Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 1, 2015 FILE NO.: WR 133187

Assessed Person(s): Notyal Enterprises Ltd. Appellant(s): Notyal Enterprises Ltd. Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 06 Respondent(s): City of Belleville

Property Location(s): 38-42 Bridge Street Municipality(ies): City of Belleville Roll Number(s): 1208-020-045-06500-0000 Appeal Number(s): 2957511, 3018549 and 3073470 Taxation Year(s): 2013, 2014 and 2015 Hearing Event No.: 590771

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

Heard: December 2, 2014 and June 17, 2015 in Belleville, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Notyal Enterprises Ltd.	Trueman Tuck
MPAC	Roxanne Poulain
City of Belleville	No one appeared

DECISION OF THE BOARD DELIVERED BY SCOTT McANSH

INTRODUCTION

1This appeal concerns a prominent building in downtown Belleville. The historic structure contains two restaurants, Dinkel’s and Paulo’s, with six residential apartments on the upper levels. The building is old, but is one of the better maintained buildings in the downtown area. The assessed value for the January 1, 2012 valuation day was returned at $719,000, with $383,340 in the commercial property class and $335,660 in the multi-residential property class.

2Both MPAC and the Appellant argue that value is too high. MPAC recommends a current value of $493,000 with $164,400 in the residential property class and $328,600 in the commercial property class. The Appellant argues that the value of the property is somewhere in the range of $380,050 to $469,501. The gap in value between the parties relates to their assessment methodology.

3MPAC approached the value of subject property with two methods: a cost approach and an income approach.

4The Appellant approached the valuation problem from three primary angles: a comparison of MPAC settlements, an income approach and the opinion of a realtor.

DECISION

5For the reasons set out below I find the MPAC cost methodology to be the best evidence of the value of subject property. I do not find any adjustment necessary to make the assessed value equitable with other properties in the vicinity. I therefore reduce the current value from $719,000 (with $383,340 in the commercial property class and $335,660 in the multi-residential property class) to $493,000 (with $328,600 in the commercial property class and $164,400 in the residential property class).

Legislation

6Section 44.(3)(a) of the Assessment Act (“Act”) requires the Assessment Review Board (“Board”) to “determine the current value of the land.” Current value is defined in s. 1 as “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.” That is, the Board must determine what the subject property would have sold for in an arms-length transaction on the relevant valuation day, set pursuant to s. 19.2 of the Act as January 1, 2012 for the 2013, 2014 and 2015 taxation years.

Current Value

7The subject property was constructed in 1870 and has been well maintained, with renovations in 1980 and 1990. The building has three stories. The first floor is 7,294 square feet and contains the two restaurants, Dinkel’s and Paulo’s. The second floor is 4,078 square feet and has 1,000 square feet open to Paulo’s restaurant. The second floor also contains 500 square feet of seating for Paulo’s, 500 square feet of office area, 800 square feet of storage area and two bachelor apartments. The third floor is 4,030 square feet and contains four apartments: three one-bedroom and one two-bedroom.

8MPAC used their Automated Cost System to cost the structure and came to a total value of $510,000 using that method. However, MPAC did not provide any details of that costing and did not seriously rely on that value at the hearing.

9MPAC relied primarily on an income method to determine a value for the subject property. They used market rents for the apartments of $513 for the bachelors, $570 for the one-bedrooms and $661 for the two-bedroom, which leads to a total income of $40,764. They applied rents per foot for the commercial space of $12 per square foot for the 6,929 square feet of main floor restaurant, $10 per square foot for the 500 square feet of second floor dining area, and $6 per square foot for the 840 square foot storage space and 500 square foot office, for a total of $96,338. They then applied a Gross Income Multiplier (“GIM”) of 3.6 to the total income of $137,102 to arrive at a value of $493,567.

10MPAC presented three sales in the downtown area to support their GIM. They contend that these sales support their use of 3.6 on the subject property.

11329-331 Front Street sold in October 2010 for 590,000. MPAC time adjusted that sale price to $644,280 to reflect the January 1, 2012 valuation day. MPAC annual market income for the 12 bachelor apartments is $73,872, at $513 per month. The 5,587 square feet of office space had a market rent of $10.50 per square foot for an annual income of $58,664. The total income of $132,536 was divided into the sale price to yield a GIM of 5.01.

12317 Front Street sold in October 2010 for $375,000, which MPAC time adjusted to $409,500. MPAC market rents indicate an annual income $11.34 per square foot of retail space, which leads to $47,787 for the 4,214 square feet at this location. This property also had 12 bachelor apartments with a market rent of $513 per month for an annual income of $73,872. The total income of $121,659 was divided by the sale price to yield a GIM of 3.37.

