Assessment Review Board
Commission de révision de l'évaluation foncière
ISSUE DATE: December 4, 2015
Assessed Person(s): Ganz Realty Limited
Appellant(s): Ganz Realty Limited
Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 9
Respondent(s): City of Toronto
Property Location(s): 205 Champagne Drive
Municipality(ies): City of Toronto
Roll Number(s): 1908-033-415-01890-0000
Appeal Number(s): 2945602, 3009015 and 3076899
Taxation Year(s): 2013, 2014 and 2015
Hearing Event No.: 594831
Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended
Heard: September 10, 2015 in Toronto, Ontario
APPEARANCES:
| Parties | Representative |
|---|---|
| Ganz Realty Limited | Mark Joyce |
| MPAC | Bashir Mohamed |
| City of Toronto | No one appeared |
DECISION OF THE BOARD DELIVERED BY BERNARD COWAN
INTRODUCTION
1The subject property at 205 Champagne Drive is a 63,790 square foot ("sq. ft") multi-tenanted industrial building.
2It was assessed at $4,611,000 for the 2013, 2014 and 2015 taxation years by an income-based methodology whereby market rents net of standard expense and vacancy deductions, as determined by MPAC, were capitalized.
3During the litigation period, and continuing until immediately before a delayed commencement of the hearing to enable the parties to seek a resolution, both parties revised their positions. As they were unable to settle on common ground, a variety of values derived from various approaches were argued before me.
4The standard expense and vacancy deductions, the capitalization rates and the median actual rents of about $5.22 per sq. ft. ("psf") for the subject property are not at issue.
5Admitting from the onset that the market rents used by MPAC was excessive based on his sales analysis, Bashir Mohamed, a property valuation analyst appearing for MPAC, recommends that I reduce the assessment to $4,465,000. This results from applying the subject property's 63,790 sq. ft. building area to the $70 median sales price psf of structure of the three sales in his Report (Exhibit 1) that he now relies upon. Mr. Mohamed argues that this value is corroborated by its affinity to the $4,320,000 value that he derived from substituting the subject property's actual $5.22 psf rent into the agreed capitalized income formula.
6Likewise, Mark Joyce, the appellant's representative, adopts sales prices psf of structure as his basis for establishing the assessment that he seeks. In this instance, he now relies on his calculated $64.78 sales price psf of the nine sales in his (Exhibit 3) Report. This results in the $4,123,0001 assessment value that he seeks.
7Both Mr. Mohamed and Mr. Joyce argue that certain properties used by the other in calculating values psf are unsuitable for inclusion in my determination of an appropriate current value ("CV") for the subject property.
8I must determine which properties to exclude, if any, in a comparative sales analysis leading to an appropriate CV for the subject property. I must then refer to other similar properties' assessments to ensure that the CV as determined is not inequitable in relation thereto.
DECISION
9The assessment is reduced from $4,611,000 to $4,166,000 for the 2013, 2014 and 2015 taxation years. This CV is equitable with the assessments of similar industrial properties in the vicinity.
10By agreement between the parties, the CV is allocated among property classes in the same ratio as the initial assessment. This yields the following rounded apportionments:
Commercial property class $1,633,000
Industrial property class $563,000
Shopping Centre property class $1,970,000
REASONS FOR DECISION
Background
11Having reserved my decision, during the course of evaluating the evidence respecting sold properties I was faced with differences between the building areas of two properties in each party's report and between all 11 of the sales prices psf of building area in Mr. Joyce's Report and my own calculations. Neither party expressed any issue with these differences during the initial in-person hearing, nor had either "flagged" any related discrepancy.
12I consequently reconvened the hearing by a brief telephone conference, at which the parties undertook to address these matters and to report their conclusion(s) to me, through the appropriate Board channels. They did so by providing an agreed modified Industrial Mall Comparables: GRAD document ("GRAD") that includes the structural areas and sale prices for all of the sale transactions in Mr. Joyce's Report.
Current Value
13Section 19.(1) of the Assessment Act (Act) states:
The assessment of land shall be based on its current value.
14The Act establishes January 1, 2012 as the valuation date for 2013 to 2016 taxation, and defines current value to mean:
...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.
15Accordingly, the marketplace as of January 1, 2012 is to be determinative of the subject property's CV.
16Having agreed that I should exclude the property at 200-214 Dolomite Dr. because it was part of a multi-property sale, Mr. Mohamed considers the three remaining property sales listed on page nine of his Report to constitute the most comparable and hence best sales for my determination of an appropriate current value for the subject property. Two are duplicated in Mr. Joyce's Report, and accordingly merit weight in my determination of current value.
