Developer struggles to get construction financing for Little Mountain project

Developer struggling to seek construction financing for Little Mountain housing project in Vancouver

2016 rezoning concept rendering of the Little Mountain redevelopment in Vancouver. (Holborn Group)

In order to achieve progress on the Little Mountain residential development, local developer Holborn Properties is requesting the City of Vancouver to remove occupancy permit holds on the lots of the first and second phases of the market condominium housing component, based on the progress of completing more of the social housing units.

According to a new City staff report, the developer is currently unable to borrow the money it needs to cover the construction costs for further phases of both the social housing and market condominiums.

This request will not impact the various holds over the lots of the third and fourth phases of market condominium buildings.

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City staff are recommending to City Council that Holborn’s request be approved, which is based on BC Housing’s stated support for such a move. Furthermore, BC Housing has confirmed that the developer is facing challenges with obtaining the construction financing it needs.

“We confirm support for Holborn’s request for the City to remove all permit holds on the Little Mountain Project to allow Holborn to obtain and access financing from Holborn’s market lenders for site servicing, City’s letter of credit as well as other items to allow the Little Mountain project to proceed,” stated BC Housing in an October 17 letter to the City manager.

“We are confident that with the existing legal and registered charges on title by Provincial Rental Housing Corporation and BC Housing that there is adequate and sufficient security and legal agreements in place to ensure that Holborn delivers on the Non-Market Housing obligations for the Little Mountain Project site.”

City staff suggest there are potential risks in releasing the occupancy permit holds, as it reduces the municipal government’s ability to ensure the social housing units are achieved ahead of the condominiums.

However, in the letter, BC Housing states that “should Holborn default on their obligations to deliver on the remaining social housing units or any other obligations of Holborn under the Purchase and Sale Agreement [of the Little Mountain site],” the provincial government can use legal and title changes to “foreclose and/or take over the site and lands” or require another entity to take over the site to complete the remaining social housing obligations.

Aerial view of the Little Mountain site in Vancouver. (Holborn Group)

5119 Main Street 196 East 35th Avenue Vancouver

Location of 5119 Main Street and 196 East 35th Avenue in Vancouver, adjacent to the Little Mountain redevelopment. (Integra Architecture/Bogner Development Group)

Land use depictions from the 2016 rezoning for the Little Mountain redevelopment in Vancouver. (Holborn Group)

With all that said, the City and BC Housing have indicated that the developer has made progress in advancing the long-delayed social housing units.

As a condition of its purchase of the 15-acre property in 2008, the developer is required to replace the previous 224 social housing units on the site with 282 new social housing units, which enables the construction of about 1,300 condominiums on the site.

Upon completion, BC Housing will own 234 social housing units, and the City of Vancouver will own the remaining 48 units.

Based on the approved master plan and site-wide rezoning, upon complete buildout, there will be over a dozen buildings up to 12 storeys, with a combined total floor area of about 1.7 million sq ft, containing 1.32 million sq ft of condominiums, 330,000 sq ft of social housing, and 33,000 sq ft of local-serving retail and restaurant space. A childcare facility, neighbourhood house amenity, public plaza, and public park are also part of the redevelopment.

In terms of the progress of achieving further social housing buildings, one building is currently under construction, two buildings will begin construction before the end of 2023, and a fourth building will begin construction by Spring 2024. In 2015, the first 53 replacement social housing units reached completion.

For condominium progress, one building is targeted to begin construction by the middle of 2024, and three buildings are currently in the pre-application process.

137 East 37th Avenue Vancouver Little Mountain social housing

Artistic rendering of the social housing project at 137 East 37th Avenue within the Little Mountain in Vancouver. (Stantec Architecture/Holborn Properties)

4902 James Street Vancouver Little Mountain

Artistic rendering of 4902 James Street (Little Mountain) in Vancouver. (IBI Group/Holborn Group)

Artistic rendering of 150 East 36th Avenue at Little Mountain in Vancouver. (Stantec Architecture/Holborn Properties)

In September 2021, the developer, the provincial government, and the City reached a memorandum of understanding to build all of Little Mountain’s remaining social housing by late 2024.

Holborn’s purchase agreement with the provincial government in the late 2000s has become somewhat of a hot political football, given that the contract provides the developer with highly favourable conditions. The site was sold for $334 million, but as of 2021, only $35 million has been paid by the developer, as the acquisition payments are based on the progress of building the condominium component.

The provincial government also provided the developer with $211 million in interest-free loans on an 18-year term, presumably to cover a large chunk of the construction financing needed, with no requirement to pay any interest until 2026. Furthermore, the contract did not stipulate a timeline for the construction of replacing social housing units.

Currently, the provincial government has a strategy of holding onto aging social housing sites instead of selling such properties to developers. Instead, through BC Housing, the provincial government is looking to build new and additional affordable housing on such sites. For example, BC Housing is currently in the process of planning the redevelopment of the 11-acre Skeena Terrace site — similar to Little Mountain’s previous condition — into over 1,900 new homes, including social housing and rental housing.

January 2019 artistic rendering of 5299 Main Street at the Little Mountain site in Vancouver. (B+H Architects/Holborn Holdings)

155 East 37th Avenue Vancouver Little Mountain

Artistic rendering of 155 East 37th Avenue (Little Mountain) in Vancouver. (Stantec Architecture/Holborn Group)

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