|
Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"
|
| View previous topic :: View next topic |
| Author |
Message |
mises
Joined: 05 Nov 2007
Location: retired
|
 Posted: Fri Jan 09, 2009 8:00 am Post subject: Van Olympics already an economic disaster |
 |
|
Which shouldn't surprise anyone who follows the economics of the Olympics. Unless you have a strong non-economic motive (as did China) the Olympics are everywhere and always (less the LA games, as little new infrastructure had to be built) a total economic disaster. What is "neat" about the Van games is that they were an important part of the housing bubble:
http://www.nationalpost.com/story.html?id=1159246
| Quote: |
Taxpayers beware of millions more in Olympic Athletes' Village loans
The City of Vancouver has authorized lending up to $100-million to rescue the financially troubled Olympic athletes village project, where construction activity continued Thursday.
The news from Vancouver's Olympic Village is becoming dire. And next Thursday is the day this billion-dollar financial minefield could blow up for the world to see.
That's when the companies that are building Vancouver's billion-dollar Olympic Village hope to access more of a $750-million construction loan from Wall Street, to keep constructing the crown jewel of Canada's 2010 Winter Olympics.
But suddenly, there's a problem in getting that money. The city might have to offer as much as half a billion dollars in loan guarantees as security, significantly more than the $100 million it has already put up to keep the Olympic Village construction going.
The project's main, U.S. financier, Wall Street's formidable Fortress Investment Group, has toughened conditions for accessing its loan. Fortress is asking the City of Vancouver to guarantee most of the $750-million loan it has offered to build the $1.2-billion Olympic Village.
That borrowed money is the primary source of funds for the work crews and developers, working on an increasingly tight - and tenuous - schedule to get the Olympic Athletes' Village built by this October.
But with its own share price in a slump, the global banking crisis still unwinding and a falling real estate market in Vancouver, Fortress essentially wants a guarantee from the City of Vancouver and its taxpayers that it will be paid. It wants the city to make good on the project's loan and interest costs if the Olympic Village fails as a real estate venture.
In short, the profitability of the Olympic Village, whose condos were supposed to be sold to the public at great profit after being used by Olympic athletes, is no longer viewed as such a sure thing. In fact, those close to the deal - now watching condo prices drop dramatically - wonder if the deal will ever make a profit.
So here's what Vancouver Mayor Gregor Robertson is facing. You'll be hearing it in the next few days, when he makes it public:
The Wall Street financial firm is saying it will continue to lend the money to build the Olympic Village - on the condition Vancouverites absorb most of the future risk. The money will be loaned until 2010, as promised, under contract, if the city guarantees repayment of the loans to Fortress.
Here's the financial - and political - challenge to Mayor Robertson, and why he's got to find another way to get the village built.
First, the rates of Fortress' loans, negotiated long before he took office, are high by today's standards: about eight per cent (or more) per annum, roughly $50 million a year or more for the project, according those I spoke to close to the deal. That is eroding the project's profitability. It's also about double the rates that might be negotiated if a similar loan were renegotiated today, with the city's backing and solid credit rating.
Secondly, it no longer seems the Olympic Village condos can be quickly sold off by 2010, as was expected. That was what made this deal work.
The local real estate market has slowed dramatically. Only 250 of the 750 Olympic Village condos have been sold. The new plan - a prudent one - is to delay the sale of the others until the market rebounds and avoid fire-sale prices at taxpayers' expense.
But that prudence comes at a cost, too. It means loan financing costs won't end on the Olympic Village by 2010. Instead, they could drag on for years, until all the units are sold.
That means the loans to carry the project will need to be extended, perhaps for years. That will entails tens of millions of dollars in added carrying costs a year, too.
But the Olympic Village's red ink might deepen even further. There is no guarantee - if the real estate market sags longer than expected - that the Olympic condos will ever be sold at prices high enough to recoup the original investment and carrying costs.
So what's the focus of the Gregor Robertson administration these days? It's the only one left: Refinance, as soon as possible.
Mayor Robertson and his advisers hope to find alternative sources of financing for the Olympic Village project, to reduce loan costs for the city and the developers building the project. That might enable them to renegotiate the Fortress loan, using the leverage of the Triple A ratings of the provincial and federal governments.
