Life Styles of the Rich and Famous at a Fraction of the Cost

Date: February 1, 2008

Increasingly Australians are craving the multi-millionaire’s lifestyle, complete with yachts, sports cars and private jets, but don’t want the bill that comes with it. Fractional ownership, a shared investment concept taking off in the USA, is being touted as the answer.

Fractional ownership, begun 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. They now form one of the fastest-growing segments of the US holiday-home market with new sales totalling $1.5 billion in 2005, up 42 percent for the year.

Luxury hotel chains such as Marriott, Disney, Hyatt, Ritz-Carlton, Four Seasons and Starwood are among the big companies that have embraced the concept. These are not time shares, which are merely contracts specifying a right to use a property on certain weeks. Fractional ownership is an actual, deeded interest: You can sell it, leave it in your will, put it in a trust, practically anything you could do with any property. They can even be a good investment with scope for capital growth. Fuelling the demand are roaring real estate markets, which have been especially good in many of the locations where fractionals exist.

The champion of fractional ownership in Australia is the ‘Members-only’, luxury private holiday club Distinctive Holiday Homes (DHH). DHH offers members first-class accommodation in the most exclusive and sought-after holiday destinations throughout the world. Current destinations include a 7,000 sq ft, six- bedroom home in Beaver Creek, Colorado, a 17th century, five-bedroom Tuscan villa set among an olive grove, a 4,500 sq ft lodge in Aspen Grove, Queenstown, NZ. There are also two luxury ocean yachts. Nick Wood, ihug co- founder, New Zealand entrepreneur and creator of DHH says “Australians are turning away from traditional holiday home investments and are discovering the huge benefits of fractional ownership.” “Our clients are often able to afford numerous international holiday homes. But they lead busy lives and don’t want the burden of ownership.”

DHH members pay an initial membership deposit (of which 80 per cent is refundable) of between $50,000 and $250,000. Annually members then pay dues between $7,000 (for seven days stay) and $28,000 (for 28 days stay). Members of Wood’s club get the full service: accommodation, laundry and cooking services, discount private jets and use of luxury vehicles for 10 percent or 15 percent of what they would have to pay to buy the house on their own. The costs of buying and running these expensive properties is shared by a number of people and the homes, instead of sitting idle most of the time, are nearly always being used.

DHH members Mark and Linda Backhaus are in their early 50’s, with two young adult children, and live in Herald Island in Auckland. Mark is a director and major owner of several food and beverage brands, a sporting consumer product company and a start up Biotech company in New Zealand. “We were looking for an easy way to take holidays which would allow us to invite friends and family to join us at great locations around the world.

“We have never owned a holiday home but always thought about it. The only problem was the upkeep, worrying about maintenance and the like. We also like to try different locations all the time. My wife loves the mountains and I love the beach.

“This helps us both get what we want at the time of year we want it.

“I no longer have a desire to own my own holiday home because, after fractional ownership, nothing would be as good or as cost effective for the money.

“This is both a financial and a lifestyle investment. This allows me to stay at properties I would normally not be able to afford and the level of service is unbelievable.

“The location we stayed at exceeded our expectations and we are really looking forward to our Greek Island Cruise in July.”

Nick Wood says "Members buy a fraction but get 100% service."

"Financially it makes huge sense in the current climate. Most second or holiday homes have limited potential for net capital growth and do not generate income. With interest rates as high as they are, and a flat property market, any holiday home you buy today you will probably be paying the bank interest for the next 4 years with little or no capital appreciation," he adds. "All our homes are worth well over AUD$2 mil. As we all know, there are many ways to buy a property. But to buy a house like this you might require a deposit of at least $550,000, and then you would spend at least $120,000 in interest alone a year on the loan before principle repayment, $ 150,000 on furniture, power, water, rates, maintenance etc…compare this to $32,000 a year for the club."

"If you invested the $225,000 you didn’t spend on the deposit for a house, and the $120,000 you saved in the first year you would earn around $30,000 in interest in the first year, which almost covers your club dues. In year 2 onwards you are making money. The real benefit of members is gaining access to an expanding portfolio (for every 6 new Members that join, DHH adds a new destination), with no further investment and without any increase to the original membership deposit.

“Convenience is key. Not only do you get a range of holidays in stunning homes and yachts all over the world, but also the ease of knowing your home is waiting for you fully stocked, lights on, fire lit, and champagne on ice. You have someone to do the laundry, cleaning and shopping. You also have access to one or more luxury vehicles.”

Each property and yacht has between four and seven bedrooms, are professionally designed and decorated; contain extensive artworks, top line furniture and fittings and all DHH destinations come with a wide range of books, movies, games, magazines and an iPod sound system loaded with music.

DHH currently has two yachts, and properties in France, Italy, Australia, Fiji and the United States. Destinations to be added within the next year include a ski lodge in Queenstown, NZ; a chalet in Megeve; a Manhattan residence; a waterfront home in South Beach. Miami; a seaside home in Diamond Head, Hawaii; a Caribbean beach house in St Maarten; an apartment on Sydney harbour; and a 63’ Sailing Yacht to be based in New Zealand and Fiji. Wood says that comparable holiday homes can cost between $14,000 to $25,000 and a luxury yacht at $50,000 per week.

"It really is a smart long term lifestyle investment," Wood said.

ENDS

More information about DHH’s history, portfolio and pricing structure is available.

To view the properties and yachts available through DHH please visit www.d-h-h.com.