Crestview Investments v. Municipal Property Assessment Corporation, 2016 CanLII 1687

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

January 12, 2016

FILE NO.:

WR 132886

Appellant(s):

Crestview Investments

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s):

City of Toronto

Property Location(s):

30, 31, 33, 35, 37, 38, 39, 46, 52, 55, 57, 58, 63, 64, 69, and 75 Leacrest Road 57, 63, 69, 75, 81, and 93 Mallory Crescent

Municipality(ies):

City of Toronto

Roll Number(s):

See Schedule “A”

Appeal Number(s):

See Schedule “A”

Taxation Year(s):

2013, 2014 and 2015

Hearing Event No.

576735 and 583137

Legislative Authority:

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

Heard:

February 18, 2015 and June 5, 2015 in Toronto, Ontario

APPEARANCES:

Parties

Representative

Crestview Investments

L. W. Bumstead

MPAC

O. Enenwali

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI AND CRISTINA MARQUES

INTRODUCTION

1The subject properties are twenty two low rise apartment buildings built in 1950 located in Leaside, operated and owned by Crestview Investments. The buildings exist in two distinctive groups separated by Leacrest Road. Fifteen of the buildings are located on the south side of Leacrest Road, and the remaining seven buildings are located on the north side of the road. The properties are owned and managed as one property. The parking garages straddle lot lines and access to the garages is made from one building to the next. In many cases the parking for one building is located in another building. As a result, the buildings are tied together. The appellant submits that the properties cannot be sold individually with individual roll numbers.

2The appellant and MPAC agree that the properties should be assessed as two parcels of land on two roll numbers. They ask the Board to create two new roll numbers and delete the existing roll numbers. The Board agrees with the request because of the inter-dependence of the buildings for parking and other services. It is agreed that the seven buildings and parking on the north side of Leacrest Road should be one roll number and the 15 buildings and parking on the south side should be another.

3The parties do not agree on the current values of the two new roll numbers. The properties have been assessed using the Gross Income Multiplier (“GIM”) approach to value which is an income approach. The main issue is the GIM to be used in applying the model.

DECISION

4The Board orders the cancellation of the existing twenty two roll numbers as set out on Schedule A, and the creation of two new roll numbers:

• 1906-042-420-00201-0000 (Group 1) and

• 1906-042-450-00801-0000 (Group 2).

5The Board finds that the current values for the roll numbers for the 2013, 2014 and 2015 taxation years to be as follows:

• 1906-042-420-00201-0000 - $7,780,000
• 1906-042-450-00801-0000 - $15,398,000

6The Board also finds that an assessment at current value for both roll numbers does not require an adjustment below current value to make it equitable with the assessments of similar lands in the vicinity.

REASONS FOR DECISION

Roll Number 1906-042-420-00201-0000 (Group 1)

7This roll number is a group of seven low rise buildings with a total of 58 units comprised of:

− 16 one-bedroom units

− 42 two-bedroom units

− Parking

− Lot area 2.62 acres

8For taxation years 2013, 2014, and 2015, the seven properties were assessed for a total value of $8,876,000.

9Okay Enenwali appearing for MPAC, testified that as a result of the new roll number amalgamation, and based on sales, a Gross Income Multiplier (GIM) of 8.75 is appropriate. He maintains that the calculations result in a fair assessment, and asks that the assessment as recommended be accepted by the Board at $7,780,000 (rounded).

Roll Number 1906-042-450-00801-0000, (Group 2)

10The roll number is a group of 15 low rise buildings with a total of 122 units comprised of:

− eight one-bedroom units

− 114 two-bedroom units

− Parking

− Lot area 6.76 acres

11For taxation years 2013, 2014 and 2015, the total assessment for the fifteen properties is $18,532,000.

12Mr. Enenwali, takes the position that the GIM of 8.39 used is appropriate. He requests that the Board accept his recommendation of $15,398,000 (rounded) as the new assessment for this group of properties.

