Fractional

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Fractional

  1. 1. An Introduction toFractional Ownership A guide to the world of fractional ownership brought to you by
  2. 2. Fractional Life in Numbers 32,150 ‘fractional savvy’ opt-in subscribers 1,002,593 highest website hits in a single month 10 average page views per visit 908,342 average website hits per month 15.8 average minutes spent on site 10,900,104 average website hits per 12 monthsStatistics correct as @ 18th June 2009 Fractional Life is the number one consumer lifestyle brand dedicated to growing the fractional ownership marketplace. Fractional Life visitors are among the most sought after consumer demographics- established and affluent professionals who are actively engaged in ‘temporary ownership’ and smartly acquiring quality luxury products, services and lifestyle experiences. Fractional Life singularly focuses on the wealthy consumer’s wants, needs, aspirations, opinions and expectations within the fractional ownership marketplace.
  3. 3. CONTENTSINTRODUCTIONABOUT 5WHAT IS FRACTIONAL 6FRACTIONAL CATEGORIESPROPERTY 7CLASSIC & SUPERCARS 12PRIVATE AVIATION 14BOATS & YACHTS 16FASHION 18FURTHER FRACTIONALS 19CONCLUSIONFRACTIONAL FUTURE 22CONTACTSAdvertising enquiries Info@fractionallife.comExhibition & Conference enquires Tracey@fractionallife.comPress enquiries Aaron@fractionallife.comAll telephone enquires +44(0)20 8340 7989
  4. 4. te dga ues, Broa Ven on nt d Eve of Lon th City th – 1609 14 pt 20 2009 Se F REE TO VISIT www.fractionallifeexpo.com THE UKS LARGEST CONSUMER FRACTIONAL OWNERSHIP AND ASSET SHARING EXHIBITIONAIRCRAFT & JETS ART BOATS & YACHTS CLASSIC CARS HELICOPTERS VINEYARDS & WINECORPORATE HOSPITALITY DESTINATION & PRIVATE RESIDENCE CLUBS HANDBAGS HOTELSLIFESTYLE LUXURY VEHICLES PROPERTY SPIRITS & CHAMPAGNE SPORT SUPERCARS RACEHORSES
  5. 5. ABOUT INTRODUCTIONSince its launch in 2006 Fractional Life has swiftlybecome the number one source for one to explorethe growing lifestyle trend of fractional ownership and “Fractional Life does not only ex-asset sharing. ist as an exit from the Information Superhighway...withBut what is Fractional Life? Fractional Life acts as a host of offline features includ-a comprehensive guide to the world of fractional ing exhibitions, networking con- ferences and consultancy”ownership- offering articles and company listingsthrough which one can explore the growing plethoraof fractional opportunities within the marketplace today.The site’s aim is to give you the choice of the best ofeverything at a fraction of the cost, all under one roof ina ‘fractional superstore.’Fractional ownership and asset-sharing gives you anideal way to get the most out of your investment bypurchasing only the shares or time you require from anasset. All other aspects are split, both the benefits andthe costs, amongst a limited number of shareholdersor members. Fractional ownership means that youphysically own a percentage of the asset until youdecide to sell, whereby opting to join an asset-sharingcompany, e.g. a private member supercar club, is an fractional property from a business point of view thereinvestment in the time and pleasure you have with that is also the upcoming Fractional Summit to be held inasset. London this July.So, using Fractional Life, you can decide, for instance, This guide offers a bridge between the two worlds- anto cost-effectively own a quarter share in an exotic online publication that can also be printed to be enjoyedholiday home abroad, have access to your favourite away from your desktop.yacht eight weeks a year, spend a selection of daysbehind the wheel of some of the most desirable cars That said, it is worth taking a look at this documentin the world, have the latest handbag on your shoulder online before you print it as it has a number of web-and even own a part-share in a nightclub! enabled features such as direct links to other content that may be of interest and a link to the sign-up form forNo matter what your budget, there’s something for you our regular newsletters (features are only available onhere and the beauty of it is, you decide. the PDF download version). It is worth taking a momentIn short, Fractional Life helps you make informed to sign up for our newsletters as they are free and offerdecisions to allow you to enjoy your lifestyle how you you the opportunity to be the first to be notified aboutwant it and when you want it. any upcoming events as well as exclusive offers from selected Fractional Life partners.Although Fractional Life began life as a web-basedservice and at it’s heart is a virtual superstore for you to Over these 24 pages you will find an introduction tobrowse fractional lifestyle opportunities it does not exist the world of fractional ownership and asset-sharing-solely as an exit from the information superhighway. covering the main opportunities on offer and someOver in the real world, Fractional Life hosts exhibitions, pertinent questions to ask the relevant parties beforeconferences, networking events, produces print content taking the plunge. All of which should provide youfor high-profile media partners including the Times and some food for thought before you log onto the mainthe Sunday Telegraph newspapers as well as offering site and select the opportunities to build your very ownbusiness consultancy services through our sister fractional life experience!company- Fractional Consultancy.On the topic of exhibitions, although you may have just All information provided in this guide is for themissed the second Fractional Life Expo you can keep convenience of our readers. Please review our fullup to date with details of upcoming Expo events at Disclaimer for further information.www.fractionallifeexpo.com. For parties interested in www.fractionallife.com 5
  6. 6. WHAT IS ‘FRACTIONAL’? INTRODUCTIONEveryone wants to live like a multi-millionaire- the and satisfaction in owning your own holiday property/holiday homes, private jets, yachts, prestige cars and yacht/supercar/etc. that you know you worked so harddesigner accoutrements amongst many other lifestyle for? Obviously, the fulfilment of full ownership is oneperks are all highly desired. aspect that fractional ownership or asset-sharing can never hope to replicate, but transumers view this fromYet in the current climate- predictions of an economic a different perspective, with the value coming from themeltdown and environmental concerns are rife and short- to medium-term experiential satisfaction ratheras such many reformed ultra-consumers are looking than that of longer-term commitment.to spend less, live more whilst all the while boostingtheir green credentials. These cash-rich, time- One man who has closely followed the growth ofpoor individuals are addressing their conspicuous / fractional in the UK is Fractional Life’s very own foundercooperative consumption balance and no longer is Piers Brown. Since it’s launch www.fractionallife.comit simply a case of blindly purchasing to satisfy their has grown to list over 300 fractional and asset sharingconsumer desires but considering experiential reward, opportunities and the company has become regardedfinancial outlay and environmental impact is also highly as the most comprehensive reference site for all thingsvalued. ‘fractional’.This has created a consumer breed referred to by trend- Piers says, “It’s clear people are becoming morewatching gurus as ‘transumers’ or ‘fractional lifers.’ This intuitive towards their luxury spending and questioninggroup values not the actual ownership of goods, but the value of whole ownership. Quality time is becominginstead focus on the experiences that those goods can increasingly short within people’s daily lives and a lotprovide and the short-term reward. This shift has led to don’t want the hassles of whole ownership of manythe rapid rise in the popularity of fractional ownership luxuries these days. There’s a growing tendency toand asset sharing, identified by J. Walter Thompson, invest more in entertainment, experiences, discoverythe forth-largest advertising agency brand in the world, and life. It’s not what you have, but what you do thatas a major trend of 2008. makes you ultimately happy.”You can now fractionally own just about anything, from Although broader acceptance of fractional ownership isa Portuguese holiday home through to a part share in a only just filtering into the daily life of many consumersfilm production and even handbags. already for some fractional lifers fractional ownership is, as the appellation suggests, a way of life.But what is fractional ownership and asset sharing?The former is the concept of dividing an expensiveasset into percentage shares and selling thoseshares to individual owners. Each person who owns afractional share then gets a relative percentage use ofthe asset, with a management company handling theasset and fractional owners paying fixed fees for thismanagement, sometimes in addition to variable feesfor usage. Fractional owners can benefit from capitalappreciation although, on the flip side, may suffer fromdepreciation.For markets that do not traditionally lend themselvesto fractional ownership, such as those involving rapidlydepreciating assets (prestige cars for example), theasset-sharing model is utilised. This generally involvesa membership fee and, sometimes, a further usage fee,allowing the member access to the use of the assets,e.g. a fleet of supercars. There are no ownership links “It’s not what you have but what youbetween members and assets, so there is no investment do that makes youpotential in this model. ultimately happy.”On the one hand, some may suggest that fractionalownership and asset-sharing only gives you a fractionof the experience—where is the sense of achievement6 www.fractionallife.com
  7. 7. PROPERTY FRACTIONAL CATEGORIESOne may long for their very own property located in amore temperate climate, yet they may never take theplunge for any number of reasons. The key issue canbe financial, whether it is simply a limited budget ortrying to justify spending a large amount of money onsomething from which you are going to get limited usebut remain responsible for all year round. On average,people only receive five weeks of holiday Armed withthis knowledge a fractional property makes superbeconomic sense as the cost: benefit ratio can be highlyappealing. With fractional ownership, because you areonly buying a part-share of the property, you can affordto buy something more lavish than you could ever fundoutright. In effect, you are spreading your investmentand owning a superior quality holiday home. This is not “Potentially the smarterjust the ‘poor-man’s’ choice but also the smarter choice, choice even for those who traditionally optedeven for those who would traditionally plump for the for full ownership”time-honored outright purchase.“Investors are clearly attracted to having access to whatare, in many cases, luxury second homes without thecost burden of all year round ownership” so says Paul used interchangeably so you’ll find some companiesStewart, Tax Director at KPMG. “We are seeing an that might fit closer to the definition of one but whichincreasing number of new fractional ownership projects refer to themselves as another.particularly in relation to property. Indeed it’s fair tosay that from a tax perspective fractional ownership All offer an enticing alternative to fully owning luxuryinterests in property give rise to interesting challenges holiday properties. Both Destination Clubs and PRCsand opportunities for developers and investors”. provide fully serviced and maintained luxurious, finely furnished and well appointed properties to theirFractional Property generally breaks down into three members and owners. Destination Clubs require acategories- Property, Destination Clubs and Private lump-sum payment for membership whereas joining aResidence Clubs (PRCs). In many cases the terms are PRC gives you an equity stake with access to a number of properties within the club’s portfolio. So let’s take a look at some of the key differences- the main difference with Fractional Property is that you are purchasing a share in one property in one location and so this is a good fit for those who know that they want to return to the same location time and time again. But one should note that although strictly speaking you are only buying a share of a single second home a number of PRCs also offer the opportunity to swap your time and location with other locations within their company portfolio or with selected affiliates and so a PRC should not be dismissed out-of-hand on the grounds of limited choice. Destination Clubs are tradtionally non-equity, giving members access to the club’s luxury homes (ranging in value from $1m to $30m+) throughtout the world. Members can select whereever they choose from this portfolio for each trip. The property collections provide members with a wealth of different climates, activities and experiences for members to choose from all year round. www.fractionallife.com 7
  8. 8. PROPERTY FRACTIONAL THE LEGAL ISSUES CATEGORIESMemberships can range from sub-$150,000 to $3m+ Eric Gummers, Head of Leisure at international law-but most membership deposits are 80% refundable if firm Howard Kennedy talks us through some of thea member decides to leave the club. Some destination fractional property legal issues.clubs also offer to share in property appreciation butat this time the benefits of such iniatives are largely At the risk of the obvious, the first element from a legalunproven. The growth of Destination Club can benefit and tax perspective is for the prospective fraction ownerall as more members means that that the club purchases or member to understand the legal structure of thefurther properties to maintain the member:destination fraction.ratio. Essentially, the fraction is likely to be configured in oneWith PRCs members pay for the residence for a fraction of the following legal forms:of the year rather than on a per-visit basis, and there are • Membership of a clubusually no limits on additional free-space reservations. • Participation by way of a shareholdingCost range from $100,000 to more than $500,000, • Becoming a limited partnerdepending on fraction size, the residence itself and • Direct real estate holding with others, usually location. In addition, owners pay an annual fee, which governed by a trustranges from $8,000 to $25,000. Although as PRCmembers actually have title and deed they can benefit There are pros and cons to each type of legal structure.from any appreciation and potentially reclaim their initial However, a well-designed structure should fit thepurchase price and more through reselling. requirements and objectives of the individual fraction holders for the particular asset group, with securityFractional offers a holiday getaway with fewer hassles, to enable usage over the long term and appropriateinsulation from market fluctuations and investment flexibility.potential. A winning combination that explains whyproperty is one the fastest growing fractional markets. Because of the overlapping interests, the legal documentation is likely to be relatively lengthy and you will want a full explanation as to what it means in