Tribunals Ontario / Tribunaux décisionnels Ontario Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: February 12, 2021 FILE NO.: DM 167742

Assessed Person(s): See Schedule A attached Appellant(s): City of Toronto, Loblaws Properties Limited, Omers Realty Holdings and Oxford Properties Group Respondent(s): Municipal Property Assessment Corporation Region 09, City of Toronto, Loblaws Properties Limited, Omers Realty Holdings and Oxford Properties Group Property Location(s): See Schedule A attached Municipality(ies): City of Toronto Roll Number(s): See Schedule A attached Appeal Number(s): See Schedule A attached Taxation Year(s): See Schedule A attached Hearing Event No.: 736210

Legislative Authority: Rule 45 of the Assessment Review Board’s Rules of Practice and Procedure

Parties	Counsel
City of Toronto	Angus MacKay
OMERS Realty Holding, CP REIT Ontario Properties Limited	Stephen Longo
Municipal Property Assessment Corporation	Karey Lunau

REQUEST FOR: Disclosure HEARD: November 16, 2020 in writing ADJUDICATOR(S): Dirk VanderBent, Vice-Chair

MOTION DECISION

OVERVIEW

1The City of Toronto (“City” or “Appellant”) has filed appeals with the Assessment Review Board (“Board”) pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act“), for the taxation years 2017 to 2020, or is a responding party in respect of three properties described as “Loblaw Big Box grocery stores” (the “Loblaw Properties”):

1. 1755 Brimley Road (owned by OMERS Realty Holding) (City appealed)
2. 11 Redway Road (owned by CP REIT Ontario Properties Limited) (City appealed)
3. 0 Redway Road (owned by CP REIT Ontario Properties Limited) (City is a responding party)

These owners are collectively referred to as “Loblaw”.

2For 1755 Brimley Road, there are appeals for three assessment cycles (2009 to 2020 taxation years) where the City appealed the 2017 to 2020 taxation years, and is a responding party in the appeal proceedings for the previous assessment cycles.

3For 11 Redway Road there are appeals filed by both the City and Loblaw for the current assessment cycle only (2017 to 2020 taxation years).

4For 0 Redway Road, only Loblaw has filed appeals for four assessment cycles (2008 to 2020 taxation years). Therefore, the City is a responding party in the appeal proceedings for all four assessment cycles.

5The City has brought a Motion, pursuant to Rule 45 of the Board’s Rules of Practice and Procedure (“Rules”), requesting disclosure in respect of its appeals for the current assessment cycle only. As provided in the Act, the valuation date for these appeals is January 1, 2016 (“Valuation Date”).

Issue – Determination of Multiple Disclosure Requests

6The City states that its disclosure requests are the same for each of these three properties and that its submissions in support of its requests are also the same for each of these properties. The other parties concur. Therefore, each party has made its submissions on the basis that each request applies to each of the three properties. The City’s disclosure requests are directed only to the owner of each property. The Municipal Property Assessment Corporation (“MPAC”) supports the City’s disclosure requests, in some instances providing further detail respecting the documents requested by the City. Loblaw submits that, in respect of three of the City’s requests, the requested documents do not exist. Loblaw opposes the remainder of the requests.

7In the following table, MPAC has summarized the City’s requests by providing a short descriptor for each request, followed by the detailed request made by the City.

No.	Request (Short)	Request (detailed)
1	Leases	Lease/leases and occupancy agreements between Loblaw and any other tenants with the owner(s) including Choice Properties (CP) REIT Ontario Properties Limited and OMERS Realty Holding of Loblaw Properties
2	Sale Agreements	The agreements of purchase and sale/transfers agreements for Loblaw Properties
3	Offers to Purchase	Information related to any offers to purchase, or expressions of interest in purchasing any of Loblaw Properties
4	REIT Transfer information and appraisals	For each Loblaw store owned by CP REIT Ontario Properties Limited located in the City including, specifically, 11 Redway Road and 2549 Weston Road: As of June 30, 2013, and December 31, 2013, 2014 and 2015: a) Their fair value b) All valuation reports of these stores prepared by independent appraisers at or close to the above- mentioned dates c) Overall capitalization rates (consistent with rates utilized to calculate the weighted average for Canadian investment properties as published in the REIT’s 2015 Annual Report, page 7)
5	Other appraisals	All other valuation reports of Loblaw Properties by independent appraisers since 2005
6	Building plans	Building plans (architectural, elevations, structural, mechanical, plumbing and refrigeration)
7	Construction Costs	Detailed/itemized store construction costs (project cost sheet is preferred) including refrigeration
8	Renovation/Refurbishment Costs	Costs of construction and full description for all renovations, changes, upgrades, refurbishment, “remerchandising”, etc., for each of the Loblaw Properties since Loblaw stores opened
9	Planning opinions	Copies of any planning opinions, reviews, memoranda etc. regarding the redevelopment any of Loblaw Properties
10	Toronto grocery store sales information	For each Loblaw Big Box store [including Loblaw Properties] for which the City has appealed the 2016 current value assessment (CVA): a) Total sales b) Total square feet c) Sales per square foot
11	Toronto vs. Ontario Annual Aggregate Grocery Growth Information	For the aggregate of all Loblaw food retail stores in (i) City, and, (ii) rest of Ontario: Annually for the years 2006-2015: a) Food retail same-store sales growth per cent (consistent with sales data for Canada as published in Loblaw’s 2015 Annual Report, page 119) b) The total sales data for the years 2006-2015 used in the calculation of (a)
12	Ontario grocery store sales information	For each Loblaw Big Box store located in the Ontario municipalities with properties utilized in Charles Johnstone’s application of the Market Extraction Method: 1. Total sales 2. Total square feet 3. Sales per square foot

8As discussed in greater detail below, Rule 45 requires the disclosure of any document that is relevant to an issue raised by any of the parties in the appeal proceeding, as set out in a Statement of Issues or Response. In this case, the City has raised issues relating to the application of three property valuation methodologies: direct sales comparison, income approach and cost approach.

