Timeshare developers focus on NYC market

Real Estate Weekly, June 23, 2004 by Allan Starr

The timeshare sector in New York City has seen a significant increase in activity during the past several years.

Currently, there are three timeshare projects operating in Manhattan with a number of others on the drawing board.

Unfortunately, existing regulations needlessly place roadblocks in the way of local and out-of-state developers interested in converting residential or hotel properties for use as timeshares or in selling timeshares to New York residents.

Some developers are seeking to convert existing buildings in whole or part, or to work with developers of upcoming buildings still in the planning stages. Timeshare projects also provide an exit strategy for underutilized hotels. While developers primarily are interested in sites in the Midtown area, with easy access to major city attractions such as Broadway and Central Park, they are also exploring Chelsea and Greenwich Village for possible boutique properties.

In a response to consumer protection due to the number of New Yorkers who wanted to purchase timeshares, the state Attorney General's office drafted regulations in 1985 modeled after New York condo and co-op concepts that govern in state and out-of-state timeshare projects. The regulations were drawn up at a time when there were only a few timeshare projects nationwide, and none in New York except for maybe a campground. Marriott had just entered the market in 1984, and Hyatt, Disney and Hilton followed suit in the early 1990s.

The timeshare regulations added significant unnecessary expense and delays to timeshare development. For example, developers must amend the offering plan for a timeshare property every single time there is an increase in price, whether or not the timeshare unit is located in New York. The price of a timeshare unit cannot be decreased more than 10 percent without filing an amendment. This provision was an admirable effort to insure consumer protection but does not apply in a practical sense with the generally accepted sales practices of the industry.

In addition, timeshare developers must amend the offering plan every six months. Other property types require a similar amendment every 12 months, once construction of the project is complete. Every amendment to the offering plan means the developer must hire a lawyer and pay a fee to the state. Unless there is a material change in the offering, multiple amendments should not be required.

New York's cumbersome registration requirements must be addressed. The timeshare industry, which has overcome an initial stigma created by problematic developments in the early 1980s, has attracted increasing attention from our chasers who either cannot afford the full cost of a second home, or who want the option to travel to several different vacation destinations without being tied to only one vacation home.

The growth in popularity of urban timeshares has mirrored the renewed interest in urban living and travel to urban locations. Urban timeshares, especially those in the underdeveloped market of New York, are attractive to vacation users and to corporations or individual business people who find that they return to the city on a consistent basis.

While the state of Florida has 363 timeshare resorts, the greatest number in the United States, the state of New York is home to the second-highest number of timeshare purchasers. A deep market of consumers and a worldwide destination with restaurants, theatre, arts and cultural attractions, has made Manhattan a natural location for development.

A New York location adds appeal to existing vacation clubs by increasing the pool of options for internal exchange. In addition, an urban timeshare may provide a pied a terre for former city residents who return each year. The Manhattan Club, the first urban timeshare in Manhattan, is very popular with purchasers living within 90 miles of the city. The Customs House timeshare project developed in Boston several years ago has proven to be a huge success, attracting Harvard alumni and prompting activity by a host of developers who can see the trend developing.

New York has always been viewed as a complicated market to enter, based on the complexity of offering plan registration and the costs of development. Because of the expanding interest of purchasers in the timeshare product, the New York regulators need to break down the barriers so developers can bring more of their product to New Yorkers.

ALLAN STARR, STARR ASSOCIATES LLP