Shoppers Drug Mart - UBC Sauder School of Business...Charles Johnstone, AACI, P.App, RI AEC International Toronto • Montréal • Edmonton • Calgary • Halifax • New York •

Shoppers Drug Mart

Alexandria I.D.A Pharmacy

5 Main Street South, Alexandria, Ontario

Prepared For: Ms. Nelia Gelinas, A.I.M.A. Director, Property Taxation Shoppers Drug Mart/Pharmaprix

Appraisal Report

Prepared By:

Charles Johnstone, AACI, P.App, RI

AEC International

Toronto • Montréal • Edmonton • Calgary • Halifax • New York • Vancouver

AEC International Inc. 100 Sheppard Avenue E. Suite 760, Toronto, Ontario M2N 6N5 Tel: 416.224.5115 | Fax: 416.224.1163 | www.aec-international.com

Toronto • Montréal • New York • Edmonton • Calgary • Halifax • Vancouver

April 25, 2008

Nelia Gelinas, A.I.M.A. Director, Property Taxation Shoppers Drug Mart/Pharmaprix 243 Consumers Road, Toronto, ON M2J 4W8

Dear Ms. Gelinas:

Re: Appraisal of 5 Main Street South, Alexandria, Ontario

This appraisal report has been prepared as per your instruction. The value opinion reflects the fee simple ownership of the above captioned property.

I have completed an inspection of the property and researched market information which supports my opinion of value.

The report is intended for exclusive use by Shoppers Drug Mart and should be read as a whole as sections resourced, on their own, could be taken out of context.

I have concluded a current market value for the above captioned property, as of April 25, 2008 to be:

EIGHT HUNDRED THOUSAND DOLLARS

($800,000)

Should you require additional information or clarification, please contact me at your convenience.

Yours Truly, AEC International

For Demonstration Purposes

Charles Johnstone AACI, P.App, RI

Table of Contents

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Table of Contents

1.0 Introduction ...................................................................................... 1 1.1 The Client ......................................................................................... 1 1.2 Intended User ................................................................................. 1 1.3 Purpose of the Appraisal ................................................................ 1 1.4 Function of the Appraisal ............................................................... 1 1.5 Present Ownership .......................................................................... 1 1.6 Sales History ................................................................................... 2 1.7 Property Rights Appraised Date of Appraisal ................................ 2 1.8 Effective Date .................................................................................. 2 1.9 The Scope ........................................................................................ 2 1.10 Definitions ..................................................................................... 3 1.10.1 Market Value Definition .................................................................... 3 1.10.2 Exposure Time ................................................................................ 3 1.10.3 Marketing Time ............................................................................... 4

2.0 Assumptions and Limiting Conditions ................................................ 5 2.1 Ordinary Assumptions ..................................................................... 5 2.2 Ordinary Limiting Conditions .......................................................... 5 2.3 Extraordinary Assumptions or Limiting Conditions ...................... 5

3.0 Identification of the Property ............................................................ 6 3.1 Location ........................................................................................... 6 3.2 The Subject Site .............................................................................. 9 3.2.1 Shape ............................................................................................. 9 3.2.2 Area & Dimension ........................................................................... 11 3.2.3 Access .......................................................................................... 11 3.2.4 Topography ................................................................................... 12 3.2.5 Services ........................................................................................ 12 3.2.6 Encumbrances ................................................................................ 12 3.4 The Building................................................................................... 13 3.4.1 Areas & Dimension .......................................................................... 13 3.4.2 Description of Improvements ............................................................ 15 3.5 Land Use Controls ......................................................................... 17 3.5.1 Permitted Uses ............................................................................... 17 3.5.2 Conformity .................................................................................... 18 3.6 Assessment & Taxation ................................................................. 18 3.7 Highest and Best Use .................................................................... 19 3.7.1 Overview ....................................................................................... 19 3.7.2 Highest and Best Use as if Vacant ..................................................... 20

Table of Contents

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3.7.3 Highest and Best Use of the Property as Improved .............................. 20 3.7.4 Highest and Best Use Conclusion ...................................................... 21

4.0 Appraisal Procedures ...................................................................... 22 4.1 Common Valuation Approaches .................................................... 24 4.2 Chosen Analysis Methodology ...................................................... 25

5.0 Cost Approach ................................................................................. 26 5.1 Overview ........................................................................................ 26 5.2 The Process ................................................................................... 27 5.2.1 Land Value .................................................................................... 27 5.2.2 Reconciliation into Estimate of Value for Subject Site ........................... 30 5.3 Cost Analysis ................................................................................. 31 5.3.1 Define and Contrast Reproduction and Replacement Cost ..................... 31 5.3.2 Selection of Cost Method ................................................................. 32 5.3.3 Estimate of Reproduction Cost New Using Cost Manual ......................... 33 5.4.6 External Obsolescence ..................................................................... 34 5.4.7 Summary of All Depreciation (Building) .............................................. 41 5.4.8 Depreciated Value of Site Improvements ............................................ 41 5.5 Summary of the Cost Approach .................................................... 41

6.0 Direct Comparison Approach ........................................................... 43 6.1 Overview ........................................................................................ 43 6.2 The Process ................................................................................... 43 6.3 Comparative Analysis ................................................................... 43 6.3.1 Market Sales .................................................................................. 44 6.3.2 Improved Sales Data Sheets ............................................................ 44 6.5 Observations and Concluded Value .............................................. 54

7.0 Reconciliation and Final Value Estimate .......................................... 56 7.1 Depreciated Reproduction Cost Approach ................................... 56 7.2 Direct Comparison Approach ........................................................ 57 7.3 Final Value Estimate ..................................................................... 58

8.0 Certification .................................................................................... 59

Addendum ............................................................................................. 60

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy Executive Summary

Summary of Salient Facts

Assignment Estimate the market value of the fee simple interest.

Address 5 Main Street South, Alexandria, Ontario

Site size 29,185 square feet

Building size 15,897

Property type Commercial

Present use Retail Pharmacy

Year Built 1990

Highest and best use As Improved

Zoning CA – Village Core

Construction year 1990

Date of inspection April 14, 2008

Building condition Average

Effective date: April 25, 2008

Current assessment $671,700

Report Conclusion $800,000

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 1.0 Introduction

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1.0 Introduction This report provides a market value opinion for the property identified. In a global context, the International Valuations Standards Committeee (IVSC) has developed a set of broad principles for its 30 plus member countries, Canada being one. The Appraisal Institute of Canada has developed and adopted Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP). This Appraisal has been completed in conformity with the Standards specified within CUSPAP.

1.1 The Client

The client for whom this Appraisal was conducted is Shoppers Drug Mart/Pharmaprix.

1.2 Intended User

This report is intended for use by officers and officials of Shoppers Drug Mart/Pharmaprix. It is our understanding that the report will be used as an internal document in the decision-making process with respect to potential purchase of the subject property.

Use of this report by others without written permission, is not intended by the appraiser, and any liability in this respect is strictly denied.

1.3 Purpose of the Appraisal

The purpose of this appraisal is to express an opinion on the fee simple value for the herein described property.

1.4 Function of the Appraisal

The function of this appraisal is to assist Shoppers Drug Mart/Pharmaprixs in the decision-making process of determination a potential purchase price.

1.5 Present Ownership

Sultan Drugs Limited and 519533 Ontario Limited


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1.6 Sales History

The owner states the property is not currently listed for sale. However I am informed that discussions are ongoing between the present owner and Shoppers Drug Mart, details of which have not been disclosed.

1.7 Property Rights Appraised

Fee Simple

1.8 Effective Date

April 25, 2008

1.9 The Scope

This appraisal has been carried out in conformance with the requirements of the Canadian uniform Standards of Professional Appraisal Practice (CUSPAP), as set out by the Appraisal Institute of Canada.

In order to complete our appraisal, we had regard to the following:

Inspection of the subject property.

Inspection of the surrounding properties.

Investigation of the current zoning and planning restrictions applicable to the subject and surrounding properties.

Investigation and review of neighborhood trends and recent developments of surrounding lands.

Review of original “as Built” plans.

Search for competitive rental rates.

Determination of cost new

Estimation of Depreciation

o Physical depreciation o Functional depreciation o External depreciation

Establishment of land value

Analysis of market sales data.


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1.10 Definitions

1.10.1 Market Value Definition

One definition of market value is: “The most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”1 The definition may be expanded by adding: Implicit in this definition are the consummation of a sale as of the specified date and the passing of title from seller to buyer under conditions whereby:

buyer and seller are typically motivated;

both parties are well informed or well advised, and acting in what they consider their best interests;

a reasonable time is allowed for exposure in the open market;

payment is made in terms of cash in Canadian dollars or in terms of

financial arrangements comparable thereto;

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

1.10.2 Exposure Time

Exposure time is referred to in most market value definitions. In an appraisal, the term means the estimated length of time the property interest being appraised would have been offered on the market before the hypothetical consummation of a sale at market value on the effective date of the appraisal. It is always presumed to have preceded the effective date of the appraisal. It may be expressed as a range. The overall concept of reasonable exposure time encompasses not only adequate, sufficient and reasonable time, but also adequate, sufficient and reasonable marketing effort. Based on our review of listing and sale data the exposure time is estimated to be 9 to 12 months.

1 2007 Canadian Uniform Standards for Professional Appraisal Practice Section 12.16.1.


