Sunday, October 3, 2010

An Olympic Village Reality Check

A number of people have suggested that I have been too silent in responding to those who blame the NPA for the current situation at Olympic Village. To them I say I do not think there is a lot of benefit in continuing to treat this project as a 'political football'. However, I do think there is benefit in trying to understand how we got to where we are, in order to assess how best to resolve the situation and make sure we don't get into a similar situation again in the future.

The following is a modified version of an email I sent this morning to a number of people in the media who are writing about the Olympic Village, as well as a few city staff. Rather than send copies to everyone affected, I have decided to post a slightly modified version of my notes below:

As we all analyse how we got into the current situation, and how we get out of it, here are a few matters that I think need to be checked out with real estate experts as you write future articles and the city prepares further fiscal analyses related to the Olympic Village Project:

1. Is the Mayor correct in saying it's naive to bring more units onto the market, in response to the suggestion that the social and rental housing units be sold?

2. What is the average cost of the condominium units, in terms of dollars per square foot, and what is the likely rent? On this basis, is there a business case for renting these units out, as Raymond Louie is quoted as saying? Would the city ever recover its costs and land payment? (as an aside, my understanding is the average price is in the range of $1100 to $1300, or more. The rent is not likely to be more than $2.50 a foot, given the larger unit sizes. On this basis, the numbers will not work, especially when adding in the future repair and renovation costs, etc.unless there is a significant increase in market values. Furthermore....

3. This is a minor consideration, but if the units are retained by the city and rented out, just how much property tax money would be lost over 10 years? Was this factored into the business case? (my guess, and this is just a guess, the annual property taxes are in the order of $7,000 per unit x 450 units x an annual increase x ten years....that's probably $40 million right there!)

4. How much does the decision on the future of the Social Housing units affect the overall revenue projections. For instance, in addition to saving subsidy costs, and recovering costs and possibly a small profit, are the condominiums worth less if the social housing units remain as social housing? If so, how much less?

I would like to think that the UDI members who initially advised the city could provide some assistance in addressing these questions.

5. In addition, how significant is the 'obligation' to the International Olympic Committee? Should this reallybe a factor in the city's decision on how best to proceed?

While some like to blame previous councils for the current situation, the following are some of the factors that I think are responsible for where we are now:

  1. The initial decision to offer the site to one developer. It was too many units for any one firm to build and market in an effective way.
  2. Millennium's initial bid, at a time of rising prices, was too high for the land. As a result, they started off very badly. The high price also led to their decision to build very high end units
  3. The law department's insistance that the city not transfer title until the project was completed. Unfortunately, Millennium and its lawyers did not fully understand the ramifications of this, until they tried to arrange financing;
  4. Millennium's choice of architects. Merrick and Erickson were both talented firms, but the wrong choice for this project; Their designs were very inefficient, not truly respecting market realities and very expensive to achieve. At one point, Millennium wanted to use other architects but wasn't allowed to do so. GBL, the architects for the social housing are an experienced firm; but they saw this as a chance to design the most impressive social housing in the world, and they tried to. That too was a mistake;
  5. The extensive and confused community direction, and the Planning Department's interference in the planning process. Directors of Planning and other city staff have often talked about how much they influenced the design of the overall plan, the streetscapes and buildings
  6. The decision to make this the greenest project in the world, and a LEED Platinum award winner; None of us really know just how much this added to the cost...but as I have often told Frances Bula, it's not 5 or even's more.
  7. Poor project management by Millennium who had a very small staff, and had never undertaken such a large project. The company has created some very beautiful and successful projects, but was completely over its head on this one;
  8. Poor project management by some city staff, especially related to the Social Housing in terms of the initial program, unit sizes, building efficiency, specifications. In part, this might have been due to all the other projects they were having to deal with. There was also an absence of involvement by the Province, who normally are involved. BC Housing let the city make mistakes on its own. This was a very unusual situation;
  9. A difficult bidding climate. The project was put out to bid at a time of rising costs. ITC is an excellent contractor and Metro Can was also very experienced. I have never worked with them so cannot comment further But as I noted in Frances Bula's Vancouer Magazine article, Millennium has had past difficulties in its dealings with contractors since they often participate in certain aspects of the construction themselves. This impacted the initial bids, and the subsequent cost of change orders, etc;
  10. The world global crisis. Most of us never expected the dramatic events that happened. For instance, while I didn't know much about Fortress, I never expected them to get into such serious trouble, and I admit to saying as much in a CTV interview in fall 2008;
  11. The city staff's recommendation to Council that the city guarantee the loan to Fortress in order to ensure that the project was completed on time. While some would say the city had no choice given the need to complete by an imovable deadline, there were other options that could have been implemented at the time. It is unfortunate that the city councillors were either not presented, or did not appear to understand the full legal and financial ramifications of this decision.
  12. The timetable related to the project, and deadline to complete. It is interesting that one major developer recently told me he didn't bid since he was concerned when Larry Campbell was Mayor that it was taking too long to get the project started.
Now, in terms of moving forward, I still believe the city could recover its costs for the social housing and market rental housing by selling the units as 'fettered ownership'. I don't think this is naive. They could be offered as leasehold, and carefully positioned and priced to not inappropriately compete with the market housing. One idea might be to follow the lead of earlier phases of South False Creek and give purchasers the option of prepaying the lease, or making monthly/annual payments perhaps on a pre-determined graduated payment scale, with lower payments in initial years. This could enhance affordability and broaden the community mix.

