We’ve seen a lot in the news lately about potential losses at the Millennium Water Olympic Village and what it means for Vancouver city taxpayers. The developer still owes the city $731 million which would be ok if they could unload the units for the ‘hot market’ dream of $950 per square foot. Unfortunately all the potential buyers appear to have noticed that the Vancouver real estate market is in a bit of a slump.
Local developers are urging the city not to undercut the market for their product, but it’s not exactly a secret that they’re going to be dropping the price on these units in an effort to get rid of them. The loss to taxpayers has been estimated anywhere from ‘tens’ to ‘hundreds’ of millions of dollars.
Curious how different sales scenarios would play out?
Well you’re in luck! Jesse has put together a spread sheet showing loss levels based on different sales prices. He expands on this in the following comment:
Based on my calculations at $800psf which is pie-in-the-sky, the City’s shortfall will be close to $275MM if they can unload the units within about a year. This includes debt servicing for the past year plus the next year.
If they can find a sucker to take these units on in a bulk purchase for $700psf, they will have lost about $330MM. If they find a reasonable investor to buy them at $450psf, they’re out $450MM. Good luck finding someone willing to buy these bulk at $700psf.
Based on my analysis, if the CoV can’t find a bulk purchaser, the BEST they can do now is slash prices hard, to maybe $600-700psf and clear them out, including the rentals and commercial space, in a massive orgy of post-Olympic speculative feeding through Rennie et al. They will have losses of $350MM cast in but they save $100-150MM compared to what they would have to face if they held onto them and the balance of the debt for another few years.
I don’t know how the City is coming up with its numbers but I think they need a little one-on-one time with Bob Rennie so he can slap them in the face with a giant reality fish.
So rip off the bandaid or drip drip drip, which option do you foresee the city taking?