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1.10.3 Marketing Time

Related information includes other market conditions that may affect marketing time, such as the identification of typical buyers and sellers for the type of property involved and typical equity investment levels and/or financing terms. Marketing time is a function of price, time, use, and anticipated market conditions such as changes in the cost and availability of funds - not an isolated opinion of time alone. Marketing decisions rest with the owner or client.

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 2.0 Assumptions and Limiting Conditions

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2.0 Assumptions and Limiting Conditions 2.1 Ordinary Assumptions

The values established in this report are based on the following ordinary assumptions:

reliability of data sources;

compliance with government regulations;

marketable title;

no defects in the improvements unless stated;

bearing capacity of soil;

no encroachments;

no change in the subject property occurred between the date of inspection and the effective date of the appraisal;

no site contamination exists;

diligence by intended users.

2.2 Ordinary Limiting Conditions

denial of liability to non-intended users and for any non-intended use,

conclusions may be valid only at the date of valuation;

responsibility denied for legal factors;

no environment audit was undertaken;

report must not be used partially;

possession of report does not permit publication;

disclosure for peer review may be required;

cost estimates are not valid for insurance purposes;

value conclusion is in Canadian dollars;

denial of responsibility for any unauthorized alteration to the report; and

validity requires original signature.

2.3 Extraordinary Assumptions or Limiting Conditions

None

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 3.0 Identification of the Property

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3.0 Identification of the Property 3.1 Location As indicated on the following figures the subject site is situated in the amalgamated township of North Glengarry, in the Village of Alexandria, Ontario. More specifically it is located in the northern section of the village, on the east side of Main Street South, just south of Centre Street, formerly Catherine Street. Figure 1 – Alexandria Location

North Glengarry Township is located in eastern Ontario, in close proximity to the Quebec border. The area was first settled in 1792, and incorporated in 1998 with the amalgamation of the former townships of Kenyon and Lochiel, and the Villages of Maxville and Alexandria. North Glengarry Township spans an area of 642.40 km2 and has a population of 10,635 according to the 2006 Statistics Canada Census. The population is 54% English speaking (as a first language) and 41% French speaking. The unemployment rate in the area is 5.0%. The area has expanding commercial and industrial sectors around the Village of Alexandria.


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Alexandria is a rural town centre servicing farming communities within the area. The area was first settled in 1794, and economic prosperity was brought to the village with the construction of the railroad in the 1880s. Also around this time was the construction of a grist mill on the Garry River, which is now a designated heritage building, and converted to a fine dinning restaurant. The Village continues to be serviced by the Montreal-Ottawa VIA rail trains, stopping 5 to 6 times per day.

Distance to metropolitan centers:

Montreal – 116 km East

Ottawa – 121 km West

Cornwall – 47 km South

Figure 2: Ariel View of Village of Alexandria

The population of the village is estimated at approximately 3,200 people. The Chamber of Commerce states that the shopping population serviced by Alexandria is approximately 25,000 people. The historic main street of Alexandria is narrow by today’s standards, as it is a two lane roadway with


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limited parallel parking available. The majority of the buildings date back approximately 100 years, and many of the commercial buildings are in need of repair. The southern gateway to the Village located at the 400 and 500 South blocks of Main Street, has some newer strip mall developments which offer ample off-street parking.

On the opposite end of the Village is the Alexandria Industrial park, made up of three separate parcels. There is a total of 136 acres of developable land located north of Leroux Street and west of Industrial Road. Of the 136 acres, approximately 70 are zoned industrial and the remainder is zoned residential, which could be re-zoned for industrial or other commercial uses.

Economic Overview

Based on recent discussions with industry contacts and our general market knowledge, it has become clear that the boom which impacted most of Ontario such as the major centers of Toronto and mid-level centres such as London and Ottawa through 2006 and into 2007 is now over. This is not to say that the market has reached its peak, but simply, any significant adjustment upward in overall values has been realized by most property owners. The strong increases in real estate demand and resulting values have therefore tapered to what is believed by many industry experts to be more sustainable levels. This was the anticipated course of events taken by the market, as it is unreasonable to have record numbers for values, absorption rates and construction starts for several years running.

2008 Ontario Economic Outlook

According to various economists, with export-oriented and manufacturing sectors continuing to face particular pressure, real GDP growth for this year is expected to be nearly flat at 0.5% - 1.8% in Ontario. Economists continue to be impressed with the resilience of most housing markets, and this combined with elevated commodity prices comes as good news, in particular for resource-driven markets. But even these outperforming economies are unlikely to sidestep the general trend towards slower growth in the current phase of the economic cycle.

2009 Ontario Economic Outlook

Canada’s external environment is still the dark cloud hovering above its economic prospects for 2008 and 2009. Flirting with recession towards the middle of this year, the Canadian economy, in particular Ontario’s, is expected to experience growth well below potential until late 2009. Still tied-in to the U.S.


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economic cycle, with a lag, worldwide growth will also ratchet down to about 3.5% this year after a solid five year run averaging close to a 5% rate.

For 2009, prospects in Ontario are expected to gradually brighten in tandem with the export picture. However, economists in general caution that as over-stretched consumers and cautious businesses in the U.S. are not expected to go on a spending spree any time soon, this pickup could prove to be slow and arduous, particularly for central Canadian economies more leveraged to this demand, such as Ontario. The downside risks to worldwide credit conditions and U.S. business and consumer spending have increased both in terms of potential depth and duration of the current U.S. recession.

3.2 The Subject Site

The subject property is located at 5 Main Street South, in the downtown core. The site is east of Main Street South, and south of Centre Street.

Figure 3: Location Map

3.2.1 Shape

As illustrated in Figure 4 the site is irregular in shape. A larger site plan is found in the Addenda.


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Figure 4: The Site


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Figure 5: Aerial View

3.2.2 Area & Dimension

Dimensions as provided by the site plan are provided in the Addendum, as Schedule A.

The total area is 29,185 square feet (0.67 acres).

3.2.3 Access

The subject site is the result of a land assembly that was completed in the late 1980’s and is comprised of two lots fronting on Main Street and 2 lots fronting on Center (formerly known as Catherine) together with various small parcels and rights of way. A survey plan provided by the owner has been provided on the previous page for reference. The site is an irregular shape with 67.5 feet of frontage on Main Street, 148.9 feet of frontage along Center Street and approximately 149.8 feet of frontage along Dominion Street. A 10 foot right of way separates the 2 lots that front on Main Street from the rear lots that are


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used for parking. It is our understanding that an agreement was reached with the Township and the property to the south that enabled the construction of the rear entryway that houses the elevator and stairwell on a portion of the right of way. The property owner advised that the owners of the “Glengarry News” building, at 3 Main Street S, refused to sell their property to him which prevented him from creating the rectangular corner lot that he desired.

The Garry River runs along the southern boundary of the property. The banks of the river have stone and concrete retaining wall to control the water course. The owner advises that the Garry River has never caused any problems.

The assembled site is unique in the downtown core in that because of it size and frontage on three streets it able to provide customers with a considerable amount of off-street parking, in addition to the limited on-street parking that is available along Main Street. The paved parking lot is at the rear and has access from Center and Dominion Streets.

3.2.4 Topography

The site falls from Main Street in the South to Dominion Street in the North approximately 12 to 15 feet. This allows for ground level access to the upper level from Main Street and to the lower level from Dominion Street.

3.2.5 Services

The site is serviced by water and sewer. Hydro, phone, cable are available. Police, fire and emergency services are all in close proximity.

3.2.6 Encumbrances

Encumbrances on the property include a 10 foot right of way that severs the Main Street frontage from the rear lots.


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3.4 The Building

3.4.1 Areas & Dimension

The following table provides a summary of building areas.

Table 1: Building Areas

Section Area Drug Store

Lower Level 7,304 ft2 Plus: Entrance 583 ft2 Plus: Entrance II 123 ft2

Subtotal (Lower Level) 8,010 ft2 Upper Level 7,304 ft2 Plus: Office 583 ft2

Subtotal (Upper Level) 7,887 ft2

Total Building Area 15,897 ft2

The following figure illustrates the footprint and use of the structure:


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Figure 6: Building Footprint

Lower Level

Upper Level


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Figure 7: Photos of Subject

3.4.2 Description of Improvements

A brief description of the improvements is presented in the following chart:

Year Built: 1990

Layout and Design: The upper level has retail area with store front facing Main Street, a 2 piece washroom, a boardroom, and 5 small offices along the north wall. The lower level is unfinished, with the exception of the rear entry and stairwell, has access from Main Street and a small storefront with access from the parking lot fronting on Dominion Street

Foundation: Reinforced concrete.


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Floor Structure: 5” concrete slab reinforced with 6” x 6” wire mesh on lower level. Upper floor is 4” wire reinforced concrete slab on a 1½” 22 gage steel deck.

Framing: 8” Concrete hollow block with Steel I- beam supporting upper level and roof deck.

Roof: 1½” 22 gage steel deck supported on 22” steel joists with built up roof cover.

Exterior Wall: Red Brick with anodized aluminum store front

Flooring: The retail area of the upper level has 1’ x 1’ ceramic tile. The upper floor offices are carpeted. Vinyl tile has been used in the office corridors and the stairwell landing.

Interior Walls: 5/8” gypsum on upper level. Lower level is unfinished with the exception of the rear entry and stairwell.

