Frances Bula, (THE GLOBE AND MAIL) — The Vancouver School Board has lost a legal fight to force a developer to pay almost six times the lease rate on a prime piece of commercial property the board owns but can’t redevelop without the co-operation of the firm.
The Vancouver School Board owns the Kingsgate Mall, a two-storey shopping plaza and large parking lot near downtown and built in 1974. It has been considered a prime site for redevelopment at much higher density since 2010.
But the land is subject to a 99-year lease that doesn’t expire until 2071. The current leaseholder, Beedie Development LP, manages commercial and residential properties throughout the region and has the right of first refusal on all future lease renewals or changes.
“It’s time to move forward,” Mr. Beedie, the head of the company, said in an interview after the B.C. Supreme Court ruled against the school board’s efforts to raise his payments.
“I’m going to be reaching out soon to the board chair. This is such a unique and special site. It will provide significant benefits to the community.”
The school board and province have both floated ideas for at least a decade about redeveloping the property, which was the original site of Vancouver’s first school outside the downtown peninsula. Some of those proposals included incorporating some education uses in the new development.
The board had been trying to get the company to the higher lease rate based on the estimated value of the land if it were developed to its maximum – $116.5-million, according to the court documents. With the current zoning, though, the court considered the site valued at only $20-million.
Under the terms of the original lease, signed in 1972, the rent to be paid on the property is 8.25 per cent of its market value. The school board challenged that in 1999, saying the lease rate should be based on the property’s maximum potential, not just on what zoning would allow at any given time.
A 1999 decision from an arbitration panel rejected that idea, but a 2022 decision from a different arbitration panel decided in the school board’s favour.
The B.C. Supreme Court concluded in a recent ruling that the 1999 decision was the correct approach, since it would take anywhere from three to five years to get the property rezoned.
That means it is not an “immediate” option, something that the lease terms spelled out were the conditions for determining the site’s value.
B.C. Supreme Court Justice Anita Chan, in the ruling, called the 2022 arbitration decision “unreasonable and incorrect” and that it erred in “considering irrelevant factors.”
She ruled that the company’s rent is to be set for $1.65-million for the entire 2017-2027 period.
As the case dragged through arbitration panels and the courts, the value of the land skyrocketed. The B.C. Assessment Authority lists the current valuation at $209-million. And that figure is likely to go higher: The land is located a block away from the future Mount Pleasant SkyTrain station, well within the area that both the city and province have said should accommodate very high density.
The school board said in a statement that it is weighing its response. “The court’s decision establishes a significantly lower valuation of the Kingsgate Mall property for the purpose of determining the monthly amounts payable by Beedie to the Vancouver School Board,” it said.
“The VSB is currently evaluating its next steps in response to the ruling.”
The lower valuation and the unlikelihood of wringing additional money in lease payments out of the company could make it more attractive for the board to redevelop the site itself. But Mr. Beedie said given his long-term lease, the two sides will need to co-operate.
“They can’t develop without us. All roads lead through us,” he said. “We both have an interest in the property.”
Mr. Beedie said the site should ideally be a combination of housing, retail, and community-serving spaces.
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