Your Piece of Paradise - SIRKIN FRACTIONAL LAWYERS

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Fractional
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offers
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a compIetevacation experience ft,"+
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or years,Dr. Marc Schwartz,his wife
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Randi and their two children spentmost
weekendsat their secondhome in the
Berkshires.But as the children grew older,the
family's time at the cabin dwindled from about
40 weekendsa year to about six.
"I liked choppingwood in the Berkshires
s
when I was 35," remarksMarc with a smile. "I
didn't like it as much when I was 45."
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Eventually,Marc and Randi decided to sell the cabin
r
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e
i:
a,
and consider anothervacation-home optionfractional ownership, or the purchase of a fraction
r
ofa property. Fractional owners differ from
o
timeshare owners: The latter generally own the
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right to an allotment of time per year; fractional
7
owners are usually co-owners of the actual real
estate,wlth a title and deed.
Purchasing a vacation property with multiple buyers can give a
buyer accessto a development he or she wouldn't be able to afford
otherwise-and owners also value the flexibility and variety this
type of ownership gives them. Often, fractional developments
grant owners reciprocal-usageprivileges at other national or
international locations, allowing them to vacation in a variety of
destinations. Fractional developments also offer varied usage
flexibility-some
have fixed calendars,while others have an
open-reservationsystem-allowing owners to choose the option
that is the best fit.
In the case of Marc and Randi, they were looking for an
upscale vacation experience with a lot of flexibility. So one night
two years ago, Randi made a phone call to The Ritz-Carlton
A L AS K A A IR L INE 5 MA GA Z INE
MARCH 2009
Company to inquire about fractional-
For about $240,000, Marc and Randi
They incorporated their fractional
ownership opportunities. She was trans-
purchased a 1/rushare of a one-bedroom
home into other vacations: Last March, for
ferred to the office at The Ritz-Carlton
residencein The Ritz-Carlton Club and
example, they visited San Francisco for
Club and Residences,San Francisco,which
Residences,San Francisco. Ownership
four days before departing for a stay at The
has 44 fractionai residenceshoused in the
aiiows them use of the facility's private
Ritz-Carlton hotel in Kapalua, Maui, and
famed 19th century, beautifully renovated
fitness center, spa and lounge, and
spent a few more days in San Francisco on
San Francisco Chronicle Building.
reciprocal-usageprivileges at other
the way back. The City by the Bay is also a
Ritz-Carlton fractional developmenrs.
vacation destination in its own right for
vacation home on the opposite coast,
which include Aspen, St. Thomas and Lake
the family-they
Marc and Randi purchased the property
Tahoe, as well as a Kapalua Bay, Maui,
tour Wine Country.
sight unseen
developmentthat will be completed
Intrig ue db y th e ideaof own ing a
but first they did some due
diligence.
in May.
"I sat down and did a lot of math," says
Marc. "That included fconsidering] the
cost of the Berkshire house and our other
love visiting to shop and
Marc describesthe family's fractionalhome purchase as "embracing an
Marc sayshe was pleasantly surprised
opportunity"-an
opportunity to travei,
to realize that for roughly the same
while enjoying the finest accommodations
amount of money he and Randi had been
and amenities.
vacations, and the cost ofthe [San
Francisco] property. They were very
spending on vacations each year, they
could enjoy a much higher-quality experi-
Fractionalsare availablenearly everywhere
similar-that's what made me feel like it
enc e. L a s t s u m m e r . t h e f a m i l y t o u r e d
people vacation. Such opportunities aren't
was something we could pursue." He adds,
laughing, "lt was an impulse decision, but
Europe while staying in Ritz-Carlton hotels
limited to the United States:Mexico is just
at a dlscounted rate that they were eligible
one popular international destination with
an impulse decision that took three
f or t hr o u g h t h e o w n e r s h i po f t h e i r S a n
fractional-ownership properties. For
months to make."