9The City also requests a 90-day extension of the due date under the applicable Schedule of Events governing the appeal proceedings for each of these three properties.

10In its response to the City’s Motion, MPAC has, in one instance, submitted its own disclosure request and also requests that the Board order Loblaw to allow inspections of the three Loblaw Properties.

Result

11The Motion is allowed in part. The Board’s specific disposition for each requested item is set out in the Board’s findings below.

ANALYSIS

Relevant Legislation and Rules

12The Act states that:

1. “current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.

19(1) Assessment based on current value. – The assessment of land shall be based on its current value.

13The Board’s Rules states that:

Proportionality

5. These Rules shall be applied in a manner proportionate to the importance and complexity of the issues in a proceeding and with a view to resolving appeals within the four year cycle.

Statement of Issues and Responses

1. Statements of issues and responses must contain:

(1) If the issue is current value:

a) the current value requested and how it is calculated;

b) a full statement of every issue that the party intends to raise, including identification of comparable property to be referred to, if any;

c) a list of all facts, legal grounds and documents that the party relies on in support of its position.

(2) If the issue is the equity of the assessment pursuant to section 44(3)(b) of the Assessment Act:

a) the assessment requested;

b) identification of the vicinity claimed by the party;

c) identification of similar lands in the vicinity to be relied on by the party;

d) how the party proposes to calculate the adjustment for equity; and

e) a list of all facts, legal grounds and documents that the party relies on in support of its position.

Disclosure

45. All parties must provide a copy, in paper or electronic form, of all relevant documents in their possession, control or power to all other parties in the proceeding, except for privileged documents.

No Admission

46. The disclosure or production of a document is not an admission of its relevance or admissibility.

The Test to be Applied

14The test to be applied has been set out in Walmart Canada Corporation and Target Canada Corporation v Municipal Property Assessment Corporation, Region 01, 2018 CanLII 67789 (ON ARB):

18Relevance is determined in relation to whether a document is relevant to an issue in dispute. However, this is not the only criteria that the Board will consider when determining whether a document, which may be relevant, should be disclosed. Rule 45, itself, provides an exception for privileged documents. In addition, Rule 5 provides that “These Rules shall be applied in a manner proportionate to the importance and complexity of the issues in a proceeding and with a view to resolving appeals within the four year cycle”. Therefore, the requirement to disclose relevant documents must also be applied in a proportionate manner. Rule 45 does not include specific criteria to assess proportionality. However, the Board finds that the criteria in Rule 29.2.03(1) and (2) of the Rules of Civil Procedure (Ontario) are applicable, namely:

1. the time required for the party or other person to answer the question or produce the document would be unreasonable;

2. the expense associated with answering the question or producing the document would be unjustified;

3. requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

4. requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action;

5. the information or the document is readily available to the party requesting it from another source; and,

6. whether an order for disclosure would result in an excessive volume of documents required to be produced by the party or other person.

The Board observes that this is a non-exhaustive list. There may be other criteria identified on a case by case basis.

19In applying the above criteria, the Board must balance these considerations with relevancy of the information, i.e. the degree to which it appears that the document is relevant to an issue in dispute, and, if so, how probative this evidence may be. The onus to establish that a document should be disclosed pursuant to Rule 45 rests with the party who requests the disclosure.

20In addition to the above, it should also be noted that Rule 45 only requires disclosure of documents in a party’s possession, control, or power. A party is not required to produce new information, or obtain documents that are not within its possession, control, or power.

Disclosure Guide and Schedule

15In consultation with the stakeholder representatives, the Board developed and issued a Guideline entitled Disclosure Requirements for General and Summary Proceedings (“Disclosure Guideline”). This Guideline includes the Disclosure Schedule Appendix A and B (“Disclosure Schedule”) which sets out stakeholder consensus on a non-exhaustive list of the types of disclosure which should routinely be disclosed as it is generally accepted that they are relevant to specific property valuation methodology issues, as well as other issues such as equitable reduction and property classification.

Disclosure Requests No. 3, No. 5 and No. 9

16For each of these requests, Loblaw states that the documents do not exist and, consequently, Loblaw has nothing to disclose. The City and MPAC do not dispute Loblaw’s assertion. Therefore, the Board makes no order in respect of these requests.

Disclosure Request No. 1 - Leases

City and MPAC’s Submissions

17The City states that the request relates to the issue of the correct application of the income approach.

18The City states that it understands that there are leases or occupancy agreements in place with tenants for each of the Loblaw Properties. The City submits that these leases or occupancy agreements are relevant to its valuation expert’s analysis of the income approach.

19MPAC further particularizes the City’s request as a request for the full lease for each of the Loblaw Properties and/or related onsite tenancies (e.g. gas bar, fitness centres) and any subsequent amendments, renewals or extensions. This request includes: Detailed occupancy/lease/licence agreements for any tenants such as optical, hair salon, dry cleaners, banks, coffee shop, fitness centres, doctor offices, etc. and any amendments, renewals or extensions.

20MPAC submits that the relevance of these leases is reflected in their inclusion in section 2(b)ii of the Board’s Disclosure Schedule as being documents that the appellants should routinely disclose with their Statement of Issues.

