The receivers for Vancouver's Olympic Village are looking to rent some condos - at a loss - to help fill up the project and make sure that retailers move in.
The 112-page plan, outlined by Ernst & Young and filed Thursday in B.C. Supreme Court, notes that one of the several reasons the marketing effort last year only attracted 30 buyers was because of the lack of shopping in the nine-block development.
London Drugs, the Urban Fare grocery store, and a Mark James brew pub were supposed to be part of the Village's attractions.
Those spaces remain vacant and the receivers were warned that "if occupancy levels remained near the low levels, the major proposed tenants had advised the receiver that opening for business in their proposed location would not be feasible."
And, if the large stores don't come in, neither will the smaller ones, they noted.
As a result, the plan recommends renting out up to 127 of the higher-end condos (though none valued at over $1-million) even though Vancouver, which is on the hook for the $740-million owing on the project, is likely to see a loss. Not because the rents will be low. They won't be.
But, because of a complicated situation inherited from the previous private developers who didn't apply to stratify the units by the required deadline, the city will have to pay HST on the value of any condo that gets rented out. It would take 20 months of renting to recover that.
As well, those previously rented condos will likely sell for less at some future date or need to be refurbished in order to get a good sale price.
In spite of those "adverse considerations," the receiver's plan says it is worth it in order to accelerate occupancy at the Village.
The receivers envision seeing the Village 70 per cent occupied by the summer, compared to the 32 per cent it stood at in mid-November.
However, it's anticipated that it could take as long as three years to sell everything in the project. And the receiver says it has no prediction on whether the city will get back all of its money.
The rental issue is just one of the many complications the receiver has had to grapple with to come up with a plan for the Village, as the city tries to get back as much as possible on the money it is still owed for land and construction costs after the private developer, Millennium Development Corp., agreed to have it placed in receivership.
That plan currently envisions putting 230 of the condos up for sale through a marketing re-launch next week, with prices reduced about 30 per cent from what they were last May. The most expensive condos would be held off the market for now, while up to 127 might be rented.
Some of the other dilemmas:
* The prices needed to be reduced, but not so much that it would damage the equity of people who already bought in. So the plan emphasizes that the pricing due to be announced next week "is not intended to represent a 'fire sale' or drastic discount in order to accelerate sales." Instead, it says, the prices are meant to reflect actual market value.
* The market can't absorb all 480 units at once, so the receiver is holding back about 250 units. But that costs money. Not only does the city have to pay interest on the loan that goes unpaid while those condos sit empty, but it has to pay the strata fees on the empty units.
Besides figuring out future sales and rentals, the receivers have also had to deal with current problems - all of which are adding up to more bills for the city.
When the cold snap hit in December and the project's unusual capillary-mat system didn't function properly, the receiver had to arrange to have electric heaters delivered to some units as well as get the existing system repaired.
The heat also had to be turned up to a minimal level in some of the empty apartments in order to prevent the cold from permeating the occupied units. The receiver has had to hire extra security to make sure that the high number of vacant buildings and units are protected.