Developer wins multimillion-dollar rent dispute with Vancouver School Board
B.C. Supreme Court ruling lowers rent from $9.6 million to $1.65 million per year for Kingsgate Mall site
A Vancouver developer will pay almost $8 million less in rent to the city's school board, after the B.C. Supreme Court issued a ruling on the school-owned Kingsgate Mall property.
Beedie Development Group is set to pay $1.65 million per year for the lease of the mall property until 2027, despite a 2022 tenancy arbitration panel ruling that said the rent should be $9.6 million per year.
Beedie appealed that ruling in the B.C. Supreme Court, arguing that the arbitration panel had misinterpreted an earlier 1999 ruling on the matter and it should pay a lower amount.
In a December decision released last week, the court agreed with the developer.
The Vancouver School Board says it's now evaluating its next steps in the matter.
Rent based on value of land
Kingsgate Mall, on Kingsway and Broadway in East Vancouver, was first leased out by the city's school board in 1972. It is a 99-year lease, with an initial 25-year renewal period and a renewal every 10 years after that.
The first renewal term for the property came up in 1997. Neither the VSB, nor then-tenant Royal Oak, could agree on a lease amount, so the matter went to an arbitration panel in 1999.
That panel set a lease for the site, and ruled that the annual rent should be based on the land's immediate redevelopment value, and current use as a retail space.
Beedie took over Royal Oak's lease in 2005, paying $750,000 and then $760,000 a year. In 2015, they applied to renew the Kingsgate lease again, but once again the board and developer couldn't agree on terms.
The dispute led to the 2022 arbitration hearing, in which a panel rejected the 1999 hearing's interpretation and said the property's worth should be assessed off the value it could have if it took advantage of available upzoning.
The ruling increased the worth of the land to $116.5 million, and set the rent to $9.6 million per year.
Beedie argued the 2022 decision misinterpreted the 1999 ruling over what constituted "immediate" redevelopment value.
In her December decision, B.C. Supreme Court Justice Anita Chan agreed.
"Depending on how 'immediate' use is interpreted, the difference in the market value of the lands, and thus the rent, is significant."
She reverted to the 1999 interpretation of current property value, setting the site's worth at $20 million and the annual rent to $1.65 million.
Ryan Beedie, the president of Beedie Development Group, said in a statement that the decision confirmed the 2022 panel was incorrect in its interpretation of the lease.
"It is extremely unfortunate that it took a lengthy and very expensive legal battle with the Vancouver School Board to establish this fact, and we sincerely hope this matter is now firmly behind us," he said.
"We look forward to collectively turning our attention towards what is best for the future of Kingsgate Mall and for the community."
Trustee questions leasing to developers
The ruling has one school board trustee questioning whether school boards should be leasing lands to developers for the purposes of generating funds.
"Giving longterm leases and sales like this is really giving away school board property, and doesn't allow us to hold it in trust for future generations," OneCity trustee Jennifer Reddy said. "So it's demonstrating exactly what happens when decisions like this take place."
Reddy was one of two trustees to vote against a recent 99-year lease handed out to another developer for a portion of school land in East Vancouver, and argued that a need to balance budgets should not mean the loss of valuable land.
She told CBC News the centrally-located Kingsgate property had the potential to be the site for a future school, child-care centre or another public amenity.
"Of course, the budget is the important driver of our values and how we deliver education," she said.
"But to cover it with shortcut measures at the expense of future generations is not the way to do it in my view."
In a statement, the VSB said its most up-to-date financial information reflects the $1.65-million rent and that "contingent assets like the Kingsgate Mall site, are considered during the financial planning process."
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With files from Liam Britten