1429458 Ontario Limited v. Municipal Property Assessment Corporation, 2015 CanLII 38434

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 2, 2015

FILE NO.: WR 128337

Assessed Person(s): 1429458 Ontario Limited and 1266845 Ontario Limited

Appellant(s): 1429458 Ontario Limited and 1266845 Ontario Limited

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 9

Respondent(s): City of Toronto

Property Location(s): 65 George Street 187 King Street East

Municipality(ies): City of Toronto

Roll Number(s): 1904-064-310-00100-0000 1904-064-310-00200-0000

Appeal Number(s): 2972879, 3011390 and 3075994 (deemed 2015) 2972874, 3012306 and 3078350 (deemed 2015)

Taxation Year(s): 2013, 2014 (and deemed 2015)

Hearing Event No.: 566414

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: October 9, 2014 in Toronto, Ontario

APPEARANCES:

Parties	Counsel+/Representative
1429458 Ontario Limited	Paul Millar
1266845 Ontario Limited	Paul Millar
MPAC	Irene Subocz
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1These appeals involve two separate properties in the St. Lawrence Market area of Toronto. At the outset of the hearing, and as the two properties are adjacent to one another, the parties agreed that the issues to be addressed are identical for both properties and the preference was for the two properties to be heard together. Both are commercial buildings

2The first property, known as 65 George Street (“George St.”) is a two-storey commercial building near the corner of King Street East. Each of the two-storeys comprises 3,256 square feet (sq. ft.) for a total building area of 6,512 sq. ft. The building was constructed in 1888. MPAC has applied an effective year built of 1935 for some upgrades that occurred on an undetermined date. The building occupies a lot of 0.08 acres with frontage on George Street of 48.67 ft.

3The second property is known as 187 King Street East (”King St.”). It is a four storey building with a partially finished basement. The first, second and third floors comprise 1,595 sq. ft. each, with a fourth floor of 1,435 sq. ft. It was built in 1888 also and has been given an effective date of 1970 to reflect some minor renovations. King St. has a frontage on King Street East of 25.8 feet and a frontage of 71.9 sq. ft. on George Street.

4MPAC has returned an assessment of the two properties, for the 2013 and 2014 taxation years as follows:

	2013 Taxation Year	2014 Taxation Year
65 George Street	2,193,000	2,193,000
187 King Street East	2,292,000	2,086,000

5In preparation for the hearing, MPAC has amended their assessment for King St. and recommends a value of $2,012,000 for the 2013 and 2014 taxation years. Similarly, MPAC has revised their assessment of George St. and recommends a value of $2,028,000 for the 2013 and 2014 taxation years.

6The Appellant believes that the values recommended by MPAC are still too high and submitted that the correct current value of George St. is $1,500,000 and for King St. the value should be $1,400,000.

7The Board must determine two things in these appeals. Firstly, the Board must determine the current value of the two subject properties as of January 1, 2012, the valuation day stipulated in the Assessment Act (“Act”) for the 2013, 2014 and deemed 2015 taxation years. Secondly, the Board must determine if, when reference is made to the assessments of similar lands in the vicinity, the assessments of the subject properties should be reduced to make them equitable.

DECISION

8The Board finds that the current value of 65 George Street is $1,980,000. The Board also finds that the current value of 187 King Street East is $2,012,000. Further, the Board finds that the evidence before it does not support the conclusion that the current values of the properties as determined above require an equity reduction.

9Accordingly, the Board finds that the assessments of the two subject properties are as follows:

	2013 Taxation Year	2014 Taxation Year
65 George Street	Reduced from $2,193,000 to $1,980,000	Reduced from $2,193,000 to $1,980,000
187 King Street East	Reduced from $2,292,000 to $2,012,000	Reduced from $2,086,000 to $2,012,000

Legislation

10In making its determination on these appeals, the Board must consider s. 1, s. 19.(1) and s. 44.(3) of the Assessment Act (“Act”), R.S.O. 1990, c. A.31.

11Section 1 of the Act states:

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

12Section 19.(1) of the Act states:

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

13Section 44.(3) of the Act states:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(a) determine the current value of the land; and

(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

MPAC’S Evidence

14Irene Subocz is a property valuation analyst with MPAC. Ms. Subocz prepared a valuation report on the two subject properties to arrive at the current value to be applied to each. Ms. Subocz undertook two separate analyses to make her determinations. The first analysis was a direct comparison approach to value, whereby the sales of comparable properties are used to arrive at a value of the subject properties by making reasonable adjustments to various characteristics that vary between the comparable properties chosen and the subject properties. The second analysis undertaken by Ms. Subocz was the income approach to value. Ms. Subocz testified that this method of determining current value involves the application of fair market rents to the subject properties and their leasable area, to arrive at a gross income for each. Once the gross income is determined, an allowance is made for operating expenses and vacancy to arrive at a net income. To determine the current value of the properties from the net income, a capitalization rate is applied to the net income.