13311 Front Street sold in July 2008 for $332,500, which MPAC time adjusted to $387,030. MPAC market rents indicate an annual income $16.20 for the 4,686 of retail space, leading to an income of $75,913. This property also has 16 bachelor apartments with a market rent of $513 per month for an annual income of $98,496. The total income of $174,409 is divided into the sale price to yield a GIM of 2.22.

14The sales indicate a wide range in GIMs. The median of 3.37 and mean of 3.53 are close to one another, but the variation makes that median unreliable. MPAC was candid that there were very few sales in the downtown area on which to base their analysis. Based on the limited evidence before me I am satisfied that a GIM of 3.6 is reasonable.

15The Appellant primarily relied on an income approach to value. Paul Dinkel, the president of the Appellant, testified on the income and expenses at the subject property. The Appellant focused on his evidence that vacancy in the apartments has been high, with a mean rate of 21.6% over 2011, 2012 and 2013. The Appellant also noted that there is some deferred maintenance at the subject property, including window replacement and roof repairs.

16The Appellant presented three primary variations of MPAC’s income approach summary. I cannot accept any of them as better evidence of value than the summary presented by MPAC.

17First, the Appellant presented a version in which the square footage of the commercial space was modified to 2,000 square feet for Paulo’s, 2,000 square feet for Dinkel’s and 3,229 square feet of storage. Using the same GIM of 3.6, these changes lead to a current value of $428,583. However, no compelling evidence was presented that the area of the commercial space is other than as presented by MPAC. Mr. Dinkel did not dispute MPAC’s measurements and the Appellant’s witness, Lisa Bevington, indicated that she took no “physical” measurements of the building. I therefore put no weight on this income model.

18The Appellant then presented a version of the MPAC income method summary using lower rents for the residential units and maintaining the incorrect commercial space measurements. This summary indicated as assessed value of $359,300. As indicated above, I cannot accept the modified commercial measurements. I also cannot accept the modified rents. The Appellant used $450 for the bachelor apartments. MPAC used a market rent of $513 and Mr. Dinkel’s documents indicate he obtains rents of $540. Similarly for the one-bedroom apartments, the Appellant used rents of $550. MPAC used a market rent of $570 and Mr. Dinkel’s documents indicate he obtains rents averaging $657. Finally, the Appellant used a rent of $625 for the two bedroom apartment. MPAC used a market rent of $613 and Mr. Dinkels documents indicate that he obtains a rent of $810. As can be seen, the rents used by the Appellant bear no relation to the market average or the rents for this property.

19Finally, the Appellant presented an income approach using the income and expenses from the property, a 28% vacancy rate for the apartments, and a capitalization rate of 12%. This led to an indicated current value of $517,700, from which the Appellant removed 26.5% as a “Belleville Business Improvement Area (“BBIA”)” adjustment. No explanation was provided to justify such a dramatic adjustment for being a member of a BBIA. I cannot accept that as a reasonable adjustment.

20The Appellant also relied on the settlement of two properties as an argument of value. It was noted that 184 Front Street had a returned value of $242,000, which was reduced by 38.5% to $149,000 by minutes of settlement. 186-188 Front Street had a returned value of $194,000, which was reduced by 30.9% to $134,000. The Appellant argued that a similar reduction of 35% should be applied to the returned value of the subject property. I cannot accept that submission.

21The settlement of other property can be due to any number of factors, which are not disclosed. It could be due to factual errors with the description MPAC has of the property. It could be due to income information. It could also be a unique judgment call on the part of the assessor. There is no reason to apply a consistent reduction to returned values and it certainly does not provide any reliable evidence of the market value of the subject property.

22The Appellant also relied on the opinion of value provided by Bill McGuire, a real estate agent in the Belleville area. He has never sold a property in downtown Belleville, as his practice is focused in neighbouring Trenton. The Appellant never put forward Mr. McGuire’s credentials or asked that he be qualified as an expert. As such, his opinion evidence is not properly before me. Mr. McGuire did not provide any evidence other than his opinion, instead relying on other evidence to form his opinion. I therefore reject his evidence in its entirety.

23Neither party argued that a further reduction was required to make the property equitable with other properties in the vicinity, as set out in section 44.(3)(b) of the Act. I do not find that any such adjustment is required.

CONCLUSION

24For the reasons set out above, the assessed value of the subject property is reduced from $719,000, with $383,340 in the commercial property class and $335,660 in the multi-residential property class, to $493,000, with $328,600 in the commercial property class and $164,400 in the residential property class.