Loblaw’s Submissions

21Loblaw submits that the leases requested are not relevant. Loblaw states that the lease for 1755 Brimley Road is a ground lease which cannot be used in an income valuation as it is not a representative of a true market lease. Loblaw further states that the remaining leases are non-arm’s length leases between Loblaw and various related subsidiaries. Loblaw asserts that such non-market leases between related parties are irrelevant to an income valuation. Accordingly, Loblaw submits that the leases have no probative value.

City’s Reply

22The City asserts that Loblaw’s submission is based on a view that Loblaw can decide whether its leases are relevant to the issues in these appeals. The City submits that the Board rejected a similar argument in Vaughan (City) v Municipal Property Assessment Corporation, Region 14, 2020 CanLII 44350 (ON ARB), (“Vaughan”), stating at paragraph 40:

40Promenade submits that it should not be required to produce a relevant document if other sufficient information has been provided. Implicit in this argument, is the assumption that the disclosing party can decide whether another party requires the requested document for the preparation of its case. The Board does not accept this submission. Rule 45 clearly requires that, if a party has a relevant document in its possession, power, or control, it must be disclosed. Other parties are entitled to receive all relevant documents, for the purpose of determining whether they will rely on them as part of their evidence at the hearing of the appeal. [emphasis added]

Findings on Request No. 1

23Rule 45 requires that if a document is relevant it should be disclosed. As noted in Vaughan, other parties are entitled to receive all relevant documents, for the purpose of determining whether they will rely on them as part of their evidence at the main hearing of the appeal. If they decide to present this evidence, it is the Board Member conducting the main hearing who must ultimately determine whether the evidence is relevant and probative.

24The Board also notes that, should the Board order that a document be disclosed, Rule 46 provides that providing the disclosure is not an admission of its relevance or admissibility.

25The Board notes that, although Loblaw argues that the leases should not be considered because of the nature of the lease transactions, Loblaw does not challenge that leases are generally relevant to a property valuation using the income approach. As MPAC has noted, the Disclosure Schedule clearly identifies that such leases are relevant.

26However, Loblaw argues that the leases are not probative for the reasons cited in Loblaw’s submissions, which are supported by the opinion evidence of its valuation expert filed by Loblaw on this Motion. In addressing this argument, the Board notes that, at this stage of the proceeding, the Board will only consider how probative a document may be when deciding whether it is proportionate to require that the documents be disclosed. Simply put, it is not proportionate to order the disclosure of documents that appear to be of limited probative value, if the disclosing party would be required to expend significant time and resources to locate, copy and deliver the documents.

27In this case, there is nothing in the evidence to suggest that Loblaw would be required to expend significant time and resources to locate and deliver the leases.

28For these reasons, the Board grants Request No. 1.

Disclosure Request No. 2 – Sale Agreements

City and MPAC’s Submissions

29The City states that the request relates to the issue of the correct application of the direct sales comparison approach.

30The City refers to a number of sales of Loblaw Properties of which it is aware, stating that relatively recent sales of Loblaw Properties will provide relevant information to determine each property's current value and to provide a direct comparison of value for each of the Loblaw Properties.

31MPAC submits that the issue of Loblaw Properties sales is a recurring sub-issue referenced in the Disclosure Schedule: sections 1(b) for the cost approach, 2(e) for the income approach and 3(a) for the direct sales approach.

32MPAC further particularizes the City’s request as a request for land acquisition details (sale and particulars) and site servicing costs (grading, drainage, concreate/asphalt paving, lighting/utilities, etc.).

33MPAC submits that Loblaw owners can be reasonably expected to have in their possession the agreements of purchase and sale and land transfer documents effecting their ownership. MPAC also submits that documents detailing the Loblaw Properties’ sale/acquisition/transfer near the Valuation Date are de facto relevant and probative to the determination of the properties’ correct current values. Therefore, they should be disclosed.

Loblaw’s Submissions

34Loblaw first notes that it is not a party to the sales transaction referenced by the City respecting 1755 Brimley Road, and, consequently, states that it does not have any documentation related to the Agreement of Purchase of Sale for this transaction. Respecting the other two properties, Loblaw states that the transfers referenced by the City were non-market transactions between related parties and, therefore, are not arms-length transactions. For this reason, Loblaw submits that documents related to these transactions are not relevant or probative.

35In support of this submission, Loblaw relies on its valuation expert’s opinion evidence, which describes that sales between closely related buyers/sellers are not usually open market transactions, and that acquisitions or divestments by large corporations, pension funds, or real estate investment trusts that involve multiple parcels typically should not be considered for analysis. Loblaw further relies on its expert’s opinion that Big Box stores do not sell as going concerns but often sell as leased-fee investment properties, where leased-fee sale prices can exceed the fee simple value.

36Loblaw observes that two of the transfers referenced by the City show that the transfer was made for $0.00. Loblaw relies on its expert’s opinion evidence which indicates that, in order to determine the current value of a property, sales involving leases containing non-market rents must be adjusted, if possible. If not, the sale transaction should not be considered. This opinion evidence further asserts that an operating business is often referred to as a going concern and may include intangible personal property (e.g. business enterprise value or good will) that is not to be considered in the assessment or the valuation of the fee simple estate.

City’s Reply

37The City re-iterates its reply submission in respect of Request No. 1, namely, that a disclosing party cannot decide whether another party requires the requested document for the preparation of its case.

38The City submits that the question whether Loblaw leases or agreements of purchase and sale are non-arm's length, is an issue of the weight that a Hearing Member will give these documents if they are admitted as evidence in these appeals. The City argues that it requires the requested disclosure so that its experts can determine whether these agreements are arm's length, a ground lease, etc. Further, the City submits that it has specifically raised the correct valuation approach as an issue in these appeals. The City argues that these agreements are relevant to deciding if the current value of the Loblaw Properties can be determined using the income or direct sales comparison approaches.

