Susan Kime (RSS feed) June 1st at 9:01AM

In some of my recent Luxist articles, The Dawn Of A New Economy and From Conspicuous to Conscious Consumption I have suggested how newer definitions of luxury help inform the decisions about how and why people buy in this unusual social-economic climate. I learned from the many presenters at the Luxury Summit, a luxury ideas symposium held last month, about the nuances of an emerging economy with new luxury consumer decision-making processes, especially regarding big ticket items. And few are bigger than second and third homes. It is no secret this market has suffered, as has the primary home market in 2009. But there are rays of light in 2010, and especially with the Turks And Caicos Sporting Club at Ambergris Cay. Amid the barrage of news about market declines and foreclosures, this club is doing well. And the reasons for success circle back to the trends explored at the Luxury Summit.

" Last year," recounts Steve Schram, CEO and Managing Partner of DPS Development who owns and runs Ambergris Cay, "was basically a static year. We didn't make money, we didn't lose money There were a few sales, but nothing like we were used to. Then, in 2010, YTD, we have done 20M worth of new home sales. It seemed as if potential buyers were actually hesitant to call us in 2009, and then, in 2010, they called. It was as if the phone lines were reconnected. Most were member referrals, which is always rewarding. There are three new homes just started and another seven to ten starting in the next six months. We will start two of these houses in the next two months. Members and their families know what they receive here, and it fits so well with a newer sense of social and environmental responsibility, along with a sense of being connected to each other and to the island."

One of the many trends gleaned from the Luxury Summit, and borne out by the success of the Turks And Caicos Sporting Club, is that the luxury consumer is not on autopilot anymore. Their purchasing interests have evolved from I want to I need to we need: essentially a journey from individual self-absorption to a kind of familial populism. The consequence of such a shift is the take away value -- which has also moved from quantitative excess to a qualitative rediscovery of feeling favorably connected -- whether it is with people or new experiences. In both instances, Ambergris Cay fits with these ideas in an eco -sensitive, communitarian way.

Owned and managed by DPS Development, Ambergris Cay itself is a private island about 3 ½ miles long by 1 ½ miles wide, about 1100 acres, 450 of which is a nature preserve. It is a 25 minute plane ride from the Providenciales airport to the Ambergris Cay airport, with its 5700 foot paved jet strip and Customs/Welcome house. Club members often fly their private jets in and out of this airport, either back to Provo or Miami or beyond. It is 575 miles from the Florida mainland.

The original vision for this island was conceived by Henry Mensen, a Canadian developer and visionary who bought Ambergris Cay is the mid 1990's, with the belief that an eco-sensitive community could exist and sustain itself, once the island was discovered by others. He built a personal family compound at the eastern tip of the island, called Ocean Rise, and hoped others would discover it also. Who did discover it and see its possibilities were Steve Schram and Peter Pollak, founders and owners of DPS Development, a well respected development company, whose earlier enterprises included The Ford Plantation, The Greenbrier and the Snake River Sporting Club, to name a few. Steve and Peter understood Mensen's vision: an ongoing sustainable development that included an eco-sensitive infrastructure. To that end, Menson sold it to DPS, and the cautious planning commenced, infrastructure first. This plan-- now completed -- included the airstrip, the radio tower that allows Internet and cable TV in all the homes, a large reverse osmosis water purification and filtration system plant that allows pure water into the homes, the irrigation systems, and the Calico Jack (the Club's restaurant and bar) Pavilion. Because of the DPS commitment to eco-sensitive processes, Ambergris Cay also has a glass and plastic recycling program, and clean burning trash incineration.. There is also a new Environmental Learning Center, used by children and families of members to learn more about the unusual flora and fauna of the island.

The Club is redefining the meaning of a traditional sporting club. When many think of a sporting club, they think of golf courses, tennis courts, multiple swimming pools, yacht racing, where nature is separated from culture, and sanctuary is separated from adventure. It is very different here, as members use the Club as it was envisioned – both as a haven for adventure and for sanctuary from the world. In both cases, the sensuous component is never far away. The members and friends often go fishing, always catch fish, and then the catch is taken to Chef Tadd Frye, who in turn creates dishes of Sashimi and sushi, from Ahi tuna, Grouper, Yellowtail, Conch. The members can also go on Flamingo searches, snorkeling and deeper diving expeditions, all types of fishing, catamaran sailing, and sea kayaking.

