Private Residence Club Perspective Part 1

David Disick, President, David M Disick & Associates.

Fractional Life is joined by a true innovator in the fractional industry. David successfully launched Franz Klammer Lodge, the first PRC in the United States back in 1994 and continues to be at the forefront of fractional development.

Over to David for the first of his bi-monthly ‘Perspectives’ discussing fractional issues and news.

Historical Perspective

When I inaugurated the Private Residence Club (PRC) industry in the mid '90s with The Franz Klammer Lodge in Telluride, United States of America, little did I realize how fast the PRC segment would grow. Today, there are $2 billion in annual sales; the industry has performed well notwithstanding the current general real estate economic climate and projections for expansion are extraordinary.

Financing

The growth creates both the challenge and the opportunity. With growth, obviously more financing is needed. However, in the current market, that can be challenging. First, the general real estate economic climate obviously creates a non-positive atmosphere. Even though the 2007 results show a healthy fractional real estate PRC market notwithstanding current general climate, general climate can be an impediment. I had one financing source say to me: (a) I agree with you, David, that the PRC market has remained and will likely remain healthy; (b) however, I am just concerned about how bad the current general climate will become; and (c) even though the general climate has not affected PRCs, I am hesitant to invest at this point. We are refining techniques to deal with this non-sequitur.

And even if we can deal with it, there is a second challenge. Fund managers are in a frenzy to invest in "distress properties" because of the profit potential and it is a challenge to get them to focus on the opportunity in PRCs by reason of the "fractional multiplier" and the ability to buy quality property at favorable prices because of the difficulty of selling quality property at true inherent values in whole ownership format. Again, we are refining techniques to deal with that and these issues will be the subject of subsequent perspectives.

I am fond saying "don't hold it against me, but I used to be a Wall Street lawyer." I and my team have spent substantial efforts over the years in educating the Wall Street community as to the profitability potential in our industry and by and large, if I do say so, we have been pretty successful. We have generated significant interest in offshore institutions, domestic investment funds and others, and high net worth channels, and significant expertise in how to access the money.

These topics will be the subject of the next Perspectives, to be followed by discussions of unique marketing and sales initiatives for today's world.