Credit crisis comes to Olympic Village

Gah just posted this link, looks like Millennium Water might need a bail out:

As the credit crisis south of the border begins to creep north, concerns are mounting over the impact it may already be having on construction of the athletes’ village for the 2010 Winter Games.

Last week, members of Vancouver’s city council held an emergency, in-camera meeting to get an update on the project. Much of the discussion revolved around the city’s obligation in the event the developer, Millennium Development Corp., can’t meet demands from the bank because of massive cost overruns, according to sources briefed on the meeting.

The best part? Even if you haven’t been speculating on Vancouver condos, now you get a chance to take part in the collapse since it looks like the City is on the hook for cost over-runs on this particular project.  But don’t fret, the absolutely ‘worst case scenario’ at this point looks like a $100 million dollar bill for Vancouver tax payers.

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90 Responses to “Credit crisis comes to Olympic Village”

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  1. 1
    Bubble Lad Says:
    I wonder how hard it is to scrape those “I BACKED THE BID” bumper stickers off your car…

    Current score: 52
  2. 2
    Gadwin Says:
    Unfortunately, Canada won’t be immune to the credit crisis. The credit crisis is working its way into the Canadian economy.

    Our economy will head in the same direction as the U.S. economy and at this moment, Uncle Sam is headed downwards.

    Specuvestors, you will all be in deep red ink and looking at a foreclosure sign soon unless you cut price agressively and sell before it’s too late.

    Current score: 20
  3. 3
    snark Says:
    Bubble Lad, you don’t have to scrape it off, you just stick one of these over the top of it :D
    http://vancouvercondo.info/images/backingaway.gif

    Current score: 32
  4. 4
    Noname Says:
    Remember, just like with the US bailout, the taxpayer is NOT on the hook since after the markets return to fundamentals, there will be a profit to be made and the taxpayers will end up with more than what they put in…

    …NOT.

    Noname

    Current score: 7
  5. 5
    Anonymous Says:
    I’m bailing out the bid!

    Current score: 9
  6. 6
    markx Says:
    OK, 1100 unit, at a cost of 1 billion, and you have cost overrun? Somehow 1 mil/unit is not enough to cover costs? Has these clowns considered the fact that this development is in North America, for just a second? Some people must really take “world class city” too literally. I wonder how big the units are. You know, at $1,000/sqft, the average unit would need to be 1,000 sqft. That seem to be on the generous side for a downtown development. Or does the green building standard and all the social housing pork really account for the high construction costs? Seems like the developer need AT LEAST $1000/sqft to break even. I give then $200 for land, $250 to 300 for market construction cost. Now where does the rest of the money go?

    Current score: 14
  7. 7
    Dave Says:
    Markx, the development isn’t just residential. It also has commercial and retail.

    Yes, the developer had planned to sell some of the better located units at or above $1000 per ft2. The land cost was the highest paid in Canada to date per ft2 of development space so $250 to $300 seems low to me.

    Current score: 3
  8. 8
    holdem Says:
    At a population of about 612,000 people, that would be $163 for every man, woman, and child.

    Do I make my check out to Bob Rennie?

    Current score: 14
  9. 9
    RFC Says:
    The land cost was the highest paid in Canada

    This is exactly why local government should NOT be giving support or backing to projects like this. Who cares if you overpaid for the land as long as its taxpayers left holding the bag when your optimistic forecasts fall through?

    Current score: 28
  10. 10
    Bubble Lad Says:
    LOL snark!

    better yet:
    “My backside hurts from the bid”

    Current score: 3
  11. 11
    Zolein Zack Says:
    Perhaps instead of the City, the super-realtor Rennie should bail them out. He can do anything!

    Current score: 23
  12. 12
    Drachen Says:
    “But don’t fret, the absolutely ‘worst case scenario’ at this point looks like a $100 million dollar bill for Vancouver tax payers.”

    Easy, just raise property taxes! Helps pop the bubble and nails the perpetrators of the bubble to the wall. Win/win scenario!

    Current score: 4
  13. 13
    Brittanny Says:
    The world does not know where to put it’s money today. Under the matress is starting to look pretty good.

    Current score: 9
  14. 14
    Anonymous Says:
    “and nails the perpetrators of the bubble to the wall.”

    you wish. likely they’re walking away with lots of $$$. it’s the buyers who are going to take it up the @$$.