So far, those governments aren't saying much. The province, in fact, continues to say this is the city's problem, not theirs. But that's a mistake. This is the moment when the West Coast's biggest city needs the help of the bigger boys at the negotiating table. The city's past administrations messed up badly.
Vancouver Sunbertson and his advisers hope to find alternative sources of financing for the Olympic Village project, to reduce loan costs for the city and the developers building the project. That might enable them to renegotiate the Fortress loan, using the leverage of the Triple A ratings of the provincial and federal governments.
So far, those governments aren't saying much. The province, in fact, continues to say this is the city's problem, not theirs. But that's a mistake. This is the moment when the West Coast's biggest city needs the help of the bigger boys at the negotiating table. The city's past administrations messed up badly.
|
The Olympics both fueled and depended upon the disgusting Van housing bubble:
http://condohype.wordpress.com/2009/01/09/be-afraid-be-very-afraid/
| Quote: |
We�re about a week away from finding out how bad things are with the Olympic Village. The Vancouver Sun is reporting the City of Vancouver is on the verge of a major announcement on the state of the development. According to the Sun, the financier of the Millennium Water condo project is looking for as much as $500-million in loan guarantees:
...
The situation is a total mess, even if we have yet to learn all the details. What we know is troubling enough: taxpayers are locked in a deal based on real estate speculation. The viability of the Olympic Village depends on market demand for luxury condos. If the market fails, the debt falls to the public.
In this scenario, the city would take ownership of the condos to sell, almost certainly at a serious loss. If that pill�s too hard to swallow, the city could choose to speculate on a market bounce. The price tag on the interest payments of waiting it out? A world-class $1-million a week.
Bob Rennie once said you don�t have to buy to be a speculator. He was right. |
|
|
| Back to top |
|
 |
On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
|
| Posted: Fri Jan 09, 2009 9:50 am Post subject: |
|
|
| It's truly beyond my comprehension why any city would want to host the Olympics. I can think of few greater intrusions into a peaceful quality-of-life. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Fri Jan 09, 2009 9:56 am Post subject: |
|
|
| On the other hand wrote: |
| It's truly beyond my comprehension why any city would want to host the Olympics. I can think of few greater intrusions into a peaceful quality-of-life. |
I entirely agree. But this is how politicians think.. They want a legacy project. And the Olympics are an easy way to get the public to go along with useless capital spending projects.
When the Montreal games were proposed the mayor said "the Olympics can not lose money any more than a male can birth a baby" (or similar). The games lost money hand over fist. Finally paid off in '99, long after the Mayor was dead. However, this was about the last large development that Montreal saw... |
|
| Back to top |
|
|
Kuros
Joined: 27 Apr 2004
|
| Posted: Fri Jan 09, 2009 10:01 am Post subject: |
|
|
Oh, a bunch of Olympics scrooges.
I don't think its irrational for a city to wish to host the Olympics; its only irrational to believe it will be a net profit.
For what its worth, a lot of Beijingren I met were also anti-Olympics. Lawyers and economists the lot of them. |
|
| Back to top |
|
|
On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
|
| Posted: Fri Jan 09, 2009 10:06 am Post subject: |
|
|
| Quote: |
| Finally paid off in '99, long after the Mayor was dead. |
Actually, Jean Drapeau died in 1999. But yeah, he hadn't been mayor since '86.
And of course, there was the famous Aislin cartoon of Drapeau on the telephone: "'allo, Morgentaler?" (That being the name of a doctor in Canada famous for providing abortions.) Incredibly enough, that cartoon does not seem to be housed anywhere on-line.
Last edited by On the other hand on Fri Jan 09, 2009 10:18 am; edited 1 time in total |
|
| Back to top |
|
|
On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
|
| Posted: Fri Jan 09, 2009 10:08 am Post subject: |
|
|
| Quote: |
I don't think its irrational for a city to wish to host the Olympics; its only irrational to believe it will be a net profit.
|
All I'm saying is that I, personally, would hate to live in a city that was hosting the Olympics. If other people think it's a great idea, so be it. That wouldn't change my vote in a referendum, though. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Fri Jan 09, 2009 10:09 am Post subject: |
|
|
| Kuros wrote: |
Oh, a bunch of Olympics scrooges.
|
I do understand why some people (and many corporations) like the Olympics as they are. But it is entirely immoral and unreasonable to bill a already stressed taxpayer for the construction of infrastructure that will only be used for a month, and then sit largely empty and/or underutilized until it is brought down.