Other activities are nature walks, both in the day and in the evening to see the highly hybridized flora of the island – an example: Turks Hat cacti that grow only on this Cay. There are also explorable pirate and Loyalist ruins here also. The evening nature walks expose peering red eyes in the dense brush and bush. Of course, in the daytime there are large Rock Iguanas at many turns in the road, always looking at bemused members in a stern, reprimanding way – whose island do you think this is? they seem to ask. And when members need some sanctuary within sanctuary, there is a Wellness Center, offering Yoga and Qigong, and massage sessions.

At present, there are now over 200 members have purchased view lots and have built or are building beach cottages -- large three and four bedroom homes, all with ocean views, and ocean access. Some have plunge pools; all have decks that look out to sea. Pricing runs between $600,000 and $3M per lot, given the size. At present, thirty lots are available.

This Club has allowed the meaning of luxury to evolve into newer dimensions of balance, happiness and community. The few brands that propagate this Platonic idea of eudemonia, translated as human flourishing, flourish themselves.

by Susan Kime (RSS feed) Feb 17th 2010 at 9:01AM http://www.luxist.com/category/luxury-travel/...

Because of the ongoing severity of the economy, the definitions and presentations of luxury appear to be evolving. What is emerging, due to the shock and awe of this recession-roller-coaster ride, is the shift in luxury awareness from mirror to window, or, from narcissism of self, involving conspicuous consumption, to window: looking from conspicuous to conscious consumption, infused with a strong measure of social awareness. Looking out the window garners new vistas, and as it does, garners divergent root systems in the meaning and awareness of the luxury experience.

A new example of this evolving definition are the new ideas put into place at the Tryall Club – a bastion of family tradition and colorful history near Montego Bay, Jamaica.

It is, and has been for the past ½ century an enclave of understated elegance, with an exceptional social history and multilayered cultural tradition. Originally a 2300 acre sugar plantation, it was transformed in the 1950s into an elite club of private oceanfront, ocean view and golf course villas. Bing Crosby ( who bought four plots of land in one morning), and friends visited there, Noel Coward, Princess Margaret, Winston Churchill all were there. It defined and still does, some of the best that money buys in terms of time, space, location and design aesthetic.

At present, The Tryall Club offers 84 private villas, many for rental – moving from $3000 to $25,000 a week, and a few which start for sale between $750,000 and reach $4,770,000 . Utilizing a Caribbean Colonial architectural style, each one- and two-story residence is noted for size (up to 20,000 square feet), views (of Montego Bay, the golf course and the northern coastline), and, perhaps most, its household staff. Every villa has a minimum of one private butler, cook, housekeeper, gardener and laundress. Each villa rents for between $3,000 and $40,000 a week, and was also designed to house their private home staff: chefs, housekeepers and assistants, landscapers, gardeners, laundresses, drivers. The Tryall Golf Course is built in and around the exceptional centuries old ruins of the sugar plantation and the still-functioning aqueduct and water wheel.

Many Villa owners were introduced to the Tryall Club by their parents and grandparents, each carrying their legacy to their own children, grandchildren and in some cases, great-grandchildren. In this regard, the Tryall Club feels like a living legacy.

But, legacy or not, the story may well have ended there, with guests and owners coming and going, everything perfect, clean, bright, colorful, ironed, and static. But the trajectory of life does not go that way, as what's static usually entropizes -- and the Villa owners' way of seeing and doing are certainly not that. Those that I met are profoundly aware of the cultural and social complexities away from the enclave. It is to their great credit they do more than talk about these issues.

Alice Needle, owner of a Villa named Haystack, is representative of the philanthropic mindset of the many Villa owners I met. She owns a 12 bedroom, 12 1/2 bath Villa on three acres, and four of those bedrooms and baths are for her staff. The staff residences have ocean views, and spacious living areas. She is also the person who helped begin the Sandy Bay Basic School, located in Sandy Bay the neighboring town to the Tryall Club. It is a school for the children of all the Tryall Club staff. The day before I met her, she was down at the school, painting the interiors.

George Hodges, Villa owner and incoming President of The Tryall Club, has donated many computers to the Sandy Bay Basic School as well as to the High School in Montego Bay. More are to come. Recently, as of February 13, the Villa members held the Sugar Cane Ball, that included a silent auction. The money raised there was for Hanover Charities, that supports health and education initiatives in Hanover Parish, the area surrounding the Tryall Club.

