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Trying to put Olympic village together again

February 11th, 2011 · 11 Comments

Going through the 112-page report from the Olympic village receivers in detail makes it clear that getting the village into an upward spiral is not going to be easy. I itemize a few of the interlocked problems here.

The receivers don’t mention it, but part of the problem is that the village has become a political football.

Vision Vancouver campaigners piled on during the election, making hay of the news that it was over-budget and that the city had had to start lending money. After the election, they blamed the previous administration for all kinds of bad decisions.

Now, NPAers and those affiliated with them seem to revel in leaked documents that portend disaster and are out in front of every microphone predicting losses in the $100-million-plus range.

In both cases, it’s been like the anti-marketing campaign of all time.

So, with that as the backdrop, the report paints a picture of interlocking problems where no one solution appears ideal and every move affects all the other pieces. Drop the prices too much or sell it off in bulk — the city definitely loses money and the equity of existing buyers is eroded. Rent some units? Helps populate the village, but it comes with all kinds of hidden costs. Hold some units back from the market since it’s too much to sell in one go? Helps reduce the competition for the existing units, but the city has to pay interest and strata fees for everything it holds back.

Some of what’s in the report are the standard issues that are part of any development project in the city. Although it might seem as though real estate in Vancouver sells itself, in fact there are developments that get into trouble and have to try new tactics to sell themselves. Or, like the village, they have people moving in who are unhappy about things that don’t work.

(Like the Woodward’s project, where all I heard from residents for months after the move-in was how much griping was going on about the counters — apparently they weren’t sealed properly, so they stained with red wine or lemon juice. Fixed now, but my goodness, the carrying on.)

The difference here is that, because this is now a public project, we get to sit in on every marketing meeting (or the equivalent) and hear exactly what strategies the receiver and marketer are going to try. And everyone becomes an armchair expert in what they’re doing right or wrong.

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  • ITK

    Let’s not forget that Vision and COPE are the ones who turned the Olympics and the Village into a political football during the last two councils and have benefitted greatly from doing so. Now that they are in complete control of City Hall and this file, they are bungling it badly.

    But rest assured, as the election nears, we’ll start hearing the all-too-familiar “blame the NPA and Sam Sullivan” chorus from these very same people. The NPA will have every right to reflect that blame right back to the Vision/COPE councillors who were instrumental in turning this into the multi-million dollar cluster%*$# they worked so hard to assure it would become, all to score political points and win an election.

  • Dan Cooper

    I disagree with the idea that people won’t buy/move in, especially to “luxury” housing, if there isn’t a major grocery and other stores within a block of their apartment (as opposed to “only” Buy-Low, Whole Foods, Save On Foods, IGA, Safeway, and T&T as well as a host of other shops of all types within about a mile radius). If people are rich enough to buy these condos, they are rich enough to own a car! Certainly, people living in the multi-million (and multi-tens-of-million) houses in Shaughnessy or points south generally don’t have grocerie stores at their doorsteps.

    So what then in my humble opinion is the problem in getting people to move in to this development? I suspect the number one mistake was not that they put lower income housing among the luxury apartments, but that they put luxury apartments in that area – not a high rent district – at all. Of course, short of ripping them out and starting again, that’s water under the bridge, and the question is what to do next. Hopefully with this new plan the prices will be brought down enough to make it affordable to a broader range of buyers.

  • Morven

    There is clearly plenty of blame to ascribe to our elected representatives for this problem.

    But to be fair, there really has been a cultural hubris extending from the provincial government downwards (and including the development industry) that hindered an appropriate assessment of risk at the Village.

    There is a phrase often used in project management – optimism bias. It was alive and well in the run up to the Olympics and the aftermath. We pay a big price for now recognizing it.
    -30-

  • Joe Just Joe

    We shouldn’t forget the past but we shouldn’t dwell on it either. It’s time to move forward and fix some of the items that are currently still broken. The city would be wise to follow some of Michael Gellars ideas, even if they have to reword them and stamp Vision on the top. Wether is $50M of $150M it’s money that we can all agree could’ve been spent better on something else.

  • Bill McCreery

    Insightful comments all.

    With these price reductions if I were looking for a central city place I’d be in there quick.

    Your take Frances is right on. However, it “has become a political football” unfortunately. That is a reality, so let’s look at a risk assessment of same.

    If Vision had been willing to listen to well meant and extremely well qualified advice months ago, but which was unfortunately in their eyes politically tinted, much of this current fiasco could have been circumvented.