Findings on Request No. 2

39In making its finding on Request No. 2, the Board adopts its analysis in respect of Request No. 1. The Board accepts that Loblaw’s opinion evidence raises legitimate questions whether the sale transactions should be considered when assessing current value. However, the Board notes that this opinion evidence does indicate that sales involving leases containing non-market rents can be used in some cases, if appropriate adjustments can be made. Apart from this, Loblaw’s opinion evidence does not address the point that the sale transactions in question can include relevant information, even if the valuation experts do not ultimately rely on these transactions in arriving at their conclusions on current value. On this basis alone, it cannot be said that information related to these sales transactions is irrelevant. As such, the other parties are entitled to receive these documents in order to make their own determination respecting whether they may rely on these sale transactions.

40In light of the above findings, the Board concludes that, at best, Loblaw has raised questions regarding how probative this evidence may be. However, the Board re-iterates that it is the Board Member who conducts the main hearing who must ultimately determine whether the evidence is relevant and probative.

41The question, therefore, is whether it would be proportionate to order the disclosure. In this case, there is nothing in the evidence to suggest that Loblaw would be required to expend significant time and resources to locate, copy and deliver the requested documents.

42For these reasons, the Board grants Request No. 2, with the exception of the sale transaction for 1755 Brimley Road for which Loblaw states that it does not have any documentation.

Disclosure Request No. 4 – REIT Transfer Information and Appraisals

City and MPAC’s Submissions

43The City states that the request relates to the issue of the correct application of the direct sales comparison valuation method.

44The City submits that offers to purchase or expressions of interest in purchasing any of the Loblaw Properties are relevant to the opinion of the City's expert respecting current value based on the sales comparison approach.

45MPAC emphasizes that Loblaw owner, CP REIT Ontario Properties Limited, acknowledges in its prospectus and annual reports that it retains a third-party appraiser who estimates the fair market value of the stores. MPAC further notes that CP REIT Ontario Properties Limited must prepare annual financial statements pursuant to the International Financial Reporting Standards, which require it to measure the fair value of its real estate assets on a continuous basis. Therefore, MPAC submits that the requested disclosure is for documents that Loblaw is required by Canadian securities law to create and possess.

46MPAC maintains that the appraisal reports requested are directly relevant to the issue of correct current value. MPAC submits that the relevance of these appraisals is reflected in their inclusion in sections 1(b)ii, 1(d)ix and 1(f) of the Disclosure Schedule as documents that an appellant should routinely disclose with its Statement of Issues.

47MPAC further submits that these appraisal reports, whether they are created for financing or for related party transactions, are of great probative value in resolving the underlying appeals. MPAC argues that the relevance and weight of the factual and opinion evidence within the report is a matter to be decided by the Board Member who conducts the hearing, not one that is at issue in a production motion.

Loblaw’s Submissions

48Loblaw maintains that any analysis, appraisals, or capitalization rates developed would have been done for internal corporate financial valuation purposes in relation to financial vehicles and that such valuations would use very different approaches and methodologies than what would be used to determine an assessed market value of the real property for tax assessment purposes. As such, Loblaw submits that this information is not relevant. Loblaw also submits that it would be disproportionate to require this disclosure, as it is not probative in determining correct current value, noting further that current value is based on market value in a sales transaction between unrelated parties.

49In support of its submission, Loblaw relies on its valuation expert’s opinion evidence that values derived for assessment purposes are different from appraisal reports prepared for financial reporting purposes, because they use differing definitions of ‘value’ and ‘property’. More particularly, correct and equitable current value will be different from a correct ‘fair value’ or a correct ‘business value’. This opinion also states that ‘fair value’ and ‘investment property’ are defined accounting terms, and that appraisals performed on investment properties for financial reporting have a different definition of the real estate interests to be valued than those required for an estimate of current value. In this regard, it is noted that ‘current value’ requires an estimate of the fee simple interest, as if unencumbered, whereas the ‘fair value’ of an investment property must estimate and include the value of the encumbered interest. Therefore, it is Loblaw’s expert’s opinion that adopting a value from an appraisal for financial reporting purposes, even as a cross-check, could be misleading. The opinion concludes that, as these types of sales should not be considered, it stands to reason that the overall capitalization rates and discount rates associated with these sales should not be considered for analysis in the derivation of the current value (i.e. market value of the fee simple, as unencumbered, interest).

City’s Reply

50The City endorses MPAC's submissions.

Findings on Request No. 4

51In addressing MPAC's submission that the Disclosure Schedule provides for disclosure of the requested appraisal reports, the Board notes that the Disclosure Schedule states:

Particulars of Subject Property sale(s) including:

ii. Full copy of property appraisal(s) prepared for property assessment purposes if an appraisal was completed within the five years preceding the valuation date; and

iii. Confirm the existence of property appraisal(s) prepared for any other purpose.

52The Board notes that the Disclosure Schedule distinguishes between appraisals of current value under the Act and property appraisals prepared for any other purpose. As noted earlier, the Disclosure Guideline represents stakeholder consensus respecting relevant information that should be disclosed, which has been accepted by the Board. As the Disclosure Guideline indicates, the only consensus respecting “property appraisals prepared for any other purpose” is that the existence of such appraisals should be confirmed.

53In this case, the requested appraisal reports are property appraisals “prepared for any other purpose”. Therefore, the Disclosure Schedule does not indicate, one way or the other, that these reports should be disclosed.

