Developers, heads up: It's pop quiz time:
Q: How do you take eight very nice condominium units on Anna Maria Island and spin them into 104 products worth $20.8 million?
A: Sell "fractional units."
So is fractional ownership a new real estate product or just a new way of packaging time shares?
It depends on who you ask, said Tom Goetschius, an Orlando-based fractional ownership expert and consultant advising two local fractional project developers.
"The ownership is designed differently, used differently, (for) a different clientele and is, mostly, sold differently."
But Goetschius admits that "the only place in Florida law it fits is under the time-share statutes."
The concept is being undertaken for condominiums at the De Soto Grande Anna Maria Island and the Tropical Breeze Resort of Siesta Key.
Fractional ownership as a second home product is usually designed to a "higher standard of quality and service," he said, adding that the concept combines "all of the benefits of traditional whole ownership with the services and amenities of a fine hotel."
The service aspect is key to fractional ownership because well-heeled owners will be sharing the same space at various times, with all the potential for friction and conflict that implies.
The required levels of concierge service are usually just not available in a whole-ownership second home and exceed that usually found in time shares, he said.
Services might include pre-arrival grocery shopping and selection of wines and booze, daily housekeeping, valet and bell service, on-site personal concierge, pre-set thermostat and lighting accommodations, placement of personal items like photos or sports equipment, owner storage (other than in the residence itself), flowers upon arrival and so on.
Time-sharing is a "vacation product" -- the pre-purchase of a week or two of vacation, increasingly sold to a mass market by major hotel chains, Goetschius said.
Fractionals are "an alternative to a high-priced second or vacation homes located in a destination area where owners return periodically throughout the year."
More profit for developers
-- what else is new?
As real estate investment dollars dried up, would-be sellers began to explore more exotic constructs to move their properties at premium prices.
Two area developers have taken a page from the executive jet and yacht industries and have introduced fractional ownership vacation property.
For years, the fractional concept has been used to sell ownership units in every high-ticket non-essential item from corporate jets to mega-yachts.
Recently, the two local developers launched fractional sales of condominiums.
The pitch goes something like this:
Prices for vacation or second homes in a resort areas have spiraled out of reach for most people. Statistics provided by promoters indicate that the average vacation/second home owner uses the property only for an average of about a month each year, so why pay the huge costs for the property to sit idle for 101/2 months annually?
Goetschius, a former theater professor at the State University of New York with a "mouster's degree" in people management from "Disney University," is consulting with Palatial Destinations and Tropical Breeze Condominiums.
Palatial is a Myrtle Beach, S.C.-based developer of luxury fractional homes that began offering units in De Soto Grande Anna Maria Island earlier this month. The company also has projects underway in St. Maarten, Costa Rica, Boston, North Carolina and elsewhere.
Palatial offers the opportunity to own a "multimillion-dollar vacation estate for a fraction of its value," for a fraction of the year, said managing partner Adam Eberle.
Shared owners will have a deeded interest in a multimillion-dollar condo for less than a typical down payment, or about $200,000.
Each of the 104 "interest units" amounts to two two-week annual vacations on a "fixed and rotating schedule."
In addition to the sale price, Eberle expects each unit to spend about $5,000 annually for "property costs." That is more than $500,000 annually for the eight units.
Each owner receives a fee simple deed of ownership, and Palatial, with the the operating money in hand, ensures that the property will be "immaculately maintained," said Beth Bobb, whose Pecora & Bobb public relations firm is marketing DeSoto Grande.
The key is designing the product so that banks will lend against the units. That typically requires a 20 percent cash deposit at interest rates of 1 to 1.5 points higher than for conventional 30-year mortgages, Eberle said.