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 months
Statistics 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.
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THE UK'S LARGEST CONSUMER FRACTIONAL
OWNERSHIP AND ASSET SHARING EXHIBITION
AIRCRAFT & JETS ART BOATS & YACHTS CLASSIC CARS HELICOPTERS VINEYARDS & WINE
CORPORATE HOSPITALITY DESTINATION & PRIVATE RESIDENCE CLUBS HANDBAGS HOTELS
LIFESTYLE LUXURY VEHICLES PROPERTY SPIRITS & CHAMPAGNE SPORT SUPERCARS RACEHORSES
5. ABOUT
INTRODUCTION
Since its launch in 2006 Fractional Life has swiftly
become the number one source for one to explore
the growing lifestyle trend of fractional ownership and
“Fractional Life does not only ex-
asset sharing. ist as an exit from the
Information Superhighway...with
But 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 listings
through which one can explore the growing plethora
of fractional opportunities within the marketplace today.
The site’s aim is to give you the choice of the best of
everything at a fraction of the cost, all under one roof in
a ‘fractional superstore.’
Fractional ownership and asset-sharing gives you an
ideal way to get the most out of your investment by
purchasing only the shares or time you require from an
asset. All other aspects are split, both the benefits and
the costs, amongst a limited number of shareholders
or members. Fractional ownership means that you
physically own a percentage of the asset until you
decide to sell, whereby opting to join an asset-sharing
company, e.g. a private member supercar club, is an
fractional property from a business point of view there
investment in the time and pleasure you have with that
is also the upcoming Fractional Summit to be held in
asset.
London this July.
So, using Fractional Life, you can decide, for instance,
This guide offers a bridge between the two worlds- an
to cost-effectively own a quarter share in an exotic
online publication that can also be printed to be enjoyed
holiday home abroad, have access to your favourite
away from your desktop.
yacht eight weeks a year, spend a selection of days
behind the wheel of some of the most desirable cars
That said, it is worth taking a look at this document
in 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 for
No matter what your budget, there’s something for you
our regular newsletters (features are only available on
here and the beauty of it is, you decide.
the PDF download version). It is worth taking a moment
In short, Fractional Life helps you make informed
to sign up for our newsletters as they are free and offer
decisions to allow you to enjoy your lifestyle how you
you the opportunity to be the first to be notified about
want 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-based
service and at it’s heart is a virtual superstore for you to
Over these 24 pages you will find an introduction to
browse 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 some
Over in the real world, Fractional Life hosts exhibitions,
pertinent questions to ask the relevant parties before
conferences, networking events, produces print content
taking the plunge. All of which should provide you
for high-profile media partners including the Times and
some food for thought before you log onto the main
the Sunday Telegraph newspapers as well as offering
site and select the opportunities to build your very own
business 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 the
missed the second Fractional Life Expo you can keep
convenience of our readers. Please review our full
up 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. WHAT IS ‘FRACTIONAL’?
INTRODUCTION
Everyone 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 hard
designer accoutrements amongst many other lifestyle for? Obviously, the fulfilment of full ownership is one
perks are all highly desired. aspect that fractional ownership or asset-sharing can
never hope to replicate, but transumers view this from
Yet in the current climate- predictions of an economic a different perspective, with the value coming from the
meltdown and environmental concerns are rife and short- to medium-term experiential satisfaction rather
as such many reformed ultra-consumers are looking than that of longer-term commitment.
to spend less, live more whilst all the while boosting
their green credentials. These cash-rich, time- One man who has closely followed the growth of
poor individuals are addressing their conspicuous / fractional in the UK is Fractional Life’s very own founder
cooperative consumption balance and no longer is Piers Brown. Since it’s launch www.fractionallife.com
it simply a case of blindly purchasing to satisfy their has grown to list over 300 fractional and asset sharing
consumer desires but considering experiential reward, opportunities and the company has become regarded
financial outlay and environmental impact is also highly as the most comprehensive reference site for all things
valued. ‘fractional’.