practice.I������������������������������������������������������� f you are thinking about investing in a fractional own- Managementership property, here are the top 25 questions to ask You should pay particular attention to the provisions forthe company about the property you are considering management and reservation so as to be satisfied that these are workable and robust.1. Is the property offered ‘deeded property’? One of the attractions of having a fractional interest is passing the burden of asset-management to a professional manager and sharing the costs with other fractional owners. Accordingly, the choice of manager, together with the inclusion of appropriate controls on costs and reporting requirements, will be very important. Given the need to maintain the underlying assets, we recommend that you carefully consider how the annual fees and service charges work to ensure that the projections of these are soundly based and that there are sufficient protection clauses in place to avoid future unpleasant surprises. Reservation and usage Usage is at the heart of having a fraction. The arrangements for usage need to suit your desires, balanced with the desires of other fraction holders. In looking at the marketing materials for a fraction, are you comfortable that what is portrayed is deliverable in reality? If it sounds “too good to be true,” then it may not be workable.8 www.fractionallife.com
  9. 9. FRACTIONAL CATEGORIESPROPERTY- THE LEGAL ISSUESA carefully considered usage system is one of thehallmarks of a fractional system that is likely to work Rental income derived from your fraction will be liable tosatisfactorily for all. tax and is required to be included on your tax return.In looking at usage, review the reservation requirements For condo hotels or buy-to-use-and-let offerings, you mayto be sure that the advance notice requirements work well need to separately register and account for valuewith you and your family’s lifestyle. added tax in respect of the rental income generated. A responsible promoter will have taken steps to assist youExit with the necessary administration.The mechanisms for sale, transfer or exit at the pointwhen you no longer want to use your fraction are Taxation on saleimportant. On the sale of your fraction, if a gain is made on the original price, then, subject to indexation and deductionThe ability to resell in the future and the timescale of of the costs of sale, the uplift will be subject to capitalreselling will be critical elements of value. As a fraction gains tax.owner, you will wish to see that there is an orderlyaftermarket and to understand any restrictions that may In some jurisdictions, there may be transfer taxesapply. or stamp duty payable on the sale of interest and the responsibility for these between the buyer and the sellerSome companies provide for buy-back provisions, such should be established.as repurchase after a certain number of other sales and,if these are being included, you will want to consider this Summaryoption and how it might work in practice. Whilst fractions may have some complexity from a legal and tax perspective, the well-structured fractionalFinancing offering will have taken these concerns into account soWhilst it is a relatively new product, finance is now being as to ensure an efficient structure for fractional owners,made available for the purchase of certain real-estate- with the rights and obligations (including costs throughoutbased fractions. As with any finance option, you will the life of the fraction) being clearly presented at theneed to be comfortable with the borrowing terms and outset.the costs. e.gummers@howardkennedy.comIf you do require third-party finance for the purchase, the www.howardkennedy.comability to exit and realise the fraction may be of higherimportance.TaxationAgain, the prospective fraction holder should understandthe tax implications of the purchase, holding and sale ofthe fraction.Taxes on purchaseAt the point of purchase, the price may be subject toa value added tax or equivalent sales tax. You shouldestablish what the anticipated indirect taxes are and takeaccount of this in the purchase decision. If the fractioninvolves a direct property interest, then stamp duty maybe payable.The fraction structure itself will be liable to certain taxeson the acquisition of assets, such as homes, and will haveongoing responsibilities for local taxes and employmenttaxes in respect of staff.The 2007 Budget has helpfully removed a concern forUK taxpayers such that interests in overseas real estateheld through corporate structures might involve liabilityto tax on usage as a “benefit in kind.” www.fractionallife.com 9
  10. 10. FRACTIONAL CATEGORIESFRACTIONAL PROPERTY- TOP QUESTIONS 2. What percentage fraction is being offering? 20. How are the properties furnished (what sort of style and decor, fixtures and fittings etc..)?3. Are the weeks offered fixed or variable? 21. What other amenities can I expect at each resort4. Is the building completed yet? – e.g. access to vehicles, golf cart and professional access (where applicable)5. What percentage of the total units have been sold to date? 22. What is the average amount of days a member currently uses for the plan I’m considering and can6. How many price increases has the development you rollover any unused days to the following year?had over time? 23. Does the resort partner with travel agencies, jet,7. Exactly what does ownership include? yacht services or have access to any other assets? 8. May I see a printed list of the fees you charge? 24. Who owns the properties at present and what happens if the property company fails?9. If finance is required, how do you recommend Ifinance the purchase? 25. What do you believe are the strengths and weaknesses of the company and properties available10. How long has the company been operational? and why should I ultimately buy this one in comparison to the choices available?11. Do you mind providing the contact details of somecustomers who have purchased fractional interests inyour properties recently?12. Can I test the reservation process and visit aproperty before joining? 13. If I decide to purchase a fractional share in aproperty, can I change my mind, and if so, by when?14. What is the process if I wish to sell my fraction inthe property at any time in the future? 15. How does one book for popular holiday periodse.g. school holidays, and what booking system is inplace e.g. first come, first served and is there anypriority amongst owners? 16. What additional services does fractional ownershipcover (e.g. concierge, car rental, airport pick up / dropoff) and are there any extra costs? 17. Are there any additional fees or charges applicablein addition to the fractional property purchase? 18. Does the company have plans to raise prices –if so, when and by what rate and what factors wouldinfluence such price increases in the future?19. Are photos and floorplans available for theproperties and are their any ownership rules – e.g. arepets and is smoking allowed?10 www.fractionallife.com
