There are many, I am sure, who feel about the Olympic village the way they do about trying to sell the house after a divorce. Just anyone take it off our hands, please, at any price, so we don’t have to deal with this any more.
Dream on, my friends. The village’s problems may be with us for a long time, a topic I explored in the new urban-focused page of the new Globe.
They will also be plaguing the Vision Vancouver council, which rode in on a promise to fix the mess, something Gary Mason looked at today as well. Among their problems — the fact that an assessment of the village’s value, done for internal purposes, shows that it is worth far less than what the city’s into it for.
25 responses so far ↓
1 Bill McCreery // Oct 2, 2010 at 8:51 pm
From your G&M article above, my take for starters:
“That concept is very naïve,” Robertson said. “Putting product on the market in this environment doesn’t make any sense.”
NAIVE?! Well, let’s just see…..
“The Vision team appears to be leaning strongly towards the idea of having the developer (IF THINGS WORK OUT) or the city (if they don’t) hang on to those condos at all costs and possibly rent them out until the “market comes back.
“Although many real-estate experts say that renting out luxury condos is a DISASTEROUS IDEA– it instantly reduces any future sale value by a huge margin and the rent never makes up for that – Councillor Raymond Louie said the city has been having some modelling done that indicates it could work financially.
“In one of the scenarios, “if there’s no fire sale, we take it over and we rent it until the economy recovers,” Mr. Louie said. “We are not a private entity that may come under pressure and fail. The benefit of being the city is that we are lasting and WE CAN STAY FOREVER. So it’s a PAPER LOSS FOR NOW, but we can wait for the market to recover.”
“Mr. Louie acknowledges that the sale price of the units WILL DROP SIGNIFICANTLY if they’re rented – just like the value of a new car does the minute it’s driven off the lot – but that the modelling shows that “at some tipping point, it starts to make sense, the time horizon overcomes the discounts.”
“What is that time horizon? Mr. Louie DIDN’T HAVE A NUMBER TO OFFER, but some have suggested that anywhere from 10 TO 20 YEARS might be needed.”
Now, who’s naive? Louie by his comments is not only contradicting himself but also, the clear advice from experienced professionals & in the process he is contradicting them as well.
These Vision Councillors have proven by their track record to date not to be competent to be able to deal with the decisions which must be made to protect the interest of Vancouver taxpayers. They need to step aside & turn this entire fiasco over to an independent real estate team who can make non-ideologically based, rational decisions concerning the marketing of this huge financial City of Vancouver liability.
2 VHB // Oct 2, 2010 at 10:27 pm
“The city’s experts are urging the mayor to stay cool, don’t panic, hang on to the property and wait for the market to return, even if it takes three to four years.”
Return in 3 to 4 years as a worst case scenario? This is a pipe dream best-case scenario, not the worse case scenario.
We are at the very top of a once-in-a-century housing bubble. Just look at EVERY other city in the world for crissakes that has gone through this over the last few years.
If the city makes its decisions based on the assumption of condo prices being ‘back’ at $1000/sf in 3 or 4 years, then they deserve the cataclysm that shall rain on them.
3 Robert // Oct 3, 2010 at 3:44 am
Many Condo developements have resrtictions on rentals either none or a limit on the number.
Just another consideration
4 Roger Kemble // Oct 3, 2010 at 8:27 am
“But the Vision Vancouver council is strongly resisting DON’T suggestions (by some) and screaming (by others that it simply sell off both the social housingNOT and the private condos YES for whatever it can get and walk away. Poorer, but out of the mess.”
THE BEST ADVICE YET!
“Gordon Campbell . . . gave an audience to Bob Rennie, the condo marketer who stirs the drinks in Vancouver.(Gary M). Bob Rennie! Nice fella, but what does he know? I thought real estate expertise was a nice smile and a pocket calculator!
El mundo grande is experiencing a new paradigm: i.e. unknown territory. Not even “Ice Road” Gordon, or “every-thing-will-be-alright” Bob have anything but self-serving interest to draw on!
“The city’s experts (sic) are urging the mayor to stay cool, don’t panic, hang on to the property and wait for the market to return, even if it takes three to four years.” VERY, VERY BAD ADVICE THAT ONLY MYOPIC EXPERTS COULD CONJOUR!