This has created a consumer breed referred to by trend- Piers says, “It’s clear people are becoming more
watching gurus as ‘transumers’ or ‘fractional lifers.’ This intuitive towards their luxury spending and questioning
group values not the actual ownership of goods, but the value of whole ownership. Quality time is becoming
instead focus on the experiences that those goods can increasingly short within people’s daily lives and a lot
provide and the short-term reward. This shift has led to don’t want the hassles of whole ownership of many
the rapid rise in the popularity of fractional ownership luxuries these days. There’s a growing tendency to
and asset sharing, identified by J. Walter Thompson, invest more in entertainment, experiences, discovery
the forth-largest advertising agency brand in the world, and life. It’s not what you have, but what you do that
as a major trend of 2008. makes you ultimately happy.”
You can now fractionally own just about anything, from Although broader acceptance of fractional ownership is
a Portuguese holiday home through to a part share in a only just filtering into the daily life of many consumers
film 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 expensive
asset into percentage shares and selling those
shares to individual owners. Each person who owns a
fractional share then gets a relative percentage use of
the asset, with a management company handling the
asset and fractional owners paying fixed fees for this
management, sometimes in addition to variable fees
for usage. Fractional owners can benefit from capital
appreciation although, on the flip side, may suffer from
depreciation.
For markets that do not traditionally lend themselves
to fractional ownership, such as those involving rapidly
depreciating assets (prestige cars for example), the
asset-sharing model is utilised. This generally involves
a 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 you
between members and assets, so there is no investment do that makes you
potential in this model. ultimately happy.”
On the one hand, some may suggest that fractional
ownership and asset-sharing only gives you a fraction
of the experience—where is the sense of achievement
6 www.fractionallife.com
7. PROPERTY
FRACTIONAL CATEGORIES
One may long for their very own property located in a
more temperate climate, yet they may never take the
plunge for any number of reasons. The key issue can
be financial, whether it is simply a limited budget or
trying to justify spending a large amount of money on
something from which you are going to get limited use
but remain responsible for all year round. On average,
people only receive five weeks of holiday Armed with
this knowledge a fractional property makes superb
economic sense as the cost: benefit ratio can be highly
appealing. With fractional ownership, because you are
only buying a part-share of the property, you can afford
to buy something more lavish than you could ever fund
outright. In effect, you are spreading your investment
and owning a superior quality holiday home. This is not “Potentially the smarter
just the ‘poor-man’s’ choice but also the smarter choice, choice even for those
who traditionally opted
even for those who would traditionally plump for the
for full ownership”
time-honored outright purchase.
“Investors are clearly attracted to having access to what
are, in many cases, luxury second homes without the
cost burden of all year round ownership” so says Paul used interchangeably so you’ll find some companies
Stewart, Tax Director at KPMG. “We are seeing an that might fit closer to the definition of one but which
increasing number of new fractional ownership projects refer to themselves as another.
particularly in relation to property. Indeed it’s fair to
say that from a tax perspective fractional ownership All offer an enticing alternative to fully owning luxury
interests in property give rise to interesting challenges holiday properties. Both Destination Clubs and PRCs
and opportunities for developers and investors”. provide fully serviced and maintained luxurious,
finely furnished and well appointed properties to their
Fractional Property generally breaks down into three members and owners. Destination Clubs require a
categories- Property, Destination Clubs and Private lump-sum payment for membership whereas joining a
Residence 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. PROPERTY
FRACTIONAL THE LEGAL ISSUES
CATEGORIES
Memberships 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 the
a member decides to leave the club. Some destination fractional property legal issues.
clubs also offer to share in property appreciation but
at this time the benefits of such iniatives are largely At the risk of the obvious, the first element from a legal
unproven. The growth of Destination Club can benefit and tax perspective is for the prospective fraction owner
all as more members means that that the club purchases or member to understand the legal structure of the
further properties to maintain the member:destination fraction.
ratio.
Essentially, the fraction is likely to be configured in one
With 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 club
usually no limits on additional free-space reservations. • Participation by way of a shareholding
Cost range from $100,000 to more than $500,000, • Becoming a limited partner
depending 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 trust
ranges from $8,000 to $25,000. Although as PRC
members 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 the
purchase price and more through reselling. requirements and objectives of the individual fraction
holders for the particular asset group, with security
Fractional offers a holiday getaway with fewer hassles, to enable usage over the long term and appropriate
insulation from market fluctuations and investment flexibility.
potential. A winning combination that explains why
property 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.