13Lorne Bumstead, appearing for the appellant, takes the position that the assessments are too high because the properties are in poor condition compared to the properties to which they are being compared. He is of the opinion that MPAC’s average condition designation is wrong and that it should be changed to poor condition; resulting in a lower GIM which he argues will result in more realistic assessments for the subject properties.

14The parties main disagreement is on building condition, that in turn could change the GIM values and the current values of the subject properties.

15The Board must determine if the assessment for 2013, 2014 and 2015 taxation years reflects current value as of the legislated valuation day, January 1, 2012, and if it is equitable, having reference to the assessments of similar lands in the vicinity.

Legislation

16The Board must have regard to s. 1, s. 19.(1), s. 19.2(1), s. 40.(17), s. 40.(19), s. 44.(3)(a) and (b) of the Assessment Act (“Act”) when determining whether or not the assessment under appeal is correct.

17Section 1 of the Act defines current value as follows:

“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.

18Section 19.(1) of the Act states:

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

19Section 19.2 of the Act provides:

Valuation days

19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

Exception

(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the Minister prescribes a different day as of which land is valued for that year.

20Section 40.(17) of the Act states:

40. (17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

21Section 40.(19) of the Act states:

40. (19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

22Section 44.(3)(a) and (b) of the Act state:

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.

Determination of Current Value

Case for MPAC

23Silviana Tjhia, appearing as a witness for MPAC, testified that on February 4, 2015 MPAC inspected the properties, in preparation for this valuation analysis. She is confident that the GIM used for the valuation for the properties is correct, and indicated that multi-residential properties are sold in the market based on the income that they are able to generate. In support of the assessments as recommended, she presented Exhibit 1 consisting of an MPAC report asserting the assessor’s position, which also included:

• location and current value study map

• unit mix and rental income reports for the subject properties

• photographs of the subject property, and the suggest comparables

• current value study with seven comparable sales

24Ms. Tjhia stated that the suggested comparable properties are considered by MPAC to be similar to the subject properties on the basis of year built, quality of construction, condition, location, and unit mix. She relied on the sale of walk-up apartment properties, all within the vicinity of the subject properties, to determine whether the properties are assessed at or close to their current values.

25Details of each property on the Current Value Study are summarized in Table 1:

Table 1

Address

Year Built

2012 CVA

Number of Units

Sale

Sale Date

Time Adjusted Sale

PGI

Sale GIM

981-983 Broadview

1928

1,190,000

10

1,262,500

May 2010

1,382,438

108,708

12.72

648 Broadview

1917

1,399,000

10

1,050,000

Aug 2011

1,265,250

115,723

10.93

28 Oak Park

1918

990,000

15

1,290,000

Aug 2014

1,083,600

106,374

10.19

89 Lamb

1920

1,421,000

9

2,445,000

Feb 2014

2,127,150

132,470

16.06

646 Broadview

1907

1,796,000

13

2,465,000

Apr 2014

2,119,900

150,776

14.06

1127 O’Connor

1951

1,043,000

11

1,049,000

Oct 2012

1,122,430

108,612

10.33

1157 O’Connor

1953

985,000

11

1,310,000

Jan 2008

1,624,400

102,506

15.85

26Ms. Tjhia relies on these sales to determine whether properties are assessed at or close to their current values. Each sale is time-adjusted to bring the sale to the valuation day of January 1, 2012. Each adjusted sale amount represents an estimated sale value that each of the buildings of the subject properties could realise if sold at the legislated valuation date. The time-adjusted sale of the seven comparables establishes a range of values between $1,083,600 and $2,127,150.

27MPAC values multi-residential properties using the income approach to valuation. Firstly, a rental model is developed to calculate Fair Market Rent (“FMR”) in order to arrive at the Potential Gross Income (“PGI”) for each property. Secondly, MPAC analyses the relationship between sale prices and the income generated by the properties to determine the Gross Income Multiplier (GIM).

