The whole is greater than the sum of its parts?

Not so when it comes to fractional ownership of recreation property, especially for families sharing a place they could not afford – or find the time to occupy – by themselves.

Michael Burns, who grew up in the timeshare industry, formed Private Residents Resorts in 1999 and now is marketing a $300,000 fractional model in Sun Valley, Idaho, and a new $100,000 model in McCall, Idaho. Both projects provide a one-eighth deeded interest in the property. More destinations are planned for Mexico, Hawaii and the San Juan Islands.

Fractional ownership combines traditional, full-time ownership with the affordability of timesharing and the services and amenities of vacationing at a resort hotel. These properties are usually located in international, national and regional destination resorts and sold in interests ranging from one-quarter to one-twelfth shares.

Fractionals are viewed as an alternative to second home “whole ownership” where actual use can be four to six weeks a year. The typical buyer is a couple in their mid-50s, and their children are typically out of the home or off to college.

“These people have the discretionary funds for a true second home,” Burns said. “But what is driving them is that the qualitative aspects are as compelling as the quantitative. While the economics have to make sense, we have provided everything they potentially would want and need in a turnkey operation. They don’t have to worry about preparing it for winter or getting it ready for summer. Our management team does all of that.”

While timeshare loyalists argue that more time and different seasonal time can easily be purchased or traded for, fractional officials say the difference between the two leisure offerings goes far beyond obtaining keys for winter skiing and summer sailing. They believe the possibility of actually gaining appreciation is far greater with a fractional than with timeshare ownership. While fractional resales have been relatively few so far, the number of resale timeshares on the market is enormous. In many cases, the return on a timeshare can be 20 cents on the dollar.

“We explain our product as a second home in a destination that you frequent,” Burns said. “Timesharing is more of a prepaid vacation-use product. We sell far fewer buyers into fractional ownership than you would a timeshare. That pushes down the marketing costs so that you can divert more funds back into the product.”

The market for second homes and fractional ownership will most likely rise for the next decade as consumers seek alternative avenues to the conventional financial markets. In addition, a recent AARP report showed the top 25 percent of the baby boomer group has a median income of $100,000 and a median net worth of $360,000, putting them well ahead at this stage than the previous generation.

According to the National Association of Home Builders, one-fourth of home buyers aged 50 and older are paying more for the home of their golden years than for their previous house. In addition, they are healthier and wealthier than their parents were heading into retirement, according to Seniors Research Group, a subsidiary of J. Walter Thompson Worldwide.

Burns was born in the Pacific Northwest and received a political science degree from the University of Washington in 1978. In 1975, he graduated from the University of Pennsylvania’s Wharton School Executive Business Development Program.

He also lived the early days of timesharing. His grandfather worked for the old Mount Baker Recreation Co. near the Washington State-Canadian border when the mountain’s first chair lift was installed. His family purchased an old forest service cabin, made some needed repairs, and shared the place with five other families during the winter ski season. His father took the concept a huge step further, starting Vacation Internationale in 1974.

Burns went to work for points-based Vacation Internationale in 1978 and five years later joined Marriott Hotels and Resorts as director of marketing for the company’s new timeshare properties in Orlando, Fla. In 1989, he was recruited by the Walt Disney Co. to create its new timeshare division, overseeing what would eventually become the Disney Vacation Club. He returned to Vacation Internationale as president and COO in 1996 before starting Private Residence Resorts three years later.

What goes around comes around, even in fractional portions.

Tom Kelly’s new book “How a Second Home Can Be Your Best Investment” (McGraw-Hill) was written with John Tuccillo, former chief economist for the National Association of Realtors. Tom can be reached at news@tomkelly.com.

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