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f you are thinking about investing in a fractional own-
Management
ership property, here are the top 25 questions to ask
You should pay particular attention to the provisions for
the 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. FRACTIONAL CATEGORIES
PROPERTY- THE LEGAL ISSUES
A carefully considered usage system is one of the
hallmarks of a fractional system that is likely to work Rental income derived from your fraction will be liable to
satisfactorily 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 may
to be sure that the advance notice requirements work well need to separately register and account for value
with you and your family’s lifestyle. added tax in respect of the rental income generated. A
responsible promoter will have taken steps to assist you
Exit with the necessary administration.
The mechanisms for sale, transfer or exit at the point
when you no longer want to use your fraction are Taxation on sale
important. On the sale of your fraction, if a gain is made on the
original price, then, subject to indexation and deduction
The ability to resell in the future and the timescale of of the costs of sale, the uplift will be subject to capital
reselling will be critical elements of value. As a fraction gains tax.
owner, you will wish to see that there is an orderly
aftermarket and to understand any restrictions that may In some jurisdictions, there may be transfer taxes
apply. or stamp duty payable on the sale of interest and the
responsibility for these between the buyer and the seller
Some 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 Summary
option and how it might work in practice. Whilst fractions may have some complexity from a
legal and tax perspective, the well-structured fractional
Financing offering will have taken these concerns into account so
Whilst 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 throughout
based fractions. As with any finance option, you will the life of the fraction) being clearly presented at the
need to be comfortable with the borrowing terms and outset.
the costs.
e.gummers@howardkennedy.com
If you do require third-party finance for the purchase, the www.howardkennedy.com
ability to exit and realise the fraction may be of higher
importance.
Taxation
Again, the prospective fraction holder should understand
the tax implications of the purchase, holding and sale of
the fraction.
Taxes on purchase
At the point of purchase, the price may be subject to
a value added tax or equivalent sales tax. You should
establish what the anticipated indirect taxes are and take
account of this in the purchase decision. If the fraction
involves a direct property interest, then stamp duty may
be payable.
The fraction structure itself will be liable to certain taxes
on the acquisition of assets, such as homes, and will have
ongoing responsibilities for local taxes and employment
taxes in respect of staff.
The 2007 Budget has helpfully removed a concern for
UK taxpayers such that interests in overseas real estate
held through corporate structures might involve liability
to tax on usage as a “benefit in kind.”
www.fractionallife.com 9
10. FRACTIONAL CATEGORIES
FRACTIONAL 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 resort
4. 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 can
6. 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 I
finance the purchase? 25. What do you believe are the strengths and
weaknesses of the company and properties available
10. 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 some
customers who have purchased fractional interests in
your properties recently?
12. Can I test the reservation process and visit a
property before joining?
13. If I decide to purchase a fractional share in a
property, can I change my mind, and if so, by when?
14. What is the process if I wish to sell my fraction in
the property at any time in the future?
15. How does one book for popular holiday periods
e.g. school holidays, and what booking system is in
place e.g. first come, first served and is there any
priority amongst owners?
16. What additional services does fractional ownership
cover (e.g. concierge, car rental, airport pick up / drop
off) and are there any extra costs?
17. Are there any additional fees or charges applicable
in 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 would
influence such price increases in the future?
19. Are photos and floorplans available for the
properties and are their any ownership rules – e.g. are
pets and is smoking allowed?
10 www.fractionallife.com
11. FRACTIONAL CLUBS
DESTINATION & PRIVATE RESIDENCE
CATEGORIES
TOP QUESTIONS
If you are thinking about joining a private destination 13. What is property availability like this coming month
club here are the top 25 questions to ask the clubs and how does the club ensure there is decent availability
under 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 holiday
assurance 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 any
deposit refund obligations at any time and can this be priority amongst members?
proven via financial disclosure?
