Ten years ago, some people said the coming Walmart store would be sitting on the “juiciest piece” of real estate in the country.
Skip ahead to the present and the site, in the company’s view, is overvalued, at least when it comes to its annual property assessments.
Walmart is in the middle of an appeal of its assessments for the years 2010 through 2013. In December 2014, the Assessment Appeal Board three-person panel came back with figures up to $14.5 million for the property, lower than an appraisal conducted for the BC Assessment Authority but still significantly higher than the company’s estimate.
One of the company’s key positions has been that the value of the store itself has been overestimated because the Discovery Way site, unlike other new Walmart stores, does not offer a full line of groceries.
When it opened, as noted in The Squamish Chief at the time, the store employed 130 associates and had 86,000 square feet of merchandise and some groceries, but no fresh produce or fresh meat – products that it still does not offer.
In response to the appeal, Walmart launched an action in B.C. Supreme Court to contest the decision, but there has been little progress on the case to date.
The Assessment Appeal Board’s 2014 decision outlined complicated sets of formulae that in various ways examine the value of both the land and the building that sits on it.
The company’s appraisal expert David Nishi-Beckingham has argued a cost approach be used to calculate the value, which among other things takes into account the cost of developing the site and its functional obsolescence.
“The evidence… is that all Walmarts built today are supercentres with a full grocery component. As this store does not have a full grocery component, Mr. Nishi-Beckingham determines that it suffers from functional obsolescence,” the appeal board wrote.
Nishi-Beckingham has been retained by the company in other appeals Walmart has made over its property assessments in communities including Vancouver, Quesnel and Abbotsford.
According to his calculations, the Squamish land alone should have been valued at roughly $3.5 million, while “replacement costs” – in other words, the total of what it would take to replace the nearly 87,000-square-foot building – varied each year. The range falls between approximately $7.2 million and $8.2 million. In total, this puts the value, in the company’s eyes, at between $10.7 and $11.7 million, depending on the year.
BC Assessment has taken a different view. The assessments varied from almost $13.4 million in the first year to more than $16.1 million in years three and four.
Every July 1, BC Assessment takes a general look at what every property is worth and comes up with annual assessments, which form part of the equation for annual property taxes. The agency typically does not make a thorough examination of the actual market value. For this appeal, though, BC Assessment appraiser Simone D’Souza conducted a more in-depth look at what the property should be worth by looking at its income potential. Based on this, the assessor asked the appeal board to set the value at just over $15.1 million for all four years.
The appeal board came back with values slightly lower than the original assessments in three of the four years, though in the range of $13.5 million to $14.5 million – higher than Walmart’s figure.
The appeal board, in its decision, had to consider a range of issues including corner lot values, financing costs, reasonable rates of return on developer’s profits, “soft” costs such as professional fees, highway frontage and comparable properties. “Ms. D’Souza says that due to the limited number of big-box retailers in Squamish, there were no similar-sized outlets for comparison purposes,” the appeal board wrote.
One of the sticking points has been the effect of the limited grocery section to the lifespan of the building. Nishi-Beckingham argued that it shortens the length of time the site can operate. “He says the inability to meet current consumer trends shortens the life of the building from 25 years to 20 years or less,” the appeal board said.
Grocery sales have been a key area of expansion for the company. Walmart Canada’s own website notes on its timeline that in 2006, it began introducing the so-called supercentres, which began offering a full line of groceries. In effect, the Squamish store represented the last of the old line of simple discount stores and was almost out of date when the doors opened on Nov. 21, 2006, at least when looking at the direction where the popular retailer was already heading at the time.
Neither Walmart or the BC Assessment Authority is commenting on the longstanding dispute at this time because the case is before the courts. The next court date for the case has not yet been set.
