Jury still out on fractionals
Sales of fractional-ownership condominiums have quadrupled nationally over the past three years. Fractional ownership is the 21st-century version of the timeshare: Someone can buy an interest in a property, such as an eighth or 12th share that translates into a several weeks a year at the fractional-ownership resort.Aspen, with a quarter of the 32 fractional projects in Colorado, is at the epicenter of the crunch to build more.Questions remain, however, about the impact of fractionals on the community. In fact, the Aspen City Council has recently questioned the need for more fractional projects in town, such that developers are hesitant to propose them at this time. “There’s a feeling the city council isn’t sure they like it,” said Mitch Haas, a private land planner based in Aspen. “The focus is more on that than why they meet the code requirements. [Developers] want to [build fractionals], but now they’re weighing other options.”The skepticism is not based on any hard statistics, yet, although the city is studying fractional projects and their effect on the resort economy. City council members have a number of concerns about fractionals, from crowding the offseason, to creating empty bedrooms, to loss of tax revenue. What they could agree upon, though, is that fractionals are hot. To give some idea of the booming nature of fractionals, nationwide sales went from $513 million in 2003, to $1.5 billion in 2004 to nearly $2 billion in 2005, according to a study by the National Association of Realtors. The Residences at Little Nell, for example, a $380 million development of 26 residences (19 three-bedroom and seven four-bedroom) are selling for prices unheard-of in the fractional industry. A one-eighth share of a three-bedroom condo is going for $1.37 million, and a one-eighth share for a four-bedroom unit is up to $2.25 million. The Ritz-Carlton, with a fractional at the base of Aspen Highlands, has doubled its fractional portfolio with four new properties under construction in Maui, Lake Tahoe, San Francisco and South Beach, Fla. Aspen Mayor Helen Klanderud doesn’t want to see empty bedrooms and recognizes that more people in the offseason would help small businesses survive the offseason. That coin has another side. “Those of us who live here need offseasons,” she said. “There may be a diminished offseason due to fractionals.”These ideas are exactly that, ideas. That’s why the city is moving forward on collecting information from the various fractionals around town to get some data on the customers and their habits. “We’re going to survey the fractional owners,” said Paul W. Menter, finance director for the city. “Assertions were made in the application process about economic activity. We’re testing those assumptions.”It remains a question how much fractional owners spend in town and how often they actually use their designated days. For instance, it has been suggested they would spend more in town because they don’t have a big lodging bill at the end of the stay, the lodging is already paid for. “For me personally, the downside is more that you’re dependent on one strata of tourists,” said councilwoman Rachel Richards. “It’s definitely high-end, people willing to buy in advance, pay a mortgage for a vacation in your community.”Indeed, Ritz-Carlton says that its member demographics are in the top 1 or 2 percent for wealth, with a net income at $300,000 or higher, and a net worth of $3 million or more.For Richards, the main issue comes down to a healthy mixture of various beds for tourists. “Who is your bed base? Are there too many fractionals dominating your market?”Joel Stonington’s e-mail address is firstname.lastname@example.org
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