15. What additional services does membership cover
2. 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 applicable
can 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 would
5. What is the current retention level – is this increasing influence such price increases in the future?
or decreasing over time? Of those members who have
left the club, how long on average did they wait to 18. Are photos and floorplans available for all properties
receive their refund and was this within the contractual and what are the residence rules – e.g. are pets and is
obligation? 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 of
6. 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 club
years? 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 resort
in 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 can
9. 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 happens
11. 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 and
12. Can family members use the properties without the weaknesses of the club and why should I ultimately
primary member being in attendance? Are there any join this one in comparison to the choices available?
rules / additional costs based around the respective
ages and amount of family members who can be
added to the membership? www.fractionallife.com 11
12. FRACTIONAL CATEGORIES
CLASSIC & SUPERCARS
“Let’s take the Lamborghini”. Practice saying it, roll to keep fleets fresh, resale values as high as possible
those 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 a
of 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 of
We would all like to be able to utter those grin-inducing fleet management.
words each time we left the house but unfortunately such
vehicles are unobtainable to many and impractical for So let us look at the mechanics- the basic model is that
those who can afford the purchase and running costs. a membership fee gets you a number of points. The
They are simply not a ‘do-all’ vehicles, a Murciélago amount of points used depends on the category of the
would not relish the short run to the train station each car (more points equals more desirable and expensive
day and nor would you wish to take it to the supermarket metal), whether you want to drive on weekdays or
for fear of damage as well as the need for a ‘support weekends (more points for the latter) and the time of
vehicle’ 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 but
One 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 only
to the coast in the summer months and perhaps for weekend use during the summer and more if you opt
something 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 at
your disposal it is unjustifiable on economic grounds to In choosing which car club is going to receive your
tax, insure and maintain more than a few cars at a time cash a large part of the decision is going to be based
and when you consider it there are few truly memorable on the cars on offer but you should also check out our
journeys 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 the
It is around this point of contemplation that one realises value for money it offers. It is also worth checking out
that although full ownership would be nice you do not any additional services your short listed companies may
necessarily need to own such a fleet but merely to offer as these can vary from carbon offset programs
experience the thrill of driving them on an occasional or social events including shooting weekends, sports
basis. events, driving jaunts, restaurant visits, horse racing,
polo to many other value-added extras that could help
So what one needs is a garage in which someone else sway your decision.
has purchased all the cars and pays for their running
and upkeep but you can select from their stable at any
time and for the price of the fuel make your memorable
“...a supercar for the
trips all the more memorable. Obviously there would be pilgrimage to Le Mans? a
an annual fee for this service but other than that and the classic for cruising to the
aforementioned petrol you would be free of all the usual coast? perhaps something a
car-owing drags as well as not only having the access little impractical and out of the
to 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 a
fractional car club.
More than 28,000 Londoners belong to car-sharing
clubs. Transport for London said that half of members
claim parking is a reason for not running their own car
and that each vehicle replaces 20 private cars meaning
that you can also ease your environmental conscience
despite enjoying some of the least frugal modes of
transport available!
The popularity of asset-sharing car clubs has soared
in recent years, promoting access to classic and
supercars for a fixed membership cost. As costly assets
to maintain car clubs tend to adopt the asset-sharing
model- the shelf-life of individual cars is relatively short
12 www.fractionallife.com
13. FRACTIONAL CATEGORIES
CLASSIC & SUPERCARS- TOP QUESTIONS
If you are thinking about joining a fractional classic or 20. Can I pay by installments and are there any
supercar club, here are the top 25 questions to ask additional fees?
prospective clubs
21. Does the club have plans to raise prices and
1. 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 accounts
4. What is the club’s maximum membership available for viewing?
capacity?
24. Is there a cooling off period after I’ve paid my fees
5. 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 I
7. When do I activate my membership time period and elect to renew?
how does it end?
8. Does membership cover insurance and if so, what
type of insurance is included?
“No maintenance, insurance,
9. Does the insurance offered have an excess tax or any of the other usual
policy? drags of owning your own
classic or supercar. Just
book, drive and enjoy. Most
10. What happens if something occurs not covered by clubs can even deliver direct
insurance – 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 use
my 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 becomes
unavailable at short notice?
15. Can you arrange for cars to be delivered and
collected?
