GIBRALTARINTERNATIONAL

F I N ANC E AND BUS I N ESS

p26 Insurance Feb/March/April 2011p16 Investment

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Banks essentialrole in supporting

growth

a quarter to a twelfth fractions – a month’susage for a twelfth share, three months fora quarter share and so on.

As Ioannis Verdelis, Senior Consultantat leading fractional consultancy The BestGroup notes, “With the current dynamicsof the property market being the lack offinance and confidence, we have seen anumber of property buyers consideringfractionals as a way in which they can stillenjoy fine assets at a lower price. We havebeen working with a number of developers,including some very well known names,and so we can say with some confidencethat fractional ownership is now reallycatching the eye of the property industrytoo”.

With fractionals, the beauty is in thedetails. Glossy brochures may help sell thedream but with so many options out there,from NetJets to Napa Valley wineries,scouring the fine print is essential.

Do your homeworkPiers Brown of Fractional Life www.fractionallife.com says it’s important to doyour research:

“Do your homework. There is a bewildering variety of product on offer –including timeshare masquerading as frac-tional ownership – so it's essential tochoose the right one for you. Think aboutyour lifestyle and/or investment needs andtry to find a scheme that fits in best withthat in terms of location, number of weeks,usage plan and amenities.

“And as with any property transaction,make sure you use an independent lawyerto do due diligence and check you are actu-ally buying what you think you're buying.”

The recession slowed sales but therehave been sticking points, too, includinglack of financing, a hot topic at FractionalLife’s Fractional Summit 2010 which

returns to London on 17-18 February 2011. Geoff Hadwick, Editorial Director of

the Overseas Property Professional Groupsays the sector is still being held back by alack of funding and a lack of understand-ing, especially in Europe (the concept isknown and accepted in the US).

“In Europe, overseas property agentsand developers have a lot of educationalwork to do in the next few years to makebuyers feel safe and confident that investingin a fractional development is a good, long-term idea,” he says, but adds, “Fractionalownership is an idea whose time is coming.”

Getting in (and out)Banks are gradually starting to comearound, so many developers have had toprovide financing themselves. And what ifyou want to sell your share, can you? Andwhen? Developers are now marketingproperties that offer built-in exit strategies;if your property’s value has risen when yousell, you’ll gain – perhaps not a hugeamount but it has paid its way in happyholiday currency.

And with 365 days in the year, what ifeach family wants the same Sardinian villafor the school holidays? Rotating calendarsare among the ways to slice the time morefairly.

Buying a slice of the property pie hasits advantages. Funds permitting, you couldbe in Paris in Spring, Sotogrande forSummer, Tuscany in October andChamonix at Christmas and if your proper-ty’s resort is linked to a reciprocal exchangeprogramme, the options are wider still.

Looking aheadUrban fractionals are untapped as yet, butThe Hideaways Club kicks off 2011 in stylewith The City Collection, ten chic city residences in New York, London, Paris,Venice, Miami and Istanbul, expanding toMoscow, Rio de Janeiro, Bangkok andSydney.

Mike Balfour explains, “The CityCollection will provide member investorswith a new way to enjoy an unrivalled citylifestyle with ultimately 120 city centreapartments in some of the most glamorousand vibrant cities in the world.”

On a different note, Paul GardnerBougaard of Fractional and SharedOwnership Trade Association (FSOTA)says fractional developers will have to comply with the new Directive due to be

implemented across the European Union by 23rd February 2011.

He says, "The implications could befar reaching as many fractional develop-ments did not fall within the scope of thefirst directive which regulated timesharesales or perhaps fell into what could becalled "grey areas" where they were outsidethe provisions of the law". (Seewww.fsota.org for more information).

Fractional developments used as holi-day homes are not usually SIPP compliant,but Guy Tollhurst, Managing Director atIntelligent Partnership, who specialises inthis field says they do exist, one examplebeing Caracola Beach & Spa Resort on IslaMargarita in the Caribbean.

With an established market in Americaand developments mushrooming in Europe,Egypt and Dubai, it’s a property model towatch. Lawyer Andy Sirkin of Sirkin &Associates specialises in shared ownershipand fractionals and he sees buyers tappinginto the benefits of owning fractionals inthis economy:

“Many people buying fractionalstoday would have bought an entire vacation estate three years ago. Now theyfully appreciate the cost-effectiveness andrisk-diversification benefits of fractionalownership, and understand that it’s not somuch about what you can afford but moreabout what makes sense to buy. In a fewyears, we may look back on the financialcrisis as the best thing that ever happenedfor fractional ownership because it broughtits best qualities into sharp focus.”

