Reefs Club – Landmark Bermuda Hotel Sells Fractionals

Guests of the Reefs, a 62-year old family-owned boutique luxury hotel on its own idyllic beach in Bermuda, are known for their loyalty. Some have vacationed there 20, 30 and more times. Now the Reefs is counting on loyalists as well as newcomers to buy into its 19-unit private residence club. The Reef Club -- fractional-ownership two- and three-bedroom “villas” adjoining the hotel -- are nearing completion and will open July 3. (Photo above shows what it will look like when villas are completed.)

By Bermuda standards, the 1/10th ownership furnished fractionals are “affordable” -- $350,000 for a 2-bedroom, $410,000 for a 3-bedroom. (Another 13 % is tacked on in fees, taxes and closing costs.) Full ownership condos elsewhere on this adorable, expensive island start at over $1-million, although one real estate agent, Buddy Rego, said last month that no Americans went to closing on condos anywhere in Bermuda in the first quarter of 2009.

Bermuda’s restrictive laws on non-Bermudian ownership of property keep prices high. Yes, the worldwide recession is taking its toll. Since Reefs Club fractionals were first offered, 30 out of 80 early birds who had put down “soft” $5,000 deposits have opted to pull out, according to Chrissy Frith, membership director.

Nevertheless, Reefs president David Dodwell told me that he has no plans to lower prices, although he might consider some “value-added” incentives, such as rebates on certain homeowner fees for a period of time. The villas give Reefs fans a “rare opportunity,” he said, adding that some units might be used for overflow hotel guests during peak times. The villas building will also house a much expanded spa and fitness center.

Will Luxury Fractionals Be First to Rebound from Credit Crunch?

Two prominent voices in the resort development world feel private residence clubs -- the luxury arm of the fractional resort market -- may be among the first to rebound from the credit crunch. Dick Ragatz (pictured) says buying $3 million whole ownership houses on the beach or in a ski resort with the expectation of 20% annual appreciation are gone, but the alternative, residence clubs, typically a shared ownership by six to ten households in each residence, with club staff to care for the property and provides hotel-like services, still make sense.

While Ragatz Associates, points out that fractional sales will undoubtedly be off for 2008, "in the long term, recent events will enhance" their attractiveness" when compared to whole ownership.

Steve Dering of DCP International agrees. His Chicago-based firm helps market residence clubs, and while sales have slowed, he believes “affluent households will always want a vacation home.”

With residence clubs "the use is the same as whole ownership but the purchase price is far lower. Additionally, the shared annual ownership cost is significantly less than the cost of renting a comparable luxury home multiple times a year. When you factor in the abundant amenities and a private staff that takes care everything, it’s more for less without the headaches. The game changer for us," concludes Dering, "is that our buyers do not have to sell other real estate to purchase at a residence club,” Dering said. “And many do not have to finance, although financing is still available.”

The Porches at Steamboat: Family-Friendly Houses, Reasonable Prices

Sales momentum at premier Colorado resorts has slowed, but The Porches at Steamboat, which I visited recently, offers multigeneration-sized single-family homes that would cost a whole lot more in Vail or Aspen. Looking for five-bedrooms? You’d have a hard time finding that big a house for $3-million in those towns. Yet the 5,000 square foot homes at The Porches qualify for that often-misused term “affordable luxury.”

To make The Porches unique in the Yampa Valley, co-developer Bruce Shugart and partners combined an amenity package with a neighborly atmosphere designed to woo those who want their children and grandchildren or grandparents with them in snow country. At the center: “The Barn,” a clubhouse whose wood floors, reclaimed from an 1883 barn in Pennsylvania, reflects Steamboat’s cowboy heritage. There’s nothing old-fashioned about its interior, which includes soaring windows and a generous exercise facility with Nautilus equipment. A concierge and property management team handles everything from stocking the fridge to producing poolside birthday parties.