  11. 11. FRACTIONAL CLUBSDESTINATION & PRIVATE RESIDENCE CATEGORIESTOP QUESTIONSIf you are thinking about joining a private destination 13. What is property availability like this coming monthclub here are the top 25 questions to ask the clubs and how does the club ensure there is decent availabilityunder consideration to allow members to travel on short notice? 1. How long has the club been operational and what 14. How does a member book for popular holidayassurance do I have that the club has enough assets periods e.g. school holidays, and what booking system(e.g. property equity, cash) to meet membership is in place e.g. first come, first served and is there anydeposit refund obligations at any time and can this be priority amongst members?proven via financial disclosure? 15. What additional services does membership cover2. Can I test the reservation process and visit a home (e.g. concierge, car rental, airport pick up / drop off)within the club’s portfolio before joining? and are there any extra costs? 3. If I decide to join and get my membership confirmed, 16. Are there any additional fees or charges applicablecan I change my mind, and if so, by when? in addition to the annual membership fee (e.g. extra night charges) ?4. How many members are in the club and what is the average occupancy rate across all properties? 17. Does the club have plans to raise prices and policies – if so, when and by what rate and what factors would5. What is the current retention level – is this increasing influence such price increases in the future?or decreasing over time? Of those members who haveleft the club, how long on average did they wait to 18. Are photos and floorplans available for all propertiesreceive their refund and was this within the contractual and what are the residence rules – e.g. are pets and isobligation? Does the club mind providing you with the smoking allowed?details of a current and lapsed member for you to contact? 19. How are the properties furnished (what sort of6. What is the current value of the club’s property style and decor, fixtures and fittings etc..)?portfolio and how many properties are in the club’s portfolio now and due to be purchased in the next 2 20. What standard and special amenities does the clubyears? provide in each property ( kitchen utensils, dressing gowns, trouser press, mini bar etc..)7. What is the average appraised value of a property? What is the value of properties that will be purchased 21. What other amenities can I expect at each resortin the next 2 years? – e.g. access to vehicles, golf cart and professional access (where applicable)8. What is the proportion of properties that are owned / rented or leased? 22. What is the average amount of days a member currently uses for the plan I’m considering and can9. How many members does the club have at the you rollover any unused days to the following year?moment who have paid their full deposit? 23. Does the club partner with travel agencies, jet,10. What is the process if I wish to relinquish my yacht services or have access to any other assets?membership at any time in the future? 24. Who owns the property portfolio and what happens11. What is the club’s maximum membership capacity if the club fails?and what is the property to member ratio? 25. What do you believe are the strengths and12. Can family members use the properties without the weaknesses of the club and why should I ultimatelyprimary member being in attendance? Are there any join this one in comparison to the choices available?rules / additional costs based around the respectiveages and amount of family members who can beadded to the membership? www.fractionallife.com 11
  12. 12. FRACTIONAL CATEGORIESCLASSIC & SUPERCARS“Let’s take the Lamborghini”. Practice saying it, roll to keep fleets fresh, resale values as high as possiblethose words around and try not to smile, try replacing (the market for high mileage supercars is near non-Lamborghini with Ferrari, Aston Martin or any number existent!) and maintenance and consumable costs to aof highly desirable performance marques. minimum. Also, it allows for a greater range of models to be purchased by the club as they are in full control ofWe would all like to be able to utter those grin-inducing fleet management.words each time we left the house but unfortunately suchvehicles are unobtainable to many and impractical for So let us look at the mechanics- the basic model is thatthose who can afford the purchase and running costs. a membership fee gets you a number of points. TheThey are simply not a ‘do-all’ vehicles, a Murciélago amount of points used depends on the category of thewould not relish the short run to the train station each car (more points equals more desirable and expensiveday and nor would you wish to take it to the supermarket metal), whether you want to drive on weekdays orfor fear of damage as well as the need for a ‘support weekends (more points for the latter) and the time ofvehicle’ in which to pack your groceries. year (less points for the winter months and more for the summer). How your points are used is down to you butOne truly desires are multiple cars for multiple purposes- generally between 35-50 days use per year is the norm-a supercar for the run to Le Mans, a classic for cruising obviously less if you want the top-ranked vehicles onlyto the coast in the summer months and perhaps for weekend use during the summer and more if you optsomething a little impractical and out of the ordinary for off-peak weekdays in lower band cars.just for occasional kicks. Yet even with the funds atyour disposal it is unjustifiable on economic grounds to In choosing which car club is going to receive yourtax, insure and maintain more than a few cars at a time cash a large part of the decision is going to be basedand when you consider it there are few truly memorable on the cars on offer but you should also check out ourjourneys made over the course of an average year. questions to ask over the page so that you can satisfy yourself as to the solidity of the business as well as theIt is around this point of contemplation that one realises value for money it offers. It is also worth checking outthat although full ownership would be nice you do not any additional services your short listed companies maynecessarily need to own such a fleet but merely to offer as these can vary from carbon offset programsexperience the thrill of driving them on an occasional or social events including shooting weekends, sportsbasis. events, driving jaunts, restaurant visits, horse racing, polo to many other value-added extras that could helpSo what one needs is a garage in which someone else sway your decision.has purchased all the cars and pays for their runningand upkeep but you can select from their stable at anytime and for the price of the fuel make your memorable “...a supercar for thetrips all the more memorable. Obviously there would be pilgrimage to Le Mans? aan annual fee for this service but other than that and the classic for cruising to theaforementioned petrol you would be free of all the usual coast? perhaps something acar-owing drags as well as not only having the access little impractical and out of theto just one or two cars but as many as thirty or forty ordinary for weekend kicks? Why pick just one...”vehicles. Welcome to the petrol head nirvana that is afractional car club.More than 28,000 Londoners belong to car-sharingclubs. Transport for London said that half of membersclaim parking is a reason for not running their own carand that each vehicle replaces 20 private cars meaningthat you can also ease your environmental consciencedespite enjoying some of the least frugal modes oftransport available!The popularity of asset-sharing car clubs has soaredin recent years, promoting access to classic andsupercars for a fixed membership cost. As costly assetsto maintain car clubs tend to adopt the asset-sharingmodel- the shelf-life of individual cars is relatively short12 www.fractionallife.com
