DO you crave a millionaire’s lifestyle, complete with must-have accessories
like yachts, sports cars and private jets, but don’t want to pay millionaire
prices?
Fractional ownership is being touted as the answer. The concept, which began
in America more than 20 years ago, involves buying a stake in a luxury asset
such as a vineyard, an upmarket villa or a work of art that gives you the
right to use it for a fraction of the year.
It is taking off here as the moderately wealthy seek to emulate the lifestyle
of the super-rich, but balk at the soaring cost of all the trappings.
Everything from fine art to classic cars has leapt in price in recent years
as new buyers from Russia and China compete with a more traditional
clientele.
Piers Brown at Fractionallife.com said: “Inquiries have doubled over the past
year. Even the super-rich can benefit from fractional ownership if they lead
busy lives and don’t want the burden of ownership.”
Schemes are available for almost any whim with wannabes sharing everything
from whisky to handbags and even pets. With Flexpetz, which plans to open an
office in London before the end of the year, you can buy the right to spend
a few hours to a number of days with one of its dogs.
Experts warn that the schemes are generally a cut-price way to get a certain
lifestyle rather than a good investment – although there could be potential
for capital growth.
Christine Ross at SG Hambros, a private bank, said: “They should be seen as
lifestyle investments rather than financial ones.”
Most of the schemes are unregulated so you could be left with nowhere to turn
if you had a complaint – short of going to court. We assess the pros and
cons of some of the schemes on offer.
Wine
Investors in wine are being tempted to buy a share in Bordeaux and South
African vineyards through Wine Estate Capital Management (WECM). Its current
schemes have all sold out but it said a new project could be imminent.
The minimum investment is €100,000 (£67,000) and offers stays of three to five
weeks on an estate and a minimum of 10 free cases (120 bottles) of its wine
each year.
The value of these freebies varies from estate to estate. WECM’s first
investment was Chateau Richelieu in the Fronsac region of Bordeaux, formerly
owned by the famous cardinal of the same name.
Despite its prestigious history it is not regarded as a top-class chateau.
Past vintages sell for between £100 and £300 a case, so 10 free cases are
probably worth at least £1,000. A three-week “free” stay in the chateau
during the summer would save you about £1,400.
There is also the possibility of annual dividend payments from a share of the
profits generated by guesthouse accommodation, sales of wine and other
agricultural products grown on the estates, such as olives.
Together, the free wine and the dividend payments should produce the
equivalent of an annual return of 6%, WECM claims, equivalent to a return
from a high-interest savings account.
The intention is also to sell the estates and divide the profits between
shareholders. The managers think this could boost returns to as high as 20%
a year, although this will depend on land and property prices.
Art
Investors can buy a share in contemporary works through schemes such as
Artvest, which give you the right to display the art on your walls when you
need to impress.
You invest a minimum of £2,000 a year and the works bought by the syndicate
are rotated round members’ homes for three months at a time. At the end of
three years everyone is given the option to receive at least two pieces of
work or the cash equivalent.
Members get a say in which pieces they would like to own, but where more than
one member is after the same piece the person who receives it is chosen
randomly.
Yachts
Boat and yacht schemes are proving particularly popular, as they offer a
cost-effective way to enjoy sailing without the expense of buying your own
boat.
Sailtime, for example, offers you the chance to sail at least seven times a
month in the same yacht or powerboat and treat it as your own, without
making a purchase.
You pay a one-off joining charge and a monthly membership fee that varies
depending on the boat you choose and the location. For a Beneteau 343 yacht,
which is big enough for two couples, you would pay £2,500 upfront, of which
£1,000 is refundable, assuming you don’t damage the craft. The monthly
membership fee in Falmouth is £528.75 including Vat – cheaper than a typical
weekend’s hire of a similar yacht.
You have to sign up for at least 12 months so over a year you would sail 49
times and pay £7,845, if your £1,000 deposit is returned. That’s just over
£160 per sail.
To buy an equivalent boat brand new would cost £57,000. If you borrowed up to
80% of the boat’s value using a marine mortgage with a term of 10 years,
monthly repayments would be be £563 a month at a 9% rate of interest,
according to Bank of Scotland.
Berthing fees in Falmouth would set you back about £4,000 a year and insurance
about £450, according to Noble Marine Insurance. Ignoring any extras such as
maintenance and fuel puts the annual cost at about £11,000 – £3,000 a year
more than the fractional-ownership option. You will be able to sell the boat
on, but most depreciate in value as soon as they are bought.
With fractional ownership, though, you have to share your yacht with up to
seven other members, so there is no guarantee you will always be able to use
it when you want.
Classic cars
Fractional ownership is also being applied to classic and sports cars,
providing part-time use for far less than it would cost to purchase your own
model. The Classic Car Club, for example, offers mint-condition motors such
as a 1972 Jaguar E-Type convertible or a 2005 5.4 litre V8 supercharged Ford
GT.
Your subscription buys you points, which you trade for days in cars. The most
basic package includes a joining fee of £500 and an annual subscription of
£3,250, which buys you 750 points. That’s enough for about five weeks’ use
of a Ferrari 308. Other schemes include Parc-Ferme, True Classics and P1.
If you are interested in what’s on offer this month’s Fractional Ownership
Expo in Broad-gate in the City of London is a good place to learn more. The
fair runs from August 20-22.
Fractionals are the wave of the future in gaining access to luxury assets. The Fractional Concierge website (http://www.TheFractionalConcierge.com) is the world’s first website that brings together ALL assets sold as fractionals: Real estate, aircraft, sea vessels, automobiles, recreational vehicles, and everything else from handbags and artwork to dogs and organically grown meats. The website gives you detailed information, pricing and photos on hundreds of fractional assets so you can peruse the many different options.
Daniel Giannini, Aquebogue, New York