Olympic Village loan mess continues to confound

Post by Mike Klassen in

33 comments

Olympic Village social housing under construction (Oct 2009)
Olympic Village social housing under construction (Oct 2009)

GlobalTV News first broke the story of backroom in-camera secret negotiations happening in regards to the Olympic Village development. This was followed by vehement denials by Mayor Gregor Robertson and City Manager Penny Ballem. As this story is unfolding this afternoon everyone is still confused by the City's bizarre response.

According to an early report by the Globe and Mail, Millennium Development Corp. was being required to pay $561 million dollars immediately. The City acknowledged that the developer did not make its first full $200 million loan payment as far back as August 31st, falling short by $8 million. Then they updated to say that Millennium had paid another $5 million for a total of $3 million outstanding.

Mayor Gregor Robertson in full spin mode said the reason for the admission now and not last week is because he wants his government "to be open and transparent". In actual fact, they've known the situation for weeks, and it appears they are only now coming clean publicly because they got caught.

This situation will likely have HUGE implications for Vancouver taxpayers. See Frances Bula's updates on this story on the Globe and Mail website.

Here is what Mayor Robertson told CKNW radio this afternoon:

I have faith that we're going to continue on here. We have the best marketer in the country in Rennie Marketing Associates on this. But obviously we need a new sales plan. We want to see that urgently. I think it's clear that the current arrangement is not producing results. We don't have a lot of time to waste here.

Now contrast that with the Mayor's go slow, we need time comments from just last week in The Province:

Vancouver city council and Mayor Gregor Robertson are taking a wait-and-see approach as Millennium Developments prepares to offer a fall incentive program to spark sales of 480 remaining Olympic Village condos in advance of a pending loan repayment deadline.

"We need to be patient," Robertson said Saturday. - Sept 26, 2010

In the days following the news of a secret backroom meeting on the Olympic Village project, here is what a few other folks at City Hall told the media:

So far the indications are that we are on track and nothing has changed from prior reports to council. Opportunities always arise and it is prudent for any city to look at all opportunities. - Vision Councillor Kerry Jang - Vancouver Sun Sept 23, 2010

There is some concern we’re going into another [economic] dip,” Robertson said last week. “[But] I have full confidence in the developer and the marketing taking place. - Mayor Gregor Robertson - The Province, Sept 30, 2010

But there is no plan to call the outstanding balance of the city's loan to Millennium and the developer remains the owner of the project, Ballem told Vancouver Sun Sept 23, 2010.

Millennium is certainly not in default of any $200 million. But as you know, sales are slow and we have actually done a great job in this environment with the pre-sales that have closed. We're working with Millennium every day to optimize what will happen at the village. I don't think there is any mystery about it, it is a very difficult real estate and economic environment and there is not any developer in town who is enjoying a breakthrough season. - City Manager Penny Ballem - Vancouver Sun

No decisions have been made, but all of those options had always been potentially there. - Vision Councillor Geoff Meggs - Globe and Mail - Sept 24, 2010

The city says that Millennium is not in default on the loan. - Globe and Mail - Sept 24, 2010

And check out this video of City Manager Penny Ballem being interviewed by GlobalTV after it was revealed council held a backroom meeting on the Village development. We also now have a copy of the PowerPoint presentation delivered to the media. To access it click here.

24 Hrs has also posted up an official statement from Millennium Development:

We have heard the City’s concerns today about the taxpayers investment in this community, and share the City’s interest in protecting the value of the asset for the public and Millennium. We care passionately about this project and what we have accomplished here.

Not everything in an accountant’s report describes how we arrived at this place. There have been many hurdles to get over – including delivering the Olympic and Paralympic Village on time, which we did. We created the Olympic Village – now called Millennium Water – for Vancouver, for British Columbia and for Canada. That commitment has never changed.

We are in active negotiations with the City.

While we are in negotiations with the City, we understandably will not have a lot to say publicly. However, in the weeks to come, we will continue to work tirelessly with the City to develop a mutually acceptable plan that protects the value of the asset for all stakeholders.

We will make ourselves available to the media for further comment next week.

Leave your comments below. More to come on this breaking news story as it becomes available.

For further background on the facts of how we got into this mess, read our previous feature reports on the history of the Olympic Village:

 

33 Comments

Hmmm,

The Sun only reports the default and not the call on the loan.

Two different things entirely.

Can you clarify?

http://www.vancouversun.com/Vancouver+Olympic+Village+developer+defaults+loan+payment/3605636/story.html

Only CityCaucus could try to turn a story about the City exercising its contractual rights into a story about the mayor being shifty.

Seems that Vision are not the only ones in "full spin mode".

