A humming patio, this one at The Original Tap & Barrel restaurant and bar in the Olympic Village–now common in a neighbourhood that was once barren.Rafal Gerszak for the Globe and Mail
A successful rebranding of the Olympic Village has turned it from a virtual ghost town into a bustling new neighbourhood and pushed condo sales far ahead of what anyone had expected by this point.
But that hasn't wiped out the financial problems for the city, which is still holding a massive loan on its books. In addition, there is still $170-million that remains unpaid on the land after the private builders agreed to put the project into receivership in November, 2010.
The receiver is about to sell the village's 119 market-rental units in a block to try to reduce the city's debt load. Revenue from sales is being partially eaten up by high expenses for deficiency repairs, receiver and legal bills, marketing costs and other outlays.
"The sales have been fantastic and our revenues have been well sustained but the market is slowing," said city manager Penny Ballem.
The city still had $462-million listed as its debt for the village at the end of 2011. Ms. Ballem said it's still too early to say whether the city will lose money .
Although there were $157-million in condo sales between November, 2010 and June, 2012, and another $8-million in rental income was banked, the city only got $114-million after expenses were paid, according to the receivers' report.
Among the expenses:
- $13-million to repair deficiencies, including a backlog of uncompleted repairs on the books when the city took over from brothers Shahram and Peter Malek and their company Millennium Development;
- $11-million in sales commissions and marketing costs;
- half a million in legal costs;
- $7.3-million to buy out the energy-monitoring system and private club that had been operated by a separate company;
- $4.2-million for the receivers’ billings;
- $5-million in holding costs.
The Village
The market-rental units have been advertised for sale the past few weeks and a successful bidder is expected to be announced shortly. That bidder will have to maintain the units as rentals for the 20-year covenant originally put on them, said Ms. Ballem. She said it was the decision of the receivers, Ernst & Young, to sell the units. (These units are separate from the 252 apartments the city had built as social housing that are now being rented out as a mix of subsidized and unsubsidized units.)
"The purpose and benefit of the sale of the rental buildings is to generate cash to repay the loan payable to the secured lender [the City of Vancouver]," said a statement from Ernst & Young. "It is particularly advantageous to undertake such now while interest rates remain low, the rental buildings at The Village on False Creek are fully leased and there remains an active pool of potential and interested buyers."
The receiver also got permission from the court to put the project into bankruptcy, if needed, a move that it says is not being contemplated right now but "gives … the flexibility to consider the option of generating value from SEFC's operating tax losses."
Marketer Bob Rennie said there are now fewer than 200 condos left to sell at the project, out of the original 750.
A particularly welcome development for the city was that the most expensive units have been selling well. The first 30 of the 60 units in the Arthur Erickson-designed Canada House towers sold for $66-million by mid-June. Another 15 have sold since then.
To entice people back into buying after sales stalled during the recession that hit just before the Olympics, the project was rebranded in February, 2011 as The Village and units were offered at 30-per-cent below previous prices. As of August, buyers were offered another $5,000 in either cash or amenities.
As another incentive, to get commercial tenants to move in and help animate the village, the city lowered the property taxes for those parcels.
Frances Bula