Michelle Feder

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Fractional Owners at Sun Valley’s Les Saisons enjoy units with gourmet kitchens. Photo courtesy Les Saisons. Amenities at Sun Valley’s Les Saisons private residence resort include a heated year-round rooftop outdoor pool. Secure long-term storage for personal items and a private owners’ lounge and bar. Photo courtesy Les Saisons. The Pool House at The Lake House at Chelan is a shared facility for fractional owners. Photo courtesy the Lake House at Chelan.

For about 28 years, Redmond resident Barbara Wasserman and her husband, Peter, often visited Sun Valley, Idaho, while raising a family, and several times they considered buying a place there. After retirement, however, the couple decided that a fractional property made more sense. So in September 2006, the Wassermans purchased a three-bedroom, 3.5-bath fractional at Les Saisons in Ketchum. Their fractional interest of five weeks—two in summer, two in winter and one floating week—meets their requirements for time, space and money better than buying full ownership of a Sun Valley home or staying at a hotel. They don’t want to live at the resort several months of the year, but when they visit, they want to be able to accommodate their kids and grandkids.

Barbara says their Les Saisons share is not an investment property per se. “We have no intentions of selling it,” she says. “We are hoping our children will use it, and when we are not around anymore, they will still have it as part of the family.”

For people who have arrived at the time in life when they want a second home, resort communities hold obvious appeal—the chance to live on the golf course, ski slope or ocean. “Because of the demand [for] and scarcity of good properties, and the pressure in resort communities to minimize development for environmental reasons, people started to look at alternatives,” says Michael Burns, founder and owner of Private Residence Resorts, the first company to introduce the concept of fractional ownership to vacation home buyers in Idaho. Out of this desire emerged the niche ownership category called fractional ownership, which is “an alternative to owning a second home in a destination you go back to frequently,” says Burns, whose company, PRR, developed and manages Les Saisons, as well as Hearthstone, another Idaho fractional property, and is consulting with a property being developed in the San Juan Islands.

Fractional ownership is “an alternative to owning a second home in a destination you go back to frequently.” —Michael Burns. Private Residence Resorts

In the United States, owners use fully owned second homes just four to five weeks a year on average, Burns says, though some owners rent out their second home when not using it. However, the more valuable the property, the less likely the owners are to offer it for rent, he adds. This is another reason high-end fractional ownership is appealing: “It’s hard to spend $1 million or more for something you use four to six weeks a year,” Burns says. Fractionals let you experience a high-end vacation home without owning it alone.

The first fractional was started in Deer Valley, Utah, about 10 years ago, Burns says, and the trend of fractional real estate is gaining traction—at a rate of about 20 percent a year for the past five years. “Total sales volume for the shared-ownership industry is estimated at slightly over $2.1 billion for 2006,” according to an industry report by Ragatz Associates, a Eugene, Oregon–based consulting and market research firm. The study identified 254 fractional-interest projects and private residence clubs in North America.

Under the umbrella of shared-ownership real estate, there are three categories: timeshares, which Burns defines as “a prepaid vacation product where you buy a week or two in a location you are exchanging around the world” but do not typically own the property; fractional ownership, which offers ownership in a property based on the amount of time you use it; and destination clubs in exclusive resorts, which typically sell 30-year memberships on a nonequity basis in a wide network of vacation homes. Destination clubs charge a deposit—usually in the $500,000 to $1 million range, plus annual dues for access to homes in mountain, beach or urban areas such as Vail, Colorado; Cabo San Lucas, Mexico; New York City; or Tuscany, Italy. Members generally do not have equity in the real estate. In its report, Ragatz Associates assumes that property selling for less than $1,000 per square foot falls into the fractional interest category, and property selling for more than that amount falls into the category of private residence clubs.

Buyers of fractional properties purchase a deeded share in a residence, which gives them a certain number of weeks per year at the property. By paying for only the time of use, buyers consider the purchase a more cost-effective way to experience a favorite location. Burns says fractional buyers typically buy between a one-twelfth share (one month of annual use) to a one-quarter share (three months).

The size of available shares is one difference between fractionals and timeshares, which offer owners as little as one week per year. Another difference is that with fractional properties, buyers purchase a portion of a condominium, town house or house in the development and receive a deed to a share of the property; with time shares, as many as 50 buyers pay for specific blocks of time but usually do not own a share of the property.

Lost and Found Elizabeth Mitchell, star of the ABC TV series Lost, has found herself living in the Puget Sound area. The 37-year-old actress, who plays the show’s femme fatale, Juliet, has performed in shows and movies such as ER, Nurse Betty and the HBO movie Gia with Angelina Jolie. Today, the actress lives with her husband, actor Chris Soldevilla, 38, and their 2-year-old, C.J., in an 1896 Victorian home “on a small island in Puget Sound, near Seattle,” according to People magazine. Which island? It’s a mystery.

