Vancouver city staff seek new lenders for Olympic Village
By Catherine Rolfsen, Vancouver Sun
VANCOUVER - Vancouver city staff want to start planning on financing the Olympic Village project directly after current lender Fortress Investment Group cut off funding to the developer.
A report written by director of finance Kenneth Bayne, made public Tuesday and to be considered by city council Thursday, requests authority to start talking with potential lenders "to put in place a flexible, revolving bank facility with a term of up to four years."
Bayne compared such a bank facility to a line of credit. The city would also be able to explore issuing debentures.
His report recommends that, for the fifth time in a row, the city should fund monthly construction costs due in mid-February, as new financing may not be in place by then.
The report included new details about the financial predicament of the project.
It noted that Fortress has said it won't lend beyond its current $317-million commitment under the current terms, and that developer Millennium Development hasn't been able to find other financing on its own.
"The lender has indicated that going forward, their involvement will result in higher interest costs and/or in a smaller loan facility," the report says.
"As a result, the developer and/or the city will have to identify the balance of the project financing from alternative sources."
Bayne's report outlined the case for making the city a lender in addition to, or in place of, Fortress.
* The current interest rate on Fortress's loan is 9.5 per cent, but since rates have dropped significantly since that deal was negotiated, Bayne said the city could now get a rate of less than five per cent.
* Risks associated with borrowing from a U.S. lender would be eliminated by using a Canadian lender.
* The city could take a stronger role in the village project and reduce the risks associated with financing.
However, Bayne noted, there are also significant risks associated with the city becoming the lender.
The city's strong credit rating could suffer, he said, and a lower credit rating could result in higher interest costs on other city borrowing.
City manager Penny Ballem noted in the report that directly financing the project would represent "a fundamental change" in the city's role on the project, and would be a "highly unusual role" for the city.
"However," she went on, "the refusal of the current lender to provide funding to complete the project suggests that this may be the only way to ensure project completion to meet the guarantees given to Vanoc."
Coun. Geoff Meggs said Tuesday that negotiations were continuing with Fortress, but since the province has granted the city new borrowing powers, Vancouver's hand is stronger now.
"I think we have to see all the options, have them all on the table," Meggs said. "But up till now it's felt like we were taking dictation. I think now we'll be involved in more respectful negotiations."
Also Tuesday, Mayor Gregor Robertson announced the creation of an advisory group of developers to help oversee the village project.
The 10 volunteer members include Maureen Enser, executive director of the Urban Development Institute; David Podmore, president and CEO of Concert Properties Ltd.; and David Negrin, president of Aquilini Development.
crolfsen@vancouversun.com
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