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Five Facts About Fractional Real Estate

1. Fractionals are here to stay. Fractional ownership has always been with us. Two or three couples team up to purchase a cabin by A clear mountain lake; a group of siblings opts to buy a seaside home to vacation together or separately; a ski chalet for one group of friends become a fall mountain retreat for another. Now the term “Fractional Ownership” has been formalized. Last March, Dick Ragatz of Ragatz Associates has reported at that more than $1.5 Billion in sales of Fractional Properties was achieved by this luxury component of the shared ownership industry.

Today’s Fractional Real Estate Owners have benefited by the lessons learned from Timesharing: they are protected with deeds and title insurance, have the ability to obtain consumer loans; they can even re-sell their property. Every major hospitality brand, from Four Seasons to Starwood to Ritz Carlton has given a commitment to Fractional Resort Real Estate. Star Resort Group, a sales and marketing organization in Phoenix verifies that nearly every mixed use development has a fractional component. There is no doubt that this permutation of luxury resort real estate works!

2. The most common share for high -end fractionals is a 1/8 share (6 weeks) Fractional properties are akin to second homes; division of the share ranges from 13 owners per share to quarter interest shares (four owners per unit). However, research shows that most shares for upper end fractionals are six weeks, depending on location and use. The beauty of a fractional use plan is another buyer protection of sorts. Whereas the siblings who bought a home on the Gulf in Florida to share often come to blows about who gets to stay on the Fourth of July, fractional properties can allot the time fairly and equitably.

3. Consumer loans are becoming more readily available for fractional purchases Proof that fractionals are a readily acceptable niche in the market is the growing availability of consumer financing. Mortgages with rates similar to those on traditional homes are becoming more and more the norm.

4. Fractional projects do not have to be far from home to be successful Although many fractional projects are located in exotic destinations such as Punta Mita or Cyprus, the drive-to (or short plane ride) family vacation is still the most popular. Witness the popularity of ski resort destinations such as Tahoe’s NorthStar Club (a two-hour drive from California’s Bay Area) or the plethora of golf resorts in Arizona (within a short plane ride from most of the Western US). The idea that a second vacation home is easy to get to makes it usable many more weeks out of the year.

5. The niche of luxury resort real estate takes experts in Sales and Marketing Just because fractionals have distinct advantages in the luxury resort real estate market does not mean they are a slam dunk in generating revenue. This is not timeshare, nor is it whole ownership. While a buyer may intuitively want to purchase, nagging questions about the use of a fractional and what the ongoing annual costs may cancel out many sales if not handled with aplomb. Your choice of a team to run the sales and marketing is all important. Look to experts who have had experience and have made their own investment in fractional projects

Carl G. Berry RRP, Managing Dirctor of Star Resort Group, which acquires, develops, and markets projects for its own account as well as providing sales and marketing, development and management expertise to other hospitality operators, landowners and builders. Berry has more than 30 years of resort and urban development experience. Founded in 1978 Carl’s company, California Resorts, Inc. (dba Resort Development & Advisors), is the market leader in urban share projects such as The Manhattan Club in NYC, San Francisco Suites and Powell Place City Shares in San Francisco. He is a co-founder of The World’s Finest Resorts (now part of RCI’s Registry Collection). He has served as Chairman of the American Resort Development Association (ARDA; and is a member of the Red Flight, Recreational Development Council of ULI.

Tags: fractional real estate, real estate development, resort development, vacation ownershipfractional real estate, real estate development, resort development, vacation ownership

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When resort real estate experts congregate in throngs to learn and share information about an exciting product, they are bound to come up with some guidelines. A May 2006 gathering of nearly 400 resort and real estate experts at the Ragatz Symposium in Coronado, California was held in wrapped attention as their colleagues shared “dos and don’ts” about Fractional Real Estate for developers.

Fractional Real Estate projects (including Private Residence Clubs) increased by 218% say Ragatz Associates, internationally recognized as a leading market research organization in the resort industry. Primarily, the rapid growth in this intriguing product results from the void it fills for both consumers and developers: it has a good image; it offers variety of types of products and locations; many major hospitality brands have jumped aboard; and it is increasing in market acceptance.

So, if you are a developer considering fractional real estate, what seems to be working best, you ask? Well, it is real estate after all. Logically, the first component is always location in a popular vacation resort area. Secondly, a great location within the resort is always optimal. If families can ski-in/ski-out, golf-in/golf-out, it is a bonus for all involved.

After location, buyers look for credibility in a developer. What have they done before? With whom are they associated? Do they know the area? All these elements are key to building a strong foundation with potential buyers.

Fractional Resort Real Estate is primarily residential in nature, so adjacency or association with a fine hotel and being able to draw on its services, amenities and dining opportunities boosts the value of a Fractional purchase. It also makes it easier to draw potential clients who are already favorably predisposed to the on-site offerings.

Developers are urged to look at the traditional real estate offerings in the area. Are there limited and/or expensive second homes in the vicinity that makes a fractional purchase an enticing venture for a family who would prefer to have the advantages of home ownership but not the hassle of keeping up a second vacation home? Are homes in the location priced out of reach for even comfortably positioned second home buyers?

Your location must have year-round appeal or at the very least two strong visitation seasons. A ski resort that offers no summertime activities or a lake that is inaccessible nine months of the year do not lend themselves to luxury fractional ownership.

If your fractional resort is the first one to hit the market, or has limited local competition, your chances for success are better, says research presented at the Ragatz Symposium. Experts also say that proximity to a large affluent visitor base, along with urban centers helps put the stamp of pre-disposed success on a fractional product.

Another marketing assurance for a developer to consider is access to a data base which includes resort visitors and real estate prospects. This kind of data base takes building a relationship with local brokers and tourism centers such as chambers of commerce, local attractions (e.g., lift tickets/greens fees), as well as the utilization of various internet sources.

Add a great history of the area (legends, tales of healing waters, golf greats who frequent the course) or story telling opportunities for the future (improvements, plans for the future, activities) to the mix and you have a recipe for success.

This check list for success is not only enhanced but solidified with a use plan which is designed around the buyer. Without that important look at your owner, all your hopes and plans and dreams can come to naught.

Keep this check list in mind while planning for your future success in the Fractional Real Estate world:

 Popular resort location
 Great location within the resort
 Developer credibility
 Fine hotel nearby
 Limited availability to second homes
 Year round appeal
 Proximity to visitor base
 Access to valuable data bases
 Great history or story telling opportunities
 Well designed use plan

Carl G. Berry RRP is CEO for The Star Resort Group. He has over 30 years of resort and urban development experience. Founded in 1978 Carl’s previous company, California Resorts, Inc. dba Resort Development & Advisors, has been the market leader in urban share projects such as The Manhattan Club in NYC, San Francisco Suites and Powell Place City Shares in San Francisco. Mr. Berry is a co-founder of The World’s Finest Resorts. He has served as Chairman of the American Resort Development Association (ARDA). Carl Berry earned a BS degree from the University of Idaho. http://www.carlgberry.com

Tags: fractional real estate, real estate development, resort development, vacation ownershipfractional real estate, real estate development, resort development, vacation ownership

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