One of the first fractional properties in Washington is the Lake House in downtown Chelan, slated for occupancy in spring 2009. Situated across from Don Morse Park, the Lake House will look north up the 50-mile-long freshwater lake. A one-quarter fractional interest (13 weeks per year) is $119,900–$399,900 for the one- to three-bedroom, fully furnished residences. That purchase gives owners four planned weeks of use in the peak season from June to September and nine additional weeks of their own choosing, according to sales manager Brian Merrill. Owners can use, trade or rent their planned weeks and can sell, will or gift their ownership—just as they would any other deeded real estate.

Lake House amenities will include an activity center with a year-round pool and hot tub, a children’s “splash zone,” an indoor-outdoor kitchen, a fitness facility and an outdoor fire pit. Staff will perform all maintenance and upkeep, and services will include prearrival grocery shopping and setting up dinner reservations, tee times and wine tours. Merrill says the building’s concrete-and-steel design includes acoustics for “private, quiet luxury.”

Elsewhere in Washington, PRR’s upcoming Snug Harbor project will be developed by Eric Nelson on the west side of San Juan Island. The resort will encompass 16 two-bedroom town homes, with initial pricing set for a one-eighth interest at $249,000. (Construction is slated for fall 2008, and Burns estimates that buyers will be able to take occupancy by spring 2010.)

Olive 8 LEEDs the Way From its Eighth Avenue and Olive Street corner to its 14,500-square-foot green roof, Olive 8 [link to olive8.com] is designed to join 26 other Seattle buildings certified by Leadership in Energy and Environmental Design (LEED) when it opens in late 2008. Seattle has more LEED-certified buildings than any other city in the nation, but Olive 8 will be the city’s first hotel-condominium project to achieve that distinction. Olive 8’s green roof will be Seattle’s largest, with drought-resistant native and adapted plants providing a habitat for birds, butterflies and bees. The roof will decrease stormwater runoff by 25 percent and divert a portion of runoff to plants in the project’s common areas so its landscaping uses no city water. Asphalt roofs raise Seattle’s downtown summer temperatures, but Olive 8’s green roof will help reduce this “heat island effect.” Twenty percent of the materials used to build the 39-floor tower housing 204 condominiums and a 350-room Hyatt ho-tel are made from recycled products. More than 95 percent of construction waste is being diverted through recycling or re-use, as required by the LEED program. Additionally, the developer, the R. C. Hedreen Company, paid almost $1 million toward establishing Sugarloaf Mountain Park in rural King County and maintaining other lands for the preservation of salmon habitat. At press time, about 80 percent of the condominiums had sold. With its green features, Olive 8 is a peek into the future of building a sustainable urban environment.—Eric Livingston

A fractional interest in Snug Harbor would equal a $1.2 million–$1.4 million value for an equivalent second home, Burns says, given the property’s waterfront location, marina, amenities such as pool and exercise room, and full range of services. Snug Harbor will be designed in an environmentally sensitive way and will have large waterside decks, gourmet kitchens and high ceilings, with architecture designed by Geoffrey Prentiss and interiors designed by Seattle’s Garret Cord Werner. The property is located adjacent to Snug Harbor Marina, allowing arrival by private vessel or seaplane. Kitchens can be prestocked before arrival, transportation to and from the island can be arranged, and a dedicated housekeeping and maintenance staff will allow owners to focus on whale-watching and R & R.

“The benefits of fractional ownership have never been more appealing as we work through these more challenging economic times,” Burns says. He believes that as the economy improves, demand for fractional properties will increase. “It’s a solution to owning resort real estate that’s practical and sensible, considering the amount of time people have to actually use it and people’s desire to simplify their lives from the burden and responsibility of owning and managing another home.”

That’s certainly the case for Barbara Wasserman, who says the possibility of visiting other places still has great appeal, and she does not want to feel saddled with a sense of obligation to go only to a home the couple fully owns. The Wassermans own a second home they bought 15 years ago on Lopez Island, and as Barbara says, “You can only be in so many homes for so much time.” The home on Lopez is a lot of responsibility—keeping it up, keeping it clean, keeping it safe in a snowy winter. “I don’t have to do that at Les Saisons. I leave, and somebody else does the laundry and changes the sheets, and when I come the next time, it’s clean.” Wasserman says her peers, who are retired or close to that stage of life, appreciate fractional ownership because of that sense of ease. She says, “You can just walk out, and you’re done.”  

Michelle Feder lives on Mercer Island.