    Current score: 1
  15. 15
    bcubbins Says:
    Only 60% sold!!!! I wonder how long it will take to sell the remainder?

    Current score: 15
  16. 16
    Noname Says:
    bcubbins said “Only 60% sold!!!! I wonder how long it will take to sell the remainder?”

    And how much of that 60% will back out before completion?

    Noname

    Current score: 15
  17. 17
    buff_butler Says:
    super-rennie doesnt even use a car anymore… he flys arround on realtor sign.

    His superpowers include:

    -Change old counter tops into granite upon touch
    -Convert older condos into “executive” condos just by walking inside them
    -His cape give him invisibility to bear-ish reporters
    -Convert any 25 yr mortgage to a 40 yr one

    Current score: 28
  18. 18
    beatstreet Says:
    What a scandal. What name should we call this new tax? Let’s have a contest!

    Current score: 2
  19. 19
    jesse Says:
    The timing is not too good for the incumbent council who voted for this. Does anyone know where to find the minutes on who actually voted for the arrangement?

    Current score: 4
  20. 20
    Anonymous Says:
    “Just what those overruns are nobody is saying, although the number bandied about most is $100-million - one that was dismissed by the same source. “That is a worst-case-scenario number if everything [continues to go] wrong. But right now it’s not there, for sure.”

    Does “worst case” include a RE bust as well as overruns?

    Current score: 1
  21. 21
    patriotz Says:
    If Vancouver taxpayers want to know who to blame, they should look in a mirror. City council held a plebiscite on the Olympics way back in 2003 and the voters had a chance to kill the games right there.

    Oh property tax increases are negative for RE prices of course. Just ask Montreal.

    Current score: 17
  22. 22
    Strataman Says:
    I voted against it; lobbied all my friends to kill it. So why do I pay? Better idea add all overruns to Olympic tickets especially those with prime seats. For instance all A and B rows at opening ceremonies well they pay for the overrun? :-)
    Current score: 20
  23. 23
    jesse Says:
    “If Vancouver taxpayers want to know who to blame, they should look in a mirror.”

    I think 60% should look in the mirror. The point about higher property taxes being negative for property prices is a good one but realistically other city services will suffer in the wake of this bad investment and everybody suffers.

    I’m not sure how much the city will have to cover but it seems suspicious the developer is turning over its loans at the exact time credit is hard to come by. I don’t know the property development business well enough to comment whether this is normal practice.

    Current score: 7
  24. 24
    Clam Chowderhead Says:
    Don’t worry I am here to fill everyone in with the real story. The development is not in financial trouble, the developer is not going to lose any money on this project. The issue at hand is credit drying up. The Developer needs X more dollars to finish the project, the credit market being what it is, only want’s to provide (worst case scenario) X-$100Million, (reality it’s closer to X-$45Million.
    So the current situation is
    A) Millennium takes there business elsewhere and tries to find a new creditor. Hard to do in the current marketplace, but apparently some Canadian financials are interested.
    B) Millenium obtains a co-signer to guarantee the investment, ie the COV or the BC Government or another high profile development company.

    The project stating it’s 60% is including that fact that none of the final phase has even starting selling yet. Fortress out of NY is worried that they won’t be able to sell hence their reservations of providing the credit needed to finish the development. Millenium isn’t worried about being able to turn a profit on the project, even if they were to lower the prices for the more desirable phase 3 they would still turn a profit. The only reason the COV is even involved at this stage is they provided a guarantee to the IOC on Olympic housing.

    Here’s a tip expect a Canadian pension fund to pick up the financing at a slight discount as Fortress unloads the loan. The project will continue ahead as is.

    Current score: 11
  25. 25
    beatstreet Says:
    Patriotz,

    I agree that Vancouverites voted in favour of the Olympics, but we didn’t vote in favour of providing a backstop to hedgefunds and developers so they could profit.

    Current score: 4
  26. 26
    Paul Says:
    I’ve mentioned on this site that the developer’s cost to build is NOT the driving force behind the actual selling price. The cost to build is only a small factor. The selling price is basically the maximum price that the developer and its marketing people can convince the public to pay. Developers have every right to charge as much as they possibly can for the finished product, irrespective of what it costs them to build it.

