x Abu Dhabi, UAEMonday 24 July 2017

The high life, short and sweet

For those hankering to get behind the wheel of a luxury car or keen to pilot a superyacht, fractional ownership schemes offer the chance to enjoy all the benefits without worrying about upkeep or insurance.

Alonzo Sherman is a happy member of Classic Car Club in Dubai. Satish Kumar / The National
Alonzo Sherman is a happy member of Classic Car Club in Dubai. Satish Kumar / The National

For those hankering to get behind the wheel of a luxury car or keen to sail a superyacht, fractional ownership schemes offer the chance to enjoy all the benefits without worrying about upkeep or insurance. Prerna Suri writes

Alonzo Sherman adjusts the rear view mirror of his beloved AC Cobra and speeds on to Sheikh Zayed Road attracting admiring glances as he goes.

"I don't let the attention affect me too much," says Mr Sherman, 32, an American investment banker who has lived in Dubai for five years. "I'm very passionate about cars. For as long as I can remember I've loved cars and as I've got older that passion has got stronger."

Mr Sherman enjoys owning his own classic sports car so much that when he travels on business to London or Manhattan he likes to replicate the experience, driving a different classic car every weekend he is there.

But here's the catch: it costs him less than US$200 a month to live his dream. "I wanted to enjoy the best parts of owning a classic car without the worst parts of owning one," he explains. "I didn't want to worry about maintenance or insurance costs, storage, purchasing and selling."

So, how does he do it? It's called fractional ownership. The concept first surfaced in the late '90s with companies offering jets to busy clients who could partially own shares in them and in exchange fly for a certain number of days each year. Given the high costs of maintaining a private aircraft, there were many takers.

Since then, this scheme has expanded to other products - resort- style holiday homes, yachts and classic cars - all sold for a fraction of the cost to willing owners who wanted to buy into a particular lifestyle without the risk of a large investment.

"Everyone wants to live like a multimillionaire," says Piers Brown, the founder of the Serviced Apartment Summit, a conference that brings together leaders from the fractional ownership industry. "Yet in the current climate predictions of an economic meltdown, where environmental concerns are rife, many reformed ultra-consumers are looking to spend less, live more. This has created a consumer breed referred to by trend-watching gurus as 'transumers' or 'fractional lifers'."

While UAE residents like Mr Sherman generally take advantage of such schemes when they travel overseas, the fractional ownership concept is slowly taking off here, too.

The Fairmont group's Hideaway Club, for instance, offers holiday memberships for its resorts in Dubai and overseas. Supercar Club ecurie25 plans to add a Dubai base to its seven locations this year and is already accepting applications to join on a first-come, first-served basis.

However, setting aside the aspirational benefits of joining such a club, is fractional ownership really that cost-effective?

Consider the model - six or seven like-minded individuals hold equal shares in a common company. They then divide the annual maintenance costs and agree on time-sharing schedules of the asset itself between themselves. Take a $14 million yacht, for example. Divide that by seven owners and it now costs a mere $2m each.

Customers like Mr Sherman typically have only 30 or 40 days of entitlement in a year, compared to infinite usage if they owned their own cars. And lately the industry has also been plagued by scams - especially among holiday homeowners - that have dented its reputation.

Despite such drawbacks, Michael Prichinello, who started the Classic Car Club company in New York and now London, says fractional ownership is good value for money.

"The concept for automobiles works very well for a few reasons. The first is outstanding cars are expensive. They also cost quite a bit of money to maintain and insure and in many regions, absurd luxury taxes are applied to cars that can double the actual cost of ownership. This takes the fun out of the ownership experience. Additionally, no matter how great a car one might have, it never changes," he says.

While the business model works well for cars, it does not necessarily work for all luxury products.

Executive Jets Asia, a premier jet charter service based in Malaysia and Singapore and one of the first companies to offer fractional ownership schemes in Asia, had to wrap up its syndicated operations after a lacklustre demand.

"Fractional ownership doesn't work in Asia," says Prithpal Singh, the chief executive of Executive Jets Asia. "Here, individuals with high net worth can afford to buy their own jets. Others simply don't understand the concept of partially owning a jet for business or pleasure and sharing it with others. There's still a lot of mistrust."

As well as mistrust, there can also be snobbery among the super-rich - you either own a yacht fully or you don't. There's also that tricky issue of sharing your precious asset with others. Those who are passionate about yachts, for instance, would have to limit their days at sea to 30 a year on some schemes. This may seem a fair deal for some, but for the diehard sailor it simply isn't sufficient.

Rajeev Ramanath, a 28-year-old entrepreneur who has lived in Dubai all his life, toyed with the idea of fractional ownership a few years ago, but soon decided it wasn't for him.

"I would rather buy my own yacht because I love the sea," says the Indian native, who invested in a yacht three years ago. "I bought my own yacht not for the sake of having a big toy but because I take it out twice a week and wouldn't like to ask others for permission to be on my own boat."

Some luxury fractional ownership companies have taken this thinking on board, custom-making agreements to be more flexible.

Curvelle, a London-based yacht company with boats in London and the Mediterranean, which recently began its syndicated operations offering deals such as a 14.3 per cent share in a 110-foot catamaran syndicate for €1.5 million (Dh7.3m), allows customers more autonomy.

"Every customer is different," says Steve Last, a syndicate ownership manager for the company.

"If our members feel they need to resell their yachts after the agreement, then we enable them to do it. If they feel certain members should pay more as they enjoy more time on the boat, then that's their prerogative."

Despite some pitfalls, it seems fractional ownership allows access to a lifestyle most of us can only dream about, albeit in a more frugal way.

"What used to be a big investment and something you held on to for years has become something new. People choose cars for entertainment as much as for functional purposes," says Mr Prichinello.

Back in Dubai, Mr Sherman is now eyeing a beautiful catamaran. "That's next. I can't wait to join a boat club where I can use different boats every weekend," he adds.

 

business@thenational.ae