The goal, says Shugart, is “an environment you can bring families to. We fill a niche – large private homes with services,” including ski shuttle and equipment storage at the base of the ski mountain less than a half mile away. The Porches also is marketing several of its homes – as six-week Private Residence Club fractionals starting at $340,000. And yes, the houses do sport rocking chair-ready porches.

Aspen On The Cheap? Not Really.

I write this from Snowmass Village -- a construction site worthy of Donald Trump. The new Base Village is being built at the base of the lifts and looks WAY larger than it did when I saw the little scale model a few years ago. Indeed, it could be the new Vail. But although condo and home values continue to boom here, the fractional market is surprisingly soft. If you want to invest in a large 2-BR, 4-week deal at the Snowmass Club, for example, they're offered at about $200,000. Devil is in the details -- this is less than they went for about a decade ago, and the upkeep is a whopping $12,000 a year in homeowner dues. Need a broker? You can't do better than the team at BJ Adams and Company, which has been operating in this valley for many years.

Hidden Cost in Aspen Fractionals

Beware of fractionals for sale that don't tell you clearly about a "club membership." A new development here in Aspen, CO, the Dancing Bear, is just a few holes in the ground but already lining up buyers. It is being sold as fractional deeded interests, but... deep in its Web site it reveals the annual cost of the "membership" -- not yet determined, but estimated at about $13,000=$15,000 per year. While that includes homeowner dues, it means that besides the $769,000 price of a 3-BR 1/12th ownership, you'll pay at least $2,100 a month for each month of use. Might be cheaper to rent.

How to Tell Timeshare from Fractional

Not quite sure of the difference between various "shared ownership" vacation home plans? Today's New York Times has a very helpful article about this. A "timeshare purchase is typically a week, whereas a fractional purchase is usually three or four weeks. The luxury versions of fractionals are private residence clubs, defined by industry analysts as any residence selling for more than $1,000 a square foot and offering amenities like a private storage facility, daily housekeeping and concierge services....Timeshares and fractionals are usually deeded and can be bought, sold or passed from one generation to the next....Timeshares can cost about $10,000 to $50,000," says one expert. Another says "fractional prices range from $24,730 to $70,435 a week; annual maintenance fees range from $5,410 to $8,700."

Boomers Search for "Middle-Class Luxury"

Realtors from around the U.S. and elsewhere who specialize in second homes and resort real estate converge are meeting this week in Vail, CO this week and at least one speaker reports that condo hotels, fractionals, and timeshares are still doing well in the strongest markets. Bob Waun, CEO of Vacation Finance, told the group that the baby boomers are still fueling these purchases. They "are seeking unique alternatives that make fiscal sense and create ownership opportunities that are not burdensome. Many Americans do not want just one second home, they want one in multiple locations," Waun told the National Association of Realtors Vail symposium. "Luxury is a new middle-class expectation," he declared, and "making it affordable requires thinking outside the box of traditional ownership."

Like Pizza, Slice of Vacation Home Better Than None

Once upon a time, even the most mid-level middle-income folks could afford a getaway shack, cottage or cabin on a lake, by the seashore or near the mountains. The place I owned in Snowmass Village in the 1980s cost us only $100,000 for a 2-bedroom condo at one of the nation's great ski resorts. Now, the same kind of money will get you only a few weeks -- a timeshare, or fractional ownership, as the sales crowd likes to call it.

There were 188 "fractional interest" projects in the U.S. in 2005 with $2-billion in sales, a 28 percent jump over 2004, according to NorthCourse.com, a research firm that keeps tabs on the market. A newspaper article recently spotlighted a California family that paid $56,000 for the use of a two-bedroom, furnished home in the Old Greenwood development (photo above) at Truckee, near Lake Tahoe, for at least 21 days a year. With their purchase of a slice of the house comes membership in the Tahoe Mountain Club, which includes access to private restaurants and recreational and spa facilities. And of course owners can take a tax deduction on the mortgage interest.