Interior Ceilings: Predominately drop T-Bar & acoustic ceiling tile

Windows: Aluminum thermo pane.

Exterior Doors: Aluminum and Glass.

Electrical: 400 Amp Service. Recessed fluorescent lighting.

Hot Water: Electric hot water tank.

HVAC: 4 ducted roof mounted package HVAC units servicing both the upper and lower levels

Washrooms: 1 - 2 piece on the upper level

Other: 16 passenger elevator to provide access from rear parking lot to upper level Paved parking with lines and lamp standards at rear. Owner indicated that the structure was engineered to allow for an additional 2 floors of medical office to be added at a future date.


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Overall Condition During the inspection I noted water damage to the ceiling tiles in the rear stairwell and lifting of the vinyl tiles in the stairwell landing. The owner reported that this was caused by a malfunction of one of the roof top air conditioners.

The structure and equipment has been maintained and serviced. It is considered to be in average condition with only minor maintenance required.

3.5 Land Use Controls

The subject property is zoned CA (Village Core) as identified in the Township of North Glengarry Land Use By-Law 39-200, Schedule C for the Village of Alexandria. Details of the land use controls can be found in the addenda.

3.5.1 Permitted Uses

Development permits may be issued for all residential or commercial uses. Section 8 of the By-Law outlines the permitted uses for this zoning.

1. Permitted Uses i.) Residential Uses:

- single detached, duplex or semi-detached dwellings - rowhouse dwelling - converted dwelling - apartment dwelling - boarding house - existing dwelling - dwelling units located in a building containing a

permitted non-residential use ii.) Public/ Institutional Uses

- all uses permitted in the Institutional (IN)Zone iii.) Commercial Uses

- all non-residential uses permitted in the General Commercial (CG) Zone

iv.) Mixed Uses - Any combination of the permitted uses listed in (i),

(ii), and (iii) above.


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3.5.2 Conformity

The subject complies with existing Land use requirements.

Table 2: Zoning Requirements

Requirements Area/Length Conforms

Minimum Lot Area 450.0 m2 (4,842 sf) Yes

Minimum Frontage 15 m (49.21 feet) Yes

Minimum Front or Flank Yard 7.5 m (24.61 feet) Yes

Minimum Exterior Side Yard 7.5 m (24.61 feet) Yes

Minimum Interior Side Yard* 3.0 m (9.84 feet) Yes

Minimum Rear Yard 6.0 m (19.69 feet) Yes

Maximum Lot Coverage 40 % Yes

Maximum Height of Main Building 12.0 m (39.37 feet) Yes

*Provided that when the interior side lot line abuts another lot in a Commercial Zone, no interior side yard will be required.

3.6 Assessment & Taxation

The property is assessed under four roll numbers for 2008. The amount of the assessment and the tax classification of the property are as follows:

Table 3: 2008 Assessment

Roll Number Tax Class Assessment

01-11-018-000-33500 CT – Commercial $267,000

01-11-018-000-33700 CT – Commercial $342,000

01-11-018-000-82200 RT – Residential $19,700

01-11-018-000-82300 GT – Parking Lot $43,000

Total $671,700


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Since the roll numbers are allocated to different tax classes, the property is subject to the commercial tax rate, the residential tax rate, and the parking lot tax rate for each respective portion.

3.7 Highest and Best Use

3.7.1 Overview

Highest and best use is defined as:

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.2

In general terms, the “Highest and Best Use” of a property is the most reasonable and probable use for which a property can be utilized and is the most likely possible use for a property within the foreseeable future. It is the economic concept that measures the interaction of four criteria: legal permissibility, physical possibility, financial feasibility, and maximum profitability. Estimating the highest and best use of a property is the most critical component of an appraisal as it sets the valuation context for the selection of comparables and analysis undertaken in the report.

Physical Possible Uses

This refers to the legal uses of the subject that are physically possible and can be accomplished on the site considering the size, shape, topography, soils and environmental conditions.

Legal Permissible Uses

This refers to the possible uses of the subject permitted legally by land use controls, any existing leases, easements, deed restrictions or subdivision controls, covenants and restrictions or any other public or private limitations.

2 The Appraisal of Real Estate (2002), 2nd Canadian Edition, Page 12.1.


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Financially Feasible Uses

This refers to the uses of the subject which are physically possible and legally permissible that will produce a positive net financial or economic return to the owner of the site.

Maximally Productive Uses

This refers to the use that is economically feasible which will produce the greatest net return to the subject or which will result in the highest property value.

Highest and Best Use is estimated by analyses of all physical, legal, and economic facts and trends that affect the property’s potential to be used in the most profitable way. Two concepts are explored: Highest and Best Use as if vacant and ready for development and Highest and Best Use as the subject property as improved, at the date of appraisal.

3.7.2 Highest and Best Use as if Vacant

Highest and best use as if vacant assumes that the property can be made vacant by demolition of any existing improvements. With this assumption the appraiser can consider all potential uses that generate value and select comparable vacant sales to determine a value of the parcel as if vacant. The determination of the land value as vacant is required for use in the Cost Approach to value.

The property is considered in relation to the most likely and optimal potential uses of the parcel as though undeveloped. It may be determined that the Highest and Best Use of the site as vacant and available for development is different from the Highest and Best Use of the improved real property. However, if the existing development contributes to the total real property value in excess of the value of the site, removal of the improvement may not be warranted.

3.7.3 Highest and Best Use of the Property as Improved

The highest and best use of a property as improved is the use that should be made of a property as it exists, or the ideal improvement determined in the conclusion of the highest and best use as if vacant. This could be the continuation of the current use or a new improvement given the costs of demolishing existing building and constructing a new one, are offset.

Establishing a conclusion for Highest and Best Use may or may not be akin to a feasibility analysis that pin points a final development or use plan for a particular


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property. The underlying purpose from a valuation standpoint is to look at the various criteria, derive the Highest and Best Use of the subject, and then identify the most comparable property category from which to draw the input data utilized in the value estimate of the subject.

3.7.4 Highest and Best Use Conclusion

Having considered all the elements of the subject property, it is concluded that the existing improvements meet and reflect the criteria for Highest and Best Use. The subject site is located in a commercial district area. If vacant, it would most likely be improved for commercial or retail purposes in keeping with the surrounding neighbourhood. The improvements are legal and conforming. Current use suggests the improvements contribute additional value to the land. The existing use as a single tenant retail space is the Highest and Best Use.

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 4.0 Appraisal Procedures

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4.0 Appraisal Procedures

In determining market value there are generally three approaches that can be contemplated: The Appraisal Institute of Canada defines the various approaches as follows:

The Cost Approach

The cost approach is based on the understanding that market participants relate value to cost. In the cost approach, the value of a property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation (i.e. deterioration and obsolescence) in structures from all causes. Entrepreneurial profit and/or incentive may be included in the value indication. The approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market. Cost approach techniques can also be employed to derive information needed in the direct comparison and income approaches to value, such as the costs to cure items of deferred maintenance.

The Direct Comparison Approach

The direct comparison approach is most useful when a number of similar properties have recently sold or are currently for sale in the subject property’s market. Using this approach, an appraiser produces a value indication by comparing the subject property with similar properties called comparable sales. The sale prices of the properties that are judged most comparable tend to indicate a range in which the value indication for the subject will fall.

The Income Approach

In the income approach, the present value of future benefits of property ownership is measured. A property’s income and resale value upon reversion may be capitalized into a current, lump-sum value. There are two methods of income capitalization: direct capitalization and yield capitalization. In direct capitalization, the relationship between one year’s income and value is reflected in either a capitalization rate or an income multiplier. In yield capitalization, the relationship between several years’ stabilized income and the reversionary value at the end of a designated period is reflected in a yield rate. The most common application of yield capitalization is discounted cash flow analysis. Given the differences in how and when properties generate income, there are many variations in direct and yield capitalization procedures. Like the direct comparison


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and cost approaches, the income approach requires extensive market research. Data collection and analysis for this approach are conducted against a background of supply and demand relationships, which provide information about trends and market anticipation.

Each of the three Approaches requires the gathering and analysis of sales, cost, and income data that pertain to the property being appraised and to comparable properties. All rely on data from the market. One or more of the approaches may not be applicable to a specific assignment or may be less reliable due to the nature of the property; therefore one or more of these approaches are used in all estimations of value. The approaches employed depend on the type of property, the use of the appraisal, and the quality and quantity of data available for analysis.3

3 The Appraisal of Real Estate (2002), 2nd Canadian Edition – Excerpts from Chapter 4


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COSTAPPROACH

DIRECTCOMPARISON

APPROACH

INCOMEAPPROACH

EstimateMarket Rent

DeductVacancy &Bad Debts

EffectiveGross

Income

DeductNon-Recovered

Expenses

Net Income

CapitalizationRate

R = I / V

PotentialGross

Income

EstimateMarketValue

V = I / R

Reconciliationof

Values

FinalValue

Estimate

EstimateImprovement

Costs

DeductPhysical

Depreciation

DeductFunctional

Obsolescence

DeductExternal

Obsolescence

Net Value of

Improvements

EstimateLandValue

EstimateMarketValue

Inspect andDescribe

Subject Property

IdentifyComparable

PropertySales/Listings

EstablishAppropriate

Units ofComparison

ResearchCharacteristics of

Comparables

IdentifyDifferences

between Subjectand Comparables

Adjust forDifferences between

Comparables and Subject

EstimateMarketValue

4.1 Common Valuation Approaches


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4.2 Chosen Analysis Methodology Alexandria is a small rural town, with limited market information. The commercial buildings are predominately owner occupied, meaning they have been purchased with purpose of providing space for the owner to conduct their business. In many instances these commercial properties also include an apartment on the second floor. Again many of these apartments are used by the owner. In researching the market we found that some of the apartments have been let for nominal monthly incomes; however the nominal upper floor incomes are not considered a primary driver in the determination of the total property value.

