Independent audit and inquiry needed into Olympic village mess
It’s the only way to find out what happened, to avoid similar mistakes as city moves forward with development of other property
Only in some parallel, political universe where land-sale prices are “aspirational” and only with some bookkeeping sleight of hand does it seem possible to conclude that Vancouver lost only $50 million on the Olympic village and not at least four times that.
In the seven days since journalists’ first technical briefing with city manager Penny Ballem and Coun. Geoff Meggs on the loss and since a follow up briefing a few days later, a great deal has been written about the numbers. But what’s lacking is certainty and trust in any of them.
Here’s a brief synopsis.
The city wrote off the nearly $180 million owed for the land cost — the so-called “aspirational” price that developer Millennium Developments contracted to pay.
It justifies that on the basis that years ago the city paid $27 million for the land and recovered $29 million from the bankrupt developer.
Missing from the city’s calculation is money spent on ground preparation, legal costs related to construction deficiencies, holding costs and infrastructure including sewer, water, shoreline improvements, walkway and community centre. Assessing the value of that, however, is controversial since some of those costs will be recovered when the city develops the remaining two-thirds of the site.
Suffice to say, no homeowner would call it a wash if they got $150 million less than the agreed price even if they’d inherited the property and paid nothing for it. And far from being soothed by city officials’ insistence that there won’t be a tax increase because the money will come from the property endowment fund, most citizens recognize that the money’s gone regardless of which pot it’s taken from. Seven days on, what’s clear is that this is one great mess. It has echoes of Montreal’s Olympic debt that took 30 years to repay, only this one lacks the tidy benefit of being able to place the blame on a single politician as Montrealers did with Jean Drapeau. What needs to happen are not more rounds of technical briefings, nighttime Twitter duels among the political cognoscenti or ill-informed debates.
What’s needed is transparency and that now seems only possible with an independent financial inquiry separate from both the city’s administrative and political wings, which seem of a single mind on the idea that the shortfall is no more than $50 million.
It cries out for the sort of forensic accounting done at the provincial and federal levels by the auditors-general and it raises the question of why Vancouver doesn’t have an auditor-general like some other big cities including Montreal.
If Vancouver balks at a full-time, independent auditor-general, the provincial government ought to consider other options because even though Vancouver has the most spectacular fiscal fumble, it’s far from the only one to have them. West Vancouver citizens, for example, might have liked to know exactly how their community centre ended up costing more than double its original estimate. One option is to expand the provincial auditor-general’s mandate to include municipalities. Another option would be reinstituting the inspector of municipalities office, which was eliminated years ago in an early round of provincial government cost-cutting.
The municipal inspector had broad powers to investigate and even overturn council decisions. However, there were some flaws in the legislation that ought not to be repeated if the office is reinstated. The inspector ought to be appointed by, and report to, the legislature so that s/he is fully independent of both the provincial cabinet and the municipalities.
But a financial audit of the Olympic village alone is not enough. There needs to be an independent inquiry into the decision-making process that...
Vancouver Olympic Village condo owners file lawsuit for Defects
Olympic Village condo owners, some of whom paid more than $1 million for their suites, filed lawsuits this week seeking refunds for what they claim are gross deficiencies in their homes.
After months of sluggish sales, condos are finally selling at Vancouver's former Olympic athletes' village, with more than half of the re-marketed and re-priced units selling over the opening weekend.
Out of 230 units available for sale at the newly christened Village on False Creek, 128 have sold since Friday. Before it was placed in receivership in November, only 36 condos had sold since the development hit the market in May, despite strong presales of 223 units in 2008.
Marketer Bob Rennie told reporters that the Village has now lost its "ghost town" image.
"The clouds are rolling away," he said. "I think what we brand our company is ‘Ghostbusters.'"
Twenty units priced at more than $1 million sold this weekend, with the most expensive selling for almost $3 million and the cheapest for $329,900. The average selling price was $778,800.
Buyers have seven days to rescind their offers if they change their minds -- Rennie estimates that between four and 10 per cent of buyers typically rescind their offers.
All of the units sold over the weekend went for the asking price. Since Ernst & Young took over as receiver for the development, Rennie and his marketing team have sliced prices drastically, cutting them by an average of 30 per cent.
Rennie credited that move for the heavy sales over the opening weekend.
"I've never had a proximity problem or a product problem, but we did have a pricing problem," he said.
Another 244 waterfront units in the development have been held back from the market -- half were meant to be offered for rent, and the rest would go up for sale at a later date. But Rennie said Tuesday that he would like to hold the rental units so that they can be sold as well.
The marketer was hopeful about what the upswing in sales will mean for the $740-million debt on the development owed to the city.
"Between Bob being happier or the taxpayer, the taxpayer has to feel good that things are moving along properly," Rennie said, referring to himself in the third person.
"We're cautiously optimistic that we have stabilized the asset for the taxpayer."
Real estate experts have estimated that the city stands to lose between $150 million and $170 million on the development.
Price of units lower, but still no bargain, expert says
Even at reduced prices, it's unlikely taxpayers will fully recoup $740 million invested in project, according to UBC professor
The new prices for condos in the taxpayer-owned Olympic village are more in line with the rest of the real-estate market, but they're still no bargain.
That's the analysis of a realestate expert and a business professor who say it will still take years to fill out the Southeast False Creek project.
