Sunny and share

An established multi-million dollar industry in the US, fractional ownership now has a credible investor following across the Caribbean. Laura Henderson reports on the rise of "divide and rule" real estate

Having cut its teeth in the US during the 1990s, with master-planned communities such as Aspen in Colorado, the fractional property market has since diversified. One of the boom property areas to benefit from this has been the Caribbean, where private residence clubs and high-end resorts are now routinely sold on a fractional basis.

It makes sense, because the Caribbean property market is one where so-called "lifestyle real estate" accounts for a large portion of foreign exchange earnings. "Fractionals, unlike 'vacation time only' timeshare, confer a deeded interest and equity share in a managed property," explains Brad Lincoln of the Best Group. "You get all the benefits of a holiday home for several weeks a year, but bought in partnership with others who bear the costs with you."

Typical buyers, Lincoln adds, will have toyed with the idea of purchasing a second home outright, but ruled it out probably because of likely limited use: "For many, it's the perfect middle ground solution-you get a share in a valuable asset, with a third party to manage the maintenance and the upkeep side of things."

Balancing exclusivity with time-tested usage, the typical fractional scheme will involve anywhere between four and 13 "shares". The number of shares offered is depends above all on the amount of prime time that can be guaranteed. "Properties with a relatively short prime season will generally offer fewer shares, with a float time during the least popular months," explains John Hagelin of Hot Properties Worldwide.  "Full rights of ownership, including selling to others, renting, and buying additional fractional shares is standard, as is the fraction becoming part of an owner's portfolio of heritable wealth."

Owners can also swap weeks between themselves or rent out their allocated period privately, with vacation exchange opportunities often available, although this is usually regarded as more of an add-on benefit and not the primary reason for the purchase. "Off-plan investors may also find fractional ownership a beneficial means of releasing invested equity sooner by selling fractional shares in their property," Hagelin adds, "whilst at the same time retaining a fraction for their own use or for rental purposes."

Buyers considering a fractional share arrangement have two legally approved purchase formats open to them; setting up a limited company in which each owner owns a percentage of the shares in the company (more common where there are five or more owners), or drawing up of a deed of co-ownership with individual names placed on the title deed. "An annex document in both cases outlines owners' rights to certain weeks a year based on high/low season distribution," explains Hagelin, "with upkeep of the property the responsibility of the resort's elected management company written into the deed of co-ownership."

Maintenance fees vary widely by resort with a benchmark of between £2,000-£4,000 per property a year, plus a contribution to what's often called a "sinking fund", to cover incidental expenses. This roughly equates to 10 per cent of the annual maintenance fee. So, although you'll still have to contribute as an owner, it's not nearly as much as might be as a sole proprietor.

"There's a certain comfort in knowing that the risks are shared out," says Stephen Wakeling, who bought his property through the Best Group, investing £100,000 in a fifth share of an apartment in Villas on the Green in St Lucia: "Not everyone wants to commit capital to buying a holiday home outright. But if you value your privacy and independence and can live with a restricted calendar of occupation, it's just the ticket. I have ten weeks a year property use spread between peak and shoulder season, which is more than adequate. The company also takes care of the rental side of things, with a minimum 5 per cent return guaranteed for the first two years, and the option to remain in the letting pool beyond this."

As to co-ownership DIY style, "It's doable," explains business entrepreneur Sandip Chauhan, "but only if your purchase motivations coincide. I bought an apartment with two friends in St Lucia through Premier Resorts. But our primary focus was always return on investment, as opposed to holiday-home use."

Sandip set up a limited company, with allocation of shares divided equally: "Our lawyer drew up a partners in common contract, and we collectively tweaked co-ownership requirements until we were all happy. Finding a specialist legal firm is a must. The tax penalties for getting it wrong are punitive, not to mention the complexities of selling-on shares, with promotion legalities and transfer duty issues to take into account."

As always with real estate investments, it pays to think hard about your exit plan before you buy. But if you pick your partners and property with care there is no reason you couldn't still be onto a prime-time winner.