Francisco residence.
instance, Villa La Estancla offers fractional
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As you considert'ractional ownership, here are somel?ey
questionsthat real eskrte attorney Andy Sirkin suggesfsyou asle:
What is the balanceof predictability
andflexibilityin useof
the property?
What is the per-nightcost whenone addsup all of the annual
costsanddividesthem by the numberof daysof useeachyear?
How lik elyis it t h a t t h e p e r - n i g hct o s tw i l l i n c r e a sfea s t e rt h a nt h e
c os tof alt er na t el o d g i n gi n t h e a r e a ?
The i?it:-CarltcnClubancl
Res!dences,
KapaluaSay.
Willthe co-ownershaveany controlover how costs(particularly
management
feesanddues)
inc r easov
e ert i m e a n dh o wt h e p r o p e r t yi s m a n a g e a
d n dm a i n t a i n e d ?
To what extent are co-ownersfree to rent out the sharedpropertyandto controlthe rentthey charge?
Doesthe property offer reciprocalusage,and how easyis it to get the
desiredlocationanddates?
What, if any,restrictionsapplyto resale?
What competitionwill a fractionalowner faceat the development,
and in
the immediate
a r e aw
, h e ns e l l i n g ?
t*
Whatfinancing(if any)will be available
to the buyer?-C.A.
l_
A L AS K A A IR L INE S MA GAZINE
MARCH 2OO9
developments in Cabo San Lucas and
Nuevo Vallarta, with Cancrin and Loreto
developmentsunder construction. Owners
will be able to exchange their time among
the four properties.
More than 50 percent of the 132 villas
at the Nuevo Vallarta location have been
sold. They range in size and price for a 1/+
share, from a two-bedroom, 2,OOO-squarefoot residencefor $260,000 to a threebedroom, 4,300-square-footoceanfront
penthousefor $968,000.
Gregory and Lynn Drohan, who make
their permanent home in Canada, are two
owners who have invested in Villa La
Estancia Nuevo Vallarta. The Drohans
decided to purchase a fractional interest in
the developmentafler experiencing
difficulty securing available times in a
nearby timesharethey frequented.The
couple found Villa La Estancia'spredictable
rotating calendar system a much better fit
for their lifestyle.
"For the next 50 years," saysGregory,
"we know exactly which months we have."
The couple plan to spend some Christmases at their fractional home with family
members.
It's even possibleto buy a fractional interest
in a project before it is completed-the
Switzer Canyon Village Residencesin
Flagstaff, Arizona, being one example. The
96 mountain villas-on
which construc-
tion began in fall 2008, and which are
scheduledto be compleredby summer
2010-are being sold based on a model
unit. They are priced at $250,000 to
$300,000 for a 1/+share.
"Flagstaff is a big second-homemarket,
and fSwitzer Canyon] will make it easier to
own a second home here," saysBilly Holly,
office manager at AZNorth, developersof
Switzer Canyon. He describesthe property-which u ill feature a concierge
service for arranging dinner reservations,
ski trips, Red Rock tours and other
activities-as "an oasis in the desert."
Andy Sirkin,a SanFrancisco-based
attorney
who specializesin fractional ownership,
saysthe concierge service and other
upscale amenities-such as deluxe golf
M AR C H 2OO 9
ALASKA AIR LIN E S MA G A ZI N E
coursesand pools-offered by many
fractional developmentsare appealing to
buyers. Another attractive element,
according to Sirkin, is not having to do the
maintenance.
"Most people just want to show up
fat
their vacationhomesland then iorget
about them when they leave," saysSirkin.
Fractional developmentsallow owners to
do just that, since maintenance and
improvements are typically handled by a
management company. The management
company, maintenance and improvements
are generally funded by the homeowners
in the form of annual dues.
