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More details, public and private, from the Olympic village scrums

January 10th, 2009 · 55 Comments

If everyone could just PLEASE REMAIN CALM.

As unpopular as this might be to say right now, I’d just like to warn everyone that there’s nothing more dangerous or potentially uninformative as a media pack in full pursuit of a crisis. Everyone scrambles to find a detail that’s worse than what the last guy/gal just reported. It would be really helpful if everyone could sit back and take a deep breath before running off screaming into the night.

Good. Now, having said that, we all got so much information this afternoon that it was hard to pack everything into the space that we had, whether that was two minutes, 600 words, five minutes, or a full page.

So, on top of the Globe story I wrote and Gary Mason’s column, here are some additional random facts from the afternoon. (And before I go any further, a huge thank you to Connie in the mayor’s office, who allowed me to use her computer to file my story this afternoon after my laptop failed to function. This caused much hilarity for all as I sat at the reception desk for the mayor’s office, typing my story.)

1. Gregor Robertson and Geoff Meggs told people there that Vision councillors voted AGAINST the proposal back in September 2007, where the city agreed to conditions that would allow Millennium to get financing from Fortress. Those two conditions were providing a $193-million loan guarantee on the total $750-million loan. The other, and this was the news that came out today, was providing a completion guarantee, i.e. the city guaranteed that if Millennium failed, it would find a way to finish building the project. That completion guarantee stipulated that the project had to be finished according to the original designs.

2. The Vision councillors consulted with people in the development industry to assess the deal. Two of the names mentioned as consultants were lawyer Mitchell Gropper (described this way on the website of his law firm, Farris Vaughn: Gropper is rated by Lexpert as one of Vancouver’s leading lawyers in mergers & acquisitions, corporate finance and corporate commercial, one of Canada’s 40 “Deal-Makers”, one of Canada’s 100 most creative lawyers, and one of Canada’s 100 leading cross-border transaction lawyers) and Morley Koffman, described this way on his Koffman Kalef website.

Morley is a founding partner of the firm with over 45 years’ experience as a corporate and commercial lawyer acting for clients in a variety of industries. A few representative legal retainers include the creation of and operating procedures for Cantel Limited, special counsel for projects for B.C. Hydro and B.C. Lumber Trade Alliance, and the secondary offering in the U.S. for shares of USFreightways for US$250 million. Morley currently sits on the board of directors of Ainsworth Lumber Co. Ltd. and Lions Gate Entertainment Corp. Morley was appointed Queens Counsel in 1986.

3. Neither the “senior city manager” who briefed us nor Gregor Robertson had an estimate of how much the city might lose if a. it had to take over the project from Millennium and b. the 730 market condos sell for way less than originally anticipated. I’ve had one developer sketch out a quick pro forma for me, suggesting that if Millennium was paying $1 billion for the project (200 for land, 800 for construction costs), it was probably expecting to make a 15-20 per cent profit, so $150-200 million. If condo prices are down 20 per cent, that would mean break even — but it still doesn’t mean a loss. Or it (or the city) could try to hang on until prices rise again, but that would mean carrying costs, so it would have to bet that a future price rise would be more than ongoing carrying costs, which are considerable.

I’m happy to publish additional amateur speculations on construction-loan financing and $1-billion project pro formas. It seems to me this issue has now become the do-it-yourself development topic du jour, so we might as all weigh in with our thoughts.

Finally

4. There are still a zillion questions about all of this. I have covered this deal extensively and I still don’t know

a. How much the city had to pay, over and above the $30 million it got from the federal government, for the 250 units of social housing. Hard to believe it built that much housing for $30 million in the recent era of sky-high construction costs.

b. Who pays for what when it comes to the market rental housing. Is the construction cost for those 120 units included in the $875 million total cost?

c. What is the city’s total cost for all the other amenities it provided for the neighbourhood — walkways, bridges, roads, parks, etc.?

d. Why do Millennium’s construction costs seem so high? At $875 million, as we now know, to build the project, that’s about $875 a square foot for the million feet of condo space — very high for that, but maybe that’s a wrong calculation.

Go ahead, kids, post away on all this.

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  • Kevin

    Vancouver has become totally unaffordable to the middle class. Only the very rich and the very poor can afford to live in Vancouver. This Olympic Village fiasco was was sold to B.C. in the same way that Drapeau sold (hoodwinked) Montreal on the Olympics.

    And in the never-ending Canadian way, taxpayers are invited to clean up the mess after the party is over. No one monitered the party people and no one will ever take personal responsibility for anything.

  • Dawn Steele

    VHB said:

    “The damage was not done by those *reporting* or *commenting* on the problems. The damage was done by those *signing* the deal. ”

    Absolutely. And thank heavens for some transparency at last!

    Stephanie thinks it’s OK for the City to put taxpayers on the hook for $875 million for a luxury condo project because “the idea that competence is somehow vested in the private sector is a myth that our current economic woes must surely have dispelled.”

    The difference between City of Vancouver taxpayers and all the other folks losing their shirts out there is that we taxpayers were neither consulted nor informed about the fact that the city was gambling on the real estate market with a billion dollars of our money and assets.

    Which brings us back to the issues of transparency and prudency.

    And this whole obsession with our international reputation. Just how much have we spent trying to convince the world we’re “the best place on earth” (vs. just investing in trying to make this a more liveable place for most citizens) and where has it gotten us? Seems to me we got a lot more done and generated a lot more international compliments when we focussed more on our own citizens than on what the world thought of us.

  • Stephanie

    I’m sorry, Dawn, but how did I give you the idea that I think the city’s handling of this development is OK? If I did, then my comment was poorly worded.

    What I am trying to get at is my concern that one of the long-term consequences of this mess will be the destruction of public support for government involvement in the provision of non-market housing. There are some political commentators who already cynically exploiting the situation to that end.

    Now, not knowing Mr. Ransford, I cannot say whether that’s what he’s doing – although I will say that his Vancouver Sun piece about creating a “real” neighbourhood in the DTES through market condo development was one of the sillier pieces of writing about the neighbourhood I’ve encountered.

    I do think you’re somewhat overstating the situation as well – believe me, I am not trying to minimize the difficulty of the position we are currently in, but it’s also not accurate to say that we would be on the hook for $875 million for a luxury condo project. The development contains a lot more than luxury condos. Not enough more, in my opinion, but still a lot more.

    tl;dr: This is clearly an example of Doing It Wrong. But that doesn’t mean that government always does it wrong. And it doesn’t mean that we should leave meeting the city’s housing needs to the private sector.

  • “The things you own end up owning you.”

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