    Current score: 8
  27. 27
    patriotz Says:
    That’s pretty naive. The Olympics are one of the original “privatize profits, socialize losses” scams and Canadians of all people should know this, given what happened in Montreal.

    Current score: 26
  28. 28
    RJB Says:
    The project is being financed by Fortress Investment Group, a hedge fund/private equity company based in New York.

    http://www.tradingmarkets.com/.....s/1919496/

    Oct 3 (Reuters) - Citigroup recommended that investors sell shares of E*Trade Financial Corp and Fortress Investment Group LLC, saying the companies may have huge portfolio losses and capital constraints as the credit crisis continues.
    Analyst Prashant Bhatia said in a note to clients that he expects Fortress to run out of cash in the first quarter of 2009 and sees losses of $3.4 billion in E*Trade’s mortgage portfolio.

    Current score: 14
  29. 29
    Alexcanuck Says:
    The olympics, the housing boom, Campbell, COV, all linked up nicely here.
    http://tinyurl.com/ys7eu2
    All planned, taxpayer (ignorant and malleable as they are in aggregate) wrapped up and delivered. Media co-opted to held the show along. What chance does the public have when confronted by a co-ordinated attack like this?

    Current score: 6
  30. 30
    beatstreet Says:
    Patriotz, I think people where hoping for better such as the Salt Lake City, LA or Calgary experience.

    Current score: -1
  31. 31
    patriotz Says:
    The Calgary experience? The 1988 games did absolute squat for the local economy or RE market, which did not truly recover until a decade afterward.

    http://cuer.sauder.ubc.ca/cma/.....algary.pdf

    Nor did the city or province undertake the level of infrastructure spending that we are seeing in Vancouver. An exception being the Saddledome which was needed for the Flames anyway.

    SLC almost turned out to be a financial fiasco which had to be averted by Mitt Romney. And LA will be forever known as the McLympics - even the locals tried to ignore it.

    Current score: 7
  32. 32
    Brittanny Says:
    I like the main stream media coverage of “expert” banking economists peddling their spin of “lets not alarm the general publics confidence” with such things as the “REALITY” of the actual global economic situation.
    I am glad that we (the public) are always last to know the real situation so that these overpaid,underproductive, pompous, greedy, above the law, supposed intellectuals can bilk us out of our hard earned money leaving us scratching our heads wondering WTF happened.

    Current score: 5
  33. 33
    jesse Says:
    Fortress is financing the project? Is that for real? You can’t make this stuff up… Vancouver is starting to sound like a Norwegian village with every passing day.

    Current score: 7
  34. 34
    beatstreet Says:
    Patriotz, the downturn in the Calgary economy clearly had more to do with the oil market than the Olympics.

    In any event, the fact that Vancouver voted for the Olympics does relieve city council from their fiduciary responsibility to voters to note give a sweet deal to a New York hedge fund.

    Current score: 2
  35. 35
    islander Says:
    We need to stop the fiction that the Calgary Olympics “made” money. The Olympics stuck Calgary with a ridiculous civic debt that took Ralph Klein’s successor years to dig out from.
    The only way one can consider the Olympics to be break-even or better is by not counting most of the stuff that costs money.
    The retards who voted for the 2010 games should get the bill for this. Not me.

    Current score: 19
  36. 36
    Big Crash Says:
    Hey stop this negativity; we still have the upcoming 2010 Olympic and the best place on earth to shield us from the recession. And Gordy Cambie…

    Current score: 1
  37. 37
    patriotz Says:
    Patriotz, the downturn in the Calgary economy clearly had more to do with the oil market than the Olympics.

    That was my point. As an economic stimulus the Olympics are at best useless, and at worst mire a city in long-term debt.

    Anyone who thinks that the Olympics are in any way going to offset BC’s long-term problems with the forest industry and tourism (reduced US consumer spending) is nuts.

    In any event, the fact that Vancouver voted for the Olympics does relieve city council from their fiduciary responsibility to voters to note give a sweet deal to a New York hedge fund.

    That deal was made by the NPA-controlled council which was elected in 2005. Once again, you get what you vote for.

    http://www.city.vancouver.bc.c.....eloper.htm

    Current score: 8
  38. 38
    NO -LYMPICS Says:
    Ah yes, reality bites. This Olympic Village was fishy from the start….the price paid was exhorbitant. I hope the whole thing crashes and burns, the whole Olympic endeavour disgusts me. My view is that the financing will dry up due to the global credit crunch …and the suckers that bought into these $1000 sq/ft pigeon holes will bail….the locale ain’t that great, so the price paid was already way over the top. However, how will Vancouver lose…didn’t they make a pile selling the land? PS Good comments by others, my compliments.

