"How's the Olympic Village going?"
Financing the 2010 Olympic Village
Where are we at?
The 2010 Olympic Village, when completed will be home to 1,100 residences. Under ideal condition, the buyers of the units will pay for all of the costs and the development will be profitable and successful.
Under the worst conditions, sales will be slow, and not enough units will sell to cover costs. The City will be left with the debt and carrying costs.
How did we get here?
The original idea was for the City to sell the property to developers and re-invest the proceeds in Olympic infrastructure. The City had hoped to make $50 million over 20-25 years.
In 2006 Vancouver chose Millennium Properties Ltd. as the developer of the Olympic Village site.
Millennium provided a $29 million deposit. The City retained title to the land until the project was completed, the units were sold and the developer paid off the balance of the $193 million.
To finance the development, Millennium secured a loan of $750 million from the Fortress Investment Group, a hedge fund headquatered in New York. Because Vancouver retained title, Millennium lacked security. So, the City provided a $190-million loan guarantee and also guaranteed the project would be completed on time.
By last autumn, with cost overruns of $125 million, Millenium needed to re-finance. Fortress, hit hard by the credit crisis, had already lent Millennium $317 million and was unable to loan more and stopped funding.
On October 14, 2008, Vancouver City Council unanimously voted to provide up to $100 million from its Property Endowment Fun to rescue the project. Millennium must pay back all loans with interest. The City also approved spending of up to $450,000 for temporary staff and constractors to oversee the project.
The city then asked the BC government to amend the Vancouver Charter to enable it to borrow the remaining $700 million required to buy out Fortress’ loan and complete the project.
What will happen now?
When the City signed the agreement to host the Olympics, part of the contract was to deliver the Olympic Village in time for the games. The Olympic Village project must be built on time. Contractors have to be paid, otherwise it doesn’t get finished.
The City has also appointed a panel of experts to oversee the project, including well known developer and UDI past-president David Negrin.
The risk is after the 2010 Winter Games. If the units don’t sell, the City will be left with all of the carrying costs of the financing. And the question remains - can the condominiums be sold for more than the project costs? REALTORS® know best. What do you think? Will this project sell?