The alternative, for me is problematic due to the cost of subsidizing the units, even the market rental units. As noted above, I do not believe Vision councillors are correct in believing these units are not being 'subsidized'. They are being subsidized, when you cnsider the amount of equity the city will have to put in, with little or no return. When you add in the lost revenues on the land, the 'subsidy' is even greater.

One of the concerns I have with retaining the social housing as social housing, is that both the Mayor and the Portland Hotel Society have spoken about the need to house the homeless. The PHS has only been involved with housing the hard-to-house... the drug addicted and those with mental illness. Even if that's not who the city wants or expects to move in, this is now the public perception. The stated desire by one councillor to fill the units up quickly could exacerbate the problem.

My other concern is that the income and social disparity between the potential social housing residents and the residents of the market units is too great. We had the same potential problem at Bayshore and addressed it by relocating some of the social housing to another site, with support by politicians on the right and the left. The current proposal will not only reduce the value of the condominium units, it could result in a less than desirable community.

In terms of selling the market units, I think there are advantages and disadvantages to a number of options. Again, those lenders who have been in similar situations are in a position to offer better insights. However, from my limited experience with similar situations, the solution is not always as obvious as some lay people might assume.

One day this will be a very attractive and lively community. However a lot of wise decisions need to be made in the coming months, in order for this to happen. I hope these remarks are helpful in explaining my concerns and viewpoints and resolving the outstanding challenges.


Anonymous said...

You might think you are going the right way for the economics questions involved, but this can be argued. What is inarguable is that you are going the WRONG way in terms of social justice and for what this community needs. I know that in the current neo-liberal paradigm virtue ethics has been replaced by the triple bottom line and I am proud to be part of the corrective to this. At olympic tent village we were empowered by the DTES community and countless grassroots activists and organizations and we showed the world how a community can heal itself and provide examples for elected officials to follow. At the athlete's village open house we tore down the fence and crashed the meeting, disrupting your controlled message to people who were unaware of your ethical violations i.e. broken promises. We'll have a lot of fun at the Halloween roaming street party through that ghost town, and in February we promise (not merely propose) to celebrate the one year anniversary of olympic tent village with a new and even bigger one at Athlete's village, that is unless the original promises are kept. If you want a real reality check, just look to the faces of the most vulnerable - if you empathize you will know reality, otherwise you are hopeless and direct action is the only response you should expect.

Michael Geller said...

I deeply care about social justice and housing the homeless in Vancouver. But I do not think the first phase of the athletes' village is the place to do it, given the serious financial challenges. Furthermore, by disrupting the project marketing, and in turn potentially costing the city a lot of money, you are simply exacerbating the problems you claim to be wanting to solve.

Jon Petrie said...

Reality check on Vancouver's management of its own real estate:

John Breckner of Real Estate Services just prior to the awarding of the Collier's management/ marketing contract for the City's 98 unit 1 Kingsway/ 228 E 7th market rental complex said on July 9th, 2009 in the Council chamber: "We have a plan to market the units ... [Colliers] will be running the initial marketing program, of course it is all approved by us ..."
(See/ listen:,002
-- on the video between circa 6:35 and 7:50)

If there was a plan it hasn't been followed or was a joke.

1 Kingsway was ready for occupancy per the City's Building Department mid December 2009 (I was in all the top floor units at that time, they were ready) but 'advertising' did not begin until mid January and the early craigslist ads did not give rents, show pictures, or mention an address. A Sun ad ran for a month starting Jan 15 and read:

>1 & 2 BR, balcony, secured parking,/ 6 appliances, incl. insuite laundry./Call Mike: 604-872-0024<

(Per the google map locator next to the Sun's on line ad for about a month, the units were located on Great Northern Way below Prince Edward -- about seven blocks from the actual location.

Last 28th April I emailed Councilor Andrea Reimer of Vision:

>>For the record we had a meeting March 17th and I have heard nothing back from you.