Four of the Best

Villas on the Green, St Lucia
Spread across seventeen acres of prime real estate with fairway views over St Lucia Golf Club, Villas on the Green offers "Country Estate" living with beach haven Cas-en-Bas just a pebble's throw away. On-site facilities include a high-tech fitness centre, Olympic-sized swimming pool and theatre. Three-bed luxury townhouses with a 1/5 share start from £97,594 rising to £100,946. Annual management fees are £2,700, with an annual rental guarantee of £5,250 for the first two years, in return for eight-weeks' annual allocation to a rental pool. www.thebestgrp.com
+44 (0) 845 130 9022

February Point, The Bahamas
Overlooking the clear blue waters of Elizabeth Harbour on Great Exuma Island, February Point's Colonial style villas (above) come with a twin-engine powerboat and private mooring. On-site amenities include a full-service marina, dive centre, and sp. Owners also get automatic membership of the adjacent Greg Norman-endorsed Emerald Bay Golf and Country Club. A 1/8 (six-week) share in a four-bedroom villa starts at £220,000 rising to £400,000 for a 1/4th (twelve-week) share. Maintenance fees run at an average of £400-£1,000 a month, with average weekly rental yields of £3,600.  www.februarypoint.com
+242 336 2693

Caye Winds, Belize
Located on the upmarket divers' paradise of Ambergris Caye, Caye Winds boasts over 1,000 feet of barrier reef waterfront, with A-list vacation hideaway Cayo Espanto lying to the west. Bauhaus inspired properties boast a host of interior features including sunken baths, spiral staircases and water walls. Fractional ownership in a deluxe four-bed mansion on a 1/12 basis starts from £50,000 rising to £100,000. Annual fees are in the region of £1,000. www.cayewinds.com
+501 622 4111

The Waterford, Cayman Islands
Scheduled to complete in 2010, the Waterford Private Residence Club on Grand Cayman's Crystal Harbour (below), will boast a mixture of luxury villas and grand estate homes, complete with centrepiece Great House and deluxe spa. Designer furnished two-bedroom residences start from £154,000 rising to £380,000 for a four-bed mansion, 1/8 share totalling six weeks. Bespoke owner services includes 24-hour concierge, access to a fleet of prestige cars and a Boston Whaler boat and Captain. Annual maintenance fees from £1,000 a week include property maintenance, car pool, boat and insurance.
www.hotpropertiesworldwide.com
+44 (0) 207 095 8700

Living the dream

If you want a life of luxury, you could do worse than invest in a new hotel and resort scheme. Tina Nielsen finds out more

Fancy living in the lap of luxury? Or do you have a spare couple of hundred thousand pounds looking for a home? Either way IFA Hotels & Resorts (IFA HR) could have something for you. A new arrival to the UK property market, the firm has an extensive portfolio of resorts and developments-including second homes, investment properties, fractional ownership and hotel suites.

IFA HR also runs joint ventures in a number of developments around the world, inlcuding properties in Dubai, Lebanon, Portugal, South Africa, Kenya, Zanzibar and the UK.

"With the European launch of IFA HR UK investors will have access to investment opportunities in luxury resorts all around the world," says Alan Bell, vice president of IFA HR in London.

One of the most ambitious projects is in Dubai. The Kingdom of Sheba on the Crescent of the Palm Jumeirah island, consists of residences, a five-star hotel, a private residence club, and a retail plaza. Covering 141,500 sq m of the island, it offers villas, townhouses, penthouses and apartments. Investments start at £509,500 for two-bedroom apartments and rise to £3,566,078 for luxurious, five-bedroom villas. For that you get full access to the island's facilities, a private beach, spa, sports club, swimming pool, and shopping area.

In South Africa, the Fairmont Zimbali boasts similar luxury within the Zimbali Coastal Resort (below). In all, 154 properties are on offer ranging from apartments to villas and golf chalets. The development also includes a championship Gary Player designed golf course with attached academy.

IFA HR's product range also includes jet ownership, yacht ownership and lifestyle membership clubs.