Emery Investments v. Municipal Property Assessment Corporation, 2016 CanLII 37482

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: June 16, 2016

FILE NO.: WR 140742

Assessed Person(s): E Manson Investments Limited

Appellant(s): Emery Investments

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): City of Mississauga

Property Location(s): 6610 Edwards Boulevard

Municipality(ies): City of Mississauga

Roll Number(s): 2105-040-117-07500-0000

Appeal Number(s): 2944233, 3033905, 3084721 and 3152678 (deemed 2016 appeal)

Taxation Year(s): 2013, 2014, 2015 and 2016 (deemed appeal)

Hearing Event No.: 619943

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

Heard: April 13, 2016 in Mississauga, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

E Manson Investments Emery Investments Lorne Bumstead

MPAC Gary Charles and P. Kumat

City of Mississauga No one appeared

DECISION OF THE BOARD DELIVERED BY ANTHONY LAREGINA

INTRODUCTION

1E. Manson Investments Limited is the owner of the property located at 6610 Edwards Boulevard in the City of Mississauga.

2The property is located within the Gateway Business Park bound by Highway 10 to the west and Highway 407 to the north, Highway 410 to the east and Highway 401 to the south. It consists of a warehouse and office building, which was built in 1999. The building is situated on a 1.315 acres lot and it has a total area of 26,663 square feet, of which 6,186 square feet is interior office space with an open area above which is not in use and the rest is used for warehousing.

3The subject property was assessed at $3,172,000 for the 2013, 2014 and 2015 taxation years and classified as Commercial (CT). The returned value of $3,172,000 was established using the cost approach which MPAC included as part of their presentation.

ISSUES

4Gary Charles, representing MPAC, submits that based on the prices realized on the sales of two comparable properties, the assessment of the subject property should be reduced from $3,172,000 to $2,917,000 as of January 1, 2012. It is MPAC’s position that the time adjusted sale values of these comparable properties required further adjustments for the differences in lot size, building area, building age and height as well as differences in office areas in order to make a meaningful comparison between the subject property and the comparable properties.

5Lorne Bumstead, representing the Appellant agrees that open market sales of comparable properties provide a valid indicator of the subject property’s current value. However, he submits that only one of the two properties proposed by MPAC is comparable to the subject property and that furthermore, the adjustments made by MPAC to the sale prices are confusing and not warranted. It is the Appellant’s position that, based on the unadjusted or actual sale value of eight comparable properties identified by the Appellant, the correct current value of the property is $2,670,000.

6The main issues for the Assessment Review Board (the “Board”) are to determine which of the comparable properties proposed by the parties provide a valid indicator of the subject property’s current value as of January 1, 2012, and whether a reduction to the assessment of the subject property is required in order to make it equitable with the assessment of similar lands.

DECISION

7The Board finds that the current value of the subject property as of January 1, 2012 is $2,917,000.

8Further, the Board finds that no adjustment to the subject property’s current value is required to make it equitable with the assessment of similar lands in the vicinity.

9The Board therefore, reduces the assessment from $3,172,000 to $2,917,000 for the 2013, 2014 and 2015 taxation years and deems the same value for the 2016 taxation year.

REASONS FOR DECISION

Determination of Current Value

10The initial task for the Board is to determine the current value of the subject property as required by s. 44.(3)(a) of the Assessment Act, R.S.O. 1990, c. A.31, as amended (“Act”), which in part states that “…the Board shall…determine the current value of the land.”

11Section 19.(1) of the Act states that “…the assessment of land shall be based on its current value…” and s. 1 of the Act defines current value as “…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 40.(17) of the Act stipulates that “…the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.”

13The issue for the Board’s determination is the current value of the subject property as of January 1, 2012.

MPAC’s Evidence

14Mr. Charles has provided the Board with the sales of two properties as the basis for establishing the current value of the subject property. The details on these properties are found on Appendix B of Exhibit 1. Both 7090 Edwards Boulevard and 6465 Danville Road are located within 1.5 kilometers of the subject property and 7090 Edwards Boulevard is located on the same street. The building sizes are somewhat smaller at 24,128 and 20,891 square feet, lot sizes are 1.35 and 1.82 acres, the building heights are 28 and 27 feet and the year built is 2000 and 2003.

15The comparable properties proposed by MPAC sold on the open market during October and July 2011 for $3,025,000 and $2,455,000 time adjusted to January 2012 at $3,059,527 and $2,512,447.

16To bridge the differences in building area, lot size, building age, building height and differences in office space, MPAC has adjusted the time adjusted sale prices of the comparable properties. As a result of these adjustments, the median sale price of the properties is $109.42 per square foot. MPAC provided the details on how the adjustments had been determined using the adjustment charts on Exhibit 2.