. . . the market to return . . . The great shibboleth, of our time!
“Although many real-estate experts (sic) say that renting out luxury condos is a disastrous idea – it instantly reduces any future sale value by a huge margin and the rent never makes up for that –
This second-hand devaluation alone describes a profound sickness. How long does some one else’s smell linger anyway? Either the places are habitable and worth the money or they are not.
Councillor Raymond Louie said the city has been having some modelling done that indicates it could work financially.”
I have news Councillor Louie all the models in the world are based on yesterday’s wishful thinquing.
“By 1990, Montrealers had also paid $1-billion just in interest costs on that money owed, according to reports at the time. In today’s dollars, $1.49-billion. So a total of $6-billion.” . . . a different place . . . a different time! STILL WOW!
“The village’s problems may be with us for a long time” Yup . . . Frances . . . Yup!
“Welcome poverty! Welcome misery, welcome houselessness, welcome hunger, rags, tempest, and beggary! Mutual confidence (oh jeeezless) will sustain us to the end!” The Micawber>/I> Principle again and again and again . . .
Sell now Mr. Mayor . . . and . . .
BUTTON UP YER BUTTONS . . . ZIP UP YER ZIPPER . . . ITS GONNA BE A LONG HAUL . . .
5 Morven // Oct 3, 2010 at 8:38 am
Remember Canary Wharf.
Canary Wharf was a major real estate venture in London, England, in the 198o’s that eventually sank the Olympia and York company.
Why? Nervous banks and changes in the underlying business assumptions.
-30-
6 mezzanine // Oct 3, 2010 at 8:41 am
i agree to take a longer term view of things.
I lack sufficient experience to give market advice, but it is interesting to compare vancouver’s OV to what richmond council did with the skating oval. Richmond had the flexibility, timing (and luck) to parlay building the oval to selling off the land around it to pay for construction costs, and paying for the garden city lands for future park space.
7 AnnetteF // Oct 3, 2010 at 9:06 am
@ Morven
You didn’t mention that Canary Wharf is now a thriving suburb.
I’m not sure how long it took to turn it around, but when I was out there a few years ago it looked like a stylish, popular place to live. (I think that improved train service had something to do with it).
8 Morven // Oct 3, 2010 at 9:13 am
@Annette F # 7
You are correct. It did take about 15 years to turn around but in the process, the initial investor expectations were not met.
-30-
9 Roger Kemble // Oct 3, 2010 at 10:13 am
@Morven 5
Remember Canary Wharf. Yes very well!
Last time I was there, 2008, it was bankers and offices. No social! No condos! Canada Place was O & Y’s Waterloo. And of absolutely no comparison to OV. At the time recovery</I. was possible, in contrast to today in Vancouver.
Now if you are referring to The Tower Hamlets and The Isle of Dogs . . . makes me wish I never left!
The erstwhile dock lands are now very elegantly scaled pedestrian quartiers and absolutely no comparison to OV . . . QED
10 Bill // Oct 3, 2010 at 12:26 pm
@mezzanine
The significant difference in the two situations is that Richmond did not guarantee to provide housing for the athletes – once Vancouver did that they were the defacto developer of the site and had no way out once the financing went sideways. Vancouver should sell the complete project, take the loss as a cost of the Olympics and move on.
11 jesse // Oct 3, 2010 at 12:30 pm
@Bill McCreery : “Councillor Raymond Louie said the city has been having some modelling done that indicates it could work financially.”
My God, City council needs a giant slap with a reality fish. Maybe Jim Pattison can pick up a 25 pound sockeye on his way to meet with the council. They can make rentals “work financially”? At a, what, 3% cap rate? Just whose money does he think he’s playing with?
The City will look back at this moment in time and wish they sold these things at 20% below market value while they had the chance.
12 mezzanine // Oct 3, 2010 at 12:53 pm
@Bill, there are certainly a lot of differences bet OV and the oval, but richmond did entail a lot of risk for this, and plenty could have gone wrong.
(eg, this was a last minute plan as the oval was switched from SFU to Richmond at the end of planning as richmond put up their own money for contruction, whether building a olympic-grade skating oval on an river delta would cause ++ settling and a poor oval, or if the future plan was insistant on keeping the skating ice, leading to less community appeal, or simply if the timing was off with selling the surrounding land.)