54However, that being said, the Board finds that its analysis respecting Request No. 2 applies here. At this stage in the proceeding, relevance is determined by looking at the relationship between the information provided in a requested document and the issue in dispute, not whether the information in the document will ultimately be admitted into evidence by the Board Member who conducts the hearing, nor the weight to be given to this evidence if it is admitted.

55While the Board accepts that there may be limitations in relying on these appraisal valuations, the Board again notes that: (i) the requested appraisals are in respect of the properties under appeal, and, as such, can include information relevant to the issues in dispute, irrespective of whether the valuation experts will ultimately rely on these transactions when evaluating current value; (ii) the requesting parties are entitled to review this relevant information to determine whether they will seek to adduce all or part of these documents into evidence; (iii) even if the requested documents may provide information of limited probative value, there is no evidence to indicate that Loblaw would be required to expend significant time and resources to locate, copy and deliver documents; and (iv) pursuant to Rule 46, disclosure of these reports does not constitute an admission by Loblaw of its relevance or admissibility.

56For these reasons, the Board grants Request No. 4

57Turning to a separate matter, MPAC has raised its own disclosure request respecting Requests No. 4 and No. 5, in addition to the request made by the City. The request is for “Loblaw’s estimate of useful/effective/economic life for each subject property as determined for financial accounting purposes”. MPAC acknowledges that this request does not directly correspond to a request made to the City. However, MPAC notes that it refers to information that should be present in an appraisal report and in the accounting records for the property transfers.

58As MPAC has not submitted its own disclosure Motion, Loblaw and MPAC are respondents to the City’s Motion only. Therefore, both Loblaw and MPAC are restricted to providing response submissions. As such, Loblaw has not had the opportunity to respond to MPAC's additional disclosure request. For this reason, the Board does not address MPAC's additional disclosure request in this Motion Decision.

Disclosure Request No. 6 – Building Plans

City and MPAC’s Submissions

59The City states that its request relates to the issues of the correct application of the cost approach, its review of MPAC's replacement cost new, and Loblaw’s valuation of replacement cost new using the Marshall & Swift Valuation (“MVS”) approach.

60The City submits that the building plans for each of the Loblaw Properties are relevant to the determination of the reproduction/replacement cost new (“RCN”) and effective age of the building values and site improvement values. The City further submits that building plans are also relevant to analyze MPAC's application of its in-house segregated cost Automated Cost System for RCN and for the City's response to Loblaw’s application of the MVS approach to determine RCN.

61In support of this submission, the City relies on its valuation expert’s opinion that the relevant information necessary to estimate the RCN for each of the Loblaw Properties includes:

a) building plans (architectural, elevations, structural, mechanical, plumbing, refrigeration);

b) building plans (architectural, elevations, structural, mechanical, plumbing, refrigeration);

c) store construction costs (project cost sheet is preferred) including refrigeration;

d) costs and full description for all renovations, changes, upgrades, refurbishment, and

e) results of any physical inspection of the property.

62MPAC supports the City’s submission, further noting that relevance of the building plans and renovation costs is reflected in sections 1(c)i and 1(d)xi of the Disclosure Schedule as documents the appellants should routinely disclose with their Statement of Issues.

63MPAC further submits that, without the building plans and renovation information, the parties cannot resolve disagreements on basic factual information regarding the Loblaw Properties’ construction and components. As an example, MPAC states that Loblaw and MPAC disagree on the gross floor area of each of the Loblaw Properties, a disagreement that MPAC asserts can be resolved with the site plans.

Loblaw’s Submissions

64Loblaw states that, due to the age of the stores in question, and Loblaw’s document retention policies, the building plans are not readily available. Loblaw asserts that, while efforts can be made to locate them, production would be incomplete. Loblaw argues that, in any event, the City is the construction approval authority, so this information should be in the City’s possession.

65In support of these submissions, Loblaw relies on its valuation expert’s opinion, which disagrees that an engineer’s opinion of the remaining physical life of the various components will be of assistance and be informative in determining the correct current value of each of the Loblaw Properties. This expert opinion also asserts that it is both incorrect and of little use to determine how long a building or other improvement may stand, with on-going maintenance, if that improvement is going to be renovated, converted to a new use, rehabilitated or torn down before it physically wears out.

City’s Reply

66Loblaw is in the best position to provide the disclosure and the City is encouraged by Loblaw’s willingness to locate the requested documents. The City states it has not retained an engineer to determine the “remaining physical life” of each of the Loblaw Properties. Instead, the City states that it seeks an opinion respecting RCN and effective ages of these properties.

Findings on Request No. 6

67The Board notes that Loblaw does not dispute that the requested documents are relevant. Loblaw only asserts that the building plans are not readily available, and, while efforts can be made to locate them, production would be incomplete.

68As for Loblaw’s submission that this information should be in the City’s possession because the City is the construction approval authority, the Board finds this submission is not accompanied by a sufficient explanation to establish that the requested documents are in the possession of the City. While the reference to the City as a “construction approval authority” may refer to the requirement that property owners must obtain building permits, or obtain other forms of approval, there is no evidence or analysis to establish that the City’s records would include the requested building plans.

69For these reasons, the Board grants Request No. 6, recognizing that, while Loblaw is required to use its best efforts to locate the requested documents, Loblaw is required to disclose only those documents that it can locate.

Disclosure Request No. 7 – Construction Costs

City and MPAC’s Submissions

70The City states that its request relates to the issue of the correct application of the cost approach, its review of MPAC's RCN, and Loblaw’s valuation of RCN using the MSV approach.

71The City submits that detailed construction costs including costs of refrigeration for each of the Loblaw Properties are relevant to the determination of the RCN and the effective age of the building values and site improvement values. Detailed construction costs are also relevant to analyze MPAC's application of its in-house segregated cost Automated Cost System for RCN and for the City's response to Loblaw’s application of MVS in determining RCN.

