"I will gladly pay you Saturday for a hamburger today." - Wimpy

I read today in the Tucson Daily Star that there may be a movement afoot, lead by Manhattan-based Freehold Partners, for developers to encumber their properties with a transfer fee covenant. What this is takes a little explaining. As I understand it, the developer would essentially record a deed restriction requiring future owners (sellers) of a property to pay a one percent (1%) fee to the original developer of the property, and this would apply to all sellers over the next 99 years. Like the article suggested, this is likely to not be understood buy the initial buyer of a property and should surely impact the future value of an encumbered property negatively.

But here is the real kicker. According to the article, Freehold Partners is negotiating with institutional investors (perhaps the same ones we all recently bailed out with our tax dollars?) to “securitize” pools of transfer fees. Basically, this means that they could sell bonds whose repayment is based upon the cash flows from future sales of properties encumbered by the 1% fee. The original developer is paid today for the value of potential sales of the property in the future. It must be Christmas! Whoohoo!

Gee, this sounds awfully similar to what the banking industry did with bundling questionable mortgages together and selling them basically as bonds to generate big profits, until the people paying the mortgages could not make the payments any more and it all blew up and Congress made us pay for it. So what happens if Freehold or some other entity sells a couple of trillion dollars of these securitized pools of transfer fees, but the consumer wakes up and decides that those properties with a 1% fee owed are worth less than other properties without such a fee? Perhaps the value of those “bonds” would maybe, possibly fall? What could go wrong?

I am sure our Congressional and State leaders can figure this all out and come up with away to deal with the issue. Stay tuned in to what is going on in our country.

Freehold Partners puts a little bit of a different spin on this. What a surprise. I am shocked.

Freehold Capital Partners Announces Relocation of Corporate Offices to Manhattan
NEW YORK, Feb. 12 /PRNewswire/ --

Freehold Capital Partners (http://www.FreeholdCapitalPartners.com) is pleased to announce the relocation of its corporate offices from Austin, TX, to midtown Manhattan.
Bringing the Freehold team to the heart of the financial markets is important for the Company's continued growth. The move will provide close proximity to major investment banks, will allow the Company to attract top talent, and further illustrates Freehold's focus on strengthening its growing portfolio of financial instruments.
About Us: Freehold Capital Partners (successor to Freehold Licensing) helps the owners of real estate projects apportion infrastructure and development costs in a fair and equitable way through the use of reconveyance fee financing. Instead of forcing first-time buyers to bear 100 percent of the burden of infrastructure and development costs, and then pass those costs along to the next buyer, a reconveyance fee (also referred to as a transfer fee) apportions costs over those who utilize the improvements, lowering the cost of home ownership. In the process, Freehold helps build long-term income streams for non-profits, including funding for affordable housing, open space, clean air and more, by allocating a portion of each transfer fee to non-profits.