Metrotown mall owners sue developer over proposed mixed-use towers

It's not unusual for proposed real estate developments to prompt heated debate in Metro Vancouver's red-hot housing market, but it's not often residents hear of those battles taking place between major developers. 

The stakes, in this case, are high.

On the table — a multi-million dollar real estate project of a type industry insiders say is becoming increasingly common as retail businesses try to cash in on the lucrative housing market and take advantage of cities keen on densification. 

But a dispute, outlined in a recent B.C. Supreme Court judgment between two giant real estate developers, over a 30-year-old agreement neither of them signed but both inherited, is threatening to pull the project apart in an area the City of Burnaby is considering turning into its "true downtown."

The rift is between Ivanhoe Cambridge, the owners of the Metropolis at Metrotown shopping centre, and Concord Kingsway, a subsidiary of real estate developer Concord Pacific, the new owner of a Sears Canada store and the land on which it sits.

Concord says it could lose money on its hefty investment, while, on the other hand, Ivanhoe says Concord is pushing forward the project without abiding by their long-standing agreement to work in partnership. 

In 2013, Sears Canada issued a news release describing its intentions to turn the site into a massive mixed-use development that would include residential and office high-rise towers with retail on the ground floor, including a new store for Sears. 

Two years later, according to court documents, Concord Kingsway and Sears closed a $100 million deal for to enter into a joint venture to develop the site.

Now, Metropolis owner Ivanhoe Cambridge is taking Concord and Sears to court, claiming the company can't develop the site without its permission.

Agreement crux of dispute

At the crux of the issue is a long-standing agreement signed in 1986 that neither party was originally privy to, but which the judge said both inherited through various means when they took over their respective properties.

Sears and Concord argue the wording of the agreement is vague. 

The agreement states the two properties "are intended to be operated, supplied, maintained, repaired, altered and reconstructed as a unified, first class, integrated, regional shopping centre," according to the judgment. 

To redevelop the site, Sears would need to give 15 months' notice and couldn't build anything deemed "incompatible with the existing shopping centre." It also couldn't close the Sears store for more than 150 days.

But the judgment says Ivanhoe's "first warning signs of trouble" was when Concord wrote Ivanhoe to say that, as the new owners, it wasn't bound by the agreement.

Retail increasingly mixing with residential

Sears submitted a rezoning application to the City of Burnaby planning department in 2013, which is currently under review. Concord has since taken over the application.

At first glance, the redevelopment appears to fit in with the city's draft plan for the Metrotown area, which includes increasing services and residences in the transit-friendly neighbourhood already on a SkyTrain line. 

Andrew Evans, senior consultant with Colliers International, said he couldn't comment on this specific case but explained that it's becoming increasingly common for older, struggling department stores like Sears to develop their properties to make money off the land they sit on — but that can cause friction between neighbours. 

"In general, when somebody is proposing a large development, the neighbouring properties sometimes have challenges with it if they feel the development would affect the development potential on their property or negatively impact them in some way," Evans said.

Shopping malls in the Lower Mainland are also looking to take advantage of the current real estate market and add residential on their properties, Evans said — especially those like Metropolis that are already close to a transit hub. 

"Quite often you're not losing the retail, you're having more of a focus on how to bring residential to the site as well," he said, citing Lougheed and Brentwood malls as examples. 

Whether or not this is a route the mall owners are keen to take is unclear. 

The judgment does mention that Ivanhoe has also been "exploring redevelopment options," and the city's draft plan for the area lists redevelopment of both Sears and the Metrotown shopping centre as part of the neighbourhood's revitalization. 

Ivanhoe refused to comment on the matter. Concord Pacific did not respond to requests for comment.

Meanwhile, a different lawsuit over the matter that started two years ago is still unfolding in B.C. Supreme Court.