The Vancouver School Board has taken further court action against the leaseholder of the Kingsgate Mall property in filing a civil claim in B.C. Supreme Court that alleges it is owed more than $49 million related to rent.
The claim filed by the school board Jan. 12 is against Kingsgate Property Ltd. and Beedie Development LP. Beedie operates the subsidiary company and has leased the land at East Broadway and Kingsway since 2005.
The ongoing legal dispute is centred around the original lease agreement, renewal terms and market value of the land. The board had originally leased the property to Royal Oak Holdings Ltd. in 1972 before Beedie took it over in 2005.
In 2017, Beedie wanted to renew its lease for 10 years but was unable to reach an agreement with the school board over “basic rent.” An arbitration hearing before a three-member tribunal was held in 2021.
The tribunal concluded in a January 2022 decision that the market value for the purposes of calculating the basic rent for renewal was $116,500,000, as of May 20, 2017. The lone dissenting member of the tribunal argued the market value was $20,000,000, the claim said.
'Basic rent'
The lease allows the board to have basic rent for the lands set as 8.25 per cent of the market value with each renewal, “rather than the basic rent as set at the time of the lease,” the claim said.
Using that calculation, the board claims “basic rent” for the period from 2017 to 2027 should be $9,611,250 and payable in monthly instalments of $800,937.50.
In addition, Kingsgate is obliged to pay the board “both the deficiency in basic rent for the period during which the parties had submitted their dispute to arbitration and interest on that amount, as well as ongoing basic rent in accordance with ‘market value.’”
The “deficiency,” in this case, is in excess of $50,000,000, the claim said.
“Kingsgate has failed or refused to pay either the deficiency or rent in accordance with the tribunal’s determination of market value,” the claim said.
“Instead, Kingsgate has paid $3,750,000 toward the deficiency and ongoing monthly rental payments of $137,500 based on an annual rent of $1,650,000.”
The ongoing “monthly shortfall” is $663,437.50, the claim said, noting the board has made “repeated demands for the payment of the outstanding amount of the deficiency, the amount of the ongoing monthly shortfall which continues to accrue, the interest on those amounts pursuant to the terms of the lease, and GST on that total.”
Notice of default
In May 2023, the board issued a formal notice of default and demanded payment of the defendants’ debt. When the board issued the notice, the full amount of Kingsgate’s arrears was calculated at $49,883,770, including GST.
“The defendants have used and continue to use the arrears for the purposes of advancing their business and increasing their profits,” said the claim, which includes a summary of an affidavit filed by Mason Bennett, vice-president of the Beedie Group.
According to the claim, Bennett outlined the uses of the arrears for the following:
• maintaining an appropriate level of risk and ensuring there is sufficient equity to fund Beedie’s business commitments.
• funding ongoing developments.
• acquiring new properties.
• maintaining existing assets.
• supporting existing debt.
The claim says the company’s refusal to remit the arrears to the board has interfered with its right and title to, and use of, those funds.
“The defendants should not be rewarded for their wrongful retention of the arrears by being permitted to retain the profits derived therefrom,” the claim said.
“The defendants should be ordered to remit the full total of the arrears at the date of judgment, as well as all profits derived from the use of those funds. An accounting should be ordered to determine the extent of those profits.”
When the board issued the default notice in May 2023, a school board representative said in a separate court document that it “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.”
Arbitration appeal
In July 2023, B.C. Supreme Court Justice Michael Stephens noted Beedie had appealed the arbitration ruling that set the price of the rent. Stephens ruled “the security terms should include a stay in respect of the award [of money] and the notice of default pending the outcome of this arbitration appeal.”
Glacier Media sent an email Monday to Beedie for comment on the school board’s civil claim but had not received a response at the time of this story being posted. Beedie has 21 days to file a response to the claim. None of the allegations have been proven in court.
The history of the school board’s connection to the Kingsgate Mall property goes back to the 1800s, when the board and the city acquired parcels of land at the mall site.
Mount Pleasant school was built on the land in 1892. Then in 1962, as the area became a traffic and commercial hub, a new school was built nearby on Guelph Street. The mall was built in the early 1970s.
The site is currently zoned for commercial use and is located in an area that has seen an increase in residential development, including the Rize highrise built across the street from the mall.
