Fractional Ownership News

Fractional Ownership in The Shores

Date: 28/09/2009
Article source: The Shores @ The Ocean

Analysts say “fractional ownership” of luxury vacation homes could become a trend in the months and years ahead as folks seeking to own a dream vacation home give in to economic realities and benefits of shared ownership. among the benefits offered by The Shores @ The Ocean, a development and management company owned by Gordon McMahon of Lincoln City, is a sporty convertibel in every garage. McMahon’s firm has 65 owners, each with a one-seventh share of a Shores home.

For many, owning a luxury vacation home is merely a dream. But a potential trend toward what's known as “fractional ownership” could help more folks realize at least a piece of that dream. Lincoln City is one of the few places in Oregon where those want to can invest in and own one-seventh of a multi-million-dollar home through The Shores @ the Ocean, a development firm owned by Lincoln City resident Gordon McMahon, who launched the project in 2001.

“When I first came to the Oregon coast, I noticed exceptional house overlooking the ocean, but they were just sitting there empty and weathering away,” said McMahon, who brought with him extensive experience developing fractional properties in California.

“When I spoke to the owners, they told me that, when they did use the house, they spent most of their vacation time doing maintenance. They never really had time to just relax. It didn't make sense.”

So McMahon began selectively purchasing homes with ocean frontage or overlooking the beach.

He gutted them and restyled them into “top-of-the-line luxury showplaces,” and acquired prime oceanfront lots to build “one-of-a-kind designer homes” to sell on the fractional ownership plan. McMahon decorates and furnishes them lavishly, provides an array of recreational amenities - such as home theatres, pool tables, and spas - and even puts a sporty convertible in the garage of each home.

But The Shores' main selling point, according to McMahan, is putting ownership of such luxury oceanfront homes “within reach of many who might not have believed it possible.”  Multiple buyers purchase deeded shares of a property, usually as tenants-in-common. Properties are generally cared for on a fee basis by a management company, which maintains the property and provides various services.

Industry analysts such as Ragatz Associates in Eugene say fractional ownership allows vacation home buyers to leverage their resources, and buy only as much home as they can reasonable use.  Studies by Ragatz, a national real estate analysis firm specializing in the vacation sector, indicate that those who own a resort home actually only use it for about five weeks a year. Otherwise, it either sits vacant, or is rented out to others “who may degrade the property.”

McMahon sells one-seventh shares in The Shores homes, and each share ensures that each owner has access to the home a minimum of seven weeks each year. Owners never even need to meet each other.

The Shores team manages everything, with company staff routinely working with owners to customize and scheduling preferences. The company also handles all maintenance, keeps the homes spic-and-span, stocks the kitchen with everything from tableware to a cappuccino machine, and provides banks of lockers to allow each owner top store personal items between visits.

McMahon said the more than 65 owners who have signed on for one-seventh shares since 2002 with are highly satisfied with their decision to “go fractional.” Ragatz studies support this, indicating that 80 percent of fractional owners are “very satisfied” with the arrangement.

McMahon said fractionals are not time shares, which are simply contracts specifying the right to use a property during certain weeks. Fractionals are actual deeded interests that the owners can sell, leave in their wills, or put in a trust. And unlike time shares, which can quickly lose up to half of their value, fractional ownership has the same tax and market appreciation benefits of whole second home ownership, without the problems associated with maintaining it from a distance.

Oregon was one of the first states to have a fractional ownership development going back about 20 years.

According to Ragatz, the concept waned and has only re-merged within the past several years. Analysts say fractional ownership of luxury vacation homes in prime locations could easily become a trend, and Ragatz expects “at least a half dozen” fractional ownership developments to emerge in Oregon “within the next 18 months.”

“The rationality of he fractional concept is so much greater than it is for whole ownership,” Ragatz stated, noting that fractional owners are also helping to maximize the use of a scarce resource: prime oceanfront property. “It's a very stable part of the resort real estate industry.”  Analysts say the average investor purchasing a fractional ownership has an income of about $200,000 per year. More folks looking to leverage their assets are likely to consider the fractional option in the years ahead.

McMahon, who was at the leading edge of the fractional ownership industry 20 years ago, is ready. A newly completed home in the Road's End section of Lincoln City was one of two that were offered to potential buyers for the first time during the July 4 weekend. Each one-seventh ownership share at The Shores is currently $399,000, with bank financing available.

Information about these and other offerings from The Shores @ the Ocean is available by calling 994-3061, or visiting www.theshores.info.