Owning your own piece of heaven...
International Herald Tribune Owning your own piece of heaven ... By Shelley Emling FRIDAY, JUNE 10, 2005 LONDON  There is no place like home. But 47 Park Street comes pretty close. Located in London's exclusive Mayfair district, only minutes from Hyde Park, 47 Park Street is an Edwardian-style townhouse that has been transformed into 49 one- and two-bedroom luxury suites.   With a staff-guest ratio of 1:1, living there is like living in a luxury hotel.   But there is a difference: 47 Park Street is a "fractional ownership" property. Participants pay £99,000, or $180,000, to £170,000 to live there for 21 days a year. They cannot paint the walls, but they can use the room service and other service, all while building equity.   The property, opened by Marriott Grand Residence Club in April 2003, is billed as the first such luxury site in London. "This property is near the various embassies" and is in a very affluent area, said Ed Kinney, vice president of corporate affairs for Marriott Vacation Club International, which includes the Marriott and Ritz-Carlton club brands.   47 Park Street is just one addition to the fractional ownership craze sweeping the ever-fickle real estate world.   "Fractionals," sometimes called luxury timeshares, also are opening in the Caribbean, on Florida beaches and in Colorado ski resorts.   Ragatz Associates, a market research firm in Eugene, Oregon, estimates that sales of fractional ownership and at private residence clubs soared by 109 percent to $1.07 billion in 2004.   Nearly 60 percent of the sum was derived from sales of fractional, or equity, property; the remainder was from non-equity arrangements.   Many real estate experts claim the difference between fractionals and timeshares is a matter of semantics, but there are differences.   The main one is that, unlike a traditional timeshare, the investor in a fractional owns a share of a unit and is able to build up equity and later sell his interest in the property. And there is the interval of ownership.   "With a timeshare a person might only get a property for one or two weeks a year," said David Hehman, chief executive of www.escapehomes.com, a San Francisco-based online operation. "With fractional ownership you might get it for one-tenth or one-sixth of a year." Also, fractional ownership properties tend to be aimed at the higher end of the market so the properties are typically larger, with more amenities and services.   So fractionals tend to be much more expensive than timeshares.   "It tends to cost about $200,000 to $500,000 for a fractional ownership property, plus the annual maintenance fees of about $5,000 a year," Hehman said. "Financing for this type of property is just starting to happen and terms are better now."   "There are no 15-year or 30-year standards since terms tend to vary property by property," he said, adding that many buyers pay cash for fractionals.   Although Hehman emphasized the obvious - that fractionals are not cheap - he also explained why the concept is attractive to so many. "A family that really loves Aspen could purchase a new house there for $3 million," he said. "But they could also buy a fractional property in which they'd get all the benefits of a home with none of the upkeep hassle.   "A lot of people think of it as a second-home lifestyle with none of the headache," he said.   Lending cachet to the fractional marketplace are properties recently developed by well-known names in luxury such as Ritz-Carlton and the Four Seasons.   Ritz-Carlton, for example, operates four properties and is planning to open several more. Two are in Colorado ski resorts; the others are in Jupiter, Florida, and St. Thomas, Virgin Islands.   Ownership at a Ritz-Carlton property allows members and their guests to use an allocated number of days within the prime season each year, based on a rotating calendar. Membership prices range from $152,000 to $525,000, depending on the location and the type of residence.   Kinney said that the program offered great flexibility. "If you own in Colorado and used up 14 of your days there, and then wanted to use the balance in St. Thomas, you could do that," he said.   The Four Seasons Residence Clubs, based in Toronto, generally offer a one-twelfth or one-fourteenth share in a unit, which gives the owner about three weeks of accommodation each year. Rates start at about $150,000 plus $10,000 to $15,000 in annual dues.   Fairmont Hotels & Resorts is yet another major brand that has entered the marketplace, opening a Fairmont Heritage Place division in February. So far, the chain has fractional properties in Acapulco, Mexico; Telluride, Colorado, and on the west coast of Barbados.   Greg Doman, vice president of vacation ownership for Fairmont Hotels and Resorts, said there are several advantages to the model. "There is the comfort and prestige of a luxurious vacation home, and the option to pass that tradition on to your family, all without any added responsibilities," he said. "And your home is located in one of the world's prized locations."   A popular cousin of the fractional ownership model is the vacation residence club typified by Exclusive Resorts, whose chairman is the America Online co-founder, Steve Case. It has high-end homes in dozens of destinations, including France, Italy and Costa Rica.   Residence clubs do not involve deeds and so are not investment vehicles. "Our members are not assigned any specified time period that they can use our properties. They have essentially first-come, first-served access to our 185-plus homes," said Rachel Neumann, a spokeswoman for the Denver-based organization.   "The nice thing about fractionals and also residence clubs is that they are growing in popularity worldwide," said Hehman of www.escapehomes.com. "Timeshares had gotten a bad reputation but now higher-end companies are coming in and giving a whole new level of credibility to the concept."   In the end, though, real estate experts warn vacation homes tend to lose their value first in a market downturn.   Kinney said buyers should not look at fractionals as an investment, but as a way to prepay for a lifetime of vacations. "The destinations and features are great for those interested in taking quality vacations for a long time to come," he said.