The ResidenceClub at PGA West32 luxury homes situated around the
stunning PGA West Golf Course in
La Quinta, about 30 miles from Palm
Springs-is one example of maintenancefree vacationing. Thirteen of the haciendastyle homes are still being built; t/sshares
have been sold for approximately 14 of the
nnmnleted
hnmcc
Each ofthe 3,365-square-foot
resi
dences-which include accessto and
interest in the development'sclubhouse
and common areas-has two master suites,
a guest casita, a gourmet kitchen, a great
room and a two-car garage.At the end of a
stay, an owner just locks the door and
walks away.
"Someone else worries about the poo1,
the gardener and the cleaning," says
Christine Kiener, the development's
director of sales."You never have to go to
Home Depot."
Without having to worry about
maintenance, upkeep and security, owners
trull leel like thel are on vacation.says
Kiener. And with staff who know owners
by name, the development starts to feei
like home-or
better, as owners Rik and
Carol Floyd have discovered.
For half-a-dozenyears, the Floyd
family-Rik,
Carol and their two children,
who live in Solana Beach, just north of San
Diego-spent vacations at various rental
properties in the desert. They discovered
The ResidenceClub at PGA West in2006.
Enamored with the great golf and other
amenities.the Floydsdecidedto bu1 a
share of one of the homes, which is larger
M AR C H 2009
ALASKA AIR L I N E S MA G A ZI N E
than their permanent residence.
The family has been delighted with
their purchase: "There ls no place i see
Carol totally relax and unwind like at PGA
West," saysRik.
homes can be sold, wilied, deeded or
should also consider how decisions
placed in a trust and can offer a tax
regarding the property are made-for
write-off.
example, whether there is a homeowners'
Sirkin believes a property's appreciation
a s s o c i a t i o nt h a t g o v e r n st h e pl o p e r ty
potential is based on the location, the
through maklng budget decisions,
property itself and the market, just as with
planning improvements and so on.
According to Sirkin, the co-ownership
the
ln additionto lifestyleconsiderations,
any other real estate investment. On
investment potential of a fractional is an
average,fractionals offered by a developer
aspect of a fractional usually has little or
important prepurchase consideration, says
include a significant markup of the home's
no bearing on an owner's investment. In
Sirkin, becauseas the market appreciates
cost, so prospective buyers should evaluate
most fractional situations, homeowners'
(or depreciates),so does the property. Like
r.rhether they think the properly a nd
loans are independent of one another-so
any other form ofreal estate,fractional
amenities are worth this investment. They
if an owner defaults, the other owners are
typically not affected.
JohnVering. who until recently was
director of salesand marketing at Viila La
Estancia in Mexico, advisesprospective
b u y e r st o c o n s i d e rt h e o r i g i n s o f a fr a ctional development before making a
decision. Some properties become fractionals due to tough market conditions, says
Vering. He adds that in his experience,
properties planned to be sold as fractlonals
from the beginning fare best, becausethey
fif,\T
hcafil*#
Faradise
end a hcavcnly l'icrv.
"Snapping fresh oysters are
the stars at this, just plain fun,
scafoodinstiLution."- Tnon!
"Elliott's is one of tlie top ten
outdoor dining locationsin
the country." * USA Todalt
"One of the top fir,e
oyster bars in the country!"
- ForhtneMagaline
'Ibm Horan's America's
Top Ten Ctub
sevenyearsrunning.
- Arneriea's
TopTbn
"Elliott's is the place to go
for oystersin Seattle."
- GournrelMagaline
r.reredesignedand built specificallylor
this purpose.
Another way to evaluate fractional real
estate is to consider-or rather reconsider-the concept of "investment." Jenny
Ochtera, project director at The RitzCarlton's new fractional development in
Kapalua, Maui, cails fractional ownership
a " l i f e s L y l ei n v e s t m e n t . "M a n y o f th e
buyers she works with are families who
want a place to spend quality time
together-a place to get away from iPods,
video games and the stressesof work and
school.
