Metrotown mall owners sue developer over proposed mixed-use towers

It's not unusual for proposed real estate developments to prompt heated debatein Metro Vancouver's red-hot housing market, but it's not often residents hear of those battles takingplace 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 becomingincreasingly 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 judgmentbetween 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 Burnabyis 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, thenew owner of aSears Canada store andthe land on which it sits.

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

In 2013,Sears Canadaissueda news releasedescribing its intentions to turn the site into a massive mixed-use development that would include residential and office high-rise towerswith 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 milliondeal for to enter into a joint venture to develop the site.

Now, MetropolisownerIvanhoeCambridge 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 issueis a long-standingagreement signed in 1986that neither party was originally privy to, but which the judge said both inheritedthrough various meanswhen 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 judgmentsaysIvanhoe's "first warning signs of trouble" was when Concord wrote Ivanhoe to say that, as the new owners, it wasn'tbound by the agreement.

Retail increasingly mixing with residential

Sears submitted a rezoning application to the City ofBurnabyplanning department in 2013, which iscurrently under review. Concord has since taken over the application.

At first glance, the redevelopment appears to fit in with the city'sdraft plan for theMetrotownarea, which includes increasing services and residences in the transit-friendly neighbourhood already on aSkyTrainline.

Andrew Evans, senior consultant with Colliers International, said he couldn't comment on this specific casebut explained that it's becoming increasingly common for older, struggling department stores like Sears to develop their properties to make money off thelandthey 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 residentialon their properties, Evans said especially those like Metropolisthat 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 Lougheedand Brentwood malls as examples.

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

The judgmentdoesmention that Ivanhoehas 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.

Ivanhoerefused 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.