In addition, the Tryall Fund, a substantial amount of money garnered by other silent auctions and events, supports the Lucea Infirmary, a nearby orphanage, and the evening health clinics in Sandy Bay. The Fund also supports educational scholarships for children of the employees of the Tryall Club, Also, one of the Villa owners funded a medical clinic close to the property in Hopewell, about 5 minutes away from the club. So, should any of the owners or staff on the property become ill, medical help is close by, and yes, the doctor makes house calls.

"Perhaps it is the beauty and the peace here that allows for such giving spirits," suggests Ms. Needle. " We live a beautiful life here – look around! There is ocean view, flowers in bloom, fruit on the trees, all you would ever want or need. And our Jamaican friends make us feel at home. They are wonderful, caring, hopeful people, and I want to do all I can to make them happy, just as their caring for the club and my villa, make me happy."

" Yes," adds Mr. Hodges. " A rich life used to mean just having a lot of money. Now, I like to think that having a social conscience redefines the meaning of rich. A rich life, to us, means doing good as well as doing well. Once you have a social conscience no matter where you are, it never leaves you."

Tags: Jamaica, luxury private clubs, philanthropic goals, private clubs, private villas, PrivateVillas, redefining luxury, Tryall Club

Filed under: Estates, Luxury Travel & Hotels

"Living at Veer Towers is a fascinating juxtaposition for contemporary living," said Tony Dennis, Executive Vice President of City Center, Residential Division. " It juxtaposes and ultimately balances the evolving urban mosaic of CityCenter with a deeper variety of artful life immersion, where owners can see great art and great architecture almost everywhere they turn, both inside Veer and outside. Finally, you can see the present and the future combined here: what Las Vegas is known for now – and what Las Vegas will been known for in the future."

The residences feel as if they have been built for a population who want the needed amenities in this kind of living – a rooftop pool (see below), hot tub, fitness center, a rec room, private boardroom and business center, bike storage, residential valet and concierge, and 24 hour security, but also, have an eco-sensitivity woven into their texture of lifestyle interests. Veer is the complex that has won a the 6th gold LEED certification for CityCenter, from the US Green Building council, and that has come to matter to many who buy here.

Yet, Veer is also a child of CityCenter –as Veer's artwork is part of CityCenter's fine art collection. It displays two dramatic, hand wrought mud-wall drawings by Richard Long, 8 feet high by 50 feet wide, in the lobby of the west and east tower walls. Veer Towers also rises from Crystals,City Center's 500,000 square foot retail/shopping/entertainment space, where pieces of art by Claes Oldenberg Jenny Holzer, Henry Moore, Maya Lin, Nancy Rubin, to name just a very few, are almost everywhere. Outwardly, as in the rendering above, the same sense of artistic dynamic abides, with the inward inclining Veer Towers almost at its most visual midpoint.

Source: The Opening of the Veer Residences, CityCenter Las Vegas (http://www.luxist.com/2010/07/19/the-opening-of-the-veer-residences-citycenter-las-vegas/) by Susan Kime

It has been over a year since Graham Kos has spoken to any member of the media as to the fate to The Solstice Collection, the highest end of all Destination Clubs. Here are some questions I posed to him, with answers that may shed some light on what happened from December 2008 to December 2009. - Susan Kime

Remind our readers about what the Solstice Collection was, and what it meant to you and to the members at first.

Our model was small to begin with – our original plan at the outset was to have 7 exceptional homes and 42 members. I originally found the destination club industry compelling as, for the first time, it presented a real estate investment model that allowed you to purchase a category of real estate ( high end second homes ) which historically had the greatest appreciation over time but typically was not acquired for strictly investment purposes. In addition, it was a uniquely fun and creative project that took you to the most beautiful locations in the world.

In the beginning, I had an extremely small but very effective team. I did not hire my first "employee" for the company until year three. I did not take a salary for myself the first two years nor did the company have an office during this time. We were able to accomplish quite a bit with a very small budget. Our secret weapon was my wife, Shay, who did all the design work for Solstice. It was her style, her vision, her way of living that we were selling.