We are going based upon the report by Frances Bula titled "Olympic Village loan must be paid back immediately, Vancouver says", which says -

"The City of Vancouver has told the Olympic Village’s private developer that the $561-million still owed to the City is payable immediately."

We will update as we get more info. The comments by Robertson were supplied by someone attending today's briefing.

The Mayor shifty....nah, say it ain't so....

(PS: climb out from under the rock....!)

Jeff, the reason the Mayor's forthrightness on the state of the OV is at issue because he campaigned on it, playing politics with this project to attack the previous administration for making decisions behind closed doors. Yet here we are just two years later and he's done exactly the same thing, keeping taxpayers in the dark.

Worse, this is the kind of meltdown that doesn't just affect the future of this project but has implications for the economy of the entire city.

When he took office, the city enjoyed a AAA credit rating and owed less than $1/2 Billlion. Today we're carrying one of the higher per capita debt loads of any city in Canada and our rating has been downgraded to AA, costing taxpayers a fortune in extra carrying charges.

So when the Mayor says we could lose plenty on the financing, he's correct, but only because he put us on the hook for $3/4 billion dollars.

Worse, he did so without getting permission from the city's voters, as required by our city's charter. Instead he made a sweetheart backroom deal with Gordon Campbell's BC Liberal Party in the dead of night to change the city's charter so he could borrow the money with one vote of the me-too lock-step Vision caucus.

He got his way. And unfortunately, so did the City of Vancouver.

So, Millennium can't cover the full first payment of $200M yet the city in full on panic mode and in all its wisdom decides to call the entire loan.

Blood from a stone?

What repercussions will we (tax payers) face if they force Millennium into bankruptcy?

Sean:

In case you haven't noticed - the City's Charter means zero to Vision and Robertson.

They've breached it three times thus far...and counting....

not to get too nit-picky here but I am not sure if they loan has been called or if Millenium is simply in default and has been read the riot act.

Technically, apples and oranges even though the stomach ache probably feels the same.

How can we stop these politicians from thinking they know enough about business and real estate so someone with brains can pull this deal out of the crapper.

Don't blame the Olympics - that is a lame deflection. This is pure and simple bad planning, bad marketing and irresponsible politics.

Thx, Julia. We've been on the phone and listened to statements by the City. The situation is confusing, but we will update as we find out the facts.

good on you for rewording the post... not that it feels much better.

Makes you wonder how Bula - who is an insider - got it wrong in her post to start with.

Or, perhaps they gave her incorrect info on purpose.

To try to sort out the confusion -- there was a total dump of information onto media today about the situation, which had many of in the room a little unsure of what exactly the city was doing. Also because there was so much info, various media took slightly different angles on what we wanted to emphasize. I felt like the default (or non-payment or whatever the wording is) had already been covered, so I was interested in different things as you can see from my story in the Globe, which is now up.

Re whether the loan was called or not. Shannon Patterson at CTV and I were both sure they were saying that they were calling the loan, because the statement from the "unnamed city official" (ho ho) was that the loan was being declared "due and payable" immediately. What that exactly meant I didn't sorted out until later, when people from the city called to say I had it wrong. Apparently what is happening is the loan isn't being called, but they are taking the first step towards that, which means saying "pay the whole thing now or tell us how you are going to make the payments you legally signed up for."

I have to say, I wish I was the insider everyone keeps claiming I am, so I could have known some of this before I arrived at the news conference with everyone else. Then I wouldn't have been scrambling and correcting on deadline.

From CKNW:

Why Robertson used the term 'that money is now due' is curious. And Lord help us all if these do take on managing the social housing aspect of this project....

****

City to Millennium: show me the money
VANCOUVER/CKNW AM 980
Marcella Bernardo | Email news tips to Marcella
9/30/2010

Time to pay up.

The City of Vancouver has provided an update on the troubled former Olympic Athletes Village.

Calling it the City of Vancouver's biggest single business transaction ever, Mayor Gregor Robertson has confirmed nearly 560 million dollars is still owed by the builders of the Olympic Village, Millennium Developments, and that money is now due.

He says the city is also looking at becoming the operating manager of the 252 affordable housing units at the complex, because the project has rejected three proposals from other would be operators.

The next payment of 75 million dollars is due from Millennium in January, and if they don't pay up, they will be considered as defaulting on that loan.

@Frances. You do deserve some credit for being the only reporter to hint at the fact the developer was in default. If you recall from my post last week I wrote:

"Mayor Robertson and City Manager Penny Ballem are also insisting that Millennium is not in default of their loan. They claim that no correspondence has been sent to the developer in that regard and that everything is smooth sailing. Although it's likely that luxury condo sales will continue to remain sluggish in the coming months.