The subject property is reportedly the newest property in the downtown core of Alexandria having been completed in 1990. The quality of construction and interior finish is also considered superior to most of the surrounding properties in the core.

In preparing this report we interviewed those knowledgeable in the local real estate market. We have concluded from our research that very few properties in Alexandria are purchased as investments based on their ability to generate a rental income. Further we were unable to find sufficient comparable rental information to allow us to consider an income approach to value.

In considering the various approaches to value, the available market information relative to the subject property, the terms of reference, and the intended use of this report, it is concluded that the Direct Comparison and Cost Approaches are the appropriate valuation methodologies.

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 5.0 Cost Approach

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5.0 Cost Approach 5.1 Overview

The cost approach to value, like the direct comparison and income approach, is based on comparison. In the cost approach, the appraiser compares the cost to develop a new property or a substitute property with the same utility as the subject property. The estimate of developed cost is adjusted for differences in the age, condition, utility of the subject property to generate a value indication by the cost approach. The cost approach reflects market thinking because market participants relate value to cost. Buyers tend to judge the value of an existing structure not only by considering the prices and rents of similar buildings, but also by comparing the cost to create a new building with optimal physical condition and functional utility. Moreover, buyers adjust the prices they are willing to pay by estimating the costs to bring an existing structure up to the physical condition and functional utility they desire.

In applying the cost approach, an appraiser estimates the markets perception of the difference between the improvements being appraised and a newly constructed building with optimal utility. Generally, the cost approach supports two methods for estimating cost and three methods of estimating depreciation. In its classic form, the cost approach produces an opinion of value of the fee simple interest in the real estate at stabilized occupancy, so the cost must include any costs needed to achieve typical stabilized occupancy. Also, if the purpose of the appraisal is estimate the value of an interest other than the fee simple, an adjustment is required. For example, a property rights adjustment could be made as a lump sum adjustment at the end of the cost approach or in the final reconciliation of the approaches to value.

In applying the cost approach, an appraiser must distinguish between two cost bases, which should be used consistently throughout. Typically one of the following cost bases is applied:

Reproduction cost Replacement cost

The market and physical condition of the appraised property usually suggest whether wan exact replica of the subject property (reproduction cost) or a substitute property with similar utility (replacement cost) would be a more suitable comparison.


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The appraiser estimates the cost to construct the existing structure and site improvements (including direct costs, indirect costs and an appropriate adjustment for entrepreneurial profit or incentive) using one of three traditional techniques:

Comparative –unit method Unit-in-place method Quantity survey method

The appraiser then deducts all depreciation in the property improvements from the cost of the new structure as of the effective appraisal date. The amount of depreciation present is determined using one or more of the three fundamental methods:

Market extraction method Age-life method Breakdown method

When the land value is added to the cost of the improvements less depreciation, the result is an indication of value of the fee simple interest in the real estate component of the property, assuming stabilization.4 The classical steps of the cost approach are shown in Section 4.1 of this report.

5.2 The Process

5.2.1 Land Value

Land has value because it provides potential utility as the site of a structure, recreational facility, agricultural tract, or right of way for transportation routes. If land has utility for a specific use and there is demand for that use, the land has value to a particular category of users. Beyond the basic utility, however, there are many principles and factors that must be considered in land valuation. Although it is sometimes considered the simplest of appraisal tasks, the valuation of land requires careful analysis of complex variety of factors.5

Methods Available to Estimate Land Value

Direct Comparison Abstraction Extraction

4 The Appraisal of Real Estate (2002), 2nd Canadian Edition, Chapter 14

5 The Appraisal of Real Estate (2002), 2nd Canadian Edition, Page 13.1


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Subdivision Land Residual Ground Rent Capitalization

Method Selected

The Direct Comparison Approach has been selected for determination of the vacant land value in this report.

The Direct Comparison method is the most common technique for valuing land and it is the preferred method when sales are available6. In applying this method an appraiser analyses sales and other market indicators for similar parcels of land and compares them to the parcel being valued. The process involves comparing and considering any similarity or dissimilarity between the comparables and the subject. The appraiser gathers data on actual sales, listings, offers, ground leases and renewal options and identifies similarities and differences in the characteristics in an effort to quantify the differences paid in the market place. After adjusting the comparables for dissimilarities with the subject and ranking them for relevance, the appraiser concludes the most probable and reasonable market value of the subject land.

There are a limited number of market indicators in Alexandria available for the determination of the land value of the subject. Although limited in number the most prevalent indicators are the sales and listings of vacant and improved properties. The use of improved sales, to determine a Land Residual, requires the determination and removal of the estimated value contribution provided by buildings and as such is less preferred when vacant sales, even though limited and dated, are available.

Land Sales

Four vacant land sales have been selected as comparable to the subject. These properties are identified, compared and contrasted to the subject in the following sections. Indices 3 and 4 are within one block of the subject on the same street. Indices 1 and 2 are located at the southern entrance to town and are in a superior location.

6 The Appraisal of Real Estate (2002), 2nd Canadian Edition, Page 13.6


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Figure 8: Vacant Land Sales

Index Address Size (Acres) Size (SF) Zoning Sale Date Sale PriceSale

Price/Acre Sale Price/SF

1 439 Main Street S 0.46 20,038 C2 Jun-07 $280,000 $608,696 13.97$ 2 440 Main Street S 1.62 70,567 C1 Oct-04 $350,000 $216,049 4.96$ 3 20 Main Street N 0.15 3,687 C1S Apr-04 $25,000 $166,667 6.78$ 4 34 Main Street S 0.05 2,289 C1S Aug-00 $19,000 $380,000 8.30$

The 4 sales selected as comparable to the subject indicate a range of value for the subject site from $144,758 to $407,714 before adjustment.

Index #1 is the most recent sale; it has a superior location and topography. At 20,038 square feet this comparable is about 9,100 square feet smaller than the subject; a difference not expected to result in a different highest and best use from the subject. This comparable also has a superior ratio of frontage to total area. This comparable requires adjustment for differences in location.

Index #2 is the second most recent sale; it has similar services and superior topography to the subject. At 70,567 square feet this comparable is significantly larger than the subject; a difference not expected to result in a different highest and best use from the subject but the additional area will enhance the ability to locate buildings and provide off-street parking. This comparable requires adjustment for difference in size to the subject.

Index #3 is equal to the subject in terms of location and topography. It is located on the opposite side of the street one block west of the subject. At 3,687 it is significantly smaller than the subject and the size differences could result in very different improvement maxima to the subject. An adjoining lot would have to be acquired to satisfy the minimum frontage requirements.

Index #4 is the most dated sale; it is equal to the subject in terms of location and topography. It is located on the opposite side of the street in the same block of Main Street as the subject. At 2,289 it is also significantly smaller than the subject and the size differences could result in very different improvement maxima to the subject. An adjoining lot would have to be acquired to satisfy the minimum frontage requirements.


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Figure 8: Comparable Land Sales Map

5.2.2 Reconciliation into Estimate of Value for Subject Site

Index #1 provides the best indication of value for the subject. It is the most similar in size, and occurred closest to the date of the appraisal. The subject site is encumbered with a 10 foot right of way that severs the Main Street frontage from the rear lots, which makes Index #1 superior in terms of choices for building layout and placement. Indices 3 and 4, are somewhat dated however they provide an indication of the price to acquire smaller lots to assemble a building site in the town core. Since these lots on their own require the acquisition of adjoining lots to meet the minimum size requirements of the zoning bylaw they are inferior to the subject.


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After considering all the facts and weighing the differences between the subject and the comparables a rate of $10.00 per square foot has been selected as appropriate. The market value of the subject, as if vacant, on April 25, 2008 is:

29,185 square feet x $10.00 = $291,850

Rounded =$292,000

5.3 Cost Analysis

5.3.1 Define and Contrast Reproduction and Replacement Cost

Reproduction Cost

Reproduction cost is the estimated cost to construct, as of the effective appraisal date, an exact duplicate or replica of the building being appraised, insofar as possible using the same materials, construction standards, design, layout and quality of workmanship and embodying all deficiencies, superadequacies, and obsolescence of the subject building.7

Replacement Cost

Replacement cost is the estimated cost to construct, as of the effective appraisal date, a building with utility equivalent to the building being appraised, using contemporary materials, standards, design and layout. When this cost is used some of the existing obsolescence in the property is assumed to be cured. 8

Reproduction Cost versus Replacement Cost

The decision to use reproduction cost or replacement cost is often dictated by the age of the structure, its uniqueness, and any difference between its intended use at the time of construction and its current highest and best use. In theory, the use of reproduction or replacement cost should yield the same indication of value, but in practice both cost estimates and depreciation estimates will be different. If reproduction cost or replacement cost is used inconsistently, double counting of items of depreciation and other errors can be introduced.


