Vancouver Mayor Gregor Robertson says the decision to place the Vancouver Olympic athletes village into receivership was the right one, bringing stability and reducing risks for taxpayers that are owed $750 million by Millennium Development, the project builder.
The total value of the project, which housed 2,800 athletes, coaches and officials during the 2010 Games, is roughly $1.2 billion.
Millennium's financing dried up following the financial crash in 2008, prompting the City of Vancouver to step in - receiving ownership of the project while extending enough credit to the False Creek development to get it completed in time for the Games.
Following the Games the city and Millennium have tried to sell the units, but since May only 36 have been sold. The remaining 454 market units, out of 1,108 in 25 buildings, were not selling amid criticisms of the high price, rumours of poor workmanship and concerns with the social housing component. As well, the soft economy has been cited as a reason for the slow sales, in addition to stiff competition from other large-scale condo projects in the city.
In a letter printed in the Vancouver Sun , Robertson reassured the public that the city would recoup the entire value of the loan, after Ernst and Young were appointed by court order to resolve the debt.
"(G)iven the challenging times and the amount of taxpayer money at stake, both the city and Millennium agreed that the best option is for Ernst and Young to step in as receiver and manage the project," wrote Robertson. "Sales were not happening and Millennium's repayment plan remained uncertain. We needed to make a change."
Until the money is repaid, Vancouver taxpayers will be on the hook for the outstanding debt and interest payments.
Robertson says the new finance structure gives the taxpayers some stability with "no more negative rumours about financial difficulties or payment deadlines," and the ability "to move swiftly on a new marketing plan that gets units selling and brings the neighbourhood to life."
Robertson says the receivership option keeps the project from going to court and that they have an agreement with Millennium on the transfer of their assets to the city as part of the debt servicing plan. In other words, the city would be on the hook for the full amount of the outstanding debt but would continue to control the asset.
But while he was encouraged, Robertson also commented that the city is not out of the woods.
"That's not to say that there aren't risks ahead," he wrote. "It is too early to say if the city will recover all of the money it has invested in the new project. Much of it will depend on the housing market and how much the units sell for - a process that will take several years to complete."
The units are priced between $550 and $1,550 per square foot, depending on the size, height and view. The village was also built to high environmental standards.
Recently, Vancouver also came to a deal on social housing whereby approximately 84 units will be rented through the Co-operative Housing Federation of B.C. The agreement came after Vancouver rejected three previous proposals. Now that the project is in receivership it's unclear whether that agreement will be honoured.
In the short-term, Millennium and Vancouver are reportedly looking into the possibility of offering the units as market rentals.
The vast majority of Whistler's athletes' village is resident-restricted housing and has already sold. However, Whistler has also had little luck in selling market units. So far just one of 20 units in the River Bend neighbourhood has sold, prompting the Whistler2020 Development Corporation to take the development off the market. The homes are priced between $850,000 and $950,000 and have a total estimated value of $17 million.
The Resort Municipality of Whistler took out a loan of $100 million to complete the village, which is due in November 2011. It was recently reported that they would likely be able to repay all but $13 million of the loan by the end of this month, and that the Whistler 2020 Development Corp. believes it would be easy to refinance the remaining debt given the value of the assets.
- With files from Stephen Smysnuik