Construction workers are seen at work on the roadway in front of the future Mount Pleasant Skytrain Station on East Broadway, in Vancouver, on July 29, 2021.DARRYL DYCK/The Globe and Mail
The Vancouver School Board wants to take back a valuable property it has been leasing to one of the city’s most prominent developers, indicating to a judge it might sell the land worth hundreds of millions of dollars for development.
But parent groups argue at a time of skyrocketing real estate in the city, the board’s suggestion it might get rid of valuable property, especially in an area slated for dramatically increased density, is short-sighted.
The Kingsgate Mall at Kingsway and Broadway is one of the prize pieces of land in the Vancouver School Board’s portfolio, land that hasn’t been used for a school since at least the 1970s. Currently it is leased to a subsidiary company of industrial-land developer Ryan Beedie and is the location of a two-storey mall with a Mark’s Work Warehouse, a furniture-leasing store, a florist, two cellphone stores, a liquor store and a grocer.
The property is valued at almost $250-million.
For two years, the board has been in a legal dispute with the Beedie group, arguing the company is in default for $52-million in back rent.
And a representative from the board told a Supreme Court judge the VSB “has begun consideration of matters in light of the possible termination of the lease, including timing of any re-entry, possible sale or redevelopment options, and commencing the process of applying for rezoning of the Property.”
But Vic Khanna, the former chair of the Vancouver district parents advisory council and a years-long advocate for retaining city school spaces, argues the site could house a new elementary school, an elementary francophone school as well as different types of housing.
“Kingsgate Mall is absolutely essential for the future. It is so vital that it be an education complex,” he said.
The mall sits in a prime location in Mount Pleasant, one of the neighbourhoods in Vancouver that has seen a sharp increase in its child population in recent years as young families have flocked to the east side and to new housing that’s been built near there, like Olympic Village and new apartments around Main and Kingsway.
As well, the city’s Broadway plan, which includes the area around the mall, envisions tens of thousands of new residents by 2050.
The mall was built in 1972 on the site of what was Mount Pleasant’s first elementary school, then called False Creek school, which was demolished.
The board leased the site to a company called Royal Oak Holdings for a 99-year term. The conditions of the original lease are laid out in several summaries of the site’s legal history by Vancouver law firms involved in the case with Beedie. The conditions stipulate the rent be set at 8.25 per cent of the property’s market value.
In 1999, the board tried to argue that the site should be valued at its highest potential use after a rezoning. However, an arbitration board ruled that, since the property had not been rezoned and the leaseholder had no ability to redevelop, the rent should be continued to be pegged at the more realistic market value related to its current use.
The board challenged that in B.C. Supreme Court and lost.
Beedie’s company, Kingsgate Property Ltd., took over the lease in 2005 and exercised an option to renew in 2008. There was no dispute at that time over the value of the property.
But the VSB went back to the arbitration board many years later.
In January, 2022, the arbitration board reversed its decision of 20 years before and ruled 2-1 that Beedie’s company should be paying rent on the basis of a market value of $116-milliion – a decision that would raise the rent dramatically from about $1.7-million a year (plus the taxes, which this year amounted to $1.8-million) to $9.86-million a year.
The school board said Beedie’s company should have to pay all the back rent owing from 2018 immediately or be in default. It issued a notice of default on May 17 this year.
But Supreme Court Judge Michael Stephens ruled in July that the board can’t take unilateral action like that while Beedie is appealing the arbitration decision.
Both parties to the lawsuit said they couldn’t comment because the issue is still before the courts.