536555 Ontario Ltd. & Emros Developments Corp. v. Ottawa (City), 2024 CanLII 74379

Ontario Land Tribunal

Tribunal ontarien de l’aménagement du territoire

ISSUE DATE: August 02, 2024

CASE NO(S).: OLT-22-002385

(Formerly LC190027)

PROCEEDING COMMENCED UNDER section 26(1) of the Expropriations Act, R.S.O. 1990, c. E.27

Appellant: 536555 Ontario Ltd. and Emros Developments Corp.

Subject: Determination of compensation

Property Address: 747 Richmond Road

Municipality/UT: Ottawa/Ottawa

OLT Case No.: OLT-22-002385

Legacy Case No.: LC190027

OLT Case Name: 536555 Ontario Ltd. & Emros Developments Corp. v. Ottawa (City)

Heard: June 5-9, 12-16, 19-20, 2023, by Video Hearing September 12, 14, 2023, in person

APPEARANCES:

Parties

Counsel

536555 Ontario Ltd. and Emros Developments Corp.

Sean Foran Abbey Sinclair Nicole Dunford (Law Clerk)

City of Ottawa

Frank Sperduti Laura Robinson

DECISION DELIVERED BY ROBERT G. ACKERMAN AND ORDER OF THE TRIBUNAL

Link to Order

BACKGROUND

1This Claim is brought pursuant to the provisions of the Expropriations Act, R.S.O. 1990, c. E. 26 (the “Act”), and arises as a result of the expropriation by the City of Ottawa (“City”) of all the Claimants’ right, title and interest, in and to the lands and premises municipally known as 747 Richmond Road, Ottawa (“Expropriation”), and more particularly described as Part of Lot 27, Concession 1, (Ottawa Front) Nepean, being Parts 1 and 2 on Plan 5R-10438, City of Ottawa, being all of PIN 04751-0121 (LT) (the “Subject Property”).

2The Subject Property comprised 0.60 acres (2,443 square metres (“sq. m.”) (26,296 square feet “sq. ft.”) and was located at the north-east corner of Richmond Road and Cleary Avenue. The Subject Property was improved with a single level retail plaza which contained seven (7) tenanted commercial units.

3The City expropriated the Subject Property for the purpose of implementing the western extension of the Confederation Line light rail transit (“LRT”) system, as part of the City’s Stage 2 LRT Project on November 27, 2017, which is also the “Effective Date” for the purposes of determining the market value of the Subject Property and the calculation of the amount of the compensation payable.

4The Parties are in agreement that the highest and best use (“HBU”) of the Subject Property was not its existing use, as it had become a redevelopment site for a high-density residential/mixed-use development. The dispute between the Parties centres around the form and density which the residential/mixed-use re-development would take at the Effective Date, and as a result, the market value of the Subject Property as at the Effective Date.

5It is the position of the Claimants that the Subject Property as at the Effective Date could have been developed in the form of two residential towers of 19 and 16 storeys with ground floor commercial space, a Gross Buildable Area* (“GBA”) of up to 24,357 sq. m. (262,177 sq. ft.), and a Gross Floor Area (“GFA”) (in accordance with the City’s Zoning By-law) of 196,248 sq. ft. (the “Lahey Proposal” as described in paragraph 37 below). It is the position of the Claimants that the density of the Lahey Proposal represents the HBU for the Subject Property and that the market value of the Subject Property as at the Effective Date was $13,200,000. (* GBA and GFA are defined in paragraph 62 below).

6The City disputes the Claimants’ position on density and market value. It is the position of the City that the Claimants’ proposed development concept of two residential towers of 19 and 16 storeys with ground floor commercial space and its density are not reasonable and were not likely to receive approval. In addition, the City maintains that the Claimants’ position respecting achievable density is premised upon a density which is influenced by the scheme contrary to Section 14(4)(b) of the Act. The City maintains that when the scheme is ignored and the drawbacks of the Subject Property, including its isolated suburban location, its lack of proximity to retail and commercial amenities, and environmental contamination are taken into account, as well as the state of the Ottawa condominium market as at the Effective date, the market value of the Subject Property was $5,480,000.

THE ISSUES

7Counsel for the Claimants submits that the issues to be determined by the Tribunal are:

a. The reasonable and probable density that could have been achieved for the Subject Property;

b. The HBU of the Subject Property; and

c. The fair market value of the Subject Property, including any deduction that should be applied for environmental remediation if any, as at the Effective Date.

8Counsel for the City submits that the issue to be determined by the Tribunal is the fair market value of the Subject Property as at the Effective Date, which will require the Tribunal to answer the following questions:

(a) How is the scheme to be screened from the analysis of market value?

(b) What is the HBU of the Subject Property?

(c) In light of the HBU, what is the market value of the Subject Property?

9The Tribunal finds that the issues to be determined are:

(a) What comprises the scheme?

(b) How is the scheme to be screened from the analysis of market value?

(c) What was the HBU of the Subject Property at the Effective Date?

(d) What was the market value of the Subject Property at the Effective date?

(e) Should there be a deduction for the estimated cost of environmental remediation from the market value of the Subject Property?

THE HEARING

10The 14-day hearing of this Claim was scheduled and heard by the Tribunal by video hearing with the evidentiary portion of the hearing running from June 5 to June 20, 2023, and with final argument by written submissions and oral argument on September 12 and September 14, 2023 (collectively, “Hearing”).

THE EVIDENCE

11There were no lay witnesses called by either side. The Tribunal heard evidence from the following expert witnesses on behalf of the Claimants and the City:

12For the Claimants:

• Brian Casagrande – Land Use Planner;

• Roderick Lahey – Architect;

• Paul Morassutti – Real Estate Appraiser;

• Peter Norman – Land Economist.

13For the City:

• John Smit – Land Use Planner;

• Anthony West – Professional Engineer-Environmental;

• Mark Conway – Land Use Planner and Land Economist;

• Barry Hobin – Architect;

• Tony Capordelis -- Real Estate Appraiser.

14The documentary evidence filed by the Parties was voluminous. The following documents were filed and marked as Exhibits:

• Exhibit 1A-1H – Joint Document Brief (8 vols);

• Exhibit 2 – Claimants’ Expert Report Brief;

• Exhibit 3 – Claimants’ visual Evidence Brief;

• Exhibit 4 – Claimants’ Sur-Reply Brief;

• Exhibit 5 – City’s Expert Report Brief;

• Exhibit 6 – Agreed Statement of Facts;

• Exhibit 7 – C.V. for Brian Casagrande;

• Exhibit 8 – OPA 150 – annotated;

• Exhibit 9 – Document Brief – Brian Casagrande cross-examination;

• Exhibit 10 – C.V. for Roderick Lahey;

• Exhibit 11 – Corrected Site Plan for 111 Champlain Avenue South;

• Exhibit 12 – Definition of GFA for Ottawa, By-law 2008-250, s. 54;

• Exhibit 13 – Location of properties in relation to transit stations;

• Exhibit 14 – Document Brief for Paul Morassutti cross-examination;

• Exhibit 15 – Summary of Morassutti Comparable Sales by overall consideration;

• Exhibit 16 – Schedule C, OPA 70, showing 927 Richmond Road and 108 Woodruffe Avenue;

• Exhibit 17 – Planning Committee Report 33A – July 11, 2012, re. 927 Richmond Road and 108 Woodruffe Avenue;

• Exhibit 18 – Excerpt from Schedule C, OPA 70 showing area east of 747 Richmond Road with 175 Richmond Road and 175 Scarlet Street indicated;

• Exhibit 19 – Notice of Planning Committee meeting August 10, 2012, with Report to Planning committee August 9, 2012, re. 175 Richmond Road;

• Exhibit 20 – Report to Planning Committee, March 9, 2017, re. 1960 Scott Street;

• Exhibit 21 – Corrected Figure 2, NBLC Report, Exhibit 5, Tab 2, ST-A;

• Exhibit 22 – Replacement page 9 (p. 63 PDF), NBLC Report, Exhibit 5, Tab 2, STA