Should the Olympics want to be "sustainable" (I hate that word) the games need to be dramatically downsized. Many cities could host a smaller Olympics without building useless new bobsled tracks or curling rinks or etc etc. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Fri Jan 09, 2009 10:13 am Post subject: |
|
|
| On the other hand wrote: |
| Quote: |
| Finally paid off in '99, long after the Mayor was dead. |
Actually, Jean Drapeau died in 1999. But yeah, he hadn't been mayor since '86.
|
Ah yes. He died in 99 and the games were paid off in 2006.
Last edited by mises on Fri Jan 09, 2009 10:16 am; edited 2 times in total |
|
| Back to top |
|
|
khyber
Joined: 16 Jan 2003
Location: Compunction Junction
|
| Posted: Fri Jan 09, 2009 10:14 am Post subject: |
|
|
I feel no pity citizens shocked by this. I can't think of any Olympics that have had a long lasting benefit to the organizing city.
I learned of the existence of Lillehammer. That's it. |
|
| Back to top |
|
|
VanIslander
Joined: 18 Aug 2003
Location: Geoje, Hadong, Tongyeong,... now in a small coastal island town outside Gyeongsangnamdo!
|
| Posted: Fri Jan 09, 2009 10:57 am Post subject: |
|
|
100 mill is peanuts
tourism is a billion+ dollars per year industry in B.C. (it and logging are the lifeblood of the provincial economy, oh, plus bc bud, but that's the underground economy and another story) and the Olympics will help boost/preserve that |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Fri Jan 09, 2009 11:03 am Post subject: |
|
|
| Quote: |
| 100 mill is peanuts |
While the above is a borderline retarded statement, the 100 million is also just the tip of the iceberg. Every single aspect of the Olympics is over budget. The original estimate was 1.6billion for the whole thing, and 3billion all in is the most likely figure now.
| Quote: |
| tourism is a billion+ dollars per year industry in B.C. (it and logging are the lifeblood of the provincial economy, oh, plus bc bud, but that's the underground economy and another story) and the Olympics will help boost/preserve that |
Tourism and forestry are entirely unrelated to this topic (less tourism for the actual time of the games). But I'm curious, how do you see the Olympics "boot/preserve"ing the "bud", tourism and forestry industries? |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
|
| Back to top |
|
|
On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
|
| Posted: Fri Jan 09, 2009 11:12 am Post subject: |
|
|
| Quote: |
| But I'm curious, how do you see the Olympics "boot/preserve"ing the "bud", tourism and forestry industries? |
I thought that Islander was just mentioning weed and forestry in passing as other important aspects of the BC economy, not as things that will benefit from the Olympics. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Fri Jan 09, 2009 11:18 am Post subject: |
|
|
| On the other hand wrote: |
| Quote: |
| But I'm curious, how do you see the Olympics "boot/preserve"ing the "bud", tourism and forestry industries? |
I thought that Islander was just mentioning weed and forestry in passing as other important aspects of the BC economy, not as things that will benefit from the Olympics. |
I dunno..
| Quote: |
| tourism is a billion+ dollars per year industry in B.C. (it and logging are the lifeblood of the provincial economy, oh, plus bc bud, but that's the underground economy and another story) and the Olympics will help boost/preserve that |
Perhaps the brackets threw me off a tad. Ok, assume I'm wrong. How will the Olympics boost tourism to Vancouver after the Olympics are over? Did this happen in Salt Lake? Seoul? Anyways, I know that the boost to tourism is little to none following the Olympics. |
|
| Back to top |
|
|
On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
|
| Posted: Fri Jan 09, 2009 11:45 am Post subject: |
|
|
| Quote: |
| How will the Olympics boost tourism to Vancouver after the Olympics are over? |
Yeah, I'm skeptical of that part, too. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