72MPAC's submissions are the same as its submissions respecting the City’s Request No. 6 - Building Plans.

Loblaw’s Submissions

73Loblaw states that its document retention policies and the age of the stores make locating and producing construction costs extremely difficult.

74Loblaw relies on the opinion evidence of its valuation expert who states that actual construction costs can be useful if they are current and complete and do not contain any extraordinary or atypical expenses that would not normally be incurred. However, such costs must be trended to the Valuation Date to be meaningful in a valuation context. The greater the difference between the Valuation Date and the construction date, the less likely the trended costs will be representative of the current cost of construction.

City’s Reply

75The City’s reply submissions are the same as its submissions respecting Request No. 6 - Building Plans.

Findings on Request No. 7

76The Board notes that Loblaw does not dispute that the requested disclosure is relevant, and, therefore, the documents should be disclosed. There is nothing in Loblaw’s submission to indicate that trended cost could not be representative of the current cost of construction.

77As a result, the Board grants Request No. 7, recognizing that, while Loblaw is required to use its best efforts to locate the requested documents, Loblaw is required to disclose only those documents that it can locate.

Disclosure Request No. 8 – Renovation/Refurbishment Costs

City and MPAC’s Submissions

78The City states that its request relates to of the correct application of the cost approach, its review MPAC's RCN, and Loblaw’s valuation of RCN using the MSV approach.

79The City submits that construction costs for all renovations and upgrades etc., for each of the Loblaw Properties are relevant to the determination of building effective age, because renovations and upgrades may alter the effective age which will affect the impact of depreciation on the building RCN value. An understanding of effective age relates directly to the analysis of MPAC's application of its in-house segregated cost Automated Cost System for RCN and the City's response to Loblaw’s application of the MVS approach for determination of RCN.

Loblaw’s Submissions

80Loblaw submits that its document retention policies and the age of the stores make locating and producing renovation and refurbishment costs difficult. Loblaw states it can make efforts to locate as many as possible, but production would be incomplete. Loblaw submits that, as the City is the construction approval authority, the City should have these records in its files, further noting that its valuation expert has stated that building permit information is usually in the City’s possession.

City’s Reply

81The City’s submissions are the same as its submissions made respecting Request No. 6 – Building Plans.

Findings on Request No. 8

82The Board notes that the parties’ submissions respecting Request No. 8 are effectively the same as their submissions respecting Request No. 6. For this reason, the Board adopts the same analysis and findings in respecting of Request No. 6 as the Board provided in respect of Request No. 6.

83Consequently, the Board grants Request No. 8, recognizing that, while Loblaw is required to use its best efforts to locate the requested documents, Loblaw is required to disclose only those documents that it can locate.

Disclosure Request No. 10 – Toronto Grocery Store Sales Information

City and MPAC’s Submissions

84The City states that its request relates to the issue of determining economic obsolescence for the application of the cost approach.

85The City submits that its valuation expert requires the information in the requested documents to provide its opinion on whether economic obsolescence affected Loblaw Big Box stores, including the Loblaw Properties, as of the Valuation Date, January 1, 2016, which is relevant to the cost approach.

86The City relies on its valuation expert’s opinion evidence that external factors that influence economic obsolescence are macro, industry, company, and locational. This opinion evidence also indicates that a meaningful way to approach the existence of external obsolescence for each of the Loblaw Properties is to examine changes in their respective sales per square foot of retail space over time. If sales per square foot are rising, there is likelihood that there is no economic obsolescence. The opposite is true if sales per square foot are declining.

87MPAC relies on the City’s submissions.

Loblaw’s Submissions

88Loblaw submits that the request is imprecise, maintaining that it is unclear which stores are referenced in the City’s request.

89Loblaw emphasizes that the Valuation Date is January 1, 2016, arguing that it is difficult to understand how store sales information, even if relevant, going back to 2006 has any bearing on this Valuation Date.

90Loblaw argues that store sales information is not used in determining cost valuation component factors such as obsolescence or depreciation, and it is also not used for the determination of income values, which are based on market rental rates and other parameters. In support of this submission, Loblaw relies on the opinion evidence of its valuation expert who states:

To determine external obsolescence, one would first have to realistically define what the factor(s) outside of the real property are. These factors must be measurable and definable (i.e. a "change factor''). Then this definable external influence must be measured or compared against comparable properties without the detrimental, external factor(s). Reviewing the business enterprise's sales volume does not define an external factor. Without a change factor, the retail sales can only show you what the retail sales are. Sales volume is influenced by a plethora of elements that do not pertain to the valuation of the fee simple interest of real property. For example, an increase in sales can be attributed to a technological advancement in personal property, a better trained and skilled workforce, or goodwill. The inclusion of these will result in a value contrary to the Assessment Act. It is not informative to review the retail sales of a particular business for assessment or assessment related appraisals of a standard retail big box property.

To value the real property of a Loblaw , the only concern is that of comparable properties (size, use, design, etc.) to derive values, depreciation (in any of its forms), or otherwise, and therefore, the valuation of a Loblaw would be limited to those market participants who occupy similar real estate.

91Loblaw further argues that the relevance or probative value of the requested information is unclear given that the appeals relate to the valuation of real property, more specifically, determining the unencumbered fee simple value of the real property of the Loblaw Properties.

92Loblaw submits that the requested information is highly confidential, proprietary and commercially sensitive. Loblaw maintains that provision of non-disclosure undertakings will not afford sufficient protection against the enormous prejudice to Loblaw if such information were inadvertently disclosed to a third party.

