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.
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.