Fractional Ownership Heads to Europe

- By AMY CORTESE

Originally published in the New York Times, August 9th 2008 (link)

A FEW years ago, Michael Farver decided that it was time to start thinking about making changes in his life. For one thing, he wanted to travel more with his wife, Susan, and their 4-year-old daughter, Natalie.

“If I could spend six months a year in Italy, I would buy an old farmhouse and fix it up,” Mr. Farver said. “But that’s not going to happen.”

Mr. Farver, who lives in Plantation, Fla., still maintains a busy schedule running the nonprofit group End Childhood Hunger. But he found another way to fulfill his dream: he bought a share in Borgo di Vagli, a restored 14th-century hamlet in the Tuscan hillside.

“The thought of being able to own a piece of that struck a chord,” he said.

Long popular in the United States, fractional ownership — in which the costs of a vacation home or other asset are divided among a pool of members — is steadily making its way across the Atlantic. For prices starting at $100,000, not including annual dues, buyers can own a piece of a coveted property in the Tuscan hills, in the heart of Florence or in other European locales.

The concept was introduced in the United States in the early 1990s as a more cost-effective alternative to buying and maintaining a high-end vacation home that might be used only a few weeks out of the year. Unlike two other cost-sharing models — timeshares and destination clubs — fractional ownership plans give members an equity stake in the property, which can be sold or transferred like wholly owned real estate. The members typically own the club and the real estate, while the developers make money from the initial sales.

Fractional properties can be found in popular vacation destinations like Florida, Colorado and the Caribbean, but they were virtually unknown in Europe until recently, as developers saw an opportunity to transform crumbling farmhouses and historic buildings.

The hottest segment of the market in Europe, as in the United States, is the so-called private residence club, a fancy term to designate high-end properties that come with luxury amenities and services. The clubs have limited membership and generous use policies, and because they are in premiere locations, they are often viewed as investments that can appreciate.

While the second-home market has dropped off, sales for private residence clubs grew by 12 percent in 2007, according to a study of the North American market released this year by Ragatz Associates, a consulting company in Eugene, Ore., that tracks the shared-ownership resort industry. “Developers in Europe can’t help but take notice,” said Peter F. Kempf, the chief executive in Europe for DCP International, a real estate consulting firm.

Nor can developers in the United States. Timbers Resorts, a developer based in Carbondale, Colo., has been hard at work at Castello di Casole in Tuscany, among the largest private land holdings in Italy. Thirty restored farmhouses scattered across 4,200 acres of quintessential Tuscan landscape, with vineyards and olive groves, will eventually be available for full or fractional ownership. (Nine of them are now available.) A one-twelfth interest in one of the houses, or “casali,” ranges from 290,000 to 590,000 euros, or $436,000 to $887,000. That guarantees three weeks a year, and unlimited time on a space-available basis.

Abercrombie & Kent, a luxury tour operator based in Oak Brook, Ill., plans to buy properties in Paris, Rome and other European cities as part of a residence club it is starting later this year.

The Hideaways Club, a residence club based in London that was created last year, plans to develop properties in several European areas, including southern France, Italy and Spain.

The bulk of the activity is now in Italy, a perennial favorite for American travelers. Palazzo Tornabuoni is an urban private residence club located in a former Medici palace, one of four such palaces in Florence and the only one in private hands. It is filled with original artwork and frescoes spanning five centuries, and it has a club room with 30-foot ceilings, a cigar room and a wine cellar.

When a $150 million renovation is completed later this year, Palazzo Tornabuoni will feature 36 residences — from studios to three-bedrooms — that will be available exclusively to 288 members from 218,000 to 549,000 euros, or $328,000 to $825,000, for a one-eighth share. The Four Seasons will manage the property, and members may use the amenities of a nearby Four Seasons hotel set to open this fall.

The Palazzo’s members will have access to Florentine hunting lodges, golf clubs and special wine tastings, thanks to the connections of one of its developers, Jacopo Mazzei, who is from one of a handful of Florentine noble families. His family is also one of the oldest Chianti producers.

“Our raison d’être is access to a Florentine lifestyle,” said J. Byrne Murphy, the chief executive of Kitebrook Partners in Washington, Mr. Mazzei’s co-developer.

Patricia Gellar, an interior designer who lives in Los Angeles, and her husband, Marshall, bought a share in the Palazzo a year ago. Ms. Gellar, who collects old masters drawings, loves the cultural access that comes with membership, while her husband, an investment banker, enjoys the perks, which include having a chauffeur-driven Maserati meet them at the airport.

About an hour-and-a-half drive away is Borgo di Vagli, the restored hamlet on 32 bucolic acres where Mr. Farver paid $85,000 for his one-tenth share of a two-bedroom residence. The developer and architect, Fulvio di Rosa, spent 10 years restoring the hamlet’s 10 stone buildings, retaining its medieval spirit while adding modern amenities like a 66-foot swimming pool. An on-site concierge can arrange wine tours and dinner reservations and stock homes with groceries.

For those who prefer a Mediterranean getaway, the owners of the Regina Isabella, a resort on the isle of Ischia that was once a favorite haunt for Fellini, are turning a neighboring villa into a private residence club. Villa Isabella, expected to open next summer, will offer shares in seven spacious apartments, with sea views, to up to 70 members. Members will have access to the resort’s spa, restaurants and services.

Club developers say they believe that their prospects are good. “It’s a lifestyle investment with real estate ownership,” said Steve Dering, founding partner of DCP, the consulting firm. “That makes sense in any market.”