  13. 13. FRACTIONAL CATEGORIESCLASSIC & SUPERCARS- TOP QUESTIONSIf you are thinking about joining a fractional classic or 20. Can I pay by installments and are there anysupercar club, here are the top 25 questions to ask additional fees?prospective clubs 21. Does the club have plans to raise prices and1. How long has the club been operational? policies in the future?2. Can I visit the club and have a look around? 22. How safe are my membership fees once I have paid them?3. How many members are in the club? 23. Who owns the club and are the financial accounts4. What is the club’s maximum membership available for viewing?capacity? 24. Is there a cooling off period after I’ve paid my fees5. What is the car to member ratio? and what’s the club’s refund policy?6. What is car availability like this coming weekend? 25. If I have any points left over at the end of the first year of my membership can they be ‘rolled-over’ if I7. When do I activate my membership time period and elect to renew?how does it end?8. Does membership cover insurance and if so, whattype of insurance is included? “No maintenance, insurance,9. Does the insurance offered have an excess tax or any of the other usualpolicy? drags of owning your own classic or supercar. Just book, drive and enjoy. Most10. What happens if something occurs not covered by clubs can even deliver directinsurance – i.e. a tyre bursts, a windscreen cracks – to your door!”am I responsible for the damage?11. Can I let my friends, family, and/or colleagues usemy membership?12. What happens in the event of a car breakdown?13. What is the car booking procedure?14. What happens if the car I’ve booked becomesunavailable at short notice?15. Can you arrange for cars to be delivered andcollected?16. Can I store my car at the club? • Cost of finance (£138,500 at 7% APR): 17. How often does a new car get added to the fleet? £9,695 How much would it • Insurance (35-year-old, cost to do 4,500 miles18. What kind of concierge or additional services, if clean license): £4,200 in your own Ferrari • Yearly service: £2500any, does the club provide members? Club evenings / F430 Spider F1?events /trackdays? • Set of tyres: £970 • Depreciation: £19,92019. What is the club culture like? Total: £34,384 or £6.88 per mile. www.fractionallife.com 13
  14. 14. PRIVATE AVIATION FRACTIONAL CATEGORIESEven those that enjoy the actual flying experiencewould not argue that the initial jostling and queuing,arriving hours early for check-in, enhanced securityleading to increased delays, generally crowded planeswith cramped accommodation and other associateddrudgery is not exactly fun. Even as a small percentageof the approximately 2 billion air passengers that travelevery year, there are an awful lot of people out therelooking for something more out of their flying experience.It is fair to say that the vast majority would rather beflying privately, but is this only an option available tothe super-rich? Not if you’re travelling fractional.Private jet travel is becoming more popular for thecash-rich, time-poor consumer in today’s world andthe signs are that it is set to continue. With flexibleschedules and destinations to suit you, a super-slickairport process, extra security and the potential forentertaining friends and clients but, ultimately, to justtravel and arrive in impeccable style, nothing canmatch your own private jet.There are a wide range of different options available, deducted from your card balance, and in the former,ranging from fractional ownership programmes, you pay based on the accumulated flying hours (i.e.fractional card and membership programmes, charter excluding preparation of the craft), which are debitedcard programmes and on-demand charter. from your account in a similar fashion to prepay.Firstly, there is actual fractional ownership, where one So which format is best for you? Well, the keywordbuys a share of a plane; as a part owner, you have there is you. Where do you want to fly, how short aaccess to ‘your’ plane at short notice. Just like with notice period do you require for your needs, do youother fractional models, your annual use of the aircraft have a provider preference and even the apparentlycorresponds to your share size. At the end of your small details such as how much baggage you regularlycontract, which typically lasts around five years, you need to carry, for example, if you regularly carry skissell your share back to the management company, or golf clubs, as certain smaller craft are immediatelywhich is valued based on the current market price ruled out, are down to you. Also, there is obviouslyof your plane, less a remarketing fee. In addition to some financial risk involved in owning your ownyour share, you pay a monthly maintenance fee for the personal share of a plane, so you need to weigh thatupkeep of your plane and crew, and a separate hourly up. As with any fractional decision, there is also thefee for your flight time. release of financial concern—cards require a smaller initial investment than ownership, as this can run intoThe fractional card and membership programme is an millions of pounds. To make the decision processasset-sharing rather than a fractional model, so there slightly easier, many companies offer the full range ofis no actual ownership involved. Instead, you simply options.prepay, much as you would with a pay-as-you-go phonecard (although £10 of airtime in this case doesn’t get Although referred to as private jet travel, you will notyou very far!). When you’ve used your allotment, you always be travelling by an actual jet. Particularly whensimply purchase another card. travelling within Europe, a jet is not the most efficient way of getting around. Many companies offer a rangeOne key distinction in card programmes is the source of turboprop aircraft giving jet-like efficiency at a lowerof the planes and crew. Fractional cards provide price point and with a lower environmental impact.you with access to the same aircraft and crew thatfractional owners receive. Charter cards draw from Read on for our list of top questions to ask fractionalthe wider array of charter operators. The structure of aviation operators.the programme itself is based on either hour/plane ordebit models. In the latter, you prepay and each trip is14 www.fractionallife.com
  15. 15. FRACTIONAL CATEGORIESPRIVATE AVIATION- TOP QUESTIONSIf you are thinking about joining a fractional aviation five year commitment?operator here are the top 25 questions to ask thecompanies that you are considering 17. Can I sell my fractional interest to a third party or alternatively to you if my circumstances change, if so,1. What sets you apart from your competitors in terms of what are the processes?aircraft purchase, resale economics and preservationof aircraft residuals? 18. If I sell my fractional interest back to you, how do we calculate what credit I will receive?2. How many fractional planes do you operate and canyou provide me with some customers who use your 19. How can I get financing on the purchase or leaseservices? of a fractional interest?3. What are the principal immediately obvious 20. As a co-owner does the fractional owner havedifferences between chartering and fractional responsibility to third parties for the negligence ofprograms? another co-owner?4. What is the procedure for liquidating aircraft in the 21. Is it alright to set up a subsidiary or affiliatedevent of company wind - down? company to own and operate the aircraft, for liability reasons?5. What if I need my airplane and it is not availablebecause some other fractional owner is using it? 22. What sort of insurance is typically provided and do I need an additional insurance policy?6. I could do without absorbing a large depreciationcost and don’t wish to show aircraft ownership on the 23. What are the tax differences between owning afinancial statements of the company, can I lease a 100% interest and owning a fractional interest?fractional interest instead of buying one? 24. If a fractional interest is used predominantly for7. If I don’t need the depreciation or lease expense, business and occasionally for personal use, how is thecan I try Fractional Ownership at a lower cost? personal use taxed for income tax purposes?8. What does it cost to buy into a program and what doI get for my money? 