If so, then why is the Globe and Mail reporting that "so far, Millennium Developments has paid nearly all of the first $200-million that was due by the end of the summer as part of the loan agreement with the city"? If they have paid “nearly all” of the loan, does this mean there remains an outstanding balance? Or have they in fact paid in full what they owe to the City as Ballem and Robertson claim?"

Frances, you may not be an insider, but you were the only MSM journalist to catch the fact the loan hadn't been paid in full.

Btw...Great work on the social housing story this week as well! This one seems to have been buried with all the craziness over the loan fiasco.

"Btw...Great work on the social housing story this week as well! This one seems to have been buried with all the craziness over the loan fiasco."


Yeah, and you don't think this mess came out in the manner they chose so that some things would get buried??

Please.

You start to forget about the $60 Million they plan on giving away for their unions buddies to live in the complex, when you see $561 Million at stake.

If anyone thinks for a second that they haven't Mike Magee, Gregor, and Ballum haven't been meeting non-stop with smoke coming out of their ears on strategy to stagger the news to their least detriment, you're saldy delusional.

The Thought of The Day

"Welcome to Las Vancouver! Only place in North America where The House plays on both sides of the table and loses."

“To your right, is the Olympic Village Casino” says the guide, “480 slot machines to play on, 24/7/365. It feels like playing with ‘Hot stuff!'” he adds with a wink.
'Cause it is.

So, it turns out that the vast combined experience of Gregor, Penny and Magee in...Monopoly, Operation and Lego, didn't help them much when it came to Real Estate Development.
It felt good though, to pretend to understand what is going on. To sit around the table, shuffling through the papers you have in front of you, and every two minutes or so to exhale profusely while making a disapproval gesture with your head. ‘Tz, tz, tz and all this was left by the previous administration, tz, tz, tz, I see...’
Those daily meetings should be called what they really are... ‘Bring your suit to work on a daily basis’ meetings and then, get paid. Period.

For the past two years I made my opinions known to everyone who cared to read them, and I have to say, to my defence, that I never accused Robertson & Vision gang for being talented, or for having great business skills or for being great public speakers. Far from it.

Hundreds of thousands of dollars are wasted every day as a result of crass negligence, poor judgment and lack of due diligence. How many public amenities could have been revamped? Would there be a School closures List? How many city jobs could have been saved?

This is not funny anymore. I lost my appetite for satire. I'm without...speech. This, is criminal.

We live in Vancouver and this keeps us busy.

My prediction:

They will be raiding the Endowment Fund, to pay-off the loan and to pump the operating money (to PHS?) on this project. If they do that, I will be storming the Bastille---and I expect the other peasants to be right behind me.

Buckle your seatbelts---it's going to be a bumpy ride!!

Bravo, Glissy.

Please bring your pitchfork and flaming torch...

Whatif any is the relationship between PSH and COPE/Vision or members of Council?
They seem really tight

A Province editorial from this morning:

If Vancouver taxpayers weren’t freaked out enough already about the financial mess they’ve been saddled with at the Olympic Village, they should be in a full panic by now with latest developments. Earlier this week, the Housing Ministry took just one day to reject the three proposals submitted by groups hoping to operate social housing at the site. Nineteen other organizations that considered taking on the job didn’t even submit bids after examining the fine print.

The city says it will now move ahead on its own without the province in renting social housing at the Olympic Village.

Now, apparently with little discussion, Mayor Gregor Robertson and his Vision-controlled council say they’ll bash ahead without Victoria to run social housing at the site on their own. Is anyone taking any time in this process to ask some hard questions? If the experts in social housing can’t make this site work, why does the mayor and his staff believe they can?

The village has been plagued with poor sales of its market condos and it’s becoming increasingly likely the city will never get back the taxpayers’ cash it put up to ensure the project’s completion. Part of the reason is that buyers of expensive, high-end condos don’t want to live next to social housing.

The city has shown itself to be an incompetent real-estate investor — does anyone have faith they’ll do better as a landlord?

Social housing has never made sense at that site — some of the most expensive real-estate in North America. The city, as has been said before, needs to get rid of the social and other rental housing at the village and get on with selling all the units so it can do as much as possible to protect the interests of Vancouver taxpayers. The mayor and his officials need to stop playing a real-life Monopoly game with other people’s money.

Taxpayer,

Wasn't there some early talk in 2008-2009 from Vision that questioned the PEF, with talk of putting it to better use?

To a commun....socialist, that represents a lot of dough to build things for your friends.

Not only are they going to raid the fund, expect the talk about how the city should never be in the real estate market to begin with - start creeping from city hall as a pre-ample to gutting it altogether.

Don't forget buzz from the Hall is also that they are already $20 Million over budget and seeing as they have to balance by years end, that money has to come from somewhere.

$20 million here, $60 million there, its all pretty loose change when you're facing a $600 million dollar hole in your pocket.

