The suggestion in the article is that Concord is aiming to come out somewhere between 30M-80M ahead.“Concord is offering buyers who paid an average of $875/sf for their condo in 2016 the opportunity to buy back their unit at about $1,338/sf”.
My 2 cents.I actually think the Concord offer is reasonable.
Are people getting screwed in this process? Yep. But is that Concord's fault? Nope, it's Cresford's fault and also the risk that comes with buying an as yet unbuilt condo.
As well, you'd assume that if a better offer exists, it will be looked at ... but I've not heard of any better offers ( I'm also not really looking, but I've not seen anything mentioned about it anyway ).
Concord is a for-profit company, meaning they don't need to get involved and only will if they believe they can make money.
Additionally, they won't do it for a tiny margin, or the risk begins to outweight the expected reward since you never know how things will turn out when all is said and done.
I also thought Concord included some reasonable options within the deal.
And I say all the above as somebody who is not a fan of Concord and hasn't forgiven them for that crap they built next to Loblaws on Lake Shore.
Just my two cents.
Your top suggestion re/ buyers being considered secured creditors certainly feels reasonable.My 2 cents.
The way to avoid the perception of unfairness on a go-forward basis, is that those with sales contracts in this type of scenario should be considered secured creditors and have a right to representation at the table (via a lawyer, not 492 independent voices) which should allow them a say in the fairest solution; including giving the would-be owners the right to finance the project (to completion) themselves.
I doubt most such scenarios would end that way; (prospective owners as de fact developer) as most would lack the requisite expertise or additional required capital.
Though the increase in the market value of their units since purchase, in the above case, could theoretically serve as the required collateral.
Still, they ought to have a say, and a real choice.
One other thought, if nothing else, is that developers when holding deposits in escrow ought to be able to secure (and be made to secure) a return equal to CPI.
A bank can reasonably afford that payout in exchange for an 7-figure deposit.
The difference in this case would be along the lines of 9% premium back on deposit instead of 5% which would at least make the tough pill a bit easier to swallow.
I'm with you; I'm not in finance, so perhaps my assumption is off; I was picturing the escrow accounting being written as GIC; and the spread for the bank is in being able to loan out or invest the majority of that money ( a portion being retained as Tier 1 capital)Your top suggestion re/ buyers being considered secured creditors certainly feels reasonable.
On banks easily paying a return equal to CPI ... I'm not sure that one is as easy as you think. I work in finance. If you have funds in escrow, you need to stick with guaranteed assets like a government bond. Even before the pandemic, 5 year GOC bonds were yielding about 2%, and CPI was around 2.1%. So, even if you could perfectly mirror CPI with a fixed return, which is difficult these days, it would leave zero margin for error and zero margin for the bank to earn a spread ... meaning, nobody would have any interest in taking on that business.
That all said, I'm not sure there is any ideal situation when a developer goes under mid-construction.