8 Ibid.


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The use of replacement cost can eliminate the need to measure many, but not all, forms of functional obsolescence. Replacement structures usually cost less than identical structures (i.e. reproductions) because they are constructed with materials and techniques that are more readily available and less expensive in the current market and because correcting deficiencies may result in lower costs. Thus a replacement cost figure is usually lower and may provide a better indication of the existing structures contribution to value. A replacement structure typically does not suffer functional obsolescence resulting from superadequacies. However, if functional problems persist in the hypothetical replacement structure, an amount must be deducted from the replacement cost. Estimating replacement cost generally simplifies the procedure for measuring depreciation in components of superadequate construction. Common examples of functional obsolescence include the absence of a desirable feature such as air-conditioning or excessively thick foundations in an existing improvement. Such obsolescence would be corrected in a replacement building.

Estimating reproduction cost may be complicated because the improvements may include materials that are now unavailable and construction standards may have changed. Nevertheless, reproduction cost usually provides a basis for measuring depreciation from all causes.9

5.3.2 Selection of Cost Method

Reproduction cost will be used in this report. The use of reproduction cost will allow for a complete examination and analysis of all categories of depreciation contained in the subject improvements

Methods to Estimate Reproduction Cost New

The following methods are available to estimate the reproduction cost new of an improvement.

Indexed cost Unit in place Quantity survey Comparative Cost Manual

Marshall & Swift/Boeckh costing service will be used in this report.

9The Appraisal of Real Estate (2002), 2nd Canadian Edition, Chapter 14


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5.3.3 Estimate of Reproduction Cost New Using Cost Manual

For the calculation of Reproduction Cost New, Marshall and Swift/Boeckh, Marshall Valuation Service Brown manual has been used. The M&S/B calculator method normally estimates replacement cost new and not reproduction cost. For the purpose of this appraisal the M&S/B model using the Marshall Valuation Service Brown manual have carefully reviewed and adjusted for any differences found between the described model retail building and the subject property. Even so given the building was constructed in 1990 and the date of the cost estimate is April 2008, it is possible that not all differences in construction standards and materials have been acknowledged in the estimate.

The base date of the model used to determine the cost estimate is May 2006. A Local Current Multiplier of 1.19 was applied to adjust the base cost to Alexandria, March 2008. This is multiplier is the product of the local multiplier for Brockville, the closest city to Alexandria reported by M&S/B, for May 2006 and the current cost multiplier to update the costs from the may 2006 base date of the model to March 2008.

1.10 LM x 1.08 CCM = 1.19

A good quality drug store base model was selected for this estimate. The area, perimeter, wall height, heating type, climate and wall construction of the subject building are all recognized in base costs.

A summary of the costs are shown below our full worksheets used to estimate the costs are provided in the addenda for reference.

5 Main Street SouthAlexandria, Ontario

BUILDING NO. LOWER LEVEL LOWER LEVEL LOWER LEVEL UPPER LEVEL UPPER LEVELFunction Entrance Entrance & Stair Storage Area Office Retail Drug StoreYear Built (Effective Age) - - 1990 - 1990Building Type/Class Vestibule Mixed Retail/Office/C Neigh.SC/Shell Bldg. Mixed Retail/Office/C Drug Store/CBuilding Quality Good Good Good Good GoodExterior Wall Metal & Glass Conc./Masonry/Metal Masonry/Metal Concrete Masonry/MetalNo. of Stories/Floor 2/Lower Level 2/Lower Level 2/Lower Level 2/Upper Level 2/Upper LevelHeight Per Story (FT) 10.00 10.00 10.00 15.00 15.00 Average Floor Area (SF) 123 583 7,304 583 7,304 Average Perimeter (FT) - Combined 410 410 410 412 412 Condition Average Average Average Average AverageSection/Page/Date 15/P18/Nov.2007 13/P34/May 2006 13/P38/May 2006 13/P34/May 2006 13/P20/May 2006BASE SQUARE FOOT COST $212.69 $84.66 $41.14 $84.66 $94.33March 2008 Building RCN Cost ($) $26,948 $56,586 $369,363 $62,958 $875,750 March 2008 Building RCN Cost ($) $1,391,605March 2008 RCN ($)/SF $87.54March 2008 RCNLD ($)/SF - ROUNDED $88.00


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5.3.4 Site Improvements Reproduction Cost New Estimate

To determine the reproduction cost new of the site improvements Marshall Valuation Service cost manual was used. The base date of the manual used is December 2007 and as such all costs have been trended to March 2008. The parking lot provides good parking for approximately 60 cars, and includes lamp standards, striping and parking bumpers.

Item

Section and Page Units Manual Cost

Composite Adjustment Adjusted Cost

Parking Lot 66/3 60 1,006.00 1.178 60,360.00$

Total 60,360.00$

Yard Improvements

March 2008 Yard RCN Cost ($) $60,360March 2008 RCN ($)/SF $3.02March 2008 RCNLD ($)/SF - ROUNDED $3.00

Reproduction Cost New of the Subject Site Improvements is estimated at: $60,000

5.4 Cost Approach – Depreciation Analysis

5.4.1 Definition of Depreciation

Depreciation is a loss in property value from any cause. It may also be defined as the difference between the reproduction cost or replacement cost of the improvements and its market value.

To measure accrued depreciation, an appraiser identifies and measures the loss in value experienced by the structure in its present condition and compares its present value with the value it would have if it were new. Accrued depreciation is sometimes referred to as diminished utility. 10



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5.4.2 Methods of Measuring Depreciation

Depreciation will be estimated in this report using the breakdown method for the building and the age life method for the site improvements.

Economic Age-Life Method

To estimate accrued deprecation a ratio between the effective age and the total economic life of the building is multiplied against the total cost of the building to determine a single lump sum deduction. This method does consider physical, functional and external depreciation, but does not distinguish or separate the causes of accrued depreciation.

Modified Age-Life Method

The modified age-life method recognizes curable items of accrued depreciation separately from other forms of accrued depreciation. To apply this method the appraiser first estimates the cost to cure all curable items of physical deterioration due to deferred maintenance and functional depreciation and deducts this amount from the total cost of the building prior to applying the ratio between the effective age and the total economic life of the building to the remaining cost of the building.

Breakdown Method

To apply the breakdown method of estimating accrued depreciation an appraiser analyzes each cause of depreciation separately, measures the amount of each, and then totals the estimates to derive a lump sum figure that is deducted from the estimated reproduction or replacement cost. If the appraiser is using replacement cost, some forms of functional depreciation are automatically eliminated. The five basic types of accrued depreciation are:

Curable physical depreciation Incurable physical depreciation Curable functional depreciation Incurable functional depreciation External depreciation (which may be temporary if caused by depressed

market conditions)11

11 The Appraisal of Real Estate (2002), 2nd Canadian Edition , Chapter 16


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5.4.3 Physical Deterioration - Curable Deferred Maintenance

Curable physical deterioration refers to items of deferred maintenance; the estimate of curable physical depreciation applies only to those items in need of repair on the effective date of the appraisal. 12 This measure of accrued depreciation is quantified by the cost to cure or restore the item to a new or near new condition. A deciding factor in determining if an observed defect should be treated as a curable item in the depreciation analysis, or not, is the cost of correction. If the cost of correcting the condition exceeds the offset in the increase in value of performing the correction the condition is not economically curable. The cost to cure is generally higher than the reproduction cost new due to the requirement to remove the existing item(s) prior to repair.

Minor water damage was noted during the inspection, on the ceiling and flooring of the rear stairwell. The Owner indicated that this had been caused by a mal-function of the rooftop air-conditioning unit. No investigation of the roof membrane or the air-conditioning unit was undertaken during the inspection. The nature of the deterioration is not sufficient to warrant a separate physical deterioration adjustment; however we caution the reader to investigate this problem further to determine the actual cause of the damage and necessary repairs.

5.4.4 Physical Deterioration, Incurable

Incurable physical deterioration includes all building components that have not all ready been accounted for in the curable physical deterioration. An appraiser may use one of two methods to estimate incurable physical deterioration.

Apply a ratio of actual age to estimated total physical life. Apply a ratio of effective age to economic life.

It is difficult to determine the total physical life of building in the market place. It should also be noted that the physical life of a structure is typically longer than the economic life. For the purposes of this report we have referenced the Marshall Valuation Service cost manual. The remaining life tables in the manual are based on mortality tables derived from studies of building and equipment, discarding all cases of mortality due to excessive obsolescence13.