I would cast suspicions at the bids for building OV in the first place. Was millenium the best choice, compared to larger companies like concord pacific? Did the CoV do a good job with due dilligence? This is from the city’s report:
“‘the RFP was not structured to be a design competition; rather it was set out as a performance-based evaluation that measured abilities, commitments, and deliverables.”
http://vancouver.ca/ctyclerk/cclerk/20060404/documents/a4.pdf
hmmm…
13 Bill // Oct 3, 2010 at 1:25 pm
@mezzanine,
I agree that the execution has been abysmal (and there is lots of blame to go around and not just to the current Vision Council) insisting on social housing on the most expensive real estate in Canada, environmental standards not found in other real estate developments for which consumers are not willing to pay for etc. But I still think the fatal flaw was not appreciating the real risk that the city was undertaking – guaranteeing accomodation for the Olympic athletes which means guaranteeing completion of a billion dollar project whatever the cost.
14 Paul // Oct 3, 2010 at 2:37 pm
My God.
The number 1 glaringly obvious lesson here is that the city NEVER should have got into the development business to begin with especially when they’re spending our money. Is this completely lost on these people? Louie’s plan will only deepen the city’s investment in the village. It’s completely insane! Why am i missing here? How is this plan even being tabled!?!?!
The writing is on every wall at every turn: get out now.
Also, blame does not even matter any more. It’s already won Vision an election but it will not pay the bills or excuse these guys from using responsible leadership to get us out of this.
15 TripleNet // Oct 3, 2010 at 2:49 pm
So Councillor Louie is completing some modelling for the Olympic Village.
I’ll predict it will be a flat line for a year or two and then spike sharply upwards. Just like a hockey stick graph.
16 Michael Geller // Oct 3, 2010 at 3:07 pm
The two things that currently concern me the most re: OV are the possibility of the social housing units remaining as social housing, under the control of the Portland Hotel Society, and the city taking back the market condominiums, only to rent them out, believing this is the right thing to do. Both would be very unfortunate and costly mistakes.
I have set out my assessment of how we got to where we are, and what might be done to address the situation at http://www.gellersworldtravel.blogspot.com. I would welcome your comments.
17 Ian // Oct 3, 2010 at 3:27 pm
The fundamental problem remains the deal cut by Rogers and the NPA in 2006 and the completion Guarantee offered up in 2007.
It was built on a bubble and the NPA took on the responsibility for the bubbly.
The rest is damage control.
18 Paul // Oct 3, 2010 at 4:26 pm
No Ian, the problem is the standing inventory.
The real grown ups are beyond the cause.
The solution to this problem will not be found in partisan sniping (see your blog, Meggs, Gergor, Louie et al).
No one votes for someone who spends more time blaming than leading.
Let’s get to taking care of the problem, enough with picking scabs and pointing fingers.
19 Roger Kemble // Oct 3, 2010 at 5:14 pm
@ Michael 15
Michael
I have just read your blog. Thanqu for elucidating. I now understand the situation more clearly.
I have three queries . . .
1. Your title, An Olympic village Reality check, belies a prejudice. Your reality is yours and yours alone: no one should deny you your reality. Nor indeed should you deny others theirs. You know the familiar Fitzgerald quote, “The rich are different to us. They have more money.” To which the reverse, “The poor are different to us. They have less money” . . . and, accordingly, need our attention.
In other words cool is keeping promises, in fair weather and foul, even to the poor!
The world has changed profoundly since you reaped your professional experience. You are, if I may quote our own beloved philosopher Marshal McLuan . . . errrrr . . . “looking at our world through your rear view mirror“.
Massive corruption, not local, but effecting local, inimically, has moved the goal posts while you were diligently working and being an important part of our community.
2. “Another reason why I am so concerned in this instance is that mixing the very rich with the very poor usually does not create a good community.” Which begs the question, how do you know? Is your word,very in both instances, hyperbole. Have you ever lived in a rich/poor community?
On my visits to OV I see several stand-alone buildings. If the rich live high in their penthouses, in one stand alone, protected by their butlers and pantry maids, will they ever come in contact with their hoi polio neighbours, across the street in another stand alone, rushing to work 6.00 am returning exhausted 6 pm. How do you see that as mixing the very rich with the very poor? Are we the only economically segregated society in history?