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 miles
18. What kind of concierge or additional services, if clean license): £4,200
in your own Ferrari • Yearly service: £2500
any, does the club provide members? Club evenings / F430 Spider F1?
events /trackdays? • Set of tyres: £970
• Depreciation: £19,920
19. What is the club culture like?
Total:
£34,384 or £6.88 per mile.
www.fractionallife.com 13
14. PRIVATE AVIATION
FRACTIONAL CATEGORIES
Even those that enjoy the actual flying experience
would not argue that the initial jostling and queuing,
arriving hours early for check-in, enhanced security
leading to increased delays, generally crowded planes
with cramped accommodation and other associated
drudgery is not exactly fun. Even as a small percentage
of the approximately 2 billion air passengers that travel
every year, there are an awful lot of people out there
looking for something more out of their flying experience.
It is fair to say that the vast majority would rather be
flying privately, but is this only an option available to
the super-rich? Not if you’re travelling fractional.
Private jet travel is becoming more popular for the
cash-rich, time-poor consumer in today’s world and
the signs are that it is set to continue. With flexible
schedules and destinations to suit you, a super-slick
airport process, extra security and the potential for
entertaining friends and clients but, ultimately, to just
travel and arrive in impeccable style, nothing can
match 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 debited
card 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 keyword
buys a share of a plane; as a part owner, you have there is you. Where do you want to fly, how short a
access to ‘your’ plane at short notice. Just like with notice period do you require for your needs, do you
other fractional models, your annual use of the aircraft have a provider preference and even the apparently
corresponds to your share size. At the end of your small details such as how much baggage you regularly
contract, which typically lasts around five years, you need to carry, for example, if you regularly carry skis
sell your share back to the management company, or golf clubs, as certain smaller craft are immediately
which is valued based on the current market price ruled out, are down to you. Also, there is obviously
of your plane, less a remarketing fee. In addition to some financial risk involved in owning your own
your share, you pay a monthly maintenance fee for the personal share of a plane, so you need to weigh that
upkeep of your plane and crew, and a separate hourly up. As with any fractional decision, there is also the
fee for your flight time. release of financial concern—cards require a smaller
initial investment than ownership, as this can run into
The fractional card and membership programme is an millions of pounds. To make the decision process
asset-sharing rather than a fractional model, so there slightly easier, many companies offer the full range of
is no actual ownership involved. Instead, you simply options.
prepay, much as you would with a pay-as-you-go phone
card (although £10 of airtime in this case doesn’t get Although referred to as private jet travel, you will not
you very far!). When you’ve used your allotment, you always be travelling by an actual jet. Particularly when
simply purchase another card. travelling within Europe, a jet is not the most efficient
way of getting around. Many companies offer a range
One key distinction in card programmes is the source of turboprop aircraft giving jet-like efficiency at a lower
of the planes and crew. Fractional cards provide price point and with a lower environmental impact.
you with access to the same aircraft and crew that
fractional owners receive. Charter cards draw from Read on for our list of top questions to ask fractional
the wider array of charter operators. The structure of aviation operators.
the programme itself is based on either hour/plane or
debit models. In the latter, you prepay and each trip is
14 www.fractionallife.com
15. FRACTIONAL CATEGORIES
PRIVATE AVIATION- TOP QUESTIONS
If you are thinking about joining a fractional aviation five year commitment?
operator here are the top 25 questions to ask the
companies 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 preservation
of 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 can
you provide me with some customers who use your 19. How can I get financing on the purchase or lease
services? of a fractional interest?
3. What are the principal immediately obvious 20. As a co-owner does the fractional owner have
differences between chartering and fractional responsibility to third parties for the negligence of
programs? another co-owner?
4. What is the procedure for liquidating aircraft in the 21. Is it alright to set up a subsidiary or affiliated
event 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 available
because 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 depreciation
cost and don’t wish to show aircraft ownership on the 23. What are the tax differences between owning a
financial 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 for
7. If I don’t need the depreciation or lease expense, business and occasionally for personal use, how is the
can 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 do
I get for my money? 25. Can a foreign company or individual own a fractional
interest?
9. Is there a cheaper way to try Fractional Jet
Ownership?
10. How negotiable are the contract terms and price
packages and is there a monthly cost?
11. What paperwork is involved in buying a fractional
interest?
12. Does the purchaser or the purchaser’s advisor need
assistance in the purchase of a fractional interest?
13. What type of individuals typically benefit from
fractional programs and what other characteristics do
buyers of fractional ownership interests exhibit?
