Vancouver cuts interest costs by paying off loan with line of credit
Christina Montgomery
Province
Vancouver is now the sole financier of the Olympic Village. Photograph by: Gerry Kahrmann, The Province
The City of Vancouver has bought out Fortress Investment Group and taken over financing of the $1-billion Olympic Village.
City manager Penny Ballem said yesterday that it cost the city about $319 million to buy out Fortress, the New York-based lender for the False Creek condo project that will house athletes during the 2010 Games and then be sold off.
Fortress had agree to finance up to $750 million in loans on the project — a total the city has now agreed to lend project developer Millennium Developments.
As part of the new financing deal, the city has arranged a $400-million line of credit with the Bank of Montreal at 3.25 per cent interest.
In using that money to pay off Fortress’s 11-per-cent loan, the city is saving $90 million in interest costs, Ballem said.
The city was also able to negotiate a $4-million buy-out fee with Fortress, down from the $56-million the lender had initially demanded.
The city is legally required to hand Olympic organizers a complete Village in November for their use until the Games end.
The city will eventually find other money to finance the rest of the project using a combination of funds from its capital account and loans to be tendered shortly at what are likely to be competitive rates.
In October, after delays in the project and a collapse in international financing, Fortress stopped advancing its periodic loan installments to Millennium.
Because tight Olympic deadlines meant construction must continue, the city began advancing Millennium money itself — about $133 million to date.
Millennium now owes the city about $633 million, according to city business manager Ken Bayne.
The city retains ownership of the land during construction and would own the land and buildings if Millennium fails to finish.
The city hopes the units can be rented or sold to recoup the loan.
Work on the multi-parcel project is largely on schedule, Ballem told council.
The deadline is “tight” on parts of the project and extra workers have been hired and “trade acceleration” bonuses — all paid by the developer — have been instituted. The new community centre on site will open on time.
Mayor Gregor Robertson said he was pleased to have good news on the Village “for the first time since taking office 10 weeks ago.”
But several councillors focused on how the loan had been handled. Vision Coun. Geoff Meggs said the public should have been told in 2007 that the completion guarantee left the city on the hook for Fortress loan.
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