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Real loss at the Olympic village $230 million but no tax increase to cover that

April 12th, 2011 · 58 Comments

The story today in Gary Mason’s column, which I explore more in my story, is the real number for the losses at the Olympic village, why the assets from Millennium Development’s large real-estate empire didn’t cover that, and what the consequences are for us taxpayers.

I have to add here that I feel personally misled by what happened at the news conference on Friday, where the city aka city manager Penny Ballem explained the “$40-50 million write-down” the city would have to take on the village, which everyone understood to be the loss on the total amount of money owing on the village — both the $580 construction loan and the $180-million unpaid amount owing on the land.

I specifically asked, in fact, whether we could interpret the numbers to mean that, actually, the construction loan would end up getting paid off in full and that loss would only mean that the city wouldn’t get back the full amount it thought it was getting for the land. As you know, that’s what I wrote in my blog post.

That was the moment for someone, anyone, to say, “No, you’ve got it wrong. We’re actually unlikely to get anything for the land and the write-down is on the construction loan.”

But the answer I got was something like, “Well, that’s not the way we word it.” I responded along the lines of, “Well, that’s the way we in the media will write it” with the clear implication being, “If this is absolutely wrong, now is the time to say so.” That didn’t happen, so we all went on to explain to the public that the $50-million loss was on the total debt.

I can’t understand what the thinking was behind explaining things this way. Yes, I realize some among you will say, it’s perfectly understandable, that Vision Vancouver, Penny Ballem et all are just evil liars with a clear plan to dupe the media.

But how could they think this number wouldn’t be questioned, analyzed, poked and prodded to death and that it would become clear in very short order that, in fact, the land debt was not included in the total loss?

A huge mistake. Now it’s hard to have faith in the calculations that went into coming up with the $50 million loss number. We already don’t have a clue what kinds of assumptions are built into the calculations, so we were having to take it on trust that various items like accumulating interest, time to sell all the condos, the rental stream, and more were built it. On trust. Hmm, thinking about that one.

 

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  • The Fourth Horseman

    @Muchael Geller

    Yes, I wondered what the total damage from the Property Endowment Fund was (thought it was $170MM. Oh, well, what’s an extra $30MM between friends?).

    And the money from that fund is is supposed to cover off on social housing, correct?

    If so, I wonder if City Hall will claim that that $$$ is covering off the 250 social units in the Oly Village?

    That’s some social housing. That’s some dipsy doodling, so that it doesn’t look like we are taking even more of a bath.

    Alternativley, why not sell off some of that housing, replenish the PEF and build more small scale sustainable housing in other neighbourhoods. (such as the development @ 16th and Dunbar).

    Please, someone, as per an earlier request, does anyone want to take a crack at laying this all out in a graphical waym on some kind of timeline? Could show where the decisions were made, when, why and where the money deals were being done.

    Also would like an indicatrion of what Millennium got in the way of fees, credirts, and “other” as per more questions raised by poster “Lucy”.

  • Max

    ‘Moreover, the city spent the $193 million (and possibly more) that it was expecting to receive from the sale of the land…’

    ****

    In other words, don’t count your chickens until they are hatched.

  • Joe Just Joe

    I’ve been way too busy with my own work lately that I haven’t had the time to do the research I’d like on this matter.
    At a glance it looks like 40-50M will not be paid back on the money owing nor will the 170M left on the land price. What I’d like to know is what is the value of the assets that the PEF/COV is retaining. I haven’t heard otherwise but I imagine the city now owns all the commercial space which has some monetary value (however small in comparison to the total outstanding).

  • Higgins

    Only one thing to add to the already comprehensive commentaries.
    After reading Michael Geller’s confession “Having just heard Dr. Penny Ballem explain OV finances on CBC, all I can say is I promise not to perform any medical procedures if she’ll promise not to do any more real estate developments.” and then Glissando’s “Penny and Gregor’s favourite things” I have to say that’s the best definition for “Cause and Effect”… Amen!

  • Creek’er

    “I’m also told that the city chose not to go after other personal assets belonging to the principals of Millennium. I’ll leave it to others to comment on whether this was appropriate or not.”

    Were their personal assets put up as surety to get financing? If so and the city did not go after the assets then there is a major scandal.

    However, once the project was floundering, the creditors had no leverage to get the Maleks to put up personal assets as surety, as they would have simply walked away.

    If their personal assets were not put up as surety, then the city has no ability to go after the shareholders’ personal assets. They could attempt to pierce the corporate veil in court, but would likely be unsuccessful.

    This is, sadly, a great example of the ‘miracle’ of incorporation. Bankruptcy for a corporation has limited affect on the personal finances of the shareholders.

  • rf

    I want to know which bureaucrat let the Malek’s pledge the Evelyn property when it had negative $35mil in equity!!!!! It’s not exactly hard to pull up the mortgages on a property.

    When something like that gets missed, it really makes one wonder if there were envelopes with cash being passed around. I understand that is a serious (and unfounded) accusation…….but, aside from total incompetence (sp?) is there another answer?

    Where was Mike Flanigan? He’s been there a while. He’s the city’s real estate expert. How does he escape scrutiny on this particular blunder?

  • The Fourth Horseman

    RF,

    That’s EXACTLY what i want to know:

    What are those Millennium ‘assets’ worth, anyway?

  • Michael Geller

    I think there is a need for a full enquiry for three reasons.

    One, we need to know what really happened. How did the costs increase so much; who was making key decisions; what was the cost of the green features; etc.

    Two we need to have the best possible intelligence to ensure that the right decisions are made over the next two years or so while the balance of the units are sold off, decisions re: the rental/social housing, 119 unit rental building and retail space; and

    Three, we need to glean whatever lessons we can before the next phases of the city land redevelopment gets underway….that’s right. This is just phase one. Hopefully there will be a reconsideration of the appropriate building forms, development structure, social and economic mix, etc.

    There are important lessons that can be learned from a full enquiry by knowledgeable people. Hopefully this will ensure that Vancouver never makes the same, or similar mistakes again, and other municipalities can learn from this experience.

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