January 19, 2005

Luxury yachts, cars and RVs are among the goods available for fractional ownership.

All 1/8 of This Could Be Yours

Fractional Ownership Moves Beyond Jets to Include Yachts, Bentleys, Even Deluxe RVs 
By RON LIEBER
Staff Reporter of THE WALL STREET JOURNAL
January 19, 2005

Traveling the interstate like a rock star seemed like a swell idea to Tom Roegner until he began to do the math. The motor coach itself would cost more than a quarter million dollars, insurance and storage fees were expensive, and the depreciation would be immediate and dramatic. So the retired banker from Palos Heights, Ill. did what bankers before him have been doing with jets for years: he bought himself a chunk of the vehicle instead. 

Fractional ownership, where buyers purchase a share of an expensive asset and pay the seller fees to handle the scheduling and maintenance, is a fixture of the private jet industry and a growing force in the market for vacation properties. Now, this model of ownership is creeping into other asset classes, too. 

Increasingly it is becoming possible to buy a piece of a yacht, a fancy sports car, or even a luxury recreational vehicle -- and share the use of it with other owners. Exotic Car Share, based in the Chicago suburb of Palatine, Ill., is in the middle of parceling out pieces of a new Bentley Continental GT in one-fifth shares, at a cost of $30,000 plus $10,000 a year for maintenance. Each of the five owners gets the use of the car for nine weeks a year. American QuarterCoach, based in Burr Ridge, Ill., is selling shares in massive recreational vehicles of the kind used by musicians on tour. The cost: $184,500 for one-eighth of its high-end model, plus $7,020 a year in maintenance for five weeks of use. And Great Lakes BoatShare wants to anchor small yachts in Michigan, each owned by six people. 

Mr. Roegner, 57 years old, bought a quarter share last year in a Monaco Camelot RV that would have cost $283,000 if he owned the whole thing. He and his wife took their three-room house on wheels to Florida, and have another trip planned to the state next month to ride through Orlando, Siesta Key and Naples. In the fall, they are hoping to hit New England. "You can set the thing at 70 and just go," Mr. Roegner says.

The notion of fractional ownership has become popular enough that there also is a new Web site, dyerfractionalregistry.com, devoted to bringing together people interested in sharing ownership of goods they might not be able to afford by themselves. One item recently listed, in addition to the usual boats and cars: an explosives-detection device that eight owners could share. Price: $2,475 each. 

Despite the recent activity, there is still only a handful of companies offering fractional ownership outside aviation and real estate. But buyers and sellers say the economic logic behind shares in jets and vacation properties applies to other luxury discretionary goods, too.

Fractional ownership has been around in one form or another for quite a while, starting of course with the long-running practice of groups of friends going in on boats and condos. In the 1990s, the business of selling shares of small jets and managing them grew rapidly; it gained further respect in 1998 when Warren Buffett's Berkshire Hathaway bought the aircraft-sharing company NetJets.

Soon after, Ritz-Carlton and Four Seasons entered the market on the real-estate side and began pitching part ownership of two- and three-bedroom dwellings in places such as Jackson Hole, Wyo., and Jupiter Island, Fla. The units were on more-exclusive properties and came with better furnishings (and room service) typically offered by other shared-use properties, such as timeshares.

There are several advantages to fractional ownership. Most people don't use a Bentley, boat or recreational vehicle enough to justify owning all of it. Plus, they could afford a bigger, better yacht if they owned only part of it. The company that sells you the shares usually handles the upkeep, too, which means no worrying about burst water pipes while you are back at home.

But there are several reasons for caution. To begin with, it is a high-risk business for companies to go into, given there is always the possibility that a new entrant could run out of capital before it successfully lines up a full roster of buyers for whatever it is selling.

Get a Lawyer

Consumers should be particularly cautious about new operators. "I've seen watches, I've seen cars -- people are trying [fractional ownership] anyplace they can," says Michael Riegel, a consultant who publishes an industry newsletter, the Fractional Insider. "Lots of people are trying and not too many are succeeding."

