The idea of owning a fraction of a property is increasingly becoming mainstream in the United States thanks to the headlines generated by Pacaso, the unicorn founded by ex-Zillow employees.
The model is starting to take off in Europe with a few startups working diligently to convince second-home buyers that thanks to blockchain technology, what they offer is much, much more than a timeshare.
One company leading the way in the UK market is Fractal Homes. Founded in 2020 the company markets fractions of up-market London homes to Middle Eastern buyers and recently raised an eye-catching $30 million. We spoke to co-founders Labib Kaddoura & Wadih Abou Bechara to find out more...
Fractal’s mission is to make second home ownership accessible and hassle-free. We offer consumers the opportunity to purchase anywhere between ⅛ and ½ of a fully managed property through our co-ownership platform, effectively reducing the price, running costs and headaches that come with owning a second home.
Although fractional ownership as a concept is not new (it has been around since the 70s) its practical implementation has historically been complicated and expensive. The recent pandemic accelerated the shift in workplace and home ownership trends, making the demand for second homes and fractional ownership more relevant than ever.
A number of new players aiming to reinvent the model have recently emerged across the globe, Pacaso in the US, Myne, Vivla and Prello in Europe, and Ko in the Asia Pacific region are some of the names that come to mind.
Our biggest challenge would be making co-ownership an established ‘go-to’ option that people would naturally consider when looking at buying a second home. It’s a challenge that the whole industry is facing, not just Fractal, and it needs significant efforts from all towards education on the benefits of our model.
In terms of challenges specific to Fractal, our top pick would be the cross-border complexities linked to servicing an emerging market clientele looking to buy in Europe.
The equity portion of our seed round was led by White Star Capital, a global multistage Venture Capital fund. The debt participation came from a private credit fund.
Funds will mostly be used to scale our UK operations ahead of a targeted expansion in the Middle East next year. The debt capital will go towards the acquisition of luxury properties in London with a view to expanding Fractal’s offering to other European capitals like Paris and Madrid in the near future.
One of the most obvious risks of fractional ownership stems from sharing an asset with a group of other people you might not know. What happens for example if someone has difficulty keeping up with maintenance payments or budget contributions?
This is where having an independent manager like Fractal becomes key, we give buyers peace of mind by ensuring we step in and guarantee any shortfalls should they arise.
Another concern lies around exit visibility, how can a buyer be sure that there will be future demand for a fraction of a house should they decide to sell? Our platform and structure are designed to allow for maximum liquidity and flexibility, we help co-owners wishing to sell after a certain period of time according to a clear set of rules and give them guaranteed exit visibility built into our legal framework.
The appeal of London and other major European metropoles as centers of culture, entertainment, education and leisure is not just limited to buyers from the middle-east.
Yes, there are historical ties and established real estate investment corridors between say the GCC and the UK but the same can be said for African countries like Nigeria or Ghana, or Latin American and Asian countries as well. The beauty of our model is that it can be easily adapted and scaled to capture this existing demand, proposing a product that is more in line with the latest emerging real estate ownership trends and lifestyles.
Orchard, IMMO and Nested to name a few of our favorites in the proptech space.
We’re the newcomers and are just starting relative to others. We already have an offering of four prime central London properties on our platform and are very focused on our sales & marketing efforts to close our first transactions.
Asking if Fractal is a timeshare (it’s not!), asking about the seasonality of bookings and how the rules work, and last but not least asking about our legal structure.
We are seeing more players enter the space each with a different angle or twist to their offering. We see this as a positive that amplifies the message and the reach necessary to educate potential buyers on the model.
One thing we pride ourselves on is the amount of time and effort we’ve spent and continue to spend on our innovative structure and UK legal framework. We feel we have a responsibility to be setting the right standards in such a new asset class to avoid the mistakes of the past and protect our clients going forward.