12 The Appraisal of Real Estate (2002), 2nd Canadian Edition , Chapter 16

13 Marshall Valuation Service Section 97, Page 1, February 2007


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BUILDING NO. LOWER LEVEL LOWER LEVEL LOWER LEVEL UPPER LEVEL UPPER LEVELFunction Entrance Entrance & Stair Storage Area Office Retail Drug StoreYear Built (Effective Age) - - 1990 - 1990Building Type/Class Vestibule Mixed Retail/Office/C Neigh.SC/Shell Bldg. Mixed Retail/Office/C Drug Store/CBuilding Quality Good Good Good Good GoodExterior Wall Metal & Glass Conc./Masonry/Metal Masonry/Metal Concrete Masonry/MetalNo. of Stories/Floor 2/Lower Level 2/Lower Level 2/Lower Level 2/Upper Level 2/Upper LevelHeight Per Story (FT) 10.00 10.00 10.00 15.00 15.00 Average Floor Area (SF) 123 583 7,304 583 7,304 Average Perimeter (FT) - Combined 410 410 410 412 412 Condition Average Average Average Average AverageSection/Page/Date 15/P18/Nov.2007 13/P34/May 2006 13/P38/May 2006 13/P34/May 2006 13/P20/May 2006BASE SQUARE FOOT COST $212.69 $84.66 $41.14 $84.66 $94.33March 2008 Building RCN Cost ($) $26,948 $56,586 $369,363 $62,958 $875,750Physical Depreciation(%) 34.00% 26.00% 26.00% 26.00% 26.00%Physical Depreciation($) ($9,162) ($14,712) ($96,034) ($16,369) ($227,695)

March 2008 Building RCN Cost ($) $1,391,605Physical Depreciation(%) -26.15%Physical Depreciation($) ($363,973)

5.4.5 Functional Obsolescence

Functional depreciation is a loss in value resulting from defects in design. It can also be caused by changes that, over time, have made some aspects of a structure, such as its materials or design, obsolete by current standards. The defect may be curable or incurable. To be curable, the cost of replacing the outmoded or unacceptable aspect must be the same as or less than the anticipated increase in value. Curable functional depreciation is measured as the cost to cure the condition. Incurable functional depreciation may be caused by a deficiency or a superadequacy. Two types of deficiencies may be involved: an item not included in the cost new that should be, or an item included in the cost new that should not be.

5.4.6 Incurable Depreciation

Incurable functional depreciation due to a superadequacy is measured differently depending on whether a reproduction or replacement cost model is used. If reproduction cost is the base, the appraiser must consider the cost to construct a building that contains the same superadequacy. The superadequacy is measured as the reproduction cost of the superadequate component:

minus any physical depreciation already charged; plus the present value of any added cost of ownership due to the

presence of the superadequacy; less any value added such as increased rent.

The charge for the burden of ownership is based on items such as additional taxes, insurance, maintenance and utility charges. The excess depreciated reproduction cost of the item, over and above the cost that may be supported by an increase in rent as a result of the superadequacy. This is added to the


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capitalized net income loss to derive an indication of the total depreciation caused by incurable functional depreciation due to the superadequacy.

To estimate incurable functional depreciation due to the superadequacy when reproduction cost is the base, the appraiser must review the estimates of curable and incurable physical depreciation. If the superadequate component has been included in either of these categories, the reproduction cost of the superadequacy must be reduced by the amount of physical depreciation already charged. Such a charge is often made in estimating curable in long-lived components, but it could also be made in estimating curable or incurable physical deterioration in short-lived components. All charges made in estimating physical depreciation must be reviewed to ensure that charges for items of accrued depreciation are not made twice.14

Several items of incurable functional obsolescence due to superadequacy have been identified in the design and layout of the subject improvements.

Basement (Lower Level)

The subject improvements include a basement that was designed to accommodate an additional floor of retail, potentially for groceries. The lower level has ground level access from then north side of the building as well as a small storefront and stairway access direct from Main Street. Although once relatively common, basements are rarely found under modern commercial buildings. The lower level remains unfinished, and has not been used for its intended purpose for almost 18 years. This lack of use for other than storage, demonstrates the lack of functional utility in the design.

Market data was not available in Alexandria to quantify the amount of incurable functional obsolescence associated with the lower level. It has been our experience in other market areas that basement level retail rents are at least 50% less than those found on the main floor. In this instance the lower level remains unfinished and although the design allows it to be finished into retail space, in its current state it is best classified as storage. Basement storage space in smaller communities generally only attracts rents that are in the range of zero to 20% of the main floor.



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Given the lack of demand and nominal additional utility provided by the lower level, an 80% additional downward adjustment in the amount of $236,449 has been applied to recognize the incurable functional obsolescence associated with the lower level.

Framing

The subject building was engineered to accommodate an additional 2 floors of medical office in addition to the lower and upper levels that were constructed. In order to accommodate the weight of these potential future additions the existing steel frame, floor and roof decks are superadequate to the requirements for upper level (Main Street) space. The Marshall Valuation Services Segregated Cost Section 43 was used to determine the costs associated with the superadequate framing of the subject.

An additional $99,181 downward adjustment has been applied to the Upper Level to recognize the incurable functional obsolescence associated with the superadequate framing.

BUILDING NO. LOWER LEVEL LOWER LEVEL LOWER LEVEL UPPER LEVEL UPPER LEVELFunction Entrance Entrance & Stair Storage Area Office Retail Drug StoreBASE SQUARE FOOT COST $212.69 $84.66 $41.14 $84.66 $94.33March 2008 Building RCN Cost ($) $26,948 $56,586 $369,363 $62,958 $875,750Physical Depreciation(%) 34.00% 26.00% 26.00% 26.00% 26.00%Physical Depreciation($) ($9,162) ($14,712) ($96,034) ($16,369) ($227,695)Functional Obsolescence ($17,786) ($218,663) ($99,181)

March 2008 Building RCN Cost ($) $1,391,605Physical Depreciation(%) -26.15%Physical Depreciation($) ($363,973)Functional Obsolescence ($335,630)

5.4.6 External Obsolescence

External obsolescence (depreciation), the diminished value of a structure due to negative influences emanating from outside the building, is usually incurable on the part of the owner, landlord or tenant. External depreciation can be caused by a variety of factors, e.g. neighbourhood decline; the properties location in a community, region or province; or local market conditions. Any estimate of external depreciation must be based on thorough neighbourhood analysis and justified in the neighbourhood analysis section of the appraisal report.

External influences can cause any property to lose value. In the cost approach, an appraiser can either 1) capitalize the income or rent loss attributable to the negative influence, or 2) compare sales of similar properties that are subject to the negative influence with those that are not. If pertinent sales data are abundant, the second procedure is preferred. However, an appraiser may


40

encounter significant practical problems in attempting to account for other differences between the subject property and the comparable properties. Care should be exercised when this method is used.

To estimate external depreciation by capitalizing the resulting loss in property income, the appraiser first estimates the loss to the entire property that is attributable to external forces. Then the loss in income attributable to the improvements is capitalized at the building capitalization rate.

When net operating income and appropriate capitalization rates are used, the net income loss imputable to the building can be capitalized at the building capitalization rate. The resulting figure is an estimate of external depreciation.15

The downtown core of Alexandria is in decline. This is witnessed by the vacant commercial buildings and the general disrepair of many of the commercial buildings. Further to this, investors in real estate are indicating their preference to develop new commercial properties at the southern entrance to the town. As previously noted we were unable to find sufficient market rental data in Alexandria to draw any conclusions. In the direct comparison approach in the following section we have identified 7 improved sales of commercial buildings in the town core all in close proximity to the subject. If additional obsolescence is required to recognize external factors it will be captured in the analysis of these sales. As such no additional adjustment for external obsolescence has been applied.



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5.4.7 Summary of All Depreciation (Building)

March 2008 Building RCN Cost ($) $1,391,605Physical Depreciation(%) -26.15%Physical Depreciation($) ($363,973)Functional Obsolescence ($335,630)External ObsolescenceMarch 2008 RCNLD ($) $692,002March 2008 RCNLD ($) - ROUNDED $692,000March 2008 RCNLD ($)/SF $43.53March 2008 RCNLD ($)/SF - ROUNDED $44.00

5.4.8 Depreciated Value of Site Improvements

The asphalt paving on the site is in good repair. Asphalt normally has a physical life of 10 to 20 years in Ontario. The asphalt paving appears in good repair, without cracks, and does not require any immediate repair or replacement.

Item Cost New Age Life % Dep Dep. ValueParking Lot 60,000$ 17 20 85% 9,000.00$

5.5 Summary of the Cost Approach

The estimate of the cost new has been done using reproduction cost.

Marshall Valuation Services cost manual was used to provide a reproduction cost estimate of the improvements. Full details of the costing are provided in the previous section of this report.

In order to estimate the market value of the subject improvements, depreciation from all causes was considered as of the effective date of the appraisal and deducted from the cost estimates. The depreciation analysis for the subject building was estimated using the breakdown method, whereby each cause of depreciation is measured and analyzed separately. The depreciation analysis for the site improvements was done using the age-life method.


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Market Value of Land 292,000$

Reproduction Cost New of Building 1,391,605

Subtract Depreciation from all SourcesPhysical Deterioration, Curable - Incurable Physical Deterioration 363,973.00 Functional Obsolescence, Incurable 335,630.00 External Obsolescence -

TOTAL DEPRECIATION 699,603 (699,603)

Depreciated Value of Building = 692,002 692,002$

Plus Depreciated Value of Site Improvements 9,000$

Indicated Value According to the Cost Approach 993,002$

Rounded to $993,000

Summary of Cost Approach

The market value of the subject, as of April 25, 2008, as estimated by the cost approach is $993,000.

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 6.0 Direct Comparison Approach

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6.0 Direct Comparison Approach 6.1 Overview

In the Direct Comparison Approach, the value of the subject is estimated by comparing it with similar, recently sold properties in the surrounding or competing area.

