The fractional option
Richard Dear and various partners own the Tropical Breeze Resort of Siesta Key.
The partners tried to sell a hodgepodge of properties spread throughout the key to one buyer earlier this year but failed to attract interest in the grab-bag of commercial, residential and former motel units.
Although the properties were near the commercial center of Siesta Key, as well as the beaches, they were not contiguous and were not selling as planned in a soft market.
The problem was that the residential component was not attracting as much interest as the commercial.
Dear retained SKY Sotheby's commercial property guru David Jennings, who sold off the commercial property, including a strip mall and the Beach Club. The deal, closed earlier this month, totaled 12,000 square feet for about $7 million.
But what to do about all those former motel and condo units?
Enter fractionals.
Dear hired Goetschius to help him set up a fractional ownership program now being marketed for 43 former Tropical Sun motel units by Sarasota's Florida Sun Realty.
In Tropical's plan, the buyer gets four months annually at an average price of about $180,000 on a rotating schedule. That amounts to 43 units times three owners per year times an average sales price of $180,000, for a total of $23.2 million.
That is clearly the "best and highest use" of the property. If it were torn down for development, it would be restricted by current density limitations for a significant net loss in the number of buildable units, Jennings said.
In the Tropical Sun construct, each of the 129 potential unit owners will also pay about $1,000 annually for operating costs, said Helen Gallagher, president of Florida Sun Realty.
Robert Skalitzky, one of Florida Sun's founders, a veteran condo developer and the man who built Marina Tower, was a big skeptic at first, but eventually became a partner in Dear's fractional condo plan.
Considering how expensive waterfront property is now, "It's an idea whose time has come," Skalitzky said.
About 188 fractional projects are being marketed in places like Aspen, Jupiter, St. Thomas and Miami's South Beach, Goetschius said.
Part of the appeal is that the potential market is huge: basically everyone who cannot afford a high-end resort vacation second home.
Other players are dipping toes into the idea, including major luxury developers. Ritz-Carlton has or is developing fractional units.
But back to the thorny question: What is the difference between time shares and fractionals?
Turns out, it's not that much.
Jennings said there are image and price point differences, but as far as he can tell, "There's no difference on the deed."
Chad Roffers, Jennings' boss at SKY, says his company is "associating" with select luxury fractional projects because "we have seen an increasingly large number of affluent buyers come into our offices and leave discouraged because they cannot afford the waterfront property available in the Sarasota/Manatee marketplace."
Usage patterns are different from what they were 10, 20 or even 30 years ago, Roffers said.
People are staying in the work force longer, making it no longer practical for them to take an entire "season" out of their year to vacation in Florida. He points out, "The costs of property taxes, insurance and upkeep are becoming harder to justify whole ownership."
Roffers predicts that "major players," including WCI, the parent of competitor Prudential WCI, will be rolling out fractional projects in Southwest Florida later this year.