Vancouver based GSL Group recently submitted a proposal to city council to build two residential towers on the south corner of the Prospera Place parking lot. GSL is the parent company to several businesses that include RG Properties (which owns and operates Prospera Place, and has a 30-year lease with the Kelowna Rockets), Planet Fitness, Boomers Bar & Grill, WHL team Victoria Royals, and online ticketing site, selectyourtickets.com. They also run the Rock the Lake festival here and Rock the Ambleside festival in West Vancouver.
The proposal calls for two 27 and 37 storey curvilinear towers that will house 337 residential units total, and sit on top of layered podiums containing mostly retail and five floors of above ground parking dedicated to each. GSL Group says the site “represents a noteworthy major opportunity for development” in the area that will lead to the “creation of a well-designed entertainment district.”
What’s interesting about this proposal is that it demands the involvement of city departments other than just City Planning to look closely into the city’s 30-year arrangement with GSL Group concerning the construction and maintenance of Prospera Place, and the sale of this particular land in that deal. “We’re looking at everything such as what status Prospera Place is at in terms of functionality” City Planner Adam Cseke said earlier this week.
That’s a Helluva Deal!
GSL Group’s RG Properties’ arena project in Kelowna was one of the first major public-private partnerships in British Columbia. The deal was struck back in 1997 and it hinged on the City of Kelowna buying shares in RG Properties. So RG Properties got their project capital and, as shares, it was non-taxable as well – win-win for them.
The shares are also the mechanism for the city to reacquire the land and the building in 2028.
The city also provided further financing for the project by entering into what was called a “Community Use Agreement”. Basically the city is buying ice time from RG Properties. The terms of the agreement require the city to make annual payments to RG Properties and receive “a total of 1,500 hours of community use per annum in the facility for an initial term of five years, with five options to renew for further five-year terms” (City of Kelowna).
The city pays for this ice time/community use through annual payments from its taxpayers, estimated at the time to be $17.50 a year (based on the 1997 $160,000 property assessment) or a 1.6 percent tax increase. Yes, if you currently live in Kelowna, some of the taxes you pay continue to go towards addressing this arrangement. A staff member of Kelowna’s Parks and Leisure Services Department said at the time, “It’s the most expensive ice in the world, its over $700 an hour, in other words you have to pay $700 an hour to rent an ice rink. We aren’t really renting an ice rink. It’s really a mechanism to provide capital financing for the building. And it’s about equal to the cost of capital financing. So it worked out well.”1
Additionally in the deal, the city subdivided the seven acres – where Prospera Place currently sits, the parking surface and land immediately around it, and sold RG Properties two chunks totalling three acres at 1997 market prices, which was approximately $500,000 an acre. RG would pay property taxes and set aside $49,000 a year for major repairs or capital works. During a city council meeting in 1997 when the city concluded its negotiations with the developer, City Planner Fred Pritchard was quoted in the Kelowna Daily Courier (Sept 27, 1997) saying “that the parking would be in place for two to five years, until RG puts up a commercial development”. It’s roughly 21 years later, and now we have RG Properties’ proposal for said development.
The other day we read Councillor Ryan Donn’s remarks on social media on the city’s arrangement with RG Properties. “We pay them over $1,000,000 per year (it has been over but now it is under) that was part of the deal. Honestly it was a pretty amazingly sweet deal for RG Properties”, he wrote. “It’s honestly just a bad deal. We are locked into leasing back rental time but we don’t actually get the time used based on how the deal was set up.”
Back to the proposal, the site is currently zoned Comprehensive Development Zone CD5 by the city for mixed use commercial/residential, with a maximum building height of 12 storeys, and in order to make the project possible GSL Group is asking to rezone the property with the additional height variance. It will be interesting to see all the moving parts at play here as this process moves forward. City Planner Adam Cseke indicated to the media this week that proposal is still in the very early stages and subject to more discussion, and more importantly final city council approval.
