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Sunday, April 29, 2012

Co-op vs Condo Pt 3


A comparison between the parts we know about Brookfield & G-W.

Involvement:  Brookfield - Long Term; G-W - Short Term.
I've said I favor short term involvement.  I think we can govern ourselves well after 2-3 years.  What's not clear is me is what is the benefit to the tenants of having Brookfield involved long term.  And in particular, I've been told that after 5 years property control is posited with the tenants even if the sponsor still owns the majority of the units.  What then does a commitment from Brookfield to stay long term mean in this case when we will have control after 5 years?  Doesn't really add up.  One thing is clear though.  Over the long term, if Brookfield owns a great many rental units(due to high prices to buy), Brookfield will benefit greatly when these units vacate & can be sold at market rates.  So Brookfield must be involved long term to benefit from these sales.  No altruism here.

Flip Tax:  Brookfield- there's been mention of a substantial flip that might go on for some time.  G-W - no flip tax.
Who benefits from a flip tax?  It's true that the flip tax might generate some price stability but after some period of time, the flip tax becomes something of a liability for those tenants who wish to sell.  I think G-W has stated it would like a moratorium on tenant selling for about 2 years in order to sell the vacant units it might take over at closing.  It wants this moratorium so that it will not have to be in competition with tenants selling.  Hmmmm.  So by the same token, if there is a stiff flip tax in place for many years, who would benefit from that?  I think it would be...Brookfield.  Because during the long time needed for rental units to eventually vacate, with a stiff flip tax in place Brookfield would have limited tenant competition while trying  to sell the units it owns at market rates.  So our hands will be tied while Brookfield is free to slowly clean up.

Commercial space: Both sponsors will own. (One of our bloggers said that this was revealed about Brookfield at one of the house meetings.)
Treatment of open spaces:  Both sponsors will not build
Effect on Rental Units:  Both sponsors will present non-eviction plans.

Which scenario do you think is better for the tenants?

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