Plans for selling the Olympic village's 480 empty condos have ground to a halt because the City of Vancouver is refusing to approve a new marketing plan with drastically reduced prices until the developer proves it can make up the $100-million to $200-million loss that could result.
"They need to have a satisfactory plan for how they will meet their obligations," Vancouver city manager Penny Ballem confirmed this week. "Until that is satisfied, we can't go forward."
Ms. Ballem didn't give an exact figure for the amount that new prices might be short on the $531-million that Millennium Development Corp. owes on the construction loan it got from the city last year after its original lender bailed out. Millennium also owes the city $171-million for the land.
However, she confirmed the shortfall could be as much as $200-million.
"If the prices were the same and they were realistic, we would not ask for this. But our job now is to have them lay out their assets," she said.
The city has to approve any reduced prices because it is the lender. Agreements with lenders on residential developments frequently specify the sale prices of the units.
If a new price schedule means that the revenue will be less than the loan amount, lenders will ask for more security or proof of security.
That's where the city and Millennium Development Corp. are apparently at a standoff, according to several sources, since no one appears to be sure exactly what Millennium's assets are worth and whether they could cover any shortfall.
Asked if she thought the city had made a mistake in not nailing down the value of those assets when it extended the first $100-million loan in October, 2008, Ms. Ballem replied: "Those are questions that need to be asked, but I'm just trying to focus on the asset situation now. There are assets we recognized and covered off in our legal agreements and there are other assets."
The city's unwillingness to agree to a new sales plan without proof of security has the project's marketer at a standstill.
"The new direction that is sitting on my desk includes price reductions and various incentives, with a heavy emphasis on populating the village. But the lender has to approve these prices. And while the negotiation is going on, the new direction has to stay on my desk," said Bob Rennie, who is marketing the village.
His plans to launch a new marketing plan, reported in the media over the past several months, have been pushed from mid-October to mid-November and, most recently, to February.
That leaves Millennium on a cliff edge, because it is supposed to come up with $75-million by January for its next payment.
Millennium had trouble making the first payment of $200-million in September, and didn't remit the full amount until a few weeks after the deadline.
Asked if he can sell $75-million worth of condos by January to come up with the next payment, Mr. Rennie said, "That depends on when I get the go-ahead."
Both Ms. Ballem and Shahram Malek, who runs Millennium with his brother Peter, say negotiations are continuing.
Mr. Malek said he is aiming to get a new sales plan in place as soon as possible. He declined to say whether his company would come up with the $75-million from other assets if there is no sales plan and no condo sales by January.
"Our focus right now is on getting the sales plan finalized as soon as possible so that we can get out there and start selling, and it's not useful for any of us to speculate on 'what if' or 'Plan B' scenarios at this time," Mr. Malek said in an e-mail.
In more positive news about moving people into Olympic village units, Vancouver council chose a non-profit operator Thursday to run the city's three rental buildings in the village.
After some controversy when the province rejected three non-profits that had applied, the city has picked the Co-operative Housing Federation of B.C. to manage the buildings and their 252 units.
Special to The Globe and Mail