17The third remaining property in MPAC's evidence, the sale of 605 Fenmar Drive, is argued by Mr. Joyce to be unsuitable for my consideration on the basis that it was wholly tenanted by a single user, one of the corporate owners, at the time of its sale. Consequently, he introduced as Exhibit 2 an Industrial Transaction Summary from RealNet, a recognized reporting service, in support of his contention that the Fenmar transaction is not a multi-tenant industrial building like the subject and other properties in evidence, and consequently inappropriate for inclusion in my sales analysis.
18I find it appropriate to include the sale of 605 Fenmar Drive in my determination because of Mr. Mohamed's response to questioning of this document in Mr. Joyce's cross-examination. Mr. Mohamad advises that MPAC assessed this property by the same income-based methodology as the subject. MPAC's assessment is as a multi-tenant industrial building. It always has been assessed as such and continues to be so. I note that no error in assessment valuation appears to have resulted, as this property's assessment at $5,229,000 corresponds very closely to its $5,338,000 sale price. Furthermore, while Exhibit 2 does in fact indicate one of the vendors to be in occupancy at the time of sale, it also describes the "Tenancy Type" as "Multi Tenant", and the "Physical Details" as being "...improved with a single storey, multi tenant industrial building...serviced by approximately 10 ten truck level doors." This sale merits weight in my determination.
19Having agreed that I should exclude the properties at 50-52 Arrow Rd. and 80-100 Dufflaw because both were distressed sales, Mr. Joyce considers the nine remaining property sales listed in Appendix G to his Report to constitute suitable sales for my determination of an appropriate CV for the subject property. These nine sales incorporate the two duplicated in MPAC's evidence. Mr. Mohamed has introduced no evidence or argument sufficient to establish any meaningful basis for me to exclude these nine properties from my sales analysis.
20I consequently find the best evidence from the marketplace for determination of the subject property's CV to be the nine sales referenced in the immediately preceding paragraph, together with the sale of 605 Fenmar Drive.
21Schedule A hereto is my Comparative Sales and Assessment ("CV") Analysis. This is a listing of the 10 transactions that I consider to merit inclusion in my determination of the subject property's CV. It incorporates the information respecting the building areas, sales and assessment values as agreed by the parties for the properties emanating from the GRAD document, 605 Fenmar Dr. as presented in Exhibit 1 and accepted as factual without challenge by Mr. Joyce, and my calculations of the sales and CVs psf of building areas for each property.
22I concur with both Messrs. Mohamed and Joyce that the most appropriate basis for comparison of these multi-tenant industrial properties is on a psf basis. This is indicated to be a common industry standard by its use in the Exhibit 2 RealNet document.
23Schedule A leads to my finding that the CV for the subject property is $4,166,000. This is derived from applying the median sales price of $65.32 psf to the subject property's 63,790 sq. ft. building area.
24To test the suitability of this CV determination, I look to the capitalization of income valuation methodology common in the industry and utilized by MPAC in its initial and reevaluated analyses. Initially, MPAC used estimated market rents, which are now considered by the parties as inappropriate. Utilizing instead the agreed actual rents of $5.22 psf and applying the uncontested formula of 9% reductions for vacancies and expenses, capitalized at 7%, Mr. Mohamed calculates the income-derived value to be $4,320,0002. This varies from the market-derived CV by less than 4%, and clearly corroborates the suitability of my CV determination.
25Several sub-issues merit no determinative weight in the context of my above CV determination. These include:
The sale of 322-346 Wildcat Rd. Mr. Joyce asserts that this sale is, in his view, the best evidence because this property's building is closest in size to the subject and its sale transacted closest to the January 1, 2013 valuation date. However, its rental income is not in evidence, and without other evidence to establish whether or not other features are alike or different, I prefer to look to the 10 sales in Schedule A than to this one property alone for my determination of a market-derived value. Mr. Joyce has likewise looked to the median sale price psf of the nine sales in his submission for the value that he seeks. Furthermore, although the building areas vary substantially, Schedule A does not indicate a discernable correlation between increasing building sizes and sales prices psf of structures.