17By applying the median adjusted sale price per square foot of $109.42 to the subject property building area of 26,663 square feet, Mr. Charles submits that the subject property’s resulting value should be $2,917,465 and therefore requests that the current value of the subject property be set at $2,917,000.

18Mr. Charles requests that the assessment of the subject property should be reduced from $3,172,000 to $2,917,000 and no additional adjustment is required to make it equitable with the assessments of similar properties in the vicinity.

19During cross-examination Mr. Bumstead introduced Exhibits 3 and 4, Exhibit 3 is a letter he sent to Mr. Charles after the inspection of the subject property summarizing the issues and his case as of October 19, 2015. Exhibit 4 is a list of comparable property sales that were proposed by MPAC at the time. Mr. Bumstead pointed out that there were mathematical errors in the adjustments that MPAC had made for year built. Mr. Charles agreed with Mr. Bumstead that he had made some errors at the time in the adjustments which he corrected in MPAC’s valuation report, Exhibit 1. Furthermore, Mr. Charles also reduced the number of comparables from four to two for the final hearing which is also itemized in Exhibit 1.

Appellant’s Evidence

20Mr. Bumstead introduce Peter Ward to testify as an expert witness. After presenting Mr. Ward’s qualifications with no objection from MPAC, the Board accepted Mr. Ward as qualified to provide expert opinion on the valuation of industrial and commercial properties.

21Mr. Ward’s testimony is based on his Assessment Analysis report, Exhibit 5. According to Mr. Ward the best indicator of the subject property’s current value is provided by the sale prices of six to eight comparable properties not two as presented by MPAC. Mr. Ward believes that while one of the two properties presented by MPAC, 7090 Edwards Boulevard, is a good comparable, the sample size of two properties is very small to establish current value.

22Mr. Ward also opined that while the use of adjustments is sometimes useful, it should be kept to a minimum. In Mr. Ward’s report he felt that no adjustments were required based on the approach he used and the eight comparable properties he selected.

23Mr. Ward indicated in his report that the criteria for selecting the comparable properties included properties that were in close proximity to the subject property as well as properties that were 20,000 to 30,000 square feet and in similar condition, vintage and use as the subject property. In his report Mr. Ward claimed that he inspected and accepted the comparable properties as being similar. During cross-examination Mr. Ward admitted that he only inspected the comparable properties from the exterior and did not enter the buildings. Mr. Ward claimed that based on his experience he is able to determine the condition of a building from an exterior inspection.

24In order to establish similarity, Mr. Ward used the parameters of building size and land and established a land to building ratio of 2.16 for the subject property. He then selected the eight comparable properties based on a similar land to building ratio as the subject property. As he indicated in his report, properties substantially outside of this ratio were discarded and not used to establish the current value as they were deemed not directly comparable without making adjustments to the land or building component.

25Mr. Ward opines that the use of properties which require adjustments introduces subjectivity to the analysis and weakens the indicated value.

26Mr. Ward’s proposed comparable properties are listed on the report on page 12 of Exhibit 5. These properties had been sold on the open market at prices ranging from $1,925,000 to $3,025,000, during the period of February 2011 to May 2012. The median sale price per square foot of these properties is $100.17.

27By applying the median sale price per square foot of $100.17 to the subject property’s total area of 26,663 square feet, Mr. Ward submits that the subject property’s correct current value is $2,670,832 rounded to $2,670,000.

28Mr. Ward concluded in his report that if you eliminate the high and low outliers, 7090 Edwards Boulevard at $125.37 per square foot and 6390 Kestrel Road at $77.87 per square foot, the balance of the six properties would produce a sale price per square foot range between $95 and $110. Mr. Ward opines that the current value assessment of the subject property is well above the acceptable range of $95 to $110 at $118.96 per square foot.

Board’s Findings

29Both MPAC and the Appellant have presented evidence to support the subject property’s current value using the Direct Sales Comparison approach. This valuation methodology identifies similar properties sold on the open market to support a current value of the subject property. First, the Board needs to determine which of the comparable properties proposed by the parties are similar to the subject property. Secondly, once the valid comparables have been determined; the Board needs to determine the validity of the adjustments made by MPAC and the Appellant to the sale prices of their proposed comparable properties.

30Mr. Charles presented Canada Inc. v. Municipal Property Assessment Corp., Region No. 15, [2016] O.A.R.B.D. No. 49 (WR 138337) (“Canada Inc.”) which this panel fully supports states the following:

To determine the validity of the comparable properties proposed by the parties, the Board considers location, building main characteristics building size, lot size and building age, as being the key comparability criteria. In addition to the physical characteristics of the properties, the Board considers whether the sales of the properties took place on the open market, were arm's length sales and whether they took place within an acceptable period of the valuation date.

