From The Province Newspaper:
VANCOUVER — In early 2009, Mayor Gregor Robertson warned Vancouver taxpayers that they were on the hook for “all of” the $1.1-billion Olympic Village project. After five years that dire statement is coming much closer to reality.
The Province’s analysis shows that with marketing costs still mounting, and about 130 hard-to-sell village homes left, when the last unit is sold final taxpayer losses of over $300 million seem realistic.
In 2010 a receiver, Ernst & Young, was tasked by the city to regain as much as possible of the $750 million owed to taxpayers, after developer Millennium defaulted.
The $750-million loan didn’t include $171 million that the city was owed by Millennium for waterfront land that the village was built on. The city’s latest financial statements say that after writing off a $50-million loan loss, about $300 million remains to be paid.
The problem is, real-estate experts say the remaining village homes generally have the worst layouts and views. According to The Province’s rough estimates, potential sales revenue might only come to about $100 million, after expenses. That means taxpayers seem likely to owe over $200 million and lose the value of the land.
The city reviewed The Province’s analysis for this story and offered a response: “The financing for the village is a work in progress,” the city stated. “The city cannot predict the outcome of the village financing at this time.”
In an interview, University of B.C. real-estate expert Tsur Somerville said: “I don’t think there is anything the city can do to mitigate the losses they will experience.
“The best case was that the city got the loan paid off and got nothing for the land, and it doesn’t even seem to be looking at that anymore,” Somerville said. “The less-desirable units take longer to sell, but now they are trying to sell those units with a whole bunch of competing units coming on the market in that area.”
But the village has bounced back since being labelled a “ghost town” in 2010. The latest reports show about 90-per-cent occupancy, plus thriving shops. But successful marketing and promotion efforts have come at a significant cost, and the bill continues to mount.
The latest court-ordered marketing update from Ernst & Young shows that as of June, 339 units have been sold by the receiver, for proceeds of $331 million. The receiver gave the city $250 million. The rest of the money was gobbled up by real-estate-agent and marketing costs, strata fees, mounting legal fees, unexpected repair and maintenance bills and the receiver’s management fees of over $5 million.
“The involvement by the receiver has exceeded its original estimates,” Ernst & Young’s June report reiterates, also noting that sales of a final 135 units will slow down “due to the remaining mix of inventory.”
So the question is, when should city hall cut off the small army of real-estate agents, lawyers and accountants that have nursed the village back to life?
Vision Vancouver Coun. Geoff Meggs, council’s expert on village finances, said he couldn’t comment. Meggs directed questions to the receiver, Craig Munro.
“There are still too many variables to attempt an estimate of total final revenue,” Munro responded to The Province’s questions.
NPA parks board commissioner John Coupar, meanwhile, said buying a condo in the village two years ago looks like a successful investment.
“When we first moved down here it was pretty quiet and it was a bit of a leap of faith that it would work out,” Coupar said.
“I’m not that familiar with the financial ins and outs, but from a residents’ point of view I think the place will come alive, and over time it will be seen as a real positive thing for the city.”
scooper@theprovince.com
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