City’s Reply

93The City submits that its request for sales data is neither imprecise nor vastly disproportionate. The City maintains that Loblaw misconstrues the reason for the City's request for the sales data, stating that this sales data is not being used to value the unencumbered fee simple interest of real estate. The City asserts that Loblaw is also incorrect in stating that sales data is not used in the determination of cost valuation component factors such as obsolescence.

94The City emphasizes that its valuation expert has examined a body of academic literature that supports the broad categories, including sales data, that can be considered in its analysis of economic obsolescence. The City relies on its valuation expert’s opinion that sales data over time, i.e. since 2006, will assist in understanding relevant economic trends. More specifically, the City’s expert’s opinion is that comparing sales per square foot of the Loblaw Properties to benchmarks, is a proxy for profits or returns for the stores.

95The City argues that its valuation expert has advanced a reasonable thesis that if there is economic obsolescence affecting the Loblaw Properties, it should be reflected in weak or declining sales performance of these stores and other Loblaw stores in the City. For this reason, the City submits that the requested sales data is probative.

96The City also submits that analyzing for the existence of economic obsolescence is also relevant to the City’s review of Loblaw’s expert’s application of the Market Extraction Method. The City asserts that Loblaw’s expert arrives at an annual rate of depreciation of 4.70% which encompasses physical depreciation, as well as functional and economic obsolescence, further explaining that this annual rate of depreciation is based on sales between 2004 to 2012 of “shuddered” Canadian Tire and The Home Depot stores in the Town of Milton, Municipality of Strathroy, City of Kitchener, City of Ottawa, City of Timmins, Town of Caledon, City of Cambridge, City of Thunder Bay, City of London (3 properties), Town of Bowmanville, City of Mississauga, City of Brampton, City of Belleville and City of Windsor. The City notes that none of these sales are in the City. The City asserts that the sales data from each Loblaw Big Box store located in Ontario municipalities, that have been used by Loblaw’s expert, will be used to determine if there was economic obsolescence affecting those Loblaw stores that is consistent with economic obsolescence that may have affected the Canadian Tire and The Home Depot stores in Loblaw’s expert’s market extraction method. The City maintains that any economic obsolescence affecting those Loblaw stores will be compared with any economic obsolescence affecting the appealed Loblaw Properties in the City.

Findings on Request No. 10

97The Board notes that there clearly is a dispute among the parties respecting the calculation of economic obsolescence. In this regard, the Board observes that the City’s position is supported by expert opinion evidence, as opposed to a lay opinion or view.

98As previously noted, at this stage in these proceedings, it is not the Board’s role to adjudicate this dispute. The City is entitled to advance its case at a hearing, which includes advancing its evidence in support of its position on this issue. While Loblaw disagrees with the methodological approach taken by the City’s valuation expert, Loblaw does not state that the requested documents are irrelevant to this approach.

99The Board also re-iterates that, at this stage in the proceeding, relevance is determined by looking at the relationship between the information provided in a requested document and the issue in dispute, not whether the information in the document will ultimately be admitted into evidence by the Board Member who conducts the hearing, nor the weight to be given to this evidence if it is admitted.

100Turning to Loblaw’s argument that the request for data as far back as 2006 has no bearing on this Valuation Date, the Board notes that the calculation of economic obsolescence is generally based on longer-term market performance, as opposed to temporary or short-term transitory changes in market conditions. For this reason, the Board does not accept Loblaw’s submission that analyzing data for 2006 has no bearing on determining economic obsolescence that would apply as of the Valuation Date.

101For these reasons, the Board finds that the requested documents are relevant.

102Regarding Loblaw’s argument that the disclosure of the requested documents contains highly confidential, proprietary and commercially sensitive information, the Board notes that the City does not dispute this assertion. Loblaw submits that provision of non-disclosure undertakings is not a sufficient protection against the enormous prejudice to Loblaw if such information were inadvertently disclosed to a third party. For the following reasons, the Board does not accept this submission.

103The Board must always balance the importance of disclosing relevant documents against any potential prejudice such disclosure may cause. However, full disclosure of all relevant information is fundamental in ensuring both a fair hearing and the integrity of the Board’s appeal process. For this reason, a disclosing party must clearly establish not only that prejudice may exist, but also that such prejudice is sufficiently significant to outweigh the importance of disclosing relevant documents. In making this determination, the Board will also consider whether the prejudice can be alleviated by the execution of a non-disclosure agreement.

104In this case, the Board notes that Loblaw has not provided any evidence or analysis to explain why a non-disclosure undertaking would be insufficient to address the alleged prejudice. For this reason, the Board finds that Loblaw has not established that the alleged prejudice outweighs the importance of disclosing relevant documents.

105The Board now turns to Loblaw’s submission that the City’s request is imprecise, maintaining that it is unclear which stores are referenced in the City’s request. The Board finds that the City’s request is specific. It clearly identifies the Loblaw Properties and the specific information requested (total sale and total square feet in order to calculate sales per square foot). For this reason, the Board does not accept Loblaw’s submission.

106Based on the above analysis and findings, the Board grants Request No. 10.

Disclosure Request No. 11 – Toronto vs. Ontario Annual Aggregate Grocery Growth Information

City and MPAC’s Submissions

107The City states that its request relates to the issue of determining economic obsolescence for the application of the cost approach.

108The City submits that, for comparison purposes, it is relevant to consider the sales data of other Loblaw stores in the City and the rest of Ontario to measure economic obsolescence affecting the Loblaw Properties. In support of this submission, the City relies on its submissions and the opinion evidence of its valuation expert, as detailed in its submissions for Request No. 10.

109MPAC relies on the City’s submissions.

Loblaw’s Submissions

110Loblaw relies on all the submissions it has made in respect of Request No. 10.

