Fractional ownership

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In business, fractional ownership is a percentage share of an expensive asset. Shares are sold to individual owners. A fractional owner enjoys priorities and privileges, such as reduced rates, priority access on holidays and income sharing. Typically, a company manages the asset on behalf of the owners, who pay monthly/annual fees for the management plus variable (e.g. per-hour, per-day) use fees. For rapidly-depreciating assets, the management company may sell the asset and distribute the proceeds back to the owners, who can then claim a capital loss and optionally purchase a fraction of a new asset.

Whether fractional ownership provides a financial advantage over renting is an on-going debate, and some countries and regions have tax laws that provide additional benefits for owners, such as capital-loss allowances, while others might penalize ownership over renting.

1 Aviation
2 Real Property
3 Sports Cars
4 Other areas
5 See also
6 External links

[edit] Aviation

The term fractional ownership originally became popular for business jets. Richard Santulli of NetJets pioneered the concept of allowing businesses to purchase shares in a jet to reduce costs — other companies such as Citation Shares, Flight Options and FlexJet soon followed. With a fractional jet plan, members will typically fly in any jet available, not necessarily the one in which they own shares. The management company will reposition jets as necessary and provide flight crews. Companies with greater needs purchase larger shares to get access to more time.

The fractional-ownership concept has since been extended to smaller aircraft and has now become common for single-engine piston aircraft like the Cirrus SR22, which are beyond the financial means of many private pilots. The same concepts apply, except that the management company may not provide flight crews nor reposition the aircraft.

Fractional ownership has played a significant role in revitalizing the general aviation manufacturing industry since the late 1990s, and most manufacturers actively support fractional ownership programs.

[edit] Real Property

The popularity of the term fractional ownership has caused extensive rebranding in other industries where similar concepts, such as real estate timeshares, were already well established. For example, Donald Trump offers fractional ownership of investment properties in New York City. Similarly, companies such as Intrawest offer fractional ownership of vacation properties.

Fractional ownership divides a property into more affordable segments for individuals. A fractional share gives the owners certain privileges, such as a number of weeks when they can use the property. Oftentimes, the property is sold after a pre-determined time, distributing the relative proceeds back to the owners.

[edit] Sports Cars

Individuals may now purchase fractional shares of high-end sports cars, including some of the world's most exclusive exotic car brands such as Ferrari, Lamborghini, Aston Martin and Koenigsegg. Such expensive automobiles, when owned by individuals, typically spend the majority of their time in storage, with high annual ownership costs. Fractional shares distributes these annual costs across several owners, who pay for and benefit from the asset.

[edit] Other areas

Fractional ownership is also beginning to appear for luxury items such as yachts and high-end motorhomes.

Fractional Yacht / Boat Ownership provides marine-enthusiasts with ownership of shares in yachts of all sizes and uses. Some programs sell actual equity in the watercraft and others sell "membership," where the members' dues provide access to the boats, but no ownership. Fractional yacht companies sell shares/membership in small motor boats, sailboats, mid-range yachts all the way to the megayachts for day-use, multi year contracts, or charter-like arrangements.