Real Estate: Developer Michael Geller says city should cut losses by discounting Olympic Village units

Real Estate: Developer Michael Geller says city should cut losses by discounting Olympic Village units

By SAM COOPER, The Province August 24, 2012
Developer, architect and former NPA candidate Michael Geller believes that if the city of Vancouver want to make the best of a bad deal from the Olympic Village units during a market downturn, those remaining unsold should be offered at a discount. Condo sales agent Bob Rennie disagrees.

Developer, architect and former NPA candidate Michael Geller believes that if the city of Vancouver want to make the best of a bad deal from the Olympic Village units during a market downturn, those remaining unsold should be offered at a discount. Condo sales agent Bob Rennie disagrees.

Photograph by: PNG , Jason Payne

As Vancouver’s real estate market cools, losses on the troubled Olympic Village development could soar above $225-million unless condo king Bob Rennie quickly drops prices on unsold units that have languished on the market for too long.

That’s the view of developer and architect Michael Geller, a former NPA council candidate, who suggests flawed pricing and weak marketing is turning the fiasco on False Creek from bad to worse.

In fall 2010 a receiver, Ernst & Young, was tasked by the city to regain as much as possible of $750 million owed to taxpayers on the development, after the city stepped in to save developer Millenium with an emergency loan in 2008.

The receiver’s latest report says condo sales have been better than expected, and efforts to shed the Village’s “ghost town” label have succeeded. Sales jumped after price reductions of about 30 per cent were offered last year on lower-priced units, and occupancy has been boosted to about 83 per cent with rentals of some unsold strata units.

There are currently about 200 remaining market units to be sold from 737 originally on offer, as the city tries to chip away at its outstanding loan, listed at $462-million in late 2011. The city has already written off about $50 million of the loan that will never be regained, and it will not receive payment of $175-million on its land sale to Millenium.

As of mid-June, the receiver has gained $165 million from condo sales and rental income. Only about $114 million of that was passed to the city, due to running expenses including repairs for Village building problems, $11 million in marketing and sales costs, and $4.2 million going to the receiver, among other one-time charges.

In interviews with The Province, Geller said he fears the city will be unable to sell many of the remaining condos at current prices, as Vancouver’s real estate market seems to have peaked “a year ago when there was a lot of fervour from Asian buyers.”

Geller says better to cut prices and stop losses as competing developments and resale units start to hit the market at prices below Village units, than continue to pay carrying costs for years in hopes of seeing a big real estate rebound.

The nightmare scenario Geller worries about — with the city throwing good money after bad by renting even more of the unsold units but actually piling on strata and tax costs instead of paying down its loan — would see Vancouver taxpayers burdened with losses well over $225-million.

“If there was more confidence in this project then maybe all the units would sell out at the current prices,” Geller said Friday, while walking through the village. “A lot of people in the real estate community are saying this project shouldn’t be taking years to sell out. Everybody knows the market has softened over the last year, and is going to continue to soften.”

Geller acknowledges there are positive developments in the Village, such as the bustling Terra Breads café and a well-attended bar. And sales of the most expensive Village condos have been good this year, he allows.

But pointing to garbage strewn in a Village park space, messy landscaping and weeds in the public square, Geller says that Rennie — the appointed marketer of the Village who is seen by many in Vancouver as a real estate genius of sorts — hasn’t been doing enough to justify his fees.

“There are things happening here that shouldn’t be happening if you are trying to show off the development in the best light,” Geller said, adding that he believes Rennie “gets very upset” whenever Geller offers comments about the Olympic Village. “I think Bob’s problem with me is that no one else is saying he’s not the condo king or even the condo prince.”

In an interview, Rennie blasted Geller, saying the former NPA candidate is politically motivated and his views are harmful to the city’s efforts to repay its loan. Rennie suggested Geller has “lost all credibility” and has no idea what he’s talking about.