    Current score: 9
  39. 39
    wolfey Says:
    THe taxplayers who voted yes for olympics should get the bill

    Current score: 2
  40. 40
    Macronomics Says:
    That’s what happens when you overpay.
    Millenium Group really needs better forecasters.
    $193 million bid blows away competition:
    http://tinyurl.com/3j59z3

    My question is does that mean pre-sale purchasers are buying a lived-in condo?
    I’d hate to be the guy purchasing the unit used by the US Men’s hockey team.

    Current score: 7
  41. 41
    stagnate Says:
    they may have to re-work the zoning on the olympic village land, forego the park, social housing component, increase the density, etc. now is not the time for civic idealism it appears.

    Current score: 3
  42. 42
    z Says:
  43. 43
    condohype Says:
    Global ran a piece on this. NPA mayoral nominee / insurrection leader Peter Ladner says the city has made no commitment to intervene but will be there to “mitigate” any risks to the taxpayer. Thanks for looking out for me, Pete.

    Current score: 9
  44. 44
    Anonymous Says:
    What a scandal. What name should we call this new tax? Let’s have a contest. (#18)

    How about Olympic Overrun Property Surcharge; or OOPS.

    Current score: 16
  45. 45
    Anonymous Says:
    http://www.youtube.com/watch?v=z-oIMJMGd1Q
    How do you make impending financial doom funny?

    Current score: 0
  46. 46
    john Says:
    The true facts here are this :

    1) The olympics will be a huge success. This is the best place on earth afterall.
    2) Vancouver condos are still a solid investment. The stock market is down over 30% on the year. Most bears have been wiped out. Bulls remain rich and will still rent to the bears if they’re nice.
    3) I’m backing the bid

    Current score: -18
  47. 47
    Raincouver Says:
    Today’s Vancouver Sun. Big “R” on the front page. Story about Vancouver’s Olympic legacy at risk.

    http://tinyurl.com/4×42zt

    Current score: 3
  48. 48
    NO -LYMPICS Says:
    In a recent article re: Toronto condo market, it noted a land shortage whereby builders who tradionally built low rise townhouses where literally forced to build hi-rises if they wished to stay in business.

    This phenomenon is growing here in BC…but the problem is an instantaneous glut in the supply demand ratio can result . if one figures how mnay condo units each hi rise contains. Bob Rennie’s bio has him being one of the 1st to foresee this “condo’s are the future” but this will be a pattern for the future of boom- bust and equally greedy Local Gov’ts pimping building permits and all the revenues that result.

    Once the economy tanks. the dominos fall and any hi rise project can go broke overnite

    Current score: 5
  49. 49
    NO -LYMPICS Says:
    While not a left winger, I foresee a bit of an uprising by the BC citizens if this sort of crap continues. The Local Gov’ts are run in a bunker mentality ignorant and indifferent to their own constituents. When their own citizens cannot afford to live in the same City and possibly even the same Province….that basically implies a sell out to other interests with little if any stake in the community. Anytime I drive around at night and view these hi rises…the “no lights on” ie nobody home ratio must be about 10-1. Its no different than the stock market….simply speculation . I think the whole dam thing should collpase and we simply start over..

    Current score: 19
  50. 50
    betamax Says:
    Country expected to ‘escape recession, but just barely,’ says senior economist

    From later in the same article:

    “…the U.S. economy is expected to start coming out of recession next Spring.”

    LOL. Yah, right. If that’s what they’re predicating our ‘escape from recession’ on, then we’re toast.

    Current score: 9
  51. 51
    Mold City Says:
    Raincouver, the final paragraph of that Sun article really inspires confidence:

    Vanoc also said in its statement that is “confident in the city’s fiscal management” of the Olympic project. It long ago transferred all of its risk in the project to city taxpayers by giving Vancouver $30 million in venue financing it received from the provincial and federal governments.

    So they’ve transferred ALL risk to city taxpayers?!? I guess Vanoc does know what they’re doing, to bad the government doesn’t seem to.