I claimed that advertising for the City’s 1 Kingsway [98 unit market rental] property was inadequate/ lousy and directed your attention to the absence of any mention of transit [5 bus lines within 100 meters] in the craigslist ads and the yahoo map function of the ad locating the property in Kingsway BC, about 400 miles north of Vancouver.

The advertising has essentially not changed since I spoke to you — the yahoo map linkage under the ad still locates the property in Kingsway BC and transit is still not mentioned.

And for the record, no advertising for the two vacant child care units, per my search, exists. <<<<

I did not hear back from Andrea Reimer and so, belatedly a good citizen, I called circa 28 April the managing agent for the property, Mike Draskovic. After my call the map function was corrected. Mike during the call told me the two childcare units were vacant and being advertised on craigslist. The claim re advertising was untrue and two weeks after my phone call (and a follow up email) the claim was barely true:

The craigslist May 11th ad titled >$1615/2br -- in the heart of Mount Pleasant ...<
contained the sentence:
>> Residences on 7th offers a limited number of 1 bedroom , 2 bedroom suites **and one childcare suits at secund floor whit enormus secured patio.** <<

(The ** xxx ** indicate the insertion in an otherwise unchanged sentence that's been running since circa 11th January)

I spoke to Mike about two weeks ago and per Mike at that time the only vacant unit available was a child care unit (a unit in which someone can run a child care business and which rents for circa $1800). At the time and today the only ad on craigslist for the childcare unit is titled >$1200 / 1br - In the heart of Mount Pleasant ...< and mentions the childcare unit in its text, once and in passing. The ad can be found at

I have written perhaps nine local journalists suggesting that 1 Kingsway mismanagement might be just the tip of an iceberg and no one showed any interest. I have more details ....
And remember seven floors of City Hall are empty.

Michael Geller said...

Jon, your frustration with the city's efforts in managing their rental suites at I Kingsway are obvious. I too share your concerns about the city possibly taking on the lease-up and management of an additional 126 market rental units and 126 social housing units. Without any doubt, the rental units would be better off sold, to recover funds. And the social housing too.

I'm not alone in this point of view. Check out the thoughtful Think City minute of December 9, 2009 that also recommends that the city admit circumstances have changed and these units should be sold.

Anonymous said...


Jon Petrie said...

Michael, certainly the City would make more money (or loose less money), at least in the medium term, by selling all the rental units rather than renting them --- rentals are in most places worth less on the market than condos, even condos on leased land. I am not sure, however, that selling in this market will fill up the units quickly and for me filling the vacant units owned by the City quickly has value.

I think with good marketing, starting tomorrow, the largely market rental building at 151 W 1st could be essentially filled by next year. And to make things simple, make the whole building market rental. Filling the building would help animate the area a bit.

(And allowing parking on the boulevard strips might also help animate the area, particularly on weekends -- the current policy of a complete absence of "no parking" signs and a policy of towing hasn't done much to promote the OV as a pleasant place to visit/ a place to come back to/ a place that a potential purchaser will remember favorably. I protested the City's boulevard quasi entrapment towing policy in an email to various Councillors including, I think, Anton months ago and received not a single reply.)

In my earlier posting I was drawing attention, hopefully, not just to my own frustration with the marketing of 1 Kingsway but the City's dismal general track record in managing its own/our real estate, a failure that should, I think, be of interest to all citizens.

I wrote on Bula's blog 29 July of the absence of any marketing for 151 W 1st and the loss of rental revenue of circa $150,000 a month from that empty building. Press attention to the empty City owned apartments in the OV only started in September and the issue that seemed to engage journalists and commentators was subsidies versus market rental, not the fact that the City had no plans in place for their own market rental properties at the end of the Olympics and that the circa 100 market rental apartments in the OV sitting empty for circa six months represent a loss of revenue of to the City of close to a million dollars.

And by the way are there any plans for the seven vacant floors at City Hall ? Has any journalist asked that question ?

Michael Geller said...

John, I think you raise some very legitimate concerns, and if the city retains the social housing units, and the rental housing as I suspect they will, I hope they will do a better job of leasing up these units than they did at 1 Kingsway. At the moment, the question is who should manage these units.

I also agree entirely with your concerns re: the city towing cars from the gravel area. I have done everything I can to expose the absurdity of this, including pointing it out to a Global TV crew. Hopefully Penny Ballem will go down and see the situation for herself, and tear the sign off the door!

Ivan Bryan said...

Again, drugs and surgery do not constitute "effective" treatment for Piriformis Syndrome. Ikon makes bomb calorimeter (digital model)cat. SEPARATE FROM NEGATIVE ENERGY This isn't a problem with most home-sized gardens. Yes, blood sugar spikes, feelings of fullness, and that fact that we have a storage mechanism that calorimeters don't all make a difference.

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