Fractional collection

David Burden, President, Timbers Company

Respected for their nine platinum-level properties and brand consistency, Timbers Resorts has been an acknowledged leader in the premium second-home real estate market since David Burden founded the company in 1998.  Recently, he took time out from a busy schedule to chat with us about the Timbers vision, current trends, and where he sees the brand in the future.

Can you talk a little about the unique vision of Timbers and what sets your properties apart?
We focus on established, high-end resorts, and are now also looking at including some urban locations.  When we are considering a destination, first we look into what sort of opportunities the location presents, then we look for the ideal site there.  ‘Ideal’ meaning if you essentially had limitless financial capability, what would you acquire.  If we cant find that, we usually pass. Lots of developers do a fine job of second and third row projects and promote their lower prices, but we don’t really sell on that level. Once we have chosen a site, we then set out to create something that is consistent with the hopes and expectations people have for that resort. That is to say, we don’t do a homogenous timbers look. We also aren’t looking for the newest exotic island.  We like locations with legacy, such as Scottsdale or Steamboat Springs, where high-end has sold in the past and will continue to sell in the future. These are places where the market may have gone when they were children, and now they are bringing their kids and grandkids.  Looking at our market in geographic terms, it’s primarily the US, which constitutes about 75 percent of our sales, but we have a growing percentage of European clients, who now make up the remaining 25 percent.

It seems Timbers plays multiple roles, working variously in the development, marketing and management of properties. Can you elaborate?
First and foremost I am a developer.  I really enjoy the whole process: acquiring the land, getting approvals, the concept and design, then building it.  We also think we are pretty good at the marketing and selling of our projects because we feel a key part of marketing is the creation of the product.  So when it comes to merchandising, the marketing and selling, we are a bit of a control freak — we just don’t think anyone can understand it like us.  At the same time, we have worked very successfully with outside brokerage firms, so to the extent they can create an opportunity and close the sale, we are happy to work with them.  But still, the product has to be presented properly, it’s a rifle shoot, not a shotgun approach. Regarding sales, we have a corporate team here at our main office in the mountains of Colorado, as well as teams located at all of our projects.  We generally turn over operations to trusted companies like Auberge. In some cases, we have been so successful selling-out our projects, the operator and their partners have approached us and acquired the property, like Auberge did with Esperanza in Cabo.  It was a great opportunity for everyone as they are better equipped to resell; we don’t really do that type of operation.  Even in this situation, however, we maintained Timbers reciprocity, so as an owner at Esperanza, you can still trade exact weeks on a one-to-one basis with another one of our  properties, such as Tuscany.  And touching on reciprocity, this is one of the best tools we have to keep resells down.  Owners want this option.  For instance, we had 22 trades last week. Some other numbers that underscore the success we’re having is we currently have 288 owners, and just four resales.  Reciprocity isn’t the only way to keep resells down.  Another important part of our success is staying involved in operations.  A good example of this is our partnership with the Plumpjack Group at the Carneros property.  We see eye-to-eye on how best to run the property – Plumpjack delivers superb operations and we manage the real estate.

How will fractional-interest projects continue to make sales?
In our case, the strategy is to stay focused on where our market is and make sure our reputation remains stellar as the top residence club property that you can own. New projects like our Steamboat Springs development (eds note: slated to open 1st quarter 2010) will keep us on target. Other tactics are to maintain a strong database and partner with good companies.  We’re working on joint marketing projects with American Express, Sentient Jets and Hertz with their top-end offerings.  We’re also enhancing our offerings, like our property in Italy, which now features 97 acres of producing vineyards.

Are troubled whole-ownership resorts appropriate for redevelopment as fractional interest properties?
For Timbers, it’s not normally something we would consider. Typically, if it’s not working as whole ownership, it probably won’t work as a fractional either. There is usually a pretty good reason a property is failing and for us, fractional ownership isn’t just a fallback. There are exceptions though and we are seeing two or three such projects coming to us every day, where once per week was the norm before. We’re actually starting a services division to look at these types of projects.

Does Timbers ever get involved in any consumer financing?
We’ve never been involved in financing in the past, but to be proactive, we feel we have to now.  There really hasn’t been much need in the past, but that’s changing. In the case of Steamboat, which is almost evenly split between whole ownership and the residence club, we have gone out in the marketplace to secure financing for both components. We’ve been very successful here. By contrast, you don’t see much in Napa, that’s cash.  But I can say that it’s not the norm — there are a few companies out there providing financing, in addition to our lenders who are working with us on end loans. The bottom line is we have to be more proactive in locating it, it’s not easy, but its there.  Ultimately, however, it’s always different for us because we are all over the world.  For instance you don’t want to finance a consumer loan in Italy, it’s cash.

Where do you think the luxury hospitality market is headed now, and how is the fractional industry positioned to serve it?
Consolidation is definitely happening.  After such a rush to develop over the last seven or eight years, water is finding its own level and some of the weaker projects are going by wayside.  Those with a sound foundation, however, will continue.  In our case, we have a good flag as developers and we want to keep our image polished by building stellar resorts.  As an example, we’re pursuing a spectacular property in San Francisco.  It’s an intimate urban project – less than 20 units – which we will co-develop with an investment group, we’re just being just very careful.  Overall, I would say fractionals probably make more sense now than ever before.

What are your future plans for the company?
More than ever we will stay in the top markets and not get tempted by bargains.  For the most part, we will stick to our plan, which is to keep on moving into top locations in the US and around the world. (editor’s note: Timbers added two more properties to their portfolio this year: Rancho Valencia in Southern California and The Links Cottages at Doonbeg in Ireland). We expect to expand as the economy improves and are making sure our marketing department is ready. At the same time, although we’ve been asked to look into other parts of the world such as Asia and Australia, we haven’t taken anyone up on it just yet.  We’re flattered, but right now, this is all down the road.