LIVING LARGE . . . . . . PAYING LESS

The Star-Ledger, June 21st, 2006

The Star-Ledger Archive COPYRIGHT © The Star-Ledger 2006

Date: 2006/06/21 Wednesday Page: 051 Section: BUSINESS Edition: FINAL Size: 1403 words

Fractional ownership lets people share the cost of high-end goods

By SAM ALI STAR-LEDGER STAFF

So that chunk of change under your mattress is not chunky enough to satisfy your cravings for Chanel clutches and Hermes bags.

And never mind the nearly two-year-long waiting list. You are definitely a few bucks shy of ditching your lumbering SUV for the sweet rumble of a Mercedes SLR, which is currently priced at over $450,000.

But fret not.

Owning stuff outright is so yesterday.

Today, the buzzword is fractional ownership, an increasingly popular concept that allows everyday consumers who aspire to a more upscale lifestyle to enjoy elite playthings and toys at a fraction of the usual cost.

Think of it as the retail equivalent of grazing – a way for everyday consumers to sample little mouthfuls of the good life on a budget. Expensive classic cars, ultra-private golf clubs, luxury RVs, even trendy designer handbags can now be rented, shared or borrowed for just a small percentage of their actual cost.

The trick: You own just a piece of the pie. And then you – as well as a whole bunch of other people – get to enjoy all the advantages of ownership, while only paying for the portion you own.

Such is the premise behind Windpath, a Stamford, Conn.-based company launched last year by 29-year-old Ian Treibick, which offers a so-called fractional sailing program. For $579 a month, eight members can share one luxury yacht that would normally cost upward of $200,000.

The boats range from a 35-foot Catalina 350 to the more luxurious 41-foot Catalina 400 that can sleep seven. The interiors have teak finishing, surround sound, flat-screen TVs and DVD players, and master suites.

Sailing days are split into two time slots – morning and afternoon and each member is guaranteed a minimum of seven uses a month, he said.

"The time-share concept is a pretty viable business model because there is not a lot of dock space to keep a boat in this area and it's fairly expensive to do," Treibick said. "This is true everywhere in the U.S. There are more boats than there are slips, and it's a big challenge."

Although most people associate shared access with real estate, the idea of fractional ownership actually took hold back in the 1980s when NetJets, now part of Warren Buffett's Berkshire Hathaway, first applied the concept to private jets.

Before then, only the extremely wealthy could afford to jet around in a private plane. But now, instead of shelling out $7.1 million for a new eight-passenger, Hawker 400XP, a one-sixteenth share can be had for about $400,000.

For his part, Treibick – a sailing enthusiast – said he often wondered why the same couldn't be done with yachts, and Windpath was born in January 2005.

"Everyone dreams of sailing off into the sunset," Treibick said.

Windpath now has six boats, all Catalina Yachts, in five bases. Four sit on the East Coast, including Stamford and Cape Cod, Mass., and he's eyeing another base here in Jersey City's Liberty Landing.

LOVE STORY Hoboken resident John Iacono, 26, is the youngest Windpath client to sign on.

Iacono, co-owner of Perk-a-roma, a West New York company that supplies coffee and equipment to businesses, fell in love with sailing back in college when he accompanied three friends on a boat trip to Martha's Vineyard.

But, between a boat's hefty price tag and the cost and time to take care of it, the idea of owning one seemed out of reach – until he discovered Windpath.

"Owning a yacht is a very expensive venture," Iacono said. "By doing it as a time share, you can cut down on the expense and the headache and the repairs and so on. It makes it simple. They even refuel it for you, and the fuel is included in the monthly cost. My only responsibility is to clean up after myself after I use the boat."

Michael Silverstein, a senior vice president at the Boston Consulting Group's Chicago office, and the author of the new book, "Treasure Hunt: Inside the Mind of the New Consumer" (Portfolio Hardcover, $26.95), describes the trend as "the democratization of luxury."

THE RIGHT MARKET Silverstein estimates there are 48 million households in the United States earning between $50,000 and $150,000 and said this demographic is largely behind this movement.

"The truth is that the upper 40 percent of Americans are rich by historical standards," he said. "Their real incomes are more than double from 1970 and more than quadruple from 1950. Fourteen percent of the cars sold in America are now more than $35,000. They have more disposable cash than ever."

These consumers are also a lot more savvy and financially sensible, Silverstein said.

"Americans have become very sophisticated consumers," he said. "The fractional ownership concept is a demonstration of that sophistication. They don't see the need to own anything anymore."

Take Tour GCX, for example.

If golf is your game, you can call on Tour GCX, which offers its members 10 rounds of golf at up to 18 private golf and country clubs in the greater New York area for $6,250 a year. Each round can accommodate up to four players, and includes greens and cart fees, that breaks down to about $156.25 per person per round for a foursome.

If you are more of a car buff, a car-sharing club, like the Classic Car Club of Manhattan, might be more up your alley.

EXOTIC CARS The club's garage is stocked with exotic cars including include beauties like the 1977 Aston Martin V8, 1965 AC Shelby Cobra, 1980 308 Ferrari, 2005 Subaru Impreza WRX STi and many others.

For a one-time initiation fee of $1,500 and a gold membership costing about $10,500, members can enjoy around 40 driving days' use per year , without the hassle of owning, insuring and maintaining such high-maintenance vehicles.

To get an idea of what's out there, consumers can also log onto PartialOwner.com, a site designed to bring together professional managers, buyers, sellers and investors who want to access a listing of assets available for partial ownership.

For its part, the Seattle-based online retailer Bag Borrow or Steal has built a loyal following of female shoppers over the past three years, who pay monthly fees to rent trendy and expensive handbags from Chloe, Fendi, Marc Jacobs and other designers.

"The key is access – access without the hassle or the guilt of buying," said Bag Borrow or Steal Chief Executive Michael Smith. "It's not about keeping up with the Joneses. It's not about collecting and owning things. People are beyond that. It's about enjoying high-end luxury goods."

Smith, the former president of Nordstrom.com and CEO of Lands' End, refers to Bag Borrow or Steal as "the Netflix for ladies' luxury goods."

Consumers pay a monthly fee, about $20, $50 or $100, and "rent" handbags and keep them as long as they like, he said. When they tire of an item, they can simply mail it back and get a new one.

THE TIP OF THE ICEBERG Smith said the Bag Borrow or Steal is just the tip of the luxury iceberg.

He said the company plans to introduce high-end jewelry and watches, such as Cartier, Tiffany and David Yurman this summer.

In his new book, "Future Shop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell, and Get the Things We Really Want" (Penguin Press, $24.95), Daniel Nissanoff, the co-founder of Portero, an online site that specializes in the resale of luxury goods, said he thinks there is a seismic shift taking place when it comes to consumer buying and selling behavior and habits.

Smith believes the whole concept of fractional ownership is a more socially conscious and financially sensible way to shop.

"Many people are sitting with perfectly good items in their closets, and nobody is getting use out of them," he said.

Treibick of Windpath sounds a similar note.

He said yacht owners rarely use their boats more than a month or two a year – meanwhile, upkeep can cost hundreds of thousands of dollars.

"The sad thing is if you go into any of these crowded harbors on a beautiful, Sunday afternoon, over half the boats are sitting there, because people just don't use them," he said. "It's like a sinkhole in the water."

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