Fractional ownership offered
Sunday, June 10, 2007
By KATHY JUMPER
Real Estate Editor
Most folks can't spend $1.5 million for a furnished vacation home, but they
can better afford about $200,000 to own a 1/8 share.
Developers of Bon Secour Village on the Intracoastal Waterway in Gulf Shores are offering a million-dollar-plus home for sale in 1/8 shares using a fractional ownership plan, according to Eddie Canaday of Cullman, a partner in the 945-acre mixed use development.
It's the first fractional resort ownership program to be approved by the Alabama Real Estate Commission, according to Canaday.
"This product will allow families to own a million-dollar vacation property for a fraction of the cost and without the concerns usually associated with second homes," Canaday said.
The 3,900-square-foot home is being offered in 1/8 ownership shares starting at $239,900, according to Bon Secour developers. The owners will receive a deed and title to the house and can use it six weeks a year.
The two-story house in the Azalea Park neighborhood at 517 Orleans St., was designed by architect Stephen Fuller and built by John O. Freeman of Gulf Shores. POSH Interiors in Orange Beach furnished the home. The Bon Secour Village development will include a marina, parks, retail, offices, restaurants and residences.
Fractional sales will be offered on other Bon Secour homes, condo units and possibly boats, Canaday said. He and his attorneys spent a year getting the fractional plan approved by the state, he said. Realtors who bring clients to buy the fractionals will be paid a 3 percent referral fee, he said.
The fractional owners share the costs of homeowner association dues, property taxes, insurance and potential assessments.
Fractionals are sold in 1/6 shares to 1/25 shares and are popular in coastal cities and ski resorts nationwide.
The high cost of ownership makes fractionals a viable option for more consumers, according to Canaday.
Fractional sales are being considered by other resort developers and land owners looking for creative methods to presell new units in a sales market that took a dive after Hurricane Katrina hit in August 2005.
The city of Gulf Shores last month set a deadline of Oct. 10, 2008, for developers of 10 approved condo projects to begin construction or recast their designs under new zoning rules that limit density and building height on the beach. The developers have sought extensions since late 2005, saying the market is so soft it's hard to find financing for the projects or presell the units.
"Fractionals broadens the market for affordability to buy and shares the cost of escalating assessments," said Greg Saad of Saad & Vallas Realty Group. He and investor partners have a contract to replace the existing 120 Sea Oats condo units on Little Lagoon in Gulf Shores with a 336-unit, concrete structure. And they are looking at fractionals as an option for some of the new units.
"The old days of folks buying a unit and relying on the rental income to cover a large portion of their costs doesn't work as well as it used to," he said. "And we're all having to explore new avenues to help the market rebound."
Fractionals will appeal to the person who makes $100,000 a year and can't qualify for a half-million-dollar unit, according to Patrick Daily, owner of REMAX of Orange Beach. "As the Gulf-front gets all bought up, it will get to the point where the average person can't afford it."
Still, Daily said he's not promoting fractionals one way or the other.
People who are looking at doing fractionals often have invested more money in
a project than the current market will return in sales, he said. "Whether they
will work or not at the Gulf, I can't say."