• Exhibit 23 – Graph by Altus Group showing new condominium apartment sales, Ottawa, 2008 - 2017;

• Exhibit 24 – Google Map – Walking route from 774 Bronson to Carlton University;

• Exhibit 25 – Google Map – Walking route from 1050b Somerset Street West to Carlton University;

• Exhibit 26 – Google Maps – Elevation view of 1451 Wellington Street West, April 2023;

• Exhibit 27 – Data Table by Altus Group showing renter-occupied condominium apartments by period of construction for Ottawa and Toronto;

• Exhibit 28 – Graph by Altus Group showing condominium and purpose-built rental apartment starts by intended market, selected CMA’s (Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montreal)

• Exhibit 29 – Preliminary Geo-technical Investigation Report by Paterson Group – February 26, 2014;

• Exhibit 30 – Traffic Impact Study prepared by CastleGlen Consulting Inc. – December 11, 2013;

• Exhibit 31 – Document Brief – Peter Norman Examination in chief;

• Exhibit 32 – Google Earth Map of Selected Westboro Properties per PMA Brokerage Study 2017;

• Exhibit 33 – Excerpt from CMHC Housing Market Assessment for Ottawa, Q3, 2017;

• Exhibit 34 – RE/Max Premier Listing for 308-75 Cleary Avenue.

15A full set of the transcripts of the oral evidence (12 volumes) was filed.

16The written submissions filed on behalf of the Parties following the conclusion of the evidentiary portion of the Hearing consisted of:

• Claimants’ Closing Submissions, July 31, 2023;

• Claimants’ Book of Authorities, July 31, 2023;

• City’s Closing Submissions, August 18, 2023;

• City’s Book of Authorities, August 18, 2023;

• Claimants’ Reply Submissions, August 28, 2023;

• Claimants’ Supplementary Book of Authorities, August 28, 2023;

• Claimants’ Compendium of Transcript Excerpts, September 12, 2023;

• City’s Closing Submissions with Transcript Citations, September 18, 2023;

• City’s Compendium of Transcript Citations, September 18, 2023.

ANALYSIS AND FINDINGS

What Comprises the Scheme

17The Claimants plead in the Amended Statement of Claim that the scheme or development for the Expropriation was the construction, maintenance and repair of the Cleary Avenue LRT station, the LRT, and all improvements, infrastructure and works related thereto. In its Amended Reply the City admits to the foregoing description of the Scheme.

18The Notice of Application for Approval to Expropriate Land was produced and filed as Exhibit 1, Tab 1. While giving notice of the intent and purpose of the Expropriation, the City’s Application for Approval provides a more fulsome description of the scheme which the Tribunal prefers:

…for the purposes of the Stage 2 Ottawa Light Rail Transit System project (“Stage 2 LRT Project”) including but not limited to the … operation and maintenance of light rail infrastructure, tunnel guideway corridors, tunnel portals, at-grade guideway corridors, guideways, stations, station entrances and station to surface access points, platforms, multi-use pathways, bridges and bridge approaches…

19The Parties entered into an Agreed Statement of Facts which was produced and marked as Exhibit 6 (“ASF”). Paragraph 16 provides that the Parties have agreed that:

The scheme or development for which the Subject Property was expropriated, as contemplated by Section 14(4)(b) of the Act, is the design, construction, maintenance, operation and repair of the Stage 2 LRT project, including the light rail transit system, tunnel, corridor, guideway, stations, including the Cleary LRT Station, and all improvements, infrastructure and works related thereto (the “Scheme”).

20The Parties have also agreed, as set out in paragraph 17 of the ASF, that the initiation of the scheme commenced with passage by the City’s Council of the 2013 Transportation Master Plan (“2013 TMP”) on November 26, 2013.

21The Tribunal finds that the matters comprising the scheme are the development for which the Subject Property was expropriated, the design, construction, maintenance, operation and repair of the Stage 2 LRT project, including the light rail transit system, tunnel, corridor, guideway, stations, including the Cleary LRT Station, and all improvements, infrastructure and works related thereto and includes the City’s 2013 TMP and the Confederation Line LRT Project (the ”Scheme”).

How is the Scheme to Be Screened from the Analysis of Market Value

22Section 14 of the Act establishes certain restrictions which the Tribunal must apply when determining market value of land taken in compensation proceedings under the Act. Section 14(4)(b) of the Act directs, with emphasis added, that:

(4) In determining the market value of land, no account shall be taken of,…

(a) any increase or decrease in the value of the land resulting from the development or the imminence of the development in respect of which the expropriation is made or from any expropriation or imminent prospect of expropriation; (Section 14(4)(b) of the Expropriations Act, R.S.O. 1990, c. E. 26).

23This statutory directive is commonly referred to by the Tribunal, the Courts and those practicing land compensation law as, “screening out the scheme.”

24Counsel for the Claimants submits that the City’s approval of the 2013 TMP on November 26, 2013, constitutes the initiation of the Scheme in respect of which the City expropriated the Subject Property. The Parties’ land use planning experts agreed that the Scheme began to influence the applicable land use planning policies in November 2013. The City’s land use planner, John Smit, and the City’s appraiser, Tony Capordelis, testified that the Scheme has dominated the City of Ottawa’s vacant development land market from November 2013 to the Effective Day and beyond. Therefore, any resulting changes to relevant planning policies are to be screened out after the Scheme Commencement Date pursuant to Section 14(4)(b), as the Scheme began to influence the applicable land use planning policies beginning in November 2013.

25Counsel for the City submits that the restrictions imposed by Section 14(4)(b) require that the Parties and the Tribunal must:

a. Ignore the fact of the LRT system;

b. Ignore the fact that the Cleary LRT station will be in the immediate vicinity of the Subject Property when evaluating the proximity and connectivity to transit of the Subject Property;

c. Ignore any potential increased density that may be justified on the Subject Property due to its proximity to higher-order transit. This includes elimination from consideration of any planning policies directing increased densities to areas in proximity to the LRT system;

d. The appraisers should select comparable sales that are not in proximity to the LRT system, and which were not impacted by the Scheme, where possible;

e. As the City’s market for vacant development sites was dominated by the presence of the Scheme, specific adjustments are required to be made to comparable sales to account for the impact of the Scheme on pricing and density.

26As the Scheme initiated with the passage of the 2013 TMP, Counsel for the Claimants agreed that any resulting changes to the relevant planning policies must be screened out after that date pursuant to Section 14(4)(b) of the Act.

27The Tribunal is of the view that, in addition to the matters agreed between the Parties in paragraph 16 of the ASF, the strict application of the provisions of Section 14(4)(b) is required to ensure that any influence of the Scheme is screened out in the analysis of market value. The Tribunal therefore finds that the restrictions contained in Section 14(4)(b) must be strictly applied to all expert witnesses, being the planners, architects, land economists and appraisers. The Scheme must be screened out when determining the relevant planning regime for the Subject Property, when determining the HBU of the Subject Property as at the Effective Date, when determining the planning regime governing the development of the Subject Property, as at the Effective Date, and when formulating the architectural concept plans for the Subject Property as at the Effective Date.

28In addition, the Tribunal finds that the scheme must be screened out by the appraisers when determining the Market Value of the Subject Property by the Direct Comparison Approach (“DCA”), by ensuring that the market values of the comparable sales were not influenced by the Scheme. The screening requires, firstly, the selection of comparable sales which were not impacted by the Scheme. If a sufficient number of appropriate comparable sales are not available, adjustments must be applied to the sales selected to screen out the impact of the Scheme upon any of the comparable sales. The appraisers should consider more than one approach to determining market value as a reasonability check on the opinion of market value arrived at by the DCA. As set out in the next section, as the Claimants’ position respecting the HBU of the Subject Property is based upon the density achievable at the Effective Date for a residential/mixed-use development, the appropriate check would appear to be the completion of a development pro forma analysis using the land residual method.