15In her direct comparison analysis. Ms. Subocz chose nine properties that she deemed to be comparable to the subject properties. Five of these properties had sales that took place within the years 2011 and 2012. Of the remaining four, three were sold in 2010 and the last property in the analysis sold in 2013. Table A summarizes the data in Ms. Subocz’s direct sales comparison.

Table A

Property	Sale Date	Sale Price ($)	Building Area (sq. ft.)	Sale Price sq. ft.
108 Queen Street East	Sept. 2011	1,075,000	3,650	295
110 Lombard	Oct. 2010	3,500,000	13,823	253
133 Berkely	Dec. 2010	1,600,000	8,255	194
137 Berkely	Jan. 2013	1,150,000	3,925	293
173 Queen Street East	July 2011	1,290,000	3,650	353
187 Queen Street East	Oct. 2011	1,615,000	5,100	317
193 King Street East	Sept. 2010	4,550,000	19,326	235
213 Queen Street East	June 2011	1,600,000	2,600	615
231 King Street East	Oct. 2012	4,500,000	14,400	417

Average $330

16To mitigate the effects of extremely high and low values per square foot in her analysis. Ms. Subocz removed the highest and lowest sale values per square foot from her calculation to arrive at an amended average value of $309 per square foot for the remaining seven comparable sales. She applies this average to George St. which comprises 6,512 sq. ft. to arrive at a value of $2,046,000. Ms. Subocz testified that the $309 figure should be considered conservative as six of the comparable properties were vacant at the time of sale. She indicated that fully leased buildings would be likely to sell at a higher rate per square foot in her opinion. As a result she believes her finding to be reasonable.

17Ms. Subocz also applied the $309 rate to the King St. property, which has a building area of 6,220 sq. ft. resulting in a value of $2,012,000.

18At the request of the Appellant, Ms. Subocz undertook a valuation study based on the income approach to value. Of the two subject properties. She testified that the income approach is not the preferred methodology of properties of this type, but acknowledged that the results ought to approximate the findings of the direct comparison approach already completed.

19Owing to the different uses permitted in the subject properties, Ms. Subocz applied different rents depending on the floor level being considered. For George St., she applied as ground floor rent of $28 per sq. ft. representing the average rent of ground floor retail space from data submitted by property owners in the area. The area of search was defined as properties south of King Street E., between Jarvis and Sherbourne Streets. For the second floor, Ms. Subocz applieda rent of $15.50 per sq. ft. reflecting her findings of rents in ‘C’ level office buildings in the vicinity of the subject properties. After allowances for vacancy at 6% and non-recoverable expenses of 6%, Ms. Subocz applies a capitalization rate of 6%, resulting in a value of $2,010,000.

20For King St. the rents applied are $14 per sq. ft. for the basement, $28 per sq. ft. for the ground floor, $15.50 for the second and third floors and $14 for the fourth floor, noting that the building does not have an elevator. When the same vacancy and expense allowances are applied to King St. and the capitalization rate of 6% is used, the resulting value is $2,017,000.

21Ms. Subocz summarized her findings by indicating that the values determined through the two separate methods are very close. In the case of George St. she recommends the average of the two values, being $2,028,000. For King St. Ms. Subocz recommends the lower result of the two approaches, being $2,012,000.

Appellant’s Evidence

22Mr. Millar contends that the correct current value of the two properties should be based on a per sq. ft. value of $225. In support of this position, he submitted an appraisal document prepared by Metrix Realty Group (Metrix), and dated February 2012, for the George St. property only.

23Similar to the approach taken by MPAC, the Metrix appraisal applies the direct comparison approach to value and the income approach to value. For the comparison approach, Metrix uses six properties that sold between August 2010 and January 2012. They are all two to three-storey buildings. A summary of the data in the Metrix direct comparison analysis appears in Table B.

Table B

Property	Sale Date	Sale Price ($)	Building size (sq. ft.)	Sale price sq. ft.
191 John Street	Jan. 2012	2,100,000	6,700	313
45 Camden Street	Dec. 2011	2,300,000	6,000	383
581-583 Wellington Street	Apr. 2011	2,390,000	7,000	341
133 Berkely*	Dec. 2010	1,600,000	8,255	194
206 Spadina Avenue	Sept 2010	1,750,000	8,353	210
269 Richmond Street West	Aug. 2010	2,000,000	10,620	183

*133 Berkely is also in MPAC’s Direct Comparison Approach analysis

24The Metrix report indicates that the author considers sales 1 and 5 to be the most comparable, with respect to location, size and condition to the George St. property. Citing the per sq. ft. values of these two sales, of $313 and $210 respectively, the author concludes that a value of approximately $225 is correct, given reasonable adjustments between these two properties and the subject George St. property.