111In particular, Loblaw submits that the City’s request is vastly disproportionate. Loblaw observes that there are hundreds of Loblaw grocery stores in Province of Ontario operating under different banners and of different ages, sizes and functionalities. Loblaw further observes that the Loblaw Properties are box-type “hybrid” stores, and that most of Loblaw’s grocery stores are not box “hybrids”. Loblaw submits, therefore, that the Loblaw Properties are not similar on any measure of comparability.

City’s Reply

112The City relies on the reply submissions it has made in respect of Request No. 10.

Findings on Request No. 11

113The Board observes that the submissions and the evidence relied on by the parties is the same as their submissions in respect of Request No. 10. The Board finds that its analysis and findings respecting Request No. 10 apply equally to Request No. 11, and, therefore, the Board grants Request No. 11, subject to one additional provision.

114The Board has concerns regarding the specificity of the City’s request, regarding the request for “all Loblaw food retail stores in the rest of Province of Ontario”.

115The Board notes that the City has not disputed Loblaw’s assertion that there are hundreds of Loblaw grocery stores in the Province of Ontario operating under different banners and of different ages, sizes and functionalities. The Board understands that the City’s approach to calculating economic obsolescence might include such properties. Nevertheless, it may not be proportionate to require disclosure of the requested information for dissimilar properties if this data is not germane to the analysis to be conducted by the City’s valuation expert. More to the point, Loblaw should not be required to guess which properties are included in “all Loblaw food retail stores in the rest of Province of Ontario”. For this reason, the Board, in granting Request No. 11, includes the additional condition that the City must provide a list of the specific Loblaw food retail stores to which this request will apply, and to serve this list on all other parties within five business days of the issuance date of this Motion Decision.

Disclosure Request No. 12 – Ontario Grocery Store Sales Information

City and MPAC’s Submissions

116The City states that its request relates to the issue of determining economic obsolescence for the application of the cost approach.

117The City states as follows. Loblaw’s valuation expert calculates an annual rate of depreciation of 4.00% per year, whereas MPAC determined a rate of depreciation of 3.33% per year. Both MPAC and Loblaw’s valuation experts use the Market Extraction Method to determine their respective rates of depreciation. In applying this method, Loblaw’s valuation expert relies on sales of properties located in several Ontario municipalities.

118The City submits that, in order to test this analysis, its valuation expert requires sales data for Loblaw stores in those municipalities. The City further submits that this data is also relevant for testing MPAC's analysis, as MPAC relies on almost all of the same sales of properties.

119MPAC relies on the City’s submissions.

Loblaw’s Submissions

120Loblaw relies on its submissions made in respect of Request No. 10.

City’s Reply

121The City relies on its reply submissions made in respect of Request No. 10.

Findings on Request No. 12

122The Board observes that the submissions and the evidence relied on by the parties is the same as their submissions in respect of Requests No. 10 and No. 11. The Board finds that its analysis and findings respecting these two requests apply equally to Request No. 12, and, therefore, the Board grants Request No. 12, subject to the additional provision that the City must provide a list of the specific Loblaw food retail stores to which Request No. 12 will apply, and to serve this list to all other parties within five business days of the issuance date of this Motion Decision.

MPAC Request for Inspections

123In its response to the City’s Motion, MPAC states that, to date, inspections have been conducted only for the 1755 Brimley Road property. MPAC requests that the Board make an order requiring Loblaw to co-operate in arranging for inspections of the other properties within 30 days of the date of issuance of this Motion Decision.

124The Board again notes that, as MPAC has not brought a Motion, Loblaw has not had an opportunity to respond to this request. Therefore, the Board does not address this request in this Decision. However, the Board observes that it expects that the parties will work cooperatively and collaboratively in arranging required inspections on a timely basis.

Request for Amendment to the Schedule of Events

125All parties agree that an extension to the Schedule of Events for the three Loblaw Properties will be required. The City has requested an extension of the due dates for filing its Appellant’s expert report(s) to a date that is 90 days after the issuance of this Motion Decision. MPAC agrees. Loblaw did not provide a response to this submission.

126As it appears that the disclosure requests ordered by the Board are somewhat complex, the Board finds it is reasonable to allow for a 90 day extension to provide sufficient time for Loblaw to provide the disclosure and for the valuation experts of responding parties to review it in order to prepare their response reports.

ORDER

127In response to Disclosure Requests Nos. 1, 2, 4, 6, 7, 8, and 10 to 12, Loblaw is required to disclose all documents in its possession, control or power no later than 45 days from the issuance date of this Motion Decision.

128Respecting Disclosure Requests No. 11 and No. 12, the City is required to provide the list of specific properties to which these disclosure requests apply, no later than five business days from the issuance date of this Motion Decision.

129The due date for serving the Appellant’s expert report(s), as set out in the Schedule of Events for the appeal proceeding for each of the three Loblaw Properties, is amended to a date 90 days from the issuance date of this Motion Decision. All other subsequent due dates are to be adjusted accordingly. The Board’s Case Coordinator will advise the parties of the specific due dates, which may be adjusted slightly due to constraints imposed by the Board’s electronic case management system. If the Schedule of Events for the other appeals filed in respect of these three properties (“Other Appeal Proceedings”) is the same as the Schedule of Events for the City’s appeal proceedings, the Schedule of Events for the Other Appeal Proceedings will be similarly amended.

“Dirk VanderBent”

Dirk VanderBent Vice-Chair Assessment Review Board

Website: www.tribunalsontario.ca/arb Telephone: 416-212-6349 Toll Free: 1-866-448-2248

SCHEDULE A

SCHEDULE A – Continued

SCHEDULE A – Continued