29In summary:

a. the Tribunal finds that the Scheme must be screened out when determining the relevant planning regime for the Subject Property as at the Effective Date;

b. the Tribunal finds that the Scheme must be screened out when determining the HBU of the Subject Property as at the Effective Date;

c. the Tribunal finds that the Scheme must be screened out when analyzing the Market Value of the Subject Property by the DCA, by adjusting the comparable sales appropriately to screen out any Scheme influence.

d. The Tribunal finds that the Scheme must be screened out when formulating the architectural concept plans for the Subject Property as at the Effective Date.

What is the Highest and Best Use of the Subject Property

30The HBU of a property is defined in Section 3.32 of the Canadian Uniform Standards of Appraisal Practice (“CUSPAP”) as:

That reasonable and probable use that will support the highest present value, as defined, as of the effective date of the appraisal. Alternatively, that use, from among reasonable probable and legal alternative uses found to be physically possible, appropriately supported, financially feasible, and which results in the highest value.

31Counsel for the City submits that the Divisional Court has distilled the CUSPAP definition of HBU down to four criteria. The HBU must be legally permissible, physically possible, financially feasible, and maximally profitable. In addition, the four criteria must be considered and satisfied sequentially in the order set out above. (1353837 Ontario Inc. v. City of Stratford, 2022 ONSC 6347 (Div. Ct.) at para. 21).

32The Parties’ land use planning experts agreed as to the applicable planning instruments and policies as at the Effective Date, and that the Scheme began to influence the land use planning policies affecting the Subject Property beginning in November 2013.

33The Parties are also in agreement (Paragraph 9, ASF, Exhibit 6) that the zoning for the Subject Property as at the Effective Date would have permitted a development comprising 236,806 sq. ft. or 22,000 sq. m. of GBA. This was referred to throughout the Hearing as the Subject Property’s “As-of-Right Zoning”, which was the outcome of the Claimants’ appeal of a site plan application to the Ontario Municipal Board (“OMB”) determined in 2008.

34Brian Casagrande was called by the Claimants to provide opinion evidence respecting the urban planning issues in the Proceeding and was qualified on consent. Mr. Casagrande produced a Report which was filed and marked as Exhibit 2, Tab 2. On page 1 of his Report, Mr. Casagrande wrote that:

this report has been prepared to detail the relevant policy and regulatory considerations in support of determining the highest density development that would have been reasonably expected and rationalized prior to the date of the expropriation, excluding any influence on the subject area associated with the planned extension and area station of the LRT system…

35Mr. Casagrande concluded that “it is my professional planning opinion that towers of 19 and 16 storeys are appropriate tower heights for the subject lands … [with] a Total Gross Buildable Area of 23,814 m2 (256,337 SF) of development, [with] 250 [residential] units with175 residential and visitor parking spaces.”

36Roderick Lahey was called by the Claimants and was qualified on consent to provide architectural opinion evidence respecting the architectural issues in this Proceeding. Mr. Lahey testified that he had designed a development proposal for the Subject Property which was informed by the maximum density opinion of Mr. Casagrande. Mr. Lahey’s development proposal, upon which the Claimants’ appraiser’s opinion of market value is based, consists of a 19-storey and a 16-storey mixed use development on a two-storey podium having a GBA of 262,177 sq. ft. (the “Lahey Proposal”). The Claimants acknowledge that the Lahey Proposal, with a GBA of 262,177 sq. ft., exceeds the GBA of 256,337 sq. ft. opined by Mr. Casagrande as permitted by the As-of-Right-Zoning, and for approval, would therefore require a Zoning By-law Amendment (“ZBA”).

37In his testimony, Mr. Casagrande testified that it is his opinion that the HBU for the Subject Property as of the Effective Date, was to be developed in accordance with the Lahey Proposal, with a GBA of 262,177 sq. ft. (24,357 sq. m.). Mr. Casagrande also confirmed that, as the density of the Lahey Proposal was greater than that permitted by the As-of-Right-Zoning, a ZBA would be required for approval.

38The City’s planning expert, Mr. Smit, disagreed that only a ZBA would be required to permit development of the Lahey Proposal, and testified that in his opinion, both an OPA and ZBA would be required for approval. Mr. Smit testified that in his opinion, the likelihood of success on such an application would be very low.

39The City also disputes the density of the Lahey Proposal. Counsel for the City submits that density of the Lahey Proposal has been influenced by the Scheme and that, screening out the Scheme, the Lahey Proposal would not have been financially feasible as at the Effective Date.

Legally Permissibility

40The first of the four criteria to be addressed when determining HBU is legal permissibility. The Claimants concede that to bring the Lahey Proposal to fruition a ZBA would be required. But Counsel for the Claimants argues that an HBU based upon the density of the Lahey Proposal would nevertheless be legally permissible because the probability of obtaining such a ZBA would be high. The City, on the other hand, maintains that both an OPA and a ZBA would be required and that the likelihood of success on such an application would be very low.

41The City’s land use planning witness, Mr. Smit, who was previously a planner within the City’s Planning Department at the relevant time, testified that it was unlikely that the Lahey Proposal would have received the required approvals for a zoning change or an OPA because it provides for a greater density of development than is permitted by the As-of-Right-Zoning. Mr. Casagrande testified that it was his opinion that, through the exercise of the principle of density redistribution, approval was probable. But Mr. Smit disagreed, stating that his opinion was based upon his direct knowledge of how the City’s Planning Department was employing the principle of density redistribution up to and including 2017. He testified that based on the planning framework and staff practice as of 2017, it is not probable that the increased density of the Lahey Concept would have been approved.

42Counsel for the City has referred the Tribunal to Farlinger Developments Ltd. v. East York (Borough), 1975 CanLII 587 (ON CA), 1975 CarswellOnt 455 (C.A.) at para. 43, where the Court of Appeal confirmed that when considering the prospect of rezoning as a factor in the determination of HBU:

… the highest and best use must be based on something more than a possibility of rezoning. There must be a probability or a reasonable expectation that such rezoning will take place. It is not enough that the lands have the capability of rezoning. In my opinion probability connotes something higher than a 50% possibility.

43The Tribunal prefers the evidence of Mr. Smit’s direct knowledge of the Planning Department’s use of the principle of density redistribution, which would contemplate reshaping density permitted as of right, but would not include an “up-zoning” related to density.

44The Tribunal observes that on the one hand, the City advances an HBU that was legally permitted under the As-of-Right-Zoning, while the Claimants advance an HBU that the Parties agree would have required a ZBA at the least, or as the City maintains, an OPA and a ZBA.

Financial Feasibility

45It is not necessary for the Tribunal to determine whether it was physically possible to redevelop the Subject Property to the height and density of the Lahey Proposal. The Tribunal will consider the third criteria of whether the Lahey Proposal was financially feasible. Counsel for the City submits that the test for financial feasibility of a proposed HBU is whether the economic value of a potential use outweighs the costs, citing the following: “If the economic value of a use is outweighed by the costs, or effectively “breaks even”, the use is said not to be financially feasible” (Christopher J. Williams, Andrea Skinner & Matthew Helfand, Expropriation Law in Ontario, (LexisNexis Canada, May 2021), Ch. 6:2.c.

46As a method to assess financial feasibility, the Appraisal Institute of Canada identifies:

The land residual technique is used most often in highest and best use analysis to test the feasibility of various uses […], and is a method commonly applied by a developer when evaluating the acquisition of land for a specific development scheme (The Appraisal of Real Estate, Third Canadian Edition (Appraisal Institute of Canada & the Appraisal Institute, 2010), Chapter 7 – The Valuation Process, p. 7.12, BOA, Tab 7).

47The position of the Parties respecting HBU differs significantly. The Claimants’ position is that the HBU is based upon the Lahey Proposal and the specific density which it provides. On the other hand, the City’s position is that the HBU of the Subject Property is to be redeveloped as a high-density residential development as permitted by the As-of-Right-Zoning, with a density up to a GBA of 236,806 sq. ft. (22,000 sq. m.), with the features and design of the redevelopment, including its density, to be determined by the developer. Counsel for the City submits that the Claimants’ failure to conduct an assessment demonstrating that a development with a GBA of 262,177 sq. ft. (18,232 sq. m.) would, at a minimum, break even, undermines the HBU opinion of Mr. Casagrande.