If it’s “luxury for less” you’re after andyou don’t have time to get away often, aflexible five-star fractional property couldbe the intelligent answer. Yours when youwant it, not when you don’t.

www.thehideawaysclub.comwww.fractionallife.com

www.gibraltarinternational.com GIBRALTAR INTERNATIONAL 17

INVESTMENT

With the global economic forecastfor the foreseeable future stillveiled in a mist of uncertainty,conflicting real estate predic-

tions abound. Spain’s property sales havebeen sliding downwards - although recentreports are a bit brighter - while in otherparts of Europe, multi-million euro estatesare being marketed with knock-down pricetags.

On the shinier side of the coin, lastOctober Halifax reported sales of London’s£1 million-plus homes (which make upapproximately 4.5% of the city’s proper-ties) were up 118% for January - June 2010compared to 2009.

And while big spenders,many of them foreign, havebeen boosting the propertymarket in Europe’s capitalcities, super yacht sales are uptoo. Sales of 50-70-metreyachts reportedly tripled in2010 compared to the previousyear and yacht brokers are seeing healthy sales in the £50million upward league.

With yachts, bigger is usually better although perhapsnot for Roman Abramovich.Originally scheduled for delivery byChristmas 2009, his 167-metre, £329 million James Bond-esque “Eclipse” wasseriously delayed by glitches.

A large mirror on one of the nine decksshattered during North Sea tests, the elec-tro-turbo engines rattled crystal ware, theFrench navigation system played up andflaking paint was spotted. Then the helipadhad to be shifted, proving that owning theworld’s biggest yacht is not necessarily aheadache-free experience.

A share of a yacht or overseas home is

a more flexible, affordable solution. Thebest fractional properties are often part offive-star resorts, complete with extras suchas 24 hr concierge service. Just as impor-tant as what you get is what you don’t –headaches like leaks, repairs and poolmaintenance are normally overseen by themanagement company for an annual fee.

The Hideaways ClubThe Gibraltar-registered Hideaways Club isone of Europe’s most exclusive private resi-dence clubs. More than a five star destina-tion club, members own equity in TheClub’s hand-picked international propertyportfolio.

Chairman Mike Balfourexplains, “Hideaways Clubmembers not only have thechoice of holidaying in over 50beautiful properties around theworld but have equity owner-ship in the entire property port-folio. In these uncertain finan-cial times when security ofinvestment is of prime concern,membership of The HideawaysClub offers both the security ofhaving an asset backed invest-ment in a liquid and diversified

Fund, plus strong potential for growth inthe future. The Fund currently projectsannual share returns of about 6.5%.”

With a member to property ratio ofjust 6 to 1, The Club has become Europe’sleading international property investmentFund. Founded in 2007 it has been catchingthe attention of those looking for a viablealternative to sole property ownership.

Financial advantages aside, The Club’smillion euro plus bracket properties inglamorous locations lend added appeal.Balfour has the globe covered: Europe,

Africa, South Africa, Mauritius and SouthEast Asia…ski chalets in Switzerland andmansions in Morocco, all for a lead-inmembership fee of £132.500 to 250,000(giving three to six weeks exclusive usageevery year). Hideaways properties are serv-iced by their own concierge who overseesmember requests from airport transfers toprivate chefs and everything in between.

The Fund’s investors automaticallybecome members of The Hideaways Club,enjoying year round usage of the still-widening portfolio (properties inMauritius, Bali and Phuket were recentlyadded, with more coming over the nextthree years).

Hideways currently owns 27 properties(47 through its alliances with US-basedEquity Estates and the Banyan Tree PrivateCollection) and to preserve exclusivity itplans to cap it at 600 members and 100properties.

Fractionals – the way of thefuture?Buying a deeded fractional propertyincludes the potential for capital growth –you own it, rather than just “spendingtime” in it (which is where the often mis-leading correlation between timeshare andfractional comes from). Shares are usually

INVESTMENT

16 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com

A Place for All Seasons

Once upon a time, not that long ago, it was the early adopters who embraced the fractional lifestyle, spotting a trend that grew into a new way to own a holiday home.Now, as the fractional ownership story goes more mainstream, one question many areasking is, is it a lifestyle purchase or alternative property investment - or both? Fiona Klonarides finds out.

Mike Balfour

The Hideaways Club, Chalet Lune, Switzerland

The Hideaways Club, Gran Vista, Majorca

The Hideaways Club, Asmara, Indonesia

Fractional property spotlight: Lifestyle purchase or bricks and mortar investment?