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A squeaker on whether Olympic village condos will sell for enough to save us from debt

February 22nd, 2010 · 15 Comments

Oh, surely with all these wonderful pictures of Vancouver being beamed around the world 24/7, we can rest assured that those Olympic village condos will sell for top prices and ensure that the Malek brothers/Millennium Developments will pay back all the money the city loaned them.

Don’t be celebrating too quickly. Even the city’s chief real-estate optimist is not willing to say anything of the sort, as I document in my latest story on the always-interesting village finances in today’s Globe. It’s going to be close call, according to Bob Rennie and many others. Likely the Maleks will have to sell off the retail components of the village, plus the 110 units that were supposed to be rental apartments to make the numbers come out even at the end of the balance sheet.

Others I’ve talked to said that the developers will likely make a very small profit or take a small loss. But before you start saving your pennies to pay for the shortfall, one interesting thing to remember — even if there is a small loss, the city of Vancouver is still making money on the loan since it’s charging the Maleks more interest than what it’s paying out to its lender.

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  • Lewis N. Villegas

    When the lights go down on the closing ceremonies we will be thick in the downturn after the greatest financial crisis since the Great Depression following the NYC Crash of 1929. The authors of “This Time is Different: Eight Centuries of Financial Folly” estimate the bust phase of housing price cycles surrounding banking crisis representing an average drop of 35.5% in values, stretched over an average of 6 years.

    That is an average. In their rubric the U.S. 1929 crash saw devaluations of just over 10% over about 10 years.

    We are at the close of the Olympiad in the most challenging of all market conditions, uncharted waters.

  • Norm Farrell

    You imply the City of Vancouver made a good deal after all. They make a “profit” on the interest spread.

    I’ve heard reports from tradespeople that much sub-standard work went into the units. Financial concerns and supervision issues encouraged and enabled much corner cutting.

    Let’s hold off on counting profits until the final results are in. BTW, do you understand the concepts of opportunity costs and risk? Still want to wait for a profit?

  • VHB

    Sigh. $1100/sf? good luck with that.

    Can we agree on something in advance? Can we agree that no one can get away with the phrase “no one could have predicted the condo market wouldn’t hold up.”

  • Booge

    “I’ve heard reports from tradespeople that much sub-standard work went into the units.”

    I have said as much from the get go. There was no way that this was going to be a quality project due to it’s late start… it was rush rush… and this leads to sub-standard work. Get ready for the blue tarps in a few years.

  • Joseph Jones

    A landmark worth its salt …

    The Salt Building. Your upbeat coda leaves out those megamillion numbers. Nice rhetorical move.

    Anybody curious? Get a partial glimpse of that financial fiasco in this
    2008 city report.

  • Denis

    I rather doubt that most of us could even qualify for a loan on one of the units and now the conditions are getting most strict, with the end of just about nothing down and forever to pay. The deal was ripe for flippers

  • mary

    @Joseph Jones, notice that the authors of the report you link to are Ian Smith and Ken Bayne: two of the handful of those most responsible for the financial aspects of SEFC. Yet who took the fall under this Vision council? Jody Andrews. Looking back, the George Orwell novel-ism of this Council was evident from the start. It’s a wonder they haven’t renamed the Communications Department the Ministry of Truth.

  • Blaffergassted

    Rennie has a vested interest in selling these condos at the highest price, and his comments are simply part of a bullish marketing campaign.

  • Hoarse Whisperer

    I can tell you that one of the producers of ‘Good Morning America’ (LA office) brought a city map to me and asked me where I thought the next real estate opp in the city was coming from. I was also asked to speculate on what Vancouver was going to look like in 20 years.

    Since I have lived here all my life and missed all the sign-posts to date, I thought it best to keep my opinions to myself.

  • A. G. Tsakumis

    Frances,

    I’m at a complete loss to how anyone can predict the coming tides, in the dark, and without a view of the shoreline…

    It isn’t possible for the Olympic Village to be salvaged unless agents are prepared to lie and buyers are willful dupes.

    FACT: The incredible rush to complete the units in time for the Olympics adversely affected their quality. In fact, the multi-million dollar green tech that went into the water recirculation system, routinely causes back-up. A restoration company was summoned to the OV just after a larger group of athletes arrived because their units flooded. This was not a one off as it happened again late last week.

    FACT: The walls are paper thin. Again, the demand for these absurd (and useless) green initiatives sealed the fate of the OV long ago. Not to mention their is a permanent life safety issue with a majority of the fire alarm panels used–since first responders cannot approach the panels with their radios for fear of malfunction.

    FACT: In case it hasn’t occurred to anyone–the only real estate market currently in play in the City of Vancouver is being driven by off-shore Mainland Chinese money. The demand is high and the inventory is low, resulting in inflated prices that has created a false market. The only people who advance in such a proposition are the realtors whose typical ethics range somewhere between a hooker and a televangelist. When the brakes are tapped that inventory will flood the market driving prices down; OR, values will plummet as demand decreases. possibly resulting in the same phenomenon, but without as big a price drop.

    FACT: The social housing component drives the price down. It was the absolutely worst place for such housing, but charlatans and manipulators like Jim Green decided long ago that it was “inhumane” to keep “poor people away from beautiful waterfront that we should all enjoy” What an idiot! Driving social housing into a singularly luxury setting such as False Creek means nothing more than guaranteeing that radical efforts at false social engineering has given rise to devaluation.