48Mark Conway was called to testify by the City and was qualified on consent to provide opinion evidence respecting the land use planning and land economy issues in this Proceeding. Mr. Conway’s C.V., which was filed and marked as Exhibit 5, Tab 2-B, indicates that Mr. Conway is an experienced land economist and professional planner who has often been retained by developers as part of a team of consultants to assess the feasibility of proposed real estate projects. Mr. Conway testified that in those mandates, his role includes identifying the probable target market segments for a development property, using that information to work with architects to guide the development concept, and working with cost consultants to prepare pro forma development statements.

49Mr. Conway testified that the land residual method is a valuation metric which developers use to assess the appropriate price to pay for a parcel of development land. The residual land value is calculated by taking the gross value of the proposed development and deducting therefrom the total project costs including all fees and developer profit. The remaining, or residual, amount is the price which the developer can afford to pay for the parcel of land while maintaining the financial feasibility of the project.

50Mr. Conway prepared a Market and Land Economics Review Report which was produced and marked as Exhibit 5, Tab 2. Mr. Conway stated in the summary and conclusions section of his Review Report and testified that the HBU opinion of Mr. Cassagrande, which was relied upon the appraiser Mr. Morassutti, refers to financial feasibility identifies necessary to establish HBU. Hi pointed out that neither Mr. Cassagrande nor Mr. Morassutti appear to have completed such an analysis of the Lahey Proposal. Mr. Conway testified that based upon his experience, a buyer of the Subject Property for the purpose of redevelopment would have obtained a feasibility study including a land residual analysis.

51Mr. Casagrande states in the Background section on page 1 of his Report that his mandate was to determine, from a land use planning perspective, the highest density of development that could have been reasonably expected to receive approved for the Subject Property as at the Effective Date:

this Report has been prepared to detail the relevant policy and regulatory considerations in support of determining the highest density of development that would have been reasonably expected and rationalized prior to the date of expropriation, excluding any influence on the subject area associated with the planned extension and area station of the LRT system (emphasis added).

52Counsel for the Claimants submits that the issue of a feasibility study, or the lack thereof, is irrelevant and a distraction from the material issues in this Proceeding, and that a feasibility study would have been premature at the Effective Date and not required for a determination of the market value of the Subject Property.

53Counsel for the City submits that the Tribunal is required to assess what a reasonably informed buyer would pay for the Subject Property, based upon the Subject Property’s HBU as at the Effective Date, using the knowledge that would have been available to such a buyer as at that time, and that a reasonably informed buyer of the Subject Property for development purposes, would have had a land residual analysis and feasibility study prepared before proceeding with the purchase.

54Counsel for the Claimants submits that the land residual approach is not an appropriate method of valuation in the context of an expropriation and cites as authority for his proposition the Decision of the Divisional Court in 1085372 Ontario Limited v. City of Toronto, 2020 ONSC 1136, 13 L.C.R. (2d) 273 (also referred to as the “Oulahen” Decision). One of the issues in the appeal for the Court’s determination was whether the Tribunal should have applied the land residual approach to arrive at the market value of the expropriated land. In its analysis, the Court cited an earlier decision of the Court of Appeal in 747926 Ontario Ltd. v. Wellington (County) Board of Education (2001), 2001 CanLII 24126 (ON CA), 56 O.R. (3d) 108 (Ont. C.A.), where it was noted at paragraphs 22 and 23 that: “…the cost of development approach is an unsatisfactory means to determine market value. However, it is not prohibited by the [Expropriations] Act.”

55In the Oulahen Decision, the Court concluded that the Tribunal was correct in finding that, since there were comparable properties available, the DCA was the appropriate method for valuing the expropriated land.

56However, the Tribunal observes that the City’s position is not that the market value of the Subject Property be determined using the land residual approach. Rather, Counsel for the City submits that the land residual approach is an appropriate means of testing the Claimants’ proposed density of development, and hence, the Claimant’s theory of the HBU of the Subject Property as at the Effective Date is best represented by the Lahey Proposal. In the case of a development property such as the Subject Property, establishing achievable density on a balance of probabilities is fundamental, as the market value of the Subject Property hinges upon, in the words of Mr. Morassutti, “what can be built on it”.

57Neither Appraiser employed the land residual approach in the estimation of the market value of the Subject Property. In the Tribunal’s view, in the instance of the Subject Property, the land residual approach is an appropriate means by which to test the financial feasibility of the Claimants’ theory that the HBU of the Subject Property was to be redeveloped to a density having a GBA of 262,177 sq. ft. as represented by the Lahey Proposal.

58The Tribunal observes that at page 289 of its Decision, the Court in Oulahen also stated that the land residual approach “may have been appropriate if factually there were no other comparable properties.” In this case, the evidence is that following adoption by the City’s Council of the 2013 TMP, the City’s market for vacant development sites was dominated by the presence of the scheme. Mr. Capordelis observed at page 14 of his Report that development applications have been influenced by the scheme since 2013, as a result of the transit-oriented development policies of the City of Ottawa and the anticipation by developers that increased height and density could be achieved.

59Counsel for the City has referred the Tribunal to the Decision of the OMB in Erbsville Road Development Inc. v. Waterloo Region District School Board, 2014 CarswellOnt 5685 (O.M.B.) and the Board’s finding at para. 24, that it is “fundamental” that the HBU be a reasonably probable use, because “a builder will not build what he cannot sell profitably”.

60The Tribunal finds that a willing buyer of a development property such as the Subject Property would most certainly perform its due diligence before committing to a purchase price in excess of $13,000,000, which would include the preparation of a feasibility study, development pro forma and analysis employing the and residual approach.

The Development Proposals

61In addition to the fact that Mr. Morassutti employed the metric system of measurement in his appraisal while Mr. Capordelis employed imperial measures, two different units of measurement to estimate the size of a development were featured in the evidence in this hearing: GBA and GFA. There was consensus on the definition of each term:

a. GBA represents the total area found within the permitted or proposed envelope of a development;

b. GFA is a term from the City of Ottawa’s Zoning By-law No. 2008-250, where it is defined as being the total floor area measured from the interiors of the outside walls and including floor areas occupied by interior walls and floor areas created by bay windows but excluding specified areas such as hallways, building cores and common areas;

c. Mr. Lahey’s testified that a “rule of thumb” is that GFA is about 76% of GBA, which metric was accepted by the other Witnesses;

d. GFA is a standard measurement used by the development industry in Ottawa.

62The Tribunal heard evidence as to the As-of-Right-Zoning of the Subject Property as at the Effective date. The Tribunal also heard evidence respecting a development proposal the Claimants had brought forward to the City in May 2013. Further, the Tribunal heard evidence respecting the Lahey Proposal upon which the Claimants rely, and a proposal put forward by the City, through its architecture expert, Barry Hobin, which is referred to as the Hobin Proposal. For purposes of comparison, the GBA and GFA amounts for the As-of-Right-Zoning and for the three Proposals are set out in the chart below:

PROPOSAL GBA GFA

As-of-Right-Zoning 236,806 ft² 179,973 ft²

May 2013 Proposal 148,150 ft² 112,594 ft²

Lahey Proposal 262,177 ft² 196,250 ft²

Hobin Proposal 178,962 ft² 132,482 ft²

63The Lahey Proposal, which provides the basis for the Claimants’ theory of HBU, and upon which the Claimants’ appraiser’s opinion of market value is based, consists of a 19-storey and a 16-storey mixed use development on a two-storey podium having a GFA of 196,250 sq. ft. and a GBA of 262,177 sq. ft., and provides for 260 residential units and 155 parking spaces.

