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Phoenix foundering

Supplier SG Blocks’ financing woes threaten to kill temporary housing project
1535phoenix
Money Woes The Phoenix project, which could produce 308 housing units for Whistler employees during the 2010 Olympics, is up against a financial shortfall

Once heralded as a community success story, the Phoenix project — temporary housing for 308 Whistler employees from this winter through the 2010 Olympics — is stalled and may be cancelled.

The American company supplying the converted shipping containers for the temporary housing complex has not secured a sufficient loan from a Canadian bank to finance the project and is currently short about $3 million.

Louise Lundy, president of the Whistler Chamber of Commerce and backbone of the Phoenix project, said SG Blocks needs to find an alternative finance plan by the end of the week if occupancy is to begin Nov. 1 as planned.

She added if a solution is not found by Tuesday, the program may be abandoned altogether.

“We learned about it probably 10 days ago, and so we have been doing everything we can — working with resort partners, and some of the bigger employers — to see if there are any contacts that we could send their (SG Blocks’) way to try and assist them to get them through this,” said a sombre Lundy.

“There are a bunch of different possibilities, but we are going to need a firm commitment quickly.”

Bruce Russell, managing partner of SG Blocks, said his St. Louis-based company planned to borrow at least 70 per cent of the project’s costs from a major Canadian bank. The bank has since said they will only loan 50 per cent.

“We kind of got caught and we can’t manoeuvre them (the banks) out of it,” said Russell.

“Even offering them X, Y and Z would not make a difference, because their criteria are criteria… As they got a clearer picture, they kept getting tighter and tighter, and this is where we find ourselves.”

Russell added his company had not assumed Canadian banks would be so “conservative”.

In mid-August, SG Blocks alerted the Phoenix board about their financial trouble, and the board immediately approached Whistler-Blackcomb to see if they could offer any solutions.

Whistler-Blackcomb had a financial analyst sit down with SG Blocks to pinpoint exactly how much the $5 million project was short.

Joel Chevalier, Whistler-Blackcomb’s director of employee experience, said it was then that the $3 million shortfall was identified.

“From a community perspective, it is pretty devastating if this doesn’t happen,” said Chevalier.

“Beyond Whistler-Blackcomb’s beds, it means about 260-something extra beds are going to go missing. Recognizing that, my boss gave his full support to see what we could do.”

Over the past week, Whistler-Blackcomb has continued to work closely with SG Blocks to see if they might be able to bridge the financial gap.

Chevalier said the latest strategy involves both Whistler-Blackcomb and the Gibbons Hospitality Group, the other big participant in the Phoenix housing, to pay their 18 months rent up front. At $650 a month, that would put an extra $1 million in SG Blocks’ pocket.

“SG Blocks would still need to come up with some financing, but they wouldn’t need to be coming up with $3 million of financing,” said Chevalier.

“The idea is that it would help them get a bridging loan to make it work because they would have an extra $1 million in the bank.”

Russell added that while 18-months rent, or $11,700 per bed, may be a lot for businesses to cough up, if any of the other businesses in town could put their money down, it would help ensure the project’s future.

“We are hoping maybe some other folks will step up, because frankly over 18 months everybody is going to have to pay the money,” said Russell.

“If we can get it on the front end then that makes the gap a lot smaller, and we can deal with it.”

SG Blocks is also looking for another third party investor to bridge the rest of the shortfall. Russell said the company has put together a new investor package with “pretty decent returns on the residual,” even though this will mean less profit for SG Blocks.

Joey Gibbons, owner of Gibbons Hospitality, said he is still hopeful the project will come together.

“Whistler-Blackcomb are really the big players in the whole thing, and there is definitely some optimism there in making this thing continue to work,” he said.

“But if not, I am sure we’ll all put our heads down and things will continue on fine… If it doesn’t work out, we’ll just have to figure a different structure to how we go about our season. Who knows what it is that we’ll have to do, but we’ll get the job done, that is for sure.”

Like Whistler-Blackcomb, Gibbons had signed up for 42 beds in the Phoenix housing project.

The Phoenix board has already alerted all participating employers of the problem. And if the project does not go through, Lundy said all deposits will be returned in entirety to businesses.

“Honestly, we have not had much reaction now,” said Lundy when asked what feedback she has gotten from the business community.

“I am sure this is very disappointing for the business community. I’ve talked to a couple, and they understand that we’ve done everything we can. This is obviously a real last minute disappointment.”

Also if Phoenix is cancelled, Whistler-Blackcomb will make sure their employees only get the number of the beds in the community that they would normally have, said Chevalier. The company is cognisant that they need to be a community partner as well.

But Chevalier said Whistler-Blackcomb has not reached that point yet.

“People are starting to talk about the project being dead, and I am trying not to use those words,” he said.

“The 11 th hour does not come until Monday night… And from a high level business perspective, the business plan makes sense.”

Up until now, the Phoenix project has been a positive news story.

The temporary housing complex grew out of the H.O.M.E. committee, an alliance between the chamber and the Whistler Housing Authority (WHA), to address Whistler’s anticipated housing crunch over the next two years.

The project progressed quickly after it was announced in February. By May, the Phoenix Board had secured a supplier, received council support, and signed the first 294 leases. And only two weeks ago, the project received final approval from council for its development permit and secured an excavation permit.

SG Blocks has also invested more than $300,000 in the project and have already purchased the shipping containers, previously destined for the landfill, and fabricated a fully functioning prototype at their factory in Portland, Oregon.

The containers were supposed to be placed on foundations by September.

Yet, as of Wednesday morning, the foundation construction has not yet begun on the site at 4500 Northland Boulevard where the housing complex of seven buildings was to go.

Instead, weeds and an empty shopping cart mark the property.