We had great PR, and we received many awards – Best of the Best for three years from Robb [Report], and two years from Business Britain. We raised our rates to the highest in the industry, we bought more properties, our credit lines were solid, and things were going well.

To us, Solstice was more than just a business venture – it was a vision; a way of seeing and indeed a way of being. It also fulfilled a need that I saw consistently with those who I knew were on the UHNW [Ultra High Net Worth] level: to travel in the most elite, seamless manner possible – and not with a lot of extra services by the way! We wanted members to have a real second home experience and with homes that had soul, a story, reflected by great interiors. Where other clubs had a very generic approach to interior design, we had furniture from the best European design houses, original art and sculpture, all hand picked from French flea markets in Paris and Lyon, or made specifically for us. Each item reflected the Solstice vision. We had a Villa in Florence whose façade was created by Michelangelo, a residence deep in the Amazon rain forest, a home in Aspen, designed by a famous young architect, Scott Lindenau, and our newest property, the home in Napa, that took about four years to build, as each stone had to be removed from an old Pony Express office in Texas, and brought here to [the] Napa Valley. I co-architected the home, and Shay did the interiors.

One of the greatest challenges along the way was balancing sales and profitability with the original vision of quality and uniqueness - these two concepts are often at odds in a business proposition and balancing these two somewhat conflicted concepts was one of the underlying issues of contention with the Parallel Group.

How did the merging and de-merging with Parallel affect the structural integrity of the Solstice collection?

We had very high hopes at the time of the Parallel merger. At the time they were a new high end destination club competitor, and we thought that merging would give our members and their members more access and variety of high-end homes. We thought also economically it made sense, but in the end, their focus – making Solstice into a much larger club – and ours, doing so without sacrifice to the quality and uniqueness – just did not jell. We also believed that with the merger additional monies would be invested to expand the portfolio and subsequently that did not happen. So, with the help of a Swiss investor who provided the money to de-merge, we de-merged. This was a necessary step, but it began a process where the de-merge circumstances began to control us, we did not control them.

After the de-merge in May of 2008, ironically, other things became clear but also painful. We took back management of the club in June and then spent the first 90 days closing our Scottsdale office and dramatically downsizing management. A month later Lehman went bankrupt and our phones literally stopped ringing. Our business model was not fundamentally different than others in the industry and it required a certain amount of sales to support the development side of the business. The combination of an abrupt end to sales, and mounting membership redemptions caused great stress to the model. As difficult as these issues were to deal with an even more daunting issue was our main credit facility – the Fortress debt – was coming due at year‘s end, and our lender, like many others at that time, was calling every loan they could (our interest rate had no floor and was yielding just 3.5% - not a terribly attractive yield to a hedge fund). The environment for new lending was extremely difficult at the time.

How did the decline begin, and when did Solstice declare bankruptcy?

2008 was a difficult year as for many reasons, potential members just weren't committing to Solstice, even though many loved the idea. In the beginning of the year our unwinding from parallel seemed to distract from our core sales efforts. We remained optimistic that once past this distraction things would return to normal - they did not. I was asked by certain members of the advisory board to step down in November of 2008. I agreed to do this, despite my misgivings, on the condition that they provide me with a viable plan to retire or replace our existing credit facility coming due at year end. After all I was personally liable on the debt. I actually never received an official response to that proposition as a few days later, after employees left the office one by one , I was informed by a third party in my now empty office that I had been removed by the board. In March of the following year Solstice declared bankruptcy.»

Could you explain the relevance of the Fortress debt and how that impacted - both positively and negatively - the fate of Solstice?

Fortress is a hedge fund and manages private investments. They provided a $50M credit line for Solstice in the summer of 2006. We were allowed to draw 40% of the cost of homes, furnishings and closing costs with that credit line.

At the time we placed the debt Fortress was a new player to the space. Prior to our securing this debt only Textron and Capital Source were lending in this area. From the outside looking in I am sure that this financing would appear to be simple but the reality was that you were purchasing and lending in many different countries - all with different laws regarding lender and borrower rights. At the time we secured this financing it provided the lowest cost and greatest flexibility of any facility that I was aware of in the destination club market, including all the largest clubs. But then again, the Fortress debt was one that our Member Advisory board eventually had issues with: they suggested it was a mistake to fund long-term assets with short-term debt. Like we didn’t know this? The reality was this completely ignores the fact that no long term debt was available in the marketplace at that time (after all, this was a new and unproven industry). Another suggestion I have heard put forth is we took out the line of credit knowing we could never pay it back. That is so ludicrous – I don’t even want to discuss it.