" P e o p l ew a n t c e r t a i n t y i n a va ca ti o n
e r p e r i e n c e . "s a ;s O c h t e r a - a nd fr a cti o n a l
ownership gives them that.
ffi,-
One family who is makingmemoriesthat
will last a lifetime is the Reynolds. Cynthia
Reynolds always turns to her husband,
Kim, after their flight from the East Coast
Where Seattle Goes for Seafood.
to Phoenix and the two-hour drive to their
fractional in Sedona,toward the end of
their journey. Driving up the Long Canyon
Trail through the rugged iandscape,they
take a moment to share what they call "the
deep exhale." It's time to relax.
A couple ofyears ago, the Reynolds took
a trip to Arizona for the first time. While
94
M AR C H 2OO 9
ALASKA AIR L I N E S MA G A ZI N E
there, they decided to tour the Seven
Canyons residential community to meet
the chefs and golfpros, and to check out
some of the best views from the golf
SPOKANE/
COEURDALENE
course. Just as they arrived to see the
pro shop and the restaurant, it started
hailing. Within 10 minutes, the golf course
had turned totally white, and many of
N OR T H
Q U I ETC R E E K
"Thequietof thecountry,
theconvenience
of thecity."
the employeesran out onto the green to
experience the uncharacteristic weather.
In a moment of kismet and chaos,the
Reynolds met several friendly employeesand they began to fall in love with the
2 O - A C RHEOMES IT E S
E X C L U SID
V E V E L OP ME N T
O N L Y8 SI T E R
S E MA IN
, LL
E L E C T R PH
I C, ON EWE
A N DS E P T IC
AP P R OV A L
FROM5279,500
place.
Surrounded by 100,000 acres of
national forest, Seven Canyons' 200-acre
expdnseis a peaceiulsett.ingfor the
development's30 villas and championship
golf course, designedby Tom Weiskopf.
The Reynolds went home to mull over
C L O STEO EV E R Y T H IN G,
R E GU L A R L Y
B U T VI S I T ED
, KMOOS
,
E,
B YD EE REL
A N DG A MEB IR D S .
the idea of buying a fractional home in
Sedona.The spectacular views of the
dramatic rock formations from the golf
course stayedwith them. About a month
later, the two golfers decided it was a place
they'd like to visit again and again. They
bought a %oshare in a three-bedroom
In ter nat ional
A ir po rt 30 Minutes
20 Minutes
Sh opping
3 Miles
Exc ellent
S c hools
4 Miles
26 Miles
C oeurDA lene Lak e
Ga m ing
20 Minutes
6 P ublicG olf Cours e s 25 Minutes
3 S k iA r easwit hin
60 Miles
Downtown
. PLENTYOF PRIVACY
. BEAU TIFUL
VIE WS
. RO LL IN G
HILLSA ND
M EAD OWS
villa for around $400,000. At Seven
htal,Qrnfvol
/r/.4/
Canyons, the couple read and golf.
Sometimes, they just enjoy doing nothing
at ail. They often bring their two daughters, ages16 and20, whom they take into
town to shop.
A year after their initial purchase, the
Reynolds bought a second 1/roshare in
Seven Canyons. Making the most of their
time last year, the family enjoyed two long
stays together. They also invited friends to
enjoy the residencewith them: Kim spent
a weekend golfing with friends with whom
he attended businessschool, and Cynthia
planned a spa-centeredgetaway with her
@'
girlfriends that included Red Rock tours
and lots of catching up. The Reynolds also
CONTACT:
VicariDevelopmentLLC
509.879.6526
P.O.Box 750
SpokaneValley,WA 99037
loan the property to friends and family, or
trade their time for stays at other resiN. Seattle,
WA98109
3014ThirdAvenue
dencesthrough Elite Alliance, Seven
206.284.3000
I pontiseafoodgrill.com
Canyons' exchangeprogram.
'At this point in our lives, when we
travel, we like to do it right," saysKim. A
Christina Amini is owriter and editor in
Son Francisco.
M AR C H 2OO 9
ALASKA AIR LI N E S MA G A ZI N E