The land involved in Kelowna’s $28M hotel development has a rocky history

The City of Kelowna bought some key pieces of waterfront property for $27.8 million to pick up a developer’s dream that went bust. 

The city has purchased the Kelowna Marina, an office building at 1440-1460 Pandosy Street and the vacant lot at 289 Queensway Avenue from developer Westcorp, according to a press release from the city issued Oct 16.

The idea is to build a hotel with a marina on the land in the next three to five years. The new hotel would replace the Willow Inn that was demolished in 2009.

Westcorp bought the land in the early 2000s and had a plan to build a hotel for years, but the project hit several hurdles and never really made it off the ground, so the city has stepped in and bought the land to help get the plan going again. 

City communication advisor Bonnie O’Sullivan said the city is going to sell the property to a developer and investor once it can make a deal that ensures a hotel is going to be built there “in a reasonable timeframe.”

The city is getting help from U.K.-based financial advisor Avington Financial Limited that is supposed to help find the investors and developer to make the hotel a reality.

Sharron Simpson is a former city councillor, local historian and granddaughter of Stanley M. Simpson, a prominent businessman who donated a significant amount of land in downtown Kelowna for public use. A condition on the land donation, known as the Simpson Covenant, played a major role in killing off the original plan for developing the property.

She said it’s important to remember that Westcorp tried and failed to get a development built on that land. Back in 2008, Westcorp wanted to build a development dubbed Lawson’s Landing.

Lawson’s Landing would have been a five-tower complex on the land that the city recently bought, but it needed part of what became Stuart Park.

The issue that collapsed the entire vision was the land for Stuart Park was protected for public use by the Simpson Covenant, land downtown donated to the city by Sharron Simpson’s family back in the 1940s with the stipulation that it would be used for the public.

“The Simpson Covenant specified what the land could be used for. And it was put in place in 1946,” she said.

The city and developer wanted to get rid of the Simpson Covenant, but the case went to the Supreme Court of BC which ruled in favour of the covenant and meant that the land had to open for the public to enjoy.

Following that ruling, Westcorp’s vision for Lawson’s Landing pivoted into a hotel, but that plan hasn’t materialized either. In 2022, Westcorp said it was moving ahead with a 33-storey hotel and condominium project, but shovels never hit the ground. 

“This developer who’s been planning this hotel since 2008, when the court case came down with the covenant and removed all possibilities of his original site, he’s pivoted to the hotel site, and it’s been going on now for 20 years,” Simpson said.

Westcorp held onto the property at 327 Bernard Avenue for years with the intention to use it as a showroom. The showroom never opened and the building was boarded up until it became Urban Distilleries this past summer. 

Fast forward to now, and the city has decided to buy the land to help support the construction of a “world-class” hotel. 

Simpson said the city shouldn’t be in the hotel business.

“The city should not be involved either, however you wish to call it, the property speculation business or the hotel business,” she said. “I’d like some facilities to take care of our own citizens … I’m offended that they would feel that they have the right to do this.”

Kelowna Mayor Tom Dyas said the new hotel would be good for the tourism industry. 

“Securing ownership of this strategic downtown waterfront site allows us to advance a long-term vision for a vibrant, world-class hotel and marina in the heart of our city. This investment strengthens our local economy, supports our tourism sector, and ensures that as Kelowna grows, we continue to offer the amenities and accommodations expected of a premier destination city,” Dyas said in a press release.

Simpson said that now the city owns that land, people ought to have input on what it’s used for, rather than default to the plan that Westcorp and the city wants to push forward.

“We have a vibrant community. We’ll give lots of input. Now that it’s in the public realm, we own it, we should be the ones making use of that property,” she said.

The $27.8 million for the land is going to be borrowed from the Municipal Finance Authority, a co-operative that lends out money to cities around B.C.

The city said the loan won’t mean a tax increase as “carrying costs associated with borrowing will be funded through asset revenues.” 

Often when cities borrow large sums of money they have to get approval from voters, but local governments don’t need approval to borrow up to $150 per resident as long as the loan is repaid within five years. 

Kelowna’s $27.8 million fits within that limit going off of the 2021 Census data for the metropolitan area. 

The city spokesperson said this isn’t the first time the city has purchased land for development. The city bought and sold the Kelowna Central Green housing development at the corner of Richter Street and Highway 97.