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Back Page: Going to Pieces

Sheila Gibson Stoodley

As the parent of any toddler will attest, sharing does not seem to be a natural human instinct, and yet it is the basis of an ongoing revolution in the luxury realm. This movement began in 1986, when Richard Santulli, then an aviation company executive and former math teacher who had attempted unsuccessfully to share ownership of a jet with two friends, crunched the numbers and produced a formula for fractional jet ownership that led to the launch of NetJets. Granted, his calculations are not as vital to humanity as Einstein’s theory of relativity, but Santulli’s efforts have forever changed private air travel and influenced the luxury industry as a whole.
 
Perhaps Santulli realized that the fractional-ownership model could apply to earthbound businesses, too, but no one envisioned how many different industries would try to adapt its underlying concept. Fractional jet ownership first appeared as a Best of the Best category in the June 2000 issue of Robb Report. In the June 2004 Best of the Best issue, Robb Report introduced the categories of fractional-ownership clubs, residence clubs, and private resort communities, all of which bring to the vacation- and second-home real estate markets benefits similar to those of fractional jet ownership. Companies that provide access to yachts, private golf courses, collectible cars, recreational vehicles, and even Thoroughbred horses also are becoming increasingly common. Matthew Gatsas, president of Sovereign Stable (www.sovereignstable.com), a four-year-old New Hampshire company that arranges Thoroughbred syndicates, says that the idea for his business was partially derived from his father’s purchasing a fractional share of a Hawker jet. “Knowing how fractional jet ownership worked helped us get Sovereign Stable off the ground,” says Gatsas. “We understand the benefits to fractional ownership, and we wanted to parlay that into the horse racing world.”
 
Dick Ragatz of Ragatz Associates, a Eugene, Ore., firm that studies the market for fractional-interest properties and private residence clubs, believes that the simultaneous rise of fractional ownership–style companies  is coincidental. “They are all coming about at the same time because of the rationality of the concept,” he says.

An iteration of the concept drives Exotic Car Share (www.exoticcarshare.com), a five-year-old company in Palatine, Ill., that provides a selection of 14 exotic and collectible cars, including a Plymouth Prowler, a 1967 Jaguar XKE, and a 1982 Rolls-Royce Silver Spur, to its members, who pay dues and additional fees to access, but not to own, the cars. In addition, Exotic Car Share is selling fractions of a 2004 Bentley Continental GT to as many as five interested parties (two of the five shares are still available). The company’s business model is not based on that of NetJets, but its founders have drawn comparisons to Santulli’s company (now owned by Warren Buffett) when explaining their services to potential investors and clients. “When I say that it’s similar to fractional jet ownership,” says president and CFO Kathy Kiebala, who cofounded the company with her husband, George, “people understand immediately and say, ‘That’s a good idea.’ ”
 
More entrepreneurs likely will try to import the fractional-ownership concept to other businesses, but the success or failure of an adaptation, in the end, depends on what the numbers dictate. In a September 1999 Robb Report interview, Santulli, speaking about why his knowledge of math granted him a sense of freedom, offered an explanation that now can be read as a summation of why fractional ownership has spread. “In math there’s always an answer, and I don’t have to get to the answer the very same way,” Santulli told us. “The way I go about something in a logical fashion is probably different from you, but we can both be correct. And with math, you’re either right or wrong.” 

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