I tend to focus on the bottom line and as it relates to financing the bottom line is no new third party financing was ever put together by the new management last year save the club. I believe now, as I did then, that it was extremely reckless to take control of the club with no plan in place and no past experience to fully understand the all the challenges the club faced.

Part II will be Published Soon.. -Ed

It was in first week in December of 2008. The Board members voted me out, and I had to leave. But when I left, I left what was at that time still a viable, functioning club. In retrospect, I found it very disconcerting that despite having achieved a certain degree of success over the preceding 5 years no one had bothered to inquire if a plan existed to retire the Fortress debt - by the way - there was. It was not until the day before new management put the club into bankruptcy that I was queried on my intentions!

One of the lessons I learned from that day, that irrespective of the facts and circumstances, there are always people that think they can do a better job than you. I believe there was more than a degree of arrogance, ego and the desire for control on the part of a few that lay at the base of their intentions and actions. What I saw evolve was a small group of individuals that desired to take control of Solstice but seemed to want to avoid the responsibility that, at least I believe, would go hand in hand with the taking of control. In order to justify their actions and absolve themselves from responsibility they would need a scapegoat to blame things on in case things did not work out under their directorship. I was the lucky scapegoat. Actually to be fair, Shay and I were both blamed for all of Solstice's ills ( including the drop in the real estate market). It seems to us we were blamed for exactly the same things we were praised for in the early years of Solstice – me for my real estate and development abilities, her for her exceptional taste and great design creativity.

At the end of the day, I think you do learn far more from mistakes than successes. There are several things I now know about myself that I was not completely aware of prior to Solstice. I am not necessarily a good judge of people. I am far too trusting. I am not built to manage companies. You should never put your personal interests behind others as your sacrifice is rarely appreciated.

So, after a year, what happens to Solstice now?

As stated before I tend to move directly to the bottom line - so here are some of the facts, as I know them, surrounding Solstice from December 2008 to December 2009:

In the spring of 2008, we had about $80M in assets.

At the end of 2009 – we will have simply retired the secured debt ($24M) with the sale of all these assets and nothing will be left for unsecured creditors. As a symbol of the whole demise, I would consider the following transactions: We had a contract to sell one of our homes in Aspen in Nov. of 2008 for a net $6.1M. Subsequently, under the new management in the spring of 09 we sold this same property for a net 3.7M.

What will happen to what’s left of the club is this: in a few weeks the minority Swiss partner in Solstice will purchase the remaining assets of Solstice for the secured debt (cents on the dollar from purchase price) and the members and other unsecured debtors will be left with nothing.

Let me explain further: the Swiss investor and his Geneva based equity group will pay off the Fortress debt, and in return, receive the remaining 9 Solstice Collection properties - fully furnished (this is the same group that took control of the club in Dec. 2008). What is personally most disturbing to me as a fully paid member of the club is the knowledge that this group obviously had the resources to help save or restructure the club at any point over the last year but engaged only at the 11th hour to acquire all the assets at a steep discount. Just 3 months earlier a document was circulated to members estimating a $25M net equity in the club after the secured debt was paid. As a member we will now have the ability to "rent" the properties back from them until the markets improve and the assets are eventually liquidated for what I believe will likely be a substantial profit. There is some language in this rental agreement that under certain circumstances could return some funds to the members if they commit and continue to pay rent for a certain time frame but this member is not holding his breath. Members have been asked to make a two year commitment on rent ($40-$86k per year ). I am aware of some members that consider this a reasonable outcome - I am not one.

With all that has happened to you, do you have ideas for models out there that could possibly work?

There are two models that in my opinion hold some promise in today's market. One, where you can put your home in a large pool of similar homes, pay a small membership fee, and travel to those homes anytime - you keep control of your asset. And two, a "closed end" fund where properties were bought, used and held for a pre-determined time by a group and then liquidated in a window of time that would allow for capturing the appreciation.

As regards to all that has not worked thus far in the DC industry: top of the list is "things often cost more than you think." This applies to both the operation and development side - I believe the often inaccurate modeling of these costs to be the Achilles Heel of the industry. We addressed this by having a very bare bones approach early on and were successful. However, if you want to scale this and do not immediately generate a very high velocity of sales you can have problems.