64As referred to above, Mr. Casagrande stated in his Report and evidence that his mandate was to determine, from a land use planning perspective, the highest density of development that could have been reasonably expected to receive approved for the Subject Property as at the Effective Date. Mr. Casagrande’s opinion is summarized on page 24 of his Planning Report (Exhibit 2, Tab 2-A):

It is my professional planning opinion that towers of 19 and 16 storeys are appropriate tower heights for the subject lands with footprints and locations illustrated in the concept recently prepared by Roderick Lahey Architects that is shown in Appendix P. This design situates the tallest tower at the western end and includes a 2 storey, “U” shaped podium at the base of the towers which will maximize light into the podium, while providing for ground oriented outdoor amenity space that will animate the public realm along Richmond Road.

The podium area is approximately 3,296 m2 (35,474 SF) of Gross Buildable Area and with tower footprints averaging areas of 586 m2 (6,310 SF) for a Total Gross Buildable Area of 23,814 m2 (256,337 SF) of development. The concept anticipates a yield of 250 units with175 residential and visitor parking spaces to satisfy the minimum zoning requirements. Preliminary parking layouts for the subject lands suggest that this would require 3 levels of underground parking.

65The Lahey Proposal is the result of the corroboration between the two experts. Mr. Casagrande admitted in cross-examination that he did not undertake a market analysis, any form of absorption study, or any form of pro forma in respect of the Lahey Proposal, nor did he consider the probable buyers for a unit in the proposed residential redevelopment.

66Mr. Conway testified that he had reviewed both Mr. Casagrande’s Planning Report, Mr. Morassutti’s Appraisal Report and the Lahey Proposal. Mr. Conway testified that it is his opinion that “the 260-unit design and resulting GFA of the Lahey Proposal would not be reasonable for the Property, because the design and the associated GFA ignore the practical market matters that would have faced this Property” as at the Effective Date. Mr. Conway pointed out that the proposed parking ratio of 0.57 spaces per unit, would mean that 111 of the 260 units would not have parking and that screening out the Scheme, the Subject Property was serviced by bus transit only at the Effective Date. Mr. Conway testified that as a result of the reliance on bus transit only at the Effective Date, the shortage of parking in the Lahey Proposal would have had a negative impact on both the sales program for the condominium units (or on the rental program of the apartment units), and hence on the financial performance of the Lahey Proposal as a whole. Ultimately these factors would negatively influence the supportable land value.

67Mr. Conway stated that a major practical market consideration would have been the market absorption of a project on the scale of the Lahey Proposal as the Subject Property was a suburban site. The Claimants’ witnesses had maintained that the Subject Property was located in the highly sought after Westboro neighborhood. This was corrected by the City’s witnesses, as the Subject Property is actually located in the more westerly located and less desirable, Woodruff neighborhood. Mr. Conway testified that the Ottawa condominium market is considerably slower than the Vancouver and Toronto markets. He testified that it is his opinion that a major failing of the Lahey Proposal was the absence of evidence that the 260-unit project could have been absorbed into the Ottawa market within a reasonable period of time, in view of the large size of the project for the Ottawa market, and the existing competition from other projects. Mr. Conway testified these factors indicate why a buyer of the Subject Property would require a detailed market feasibility study demonstrating that the level of density in the Lahey Proposal could be absorbed by the Ottawa Market. He stated that such a Study would have included an objective assessment of the market strengths and weakness of the Subject Property, and a demand analysis that considered both the projected growth of the target market and the existing competition in that market.

68Mr. Conway testified that a knowledgeable developer, considering the development potential of the Subject Property at the Effective Date, after confirming the As-of-Right-Zoning, would have obtained an opinion from a professional planner as to the HBU of the Subject Property from a planning perspective. But he stated, a knowledgeable developer would not have stopped at that point. He testified that the developer would have then gone to a market analyst and asked, “Okay, I have this density, how best to deploy it?” In Mr. Conway’s opinion, the Claimants have considered only the maximum approvable density on the Subject Property, without considering market conditions and whether market conditions would undermine the density assumptions. Mr. Conway summed up his opinion with a maxim: “It is not how much you can build. It is how much you can sell.”

69Having concluded that the design and density of the Lahey Proposal were not reasonable for the Subject Property and its target market, Mr. Conway stated his opinion that a project on the Subject Property as at the Effective Date, should have been comprised of 180 units, with a parking ratio of 1.2, with units in excess of 800 sq. ft., to attract the target buyer, in a single tower format with balconies and terraces that maximize the views of the Ottawa River and the Gatineau Highlands, and positioned to appeal to upscale or mid-market buyers.

70Barry Hobin is an architect and was called by the City and qualified on consent to provide opinion evidence respecting the architectural issues both in this Proceeding, and generally. Mr. Hobin produced a Report which was filed and marked as Exhibit 5, Tab 3-A. Mr. Hobin has considerable experience designing condominiums for the Ottawa market and was the architect who designed the Continental Condominium Project, which is located immediately adjacent to the Subject Property, at the opposite corner of Richmond Road and Cleary Avenue.

71Mr. Hobin testified that he reviewed the Lahey Proposal. With respect to the amount of parking, he testified that, due to its remote westerly location from downtown Ottawa, a project on the Subject Property would require a minimum of one parking space per unit and two spaces per unit for the penthouses. In addition, there would be a requirement for 10% visitor parking. He stated his opinion that, as a condominium project with 260 units, the Lahey Proposal should provide parking in the range of 310 spaces, which was considerably more than that proposed by Mr. Lahey. Mr. Hobin testified that the 175 spaces in the Lahey Proposal “would be woefully deficient for a condo project in this location”. He stated that the need for adequate parking would require either several additional levels of underground parking, or a reduction in the Projects’ GBA. As an example, Mr. Hobin cited the Continental Condominium Project, which contains only 96 units but provides 108 resident parking spaces and eight visitor spaces, which equals a rate of 1.2 spaces per unit. He stated that in preparation for his testimony, he had reviewed seven condominium projects in Ottawa which and found a range of 0.98 to 1.66 parking spaces per unit.

72Mr. Hobin testified that in his opinion, a reasonable and realistic design for a condominium project at the Subject Property would be a single tower design. He prepared a proposal which was attached as Schedule D to his Report, for a 17-storey development with 138 residential units and 155 parking spaces, having a GBA of 178,962 sq. ft. (16,626 sq. m.), and a GFA of 132,482 sq. ft. (12,308 sq. m.). Mr. Hobin testified that based upon his experience, a single tower with a larger podium would offer important development cost advantages, including a reduction in the amount of area required for elevator and exit cores, an increase in floor plate efficiency over the Lahey Proposal, which required smaller floor plates due to the two tower design, and a reduction in the number of units compromised, which in the Lahey Proposal were those units which were required to face each other as a result of the two tower design.

73Mr. Conway agreed that the parking ratio in the Lahey Proposal of about 0.57 parking spots per unit was too low and testified that it should be in the range of 1.2 parking spots per unit. He stated that the 260-unit Lahey Proposal would therefore require 338 parking spaces. Citing the Altus Construction Cost Guide for 2017, Mr. Conway testified that the cost to a developer to build parking spaces was $50,000 per stall. However, he noted that the spaces could only be sold for between $25,000 and $35,000 each, which would result in the developer bearing additional unrecoverable costs of between $2.4 Million and $4.1 Million. Mr. Conway testified that in his experience extraordinary costs such as for the provision of adequate parking have a direct impact on what a buyer intent on redevelopment would be willing to pay for the Subject Property, and that this further demonstrates why a reasonable developer would have a development pro forma, a land residual analysis and a feasibility study prepared.

74Counsel for the City has referred the Tribunal to the history of the Claimants’ development applications for the Subject Property. As set out in the ASF, between November 2005 and May 2013, the Claimants pursued several alternative options for approval to redevelop the Subject Property. In November 2005, the Claimants submitted a site-specific Zoning By-law Amendment application to allow for a two-tower residential development of 21 and 19 storeys with ground floor commercial space. In April 2007, the Claimants revised the Application to request a zoning change to allow for a two-tower residential development of 18 and 15 storeys. In August 2007, the Claimants filed an Appeal to the OMB as the City had failed to make a decision on the revised Application within the time required by the Planning Act. In May 2008, the OMB issued a decision dismissing the 6-storey height limit which had been approved by City Council, and directed that the Claimants undertake additional work to determine an appropriate height for a development on the Subject Property.

