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Canadian Pacific Rail CEO Hunter Harrison addresses the company's annual meeting in Calgary, Thursday, May 1, 2014.

Jeff McIntosh/THE CANADIAN PRESS

The Globe's Real Estate Beat offers news and analysis on the Canadian housing market. Read more on The Globe's housing page.

Canadian Pacific Railway Ltd.'s name is mud in the minds of Vancouver homeowners who have garden plots encroaching on CP's right-of-way that weaves through some of the most expensive real estate in Canada.

Long stretches of the Arbutus corridor have become the favourite path for residents walking their dogs, while community gardens beloved by homeowners are located along other portions of the now-abandoned freight line.

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Calgary-based CP, after warning residents for weeks, bulldozed some sheds and smashed through gardens for two weeks in August before halting the demolition in hopes of reaching an agreement to sell the property at fair value to the City of Vancouver. Talks collapsed on Friday.

Based on nearby property values along the Arbutus corridor, a garden plot that takes up the surface area of a typical single-car garage would be worth $105,600.

The 11-kilometre line, where the last freight train ran in 2001, has become the subject of much civic debate over whether the land on Vancouver's coveted west side should be used for real estate development in a city that needs more innovative and affordable housing. CP commissioned a study that appraised the Arbutus corridor's potential value at $400-million in recent years, so the railway believes its offer to sell for $100-million would be a good deal for the City of Vancouver.

Vancouver Mayor Gregor Robertson, however, is balking at CP's asking price. He insists the value is dramatically lower based on the city's plans to preserve the right-of-way as a greenbelt. He is thinking that a more reasonable value is closer to $20-million.

The Arbutus file has grown so much in importance that it has hit the desk of Hunter Harrison, who became CP's chief executive officer in mid-2012 after activist investor Bill Ackman scored a memorable victory in a bitter proxy fight against the directors of Canada's second-largest railway. Mr. Ackman enlisted the former CEO at rival Canadian National Railway Co. to shake up CP, and true to form, the detail-oriented Mr. Harrison is leaving no stone unturned in his quest to make CP more efficient.

Mr. Harrison isn't one to back away from a fight, and he can be expected to ramp up CP's case to have its right-of-way valued based on the highest and best use as development land. Many Greater Vancouver residents who don't live near the Arbutus corridor are revelling in schadenfreude – pleased to see the gardeners' dismay when work crews showed up to start clearing out vegetables in August.

"We have offered several different options, including a sale and other creative options such as a land swap and rezoning opportunities," Marty Cej, CP's assistant vice-president of public affairs, said in an interview Wednesday.

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The roots of the current dispute date back decades. Mr. Cej noted that CP received the Arbutus strip of property as municipal compensation in the 1880s in return for the railway extending a separate right-of-way from Port Moody, B.C., to what is now downtown Vancouver.

Condo dwellers who use community gardens say plots are important. But, with no deal between CP and the city, the railway intends to return the right-of-way to freight operating standards and is even mulling other ways to use the tracks, including for storage and crew training.

The uncertainty has dampened expectations for new multifamily housing along the Arbutus corridor, though developers have commended the mayor for his support of greater density in neighbourhoods through initiatives such as laneway houses – small homes built next to alleys in the spot where the garage would normally be located.

Shaadi Faris, vice-president at Intergulf Development Group, said that if civic leaders create a community plan for the Arbutus corridor, then there would be an opportunity to build townhouses and condos – higher-density units than single-family detached homes. The City of Vancouver is in a position to rezone and create much-needed housing, if it chooses to pursue that avenue, Mr. Faris said.

Hani Lammam, executive vice-president at Cressey Development Group, said that if the city does eventually buy the corridor from CP, civic officials will have to make it clear that it doesn't open the doors to gardening wherever residents feel like. "You can't go into a city park and plant your garden," Mr. Lammam said, adding he isn't betting that housing will be allowed on the Arbutus corridor any time soon.

Real estate firms aren't holding their breath for the city to show its hand because as soon as the mayor indicates that he is willing to entertain housing development or a passenger light-rail line, the purchase price will soar.

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Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said where there's a will to save some gardens and still allow housing, there's a way. "The Arbutus corridor is a uniquely valuable property," Mr. Scarrow said. "Even at CP's $100-million demand, I have a hard time believing that the city's planning department can't come up with a creative proposal that would include green space, a transportation corridor and some residential and commercial rezoning to help pay for the city's costs."

CP shareholders are cheering on Mr. Harrison. During the proxy fight, he acquired $5-million worth of CP shares in February, 2012. Those shares are now worth more than $15.5-million after CP's stock price tripled since that time. CP shares – which traded around $52 in September, 2011, and $73 in February, 2012 – set a record-high close of $229.81 on Wednesday.

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