Why Being Owed Money Sucks

In a previous post The Pope highlighted a spreadsheet looking at the City’s loan to Millennium to fund the Olympic Village construction and how much of the loan amount could be recouped should only sales revenue from this development be used. The calculations ignore interest payments, ongoing management of the whole process, land value, unpaid property taxes and strata fees amongst a handful of other (comparatively) small expenses.

The outstanding loan was $731MM. Millennium recently repaid $192MM of this amount. I’ve updated the spreadsheet to reduce the primary debt owed to the City.

The big item ignored, of course, is going ruthlessly after the collateral of the debtor, Millennium, which the City is now doing according to fearless City reporter Frances Bula:

Vancouver is taking aggressive action to secure the corporate and personal assets worldwide of the Olympic village’s private developer after acknowledging that the developer did not pay the full amount of its first $200-million loan payment to the city. …

As well, the city, which took over financing the village construction in February of 2009 after Millennium’s original lender refused to continue making payments because of cost overruns, has told Millennium that it either has to pay out the $561-million it owes the city or prove that it has a solid plan for making the loan payments that were originally scheduled.

The City is starting to put feelers into Millenium’s holdings to uncover how much additional collateral is available to repay the loan. But it’s unclear how much collateral Millennium actually has. Many of its holdings are highly mortgaged and it’s uncertain, at least to me, if the owners can face judgment against their personal holdings. Long story short, the City won’t be the only creditor represented at a bankruptcy hearing.

It may well be Millenium will go insolvent. But given how many tiered creditors Millenium has, we don’t know how quickly the City can recoup the money it is owed beyond the collateral of the OV itself.

On the plus side, the City just got $192MM from Millennium. How does that change the calculations? If Millennium does go technically insolvent before its next scheduled debt repayment, we have the following approximate shortfalls:

At $700psf, there is a $200MM shortfall; selling all the rentals and retail space reduces this to about $100MM. (Interest payments to the City’s creditors on the total balance outstanding will be on the order of $25MM for a year.)

$600psf – $250MM shortfall ($170MM if rentals/retail sold)
$500psf – $300MM shortfall ($230MM)
$400psf – $350MM shortfall ($300MM)

The question is, what will be the average price of the market units? If we do a bit of analysis based solely on rental income and assuming some “rosy” rental rates of $2.75psf/mo (500sqft flat $1500/mo) and a “rosy” 150 price-to-monthly rent ratio, we end up with a market “value” around $450psf.

I think the sales staff for the Olympic Village can do better than this. It involves, in my opinion, finding people who are willing and able to pay well above rental rates for a building with unproven infrastructure and a less-than-whole strata. But it will involve selling these condos reasonably quickly or the price will likely continue to drop.

In summary, it looks like Millennium has come up with some cash to reduce the City’s shortfall on this project. That is a good thing for ratepayers. Loss estimates are now better but still ostensibly in the neighbourhood of $250MM-$300MM, minus any additional funds Millenium coughs up. Better, but still one helluva mozza ball.

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Michael Irdas

MILLENIUM WATER , Why , Because it will take a MILLENIUM for the

Vancouver tax payers to get their money back , if then , and also

because the project is dead in the WATER !!!!!!!!!!


Commodity price is going up and bound to go up more. I think wutever kind of depreciation with real estate will be offset by the huge injection of currency.

At the end, holding on to depreciating currency doesn't do you any good in a long run.



Nope, Sold and got out of this insane mess 🙂


#2 @DaMann: "I wouldn’t buy a condo in a million years"

Priced out forever? 😉


@No More Goldocracies: Gold at 1650? On a related note I heard some of the LEEDS infrastructure is using gold as a catalyst for grey water reconstitution. Now you know why they want $900 a square foot. Think about it.


@Best place on meth: So I need to pay $1 extra for the Old Testament? Aww raspberries.


@Anonymous: "Will anyone really pay $2.75 a square foot?"

To live in that dysfunctional deserted dystopia? How about per square meter?



I still can't believe how awful those OV condos are.

The kitchen must be a joke. Two square feet of counter space!

I thought wood panelling died in the 70's.

Good luck to this guy.



Will anyone really pay $2.75 a square foot? This guy has been asking the same question for the past 3 months:




The confidence intervals etc. are goofy with only 2 data points

Why not use a 30 day moving window?

paulb fan


A lot of people are expecting encore of 2009 in 2011. Afterall RE can never go down in Vancouver. Those who sold in a hurry in 2008 became laughing stocks. The industry is going to harp on recovery like a broken record. My impression is that past Mar 2011 is when the real fun will begin. Till then, its slow bleed. I am loving it anyhow.


@jesse: Trust me, inside info.


For those that don't know, Petsov is our very own Patriotz. The new company is called Three Bears.


RBC waves red flag over Vancouver housing market

Housing affordability lacking, crippling household income

' VANCOUVER – RBC economist Robert Hogue is raising a “red flag” about housing affordability in Vancouver.

The bank’s quarterly report on housing trends and affordability, released Monday, said Vancouver is one of a handful of Canadian markets where the share of household income taken up by home ownership costs “is at worrisome levels.”… '



@crashcow: why does listening to that audio clip remind me of this photo?

No More Gordocracies


well thanks to the narrow mindedness of some here, if I do decide to ever buy a house its going to look like this:


@Girlbear: Our friend, Mr. Pestov, takes to the airwaves:



Things won't stay flat. RE has become too big a part of the economy, and flat RE means less investment, less construction, less sales, and ultimately a lot less jobs.

Then the defaults happen. Won't be different here this time.



Are you going to write the Canadian version of Stiglitz's?


No, seriously, a 10 page PPT presentation of why Canada is not different would be an interesting lecture for MBA's and business undergrads; just need to get the references correct.


Much of the discussion about changing the mortgage rules seems to stem from comments made by the Bank of Canada governor who last week warned that consumer borrowing could not continue at its present clip.

<a href="http://www.financialpost.com/news/Ottawa+ponders+further+tightening+mortgage+rules/3617608/story.html&quot; rel="nofollow">Ottawa ponders further tightening of mortgage rules

…consumer borrowing could not continue at its present clip….yeah, what else is new?….RTP


Sell-list for September 2010: 46.9%.

Sell-list for October 2010 (after two days): 46.6%.

Best place on meth

Apologies for this being non-real estate related, but I just drove by Kingsway & Fraser and noticed the Canadian Bible Society shop is having a sale on their inventory. The sign goes like this:


Fiction – $3.99

Non-fiction – $4.99


@VHB: As we all know around here, prices will drift gently down when MoI is greater than about 6.0. We're clearly over that threshold–and we can see the still-massive number of daily price changes as confirmation of this.

But if you want to see prices seriously get boogying down, then we need MoI over 10. For that to happen, we need a lot more 'have to sells' to get listing (rather than taking their listings off the market until the market 'gets better'), or we need a lot more "can't buy" guys on the demand side. Or both, would be nice, too.

I don't see any massive spike happening over the rest of this fall in inventory. If sales keep coming in at 40% or so, then we're just going to drift in this 7-8 MoI range.