14. Is it safe to purchase or use a “used” jet?
15. Are there other aircraft available in addition to
Jets?
16. Can one lease or charter fractional hours from a
fractional owner without being an owner or making a
www.fractionallife.com 15
16. BOATS & YACHTS
FRACTIONAL CATEGORIES
The outright ownership of a yacht is far from a practical
proposition, with a high buy-in cost, increasing annual
costs and notwithstanding that a yacht is a depreciating
asset that remains unused for much of the year. But
the fact is, few things say you have ‘made it’ like
casually offering to take a few friends out for a day trip
on your very own yacht, so there are no shortage of
consumers ready to splash the cash.
But for many, the cost remains tough to swallow and
harder still to justify, given the occasional nature of
use. For those who can afford it, the figures don’t really
add up to sound economical practice and the majority
of people could not even begin to contemplate yacht
ownership.
As we have seen in other categories, it is scenarios
such as this where fractional ownership comes into its
own through reducing your initial outlay and ongoing
expense, whilst still providing you the benefit to use a
fully managed asset as if it were your own. A fractional
boat plan offers a realistically priced means of enjoying
time on the water. As with all fractional plans, you
purchase 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 the
additional advantage comes in the form of managed odd spot of waterskiing, all are on offer, demonstrating
maintenance. Fractional boat plans include a monthly that there is something out there to suit all tastes and
fee that covers mechanical maintenance and upkeep, all budgets.
insurance, mooring fees and valet services, as well as
the 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 particularly
effective if the craft that you are interested in has
strong residual values as at the end of a fixed period
your boat or yacht will be sold on and you will receive
a portion the sale proceeds.
In terms of actual sailing time, each yacht is typically
available for around 40 weeks per year with the
remaining time being used to carry out servicing and
maintenance.
Then there are the extended benefits of having a
fractionally owned yacht, such as guest privileges
at the finest yacht clubs around the world, as well as
some clubs offering the bonus of such things as golf
club memberships and exclusive resorts.
And it’s not only luxury yachts and sailboats that
are available on a fractional basis. Rigid Inflatables
and Canal Boats are also available- the range of
options is vast covering from RIBs to superyachts
and pretty much everything in between. Through this
diversity the yacht and boat fractional market really
16 www.fractionallife.com
17. FRACTIONAL CATEGORIES
BOATS & YACHTS- TOP QUESTIONS
If 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 the
companies 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 and
weaknesses of the programme and why should I 17. What costs are included in my maintenance and
ultimately join this one in comparison to the choices management fee – what do I receive for this and how
available? 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 applicable
buy larger shares, if so what in addition to the annual management fees
are the benefits of this?
19. Can I test the reservation process and visit a yacht
4. What precautions have been made to make sure the before joining, and am I limited to using my own yacht
scheme 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 other
company 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 yacht
6. 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 with
my 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 to
one 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 the
programme 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 the
quality and integrity of the yacht I buy into?
11. Can I personalise my yacht and can I have a
significant say on the model we buy?
12. Are the yachts crewed and fully managed, what
training and information do the crew receive?
13. How is my ownership invoiced - if there isn’t a
membership fee, is the
company placing a margin on the yacht? If the answer
is no to both – how does the company survive?
If the answer is no to both beware you may be buying
someone else’s problems.
14. How long am I tied into the ownership period for?
www.fractionallife.com 17
18. FASHION Jennifer Clark
FRACTIONAL CATEGORIES
Today started with good intentions- a rare day away
from the office and I was fully committed to a wardrobe
clearout (and then a restock shopping spree in the
afternoon but we’ll keep that our little secret). I was
going to be ruthless, any accessories and clothing
that had not seen daylight in the past twelve months
were going to be dispatched without compassion or
remorse.
