Developers are the Olympic Games’ real winners
A former developer himself, Premier Gordon Campbell holds the purse strings to an Olympic-size sweepstakes payout.
The 2010 Olympics were still a gleam in Jack Poole's eye when he addressed a roomful of real-estate developers in the spring of 2002. Vancouver had been shortlisted for the Games, but it would be more than a year until the winning city was chosen.
The outcome of the race to win the Games didn't seem to matter to Poole, who headed the 2010 Vancouver Bid Corporation. Western Investor editor Frank O'Brien sat in on the talk and later editorialized that, according to Poole, "the real purpose of the 2010 Olympic bid is to seduce the provincial and federal governments and long-suffering taxpayers into footing a billion-dollar bill to pave the path for future real estate sales."
Indeed this was Poole's opinion. "If the Olympic bid wasn't happening," he told the developers, "we would have to invent something." Long-time developer Poole had it right. The Olympics are about real estate.
To make his case, Poole could point to the 2002 Winter Olympics in Salt Lake City, Utah. A Sports Illustrated exposé of these Games described how a blizzard of federal money–$1.5 billion–enriched already wealthy developers and ski-resort owners.
B.C. premier Gordon Campbell knows well how taxpayers subsidize developers. As executive assistant to Vancouver mayor Art Phillips in the 1970s, he was involved in the lengthy negotiations between the city and real-estate giant Marathon Realty regarding the fate of the company's massive land holdings on the north side of False Creek.
The Phillips-led council rezoned the land from industrial to comprehensive development, boosting its value enormously.
Campbell left City Hall to become a development officer for Marathon Realty. Campbell and Marathon decided not to proceed with the development because the economy was tanking. The Bill Bennett government conveniently came forward with plans for a stadium. Campbell was all smiles when he announced that Marathon would be glad to sell the land to the province at a good price. It was still worth three times as much as its value before the city rezoning.
Campbell moved on once again. This time he started his own development company and bought several properties across the street from the stadium location. He boasted that he got the property at a rock-bottom price before others became aware of what the stadium would do to land values. He built a hotel that was completed at about the same time as the stadium.
Twenty years later, Campbell holds the Olympic purse strings, and as Poole pointed out, it's payday for developers.
Some developers benefited handsomely from taxpayer investment in the $2-billion Canada Line and the $800-million Vancouver Convention and Exhibition Centre expansion. But the main vehicle for creating developer wealth is the $2-billion (including future debt-servicing costs) investment for traffic improvements between Vancouver and Whistler. True, some of this money would be spent on the Sea-to-Sky Highway even if there were no Olympics. But this work was fast-tracked, meaning that projects in other B.C. regions were shelved.
In urban land economics, they say that the purpose of transportation is to connect land uses and make them more accessible and valuable. Think of the boom in real-estate values in Vancouver's Main-Cambie corridor after the taxpayer-financed Cambie Street Bridge went in.
During 2002, as Poole and the bid corporation prepared their final proposal, the provincial government was studying various options for improving the link between Vancouver and Squamish. As well as looking at major upgrades to the existing highway, the provincial Ministry of Transportation and Highways reviewed possible routes through the Capilano, Seymour, and Indian river valleys. These alternatives would cost more–from 50 percent to 100 percent more–but the result would be a safer, faster ride.
But these alternative routes went largely over Crown land. How could they help future real-estate sales?
The ministry evaluated all aspects of the routes. One factor leapt off the page: "developable land accessed". Upgrading 99 North was ranked five out of five for this factor, with five being the best, or the most. The other options received a score of one out of five.
One area with great "developable land" potential was Britannia Beach, but its ownership was in limbo. West Vancouver investors purchased the Britannia Mine site and 4,000 surrounding hectares in 1989. They struggled from one failed attempt to another to find a way to clean up the site and turn a profit.
Then along came the Olympics, and Britannia Beach's fortunes changed overnight. Vancouver developer Rob Macdonald came out the big winner. He's a strong Gordon Campbell supporter, having donated nearly $100,000 to the Liberals since they won the 2001 election. Macdonald purchased the offshore company that held a mortgage on the property and pushed for a speedy resolution of the ownership situation. A month after Vancouver was awarded the Games and the Campbell government chose the Sea-to-Sky Highway route, the B.C. Supreme Court turned the property over to Macdonald for an undisclosed amount.
If the Vancouver-Squamish connection had gone inland, Macdonald's newly acquired property would be worthless. Instead, the highway would go right by his front door.
Macdonald donated more than 90 percent of the land to the province. This was steep slopes that were useless for development and contained "some of the most contaminated land in North America", according to then–Sierra Legal Defence researcher Mitch Anderson. Let the taxpayers assume responsibility for the cleanup. Macdonald also agreed to contribute a levy of $1.75 million toward remedial work.
Macdonald kept 202 hectares of high-value land for residential and commercial development. He would get further assistance from taxpayers in the form of $27 million for a plant to treat polluted water from the mine, another $99 million for the province to clean up contamination of the lands it got from Macdonald, and millions more from Natural Resources Canada for a visitor centre and mining museum, boosting the value of Macdonald's commercial property.
The Squamish First Nation was another big winner in the Jack Poole sweepstakes. In a complicated land swap in 2000, the First Nation ended up with an option to buy land from BC Rail at Porteau Cove in order to create a new reserve and build houses for band members. This had nothing to do with Olympics or highway improvements.
Porteau Cove is one of the very few developable sites between Vancouver and Squamish, a 500-hectare strip on the shores of Howe Sound running south from Porteau Cove Provincial Park to Deek's Creek.
Developers eyed this land for decades, but it was owned by BC Rail and not for sale. Then along came the Olympics with their highway upgrade, and the land skyrocketed in value. It was now too valuable for band housing. In 2004, the band exercised its option to purchase the land for a reported $12 million. It then signed a deal with Concord Pacific Developments to develop 1,400 homes. Interestingly, two former chairs of Concord Pacific were among the developers on the board of the 2010 bid corporation, along with Poole.
The lots are marketed as being just 25 minutes from downtown Vancouver via the new Sea-to-Sky Highway. If the venture earns just $50,000 for each lot, after putting in roads, sewers, water lines, and public amenities, that's still a profit of about $58 million to be split between the band and the developer. For its part, the band says it plans to invest the profits in housing and job creation for band members–elsewhere, of course. In Concord Pacific's case, some of the profits will likely flow back to its Hong Kong owners.
Meanwhile, up in Squamish, former UBC president David Strangway's dream for Canada's first privately owned secular university would likely still be languishing on the drawing board without the Olympics and the Sea-to-Sky Highway improvements.
When the decision to award the Games to Vancouver was announced, university project leader Peter Ufford said it "will help us in marketing the location of the university", adding that "it will help us with our real-estate sales." Because the university's business plan depends on selling 960 units of market housing, this was good news indeed. To some extent, Ufford could thank his own efforts. He was yet one more marketer on the board of the 2010 bid corporation. He was also a governor of the Canadian Olympic Committee.
In less than a year, Ufford sold the first 19-hectare parcel to a local developer to build and sell 200 housing units. With building lots listing for $290,000 and houses ranging in price from $430,000 to $1.2 million in the immediate vicinity, that's a big boost to the university's fortunes.
Strangway says the university is being built without public money. If he means no public money has been invested directly in the construction of the university, he's probably right. But, like that of Macdonald at Britannia Beach and the Squamish First Nation and Concord Pacific at Porteau Cove, his land would be worth a lot less without the support of B.C.'s long-suffering taxpayers.