In hindsight, the cost of acquiring a member is likely not too dissimilar to the sales and marketing costs associated with selling a time share - it might be somewhere closer to 40% than 20% depending on the size of the organization. I am unaware of any club that has a financial position I would want to replicate today. I think it will be very challenging environment to sell memberships over the next 24 months - if not longer.

Are there any clubs you would buy into at the moment?

Personally, after my experience, I am currently not a candidate for club membership.

It is no wonder Luca is proud. Even in this capricious economic climate, the Vallarta Garden’s launch in mid December 2009 has created major buzz. Its location is on Banderas Bay, a peaceful body of water that spans about 40 miles, and is protected by the Sierra Madre mountains. This area is known as the Nayarit Riviera, located on the Pacific, non-Hurricane side of Mexico, midway between Puerto Vallarta and Punta Mita, near a picturesque town of La Cruz de Huanacaxtle.

“And this beachfront getaway is much more than the phrase implies..” Luca comments, “It is a boutique resort, with many luxury amenities. A few minutes away from the residences owners have access to Jack Nicklaus and Tom Weiskopf signature golf courses. There is also is a yacht on the property for owners and members to use. Sportfishing and pleasure cruising are just two of the great amenities here. And then there is the spa… on the beach!”

Vallarta Gardens combines fractional, full ownership and basic vacation rental structures. The homes themselves are between 3,500 and 5,000sf, four and five bedrooms respectively. Pricing starts at $80,000 for 1/13 share.

Luca is one of the few people in the luxury fractional industry whose international reputation is widely known and respected. Multilingual, multicultural, and of European descent, he has been involved in finding and creating successful fractional projects for the past decade. He puts teams together that define the who’s who of the fractional interest industry. Jim Marmorstone, Lisa Manley, Sarah Rezak, Andrew Berry, Daned Kirkham, Eric Pierce and others who are very well-known as the best of the best when it comes to negotiating, sales, and marketing, now consult for the various LLPI projects.“ We have hand picked the best in the fractional field, and can call on them anytime to create new strategies for each of our projects.”

LLPI is an international advisory and management company servicing developers and investors in luxury mixed-use hotels & resorts. Luca said: “Our aim is to maximize value for the hospitality real estate asset,” said Luca, "and this is done by applying creative strategies toward the leisure real estate product. In turn, we can drive significant synergies between the different hotel and resort components.”

LLPI is working in partnership with Valhalla group, with its visionary president Preben Vestdam, in EMEA (Europe, Middle East and Africa) to deliver a consistent global product line -- sharing resources, know-how and operating processes & procedures.

LLPI has also established a preferred alliance with Strategic Hotels & Resorts, a leading owner, developer and asset manager of luxury hotels in North America and Europe. SHR is viewed as the pioneer and “blue chip” of hotel and resort asset management with its leading edge systems -- setting the standard for operators and owners alike.

One of the more fascinating aspects of Vallarta Gardens is the marketing decision to include a major emphasis on the Mexican market. As Luca says, “We are, of course, vitally connected to the American and pan-Asian market as well, but we know that Vallarta Gardens is only three hours away from Guadalajara, Mexico, with nearly 5 million people, and we believe that many of them want and need a beachfront getaway.”

Luca pauses, then says, “Actually, we all need a beachfront getaway, and Vallarta Gardens combines the best of both. It is a true sanctuary.”

www.llpi.us

An Optimist sees opportunity in every difficulty -- Winston Churchill

To many in the fractional interest and the destination club industry(s), this year has been the definition annus horribilis, a year most horrible, in the sense that the economy is flat, consumption has become more conscious than conspicuous, and lenders are not lending. It was projected to be, and actually was, the perfect storm of horror for developers on one end and buyers on the other. However, toward the end of this year, a few green shoots of hope have been popping up here and there, giving rise to some of the most reputable consultants, sales and marketing people and all around seers giving their thoughts on what happened this year and what’s to come.