People who are interested in buying should treat the transaction like any other big purchase. Get a lawyer involved to make sure that purchases made by individuals remain segregated from those assigned to other assets. Also, make sure that the structure of the sale is such that creditors for the company selling the shares can't put a lien on your asset if the seller gets into financial trouble. Mr. Roegner, the retired banker, checked references extensively before buying his share of the luxury coach. "I'm a banker by background, so naturally I'm cautious," he says.

YachtSmart of North America, a four-year-old company that manages two shared boats and is working on a third, has a structure typical of many fractional ownership plans: On an 85-foot Azimut yacht, a one-eighth share costs $500,000, plus $4,125 a month for maintenance, insurance and docking fees. Share owners don't have to do anything except write their checks, pay for gas, then show up and sail. Their money buys 28 days of use a year; the boat spends 20 weeks a year empty in transit from one place to another or undergoing maintenance.

As is typically the case with companies such as these, booking is first-come, first-served. But there are rules to prevent people from hogging the most desirable dates.

Like many other fractional companies, YachtSmart sells the asset after five years to keep repair costs from spiraling higher. Owners split the proceeds and can walk away with them or buy into a new boat.

Exotic Car Share, the Chicago-area company selling shares in the Bentley, began as a storage facility for fancy cars about a decade ago, before adding a club that owns cars and shares them among its members. That is still the core of its business: Participants pay a membership fee plus usage charges to have access to its fleet of vehicles, which include everything from a Porsche Boxster S to a 1971 Camaro.

Sharing a Ferrari

But now, in addition to carving up and actually selling the Bentley, it is also selling shares in a Ferrari. The company will sell the Bentley after three years, and says it guarantees that each owner will get at least $18,500 back.

Exotic's established business -- it has 547 club members -- gives its fractional effort a reputation to stand on. In fact, the club system could be more appealing than fractional ownership in some cases. Since 1996, an English company called P1 International has been using the club model to lend out Lamborghinis and Aston Martins. Exclusive Resorts, among others, is using the club model for real estate. Companies such as Pinnacle Yachts and SailTime are doing versions of it for boaters.

Your Inner Mogul

The club model is attractive for a couple of reasons. The initial financial commitment often isn't as large. Plus, it can give you access to several cars, instead of just one, or dozens of homes in different places.

Ultimately, most companies such as these are trying to appeal to a person's inner mogul: Who wouldn't want the pleasures of the yachting life without the hassles of cleaning and maintaining an actual boat? In fact, Loren Simkowitz, president of Monocle Fractional Yachts in Ft. Lauderdale, Fla., says he has seen a surge of recent interest from frustrated owners who want him to sell a few shares of their own boat to others. "It's wonderful for us, because every buyer wants a slightly different boat," he says. "It's sort of like clothes." 

Sharing a Fancy Car or Boat

Several companies offer fractional ownership in recreational vehicles, fancy cars and large boats. A sampling:

COMPANY	THE GOODS	PRICE TAG	DETAILS
American QuarterCoach 800-789-4885  (ext. 712)	2005 Prevost 45 feet, sleeps up to four people, location to be determined	$184,500 for a one-eighth share; $7,020 per year in maintenance	Owner gets five weeks of use per year; coach is sold after three years and owners split the proceeds.
Exotic Car Share 847-358-7522	2004 Bentley Continental GT, garaged in Palatine, Ill., outside of Chicago	$30,000 for a one-fifth share; $10,000 per year for maintenance	Exotic guarantees at least $18,500 back when it sells the Bentley after three years.
Great Lakes BoatShare 586-419-6798	2003 Silverton Motor Yacht  453, 48 feet, sleeps six to eight, will likely be docked in St. Clair Shores, Mich.	$102,363 for a one-sixth share; $7,243 per year for maintenance	Owner gets four weekends, and 15 weekdays between early May and the end of October. Boat is sold after three years.
YachtSmart of North America 866-869-2248	2004 Azimut 85 feet, sleeps eight (not including crew), owners determine where yacht travels	$500,000 for a one-eighth share; $49,500 per year for maintenance	Four weeks of use per year (maintenance and transit eat up 20 weeks). Boat is sold after five years.

 
Write to Ron Lieber at ron.leber@wsj.com