28The following calculations were used to arrive at the GIM of each of the subject properties. This panel has never seen a GIM determined by this methodology. In our experience GIM is calculated on sales. MPAC did not provide any evidence that the formula it provided determines correct GIM.

Group 1

2910.26 (base factor for Toronto) x 1.00 (walk up units) x 1.00 (average condition) x 0.9417 (58 units) x 0.90558 (location) = 8.75 GIM

30The assessor calculates that the correct valuation for Group 1 should be as shown in Table 2:

Table 2

Suite Type

Number of Units

Fair Market Rent / Unit

Annual FMR

GIM

Current Value

1 Bedroom

16

$1,033

$198,336

8.75

$1,735,919

2 Bedroom

42

$1,210

$609,840

8.75

$5,338,186

Total 58

$808,176

$7,074,105

Parking

$ 73,009

$ 706,000

Total Current Value

$7,780,000 (rounded)

Group 2

3110.26 (base factor for Toronto) x 1.00 (walk up units) x 1.00 (average condition) x 0.903 (122 units) x 0.90558 (location) = 8.39 GIM.

32The assessor calculates that the correct valuation for Group 2 should be as shown in Table 3:

Table 3

Suite Type

Number of Units

Fair Market Rent / Unit

Annual FMR

GIM

Current Value

1 Bedroom

8

$1,033

$ 99,168

8.39

$ 832,312

2 Bedroom

114

$1,210

$1,655,280

8.39

$13,894,275

Total 122

$ 1,754,448

$14,726,587

Parking

$72,570

$ 672,000

Total Current Value

$15,398,000

33Ms. Tjhia testified that before the roll number amalgamation the twenty two properties were assessed for a total of $27,408,000. She urged the Board to accept MPAC’s recommendations to reduce the assessment for the properties by the total amount of $4,230,000. She submitted that based on MPAC’s inspection and data received she is confident that Group 1 of properties is fairly assessed at $7,780,000, and that Group 2 of properties is also fairly assessed at $15,398,000 for a total recommended current value assessment of $23,178,000 for the 2013 and 2014 taxation years.

34Ms. Tjhia testified that MPAC is not relying on the above sales to determine current value, but on GIM.

Case for the Appellant

35Mr. Bumstead submitted Exhibit 2 consisting of a property profile with photographs, and Curriculum Vitae for Peter Ward.

36Mr. Bumstead called Mr. Ward, whom the assessors agree, possesses sufficient qualifications through his education and experience that he is qualified to express opinions in the valuation of properties such as the subject property.

37Mr. Ward argued that the subject properties should be valued using a GIM which is calculated taking into account the buildings’ poor condition. He pointed out that the buildings are in need of extensive renovations, such as replacement of single pane windows, and stair carpet. He added that the kitchen and bathroom fixtures date to the 1950s and are in serious need of upgrading. The heating system is old, and that some pipes are insulated with asbestos insulation.

38Mr. Ward pointed out that all the comparable properties have undergone some form of renovations, and are all in superior condition to the subject properties. In order to qualify the subject properties as average they should be 30 years newer or have undergone extensive renovations and upgrades. In his opinion the units are nearing the end of their economic life, and each needs $30,000 to $40,000 worth of renovations.

39Mr. Bumstead presented the following calculations to arrive at a lower GIM for each of the subject properties:

• Roll Number 1906-042-420-00201-0000 (Group 1)

4010.26 (base factor for Toronto) x 1.00 (walk up units) x 0.84 (poor condition) x 0.94117 (58 units) x 0.90558 (location) = 7.36 GIM. Mr. Bumstead calculates that the correct valuation for Group 1 should be as shown in Table 4:

Table 4

Suite Type

Number of Units

Fair Market Rent / Unit

GAI

GIM

Current Value

1 Bedroom

16

$1,033

$198,336

7.36

$1,459,752

2 Bedroom

42

$1,210

$609,840

7.36

$4,488,422

Total 58

$808,176

$5,948,174

Parking

$ 73,009

$ 706,000

Total Current Value

$6,654,174

• Roll number 1906-042-450-00801-0000 (Group 2)