    Another piece of non-politicallymotivated advice might be that their current plan is still inadequate, and they would be well advised to loosen up until they get it right. Let’s start with the new lame duck name…

  • Deacon Blue

    I understand that for some this is ‘political football’. For me though it’s more like ‘watching from the sidelines’. It’s like being in the gallery at a golf tournament, when you’re supposed to keep track of when the players are preparing to swing, and stop the idle gossiping well in advance of the critical times.

    The thing was dodgy right from the get-go. At the very first public meetings, city staff were blind-sided with criticisms they had not prepared to answer. It was as if the whole thing had been hatched in a bubble, and it seems as if it was a bubble that didn’t burst until it was much, much too late.

    I’ll say this, the Erickson buildings just keep growing on me. Stack of sardine cans or not, they are starting to take on the aura of the best architecture on False Creek.

  • rmac

    The village does look nice but the practical aspects of attempting to live in the tiny poorly laid out units is probably a major factor in the lack of sales. The appliances, although high end, are smaller than one would want (the oven appears too narrow to fit a standard baking sheet) and the configuration is odd. The lack of natural light in the neighbourhoods is also more than a little creepy. People need more than an “iconic” building to live in.

  • Michael Geller

    Thanks JJJ…for those who are interested, here are some suggestions to increase the ‘body heat’ without having to resort to renting units, that I believe will be costly and problematic. (As an aside, I find it hard to agree that it’s going to take two or three years to sell the units…sure it’s a lot of units…but it is a very attractive project for many people…not all, but many people.

    While some people have suggested to me that renting the units may not be as costly or inappropriate as I fear….here are a few ideas that might be explored as an alternative to renting units while accelerating sales:

    1. Units could be sold with a Vendor Take-back mortgage from the city. Interest would accrue, but need not be paid until the earlier of a predetermined date, say five or ten years from now, or when the unit is sold.

    To illustrate the point, a $750,000 unit sells for $650,000 and the city holds a $100,000 mortgage. The advantage of this approach is that the number of potential buyers increases. The disadvanatages are deferred cash return to the city, and some risks to the city if the units do not increase in value.

    Given that this is an emerging community, I think the risk of lower values in the future is less here than in other market areas, especially if the units are fairly priced to begin with.

    2. A sale at 5 or 10 per cent below market to a preferred market segment, on the understanding that future resales are at a corresponding ‘below market’ price. This is the approach taken at SFU to provide much needed workforce housing/

    The preferred markets might include owner-occupiers rather than investors, and those members of the workforce that the city would like to see living in the city. This would cost the city money, but would have the benefit of broadening the social/income mix and accelerating the number of sales…(Units should be priced so that the cost is still less than that estimated for renting units) I would note that similar approaches were used during the initial phase of South False Creek.

    3. leasehold, rather than freehold sale, with graduated land lease payments…there are two approaches that might be considered…one a discounted prepaid lease with stepped payments at predeterminied dates in the future over the life of the lease, or graduated payment leases. Under this approach, the units would be differentiated from the other 230 sales, and the city would recover its money, but over time…indeed, it could recover more than from the discounted sales in 2011.

    There are obviously other ideas…my concept however is to induce people to buy with creative financing provided the cost to the city is less than that of renting the units, noting the city will have to pay the HST, forego property tax payments, and refurbish the units at some point in the future. It will also have have to evict tenants when it’s ready to sell, and the challenges associated with this should not be under-estimated….

  • Joe Just Joe

    I wonder if the city could allow the following.
    We will experience a shortage of new product coming on the marked during 2012. This city for better or worse is into presales. Could the city allow the marketer to offer purchasers two options, complete now at a discount or pay 10% of a slightly larger amount and provide them the ability to complete in 2012. The city would eat some of carrying costs but could tap into a larger market. The purchasers would have the option of closing earlier if they chose, and the city gets to keep the deposits if they walk away. Obviously in order to increase body heat this wouldn’t work, but it might be a good idea on a block of units. Thoughts?

  • Michael Geller

    JJJ…I like the fact that you are trying to be creative. However, I think it’s in the city’s interest to get people into the community asap…

    At the same time, we do not want to lose too much money. That is what prompted me to suggest some of my ideas. I must say, however, that the leasehold concept may not work now, since it appears that some units have been sold in each of the buildings coming to market…so scrap that one.

    My fingers are crossed!

  • Michael Geller

    So we’re going to have a forum on Feb 22, organized by the Planning Institute of BC, SFU and ThinkCity to discuss lessons from the Olympic Village. Fabula is the moderator…

    I am hoping that all of her followers will come out wearing their nom-de-plums!