Some unsolicited advice on the Olympic Village

This week the Olympic Village was back in the news as a result of the release of another report by the Receiver, leading to a story by Frances Bula in the Globe and Mail.  She also posted a blog entry on the topic which attracted a few comments.

If I had any sense, I'd do what Bob Rennie asked me to do and 'put a sock in it'. But I don't think the team responsible for the marketing of the Olympic Village is doing everything it can to sell out the community, and feel compelled to share my views in what I hope will be seen as a positive gesture.

The following are comments I posted on Frances' site.

I am pleased the village is coming to life and I know that many people who have bought there are very happy with their purchases. I encouraged some people to buy since they were buying penthouses and very prime units at prices well below the original prices and below what they would have to pay in Coal Harbour, or other waterfront locations.

I think the OV and other False Creek developments have the potential to be much better neighbourhoods than Coal Harbour. South East False Creek will be a wonderful neighbourhood one day.

That being said, I remain concerned about the city’s financial picture. Frances, you said the sales are happening faster than anyone expected. This simply is not true.

With respect to Jesse’s comment that the previous $462MM outstanding debt included the outstanding land payment, my understanding is that the $462MM debt does NOT include any of the outstanding land payment. The outstanding land payment is regarded by the receiver and the City as an ‘aspirational payment’ in the order of $173MM and is never going to be repaid. But it is not a loss :-)

This would not be a problem if the money was all ‘profit’to the city, but my understanding is that most if not all of this amount has been spent on the infrastructure, including theshoreline, the environmental features, the community centre, etc. Indeed, many items were upgraded in anticipation of this big land payment.

Now there’s no use crying over spilled milk…this is not the fault of any one person or any one political party…but I do think the city should be doing everything it can to sell the remaining units (especially the less attractive units) in the not too distant future for a number of reasons. 

Firstly, there are still unsold units in surrounding buildings that are nearing completion, and many of the units Rennie Marketing and other developers/marketing firms sold in neighbouring buildings will soon start coming back onto the market. Why?

Because they were purchased by investors who now realize that they are not going to realize the capital gains they hoped for, and they may not even get the rents they were hoping for.

While these units do not have the sustainability ‘bells and whistles’ nor the cache of the Olympic Village, they are going to be real competition and appeal to many potential OV buyers.

I fear these resales, and the unsold units will be coming onto the market at prices below the current OV prices.

To address this competition, I would urge the City to be creative with some financing programs….I know….I’ve made the same suggestions before…but the City can offer financing programs that other developers or investors can’t offer. Maybe it is time to consider shared equity, silent second mortgages, and other forms of fettered ownership to move these units, without having to significantly reduce the prices.
That being said, I believe the market is telling us that while the better units are very well priced…perhaps under-priced in some cases….many of the less attractive units with awkward layouts are over priced.

I know the City and marketing team will be furious with me for saying this, but I think it must be said. I’m happy to back up my allegations and know that many other real estate consultants and developers agree with me.

So the City should reduce some prices now to to sell units rather than hold onto them for maybe years. Altho the City’s borrowing rate is very low, there are holding costs, and the city is not even getting property taxes. Furthermore, empty units lead to other problems.

On a different matter, I also feel that the City is not doing everything it can to show off the area. The town square is looking tired…there are weeds growing through the pavers…the banners are starting to fade…the electrical boxes that I was assured would be covered with colourful murals are now a dull, faded green. There’s no excuse for not doing something creative here.

The benches with the awful yellow/white sitting surfaces appear discoloured and some are covered in graffiti…whoever designed these should be shot…they’re just awful!

As you walk down the streets many of the hedges in front of unsold units need trimming…they look wild and unkempt…other plantings are dying and not being tended to…and there are weeds and garbage piling up.
Do these things discourage people from buying…it’s hard to say…but all of these things do affect how the area is perceived. I personally think it is important that the area look as well maintained and attractive as possible.

Moreover, I just don’t understand why this is being allowed to happen. The receiver has been paid $4.2MM according to Frances’ story. For this money his team should be pulling out the weeds.

Finally, more effort should be made to let people know what’s coming to the remaining empty spaces. While some do have colourful signage, many do not. In Ireland, where they have lots of empty storefronts, a company has created clever murals that give a visual illusion of what the empty space would look like if it was tenanted.

This would be appropriate for the Salt building which today is an empty box. I’m told something is coming, but it’s not apparent to a visitor…at least it wasn’t apparent to me when I was there last Tuesday.
So I apologize for the negative tone, but hope these comments will perhaps draw the attention of those in positions of influence. I and other real estate consultants and marketing consultants I know would be happy to walk through the project with the Receiver or City staff or the marketing team to point out the things we think should be addressed in order to accelerate the sales program.

I think it is important that the remaining units be sold in a timely fashion, because if they are not, I worry that the City many may be tempted be simply rent out more units, especially after the HST is withdrawn.
While this will have the affect of filling the project and allow planning for other phases to progress, it will also mean a much bigger financial hit. I understand the city has already taken the Receiver’s advice and rented out some of the condos…but this is a very expensive way to work out of the problem.

As a taxpayer, I would not like to see the city rent out any more units.

I hope this is helpful.