At issue was how to value the property, which is owned by the Vancouver school district. The least is based on the land value
A Vancouver developer has won a long-running multi-million rent dispute with the Vancouver school district over the valuation of Kingsgate Mall.
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Beedie Development had appealed a 2022 arbitration decision that pegged the 2017 market value of the property at Kingsway and East Broadway at $116.5 million and rent at $9.6 million a year.
In a December decision released on Friday, B.C. Supreme Court Justice Anita Chan ruled in favour of Beedie, calling the arbitration panel’s decision “unreasonable and incorrect.”
At issue was how the market value of the land — and in turn, the rent — should be calculated.
“The lease provides that rent is a fixed percentage of the value of the lands based on a use that is ‘immediate,’” said Chan in her decision. “Depending on how ‘immediate’ use is interpreted, the difference in the market value of the lands, and thus the rent, is significant.”
The land is owned by the Vancouver school district, which leased it in 1972 to Royal Oak Holdings for 99 years. Royal Oak built the shopping centre.
The lease was broken down into an initial term of 25 years, followed by 10-year renewal options, with “basic rent” set at 8.25 per cent of the market value of the lands.
In 2005, Beedie took over the lease and renewed it from 2007 to 2017, with rent set at $750,000 a year for the first five years of the term and $760,000 for the remaining five.
In 2015, Beedie wanted to renew the lease, but couldn’t come to an agreement with the school district on price. The matter went to arbitration.
The school district argued the market value should be based on the maximum allowable floor-space ratio of 3.0 allowed under city rules, while Beedie said the value ought to be based on the actual use, which is a 1.0 floor-space ratio.
In January 2022, a three-person panel ruled the market value should be calculated at $116.5 million based on 3.0 floor-space ratio, under rules that allow for other uses at the site, such as manufacturing and residential.
One member of the panel disagreed, saying the market value should be $20 million, based on “outright approval use” and the 1.0 floor-space ratio allowed there for solely retail use, in line with a previous arbitration decision made in 1999.
Beedie appealed the decision and won when Chan rejected the board’s majority decision and determined the land value to be $20 million. Based on the terms of the lease, Beedie’s annual rent would be $1,650,000, about a sixth of the amount earlier ordered by the panel.
Beedie president Ryan Beedie welcomed the decision.
“This judgment reconfirms the majority on the arbitration panel erred in their decision and were incorrect in their interpretation of the lease,” he said In a statement.
“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.”
The school board said the decision establishes a “significantly lower valuation” of the Kingsgate Mall property for the purpose of determining rent. A spokesperson said the district is considering its next steps.