Vancouver's Olympic Village in Receivership

Vancouver's Olympic Village in Receivership

Iconic Development Left Behind By the Vancouver CondoMarket (Or Just a Poorly Structured Deal?)

I just returned from a week of surfing in Mexico to find the Olympic Village project in receivership. It's a story I have followed closely and although receivership seemed inevitable, I also return to discover that Gordon Campbell's income tax cuts have all been reversed as well. What a difference a week makes!

From listening to Bob Rennie at his Wall Centre False Creek presentation center it seems that the real sticking point for the Olympic Village was that the Maleksof Millennium Developments and the City of Vancouver could not agree on price reductions. These reductions were/are criticalto realign these condo units with the Vancouvermarket and help Bob relaunch his marketing campaign. According to Rennie, the developer's original disclosure statement does not allow any price reductions unless agreed upon by both parties.

So the market for high-end condos in Vancouver softens, big time from the time the deal is done to the time the condos need to be sold. Effectively the entire development gets left behind by the market. Units don't sell, frustration levels rise and both parties dig in because there is not enough security to cover the shortfall if the City agrees to market-driven price reductions.

My point here is should an allowance for a condo market softening not have been negotiated at the time the City took over as project financier from Fortress? When a huge private equity fund withdraws from a billion dollar condo development in one of the most stable real estate markets anywhere, shouldn't the guy taking over have his head on a swivel evaluating potential risk at least three years out? I understand 2008 was a rough year in the capital markets and that the Olympic Village had to be completed at all costs but to shift all of that risk to the Vancouver taxpayer without adequate collateral to cover a shortfall?

Maybe this was just a poorly structured deal without enough consideration paid torealistic exit strategies. Maybe our civil servants should stick to civic matters such as garbage collection and bylaw enforcement.

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