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The Coles notes on today’s Olympic village episode

January 21st, 2009 · 18 Comments

You can read news stories with complete paragraphs in other media if you want. (My pal Rod Mickleburgh was covering for the Globe today, and pretty much everyone else was there in force.)

Here’s my take on what was new and interesting, beyond the basic news that the city is gearing up to go and borrow whacks of money to finance the Olympic village. (The report discussed at council today, which will be voted on Thursday, gives the city the formal authority to go do all that. If you want to read it, it’s here. Don’t let yourself get scared by the section on the London Inter Bank Offered Rate, or LIBOR.)

1. Millennium had been looking at paying out $178 million in interest costs on the village, out of the $750 total that it borrowed. The rest, $572 million, is the actual construction costs for the for-sale condos, the market condos and the retail space.

2. The city is going to get the money for next month’s construction draw (Feb. 15) by using the $29 million Millennium gave as a down payment on the land, which has been held in trust since 2006.

3. If the city has to go out and borrow a lot of money, that could lower the city’s credit rating and actually then make it slightly more expensive to borrow. Every quarter per cent increase in the cost of borrowing costs $250,000 – $300,000 extra in interest on $100 million.

4. The report seems to indicate Fortress is being unco-operative. It says that Fortress is refusing to lend any more money under the current agreement and is suggesting that any new loan would either be a) at a higher interest rate or b) smaller.

5. Millennium has been looking for alternative financing itself but can’t get it “on its own strength,” the report says tactfully. That means no one wants to lend because they think the company doesn’t have enough assets or possibility of profit to secure the loan, as I read it.

6. If the city borrows the money, it will likely charge Millennium more than the 3.75 – 5.5 per cent interst rate on that loan since, as finance guy Ken Bayne put it, “we’re not in the business of providing money to developers.”

7. The city will also ask Millennium for more security/collateral, which I didn’t quite get because I thought they had locked up pretty much every asset the company has.

Finally, I have to say it was kind of cool to see all of this stuff discussed in public — stuff that we the public were told was so incendiary that it had to be kept to in-camera meetings or the world might explode — with people getting to ask questions about what this or that meant.

And the staff, who have been pretty much invisible for the last month, got to talk. A lot less dramatic than leaked reports here and there and dire warnings about what would happen if details got revealed, but kind of comforting in a way. Okay, we’re in a jam but we’re dealing with it.

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