Press Release - The Shores @ The Ocean

Fractional Ownership Gaining Popularity

By Natali T. Del Conte
The Examiner — San Francisco
March 27, 2006



Why buy the whole cow when you can buy just the part you’re going to use? That is the rationalebehind fractional home ownership.

“Fractionals are for the rational rich,” says Howard Nusbaum, president and CEO of the AmericanResort Development Association. “They’re for people that won’t eat the whole pizza and don’t mindjust buying the slice. Why spend $3 million on a vacation condominium in Vail that I use six weeksa year when I can spend $300,000 for six weeks in that condo?”

Fractional homeowners purchase a portion of a vacation home in which they do not intend to live formore than a handful of weeks a year, typically at a fractional interest resort. The concept is basicallya hybrid of tenancy in common (TIC) and vacation time-shares although legally, they are nodifferent in terms of rights and ownership than a time-share.

“Sales for fractional home ownerships in 2004 amounted to approximately $1.5 billion, which was atripling of sales from 2003,” said Dick Ragatz, a consultant who specializes in fractionals. “We areanticipating sales in 2005 to be over $2 billion, so there’s been an incredible growth.”

A report by Ragatz Associates shows that fractional interest resorts exist primarily in four types ofdestinations: ski (52 percent), golf (23 percent), beach (20 percent) and urban (3 percent).

San Francisco is a prime destination for urban fractionals due to The City’s limited space and highreal estate prices. This year two major fractional resorts are under construction: The Ritz-CarltonClub at 690 Market St. — the old Chronicle Building — and a second one in Ghirardelli Square byFairmont Hotels & Resorts (FHR).

“[This] offers the rare opportunity to live in one of San Francisco’s landmark buildings whileenjoying the Ritz-Carlton lifestyle,” says Robert van Dijk, a representative for the San Franciscoproject.

Jim Chappell, president of the San Francisco Planning and Urban Research Association (SPUR)says these projects are consistent with The City’s goal to pull more life into the downtown areasafter working hours.

“This meets our public objective, which is to have a 24-hour downtown,” Chappell says. “If youthink of a downtown restaurant, they are filled with people for an hour at lunchtime and then closedby 5:30 p.m. This will put people in street life on the sidewalks in the evening as well as in thedaytime. It supports health clubs, and neighborhood laundries and all of the things that support acommunity.”

The Ritz-Carlton Club began accepting reservations for the new resort on March 1. Van Dijk wouldnot disclose how many sign-ups they’ve had thus far, but did say that they are “doing very well.” In addition to the 49 fractionals, the Ritz-Carlton will also sell 52 private ownership units.

The target demographic for fractional home ownership is baby boomers with oodles of money.

“You have a large percentage of the population in the lifecycle where they’re beginning to thinkabout retirement,” Nusbaum says. “They have more free time and affluence and, unlike theirparents’ generation, don’t have that Depression era mentality of having to own your own stuff. Theylove the idea of shared assets.” The concept of fractional ownership extends to other high-end assets, such as yachts and jets.

Fractional resorts are ostentatiously luxurious. The refrigerator will have been stocked to the clients’request, and a gourmet chef is available to prepare food at the owners’ whim. Owners have a storageunit so that upon arrival, personal items such as family photos will have been placed exactly wherethey were left. Despite the intimacy of owning a home with another family, experts say owners typically do notrequest to meet each other.

“As long as they’re in a club environment with people like themselves, they don’t care,” Nusbaumexplains. “People don’t feel the need to own a golf course, but they want to feel that everybodybuying into it is in the same socio-economic group.”

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