25. Can a foreign company or individual own a fractional interest?9. Is there a cheaper way to try Fractional JetOwnership?10. How negotiable are the contract terms and pricepackages and is there a monthly cost?11. What paperwork is involved in buying a fractionalinterest?12. Does the purchaser or the purchaser’s advisor needassistance in the purchase of a fractional interest?13. What type of individuals typically benefit fromfractional programs and what other characteristics dobuyers of fractional ownership interests exhibit?14. Is it safe to purchase or use a “used” jet?15. Are there other aircraft available in addition toJets?16. Can one lease or charter fractional hours from afractional owner without being an owner or making a www.fractionallife.com 15
  16. 16. BOATS & YACHTS FRACTIONAL CATEGORIESThe outright ownership of a yacht is far from a practicalproposition, with a high buy-in cost, increasing annualcosts and notwithstanding that a yacht is a depreciatingasset that remains unused for much of the year. Butthe fact is, few things say you have ‘made it’ likecasually offering to take a few friends out for a day tripon your very own yacht, so there are no shortage ofconsumers ready to splash the cash.But for many, the cost remains tough to swallow andharder still to justify, given the occasional nature ofuse. For those who can afford it, the figures don’t reallyadd up to sound economical practice and the majorityof people could not even begin to contemplate yachtownership.As we have seen in other categories, it is scenariossuch as this where fractional ownership comes into itsown through reducing your initial outlay and ongoingexpense, whilst still providing you the benefit to use afully managed asset as if it were your own. A fractionalboat plan offers a realistically priced means of enjoyingtime on the water. As with all fractional plans, youpurchase a share of the asset and are, thus, allocated encapsulates what fractional ownership is all about,an amount of usage time. This is an ideal way to whether you require a multi-million pound superyacht,make the most of both your time and your money. An a luxurious sailboat or an RIB for day cruising and theadditional advantage comes in the form of managed odd spot of waterskiing, all are on offer, demonstratingmaintenance. Fractional boat plans include a monthly that there is something out there to suit all tastes andfee that covers mechanical maintenance and upkeep, all budgets.insurance, mooring fees and valet services, as well asthe associated company administration. Two thirds of the Earth is covered in water- why not explore it in style?A fractional boat plan can work out particularlyeffective if the craft that you are interested in hasstrong residual values as at the end of a fixed periodyour boat or yacht will be sold on and you will receivea portion the sale proceeds.In terms of actual sailing time, each yacht is typicallyavailable for around 40 weeks per year with theremaining time being used to carry out servicing andmaintenance.Then there are the extended benefits of having afractionally owned yacht, such as guest privilegesat the finest yacht clubs around the world, as well assome clubs offering the bonus of such things as golfclub memberships and exclusive resorts.And it’s not only luxury yachts and sailboats thatare available on a fractional basis. Rigid Inflatablesand Canal Boats are also available- the range ofoptions is vast covering from RIBs to superyachtsand pretty much everything in between. Through thisdiversity the yacht and boat fractional market really16 www.fractionallife.com
  17. 17. FRACTIONAL CATEGORIESBOATS & YACHTS- TOP QUESTIONSIf you are thinking about joining a fractional boat And can I sell my share at any time?operator here are the top 25 questions to ask thecompanies that you are considering 15. What happens if the company fails?1. How long has the company been operational? 16. What booking system is in place and is there any priority amongst members?2. What do you believe are the strengths andweaknesses of the programme and why should I 17. What costs are included in my maintenance andultimately join this one in comparison to the choices management fee – what do I receive for this and howavailable? are these costs calculated and billed?3. How many owners are there per yacht and can I 18. Are there any additional fees or charges applicablebuy larger shares, if so what in addition to the annual management feesare the benefits of this? 19. Can I test the reservation process and visit a yacht4. What precautions have been made to make sure the before joining, and am I limited to using my own yachtscheme is in accordance with International Laws? or can I use others within the programme.5. Have you financially engineered the structure of the 20. How is my liability protected in relation to othercompany to make the most of TAX and VAT allowances co-owners?/ exemptions? If so what are they? 21. What are the insurance arrangements for the yacht6. What is the precise ownership relationship between and crew?me and my yacht? 22. If I decide to join and get my membership confirmed,7. What are the range of yachts you have available can I change my mind?and how does this fit in withmy requirements and lifestyle? 23. Can family and friends use the yachts without me being in attendance? How do you manage this?8. What locations does your fleet cover, is it local toone area or does it cover many? 24. What other services will I benefit from (concierge, private jets etc)9. What make and model of yacht is within theprogramme and what was is the rationale behind the 25. Have you got satisfied owners I can speak to?choice of the individual yacht?10. What precautions have been taken to ensure thequality and integrity of the yacht I buy into?11. Can I personalise my yacht and can I have asignificant say on the model we buy?12. Are the yachts crewed and fully managed, whattraining and information do the crew receive?13. How is my ownership invoiced - if there isn’t amembership fee, is thecompany placing a margin on the yacht? If the answeris no to both – how does the company survive?If the answer is no to both beware you may be buyingsomeone else’s problems.14. How long am I tied into the ownership period for? www.fractionallife.com 17