6.2 The Process

The basic steps of this approach are:

1. Research recent, relevant property sales and current offerings throughout the competitive area;

2. Select and analyze properties that are similar to the subject, considering changes in economic conditions that may have occurred between the sale date and the date of valuation, and other physical, functional, or location factors;

3. Identify sales that include favourable financing and calculate the cash equivalent price;

4. Analyze the sales prices to extract a common unit of comparison;

5. Make appropriate adjustments to the prices of the comparable properties;

6. Interpret the adjusted sales data and draw a logical value conclusion.

6.3 Comparative Analysis

The local market was researched in order to identify comparable property sales of commercial properties. A degree of subjectivity may be involved in the analysis. Often times, there is insufficient market data available to perform a paired sales analysis or other techniques for all the listed factors and the utilization of empirical adjustments is not possible. In such cases, a qualitative comparison can be utilized. This methodology effectively identifies the high and low parameters within which the subject’s value is contained. By qualifying the property or its characteristics as being superior or inferior, we narrow the value range to a value point most applicable to the subject property. The comparisons reflect the thought process of participants in the market relative to typical value


44

characteristics. The analysis is completed in a consistent manner, always looking at the sold property as it relates to the subject property.

During the selection process, each sale is verified, where possible, by an MPAC Property Online search or by contact with a local appraiser, title search company or real estate agent to confirm relevant information.

The sales are then analysed with the sale price per square foot of main floor area isolated as the unit of comparison. We also considered sale prices on a total building area, and a front foot basis before concluding that the sale price per square foot of main floor area was the most indicative unit of comparison in the local market. The areas of each floor have been provided for information purposes.

6.3.1 Market Sales

One of the primary objectives is to compare properties with similar utility and function. The subject property is unique in the downtown core given its age, quality, size and layout. We have identified 7 improved sales that have occurred in the town core within a relevant time period.

6.3.2 Improved Sales Data Sheets

Details of each of the sales are provided on the following pages. The property “index” numbers continue sequentially from No. 5 to No. 11 to avoid confusion with the land index number presented in the Cost Approach section of the report.


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Address:

Vendor: Purchaser:Sale Date: Sale Price: $75,000

LTO #: Roll #

Date of Registration:

Legal Description:

Land Size: Building Size: sf

OCP: Zoning: C1S Services:

Building Description:

Site Improvements:

Leases: Revenue:

Expenses:Expenses/Actual Income

Gross Income Multiplier:

Overall Cap Rate:

Sale Price/SF 23.03$

Comments: Main floor is used for retail, upper floor has apartment

Water, Sewer, Hydro, Street Lights, Curb, Sidewalk

2 1/2 storey brick built around 1900.

78.5 x 80, 6,280 sf 3,256Plan 5, Part Lots 1, 2, 9

31-Aug-06

125824 01-11-018-000-44900-0000

Index #5 8 Main St South

Gail & Denis Abrames Christine Gauthier (In Trust)


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Address:

Vendor: Purchaser:

Sale Date: Sale Price: $80,000LTO #: Roll #Date of Registration:

Legal Description:


OCP: Zoning: CA Services:


Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF 28.15$ Comments: Main floor is leased until 10/2012. Has

storage bsmt. 5 ft RoW at rear has stairs to upper floor

11,538$ 56%

3.90 11.23%


2 storey concrete brick, built around 1900.NG FHA No Parking

All rentals are month to monthFlower Shop: $695 per month2br Apt: $550 per month1br Apt: $465 per month 20,520$

Plan 5, Part Lot 22, RP 14R571 Part 1

2,842

11-Jan-08141122 01-11-018-000-34100-0000

Index #6 17-19 Main St South

Sheila Olsen Luciano Weiler


47

Address:

Vendor: Purchaser:


Legal Description:


OCP: Zoning: CA Services:Building Description:

Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF 23.87$ Comments:Listed for $59,000 Approx 1,000sf retail on

main and 1BR apt above

Water, Sewer, Hydro, Street Lights, Curb, Sidewalk,

2 story brick built around 1900. Electric BB & Oil FHA No Parking

Plan 5, Part Lot 22, Part Lot A, Part Mill Plot

20 x 58, 1,160 sf 2,304

13-Apr-06134370 01-11-018-000-34300-0000


Claude Poirer Enzo Mario Messina, & Susan Sue


48

Address:

Vendor: Purchaser:


Legal Description:


OCP: Core Zoning: CA Services:Building Description:

Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF 6.52$ Comments: Required roof at time of purchase. 12' ceiling is open and unfinished

Water, Sewer, Hydro, Street Lights, Curb, Sidewalk, Lane

1 story brick, built in 1966. minimal parking at rear

Plan 5 Part Lot 5 & 860.9 x 199.8, 12,167.8 sf 9,200

09-Feb-04125824 01-11-018-000-44600-0000

Index #8 24 Main St North

BDO Dunwoody Ltd. As a Receiver of 3074803 Canada Inc. Mario Richer


49

Address:

Vendor: Purchaser:Sale Date: Sale Price: $140,000LTO #: Roll #Date of Registration:

Legal Description:


OCP: Zoning: CG-S Services:


Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF


Roland Muri Corrina Paulenco01-Dec-05

132704 01-11-018-000-35100-0000

Plan 5 Part Lot 1836 x 165, 5,940 sf 4,246

Water, Sewer, Hydro, Street Lights, Curb, Sidewalk, Lane

2 story at front and1 story at rear wood frame built in phases dating back to 1900. 1 car parking

32.97$ Comments:Last renovated in late 1990's. Property is well maintained for age. Main fl retail is 1,862sf


50

Address:

Vendor: Purchaser:Sale Date: Sale Price: $102,000LTO #: Roll #Date of Registration:

Legal Description:


OCP: Zoning: CG-S Services:


Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF 53.01$ Comments: Good Condition and well maintained.


2 story wood frame and brick, built in 1890. Limited Parking available

Plan 5, Part Lot 1041.5 x 161, 6,682 sf 1,924

15-Dec-07140663 01-11-018-000-47000-0000


Agnes Walker Gerard & Johanne Gareau


51

Address:

Vendor: Purchaser:Sale Date: Sale Price: $190,000LTO #: Roll #:Date of Registration:

Legal Description:


OCP: Zoning: CG Services:


Site Improvements:

Leases: Revenue:



Overall Cap Rate:

Sale Price/SF 10.52$ Comments: Newer retail building attached to older warehouse


1 story brick with 1800 sf loft, built in 1914 - 68. Paved parking at front, side and rear

Plan 120, RCP Lot 1180 x 252.33, 52,708 sf 18,060

10-Jan-05129056 01-11-018-000-30300-0000

Index #11 209-215 Main St North

Bell Soryle and Heidi Glengarry Windows and Doors Inc.


52

Figure 9: Sales Summary Chart

Item Subject Index #5 Index #6 Index #7 Index #8 Index #9 Index #10 Index #11

Address 5 Main Street South 8 Main St South 17-19 Main St South 25 Main St South 24 Main St North 69 Main St South 106 Main St South 209-215 Main St North

Legal Description Plan 5, Part Lots 1, 2, 9Plan 5, Part Lot 22, RP 14R571 Part 1

Plan 5, Part Lot 22, Part Lot A, Part Mill Plot Plan 5 Part Lot 5 & 8 Plan 5 Part Lot 18 Plan 5, Part Lot 10 Plan 120, RCP Lot 1

Roll #01-11-018-000-

44900-000001-11-018-000-

34100-000001-11-018-000-

34300-000001-11-018-000-

44600-000001-11-018-000-

35100-000001-11-018-000-

47000-000001-11-018-000-

30300-0000Sale Date 31-Aug-06 11-Jan-08 13-Apr-06 09-Feb-04 01-Dec-05 15-Dec-07 10-Jan-05Title Number 135880 141122 134370 125824 132704 140663 129056

VendorGail & Denis Abrames Sheila Olsen Claude Poirer

BDO Dunwoody Ltd. As a Receiver of 3074803 Canada Inc. Roland Muri Agnes Walker

Bell Soryle and Heidi

PurchaserChristine Gauthier (In Trust) Luciano Weiler

Enzo Mario Messina, & Susan Sue Yie Yuen Mario Richer Corrina Paulenco

Gerard & Johanne Gareau

Glengarry Windows and Doors Inc.

Sale Price $75,000 $80,000 $55,000 $60,000 $140,000 $102,000 $190,000 Right Conveyed Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple

Conditions of Sale Typical Typical Typical Receivership Typical Typical Typical

Time difference (months) Apr-08 18 3 24 50 28 16 39Zoning CA C1S CA CA CG-S CG-S CG-S CG-SMain Floor 7,887 2,296 1,421 1,152 9,200 3,054 962 16,260Building Size 15,897 3,256 2,842 2,304 9,200 4,246 1,924 18,060

Area Breakdown

Main Retail: 7,887 Lower Level: 8,010

Bsmt: 960Main Retail: 2,296

2nd Floor: 960

Basement: 1,421Main Retail: 1,4212nd Floor: 1,421

Main Retail: 1,1522nd Floor: 1,152

Main Retail: 9,200 Basement: 729 Main Retail: 3,054 2nd Floor: 1,192

Main Retail: 962 2nd Floor: 962

Main Retail:16,260 2nd Floor: 1,800

Number of Floors 1 + Basement 2 + Basement 2 + Basement 2 1 2 2 1Actual Age 18 100+ 100 100+ 42 100+ 100+ 94


53

Figure 10: Sales Comparison Chart

Item Index # 5 Index #6 Index # 7 Index # 8 Index # 9 Index # 10 Index # 11

Sale Price $75,000 $80,000 $55,000 $60,000 $140,000 $102,000 $190,000Real property rights conveyed adjustment Nil Nil Nil Nil Nil Nil Nil

Adjusted price $75,000 $80,000 $55,000 $60,000 $140,000 $102,000 $190,000

Financing adjustment Nil Nil Nil Nil Nil Nil NilConditions of sale adjustment Nil Nil Nil Nil Nil Nil NilExpenditures made after sale adjustment Nil Nil Nil $20,000 Nil Nil Nil

Adjusted Price $75,000 $80,000 $55,000 $80,000 $140,000 $102,000 $190,000

Adjusted Price / Main Sf $33 $56 $48 $9 $46 $106 $12

Zoning Similar Similar Similar Similar Similar Similar Similar

Location Similar Similar Similar Similar Similar Similar Inferior

Age/Condition Inferior Inferior Inferior Significantly Inferior Inferior Similar Inferior

Off-Street Parking Significantly Inferior Significantly Inferior Significantly Inferior Inferior Significantly Inferior Inferior Similar

Building Quality Inferior Inferior Inferior Significantly Inferior Inferior Inferior Significantly Inferior

Overall Comparability Inferior Inferior Inferior Poor Inferior Slightly Inferior Poor


54

Figure 11: Location Map of Improved Sales

6.5 Observations and Concluded Value

Prior to adjustment by comparative analysis the improved sales provide an indicated value range for the subject from a low of $9 per square foot to a high of $106 per square foot of main floor area.

