SONOMA, CA—While private residence clubs and fractional developments have been relatively slow to recover from the recession versus other real estate property types, Timbers Resorts, owner, developer and manager of private residence clubs and hotels, has partnered with Oaktree Capital to expand fractional investments in the Timbers Collection, which currently includes Mayacama in Sonoma, CA and The Orchard at The Carneros Inn in Napa, CA. We spoke with Timbers Resorts chief executive officer, Greg Spencer, to find out more about fractional ownership.
GlobeSt.com: How has the industry evolved since Timbers began investing in fractional properties 15 years ago?
Greg Spencer: The fractional industry has changed significantly during the past 15 years, in some cases for the better and in many cases resulting in a tough lesson for developers, investors and purchasers. Using a location/property-first model to draw people who want to own in that location works best as opposed to a system-centric model that many of the large brands pursued, which focused more on selling the system and its optionality. We focus on beachfront or A+ locations in A+ markets like the Napa Valley and Sonoma, CA. While it sounds like an obvious strategy, many others in the space ignored this prime directive of development by developing fractional projects in B locations or B markets with lower barriers to entry. Those projects were hit hard in the downturn because there was either no demand for the product or the underlying cost of a whole ownership got to such a low level that there were other alternatives to fractional in that market.
GlobeSt.com: What is your target demographic? Who is the typical fractional real estate buyer?
Spencer: There is a common misconception that fractional real estate is purchased by individuals who cannot afford whole ownership in a given market. In fact, our average buyer has 2.5 homes before they purchase our product. Take many of the buyers from the Metro New York City area. They already have an apartment in the city and most likely a place in the Hamptons as well. They may also own a home in Florida or the Caribbean. This Metro New York City buyer is not looking for a third or fourth whole ownership home in a market like Napa, Aspen or Italy. This is a situation where a fractional product of the same quality as a whole ownership home makes a lot of sense.
GlobeSt.com: Are you looking to expand investments to urban locations versus resort destinations? Why now?
Spencer: We survey all of our owners each year and two of the top locations requested are New York City and London. Miami and Paris rank in the top 10 as well. We do plan to expand in these markets but are always going to make sure that we have beachfront or A+ locations in these A+ markets.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