75In September 2008, the OMB convened a Settlement Meeting between the Parties and approved a concept plan and the required ZBA to provide for a single residential building on the Subject Property with a 12-storey height limit on the western portion of the site, and an eight-storey height limit on the eastern portion of the site (the “OMB Approved Zoning”). The OMB Approved Zoning was subsequently incorporated into the City’s Zoning By-law No. 2008-250, in the TM10 subzone and is the As-of-Right-Zoning which governed the Subject Property as at the Effective Date.

76Mr. Smit, the planning witness called by the City, produced a Report which was filed and marked as Exhibit 5, Tab 1A. He wrote in his Report and testified that he had calculated that the approximate GBA permitted by the As-of-Right-Zoning was 22,000 sq. m., or 236,806 sq. ft. Mr. Lahey had testified that as a general rule of thumb, the GFA of a development will comprise approximately 76% of its GBA. Therefore, the GFA permitted by the As-of-Right-Zoning would have been 179,973 sq. ft.

77In May 2013, the Claimants submitted a pre-application form to the City for an OPA, ZBA and for Site Plan Approval to permit a two-tower residential development of 26 and 14 storeys with ground floor commercial space on the Subject Property. This plan was identified as the Claimants’ preferred plan (“Preferred Site Plan”). The evidence was that this was the last proposal submitted to the City for the redevelopment of the Subject Property prior to the commencement date for the Scheme. Therefore, the Preferred Site Plan was not Scheme influenced and provided for a total GBA of 148,150 sq. ft. Mr. Smit, who was working as a Senior Leader in the City’s Planning Department at the time, testified that the Preferred Site Plan did not have the support of the City’s Planning Staff due to concerns that the proposal for a 26 and 14-storey towers were too high for the Subject Property.

78Counsel for the City points out that the development concept in the Preferred Site Plan put forward by the Claimants in May 2013, proposed a GBA of 148,150 sq. ft., even though the As-of-Right-Zoning permitted a development with a GBA of up to 236,806 sq. ft. Mr. Lahey had also designed the May 2013 Proposal, yet the Lahey Proposal upon which the Claimants’ position on HBU is based, is for a 19 and 16-storey mixed use development on a two-storey podium, with a GBA of 262,177 sq. ft. Counsel for the City submits that the GBA of 148,150 sq. ft. of the Preferred Site Plan indicates what the Claimants considered to be financially feasible for the Subject Property only four or five months prior to the commencement date of the Scheme.

79Counsel for the City submits that the height and density of the Lahey Proposal have been influenced by the Scheme. The Tribunal observe that, at several points in his testimony, Mr. Lahey effectively stated that the Lahey Proposal was designed with the Scheme in mind. One example is below:

I think looking at this, compared to what we could build, the benefits are just so obvious. We have got… aside from the fact that we have got a little bit more density, which I think is a plus, from the fact that we have got a known connection to a future LRT, aside from that, what we have got is a building mass, which is I think the direction where the City is taking us to look at alternate forms of development, other than the slab building and particularly the slab building that was created through the OMB decision. (R. Lahey Transcript, June 7, 2023, p. 91, L.23-p. 92, L.8.)

80Mr. Lahey also testified that the direction to “ignore the LRT”, was “a hard thing to do because the whole reason why this project stopped was because of the LRT. So, we basically laid out and developed a scheme that actually flushed out that original concept” (R. Lahey Transcript, June 7, 2023, p. 60, L. 1-17).

81The Tribunal finds that the May 2013 Proposal is the last development concept prepared by the Claimants that is untainted by the influence of the scheme. At that time, the Claimants identified their preferred option was a two-tower, 26 and 14-storey development, with a GBA of 148,150 sq. ft.

Highest and Best Use Finding

82The Tribunal finds that the HBU represented by the Lahey Proposal would not have been legally permissible. As at the Effective Date, the Lahey Proposal was not permitted under the existing planning policies of the City of Ottawa. Without the Expropriation, or alternatively with the Expropriation and screening out of the influence of the Scheme, the Tribunal finds that it was not probable that the Claimants would have obtained the planning approvals required by the Lahey Proposal to permit its height or density.

83The Tribunal also finds that the Claimants have not demonstrated that the Lahey Proposal was financially feasible. While the Lahey Proposal may well be maximally productive, the four criteria for determining HBU must be considered and satisfied sequentially. The Lahey Proposal has not been shown to be financially feasible, as there was no evidence of a financial feasibility analysis supporting the opinion. In this regard the Tribunal prefers and accepts the evidence of Mr. Conway and of Mr. Hobin. In the Tribunal’s view a land residual analysis may have assisted in establishing the financial feasibility of a redevelopment to a GBA of 262,177 sq. ft., a GFA of 196,250 sq. ft., and having 260 residential units and 155 parking spaces.

84The Tribunal also finds that the Lahey Proposal, its density and the HBU it represents, have been influenced by the Scheme in terms of both the height of the towers and the density of the development. The Tribunal observes that, after obtaining the As-of-Right-Zoning in 2008, the Claimants came forward to the City with the May 2013 Proposal, which had a GBA of 148,150 sq. ft. which was considerably less than the GBA of 236,806 sq. ft. permitted under the As-of-Right-Zoning. As the Tribunal has found above, the May 2013 Proposal was the last development proposal for the Subject Property which pre-dated the Scheme. The Tribunal finds that in addition to not being legally permissible or financially feasible, the HBU represented by the Lahey Proposal fails to ignore the Scheme, as its height and density are driven by post-Scheme planning policies which provide for much higher densities within higher order transit station areas.

85Mr. Capordelis testified that in his opinion, when screening out the influence of the Scheme and when the physical and legal characteristics of the Subject Property are considered, along with the submission of the May 2013 Proposal, the HBU for the Subject Property, as at the Effective Date, was for development with a mid to high-rise residential building with the potential for retail uses on the main level. He testified that a development with a maximum building height to 8 to 12 storeys and a maximum density up to 236,806 sq. ft. GBA (22,000 sq. m.), in accordance with the As-of-Right-Zoning, would be most probable.

86The Tribunal agrees that the opinion of Mr. Capordelis set out above proposes an HBU which would be legally permissible, and which would effectively screen out the scheme. However, the Tribunal disagrees with Mr. Capordelis’ opinion that development up to the approved density was most probable, because the financial feasibility of developing the Subject Property to its maximum permitted density under the As-of-Right-Zoning has not been demonstrated to have been probable, and in addition, a development with the density of the As-of-Right Zoning would be Scheme influenced.

87Mr. Conway’s Report and evidence emphasized that Mr. Morassutti’s Report provided no evidence of the financial feasibility of the Lahey Proposal. It was the opinion of Mr. Conway that the size of the Lahey Proposal was too large because of the suburban location of the Subject Property and the large supply of unsold condominium units in the Ottawa market as at the Effective Date. As a feasibility study was not completed there is no evidence before the Tribunal to establish that a project with either the density within the As-of-Right-Zoning or the density of the Lahey Proposal would be financially feasible.

88Mr. Hobin testified with respect to his experience as the architect who designed the Continental Condominium building. Mr. Hobin testified that, with input from Mr. Conway, he worked “to create an academic kind of feasibility study, what might work in this situation.” Mr. Hobin testified that the result was the Hobin Proposal with a density expressed as a GBA of 178,962 sq. ft.

89After careful evaluation of the competing written and oral evidence tendered by the Parties and consideration of the final argument submissions of Counsel, the Tribunal accepts and relies on the opinion evidence of Mr. Smit, Mr. Conway and Mr. Hobin in strong preference to that of Mr. Casagrande and Mr. Lahey. The Tribunal finds that, screening out the influence of the Scheme, the HBU of the Subject Property as at the Effective Date, is best represented by the Hobin Proposal with a density expressed as a GBA of 178,962 sq. ft.

