The Landscapes on Lake of Bays.Courtesy The Landscapes
As a boy, Rob Kochel loved the cottage his family owned near Wasaga Beach, Ontario, and admits he missed it when his financial sector job took him to Vancouver. Other family members lost interest in keeping it up and the cottage was sold in the mid-1990s.
When Mr. Kochel returned to Ontario a few years ago, he felt a little nostalgic – and left out – as he watched neighbours pack up for a weekend or holiday at their lakeside retreat. But wife Dolores, a city girl who grew up with an apartment and a pool, wasn't interested in the maintenance and work that comes with a cottage.
Then while taking in a trade show, Mr. Kochel picked up a couple of brochures for something called fractional cottages and persuaded his wife to take a look at one of them – The Landscapes on Lake of Bays. "We both loved the property," he says. "My wife was enthralled. She was the one who said, 'let's do it.'"
That was eight years ago. Since then, the Kochels have become big boosters for fractional or interval cottage ownership. As vice-president of national accounts for Invesco Trimark, Rob Kochel is used to hunting for good investments. And while he says he wouldn't advise anyone to buy into a fractional cottage if their single motivation was to lock down a sound financial investment, he believes the lifestyle benefits make it well worth the price.
Fractional ownership represents the evolution of the family cottage. And because of the exchange opportunities some fractionals offer, it can also be seen as a hybrid of cottage life and the exotic overseas resort.
Today, busy families can purchase a one-tenth share in a luxury cottage set in an amenities-rich resort that guarantees them five weeks usage a year, and in many cases lets them swap some of that time for an overseas adventure.
Owners pay a management company to do the maintenance, so there's no need to open and close the cottage, cut the lawn, weed the garden, scrape and paint, or replace the roof and windows. All they need to concentrate on is relaxing.
Fractional cottages are not timeshare – where purchasers own the right to "use" a property. Fractional buyers own a portion of the title or deed to their cottage and pay a portion of the costs. In most cases, each share entitles a shareholder to five weeks a year – 35 days – in the same cottage, although some buyers purchase more than one share, giving themselves access to more weeks. As owners, they can sell their share, lend it, rent it out or will it to an heir.
The Landscapes is a two-hour drive from the Kochels' Oakville home and while he loves his summer visits, Mr. Kochel says it's just as charming in the fall, the winter and the spring.
He says there are three reasons fractional ownership makes sense: it's an affordable way to enjoy a million-dollar-plus cottage in a resort environment; it eliminates the need for repairs and regular cottage maintenance; and through exchanges, it opens up similarly glamorous resort properties around the world. In fact, after trying out an exchange on the island of Madeira a couple of years ago, the Kochels routinely set aside one of their five weeks to exchange every year.
Gary Bissonette is a professor of business at Queen's University in Kingston. He and wife Lynda live a 45-minute drive from Wolfe Springs, a fractional cottage development just outside the village of Westport in eastern Ontario. Mr. Bissonette studied several fractional developments before settling on Wolfe Springs.
Fractional ownership is an ideal way to buy a portion of a luxury product, he says. "It's a good alternative to buying something you're not using all the time." He says studies show the average cottage owner spends just 29 days a year using their property, yet they pay realty taxes, upkeep and utilities on a full-time basis. With fractionals, those costs are divided among the interval partners.
Dana McCulloch is one of the principals in the Wolfe Springs development. "I believe this is the future of cottaging," she says. "I grew up on [Wolfe Lake] A lot of children of the original cottagers aren't showing as much interest in keeping it going."
Gloria Collinson spent 25 years as president of the Canadian Resort Development Association and watched the shared resort business evolve from timeshare into fractional ownership. The big benefit of fractional, she says, is that it allows buyers from a wide range of income levels to own a share of a cottage that would be too expensive to buy outright.
Today in Canada, she says, fully furnished fractions can be obtained for as little as $35,000 for a simple 600-square-foot cottage, up to $225,000 or more for a 3,000-square-foot luxury model at a high-end resort fitted with a spa, golf or ski facility, boat launch, recreation centre and all the trimmings. At the upper end, buyers are acquiring a share of a cottage that would likely cost them $2.5-million to purchase outright.
In addition to the purchase price, buyers pay an annual fee that covers taxes, maintenance, repairs, utilities and insurance. Fees generally range from $1,800 to $6,000 a year, with most in the $2,000 to $3,000 range.
The Wiglaf Journal is aimed at senior executives who wish to share views on sales, marketing and entrepreneurship. Wiglaf says fractional ownership is the fastest growing segment of the tourist industry in the world, partially because of the strength of the business model itself, but also because of "broader trends" in society. This is an era, says Wiglaf, when consumers want the best in life but aren't willing to save up for it.
Mr. Bissonette says he certainly didn't buy his fractional cottage to watch his investment grow. The jury's still out on whether that will happen. "I'm not sure how significantly [our fractional cottage]will appreciate. It depends on the market."
Yet, says Ms. Collinson, those who got into the market early have enjoyed big increases in their investment. She points to Chandler Point, Ontario's first fractional development that dates back to 1998. "Properties are selling for two or two and a half times their original price. I'm not aware of any fractional that has sold for less than the original price."
As more recent buyers, the Kochels paid $106,000 for their fractional eight years ago and, based on resales, estimate its current value at $162,000, an increase of 53 per cent.
"The price of recreational real estate in many parts of Canada has skyrocketed in recent years," according to a July 2006 TD Waterhouse Investor Insights report entitled, Consider Fractional Ownership Property. "Cottages, ski chalets, and other vacation properties aren't as financially accessible as they once were.
"If you want to own an impressive second home, complete with personalized services and located in an expensive resort area but can't quite justify the expense because you'll only be using it a few weeks or months of the year, this type of real estate arrangement may appeal to you," the report says.
Meanwhile, as Ms. Collinson watches the resort sector mature and evolve, she predicts more changes. Canada, she believes, is about to enter the luxury urban private residence club field. So far, Canadian fractionals have been built in cottage country, ski and golf club areas. In the United States, New York's Manhattan Club and San Francisco's Fairmont Heritage Place have brought fractional resort ownership to a new level of urban chic.
"I've seen interest in Toronto," she says. "I think it will happen any minute."
Special to The Globe and Mail