Time adjustments. I find that the absence of time adjustments to any of the sale transactions does not materially impact the result in this particular matter. On the balance of probability, the consequential impact of the pre-valuation date sales is mitigated (admittedly to an unknown extent) by the impact of the post-valuation date sales. Both parties introduced sales that occurred between 2010 and 2013; and neither considered it essential to time adjust their evidence. Of the 10 sales adopted in my analysis, five precede the January 1, 2012 valuation date and five were after that date. Narrowing my focus to the shoulder years of 2011 and 2012, the three sales ranged from $51-$73 psf (rounded). My Schedule A determination of the median sale psf at $65.32, utilized to establish the subject property's CV, falls within this range, and reinforces my conclusion that the absence of time adjustments to these sales does not materially distort the result.
Adjustments for differences among the properties. Although both parties raised questions about some of the differences in certain properties from the subject, neither made quantitative adjustments to any of the sales evidence for variables in such features as design, age, lot sizes or location. I am nevertheless comfortable with the result, considering the parties did not provide any adjustments or any compelling argument of their own to adjust or otherwise exclude a sale transaction. On probability, this indicates that for properties of this type, in this general geographic area, the properties are sufficiently comparable to yield a meaningful median value psf of structure for this sample size of 10 sales.
Equity with Other Properties' Assessments
26Section 44.(3) of the Assessment Act ("Act") states in part:
...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 land
27Neither party advanced any consequential argument respecting this "Equity" section of the Act. Nevertheless, I am legislatively required to have reference to other similar properties' assessments to ensure an equitable result.
28Included in Schedule A are my calculations of the assessments psf of building for each of the 10 sold properties that I consider to be sufficiently and most similar for this reference. Again, considering the substantial range of building sizes, like the parties and RealNet, evaluation on a psf of assessment is the most suitable basis for this reference in this particular instance.
29I find the subject property's CV of $4,166,000 to be equitable with the assessments of similar lands in the vicinity because the range of assessments is indicated by Schedule A to be $58.24-$79.34 psf of building. The subject's CV of $65.32 psf falls within this range and is marginally below the median of $68.01.
CONCLUSION
30The current value assessment initially established is agreed by both parties and found by me to be excessive. It is accordingly reduced to $4,166,000 for the 2013, 2014 and 2015 taxation years. No further reduction is necessary to achieve equity with the assessments of similar multi-tenant industrial properties in the vicinity.
"Bernard Cowan"
BERNARD COWAN MEMBER Assessment Review Board A constituent tribunal of Environment and Land Tribunals Ontario Website: www.elto.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248
SCHEDULE A
205 Champagne Drive
Comparative Sales and Assessment ("CV") Analysis
| Address | Building Area (sq. ft.) | Sale Price ($) | Sale Price ($ psf) | Assessment $ | Assessment ($ psf) |
|---|---|---|---|---|---|
| 106-120 Arrow Road | 31,613 | 2,066,200 | 65.36 | 1,841,000 | 58.24 |
| 73 Alness Street | 33,440 | 2,800,000 | 83.73 | 2,653,000 | 79.34 |
| 146-150 St. Regis Crescent | 36,955 | 2,175,000 | 58.86 | 2,627,000 | 71.09 |
| 90 Signet Drive | 42,500 | 2,196,600 | 51.68 | 2,876,000 | 67.67 |
| 1000-1008 Magnetic Drive | 47,777 | 3,450,000 | 72.21 | 2,824,000 | 59.11 |
| 322-346 Wildcat Road | 62,900 | 3,635,000 | 57.79 | 3,727,000 | 59.25 |
| 605 Fenmar Drive | 76,500 | 5,338,000 | 69.78 | 5,229,000 | 68.35 |
| 3711 Keele Street. | 84,333 | 7,900,000 | 93.68 | 6,664,000 | 79.02 |
| 511-537 McNicoll Avenue | 94,993 | 6,200,000 | 65.27 | 6,900,000 | 72.64 |
| 555-573 Alness Street | 101,756 | 6,300,000 | 61.91 | 6,044,000 | 59.40 |
| Median | 65.32 | 68.01 |
Footnotes
- My rounded calculation based on $64.78 x 63,790 sf. = $4,132,000. I assume that the difference is an unintended transposition discrepancy by the appellant.
- I have utilized the building area of 63,790 sf for the subject property throughout this decision because that area is included in both parties' reports and testimony. I note however, that at page 8 of Exhibit 1, Mr. Mohamed's Report indicates a slightly lesser area and that the rent roll at Tab F of Mr. Joyce's Report indicates a slightly greater area according to my calculation. These unexplained differences are inconsequential to my determination of CV, but may explain this calculation by Mr. Mohamed.