AMS to save millions with RBC’s construction loan, student fee remains same for now

Once taken from UBC, the Nest’s $68 million dollar construction loan will now be financed by the Royal Bank of Canada (RBC). This is expected to save students up to $50 million.

The original construction loan — which was approved by the AMS in summer 2010 — would have had students paying a levy for the Nest until 2045.

Although the current Nest fee of $100 will not go down for current students, the loan from RBC will be paid off 15 years earlier than originally proposed. This is due to the RBC’s lower interest rate of 3.05 per cent in comparison to UBC’s rate of 5.75 per cent.

“That’s going to save students down the road quite a lot of money,” said AMS President Alan Ehrenholz.

In comparison to UBC’s loan, RBC’s loan will be slightly riskier because the bank does have the option to walk away if the AMS are not able to make their payments.

However, the original loan was simply deemed too expensive, and Ehrenholz believes that “it is very, very unlikely” for such a risk to happen.

“The only situation in which the bank could walk away is in a situation where we wouldn’t be able to make our payment,” he said. “We’re going to be making our payments throughout that term so we don’t see it as a risk.”

In order to arrive at this deal, the AMS also looked at options presented by other external commercial banks, including Bank of Montreal, TD, Credit Union and Scotiabank. Ehrenholz said RBC ultimately offered the best option for the AMS.

Coupled with the low interest rate, the new loan also allows the AMS to have annual prepayments without penalty — a clause that was viewed as a major benefit of UBC’s loan by the AMS because it would allow the society to pay off the loan sooner.

According to the presentation on the topic at the July 19 AMS Council meeting, it was also noted that RBC could help with other banking needs of the society.

With over $100,000 spent in negotiation fees and $50,000 in legal fees, “the papers have been signed,” and little is expected to change in the agreement even with the new NDP government.

“Overall this change from the university to RBC is going to be really beneficial in the long run,” said Ehrenholz. “We’re looking forward to what it can provide the AMS in the future.”