Will the Vancouver Olympic Village be Finished in Time?
Less than a month after VANOC announced they may be scrapping the 2010 medal award ceremonies in Whistler as a cost cutting strategy, another financial situation has been brought into question. The companies that are building Vancouver's Olympic Village are requesting a $750 million loan from Wall Street to ensure that the project will be finished by this time next year. Although these types of loans are common in the building of Olympic infrastructure, the current state of the economy has made these requests more difficult for the borrower. Vancouver may have to put up $500 million as a security deposit on the loan on top of the already outstanding $100 million they put up to keep construction going.
As real estate prices drop Fortress Investment Group wants a guarantee from the City of Vancouver that the loan will be re-payed. After the games the Olympic Village will be sold off as condominiums, in turn creating enough money to pay off the loan. With the values of these condos plummeting the profitability expectations of the plan seem outdated.
Fortress is currently under contract with VANOC and is responsible for funding the infrastructure, in full, until 2010 so there is no doubt that it will be finished, but here is the catch. The agreement made earlier came with a higher than normal interest rate, around 8% per annum or $50 million a year for tax payers in Vancouver. This interest rate ( which is double what it would be today if re-negotiated) coupled with falling real estate prices create a situation where prior profitability expectations are impossible.
Mayor of Vancouver, Gregory Robinson is facing some important decisions in weeks to come in order to resolve this financial predicament. Since the condos are not selling as quickly as hoped ( 250 out of 750) and for less than expected a new plan has been suggested that will delay the sales until the market corrects itself. That time won't come soon enough though as tax payers will be paying more to cover the interest on the outstanding balance long after the 2010 Games.
Mayor Robinson is currently looking for other sources for funding the Olympic Village in hopes that a better deal may be put on the table. He plans to use the good provincial credit rating as a selling point for a new lender which has sparked responses from non-Vancouver residents who feel this is the cities problem not British Columbia's.
As the Olympic clock ticks down to the Opening Ceremonies which will be held just over a year from now, the feelings that encompassed the monument have changed. They have been shadowed by a financial crisis that has affected all aspects of the games from Award Ceremonies to infrastructure that is needed to support the games. Was agreeing to host the Olympics a poor decision that may be more trouble than it is worth or is it external circumstances that are out of our control that are responsible for such a struggled run for the finish line?