A years-long dispute over Kingsgate Mall’s rent, stemming from disagreements about the property’s market value, has ended, with the court ultimately siding with the developer over the Vancouver School Board (VSB).
In a written decision published on Friday, a judge of the Supreme Court of British Columbia overseeing the appeal case set aside the original January 2022 award and decision when an arbitration decision made by a panel of three judges declared the market value of the 3.2-acre mall property— located at the southeast corner of the intersection of East Broadway and Kingsway — to be $116.5 million.
This new decision follows the April 2023 decision made by another judge to grant Beedie Development its request to have the January 2022 decision be reconsidered in the appeal process.
The January 2022 decision that declared the market value of $116.5 million was based on the panel’s interpretation of the valuation as of 2017, when the current lease term began. The judges overseeing arbitration sided with VSB and determined that the market value for determining rent should be based on a floor area ratio (FAR) density of a floor area that is three times larger than the size of the lot.
This previous judgement made in January 2022 was based on the panel’s interpretation of the precedent set by a 1999 arbitration over the property.
However, the appeal judge ruled that using the 1999 decision as a precedent is problematic and sided with Beedie.
Instead, as ruled by the appeal judge, the market value of the lands for determining rent for the third renewal term that first began in November 2017 is $20 million, based on a density of 1.0 FAR.
“In my view, the 2022 Majority’s interpretation of the 1999 Award is unreasonable and incorrect. Applying the standard of reasonableness, I find the 2022 Majority’s interpretation of the 1999 Award does not fall within a range of possible, acceptable outcomes that is justified, transparent, intelligible, and defensible,” reads the ruling by the appeal judge.
“On the correctness standard, I find the interpretation of the 1999 Award by the 2022 Majority not consistent with the language of the 1999 Award read as a whole, where timelines were referenced and compared throughout.”
Exterior of Kingsgate Mall in Vancouver. (Beedie)
In the process, the appeal judge deemed Beedie’s rent for the third renewal period to be $1.65 million per year and that the previous order requiring Beedie to provide real property as security be cancelled.
Furthermore, the January 2022 decision that directed Beedie to pay VSB $42 million in back rent has been overturned based on the appeal judge’s new decision.
Beedie has a 99-year lease over Kingsgate Mall, which first began in 1972 under a different entity called Royal Oak Holdings. The first 25-year term with Royal Oak Holdings ended in 1997, at which point the lease provided seven 10-year renewal options and a final four-year option. So far, the first three 10-year renewal options have been exercised.
Beedie took over the lease from Royal Oak Holdings in 2005.
Since then, the high-density redevelopment potential of the site has grown — both from the scheduled 2027 opening of SkyTrain Millennium Line’s Broadway extension, with the new Mount Pleasant Station located just one city block to the west at the southwest corner of the intersection of Main Street and East Broadway, as well as the heightened density prescriptions of the municipal government’s Broadway Plan.
The Broadway Plan identifies Kingsgate Mall as one of the “Large and Unique Sites” in the area plan that require special attention due to their large-scale lot redevelopment potential.
It prescribes towers up to between 25 and 30 storeys, with the tallest buildings located closer to Kingsway.
The existing retail/service space found in the mall should be retained in a redevelopment that does not result in any net loss of such commercial spaces. As well, residential uses should include either secured market and below-market rental housing or social housing. Specific public benefits should include a plaza or small park, as well as possible arts/cultural spaces or childcare.
Kingsgate Mall’s 1980-built structure spans a floor area of over 138,000 sq ft, including 115,000 sq ft of gross leasable area. Its largest retailers are Save-On-Foods (recently converted from Buy-Low-Foods), Shoppers Drug Mart, and BC Liquor Store.
This is the second decision Beedie has been successful in overturning through the court process. In June 2023, the court also directed the City of Vancouver to reconsider Beedie’s development permit application for the controversial 105 Keefer Street mixed-use condominium project in the Chinatown district following the development permit board’s rejection of the application in 2017.
Inside Kingsgate Mall in Vancouver. (Beedie)
Exterior of Kingsgate Mall in Vancouver. (Beedie)