    FACT: Bob Rennie is full of crap. It’s in his best interest to put the best possible face on this market, otherwise, he can’t open up another gallery that you can fawn all over.

    After all, triple macchiato, half-skim, carmel-idiot bullshitchinos can be expensive to clean up off the console of your $350,000 Bentley Continental.

    The OV is doomed. And so is the Vancouver real estate market unless some controls are placed on the whores driving it.

    It is totally unaffordable for children growing up in Vancouver to stay in Vancouver. And THAT is the real story, the real tragedy about how the real estate market has been pumped full of false values in the last twenty-five years. Downtown was over-built (with many ugly buildings) and home buying is now the currency of offshore investors content to speculate off the backs of the younger generations being chased out of a city they grew up in.

    While some slept…

  • Bob Ransford

    Frances, you presented the history, context and challenges of the Olympic Village extremely well in this story. Well done!

    A vital question that has gone unananswered so far revolves around the original goal of making SEFC a model for sustainable urbanism.

    Did the City push too hard and set the bar too high (LEED platinum is very high) for the project to stand as a model?

    For a project to be called a model, it must be worthy of replication. Is this project a mere “showcase” for multi-layered principles of sustainable urbanism and a wide range of green building technological applications rather than a model because the economics of achieving this long list of layered objective simply don’t play out in the free market of real estate development?

    A question worthy of some discussion, don’t you think?

    By the way, there are other questions– most of them around the lessons learned in civic governance when a City Hall dives into the development business

  • david hadaway

    Alex, I think you are being very unfair to hookers. In general they deliver the agreed service at the agreed price (so I’m told).

  • michael geller

    While I am always happy to answer Frances’ questions whenever she calls, and stand by my statement in this story….I am worried whether the city will receive all of the $193 million land payment owed…. I want to publicly acknowledge what I told Frances, namely that I do not pretend to know all of the latest numbers relating to the costs and required sales prices for the market condominium units at OV.

    More specifically, I, and few others know the final construction and ‘soft costs’. We are basing our opinions on earlier information that was in the marketplace.

    Another very important consideration is the financing cost. I do not know what rate is being charged by the City, although I am confident it is significantly less than the rate Fortress was charging. This could reduce the project costs by millions.

    Frances’ story does include one interesting speculation worthy of further consideration…the future of the rental housing. It should be noted that the last council granted a ‘last minute’ density bonus to the developer to include rental housing along with the market condominiums to broaden the social/economic mix in the project. This also had the effect of adding a few floors to a number of the buildings.

    Any decision on whether to allow the developer to sell these units should be made carefully, since it could have many ramifications, including the future options for the social housing units.

  • Lewis N. Villegas

    I am looking forward to the ability to walk and study the streets of the OV and test its “urbanism” while the market finds its level.

    I expressed during the urban design consultation phase my concerns that simply “extending the grid” was a poor design decision.

    From a distance the street aspect ration (ratio of the building hight to street width) seems very tight. From the distance these seem like tall and narrow street spaces.

    If that is what they turn out to be up close, then there will be two problems. First, the streets will feel mean to walk on. Second, there will not be enough separation from the neighbours, and any hope of keeping windows open for ventilation and cooling with vanish.

    I too was interested in the idea that the Olympic Village would be a “model” urbanism. The model we are still groping for in our society is for how to turn around the historic districts. The decision to go mid-rise at the OV was one I didn’t agree, because like the Historic Area Height Review recommendations, I don’t see these types of buildings as being compatible with our brand of 18th century urbanism.

    Yet, the Olympics have not disappointed in pushing the Vancouver community up against the wall, and putting some pay to the boast that we are a “World Class City”.

    The Canada Line, warts and all, is a shinning success. And the Olympic Tram a masterful demonstration of a technology that must now replace SkyTrain on that much beleaguered Evergreen Line. The plans were drawn up already.

    I was in the central space of the Woodards the other night to see Trevor Boddy’s “Vancouverism”. It felt as if I was in a darkened tent. The exhibit itself was as if I was still taking classes with Trev at UBC, we had left the models and drawings behind after the crit, and had turned off the lights on the way out.

    The Henriquez concept of creating a through-block-link “at the corners of the block”, or on the diagonal, flies in the face of good urbanism. The goal is for the block scale to decrease as we approach the center.

    Finally, I conducted conversations with merchants at Granville Island. THE FREE PARKING WILL RETURN, I was told—after the Olympics. What a head-scratcher!

    Whether or not the Olympic experience had been good for market merchants depended on what kind of merchant I spoke to. For the coffee bar by the free seating area, “Every Day is a Saturday Night” (their best time of the week). The butchers were reporting sales down, and “regulars” not showing up. The deli and the baker were not complaining.

  • MB

    Crap.

    You know, the stuff even royalty produces but never acknowledges, is probably going to be one of the success stories of SEFC.

    Many of us are familiar with the marvelous possibilities of what can happen when you connect a heat pump to a bunch of pipes in the ground filled with anti-freeze. You can extract and concentrate enough heat to supply entire buildings.

    With SEFC, they connected the heat pumps to the sewer system — which contains way more heat than the ground — and have enough for an entire neighbourhood at a modest cost.

    District heating plants using alternative sources of energy are an important part of the vastly more efficient 21st Century and will contribute much to energy security and making our cities more resilient to energy price spikes.