This article deals with financing and marketing and sales issues based on the current personal experience of the authors.

Acquisition and development financing is a challenge in today's recessionary environment because of the depressed stage of the general real estate market and the credit crunch.

Tips for Developer Financing Success:

1. To maximize the effectiveness of your financing efforts, evaluate potential sources to determine which have available capital and are viable candidates for investment in this specialized real estate segment.
2. Show the validity of your investment opportunity by documenting the performance of luxury fractionals in the current market and the comparison of that performance to the current performance of whole ownership.
3. Since the luxury fractional segment is relatively new, show that luxury fractionals are a natural evolutionary outgrowth of resort development trends over the past 40 plus years.
4. Show why your project is similar in nature to those luxury fractional projects that have performed well in the current market.
5. Review your business plan from the perspective of potential capital sources and show that you have anticipated virtually all the questions that a capital source would have in the current climate.
6. In addition to your expected case model, show a worse case model for the current climate that will still at least break even.
7. Show that your marketing and sales strategy is directed to the concerns and psyche of prospective Owner Members in the current recessionary climate. (See discussion under Issue C below).
8. Show that your marketing and sales techniques and programs are up to date with current Internet technology and current analyses of consumer attitudes in the present climate.

In the current climate, fractional mortgage funding for qualified buyers is also a challenge.

Tips for Success in Obtaining Mortgage Funding for Qualified Buyers:

9. Recognize that in today's economic climate, consumer financing is important since prospects may be reluctant to liquidate weakened stock portfolios (i.e., realize losses) to facilitate a cash transaction for a luxury purchase.
10. Even for prospective cash buyers, having consumer financing available gives comfort that when they elect to sell, their exit expectations and strategy will likely be available to qualified new purchasers.
11. Make clear to the target funding source that (a) this is fee simple real estate and the lender has the same remedies it would have in the case of whole ownership real estate; (b) the buyer/borrowers are extremely affluent; (c) premium rates can be obtained and (d) the paper should perform well compared to other types of real estate.
12. Provide historical borrower demographic and performance data.
13. Consider your construction lender because (a) they are already vested in project success; (b) they understand the project and the industry; and (c) they have an incentive to provide mortgage financing as a takeout of their construction loan - substituting the single obligation of the developer with a number of smaller mortgage obligations to affluent clientele.
14. Show your awareness of the specialized concerns related to buyer financing in terms of (a) bank balance sheet issues - these loans are generally "portfolio" loans held in house by the lender; (b) evaluation of property operations and concierge programs; and (c) management personnel.
15. Be creative in your presentations to the target funder - while the capital markets are tight, as pointed out above, these are qualified loans.

Fractional marketing and sales are especially challenging in today's environment because of significantly reduced personal net worth and the pervasive general uncertainty.

Tips for Marketing and Sales Success:

16. Show the timeliness and prudence of luxury fractional purchase in terms of the growth and future expectations of the luxury fractional segment; the reasons for that growth and expectation; and the macro economic factors favoring current luxury fractional purchase.
17. Show the value proposition for your project - in terms of items such as quality, service, use structure, and the subtleties of the experience that demonstrate superb quality.
18. Incorporate an emotional lifestyle element in your presentations. In addition to objective tests of value, the sales process is still basically about the allure and experience of unique places and homes. Stir these emotions - not by adjectives but by concrete details.
19. The current climate is replete with uncertainty in terms of the economic climate, its effect on the personal sense of financial security, and perhaps most insidious - "free flowing anxiety."
    Design the programs, presentation materials and initiatives directed to current buyer perceptions in the current climate to meet these perceptions, and expand the disclosure to prospective Owner Members to generate trust.
20. Establish marketing and sales programs including the following:
21. 1. The luxury fractional is more than the bricks and sticks of real estate; it is the feeling of belonging and offering a lifestyle. Emphasize the "experience" of being an Owner Member in your project.
       See, for example, the recent paper published by Mr. Gregory Furman, Founder and Chairman of the Luxury Marketing Council, entitled "Luxury Marketing in a Recession."
       "NOW, more than ever, great experiences are high on the value scale....The most educated consumer is putting a premium even on things or experiences that cost little or nothing and provide significant satisfaction...."
    2. Emphasize in your management training the necessity of generating in Owner Members the feeling of belonging in a privileged circle of members.
    3. Take great care in selecting your sales representatives - "Member Executives". Top sales agents see opportunity both in good times and in bad - the selection process is especially important in the current climate.
    4. Train your Member Executives to focus on personal relationships with prospective Owner Members - the art of relationship selling - especially important to generate a sense of trust.
    5. Establish time effective programs to involve senior management with serious prospects. As Mr. Furman states, "Marketing is increasingly seen as the function not just of the marketing department, but of senior management."
    6. Establish programs to motivate the entire project team - not only Member Executives but marketing, management, etc. - to recognize that every interaction with a prospective Owner Member is part of a consistent and holistic marketing and sales program. As Mr. Furman states, inspire "the entire team to have a passion for and placing a premium on creativity, 'out of the box' solutions, and rewarding those who 'raise the bar'".
    7. Establish state-of-the-art web based marketing programs to reach out to the luxury and fractional community of brokers, agents, and your target market nationally and internationally. In addition to the cost effectiveness of these programs, they generate a momentum that is invaluable.
    8. Establish programs to create strategic branding alliances and generate well placed low key public relations coverage. Third party validation is more valuable than self serving advertisements and further enhances the sense of trust and confidence in prospective Owner Members.
    9. Establish ongoing monitoring programs and followup with potential Owner Members, realtors and your owners.
    10. Establish periodic status discussions with your Membership Executives and marketing team - especially in the current climate, the real world ongoing market feedback is critically important - as is satisfaction and support of Owner/ Members.

As Mr. Furman concludes, the bottom line is that "this recession is a call to be more creative, to assemble communities, to share best practices, and to win by redefining the entire marketing proposition based on what our customers say it should be."