4110.26 (base factor for Toronto) x 1.00 (walk up units) x 0.84 (poor condition) x 0.903 (122 units) x 0.90558 (location) = 7.06 GIM. Mr. Bumstead calculates that the correct valuation for Group 2 should be as shown in Table 5:

Table 5

Suite Type

Number of Units

Fair Market Rent / Unit

GAI

GIM

Current Value

1 Bedroom

8

$ 1,033

$ 99,168

7.06

$ 700,126

2 Bedroom

114

$ 1,210

$1,655,280

7.06

$11,686,276

Total 122

$1,754,448

$12,386,402

Parking

$ 72,570

$ 672,000

Total Current Value

$13,058,402

42Mr. Bumstead submitted that a fair value for the two groups of properties is $19,713,000 for the 2013, 2014 and 2015 taxation years.

43During cross-examination Mr. Enewali testified that MPAC does not designate multi-residential properties in Toronto as poor. That the lowest condition designation in the city is average.

Analysis

Current Value

44In accordance with s. 44.(3)(a) of the Act the Board must determine the current value of the subject property. The best indicator of current value is an arm’s length and market-tested sale of the subject property on the valuation date, January 1, 2012, or close to it. Since the subject properties did not sell, the Board relies upon the sale of similar properties in the vicinity on or close to the valuation day.

45MPAC’s sales evidence has properties that sold in the same vicinity as the subject property, and had their sale prices adjusted to the valuation day of January 1, 2012. This sales evidence indicates a median GIM of 12.72, and both parties agree that for the purpose of valuating the subject properties this GIM would be too high, If the subject properties should be on the open market they would be under the same market influences as the accepted comparables. The accepted comparables are similar to the subject property in all the essential features. The unit mix for the properties presented is similar to the subject property, and will likely rent for similar values. Their median GIM of 12.72 is considerably higher than the 8.75 and 8.39 GIM, which MPAC is using to establish the current value of the subject properties.

46The Board did not receive detailed evidence on the appellant’s sales comparison located at 26-34 Saranac Avenue.

47As for Mr. Bumstead’s argument that the properties are in poor condition, and in need of $30,000 to $40,000 worth of renovations per unit, the Board cannot speculate on the value as it did not receive proper evidence. The Board is unable to use the information presented to support a further reduction in assessment because no estimates were presented to the Board as to how much it would cost to renovate the properties, apart from Mr. Ward’s opinion. The Board cannot arbitrarily assign a negative or positive value to a variable; a value must be based on evidence.

48Mr. Bumstead also argues that a poor condition multiplier is 0.84, which if applied to the subject properties, would inevitably result in a lower GIM. The Board also has MPAC’s evidence stating that in Toronto a poor condition is not applicable to multi-residential properties because of the market conditions. MPAC presented evidence in the form of photographs that at least some of the units have had some updates. Since the units seem to be all rented at a fair market rents, it stands to reason that the units are still in fairly good rentable condition, and without further evidence the Board is hard-pressed to find the subject properties in poor condition.

49The Board finds the current value for roll number 1906-042-420-00201-0000 (Group 1) is $7,780,000, and for roll number 1906-042-450-00801-0000 (Group 2) of properties is $15,398,000, for a total current value assessment of $23,178,000 for the 2013, 2014 and 2015 taxation years.

Equity

50Section 44.(3)(b) mandates and directs that after determining current value, the Board shall have reference to the value at which similar lands in the vicinity are assessed.

51The parties made no submissions under s. 44.(3)(b). There is no evidence before the Board leading to a conclusion that the assessments of the properties at current value require any further adjustment.

52The Board accepts MPAC’s recommendation to reduce the current value assessment for Group 1 of properties to $7,780,000, and for Group 2 of properties to $15,398,000, for a total current value assessment of $23,178,000 for all taxation years.