25Applying a different method than MPAC, Metrix carried out an income approach analysis using lease listings and transactions from ten commercial properties in the Downtown Toronto area, the author arrives at an average rent of $15.99 per sq. ft. Using this figure, and accounting for the adjustments for location, unit sizes, interior quality of finishes and overall condition, the Metrix report applies a rent of $14 per sq. ft. for the ground floor of George St. and $15 per sq. ft. for the second floor.

26The Metrix report generates a gross rental income of $95,990 for George St. After applying a 5% vacancy allowance and a capitalization rate of 5.5% the result for the George St. property is a value of $1,485,064, rounded to $1,500,000 or $227 per sq. ft. Mr. Millar summarized the evidence contained in the Metrix appraisal by indicating that he believes its finding of $225 per sq. ft. can be applied to both properties under appeal, with a result for King St. of $1,399,500 or $1,400,000 rounded.

27In addition, Mr. Millar raised the issue of heritage designation on the two subject properties. George St. is designated as a heritage property by the City of Toronto. King St. is listed on the City’s designation register which Mr. Millar believes is an indication that the City is considering its designation or that designation will occur in the future. Mr. Millar believes that the presence of the designation or listing places certain restrictions on the property as to its future re-development or renovation potential and as such creates a downward pressure on value that would not be in place on a property that is not designated or listed on the City’s heritage registry. Mr. Millar did not specifically quantify the impacts on value resulting from such designation or listing.

28The best indicator of the current value of any property is the sale of that property on or near the valuation day stipulated in the Act for the taxation years under appeal. In the absence of such a sale, the courts have told us that an appropriate means of determining current value is the comparison of the subject property to properties that have sold at or near the valuation date. In this case the Board has a total of 14 sales submitted jointly by the parties. None of the sale values represented by this sample were adjusted for changes in value over time. The range of sale dates is from August 2010 through January 2013; all within 16 months of the statutory January 1, 2012 valuation date.

29While both parties had reservations with respect to each-others comparable sales, the Board heard no conclusive argument against using any or all of the comparable properties in the corresponding analyses. With respect to the Metrix appraisal, the Board finds that the results of that report must be given less weight in determining current value of the subject properties, for the following reasons:

• The report’s author was not present to answer questions about the conclusions or the methodology used;

• The report was prepared for mortgage financing purposes and not for the determination of current value as defined by the Act;

• The report was prepared for only one of the two properties under appeal.

30In considering the comparable properties and their sale values, the Board notes that the per sq. ft. sale prices range from $194 to $615. There is no direct relationship between the size of the properties in evidence and their sale price per sq. ft. Accordingly, the Board finds that the best evidence of current value of the George St. property is the median sales value per square foot of all 14 sales in evidence. This median value of $304 applied to the George St. property at 6,512 sq. ft. results in a value of $1,979,648 or $1,980,000 rounded. The Board finds that the shortcomings of the Metrix appraisal do not apply to the same extent to the findings of the George St. property. While the findings of the report were not subject to scrutiny in the hearing, the data presented with respect to sales values of comparable properties are of assistance to the Board in making its finding on George St.

31With respect to the King St. property, the Board finds that the best evidence of current value is that of MPAC. While Mr. Millar was steadfast in his position that the results of the Metrix report should also apply to King St. the Board notes that King St. is a four-storey building rather than the two-storey building at George St. the property for which the Metrix appraisal was prepared. The Board notes that there is a disparity in the status of heritage designation between the two properties that has not been accounted for in the Metrix report. For these reasons, the Board finds that the Metrix report is less reliable as an indication of the current value of King Street..

32The Board applies the $309 per sq. ft. value to King St., resulting in a current value of $2,012,000 as recommended by MPAC.

33Neither party submitted evidence with respect to equity of assessment of the two subject properties. While sales information was presented for 14 comparable properties, there was no comparison advanced between these sale values, the current values presented for the subject properties and their corresponding assessments.

DECISION

34The Board finds that the current value of 65 George Street is $1,980,000. The Board also finds that the current value of 187 King Street East is $2,012,000. Further, the Board finds that the evidence before it does not support the conclusion that the current values of the properties as determined above require an equity reduction.

35Accordingly, the Board finds that the assessments of the two subject properties are as follows:

	2013 Taxation Year	2014 Taxation Year
65 George Street	Reduced from $2,193,000 to $1,980,000	Reduced from $2,193,000 to $1,980,000
187 King Street East	Reduced from $2,292,000 to $2,012,000	Reduced from $2,086,000 to $2,012,000

2015 DEEMED APPEAL

36An appeal for the 2014 taxation year is presently before the Board. Section 40.(26) provides that the Appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, this decision also applies to the 2015 taxation year.

37Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.