Overview | As controversy continued to swirl around the 2016 Rio Summer Olympic Games in the leadup to the event’s August 5 opening ceremonies, a divisive legacy of the 2010 Winter Olympics remains six years after athletes departed Vancouver’s billion-dollar Olympic Village: a residential and retail complex forced into receivership that was later sold by the City of Vancouver. In 2014, Business in Vancouver mapped out an anatomy of the deal to unload the village and its debt to local developers (“It takes a village to raise a controversy" – Business in Vancouver issue 1300; September 30–October 6 ). But freedom of information requests to determine the winners and losers in the deal had, until now, been mired in bureaucratic machinery. In this exclusive report, BIV outlines the millions of dollars spent – and the egos salvaged – in the selling of Vancouver’s Olympic Village.
In November 2010 the City of Vancouver, as the developer, petitioned the $1.1 billion, 1,108-condo Olympic Village complex into receivership after post-Games sales fell flat and previous buyers complained of shoddy workmanship.
Ernst and Young took over what was Millennium Water from Millennium Southeast False Creek Properties Ltd. and rebranded it the Village on False Creek.
City hall announced a deal on April 28, 2014, to sell the village’s 67 unsold condominium units to Aquilini Group companies for $91 million. But the city also agreed to make amends with the brothers who had started what had become the 2010 Winter Olympics’ most controversial venue. Mayor Gregor Robertson claimed the Aquilini sale retired the development’s $630 million debt and left the city $70 million ahead.
But newly released documents show it wasn’t that simple.
One of the sale’s documents, released to BIV after a two-year freedom of information legal battle dated April 4, 2014, and headlined “Acknowledgement” named Millennium Development principals and brothers Shahram Malekyazdi and Shahrokh Peter Malek and six of their named or numbered companies.
City council had chosen the Malek bid to develop the village site in April 2006 chiefly on its $200 million offer to buy the underlying land. (A 2009 KPMG report for the City of Vancouver said Millennium scored the lowest of the three developers shortlisted, but offered the most for the underlying land. In reality, however, Millennium never paid the city for the 17 acres.)
Amid cost overruns, Millennium’s lender, Wall Street hedge fund subsidiary Fortress Credit Corp., cut off funding in September 2008, and the city took over as guarantor.
When Robertson and his Vision Vancouver party came to power in that fall’s civic election, the mayor admitted that taxpayers were “on the hook” for the $1 billion project. The provincial government amended the Vancouver Charter in early 2009 to allow the city to borrow without the electorate’s consent. A Toronto Dominion-led consortium kept the money flowing, and the athletes’ village was delivered on schedule for the Games.
The April 4, 2014, contract said the city required the co-operation of Millennium to close the Aquilini sale. That included releasing Millennium from various contracts, including the restructuring agreement, loan agreement and ground lease. It also contained a three-part section that was not released to the public when the Aquilini transaction was announced.
In it, city hall agreed to acknowledge Millennium’s contribution to the Olympic Village’s design, development and construction; erect a plaque in a public area on site, approved by the city and Millennium, “acknowledging the design and development team including Peter and Shahram Malek and the Millennium Group of Companies”; and “change its website that deals with the Olympic Village in the opening paragraph.” The reworded website now reads: “The Olympic Village, developed by the Millennium Development Group, is one of the greenest communities in the world, making Vancouver a leader in sustainable development.”
The deal goes down
In an April 1, 2014, letter from
Roberto Aquilini and Aquilini Group CFO Renzo Barazzuol to Ernst and Young three days before the Millennium acknowledgement, Aquilini agreed to the loan and sale agreement closing 22 days later via Aquilini Village Holdings Ltd. (AVH) and 0995299 B.C. Ltd. (as trustee of the Aquilini Village Trust) as buyers and Aquilini Development L.P. (the covenantor).
Documents describe AVH as the “senior construction debt buyer” and the numbered company as the “subordinated construction debt buyer.”
Six new sold units, totalling $5.8 million as of April 22, 2014, were deducted from the senior construction debt price of $98.4 million.
There was also $1.2 million in payments to be made to the Maleks and Millennium companies, meaning the net senior construction debt purchase price was just over $91 million.
Another document lists each of the unsold units involved in the deal, totalling $92.5 million. Almost half of them were in the landmark waterside Canada House, where the Canadian Olympic team lived during the 2010 Games. The most expensive unit was listed at close to $5.8 million.
William McCarthy is a Burnaby developer who has watched the Olympic Village saga closely for years and written a research paper, The Failed Experiment of Vancouver’s 2010 Olympic Village, on the controversy. After reviewing the documents, he concurs with the BIV analysis from the newspaper’s September 2014 feature that the transaction was structured as a tax loss for the buyer: $20 million of the $91 million sale was used to buy $400 million of tax losses, which left only $71 million applied to the 67 condos. (The tax losses would be available to the Aquilini Group to offset future business income.)
Robertson’s 2014 announcement did not count the value of the land, which Millennium never paid for but had anticipated buying for $170 million.
McCarthy said the tax loss claim means taxpayers were left holding the bag for the project.
Aquilini Development and Construction Inc. president David Negrin declined to comment for this story.
The Rio de Janeiro 2016 Olympics boasts a $1.5 billion village in the city’s Barra district. Its 31 buildings accommodate 18,000 athletes, coaches and staff and are scheduled to be sold after the Games.