Problem was I fell in the first event of the spring clean
Olympics- the handbag hurdles. The bags had decided
to resist the clearout by using each larger bag as a
Trojan Horse- every bag I looked in seemed to house
ten 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, moving
swiftly on…
Thing is, there is a reason for each and every one of the
bags- the Prada Red Leather Hobo that was a must-
buy to match a bargain pair of shoes that cost about a
quarter of the price of the bag (oops!), the Louis Vuitton
holdall bought for a short business trip in Rome and as really, the only differences between such sites is
not forgetting the multitude of high-street bags bought some charge a higher monthly subscription with no
on the off-chance that one day they will be required. further charges for particular bags whilst others offer a
The thing that most have in common that they had their much lower monthly fee and then an additional payment
evening / 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 for
As you are reading this piece you will no doubt be aware the same or less than the price of actually purchasing a
of the opportunities offered by fractional ownership for single top-end designer bag you could have access to
you to live like a millionaire on a rather more modest every single designer’s collection for a year. Now that
budget. You can hire a gorgeous scarlet Ferrari and sounds like money well spent and, of course, frees up
perhaps 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 fabulous
uncoordinated high-street bag when stepping out a bags!
£150k sports car at the latest London hot spot. But
what if you don’t already own the correct arm jewellery If you are thinking about joining a fractional handbag
to 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 considering
for money will not be necessarily be attained by simply
rushing 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 could
borrow one of their latest fashion acquisitions but for 3. How many handbags does the club own and what is
those 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 borrowing
high-end handbags and luxury luggage has gained 5. What types of membership levels are there?
tremendous momentum, the basic premise generally
working 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 at
a time (determined by your membership level) and each 7. Is there a minimum membership term and how do I
time you return an item you can select another. Simple cancel my membership?
18 www.fractionallife.com
19. FASHION
FRACTIONAL CATEGORIES
FURTHER FRACTIONALS
8. How long does my membership application take to
process?
9. When do I activate my membership time period and
how does it end?
10. Does membership cover handbag insurance and if
so, what type of insurance is included?
11. Does the insurance offered have any excess
applicable?
12. What happens if something occurs not covered by
the insurance – e.g. am I covered if the bag gets stolen
or lost?
“The Fractional World
grows increasingly
13. Can I let my friends, family, and/or colleagues use diverse with new
my 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 coming
weekend?
This guide would be a rather more weighty tome if
16. What is the handbag booking procedure and are we were to look at every single facet of the fractional
there any priority booking periods – e.g. Christmas world in detail. So having covered the mainstream
party 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 becomes
unavailable at short notice – i.e. is returned by the Art
previous borrower damaged? An increasing number of art collectors are giving
museums a share of their most valuable works, rather
18. Who pays for shipping and handling? than donating an entire painting or collection all at once.
These so-called fractional gifts can provide donors with
19. Can you arrange for handbags to be delivered and significant tax breaks, yet still allowing them to keep the
collected at multiple addresses? art on their walls for part of the year. Wealth advisers
and tax lawyers are also increasingly focussed on the
20. How often do new handbags get added to the gift-giving technique, which helps donors to maximize
collection? 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 their
concierge or additional services, if any, does the club own private collection of masterworks, there are other
provide 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 your
22. Apart from regular installments, are there any financial investment and put them into a diverse portfolio
additional fees? of artworks, meaning that you can gain access to the
high investment quality art that was only previously
23. 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 sound
24. Is there a cooling off period after I’ve paid my first investment potential, and, as a fractional owner, you
fees and what’s the club’s refund policy? will share a corresponding pool of the resulting capital
appreciation. Investors can buy a share in contemporary
25. Are there any incentives offered for referring new works that gives you the right to display the art on your
members? walls when you need to impress.
www.fractionallife.com 19
20. FRACTIONAL CATEGORIES
FURTHER FRACTIONALS
Corporate Hospitality Hotels
Successful companies and individuals use the fractional Would you like to own a hotel room that you can use
ownership of private aircraft, yachts and luxury real when you want and be a part of something that caters
estate because it is a system that makes sense. This for your every need? Alternatively, you can rent your
model can be applied to luxury suites at sporting room out while you are away to paying guests in order
venues, providing a better return than a corporate to generate additional income.
hospitality investment. Membership in any fractional
share program allows you to capitalise on the benefits Lifestyle
of year-round ownership, but without the administrative If you would like to own shares in your own nightclub or
chores, 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 your
Helicopters fractional lifestyle when you want it, 24/7 if required.
