In the last-ditch effort to sell what has become Vancouver’s financial albatross, the Olympic village receiver is due to file a plan with the court Thursday that includes a new name, price reductions of up to 50 per cent on a new phase of condo sales, and a $7-million sweetener for buyers that will pay off the health-club mortgage and the hefty lease costs for the project’s signature energy-use monitors.
The incentives are aimed at recovering as much as possible of the $783-million the city is owed for the village, currently called Millennium Water.
Sources say the plan from receivers Ernst & Young, which proposes that the 1,100-unit project be re-branded as The Village on False Creek, argued that buyers need to be enticed in various ways.
“You have to do more than just change the prices,” said one.
Those buyers need other incentives, like removing the irritants of high maintenance fees that were being charged for the club and monitors. The city’s buyout of the mortgage and leases is estimated to reduce the fees for all owners, including those who have already bought, by about 15 per cent.
The private developers, Millennium Development Corp., had undertaken an unusual strategy of creating a separate $3-million mortgage for the health club and a long-term $4-million lease for the monitors that condo owners had to pay back through their maintenance fees.
In other developments, condo owners usually only pay for upkeep on amenities in their apartments, not a separate mortgage for the original construction cost of a building amenity.
The plan also outlines a strategy of holding back 140 of the most expensive condos until the luxury market is better and renting out as many as 110 high-end units just to get rid of the village’s ghost-town feel.
There are no specific prices listed in the plan.
“There will be a launch on Feb. 17 where we will have all the details on the prices,” said condo marketer Bob Rennie, who has been kept on the project. He emphasized that the main objective for everyone involved is to stabilize the village by populating it and removing financial uncertainties.
The Olympic village project was placed into receivership Nov. 17, after a long series of difficulties. After its construction costs went over budget in 2008, Millennium’s American hedge-fund lender refused to provide any more money. The debacle became an election issue. Under new Mayor Gregor Robertson, the city took over the construction loan in February, 2009, in order to make sure it met its legal obligation to provide an athlete’s village for the Olympic Games last year.
Millennium, using Mr. Rennie’s company, sold 263 condos up to Sept. 1 last year, just enough to make its first $200-million mortgage payment to the city. However, condo sales stalled after that at the high prices then in place.
The city, concerned about Millennium’s ability to make future payments and about management of the project overall, got the company to agree to a receivership. It is in the process of getting title to Millennium assets that were pledged against the loan.
The plan being filed Thursday is the receiver’s first report since the announcement about receivership.
The 230 condos that will be offered for sale Feb. 17 are in two buildings on either end of the middle row of the nine-block village. The prices they were being offered at last year ranged from $500,000 to $4-million.
Two sets of buildings – the distinctive, Arthur Erickson-designed curved towers on the waterfront and another high-end building facing the water – will be held back from sale. Up to 110 units, in the row of buildings on the south side, will be rented out.
The plan makes the case that it’s important to get people moving into the village, so that renting out some condos makes more sense than holding them empty for years. Receivers have also hired an agent to work on leasing out the small amount of remaining commercial space available.
The receivers did not give any serious consideration to selling off the condos in bulk. According to a source, both Wall Financial and Francesco Aquilini have expressed an interest in buying all 480 condos, “but they were such bargain-basement prices that it didn’t make any sense.”
The city is paying interest – although at a very low rate – on its loan while the condos remain unsold. It also has to pay for receiver fees, ongoing maintenance and any outstanding creditors whose ongoing services are needed.
Special to The Globe and Mail