    Current score: 5
  52. 52
    Bubble Lad Says:
    Vancouver is a one-industry town, the only industry being real estate and property development. It reminds me a lot of Oshawa and GM - they RUN the place, and they’ll tell you what THEY think you need to know, and when they say “jump” the politicians say “how high”. Anything else is complete wishful thinking. OF COURSE Vancouver was going to get the bid, and OF COURSE the taxpayers were going to be on the hook for every over run and delay and stubbed toe the developers suffered, and Vancouver will pay the price for the next decade (at least) for the Olympics and the RE bubble, while Gordo and his back-slapping cronies at Marathon etc take your cash and laugh in your face.

    Current score: 16
  53. 53
    Raincouver Says:
    #51 Mold City -

    So they’ve transferred ALL risk to city taxpayers?!? I guess Vanoc does know what they’re doing, to bad the government doesn’t seem to.

    Yeah, I flashed on that statement, too. Seems they took the money from the Province and the Feds, handed it to the city and washed their hands and walked away. $30M is just a drop in the bucket. Sweet deal for them.

    Current score: 6
  54. 54
    jesse Says:
    I have the solution! The city can put up more financing to complete the project but will require an equity stake in Millenium as compensation. That way taxpayers can enjoy the upside when this thing blows over.

    Current score: 2
  55. 55
    dbcooper Says:
    That way taxpayers can enjoy the upside when this thing blows over.

    hate to tell you this but there is no upside, at around $1000 per sq. ft. this development will be underwater for the rest of this century …

    Current score: 8
  56. 56
    patriotz Says:
    VANCOUVER - Vancouver’s Olympic legacy is at risk due to the economic uncertainties sweeping the world.

    Tumbling stock markets, tightening credit lines and slumping investor confidence could erode many of the gains that Olympic organizers are hoping will flow from the 2010 Games, economists warn

    Gee I think I’ve heard that kind of talk before… who was it… oh yeah…

    From the people who opposed the Olympics from the start.

    Current score: 11
  57. 57
    VancouverBanker Says:
    The asking price psf for Olympic Village ranges from about $800psf up to $2,500psf.

    Millennium totally screwed up the phased launches and presales. Millennium is toast, and the taxpayers will definitely be on the hook for this one.

    I know lenders in on this deal; they’re not worried because they will all get paid back by the City worst case. As a taxpayer, it makes me sick.

    Current score: 10
  58. 58
    VancouverBanker Says:
    “Global ran a piece on this. NPA mayoral nominee / insurrection leader Peter Ladner says the city has made no commitment to intervene but will be there to “mitigate” any risks to the taxpayer. Thanks for looking out for me, Pete.”

    That is an outright lie. The City has signed a completion guaranty and is on the hook to finish the project no matter what happens, end of story. Worst case, they will kick out Millennium and get a blue-chip developer like Concert or Concord to come in and finish things. Should have taken one of the established developers in the first place, they could much more easily absorb the cost overruns and also may have sold the project better.

    Current score: 7
  59. 59
    VancouverBanker Says:
    “My question is does that mean pre-sale purchasers are buying a lived-in condo?
    I’d hate to be the guy purchasing the unit used by the US Men’s hockey team.”

    Yep, exactly.

    Current score: 7
  60. 60
    VancouverBanker Says:
    “NO -LYMPICS Says: October 6th, 2008 at 10:01 pm
    Ah yes, reality bites. This Olympic Village was fishy from the start….the price paid was exhorbitant. I hope the whole thing crashes and burns, the whole Olympic endeavour disgusts me. My view is that the financing will dry up due to the global credit crunch …and the suckers that bought into these $1000 sq/ft pigeon holes will bail….the locale ain’t that great, so the price paid was already way over the top. However, how will Vancouver lose…didn’t they make a pile selling the land? PS Good comments by others, my compliments.”

    FYI, the financing is already arranged for Olympic Village, that won’t go anywhere. The cost overruns will either by covered by the developer, or the City will take over and fund it themselves.

    However, I’m also curious about how many buyers will bail when their condo is underwater, not to mention the several hundred units that haven’t even been launched yet!

    Regarding the City getting money on the land, you’re going to love this fact of information…. the land purchase is included in the project costs, so the City only gets paid for the land from the sale of the condos. So if they don’t sell all the condos, the City doesn’t get paid!

    Current score: 8

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