2. “Some will say that my comments should be ignored since they are just politically motivated. They are not. Absolutely not ignored. You are far too influential.
Your comments are based on four decades developing market and non-market housing across Canada. ” Ignore, not me! Although I believe “you” to be ideologically motivated!
“ . . . in time the Olympic Village will be a wonderful community. ¡Por supuesto! Gracias.
@ Ian . . . “The fundamental problem remains . . . ” wow, is it that easy?
20 Michael Geller // Oct 3, 2010 at 5:43 pm
Roger, you are quite right. The need for the ‘reality check’ was intended to relate to the first 4 questions which I suggest should be answered by those knowledgeable about real estate, and Question 5 which I leave to others to answer.
The balance of the posting, as I noted in the preface, is my opinion of how we got to where we are and what we should do to minimize losses and ensure a good community. In that regard, Roger, my views are really shaped by some of the post occupancy evaluations conducted by CMHC on South Shore False Creek and St. Lawrence and Edgeley in Toronto, which are two projects with which I was involved in the past. St. Lawrence has become a success….Edgeley has not.
21 Tom // Oct 3, 2010 at 6:26 pm
1) Bill McCreery @1: Good comment.
2) Raymond Louie hasn’t saud boo in months, anything he is saying is meant to either float suggestions and see where they go, or float a ridiculous suggestion, which then gets watered down to show Vision may have an ounce of pragmatism in those arrogant bones.
3) Ian..F–k, when will you folks stop thinking we’re all stupid? The blame game is over. Get over, turn the page….do your FN job already.
You’ve had 2 years in power AND when you asked the province to relax the charter for your team to take over the financing, you had plenty of opportunity to do more than you did.
That isn’t anyone else’s fault then present mayor and council.
Own some blame Ian, humility may do you more good then your arrogant ass could ever imagine.
22 Ian // Oct 3, 2010 at 8:13 pm
I’m a bystander like you all. The deal was made and I first learned of it in the fall of 2008. Since then like most Vancouverites, I’ve just been able to look at the big problem and speculate. What I see is that there aren’t a lot of good solutions. And it’s not politics that determine that, it’s economics.
In fact I probably agree most with Geller – we’re in a place where we are minimizing the damage in the short to medium term and looking out beyond that to keep the elements of a good, healthy community within a healthy city.
If you ask me all the possibilities require a leap of faith regarding the market, the recovery and a whole host of factors beyond the city’s control.
In that sense the short term fate of this project isn’t much different that what we see down south. At the current prince point the market has evaporated. It’s just not on. And projections seem to say that’s going to get worse not better in the coming year.
Lease/rental has serious problems, holding on has its own and selling those high end units now, really has big problems. I don’t think Louie is crazy to talk about some modeling (it is based on scenarios) – it’s better than reading tea leaves.
And why do I dredge up the past? Because we do not want to repeat it. And a little blame is part of that.
23 archie's dad // Oct 3, 2010 at 9:57 pm
BACK TO THE FUTURE:
24 MB // Oct 4, 2010 at 10:31 am
@ Bill #10: “Vancouver should sell the complete project, take the loss as a cost of the Olympics and move on.”
=================
That cavalier comment kiboshes sound analysis and places the throats of Vancouver residents alone between the jaws of shark’s swarming around a firesale.
The city can afford to take its time to make the correct decisions. One of them should NEVER be to take a loss over $100,000,000 … let alone potentially a half billion.
If taking such a loss is expected, then the responsibility to keep Vancouver from going bancrupt in part as the result of hosting the Olympics under great pressure must be borne by all Canadians.
25 MB // Oct 4, 2010 at 10:47 am
@ Bill & Paul.
I am sure glad you two aren’t running the CoV. And I don’t care what stripes are on your flags.
The CoV had to get involved with the OV to meet the IOC / Vanoc deadline on the athlete’s village . This is the direct result of the collapse of financial markets, which, in case you didn’t know, are beyond a city council’s control.
Everything else is incidental, except for the luxury-units-on-the-water nature of this project.
And welome to the future. District and solar-assisted heating is already widely practiced around the world and will save residents a bundle in operating costs in future.
Energy sustainability will not sink Millennium.
Leave a Comment