And even then, it's unlikely that taxpayers will fully recoup the $740 million they invested in the project through construction financing and land sales.
On Thursday, condo marketer Bob Rennie set the stage for the sale of 230 units in five buildings starting today.
He laid out for reporters and fellow real-estate agents an average price reduction of 30 per cent for the units, which make up about half of the 474 unsold units in the village.
Some units, principally the more expensive ones, have been reduced by as much as 50 per cent, while price cuts on smaller lower-priced units are closer to five and 10 per cent.
But Scott Brown, the vicepresident of residential marketing for Colliers International in Vancouver, said those cuts may not be enough.
"It's definitely come down from where it was, which tells you how far out of reality the prices were. They were really out of whack," he said. "I don't know if they have come down far enough to drive any really serious volume."
Brown said Colliers' market research has shown that threequarters of sales in the area have been for units priced at $650 to $750 per square foot.
But most of the new prices in the Olympic village are still higher than that.
Brown cited a 1,445-squarefoot two-bedroom unit now offered at $1.3 million. At nearly $900 per square foot, "that's not a deal," he said. "Those prices are not low enough yet where people will say, 'This is such a deal I've got to buy it now.'" Tsur Somerville, a professor at the University of B.C.'s Sauder School of Business, said he thinks Rennie's overall repricing strategy will eventually drive enough sales for the city to recover the remaining $570 million it loaned for construction.
But he's doubtful there's enough residual value left to also cover the outstanding $170 million owed on the city's sale of the land to the project's original owners, Millennium Developments.
"I think it is reasonable to say that it is highly unlikely that the taxpayers of Vancouver will see the full value of the lands the city contributed to the project," he said.
Somerville said the prices are competitive with other built projects in the city but not for those being sold on the basis of pre-sales, where buyers put down a small deposit and have longer to pay. By Thursday, a dozen people had camped outside the sales office, waiting for today's opening sale.
Rennie said the lineup was encouraging and he expects to see a crush of potential buyers on the weekend. However, the lineup pales in comparison to the interest in other condo developments in Metro Vancouver.
On Saturday, Bosa Properties will open its sales centre for its 45-storey 202-unit Sovereign tower in Burnaby's Metrotown.
Earlier this week, more than 400 people lined up and 2,600 signed on to a company website.
The company sent people home after giving them numbers reserving their place in line, said Bosa vice-president Daryl Simpson. He projected that up to 70 per cent of the units, priced at $650 a square foot or less, will be sold by the end of the weekend. Rennie told reporters that demand in the Olympic village can't be compared to pre-sales at other developments, noting he'd sold all but 11 of 540 pre-sale units in Wall Centre False Creek behind the village.
Pre-sale buyers put down 10 to 20 per cent and have up to three years to pay. But with built stock such as the Olympic village, buyers have to...
Realtor Bob Rennie dodged questions Thursday morning about whether taxpayers would even come close to breaking even on the Olympic Village development.
Hosting a media launch about sales that start Friday at what’s now branded The Village on False Creek, he said Rennie Marketing Systems was working to stabilize the city’s asset and to maximize revenue.
Rennie said he sees the downtown condo market stabilizing and the real estate market reviving from its recent slump.
Instead of aiming to sell approximately 480 unsold units like he did last May after the 2010 Winter Games ended and the property was returned to developer Millennium Water and the city, Rennie aims to sell 230 condos in two areas of the village. Of the 737 condos at the village, 263 have sold, most of them in 2007. Friday’s launch is the third time the units have gone on sale.
Receiver Ernst and Young has contracted with a company to rent approximately 114 units to get the “ghost town” populated fast. Those units don’t include the 119 rental units purpose-built by the developer or the city’s 252 market rental, co-op and below-market rental units in the village.
Rennie blamed slow sales after the Games on bad timing due to a sluggish economy.
“I do not believe we ever had a product problem,” Rennie said. “What I do have is a pricing problem, and that pricing problem on May 15 was compounded by the fact that there was 480 units for sale and people didn’t see any sense of urgency and everybody just moved to the sidelines and folded their arms.”
He’s confident the prices are appropriate now. He said market testing done before the latest sales launch attracted 31 offers in 10 days. They included 12 for units that cost more than $900,000, 11 offers for units priced from $600,000 to $900,000 and eight offers for units under $600,000.
Seven chairs sat outside the sales centre at 5 p.m. on Wednesday. Fourteen chairs labelled with people’s names were positioned outside the sales centre just before 11 a.m. Thursday morning. The sales centre was to open at noon Thursday with sales to begin Friday. Rennie said he was giving a tour to 1,058 realtors through the site yesterday starting at 2 p.m.
Prices for the unsold units have been reduced an average of 30 per cent from May 2010 rates. Rennie said rates on the lower priced units weren’t reduced much—a studio now goes for $349,500 to $354,900—but prices on larger units that were priced at $1.5 million saw greater reductions.
He aims to sell 60 units in 60 days.
He noted the receiver for the village, Ernst and Young, has been tackling building deficiencies and that regular new home warranties protect owners.
Only a bank and a private liquor store operate at the village. Rennie said London Drugs is eying population numbers, negotiations are underway with an unnamed grocery store—previously the grocery seller was meant to be Urban Fare—and a consultant has been hired to focus on leasing the other commercial spaces.
The city is owed $740 million for the development.
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