Bill Orwig - Director of Sales, Pond Bay Club, St. Johns

I have been in fractional sales for the past ten years, having started selling the very first fractionals in Deer Valley, Utah. This year has been quite flat and really depressing. But I am convinced, especially after speaking to many this year, that the need is still there. Over the years, having worked with clients at the Villas at Rancho Valencia in Rancho Santa Fe, California, The Rocks in Scottsdale and Pond Bay on St John's, the need for the fractional is still there! But sales people have to be hired who have the ability to help the potential member/owner to overcome fear of the economic unknown, and guilt at buying something that is beautiful, and will provide pleasure for years and years to come. So, I am cautiously optimistic. I have heard there were seven sales at the Residences at Mission Beach this past fall, there were some sales at Old Greenwood in Lake Tahoe. There have been sales with the Timbers Company properties also, so not everything is flat..

Daned Kirkham - Fractional Sales Consultant

The fractional idea still interests people, and many want to buy, I speak to them all the time! It is just that the new idea “bloom” has worn off, so we as salespeople and consultants have to help those who sell second homes to give the fractional idea a more viable chance, through educating them as to what the fractional idea really is.

Meadowood, though not a true fractional, has been very successful here in Napa because the members can buy fractions of the vineyard and have their own wine and label. It is a club idea, with fractional purchases attached. These types of themed fractionals may be one of the waves of the future.

Wally Hobson – Hobson Advisors

I recently met with some bankers and developer/investors in Chicago, who helped me see a financial reality that I, and others also, were unaccustomed to seeing - how extremely complicated it is now, and will be for eth near terms, probably until first and second quarters 2011, for developers to get loans from banks, as bankers now must personally guarantee a loan will be paid in a defined period of time. Most bankers, according to those I met with, never personally guarantee loans for anything or anyone. It has historically been too risky, and now it is untenable.

What will happen now and in the future? Well, projects in Mexico are doing well. That’s because those projects are selling to the high-end Mexican population – one that is an interesting group. They do not have the uncertainty that the Americans have nowadays. They have other problems – drugs wars being the main one - but they do not have a deeply uncertain, recessed economy. Consequently, they are not as fearful in buying fractionals as Americans right now.

With that said, there are a few successful fractionals in the US right now. I heard of one, The Meriwether Ranch in Montana, that was selling quite well. But in general, as our economy becomes more stable, as consumer trust in the economy becomes stronger, so will fractional sales.

Jim Whitteron - President, Spring Creek Partners, Sales and Marketing Director, Capella Pedregal

Capella Pedregal has been exceptionally successful, even though sales have slowed somewhat in this new economic reality. This year and next, we have learned something new: that in order to adjust to the New Normal Part 2 (The "New Normal (1)" was a phrase coined post 9/11) we had to create new marketing ideas that were completely different from those of last year. In addition, our strategic alliance with Ultimate Escapes has been very successful.

What do I think about 2010 and beyond? I have some optimism that the industry will come back, but very slowly. Gone are the good old days when sales people were order takers. Gone are the days when people would write their checks after looking for a few minutes at the project.

Luca Franco – President of LLPI, Luxury Leisure Properties International

This year has been very difficult for everyone, but here and there are some fractionals that have been selling well. We manage the Four Seasons Residences in Punta Mita, Mexico, and there have been excellent sales there. The brand, of course, is exceptional, but the property is spectacular also. Slow, but picking up, Four Seasons Punta Mita has done very well this year.

I see 2010 as full of creative possibility. We are re-launching another of our projects in Mexico, Vallarta Gardens, in December. We have generated quite a bit of interest, and much of our marketing will target those who live in Mexico. Vallarta Gardens in Puerto Vallarta is a few hours from Guadalajara, a large city of ten million. In this economy, we have learned to use new strategies to market and to sell, and we have been successful. We must use new ideas for this new economic reality.

Eric Pierce - President, Pierce Group, LLC

Here are some standard answers for poor sales performance in 2009:

1) Consumers can’t afford to purchase second home real estate anymore because they took such a hit in their savings and retirement accounts.

2) Consumers can’t justify the expense right now because they are still worried about market turmoil and the possibility of values dropping further.

3) I even heard one example of someone who said they wouldn’t buy because it would look bad to their friends; i.e. “rubbing it in their faces”… whatever, not buying that one.

4) There is no consumer financing for fractional and until that comes back, nothing will sell.

