Do any members of the group have thoughts or experience to share?
**Peter, Please my comments ** within your text below:
Has anyone brought a time-limited fractional product to market? This product variant would more closely reflect demographic shifts and consumer utilization. It also gets frequent mention at conferences, but I’m not aware of anyone having launched anything.
**Resort Suites International recent global market research entitled “The Next Generation of Resort Ownership Offerings” with Perspective Owner Magazine 13,000 Readership featured our Hotel Investment Trust (“HIT”). See our survey results 97% potential purchase interests,( request from RSIAP@AOL.COM)
Aside from marketing and presentation, there are numerous business issues arising:
**RSI’s “HIT” is non-traditional hybrid mixed-use Hotel & Shared Ownership Product to meet today’s consumer priority demands for annual income dividends. The ownership consist of two weeks minimum share or 1/8th Fractional Interest or PRC.
Legal form – a conveyance of a real property interest or not? Less significant to a non-US buyer, but potentially important in a US environment, both for consumers and regulators. If a product has a limited duration for use and ownership, there needs to be some ultimate exit strategy, whether by sale or otherwise. Who participates in any capital appreciation?
**RSI’s legal structure is basically a hotel business ownership with leased or fee title with 15-Year Financial ROI Analysis (Unlimited Ownership Rights). We have received the finest legal counsel on time/cost effective US registrations but our preference is to market to more affluent global markets such as Asia, etc. The “HIT” provides 100% Equity funds for construction and sales financing without annual maintenance fees.
Trustee – is a trustee advantageous for ownership of the real property? Piercing the ownership of real property has been a significant problem for the secondary market in all forms of shared real property ownership. This route would appear to overcome the absence of marketability of the real property following the term of the fractional entitlement. All use rights conveyed would be backed by real property held in trust for the benefit of the fractional program members. Upon expiration of the fractional program term, unpierced ownership of the real property could then be conveyed from the trustee.
**Bank Trustee services safeguard the investor-shareholders purchase ownership (Point-System) plus annual audits for their attractive income dividends. Our “HIT” Investment liquidity or Exit Plan is simply to sell the resort hotel (cap rate) with appreciation ROI or shareholders can resale their interest anytime via our securities brokerages networks.
Pricing – how would the pricing of a term-delimited fractional product compare with that of a comparable fee simple sale? To the extent that the price of such an interest is less than that of an outright sale of real property, how is the unexpensed development cost (ie. the difference between the total unit production costs and the cost attributable to the fractional sale) to be financed or does one just have to accept smaller initial margins? How would buyer sharing of any capital appreciation in the real property at the end of the term impact front-end pricing?
**RSI’s “HIT” offerings are priced directly to the Investor Shareholder’s above market annual income dividends and normally less costs per week than other competitive Shared Ownership products. Our total short-term marketing/sales/admin cost is less does not exceed 18%. The developers ROI are substantially enhanced.
Term – 15 or 20 years would seem to make sense, depending on location and buyer profiles.
**RSI’s global research results indicates potential buyers interest in 15-years products with 14% annual income dividends. The “HIT” extended term is determined by the investor shareholders.
Financing – assuming consumer financing returns at some point, could term-delimited products be readily financed? Sure, right-to-use timeshare products could be financed before the implosion, but in the fractional realm the loan amounts would be substantially higher. Suggests there might be financing issues.
**The “HIT” investment offering fund’s is Debt-Free and its low sales costs and short-term marketing programs generates both construction and purchase financing (50% or less) with more cash buyers generated by our unique affluent target markets.
Accounting and taxation – what are the consequences of this product configuration for financial reporting and taxation? It feels to me as though we’re straying into lease territory, with revenue recognition being spread over the duration of the interest.
**RSI retains the top public accounting firms to issue a “Letter of Opinion” on our “HIT” financial model projections plus performs the annual income distribution audits. If the “HIT” is registered for sales i.e. REITs, then our investors receive 90% income dividends tax-free. You must review our sample Project Financial Feasibility Model Analysis to better understand.
