alternaty - fractional sale and timesharing - en

Fractional Sale & Timesharing

Models for Developers

Opportunities & Risks

Presented by:

Rudolf Hever

Executive Director

[email protected]

+84 933 902 530

15/10/2012

Presentation outline

Alternative real estate products

Whole ownership

Whole ownership with rental pool

Fractional – quarter share

Fractional – twelfth share

Timeshare

Fractional vs whole ownership

Exchange and pointing systems

Benefits

Risks

Case studies

15/10/2012

Timesharing

Ninh Van Bay

Condotel

Best Western

Nha Trang

Branded Residence

Hyatt Regency Danang

Freehold Ownership

Ocean Villas Danang

Fractional Ownership

Beach Republic

Koh Samui, Thailand

Leasehold Ownership

The Sanctuary Long Hai

Private Residence & Destination Club

The Ritz-Carlton

Destination Club

Hotel Room

Intercontinental Saigon

TRADITIONAL ALTERNATIVE


15/10/2012

Full price

No obligation for specific standard of furniture

No rental management provided

Typically use weekends or holiday weeks (actual usage is approximately 8 - 13 weeks per year)

Limited option of management (no rental)

Possible investment gain:

1. Capital appreciation only


Whole ownership

15/10/2012



A Unit C B D

Gross

Rent $1,250 $1,000 $1,500 $1,250

Rental Pool (total rental income) = $5,000

Minus $500 Management Fee = $4,500

Minus $750 Maintenance Fee = $3,750

20% Developer 80% Owners

Net

Rent $750 $750 $750 $750 $750

1 2 3 4

15/10/2012



Full price

Obligation of a specific furniture package

Typically management company is involved

Typically owner usage allowed is 30 - 60 days

High management fee (International brand)

Possible investment gains: 1. Capital appreciation

2. Rental pool system (Revenue - operations cost - developer share)

In Vietnam this model has had mixed success (the selling price is too high and low returns)

15/10/2012



A Unit

Owner

Usage

Owners

3 months 3 months 3 months 3 months

1 2 3 4

Usage

1 month 6 weeks 2 weeks

Rental

Pool

Exchange

System

15/10/2012

Quarter of the price (1/4) + Premium for fractional club membership

Recommendation on specific furniture package

Typically no management company involved, managed by the developer

Typically owner usage allowed up to 13 weeks (3 months)

Rental pool option available for unused weeks

Exchange program for owners

Floating weeks or fixed weeks

Membership club benefits (Golf club, gym, spa, etc)

Possible investment gains:

1. Capital appreciation


3. Fraction share appreciation



15/10/2012



A Unit

Owner

Usage

Owners

1 month each

2

Usage

Rental

Pool

Exchange

System

4 6 8 9 11 12 10 3 5 7 1

15/10/2012

Twelfth price (1/12 of price) + premium for fractional club membership

Obligation for a specific furniture package

Typically no management company, managed by the developer

Typically owner usage is up to 4 weeks per share (1 month)

Typically there is no rental pool option

Exchange program

Membership club benefit (Golf club, gym, spa etc)

Limited investment gains:




15/10/2012

Unit

Owner Usage

Owners

1 week each Usage

Exchange System

Time - precious and limited

Sharing - For everyone’s benefit

Timeshare - the purchase of accommodation for: a specified amount of time

in a specified location

during a specified timeframe


Timeshare

15/10/2012

Lower investment entry level (can be as low as US$20,000 per share)

Use only what is needed (second home is used only 4 - 8 weeks per year)

Higher return for rental pool management Lower operational costs

Lower brand costs (maintenance fee)

Shorten rental period to fill (if you own 1 month, you only have 4 weeks to rent, if you own 12 month, you have 52 weeks to rent)

Option of exchange system (Vietnam or overseas)

Higher capital gain (if property price increase and if share price increase)

Club benefits (discount F&B, spa, golf etc)

Fractional vs whole ownership

15/10/2012

International

Exchange

Exchange and pointing systems

A

Member deposits

1 week

Weeks

Fixed

Floating

Points

15/10/2012

Affordable to a much larger target market

Access to the international market

Shortened sales period

Multiple income streams

Vacation Club Benefits Upfront sale of rooms (upfront cash) Additional F&B and spa spending Secured maintenance fee Increased marketing longer average length of stay International marketing and clientele

Room nights sold

Member stays


Benefits

15/10/2012

Sales risk

Long term member management obligation

Creation of the membership program and usage rotation

Points system management

Marketing

Sale training program

Exchange system

Pricing and upgrades

Resale options and membership transfers

Legal framework


Risks

15/10/2012

Location: Lamai Beach, Koh Samui, Thailand. 15 mins from main beach (Chaweng Beach)

Access: 30mins from Samui international airport

Concept: Mediterranean hip, beach club, sexy, sophisticated, cosmopolitan. A beach club with villas

Sell 2 week shares

Payment terms $3,000 reserves unit

30% down payment registers unit

60% of net rental income paid to owner

Financing options available

Annual owner’s dues per 2 week share: $650 - $1,000 depending on unit size

Divided pricing into 3 seasons (peak, high, shoulder)

Case Study: Beach Republic

15/10/2012

Case Study: Beach Republic

15/10/2012

Case Study: Pine Cliffs Resort, Algarve,

Portugal

15/10/2012

Case Study: Laguna Phuket, Thailand

15/10/2012

Timesharing and rental pool are actually two very different concepts

Exchange companies do not manage your resort

Fractional sale companies do not work for 2% commission

Timesharing will not clear your 90% unsold units

Timesharing will not improve your 80% vacancy rate

Choose an effective management solution before choosing an aggressive sale team

Final suggestion: plan carefully before you act

Do’s and don’ts for developers

Alternaty is a boutique real estate firm providing specialist advice for hotel, resort

and second home projects. Our approach is to forge partnerships with developers

to provide a suite of consulting services throughout the development lifecycle.

Alternaty

Real Estate

•Vacation ownership

•Fractional ownership

•Private residence & destination club

•Condo hotel

•Hotel investment

Boutique Consulting

•Market research

•Feasibility study

•Financial projections

•Cash flow modeling

•Highest and best use analysis

•Development recommendations

•Due diligence

•Valuation

Operator Selection

•Operator selection

•Management agreement negotiations

•Equity investment

•Sale & leaseback

•Long term lease with key money

•Technical services negotiation

•Franchise agreements

•Management with guaranteed return

Investment Services

•Joint venture partners

•Private equity and family offices

•Opportunistic, special situations funds

•Absolute beachfront land for sale

•Distressed assets

•Exit strategy execution

Investor Representation

•Timely market updates

•Active surveillance for opportunities

•Constant point of contact

•Meeting set-up and attendance

•Negotiation support

•Site finding

•Identification of target point of contact

•Site inspection

15/10/2012

Boutique

Consulting

Operator

Selection

Investment

Services

Investor

Representation

Alternative Real

Estate

Alternaty – Alternative Real Estate

15/10/2012

Alternative Real Estate Service Co., Ltd.

Unit 23, 26 Ly Tu Trong Street, District 1,

Ho Chi Minh City, Vietnam

T +84 836 028 591

This presentation produced, by Alternative Real Estate Service Co., Ltd. (hereafter

“Alternaty”), is provided for general information purposes only. Whilst making all

reasonable effort to provide correct information, no legal responsibility can be accepted

by Alternaty for any loss or damage arising out of the use of or reliance on the contents of

this presentation.

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