  18. 18. FASHION Jennifer Clark FRACTIONAL CATEGORIESToday started with good intentions- a rare day awayfrom the office and I was fully committed to a wardrobeclearout (and then a restock shopping spree in theafternoon but we’ll keep that our little secret). I wasgoing to be ruthless, any accessories and clothingthat had not seen daylight in the past twelve monthswere going to be dispatched without compassion orremorse.Problem was I fell in the first event of the spring cleanOlympics- the handbag hurdles. The bags had decidedto resist the clearout by using each larger bag as aTrojan Horse- every bag I looked in seemed to houseten others… some still with the price tags attached.Against my better judgement I started to mentally add-up the cost of my handbag haul… bad idea. So, movingswiftly on…Thing is, there is a reason for each and every one of thebags- the Prada Red Leather Hobo that was a must-buy to match a bargain pair of shoes that cost about aquarter of the price of the bag (oops!), the Louis Vuittonholdall bought for a short business trip in Rome and as really, the only differences between such sites isnot forgetting the multitude of high-street bags bought some charge a higher monthly subscription with noon the off-chance that one day they will be required. further charges for particular bags whilst others offer aThe thing that most have in common that they had their much lower monthly fee and then an additional paymentevening / weekend / week in the spotlight and then they dependent on the retail cost of the selected bag.were retired to the bottom of the wardrobe. What you really need to remember though is that forAs you are reading this piece you will no doubt be aware the same or less than the price of actually purchasing aof the opportunities offered by fractional ownership for single top-end designer bag you could have access toyou to live like a millionaire on a rather more modest every single designer’s collection for a year. Now thatbudget. You can hire a gorgeous scarlet Ferrari and sounds like money well spent and, of course, frees upperhaps give the aforementioned Prada bag another space in the bottom of your wardrobe for more shoes.airing as one just wouldn’t feel right sporting an Well, you need a wider range to match all those fabulousuncoordinated high-street bag when stepping out a bags!£150k sports car at the latest London hot spot. Butwhat if you don’t already own the correct arm jewellery If you are thinking about joining a fractional handbagto match your outfit / car / occasion- if this morning’s club here are the top 25 questions to ask the companies‘clear-out’ has taught me anything it’s that good value that you are consideringfor money will not be necessarily be attained by simplyrushing to Harvey Nicks, credit card in hand. 1. How long has the club been operational?Obviously, if you have Victoria and Colleen on your 2. How many members are in the club?speed-dial you could ask one of them nicely if you couldborrow one of their latest fashion acquisitions but for 3. How many handbags does the club own and what isthose of us outside such social circles there are still the handbag to member ratio?options open to us. 4. What is the club’s maximum membership capacity?Over the past couple of years the popularity of borrowinghigh-end handbags and luxury luggage has gained 5. What types of membership levels are there?tremendous momentum, the basic premise generallyworking along similar lines to a DVD rental website. 6. Does the club charge a membership fee?You pay a monthly fee, you borrow a number of items ata time (determined by your membership level) and each 7. Is there a minimum membership term and how do Itime you return an item you can select another. Simple cancel my membership?18 www.fractionallife.com
  19. 19. FASHION FRACTIONAL CATEGORIES FURTHER FRACTIONALS8. How long does my membership application take toprocess?9. When do I activate my membership time period andhow does it end?10. Does membership cover handbag insurance and ifso, what type of insurance is included?11. Does the insurance offered have any excessapplicable?12. What happens if something occurs not covered bythe insurance – e.g. am I covered if the bag gets stolenor lost? “The Fractional World grows increasingly13. Can I let my friends, family, and/or colleagues use diverse with newmy membership? markets being pioneered on a seemingly daily basis!”14. Can I borrow two bags at the same time?15. What is handbag availability like this comingweekend? This guide would be a rather more weighty tome if16. What is the handbag booking procedure and are we were to look at every single facet of the fractionalthere any priority booking periods – e.g. Christmas world in detail. So having covered the mainstreamparty season? opportunities earlier we now take a look at some of the more niche and unusal fractional opportunities.17. What happens if the handbag I’ve booked becomesunavailable at short notice – i.e. is returned by the Artprevious borrower damaged? An increasing number of art collectors are giving museums a share of their most valuable works, rather18. Who pays for shipping and handling? than donating an entire painting or collection all at once. These so-called fractional gifts can provide donors with19. Can you arrange for handbags to be delivered and significant tax breaks, yet still allowing them to keep thecollected at multiple addresses? art on their walls for part of the year. Wealth advisers and tax lawyers are also increasingly focussed on the20. How often do new handbags get added to the gift-giving technique, which helps donors to maximizecollection? the value of their tax deductions.21. What is the club culture like and what kind of For those who do not already have access to theirconcierge or additional services, if any, does the club own private collection of masterworks, there are otherprovide members? Club evenings / special designer fractional ownership options available to you. Obviously,offers? buying a piece outright is a frightfully expensive affair, but there are companies that exist who can take your22. Apart from regular installments, are there any financial investment and put them into a diverse portfolioadditional fees? of artworks, meaning that you can gain access to the high investment quality art that was only previously23. Does the club have plans to raise prices and policies available to the ultra-rich investor or collector.in the future? The art market has historically represented sound24. Is there a cooling off period after I’ve paid my first investment potential, and, as a fractional owner, youfees and what’s the club’s refund policy? will share a corresponding pool of the resulting capital appreciation. Investors can buy a share in contemporary25. Are there any incentives offered for referring new works that gives you the right to display the art on yourmembers? walls when you need to impress. www.fractionallife.com 19
  20. 20. FRACTIONAL CATEGORIESFURTHER FRACTIONALSCorporate Hospitality HotelsSuccessful companies and individuals use the fractional Would you like to own a hotel room that you can useownership of private aircraft, yachts and luxury real when you want and be a part of something that catersestate because it is a system that makes sense. This for your every need? Alternatively, you can rent yourmodel can be applied to luxury suites at sporting room out while you are away to paying guests in ordervenues, providing a better return than a corporate to generate additional income.hospitality investment. Membership in any fractionalshare program allows you to capitalise on the benefits Lifestyleof year-round ownership, but without the administrative If you would like to own shares in your own nightclub orchores, overwhelming number of events and the have a more integrated and varied lifestyle experience,expenses required with traditional suite ownership. this category introduces you to what can be done within providers’ remits. Their sole aim is to manage yourHelicopters fractional lifestyle when you want it, 24/7 if required.Giving you even more flexibility over a shorter distancethan a private jet, helicopters are being used more and Luxury Vehiclesmore by the time-conscious consumer who appreciates Typically, the owners of luxury coaches use theirtheir versatility. You can be airborne virtually immediately vehicles approximately three to four weeks out of everyand the fact that there are a multitude of landing spots, year. Through owning a fractional share, you can enjoyincluding airports and private spaces, makes