Market Value

90Paul Morassutti was called by the Claimants and was qualified on consent to provide opinion evidence respecting the real estate appraisal issues both in this Proceeding and generally. Tony Capordelis was called by the City and was also so qualified on consent. Both Appraisers prepared appraisal reports. The appraisal report of Mr. Morassutti was filed as Exhibit 2, Tab 1A, and the appraisal report of Mr. Capordelis was filed as Exhibit 5, Tab 5A. Both appraisers employed the DCA method in their reports and in their testimony.

91In his appraisal report, Mr. Morassutti analyzed the market value of the Subject Property on the basis that its HBU as at the Effective Date was to be redeveloped with the density represented by the Lahey Proposal. Mr. Morassutti considered four (4) comparable sales, which were all sales of high-rise mixed-use urban development sites, which had been completed close to the Effective Date. The sales were listed in Mr. Morassutti’s Table of Comparable Sales on page 40 of his report and were assessed for comparison purposes using a unit value of the price per sq. m. buildable (which the Tribunal has converted to the price per sq. ft. buildable (“PSB”), or price per sq. ft. of GBA).

92In his Appraisal Report, Mr. Capordelis considered six (6) comparable sales. The sales were identified by Mr. Capordelis in the Comparable Sales Summary Chart and Sales Map at page 28 of his Report. Mr. Capordelis employed the price per sq. ft. of land as his unit of comparison. There was only one comparable sale upon which both appraisers relied, which was the sale of 175 Carruthers Avenue.

93Mr. Morassutti testified that the metric of per sq. ft. buildable, or per sq. ft GBA, is the unit of comparison which is typically used for development lands, as the value of such lands is driven by what can be built upon the lands. Mr. Capordelis testified that in Ottawa, the unit of comparison typically used is either the price per sq. ft. of land or the price per sq. ft. of GBA.

94Mr. Morassuti and Mr. Capordelis had differing approaches to the valuation exercise for the Subject Property. Mr. Capordelis appraised the Subject Property as if vacant with development potential, and an HBU consistent with the As-of-Right-Zoning, which permitted the “development of a residential and mixed use multi-residential building.” Mr. Capordelis did not proceed with his appraisal of the market value of the Subject Property based on the ultimate built form, type or size of the prospective development.

95In contrast, Mr. Morassutti assessed a specific density for the Subject Property, which was based upon the planning opinion of Mr. Casagrande and the Lahey Proposal. The Tribunal has found that the Lahey Proposal and the HBU it represents were not legally permissible or financially feasible, and that both were influenced by the Scheme. However, the Tribunal agrees that the market value of the Subject Property as at the Effective Date would have been driven by what could be built upon it. Preference is accordingly given to Mr. Morassutti’s approach of valuing the Subject Property based upon the per sq. ft. value of achievable density in terms of GBA, or price PSB, as opposed to the price per sq. ft. of vacant development land approach taken by Mr. Capordelis.

96Analyzing his four (4) comparable sales, Mr. Morassutti arrived at a unit value of GBA, or price per SFB, for the Subject Property. Mr. Capordelis testified that in his opinion, all four (4) of Mr. Morassutti’s comparable sales showed market values which were influenced by the Scheme because all four sales were within 600 metres of the LRT. Mr. Capordelis testified that, in his view, the sale price in five (5) of the six (6) comparable sales which he analyzed were influenced by the Scheme. The sole comparable sale not influenced by the Scheme was 541 Rideau Street, which he testified was located more than 600 metres from the LRT. Mr. Capordelis testified that where the Scheme is present in a comparable sale, the sale must be the subject of a separate adjustment. He stated on page 30 of his appraisal report and in his evidence, that to estimate the potential influence of the Scheme on the comparable sales, he reviewed a Report titled Ottawa Transportation Effect – The Impact of Transportation Improvements on Housing Values in the Ottawa Region, which was produced as Exhibit D to his appraisal report (“Impact on Values Report”). The authors of the Impact on Values Report reviewed not just the impacts of the LRT expansion, but also the impacts of Hwy 417 and Hwy 7 expansion. The Impact on Values Report is a publication of the Real Estate Investment Network and pre-dates the 2013 TMP, referencing the 2003 Transportation Master Plan (“2003 TMP”). In addition, upon reviewing the Impact on Values Report, most of its research and conclusions, including the conclusion cited by Mr. Capordelis that property values would be enhanced by 10% to 20%, are in respect of properties impacted by the expansion of Hwy 417 and Hwy 7. The transit project considered in the Impact on Values Report was the Stage 1 LRT project, which was proposed by the 2003 TMP and predates the Scheme. The Impact on Values Report refers to “premiums” on residential property values in various parts of the City of Ottawa which were located within 800 metres of any LRT station without quantifying the amount of the premium. The Tribunal finds that the Impact on Values Report is of no assistance in measuring the influence of the Scheme upon the comparable sales.

97Mr. Capordelis testified that he also performed a paired sales analysis to attempt to measure the impact of the Scheme on the comparable sales. The paired sale analysis involved comparing two of his comparable sales which were within areas directly impacted by the Scheme with the comparable sale of 541 Rideau Street which was outside the area of Scheme influence. Mr. Capordelis concluded from the two paired sales that a sale price enhancement of between 20.1% and 30.6% to the price per sq. ft. of land was indicated, and that a downwards adjustment was required for all comparable sales within 600 metres of a transit station. Mr. Capordelis testified that as a result, five of his six comparable sales, and all four of the comparable sales of Mr. Morassutti, required downward adjustments to screen out the Scheme. Mr. Capordelis’ Adjustment Chart is contained on page 32 of his Report, and while there is a downwards adjustment indicated for the impact of the Scheme in the case of five of his six comparable sales, there is also no indication of the amount of the adjustment.

98Mr. Morassutti testified that he adjusted his comparable sales to account for the influence of the Scheme. In cross-examination, he testified that he agreed that there is a “premium” to the price per sq. ft. of GBA in his four (4) comparable sales attributable to the Scheme. Mr. Morassutti also testified that the adjustment for the Scheme would be an initial adjustment which he applied prior to making any of the other adjustments. However, his appraisal makes no reference to such a preliminary adjustment or to the amount of the adjustment. In his testimony Mr. Morassutti was unable to quantify the adjustments he made to account for the Scheme.

99In these circumstances, the Tribunal is unable to determine to what extent the comparable sales relied on by the appraisers were adjusted to account for the influence of the Scheme. In the absence of such evidence the Tribunal can only proceed based on the comparable sales evidence presented by both appraisers. The Tribunal finds that, unlike the other categories of adjustments which appraisers routinely make to comparable sales, where either a simple upwards or downwards adjustment is indicated for matters such as location, zoning or timing, adjustments to screen out the Scheme are statutorily mandated by Section 14(4)(b) of the Act. Adjustments to comparable sales to screen out the influence of the Scheme therefore require specificity and quantification.

100Regarding the paired sales analysis of Mr. Capordelis, the Tribunal finds that the comparison of a single sale outside the area of Scheme influence to two sales within the area of Scheme influence is insufficient to establish the amount of the required adjustment, especially a downwards adjustment with a magnitude of between 20.1% and 30.6% of the sale price. The Tribunal observes that, while Mr. Capordelis was on the right track with his paired sales approach, a far broader paired sales analysis employing multiple sales from within and outside the area of Scheme influence is required to quantify the adjustments necessary to screen out the Scheme.

101After all adjustments, for price per sq. ft. of GBA, Mr. Capordelis testified that his comparable sales numbered 1, 3 and 5, were judged to be most similar to the Subject Property. The sale of 175 Carruthers Avenue was sale No. 1 in Mr. Capordelis’ Report, and it was also Sale No. 4 in Mr. Morassutti’s Report. Both Mr. Capordelis and Mr. Morassutti found that the price per sq. ft. of GBA for this sale was $45.47 per sq. ft. of GBA ($489 per sq. m.) before adjustment. This sale was the lowest of Mr. Morassutti’s four comparable sales and was mid-range in Mr. Capordelis’ six comparable sales.

