I apologize conflating Fortress Investment Group with Lehman Brothers. Two things happened.
Lehman Brothers, Fortress' primary lender, went into bankruptcy and could no longer advance funds to it.
They lost further liquidity when a ponzi scheme they were invested in unravelled, and are still out $125 million from that.
They were left with no way to raise money, and if not bailed out in full plus the 11% interest then they would have folded. Subsequently FIG's creditors/investors would have taken losses, with the bulk owing to Lehman Brothers. FIG's investments in the Olympic Village and Intrawest were on their own balance sheet and not in a separate fund, or a SPV like Lehman's loans to it were obfuscated with.
In that way my comments were accurate; Fortress' losses were Lehman's losses. Properly referring to Fortress does allow for increased nuances, especially when discussing the personal relationships. It's impossible to discuss the Olympic Village financing by just discussing Fortress without Lehman, but it is possible to discuss the financing by just referring to Lehman. For a brief overview of just Fortress and its founders, see
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7rJVe6G62rA
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No, it forced Millennium to get their construction loan from Fortress, a PE firm, not a traditional construction loan from a bank.
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Absolutely true, and absolutely no problem. The City of Vancouver wasn't on the hook. At worst it could step in with its own financing, complete the project and have whatever was spent on its development so far by Millennium and Fortress as a buffer. If the project never covered its costs, they would be the ones to lose.
Who says the City of Vancouver shouldn't take a good deal while it's on offer?
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Fine perhaps, not ideal. The city wanted to showcase the village but to build social housing to those high specs was stupid.
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That's a business decision, and Millennium accepted it. This is the same argument as the last one. The City of Vancouver gets a showcase development, top dollar for the land, and could guarantee completion without risk of a loss by retaining land title. The City of Vancouver isn't obligated to counsel Fortress against an 11% interest rate that is too good to be true.
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Absorption of built product is much different that presale product. Obviously if they slice their prices they will sell more quickly, but they would never sell like WCFC because it's a different type of product.
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It's easier to come up with a deposit than a full mortgage, but to call them different is to presume there is an appreciation sufficient that allows anyone who can afford a pre-sale to obtain a mortgage. If the unit cannot finance and pay for itself, then such a pre-sale is equivalent to a unit that doesn't sell. If we're not relying on appreciation to finance the unit, then a pre-sale today is as good the sale of a completed unit tomorrow. This is musical chairs.
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Non-market housing is a problem. People paying close to $1000/psf for condos don't want to live next to people in subsidized housing, whether they are single moms or crackheads. Who do you think it's subsidized by? The rest of the market owners in the development. If they removed the social housing component completely they could afford to lower prices without losing money.
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Could you identify some sites around Vancouver outside the DTES that have depressed valuations based on proximity to non-market housing? Do neighbours of people living with super cheap rents thanks to rent control move away? There are halfway houses in Kits, Kerrisdale, and hospices in Shaughnessy. There are people all over that have had help from the parents to buy a home. I don't see this aversion in practice.
You go on to argue about subsidies for the housing, which is not something I brought up, but I will correct you in that the ones paying it are the taxpayers/residents mostly of Vancouver but extending outward to include British Columbia and even Canada to a lesser extent. Either through higher taxes, or more expensive housing.
I haven't run the numbers in a while but I completely doubt the City of Vancouver could escape a loss even if it sold all the social housing units at market price. The difference from non-market to market does what, allow a 10% discount across the board?
If I was a buyer/owner in one of the neighbouring developments:
- the social housing in the building across the street didn't scare me off from buying
- 10% off is probably not enough to make me switch
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This is quite obvious. I don't see how this applies here though, it is, and was designed to be to, a totally different type of product.
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The City of Vancouver was never forced into a position of taking a loss, and with the options it had the city could have completed the project to fancy specifications while exiting free of loss by selling at such lower rates.
The City retained ownership of the land. It came in as a cash investor last. It brought money when no one else could. You assume that everyone involved were equals and that the City of Vancouver was obligated to fulfill a concept of fairness the other partners in the deal never would have reciprocated.
~$350 million was sunk into the project when the city stepped in. It would only have needed ~$500 million in sales to escape any loss. Now we're talking 30-40% discounts across the board.
(was it an $850 million project including cost of land? or was that just remediation + construction)
The Maleks and Millennium would have been fine, or at least no worse off. Either their assets were bankruptcy remote, or any collateral they pledged to the City of Vancouver was already pledged to Fortress and a writeoff with a slim chance of recovery.
Do you understand now?
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