helicopter the same period of usage or more for just a fraction ofaccess a rather cool ‘tool,’ particularly if you are what it would cost to purchase outright. Unless you aresomeone such as a property investor who doesn’t want planning to use your vehicle for far beyond the averageto have to brave the roads but just view your properties lengths of time, then fractional ownership can cost youfrom the sky! less than even the initial down-payment on financing such a vehicle.A fractional ownership approach to helicopters makessense if you are using a helicopter enough to take In fact, you need not even trouble yourself with theadvantage of the economies of scale provided by shared actual driving—you can choose to pilot your ownownership, including tax benefits. You receive all of the coach or, alternatively, instruct a concierge to arrangeadvantages of ownership, but pay only a portion of the for a qualified, licensed coach driver when and wherehelicopter’s upkeep. Moreover, you never have to worry you require. If you do choose to get behind the wheelabout the mundane aspects of maintaining, crewing yourself, most companies also provide driver-trainingand caring for a helicopter. programmes to make sure that you are comfortable before you set off. Media Now here is a fractional opportunity to excite any budding music or movie producer! From websites that enable artists to raise money directly from their fans to professionally record and release an album to others that make you an executive producer of a motion picture there is something for all would-be media-moguls! If your aspirations are somewhat more small-screen there are even fractional television companies through which you can become one of many executive producers and commission programming. In the realm of the internet a recently launched company offers fractional domain name stock exchange. Racehorses A number of fractional ownership companies exist whose job it is to source racehorses, set up an agreement with the owner to lease all or part of the horse and then break them down into affordable amounts, which can then be purchased as fractional shares. All of the running costs20 www.fractionallife.com
  21. 21. FRACTIONAL CATEGORIESFURTHER FRACTIONALSare accounted for by the company, including training,transport, jockeys and race entry fees, amongst othersundries. Your involvement with the horses and theirtrainers varies from company to company. Dependenton the organisation, there are further benefits, such astraining yard and stable visits, as well as paddock tourson race days and invitations to owner enclosures and,hopefully, a visit to the winner’s enclosure to round offthe day! “...and you can look forward to drinking the wineIn a similar vein, there are also a number of fractional from your verygreyhound ownership companies springing up which own vine...”offer a similar service, but obviously without the jockeyfees!Spirits and WineThe fractional ownership of a vineyard usually embracesthree key elements: the sale of a portion of a freeholdvineyard, quality wines supplied to you direct and alsospecially labelled as your own unique vintage if required,and a limited investment opportunity.The good timing of wine purchases, the professional Sportselection and due diligence of the wine company, We know the feeling; you don’t get home early veryand the partnership with industry-known experts are often and don’t have the time or inclination to play golfall ingredients which make fractional wine investment at your local members club much. Wouldn’t it be greatfinancially very promising. to play at the best courses across the land whenever and wherever you wish? Why suffer when there areNot to forget the whiskey market... the lure of which, is so many other superb private member golf courses atthat, eventually, you may be able to pour a glass of malt which you could play?for your friends and say, “I helped make this!” Such arrangements typically follow the asset-sharing model, since you are paying for the usage of the company-owned asset rather than actually purchasing a share. “Quality wines specially Other labelled as your own One of the exciting things about fractional ownership unique vintage from and asset-sharing is the diverse markets to which the your fractionally owned models can be applied. Not only are there opportunities vine...?” available in the more traditional sectors as detailed above, but, also, there are an increasing number of more unusual applications coming to the fore. Some examples of these include asset-shared pet ownership and fractional livestock ownership for the purposes of providing you with your own personally selected meat. Although if meat-eating is not your bag, then you can buy a share in a Swiss cow and have cheeses made to your own specification! As wider consumer-acceptance of the key concepts grow, expect to see the categories on offer broaden substantially, allowing the weird to rub shoulders with the wonderful in an increasingly diverse marketplace. Hear about it all first with Fractional Life! www.fractionallife.com 21
  22. 22. FRACTIONAL FUTURE CONCLUSIONBetween the rise of ‘auction culture’, the creditcrunch and overseas property values being far fromguaranteed, consumers are currently questioning thevalue of 100% ownership of many luxury items. Luxuryis becoming more experiential in that it’s not what youown, but what you do that ultimately makes you happy.In such a climate we are seeing fractional ownershipmarket gathering greater momentum.Daniel Nissanoff, author of Futureshop, told us that“Today, more and more people define themselves bythe social networks they belong to (or aspire to belongto) - both online and offline. Fractional ownership isbecoming an increasingly popular gateway to reachthese coveted networks and is redefining how savvyconsumers efficiently access status and the necessary‘belongings’ to ‘belong’.”Previously at Fractional Life we tipped the rise of themarket in general and in particular the rise of lowerprice point fractionals- a phenomenon that is makingitself felt at the lower end with increasingly diverseopportunities available to suit all pockets as well asa rise in mid-market asset-sharing opportunities If you have never attendedrepresented by the proliferation of car clubs. So what one of our Fractional Lifeof the next shift? I foresee a growth in the promotion Expo events why not checkof mixed use of fractional packages – i.e. fractional out the showguide for theproperty developments having a selection of golf most recent Expo at www. fractionallife.com (or clickcourses / boats / supercars for owners to be able to the left-hand image in web-use enabled browsers)All that remains for me to say is thanks for downloadingthis guide. Don’t forget to keep abreast of all thelatest news, events and developments by registeringat www.fractionallife.com and checking out our sister If you enjoyed this guide whysite www.fractionallifeexpo.com for the most recent not read on with the Sundayevent news. Telegraph / Fractional Life supplement which can be downloaded at www.fraction-Aaron Weddell allife.com (or click the left-Fractional Life Editor hand image in web-enabledAaron@fractionallife.com browsers)www.fractionallife.comEmail: info@fractionallife.comTel: 020 8340 7989 Sign up for our monthlyFax: 0845 280 7989 Fractional Life newsletter by visiting www.fractionallife.com or justFractional Life Limited click through using the imageFractional Life House on the left if your viewer2a Priory Gardens supports this function.HighgateLondonN6 5QS22 www.fractionallife.com

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