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.
Olympic village condo prices to be slashed by an average of one-third
Condo prices at the troubled Olympic village project will be reduced by an average of 30 per cent from May 2010 levels, according to Ernst & Young, the project's receiver. The following is a look at how much Olympic Village units are going for on the market.
The Vancouver Condo Project Receiver To Approve Significant Price Cuts Later this Week Condo marketer Bob Rennie announced that he is about to receive approval from Ernst & Young to reduce condo prices across the board in the Olympic Village complex in southeast False Creek. Although he did not speak to any specific numbers, Rennie called the pending reductions ‘significant' . He spoke about a very delicate positioning of the new Olympic Village marketing plan quoting a ‘do it right or die' approach is the one they'll be taking. The neighbourhood's reputation has taken a beating over the past year as the market for luxury concrete condos in Vancouver has softened. I did witness quite a few of the resale unit listings go stale towards the end of the Summer. The social or non-market component has not been without its share of problems, particularly finding someone qualified to manage it. The development mix of high-end luxury condos and social housing has also been a contentious issue and a thorn in the side of the marketing effort. Rennie hinted that a possible relaunch price could be around $1,000 per square foot for the high-end units and that he expects to move 100 units by June next year. The target date for the newly priced marketing relaunch is Feb 12, 2011, the one year anniversary of the 2010 games. My feeling is that while $1,000 per square foot will be achievable, those sales will be limited to the best of the best only – waterfront suites. Look for a huge price differential between the waterfront suites and those further back in the compound towards the Wall Center at False Creek development site.
Rumours have started swirling that sluggish condo sales at the troubled $1 billion former Olympic Village might prompt the project’s major creditor, the City of Vancouver, to encourage the receiver, Ernst and Young, to start renting out units as a way to generate some revenue.
Renting units might also be desirable for the City of Vancouverbecause it would cloud exactly how much money Vancouver taxpayers lose as a result of the bungled project, according to real estate consultant Michael Geller.
Mayor Gregor Robertson frequently points out taxpayers have been exposed to the full financial risk of the Olympic Village since June 2007 when the previous NPA council agreed to be the guarantor of the project.
“That decision was kept secret until we made it public in January of 2009,” Robertson said recently. Still, many taxpayers expect Robertson to make decisions now to minimize losses. Making it difficult to pinpoint an exact loss would, therefore, also be in Robertson’s interest, Geller said.
“One piece of advice for the city is not to rent those units because they will lose too much money,” Geller said. “Besides, there are things the city could do in a more positive way.”
Geller advocates hybrid leasehold systems outside the common lease-or-own dichotomy.
For example, the city could initiate shared ownership. They could sell a $700,000 unit for $600,000 and have the contract structured so the city would get an additional $100,000 when the initial buyer resells the unit.
Another of Geller’s ideas is to have a rent-to-own program where the renter would put down a small deposit and slowly accumulate equity with each rent payment.
“Most developers don’t do this because they always need the money now. The city can have a much longer-term horizon,” Geller said.
The financial problems with the are taking the troubled project in a new direction, as the owners go into receivership. “This agreement gives us stability,” said Vancouver city councillor Geoff Meggs.
“Now, the milestone payments don’t have to become a recurring crisis. If (the developer) lacks the capacity to pay each time, the damage to the asset will be greater, compared to an orderly approach.”
The City of Vancouver has negotiated an agreement with the owners of the Millennium Water development to put the project into receivership and hand over management to accounting firm Ernst and Young.
Millennium recently failed to make a scheduled loan payment, which raised serious concerns about how the company will pay back its loans on the $1 billion project.
In August, Millennium was supposed to make a $200-million payment, but the city received $192 million and by Sept. 20, a total of $197 had been received. The next payment of $75 million was due from Millennium in January.
“They were facing another deadline in 60 days, which was problematic,” said Meggs. “We always had the option to force them into receivership, but we decided to negotiate an agreement for consensual receivership.”
The owners of Millennium Southeast False Creek Properties, Shahram and Peter Malek, agreed to go into receivership to avoid pending legal action.
The city was preparing to go to the B.C. Supreme Court to petition Millennium into receivership. Receivership is a form of bankruptcy in which a company can avoid liquidation by reorganizing with the help of a court-appointed trustee.
There are a total of 1,108 units in the Millennium Water project. The marketing company hired by Millennium has managed to just sell 259 units out of 737 market sales units, about 35 per cent of the total. This number includes 223 pre-sales units that were sold last year.
The agreement allows the receiver to make immediate decisions about a new marketing strategy and is designed to secure the payment of about $740 million dollars that is still owed by Millennium to the City. The loan for construction represents about $560 million.
“First, we will sit down and produce a marketing plan that makes adjustments to price,” said Meggs “As part of the agreement, Millennium has pledged other types of security that will be used to close the gaps in the repayment program.”
According to Meggs, cutting prices could reduce the amount of revenue that was anticipated from the sale of the units and create a payment gap.
Almost half of the unsold units left on the market are priced at less than $1 million, but another 24 per cent of these units are priced between $1 million and $2 million. Twenty eight per cent cost more than $2 million. About 60 per cent of the 119 market rental units have been rented out.
The city is working with a non-profit housing operator to manage 252 social housing units.
New York-based Fortress Investment Group, which was the developer’s original lender, stopped financing the project.
This move forced the city to buy out the building loan to better control costs and finish in time for the 2010 Winter Games.
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