102Mr. Morassutti determined through his adjustments that 175 Carruthers Avenue was inferior to the Subject Property and ultimately assigned a value of $67 per sq. ft. of GBA for the Subject Property, based on his opinion that the sale of the Subject Property would “transact near the upper end of the comparable” range due to its highly sought-after Ottawa River location and position within “Ottawa’s top performing housing area.” It was the evidence of Mr. Capordelis and Mr. Hobin that this is an overstatement as, while the Subject Property is located within Woodruffe, which is a good neighbourhood, it is an area that is in transition, and is not a properly characterized as a “highly sought after” location.

103Mr. Capordelis concluded after adjustments that 175 Carruthers Avenue was superior to the Subject Property and therefore required a downwards adjustment. He concluded a market value of $25 per sq. ft. of GBA for the Subject Property. The Tribunal finds that neither appraiser’s report or evidence provides a sufficient explanation as to how the adjustments to the comparable sales were made, or to how the very disparate estimates of market value were concluded.

104The results of Mr. Morassutti’s Comparable Sales Analysis range from $45 to $69 per sq. ft. of GBA. Employing this unit of comparison in the Comparable Sales Summary Chart prepared by Mr. Capordelis results in a range of $23.98 to $65 per sq. ft. of GBA. The average of the six sales analyzed by Mr. Capordelis is $44.44 per sq. ft. of GBA, which is very close to the $45 per sq. ft. of GBA for the sale of 175 Carruthers Avenue, which value is approximately mid-range between the $25 per sq. ft. of GBA opined by Mr. Capordelis and the $67 per sq. ft. of GBA opined by Mr. Morassutti. As referenced above, this was the unit rate for the one comparable sale relied upon by both appraisers. The Tribunal therefore finds that the unit rate of $45.00 per sq. ft. of GBA is the appropriate measure of the market value of the Subject Property as at the Effective Date.

105The Tribunal therefore finds that the market value of the Subject Property as at the Effective Date was $8,053,290, calculated using a GBA of 178,962 sq. ft. and a unit rate of $45.00 price per sq. ft. of GBA.

Environmental Remediation

106A Phase II Environmental Site Assessment (“ESA”) completed in April 2017 was filed as Tab 55 of Exhibit 1, and a Supplemental Phase II ESA (“ESA Supplement”) completed in February 2018 was filed as Tab 56 of Exhibit 1.

107Andrew West, an environmental consultant, was called to testify by the City and qualified on consent to give opinion evidence respecting the environmental contamination and remediation issues in the Proceeding. He testified that the ESA showed that the Subject Property had been previously used as a dry-cleaning depot, as a gas station and as an automobile repair garage. He testified that the ESA identified the presence of gasoline-related contaminants on the Subject Property in both the soil and groundwater which were at levels above the applicable site condition standards. He had prepared a cost estimate for remediation in accordance with generally accepted principles and practices for the remediation of the sub-surface contamination on the Subject Property. The cost estimate for the remediation assumed that the Subject property was to be redeveloped with a multi-storey residential building having two levels of underground parking. He testified that to achieve the redevelopment, a Record of Site Condition (“RSC”) to meet MOECC Table 3 Residential/Parkland/Institutional (RPI) soil standards and MOECC Table 3 groundwater standards, would be required. A total cost of $322,800 including contingencies was estimated and provided to Mr. Capordelis, who deducted this amount from his estimate of the market value of the Subject Property.

108Although the Claimants retained a third-party environmental consultant to monitor and oversee the testing for the ESA and the ESA Supplement, a report by this consultant was not filed and the Claimants did not call any evidence to dispute the evidence of Dr. West. Counsel for the Claimants submits that the deduction of the remediation estimate is unsupported and inappropriate. He submits that even though construction and excavation work has been undertaken on the Subject Property for the construction of the Works, the City provided no evidence of any actual remediation costs incurred.

109The Tribunal observes that the redevelopment of the Subject Property with a multi-storey residential /mixed use building is subject to very different requirements than the construction of the Works. The residential/mixed use development would require an RSC and the necessary site remediation to achieve the Ministry’s soil and groundwater standards. The Tribunal finds that a knowledgeable purchaser acting reasonably would have insisted upon a reduction in the purchase price of the Subject Property to account for the costs of environmental remediation. The Tribunal has reviewed the remediation costs estimate produced and filed as Exhibit 1, Tab 57, in the total sum of $322,880, and finds that the inclusion of a 20% contingency fee in the amount of $53,800 is not reasonable, and that an informed Vendor acting reasonably would not be likely to agree to such a deduction from the sale price. The Tribunal therefore fixes the amount of the deduction from market value for the costs of environmental remediation at $269,000.

CONCLUSION

110The Tribunal finds that the matters comprising the Scheme are the development for which the Subject Property was expropriated, the design, construction, maintenance, operation and repair of the Stage 2 LRT project, including the light rail transit system, tunnel, corridor, guideway, stations, including the Cleary LRT Station, and all improvements, infrastructure and works related thereto and includes the City’s 2013 TMP and the Confederation Line LRT Project.

111The Tribunal finds that the Scheme must be screened out when determining the relevant planning regime for the Subject Property.

112The Tribunal finds that the Scheme must be screened out when determining the HBU for the Subject Property.

113The Tribunal finds that the Scheme must be screened out when determining the market value of the Subject Property if by the DCA, by adjusting the comparable sales appropriately.

114The Tribunal finds that the Scheme must be screened out when formulating the architectural concept plans for the Subject Property as at the Effective Date.

115The Tribunal finds that the HBU represented by the Lahey Proposal would not have been legally permissible.

116The Tribunal finds that the Claimants have not established that the Lahey Proposal was financially feasible.

117The Tribunal finds that in addition to not being legally permissible or financially feasible, the HBU represented by the Lahey Proposal fails to ignore the Scheme, as its height and density are driven by post-scheme planning policies which provide for much higher densities within higher order transit station areas.

118The Tribunal finds that, screening out the Scheme, the HBU of the Subject Property as at the Effective Date, is best represented by the Hobin Proposal with a density expressed as a GBA of 178,962 sq. ft.

119The Tribunal finds that the appraisers’ adjustments to comparable sales to screen out the Scheme are statutorily mandated by Section 14(4)(b) of the Act, and therefore require specificity and quantification.

120The Tribunal finds that the market value of the Subject Property as at the Effective Date was $8,053,290, calculated using a GBA of 178,962 sq. ft. and a unit rate of $45.00 per sq. ft. of GBA.

121The Tribunal finds that a knowledgeable purchaser and vendor acting reasonably, would have agreed to a reduction in the purchase price for the Subject Property to account for the costs of environmental remediation. The Tribunal fixes the amount of a reasonable deduction from market value for the costs of environmental remediation at $269,000.

ORDER

122The Tribunal Orders that:

a. The Market Value of the Subject Property as at the Effective Date was $8,053,290;

b. The amount of the deduction from Market Value for the costs of environmental remediation is $269,000;

c. The City of Ottawa shall pay to the Claimant the sum of $7,784,290, less the sum of any payment(s) made under Section 25 of the Expropriations Act;

d. In the event that the Parties are unable to reach agreement respecting statutory interest and costs, either party may file a Motion requesting that the Tribunal determine either or both matters.

123This Member remains seized with respect to the adjudication of costs and interest as provided above.

“Robert G. Ackerman”

ROBERT G. ACKERMAN

MEMBER

Ontario Land Tribunal

Website: www.olt.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248

The Conservation Review Board, the Environmental Review Tribunal, the Local Planning Appeal Tribunal and the Mining and Lands Tribunal are amalgamated and continued as the Ontario Land Tribunal (“Tribunal”). Any reference to the preceding tribunals or the former Ontario Municipal Board is deemed to be a reference to the Tribunal.