Oh and lets not forget the automatic $193 Million loss from no payment on the land.

Property Endowment Fund......what fund.

Didn't Vision originally want 66% of this project to be non market housing with 33% as core social housing. Wowza!

Daniel

Sorry, I'm not following. I don't think I was the only MSM journalist to hint that the loan was in default. Pretty much everyone was after your story on Global.

Or am I misunderstanding something? I feel as though I am.

BTW, city is continuing to say that, legally, Millennium is not in default and that, if things went to court, they could not make that case which is why they are being so cautious in their wording.

I personally don't get the legal niceties. It seems to me that if you haven't made your loan payment, even if you got almost all the way there, you are in default. But apparently that's how it works in lawyerland.

Frances,

I don't know if the loan documentation is available to the public, but I have reviewed many loan agreements and every single one of them provide that a failure to make a payment when due is a breach of the loan agreement.

Either the loan agreement with Millennium is unique in this regard or you are not being provided with accurate information.

I am really confused now, who actually owns the sold, unsold and the Low Income components? Someone please enlighten....

Rober, PHS and their DTES Empire.

http://archive.vancourier.com/issues03/093103/news/093103nn1.html

Right on!

"Hundreds of thousands of dollars are wasted every day as a result of crass negligence, poor judgment and lack of due diligence. How many public amenities could have been revamped? Would there be a School closures List? How many city jobs could have been saved?"

Best way to put it in words for me, too.
Vancouver Vision sycophants are beyond satire, they are in the dungeons of shame. Keep them honest, Gliss!

From the Province - today:

'Outside the mayor’s briefing, Non- Partisan Association Coun. Suzanne Anton said it’s time the city abandoned the social-housing concept and put all units on the open market.

Anton called the Olympic Village “far too pricey” for social housing.

But both Robertson and Vision Coun. Geoff Meggs disagreed, saying at least one of the social-housing bidders is a serious contender and more will be sought.

Meggs accused Coleman of “interference in the open bidding process,” after Coleman swiftly dismissed the three bids city staff had barely opened.'

***********

Now, from what I understand, the City asked the Province to cull the prospective social-housing bids.


it is interesting how everyone is lighting their hair on fire over this.

If Millenium wanted to be jerks, they would not have made any payment at all - but they did. 90+% of it. The shortfall is a 'drop in the bucket' by PB standards. 2 million bucks is not even the 'small expenditure for a bike lane trial'. Why are we not having a nervous breakdown about the questionable spending and cost of other pet projects at the hall in an obviously tight economy?

If they don't make the January payment - I think we can pull out the matches.

To prevent a default in January, there is an obvious need for a rethink on how this OV is going to operate and be marketed. It is really time to stop the monopoly game and suspend the social engineering long enough to get this project out of the crapper. There are lots of smart people out there that know exactly what needs to be done. It is time people set aside their egos and ideology and start listening. Otherwise our worst fears will be a reality.

Judy, to follow up on your point, the original sin that's led us here is when the '02 - '05 COPE administration decided it was any business of government to create market-rate housing, thereby turning the City of Vancouver into a real-estate developer ...

And now this Vision council has compounded the error by turning the city into the financier as well, using taxpayers as a backstop for our Mayor's reckless gamble.

Meanwhile our city drifts and serious challenges remain unmet.

Julia, I agree.

And this continued negative publicity is not going to help matters - at all.

Some of the posters on the CBC site are blaming everybody, everything and the Pope for what is going on - however, CBC is behind in their up-dates and playing to the sensationalism. It does not instill that all in all, this is a prime location and once this mess is cleared up, it will be a beautiful place to live, close to the downtown core and all the amenities in the immediate and surrounding areas.

apologies, I meant Julia's cogent comment, not Judy

A few quick comments:

"If Millenium wanted to be jerks, they would not have made any payment at all - but they did. 90+% of it. "

Julia, it doesn't quite work this way. When a developer has a mortgage loan from a bank, he doesn't decide how much money to give back to his banker. The mortgage documents prescribe that most of the funds paid by purchasers automatically go to the lender, in this case, the city.

That being said, the principals of Millennium are not jerks.

The Borrowed Thought of The Day

"Off the record, on the QT, and very hush-hush..." - LA Confidential, 1997

Finally! For once, I am in total agreement with Michael, including the Malek brothers of Millennium reference.

The Virus Vancouver crooks are shooting at the glass, hoping to catch us barefoot inside their 'Imaginarium'. Window dressing.

"Everyone is a suspect...everything is for sale...and nothing is what it seems.
It's a crime saga that will shock you. It's a mystery that will keep you guessing. It's a thriller that will keep you riveted."
OV Confidential, 2010 (under development)

We live in Vancouver and this keeps us busy.

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