Saturday, January 17, 2009

Olympic Village on Shaky Ground from the Start


It's now clear that no firm financing arrangements were in place. It wasn't until June 2007 that financing details emerged. City staff told council that Millennium was proposing to borrow the entire $750 million to finance construction. The only equity it had in the deal was the $29-million land deposit. This amounted to just three per cent of the nearly $1-billion total cost.

The problem with such a highly levered deal is that it leaves no room to breathe if there are cost overruns or the project gets hung up. Given that the city had given Vanoc an undertaking to complete the project on time, this was a risky deal not just for the developer, but also for the city.

So in June 2007, city staff went back to city council, explained the dilemma and told councillors that, given the time constraints, the only choice they had was to provide Fortress with the security it required: a $190-million guarantee (in lieu of security over the land) and a guarantee that the project would be completed (so Fortress would have salable collateral at the end of the day.).

... if Millennium and Fortress had insisted on these terms in April 2006, city staff and council would have shown them the door and turned to Concord Pacific or Wall Financial, which had offered less for the land, but had more experience with large projects and better capacity to finance the project.


Not only was the project mismanaged, but also apparently, misconceived from the beginning. Somebody really pulled the wool over VANOC's eyes.

It is a big mess that will take a miracle to clean up, and tax payers are the ones footing the bill.

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