By Catherine Lackner
April 12, 2007 Miami Today
While fractional unit ownership hasn’t become established here, “the market in Miami is ripe for it,” said Joel Greene, president of Condp Hotel Center, an Internet real estate broker of fractionals and other luxury properties.
While the owner of a condo-hotel unit buys it in a transaction similar to that for a single-family home and then returns unused weeks to a rental pool, a fractional owner buys the right to use a unit for a certain period each year.
Fractionals differ from traditional timeshares in that intervals are longer, typically ranging from four weeks to 13 weeks, and the product is upscale.
Fractionals succeed in areas where there has been a demonstrably strong real estate market, Mr. Greene said. Shared ownership becomes an attractive alternative to whole ownership, he said.
While the condo-hotel trend started in South Florida, “fractionals started out West, in the ski resorts, and the trend is moving its way east,” he said. “They appeal to the top 5% of the second-home-buying market,” those who can afford the best “but don’t necessarily want the commitment and expense of maintaining a second home.”
In Fort Lauderdale, the Trump Las Olas, originally envisioned as a condo-hotel, has been reconfigured to include a fractional component, “which gives the developer the ability to target different price points,” Mr. Greene said.
Three fractional products – the Ritz-Carlton Club and Residences, South Beach; The Fairfax; and the Flamingo South Beach – have come onto the market recently. Another, Shangri-La Residences at Island Garden on Watson Island, is in the planning stages.
The arrival of Ritz-Carlton and other developers into the Miami Beach fractional market “signals that some developers feel there’s merit” to the market, Mr. Greene said.
The Ritz-Carlton Club and Residences, Sotuh Beach is unique in that “there is no transient hotel component,” said Scott Oldakowski, its director of sales and marketing. “All of the units here are privately owned residences or units owned by resident club members.”
While it is not a traditional hotel, all owner and their guests will have access to a full menu of Ritz-Carlton hotel services, “including restaurants, twice-daily housekeeping, valet service, and everything that goes with a luxury resort hotel,” Mr. Oldakowski said.
There are 86 wholly owned condo-hotel units and 45 units reserved for the fractional component that will be offered in 12 shares each, with one share equivalent to 21 nights. Owners can configure their stays in any way they choose. “Owners can take 21 Wednesdays in a row, if they have business trips here, or take two units for 10 days apiece for a family reunion,” Mr. Oldakowoski said. “We find the typical guest comes to Miami Beach four or five times a year for three to five days.”
Prices range from less than $100,000 to more than $500,000 depending on unit size and the seasonality of the interval. A seasonal membership, in which units can be reserved May 15 – October 15, is more economical than a full membership , which includes access to the facilites through the holidays including Christmas, Thanksgiving, President’s Day and Easter.
Owners have reciprocal exchange with any other Ritz-Carlton property that contains a fractional component, and the Miami Beach project is structured in such a way that one-third of the inventory is never sold, but kept for potential exchanges, Mr. Oldakowoski said, so that members are generally assured access to the South Beach property.
Unit sales began in mid-December and, while sales statistics are confidential, “I can tell you that we are already well ahead of projections,” Mr. Oldakowski said.
After visiting for years and thinking about buying a home here, “I thought Miami would be a perfect spot” to build fractional resort units, said Mehmet Bayraktar, founder and CEO of the Flagstone Property Group, creator Shangri-La Residences at Island Gardens.
When the Miami City Commission issued a request for bids in its redevelopment of Watson Island, Flagstone responded with a plan for Island Gardens, a complkex that incorportes a mega-yacht marina, hotels, shops, restaurants, luxury residential units, a spa, and spaces for public gatherings and art exhibitions.
Shangri-La Residences will contain 100 units in configurations of one to four bedrooms which will be sold in 1/8 shares, equivalent to 45 days per unit. Prices range from $200,000 – $800,000, and square footage from 800 – 3,500 square feet per unit.
Early purchasers will have their choice of seasonality, and those who take the plunge now will have more access to holiday periods as well as the desirable winter months.
“We just started taking reservations, and the response is very good,” Mr. Bayraktar said. Because he and many of his friends are part of the group of purchasers who have the means to buy a second or third home, but don’t want the responsibility, “we thought this would be the right thing to do here,” he said. The project is expected to break ground this fall, and be operatinal by fall 2009.
“Prices have gone up tremendously,” Mr. Greene said. “It’s practically impossible to find a unit in a good location for less than $500,000 to $600,000. With fractional purchase, you can be in a five-star property for #300,000, and if you’re only going to use it 10 – 14 weeks a year, why pay for the other three-quarters of the year?”
The equation also makes sense for the devekoper, he said. “If you build a project and then fractionalize it in three-week blocks, the cost per unit is far less. It’s the best of the best.
“There’s a strong market in Miami Beach and there’s no reason to think it won’t continue,” Mr. Greene said. “The cost of condos and condo-hotels has skyrocketed,” which sets the stage for a fractional boom.