In this season of fresh awakenings and new beginnings, an exciting horizon is opening to the east. The seeds of fractional ownership real estate are starting to sprout in Russia.
This post presents four vignettes of different moments in time and some personal musing as to their implications.
Vignette 1 | Today | Fractional Russia
In January 2012, Fractional Russia, , the first Russian website dedicated exclusively to fractional ownership went live.
The site, founded by visionary Arkadiy Amelin, states that though fractional ownership is an evolved concept in other parts of the world, this multi-billion-dollar global industry is still under-represented in the Russian and CIS markets. The overwhelming majority of Russian consumers, he continues, have no idea about the added value of fractional ownership and its benefits over whole ownership of leisure homes.
The site proposes to help “even things out.”
The site also discusses Russia’s severe trade imbalance. It points out that increasing numbers of Russians buy real estate abroad. Their living standards and disposable income have grown—and continue to do so—despite the global economic malaise. Over half of all overseas real estate is purchased for recreational purposes, mostly in the mountains or in warmer countries by the sea.
Many different complex and dynamic economic factors contribute to Russia’s trade imbalance. Read Arkadiy’s interesting and insightful article about this.
Russia needs and wants to correct its trade imbalance. Its economy would benefit significantly if the rubles now going overseas to purchase leisure properties were invested instead.in “home-grown,” made-in-Russia properties.
The challenge, however, is that Russia currently has a shortage of primary housing and an even greater shortage of leisure housing. This situation is in the process of dramatic transformation.
Russia has succeeded in its bid to host the 2014 Winter Olympics to be held in Sochi. The city is on the Black Sea and also is easily accessible to skiing in the Western Caucasus Mountains. Construction is under way for the infrastructure and sports facilities the games require. Ultimately, the substantial Olympic investment will stimulate demand for additional adjacent resort accommodations.
Vignette 2 | May 2011-Present | Arkadiy and Me
Arkadiy and I first met through LinkedIn in May 2011. We have emailed and Skyped with increasing frequency over the past year, as our various ideas have germinated and are starting to take root.
One fruit of our efforts is that I am privileged to be invited to address several meetings of business leaders and entrepreneurs taking place in Moscow and St. Petersburg in May. Topics I have been asked to address include:
- How to develop a fractional project successfully in the current economy and
- The ins and outs of raising capital from American banking institutions and other investment capital sources.
My Odessa-born father would have been proud.
Vignette 3 | 1959-1965 | That Was Then.
In 1959, the then-Soviet Union launched, Sputnik, the first satellite to orbit the earth from outer space. For the benefit of my younger readers:
Americans were shocked and stunned to have been caught off guard and beaten to this technological punch. President Kennedy vowed that “dominance in space” would become a national priority and that the United States would fulfill its goal of being first to land a man on the moon.
Some Americans panicked, fearing that the USSR’s technical superiority would enable the Soviets to deliver nuclear attack missiles from outer space. Among the anti-Sputnik measures was the National Defense Education Act. Its purpose was to improve the quality of high school foreign language teaching so that tomorrow’s citizens would be better prepared to…
Well, that was never clearly defined.
My wife Renee was a newly minted foreign language teacher and recalls thinking that Russian and Chinese were the languages most critical to the national defense. Nevertheless, when her teaching languages–French and German—were part of the defense program—as was Spanish!—she applied to the program and was accepted.
So, she eagerly improved her skills (along with thousands of other teachers over several years) by participating in three eight-week institutes thanks to the generosity of Uncle Sam. She is glad to have played a part in defending our country against…
Well, she doesn’t know what.
Vignette 4 | 2012 |This is Now.
Fast forward about forty-seven years to 2012.
In March, President Barack Obama met with Russian President Dmitri Medvedev at the Nuclear Security Summit in Seoul, South Korea, a conference attended by 54 countries.
A “hot mic” picked up a conversation intended to be private between the two presidents in which Obama indicated he could be more flexible on the European missile defense system after the November 2012 election.
Mitt Romney, the presumptive Republican candidate for the US presidency seized on this gaffe calling Obama’s remarks “very, very alarming” and suggested that Russia is “without question our number one geopolitical foe.”
As the president flew back to the US and his staff worked to explain away the gaffe, Medvedev responded in his place. In an interview on CNNs Situation Room with Wolf Blitzer, he mocked Romney and delivered this political zinger: “I always get very cautious when I see a country resort to phrasings such as ‘number one enemy.’ It is very reminiscent of Hollywood and also a certain phase in Russian-US relations.”
“I would advise two things to all US presidential candidates. My first advice is to listen to reason when they formulate their positions. Reason never harmed a presidential candidate. My other advice is to check their clocks from time to time: It is 2012, not the mid-1970s.”
“No matter what party a candidate represents, he has to take the current state of affairs into account. That is the only way he could count on winning.”
(I express here my deep gratitude to Arkadiy for answering at midnight his time my last-minute request for the link I could not find to the text of Medvedev’s response.)
Some Easter Musings Inspired by Fractional Ownership
So where is all this going?
Okay, here are a few things that are takeaways for me.
- I am encouraged by Medvedev’s defense of our president, but understand that hopes for co-operation between Russia and the United States on a nuclear defense shield will, of necessity, proceed at a glacial pace. This applies as well to international nuclear arms and disarmament agreements. It’s just the way it is. International negotiations are subject to many conflicting pressures—self-interested political opponents, the military industrial complex and—for all I know—the Modern Language Association.)
- I greatly look forward to meeting with the pioneers of the fractional real estate ownership industry in Russia. These leaders and entrepreneurs are in a position to make a major positive difference in the lives of their compatriots.
- The more we share with Russians—our knowledge and information, our expertise and our capital—the more good will we earn for ourselves personally and, most importantly, for the United States. This may help facilitate difficult negotiations between our respective countries. Change can be effected slowly from elected officials at the top and, more rapidly, I believe, from nimble, individual entrepreneurs working co-operatively with international partners on local economic ventures.
- In my view, my trip to Russia is not just that of a business adviser, but also that of a good will ambassador. I’m guessing that some Russians hold stereotypes and misconceptions about Americans. Similarly, some of my compatriots choose to live in the past and hold obsolete views of Russia, a country that may be on the road toward becoming an important political ally. I believe negative stereotypes and harmful prejudices can be reduced through international trade and personal one-on-one engagement.
- Now is a good moment to invest in Russia. Let’s work toward world peace one deal at a time.
Today is Easter in the United States. In Russia, this major feast day is observed next Sunday. I send my greetings and best wishes to my readers in all parts of the world who celebrate this joyous day of rebirth, renewal and hope.
And to my readers celebrating Passover, we remember our deliverance from slavery in the past, and we celebrate the freedom we enjoy in the present. Our past informs our present. It inspires us to work on behalf of today’s oppressed who lack the voice and the means to gain freedom on their own.
What are your takeaways from the vignettes and musings presented here? Do you have relevant vignettes or musings of your own? Please share.
David M. Disick, Esq. helps real estate developers secure fractional financing. A former Wall Street attorney and developer of the world’s first Private Residence Club, he consults with clients in the United States and abroad. Get in touch with him at: http://www.TheFractionalConsultant.com.