At Palazzo Tornabuoni, about half of the first 160 memberships being offered have been sold, well in advance of its December opening, Mr. Murphy said.

Still, for Americans — the primary target market — the weak dollar can hurt. Although a majority of their members pay cash, the developers of Palazzo Tornabuoni are offering buyers the option of paying in euros, which they borrow and pay back later at a presumably better exchange rate.

Mr. Murphy and Mr. Mazzei plan to expand into other “cities of culture,” like Venice, Rome or Paris, and to create a reciprocal network of private residence clubs.

Mr. Murphy has been instrumental in importing other American business models to Europe. In the 1990s, a company he founded, McArthurGlen Europe, helped establish designer outlet centers in Europe — a story he recounts in a soon-to-be published memoir, “Le Deal.”

“The potential for P.R.C.’s in Europe is just as great,” he said.

Articles

Any:
An Introduction to Fractionals

Art:
Fractional art donations prove charity starts at home

Handbags:
25 questions to ask about fractional handbag clubs

Boats & Yachts:
25 questions to ask a fractional boat operator
Fractional Boats in New Zealand
Pushing the (fractional) boat out
Boats & yachts- what's on offer?
Fractionalize This

Classic Cars:
25 questions to ask a fractional car club
Why opt for a 'fractional' classic car?
Classic Car Club Feature
Getting the most out of your fractional ownership experience
Why Not Rent?
You've Always Loved Cars?
Fractional Life hits Le Mans

Destination Clubs:
Lifestyle Asset Group: the best of both worlds
Relationship Selling to Todays Affluent Fractional Clientele
Mixed Use: Avoiding a mix up
Focus on the Registry Collection
DCs- Variety is the spice of (fractional) life
Fractional Property Glossary
Aspirational vs. Inspirational Media
Member Strategies For Lean Times
Brand Maintenance During An Implosion
What Goes Up Must Come Down...
Savings through Foreign Exchange
Fractional Finance Solutions
Destination Clubs- an alternative?
Fractional Ownership Heads to Europe
Private Residence Club Perspective Part 1
Quintess
Ultimate Resort
Calistoga Ranch
The Weybridge Collection
The Villas at The Grand del Mar
The Solstice Collection
Vacation Visions: Exceptional Exterior and Interior Designs of Residence and Destination Clubs 
Why the Boomers will change second home ownership in the US
Middle East Leisure Real Estate Market Booming
Bear Mountain Resort - A View from Paradise
New Association For Fractional Ownership
The New Vacation: A Time to Retune Re-Connect

Consultancy:
Profit Opportunities in Luxury Fractionals - A Summary

Exchange:
The Golden Rules of Fractionals

Racehorses:
A Horse by The Name of Fractional Life
Running Down a Dream

Corporate Hospitality:
So Long to the Suite Life

Aircraft & Jets:
25 questions to ask a fractional jet operator
Top tips for fractional jet travel
Jet Republic pilot applications reach new heights
Focus on Fractional Jet Europe
A closer look at fractional aviation
CoGoJets introduces jetpooling
Joining the jet set
Fly for a fraction of the cost
Flying without Wings
Can't afford that jet? Rent it
How Private Aviation Works

Legal Services:
Fractional ownership: is it timeshare in disguise?

Private Clubs:
A tale of two cities - Private residence clubs in San Francisco and London
The Italian Job: interview with Byrne Murphy of Palazzo Tornabuoni
Mixed Use: Avoiding a mix up
PRCs with added benefits
Northstars 'stay and play ' option
Private Residence Club Perspective
Fractional Property Glossary
What are the ingredients for the ideal Private Residence Club?
Savings through Foreign Exchange
Fractional Finance Solutions

Real estate:
Fractional Life in Ireland: For peat's sake!
Fractional Summit USA 2010- Speaker biographies
25 questions to ask about fractional property ownership
Fractional Summit Speaker Biographies
Fractional Property - The New Normal
Gay Community Embraces Fractional Property
Fractional Real Estate Investment Or Lifestyle Purchase?
Fractional Sales: Square Pegs In Round Holes?
Fractional Real Estate Commissions
Urban Fractionals
European Mixed-Use Resort Development in 2009
Mixed Use: Avoiding a mix up
Property- the legal issues
Fractional Holiday Getaways
Fractionals-Recession beaters?
State of fractionals
Fractional Property Glossary
Savings through Foreign Exchange
Fractional Finance Solutions
Fractional Property- the legal issues
Fractional Property Regulation
Fractional Ownership? We'll have a piece
Keep The Door Open
Why Fractional Property?
The Benefits of Fractional Ownership in Private Residence Clubs
Middle East Leisure Real Estate Market Booming
New Association For Fractional Ownership
Saving Homes, Homeowners and Banks Through Fractional Ownership?

Lifestyle:
Savings through Foreign Exchange
Convergence in the Fractional marketplace
The stock market for songwriters

Supercars:
25+ questions to ask a fractional car club
Live The High Life In A Fractional Supercar
Why Individuals Should Join A Supercar Club
Why opt for a 'fractional' supercar?
Focus on Marque II
Eco-road-warriors- How will the supercar club line-up of the future change?
Fresh metal- What's new on the supercar front?
So Why Not Buy?
You've Always Loved Cars?
Supercars- The cars of 2006/7
Let's Take The Lamborghini
Fractional Life hits Le Mans
Ascari Racing Festival Weekend
Fractional Supercars at the MPH Show
GROUP20 The SuperCar Club announce their 2007 Road Show in aid of Children In Need
New supercar club with green credentials

Luxury Motorhomes:
Denver RV show ready to roll

Wine & Spirits:
Wine