Little weight is placed upon Index #8, although the building on this property offers a similar main floor area, it is inferior in quality, finish and condition. It was also a receivership sale, which likely further explains the poor property condition and low sale price.

Index 11, has the largest improvement of all the available sales, it also is the only improved sale that provides a similar amount of off-street parking for customer parking. This property is located on the western fringe of the town core in an inferior location to the subject. Of the main floor area, 6,300 square feet of


55

is an old foundry/warehouse which is significantly inferior to the subject improvements.

Index 5, 6, 7 and 9 range from a low $33 to a high of $56; and indicate a reasonably tight range for typical storefront properties in the town core. These properties all have apartments over the main floor retail space and rely upon on-street parking for customers. Each of these properties is in close proximity to the subject and are considered to have similar locational attributes.

Index 10, although considerably older than the subject, has been well maintained and renovated over the years, and is closest in condition to subject. This property also provides limited off-street parking. Its overall comparability is still inferior to the subject in some aspects. Given its well maintained condition and the significantly smaller main floor area a downward adjustment is required.

With the exception of Index 11 none of the sales analyzed offer a similar amount of off-street parking as the subject and as such a further adjustment is warranted and appropriate to adjust for this additional utility.

After considering all the facts and weighing the differences between the subject and the comparables a rate of $75.00 per square foot of main floor area has been selected as appropriate. In addition a further adjustment of $200,000 ($10 x 20,000 sf) has been applied:

The market value of the subject, as if improved, on April 25, 2008 is:

7,887 square feet x $75.00 = $591,525

Plus 20,000 square feet x $10.00 = $200,000

Rounded =$791,500

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 7.0 Reconciliation & Final Estimate of Value

56

7.0 Reconciliation and Final Value Estimate In arriving at a conclusion of market value for the subject as of April 25, 2008, two valuation approaches or methods have been applied and considered. The results from each approach are as follows:

Depreciated Reproduction Cost Approach: $993,000

Direct Sales Comparison Approach: $791,500

Income Capitalization Approach: Not Applicable

7.1 Depreciated Reproduction Cost Approach In the depreciated reproduction cost approach an estimated reproduction cost of the building and land improvements have been determined as of the date of the appraisal. It is developed together with an estimate of losses in value that have taken place due to wear and tear, design and plan deficiencies, or neighbourhood influences. To the depreciated building cost estimate, entrepreneurial profit and the estimated land value are added. The total represents the value indicated by the cost approach.16

The Marshal Swift/Boeckh Costing Service was utilized in concluding a reproduction cost new estimate of $1,451,605. Although considered a reasonable estimate from a trusted source, the data available for analysis is limited due to the lack of commercial new construction data within Alexandria.

In order to estimate the market value of the subject improvements, depreciation from all causes was considered as of the effective date of the appraisal and deducted from the reproduction new cost estimates. The depreciation analysis for the subject building was estimated using the breakdown method, whereby each cause of depreciation is measured and analyzed separately. The depreciation analysis for the site improvements was completed using the age-life method.

Finally the land value, estimated using the direct comparison approach, was added to reproduction cost new less depreciation to arrive at an estimate of market value for the subject. The available sales data for analysis was scarce as



57

a time span of 7 years was required to provide 4 land sales comparable to the subject.

The cost approach is considered to be most reliable when, sufficient information is available, the improvements are new and at their highest and best use and supply and demand are in equilibrium. The lack of available recent cost and land sale information, as a result of the somewhat sluggish and limited commercial real estate market in Alexandria and the age of the subject, call into question the conclusion reached by the cost approach. It, none the less, is considered to indicate the upper end of the market value range for the subject.

7.2 Direct Comparison Approach

In the direct comparison approach, the subject property is compared to similar properties that have recently sold or for which listing prices or offering figures are know. Data for generally comparable properties are used and comparisons are made to demonstrate a probable price at which the subject property would be sold if offered on the market17.

Seven improved sales were analyzed to determine a value for the subject as of April 25, 2008. All of the sales analyzed differ from the subject in age; location and physical characteristics and none of the sales took place on the valuation date. The sales provided for comparison have sales dates that span a 4 year period from February 2004 to January 2008. Physical differences include 7 sales with second floors and an actual age range from 42 to 100+ years. All sales have had maintenance and upgrades over time. In some instance these renovations have been sufficient to alter the effective age of the property.

For properties that are bought and sold regularly, the direct comparison approach often provides a supportable indication of market value. When data is available, this is the most direct and systematic approach to value estimation. The number of directly comparable sales available for comparison to the subject is less than ideal but sufficient to formulate an opinion. The sales have been adjusted for any differences from the subject that would be recognized in the market.

17 The Appraisal of Real Estate (2002), 2nd Canadian Edition, page 17.1


58

7.3 Final Value Estimate

The two approaches to value applied in this report provide a value range for the subject from $791,500, indicated by the direct comparison approach, to $993,000 indicated by the cost approach. At first glance this is a significant range that may bring the results into question. Each of the approaches attempts to explain the interactions of the market place, as they would apply to the subject property as of April 25th, 2008. The range however, is not unexpected given the limited market data available as a result of the sluggish and limited market conditions.

The depreciated reproduction cost approach is considered the least reliable indication of value given the limited cost and land data available.

The seven sales analyzed in the direct comparison approach represent the market for typical storefront properties in the town core. Each has been identified as inferior to the subject in one or more aspects. Although each has been identified as inferior they form and explain the market that the subject property is located in and as such are relevant indicators.

The subject property is improved with a 15,897 square foot building well suited to single tenant occupation. The 8,010 square foot lower level only provides a nominal amount of additional utility. Its current use as a single tenant retail space is considered the highest and best use. The most probable purchaser would be someone looking to secure a long-term location to operate a business, and not someone looking for an investment to secure an income stream. The value indicated by the direct comparison approach at $791,500 is considered the most relevant and is given the most weight in determining the market value of the subject.

Based on an inspection of the property and the following investigation and analysis, it is my opinion that the market value of the fee simple interest in the subject property located at 5 Main Street South, Alexandria, Ontario, as at April 25, 2008, subject to the assumptions and limiting conditions specified herein, is:

EIGHT HUNDRED THOUSAND DOLLARS

$800,000

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 8.0 Certification

8.0 Certification Re: Current Value Appraisal, 5 Main Street South, Alexandria, Ontario

I certify to the best of my knowledge and belief that:

1. The statements of fact contained in this report are true and correct;

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal impartial, and unbiased professional analyses, opinions, and conclusions;

3. I have no past, present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved;

4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment;

5. My engagement in and compensation for this assignment were not contingent upon developing or reporting predetermined results, the amount of the value estimate, or a conclusion favouring the client;

6. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Canadian Uniform Standards of Professional Appraisal Practice;

7. I have the knowledge and experience to complete the assignment competently;

8. No one provided significant professional assistance to the person signing this report other than those listed in the report. I consulted with Stephen Maloney AACI, P.App on the real estate market of Alexandria, and details of market transactions;

9. As of the date of this report the undersigned has fulfilled the requirements of The Appraisal Institute of Canada’s Continuing Professional Development Program for designated members;

10. The use of this report is subject to the requirements of the Appraisal Institute of Canada relating to review by its duly authorized representatives;

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy 8.0 Certification

11. The undersigned personally inspected the subject property on April 14, 2008.

As a result of the analysis and conclusion presented herein, it is concluded that the Current market value of the owner’s fee simple interest in the subject property, being the land and building located at 5 Main Street South, Alexandria, Ontario, more specifically described herein, effective April 25, 2008, and subject to the Assumptions and Limiting Conditions, was:

EIGHT HUNDRED THOUSAND DOLLARS,

$800,000

Yours Truly, AEC International

For Demonstration Purposes

Charles Johnstone, AACI, P.App, RI

April 25, 2008

Shoppers Drug Mart – Alexandria I.D.A. Pharmacy Addendum

Addendum

Area Schedule Site Plan A Photographs B Zoning Regulations C

Documents

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