But here is one that we don’t hear about:

The more difficult it is to sell, the more developers push super incentives and price breaks with sales people hammering the phones and email all day long to a point where they have offended the prospect. These tactics have been around for decades and are a recipe for disaster. What sales organizations have not done is provide methods to reduce buyer risk. I spoke to someone in Telluride recently and they said Franz Klammer fractional re-sales have been somewhat steady this year. This is because the development is sold out so there is very little risk. In July of this year, the Aspen Times reported that “fractional sales are carrying the market right now” with a 23% increase from the first half of 2008. So, instead of adding price breaks or trying to find financing for something that is already heavily discounted, developers should have been wowing their prospects with experience and lifestyle and using tools that reduce risk.

What will happen it 2010?

We should continue to see slower sales pace for the next 6 to 8 months but I’m optimistic for the start of a rebound in Spring/Summer of 2010. The high-end buyer will have been sitting on their hands (and wallets) for two years by then and will be anxious, especially as the stock market continues to correct itself. One point of caution however is primary home values. If they continue to remain stagnant, fewer buyers will have equity line opportunities that they can use for a new fractional purchase.

Developers without finished product will continue to struggle next year. We still have a glut of completed inventory on the market at very low prices. Furthermore, preview stays have becoming very popular and help bring in additional revenue to developers not to mention a strong audience of affinity buyers, so those developers without the completed inventory will be at a severe disadvantage.

Fractional sales should be the leader in the resurgence of resort real estate sales. We should start to see an emergence of new risk mitigation products and services for the industry which will help kick start sales again. When the perceived risk is reduced or eliminated and the market comes back the industry will take off.

Full ownership transactions might regain a little bit of the momentum they once had but definitely nothing like we saw in 2004 and 2005. It is just not practical for the majority of the vacation population. Due to the lack of demand for full ownership there will likely be fewer investment buyers as well for the foreseeable future.

Calistoga Ranch architect Scott Lee knew that Calistoga Ranch needed to reflect a well-defined, natural organicity. “Our charge was to create a private retreat, a sanctuary celebrating what Napa Valley is all about - food, wine and nature. We designed and individually placed each of the more than 200 structures on the site not only to avoid cutting down the 100-year-old heritage oak trees but also to integrate them into our design.”

Lee and his team focused on the tradition of outdoor living by creating what he calls the campground legacy. Each guest lodge is its own camp, he says, made up of a cluster of spaces centering on the outdoor living space and fireplace, just as in a campsite. And interior designer Darrell Schmitt used rustic, natural materials to create a connection between the inside and outside, incorporating such elements as handmade tile baths and fabrics like hand-woven chenille and Tibetan wool carpets. There are outdoor and indoor showers, and multiple meditation spaces as well.

Mark Harmon, principal and CEO of Auberge Resorts, the company that owns and operates Calistoga Ranch, says members love the sense of peace the club’s design and surroundings offer. “I have spoken to so many members over the years,” he says. “They say that Calistoga Ranch is their true sanctuary ... When they leave here, they are refreshed and calmed.”

I spent some time recently at Calistoga Ranch, the experience was one of true sanctuary, just as Mark Harmon said. Calistoga Ranch is a little off the beaten and crushed wine paths of Napa. It is a high end resort with guest cottages as well as a Private Residence Club with owner’s residences. The owner’s residences are of an exceptional, modular design, with an enclosed interior living area, kitchen, and two master bedroom modules. What ties these together is the exceptional outdoor living space, with deck, fireplace, grill, outdoor dining areas, all with views of California's live oak bosques, Ponderosa and Cottonwood trees.

The undeniable feeling is that of living in an elite treehouse, with all the spa and dining amenities of living at a large resort, defining the best of both worlds, nature and culture, sanctuary and society, peace and - if you choose - activity.

The Spa at Calistoga Ranch is one that allows an enhanced feel of true sanctuary. It is located in area called The Bathhouse, where you can truly “take the waters” in a multiplicity of ways. The soaking pools overlook one of the ranch’s creeks, or you can take a mud bath in one of the large private outdoor spaces. When I was taking one of the baths, along with my thoughts, a hawk was flying high above me, moving from Live Oak to Live Oak. There was no sound, save of the soughing of the oaks and pines. The scent of cucumber and a slight odor of something vegetable, probably the mud in the bath, were all that I was aware of. When the mud bath and massage session was over, I felt as if my body had been freed from all the stress armor I wear.

The sense of peace, brought on both the complement of external environment and interior design, stays with the guest or the member or the owner. Here, everything else that used to matter, seems so far away.