“The problem with arm chair gossip that the Michael Gellers of the world have, is they don’t sit in the board room with the decision makers and the stake holders … and we have fine-tuned the pricing all the way through,” Rennie said. Rennie said various appraisers are involved in his team’s pricing decisions, units have continued to sell in August, and he is confident in his marketing strategy and pricing going forward. And while some economists and pundits are forecasting a significant correction or even crash in Vancouver real estate, Rennie disagrees.

“People come to town and say it is a bubble, but what do they know?” he said. “When you look at how conservative the banks are in Canada … banking has really restricted (housing) supply.”

scooper@theprovince.com

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COMMENT:
Good old – fashioned pissing match.
I’ve said this before…..that this Olympic Village was doomed for the start…given once any level of Gov’t gets involved.
That’s a given when Gov’t gets involved…to many masters to serve….and fingers in the pie etc..
” Autopsy ” ?  A DOG is a DOG….. is a DOG.
Quick Review : When the Olympics were awarded….. the City of Vancouver took its old city – owned industrial site on the South Side of False Creek and solicited bids for the site. The highest offer was from an outside group…which outbid local developers who knew the local market.
Rather than sell the land free and clear, and let the developers take all the risk, the City maintained ownership of the land, which made financing difficult ( aka what collateral was there ? ). The excuse was that they, the COV,  wanted to be assured the Olympic Village would be completed for the Olympics and this was their means to assure it.
Given most politicians have bought into the “Go Green” GAIA Cult, they made sure the Olympic Village had all the political fashion statements aka LEEDS certification…another scam. IMHO, these goofy beliefs invite Mother Nature INTO your home…when good home design keeps nature OUT of your home..its one or the other.
After the ( 3 ) week 2010 Olympic party…the units were then renovated for future sales ( aka what a waste that is right ? ) 
Pure and Simple it has been a disaster. The City made a bad call re:  its assessed risk….it gained nothing . Developer went broke, the City had to borrow funds and still stuck with a “DOG” with losses in the hundred of Millions.
Many of us who follow Real Estate do not think much of Mr. Rennie…the ” Condo King “.
If one follows his history typical rags -to -riches story with a twist…aka luck and timing is everything.
He foresaw that hi – density was the future before many others did, and he allied with  another party who had the same view. They formed a marketing group whereby they would have the exclusive listings for entire hi- density projects . 
Even better…given the offshore investment, with it came the pre – sale methodology, popular in Asia , which Rennie bought into  .  I have never agreed with this, because it is only a matter of time before a figurative mushroom cloud  results lingers overhead. People line -up and by something sight unseen because it hasn’t even been built yet…you get to see a floor plan with unit numbers and put a red “SOLD” on it.
Ultimately you are increasing “supply exponentially”  into the future with people who cannot afford it and/or speculators… aka people who really should not be purchasing Real Estate…history shows this always ends bad.
Mr Rennie is in a sense of denial, which is what happens to most “Kings” when all around their domain collapses. Never EVER buy into these types of Kings and there routines….the bigger they are the harder they fall .
I am not saying that if Rennie didn’t exist, someone else wouldn’t have filled the same void aka Condo pre Sale….but he has accepted the Crown. BTW he has a large marketing team with associates, implying he has develop a brand name…aka don’t expect him to be their at an open house. My understanding is that the COV has given him a $50,000 flat fee for sale of each Olympic Village Units.
Rennie seems to imply all is well, implying Geller is not in the know or in the loop…and that Rennie and his inner circle have everything under control….or under THEIR control. No, I would submit the ponzi scheme is over… the evidence is all around us…maybe Rennie should get out more. The Olympic Village is already     (3 ) years old.ie completion date was Fall 2009. It is like stale bread….mouldy cheese….no appeal or demand.    The issue seems to boil down to Rennies ego versus cut losses and get out.
I don’t think history will treat Mr Rennie and his ilk very kindly…the City has been hollowed out with new buildings that act more as tombstones….memorials to an economic war zone, a rape and pillage of the future.  In fact I predict he will leave Vancouver in the very near future.
It is my hope that sanity will return and prevail, that pre – sales will die off, if not outright banned. We need to start over with  a fresh approach.
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