Giving you even more flexibility over a shorter distance
than a private jet, helicopters are being used more and Luxury Vehicles
more by the time-conscious consumer who appreciates Typically, the owners of luxury coaches use their
their versatility. You can be airborne virtually immediately vehicles approximately three to four weeks out of every
and the fact that there are a multitude of landing spots, year. Through owning a fractional share, you can enjoy
including airports and private spaces, makes helicopter the same period of usage or more for just a fraction of
access a rather cool ‘tool,’ particularly if you are what it would cost to purchase outright. Unless you are
someone such as a property investor who doesn’t want planning to use your vehicle for far beyond the average
to have to brave the roads but just view your properties lengths of time, then fractional ownership can cost you
from the sky! less than even the initial down-payment on financing
such a vehicle.
A fractional ownership approach to helicopters makes
sense if you are using a helicopter enough to take In fact, you need not even trouble yourself with the
advantage of the economies of scale provided by shared actual driving—you can choose to pilot your own
ownership, including tax benefits. You receive all of the coach or, alternatively, instruct a concierge to arrange
advantages of ownership, but pay only a portion of the for a qualified, licensed coach driver when and where
helicopter’s upkeep. Moreover, you never have to worry you require. If you do choose to get behind the wheel
about the mundane aspects of maintaining, crewing yourself, most companies also provide driver-training
and 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 costs
20 www.fractionallife.com
21. FRACTIONAL CATEGORIES
FURTHER FRACTIONALS
are accounted for by the company, including training,
transport, jockeys and race entry fees, amongst other
sundries. Your involvement with the horses and their
trainers varies from company to company. Dependent
on the organisation, there are further benefits, such as
training yard and stable visits, as well as paddock tours
on race days and invitations to owner enclosures and,
hopefully, a visit to the winner’s enclosure to round off
the day! “...and you can
look forward to
drinking the wine
In a similar vein, there are also a number of fractional from your very
greyhound ownership companies springing up which own vine...”
offer a similar service, but obviously without the jockey
fees!
Spirits and Wine
The fractional ownership of a vineyard usually embraces
three key elements: the sale of a portion of a freehold
vineyard, quality wines supplied to you direct and also
specially labelled as your own unique vintage if required,
and a limited investment opportunity.
The good timing of wine purchases, the professional Sport
selection and due diligence of the wine company, We know the feeling; you don’t get home early very
and the partnership with industry-known experts are often and don’t have the time or inclination to play golf
all ingredients which make fractional wine investment at your local members club much. Wouldn’t it be great
financially very promising. to play at the best courses across the land whenever
and wherever you wish? Why suffer when there are
Not to forget the whiskey market... the lure of which, is so many other superb private member golf courses at
that, 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. FRACTIONAL FUTURE
CONCLUSION
Between the rise of ‘auction culture’, the credit
crunch and overseas property values being far from
guaranteed, consumers are currently questioning the
value of 100% ownership of many luxury items. Luxury
is becoming more experiential in that it’s not what you
own, but what you do that ultimately makes you happy.
In such a climate we are seeing fractional ownership
market gathering greater momentum.
Daniel Nissanoff, author of Futureshop, told us that
“Today, more and more people define themselves by
the social networks they belong to (or aspire to belong
to) - both online and offline. Fractional ownership is
becoming an increasingly popular gateway to reach
these coveted networks and is redefining how savvy
consumers efficiently access status and the necessary
‘belongings’ to ‘belong’.”
Previously at Fractional Life we tipped the rise of the
market in general and in particular the rise of lower
price point fractionals- a phenomenon that is making
itself felt at the lower end with increasingly diverse
opportunities available to suit all pockets as well as
a rise in mid-market asset-sharing opportunities If you have never attended
represented by the proliferation of car clubs. So what one of our Fractional Life
of the next shift? I foresee a growth in the promotion Expo events why not check
of mixed use of fractional packages – i.e. fractional out the showguide for the
property developments having a selection of golf most recent Expo at www.
fractionallife.com (or click
courses / 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 downloading
this guide. Don’t forget to keep abreast of all the
latest news, events and developments by registering
at www.fractionallife.com and checking out our sister If you enjoyed this guide why
site www.fractionallifeexpo.com for the most recent not read on with the Sunday
event 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-enabled
Aaron@fractionallife.com
browsers)
www.fractionallife.com
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