With regards to the comparable sales the Board finds that they meet the criteria of open market, arms-length and the sale dates are within a reasonable shoulder period to the valuation day of January 1, 2012.

31With regards to the other components, the Board has developed the following chart from the evidence provided to assist in the analysis of comparability.

Address	Year Built	Lot Size (Acres)	Building size (Ft.)	Building Height (Ft.)
6610 Edward Boulevard	1999	1.32	26,663	27
6465 Danville Avenue	2003	1.82	20,891	27
7090 Edward Boulevard	2000	1.35	24,128	28
976 Meyerside	1984	1.47	26,874	20.5
5441 Timberlea	1980	1.10	22,230	21
7320 Pacific Circle	1988	1.28	24,818	24
5815 Coopers	1986	1.51	24,703	18
6390 Kestrel	1986	1.22	24,721	20.5
6290 Danville Road	1992	1.04	19,480	20.5
6611 Innovator Drive	1989	1.28	25,307	21.0

32MPAC submitted two comparable properties, 6454 Danville Avenue and 7090 Edwards Boulevard and the Appellant submitted the remainder of the properties including 7090 Edwards Boulevard. In regards to the physical characteristics comparability criteria, the Board agrees with MPAC that the best comparable property is 7090 Edwards Boulevard. This property was built in 2000 as compared to the subject property built in 1999, has an almost identical lot area of 1.35 vs. 1.32 acres, building height 28 vs. 27 feet and very similar building areas of 24,128 vs. 26,663 square feet making this property a good indicator of the current value of the subject property. Furthermore, both are of precast construction, therefore, very similar in terms of quality. However, the Board also agrees with the Appellant’s argument that one property does not make a market. Mr. Charles provided a second property which sold at 6465 Danville Avenue as the only other sale which had similar building height and year built to the subject property. In addition to the time adjustments Mr. Charles also provided adjustments for land, building area, year built, building height and the variation in office area to establish direct comparability to the subject property. The Board deems this process as acceptable as long as the underlying comparable properties selected have a high degree of similarity without the adjustments.

33The Appellant has provided eight comparable properties with comparability based on two factors, building area and lot size resulting in a land to building ratio close to that of the subject property at 2.16. Mr. Ward did not take the age, the building height or the quality of build into consideration. Mr. Ward also did not consider the variability of the office component in each of the comparable properties rather the square footage of the entire building was considered for purposes of comparability. Mr. Ward also admitted during cross-examination that he only did an exterior inspection of the comparable properties for the purposes of establishing comparability and did not enter the facilities.

34As indicated above, the Board establishes comparability based on the five criteria, building area, lot size, year built, building height and quality of build. It is clear from Mr. Ward’s evidence that its criteria only considered two of the above, namely land size and building size. Furthermore, it is clear from the comparable properties Mr. Ward submitted that most were older and had much lower building heights, therefore, not similar to the subject property. This is contrary to his report indicating that he has taken vintage into consideration.

35Regardless, the Board is in agreement with Mr. Ward that the value of the subject property is likely within the range of $95 to $110 per square foot and also disagrees with Mr. Ward that 7090 Edwards Boulevard should be considered an outlier considering that it is the best comparable to the subject property in all five criteria of comparability.

36The Board agrees with Mr. Bumstead that Mr. Charles could have done a better job of explaining the adjustments he made to the comparable properties during his presentation. However, the Board considers these adjustments reasonable and appropriate in equalizing the variables between the comparable properties and the subject property. The comparable properties submitted by Mr. Charles take all five criteria into consideration and make reasonable adjustments where required to reflect the differences between the properties. Mr. Charles presented Canada Inc, where in paragraph 28 the Member stated that “although the comparable properties are similar they are not identical and it is a perfectly acceptable practice to quantify their differences and their impact on value.” This panel once again is in full support of adjustments and the Canada Inc. decision as long as the underlying comparable properties are similar to begin with and it appears that the two comparable properties presented by MPAC have a high degree of similarity to the subject property.

37While the Board prefers to have numerous comparable properties in this case the Board will accept the two comparable submitted by MPAC as the best comparable properties and the only two which have been adjusted for differences to the subject property. As per MPAC’s report and presentation the Board will accept $109 per square foot of building area, which also happens to be at the higher end of Mr. Ward’s range of $95 to $110 per square foot, resulting in a current value of $2,917,000.

38Based on the best available evidence, the Board will therefore set the current value at $2,917,000 based on a January 1, 2012 valuation day.

Determination of Equity

39Once current value has been established, the Board must determine whether a reduction should be made to lower the assessment below current value in order to make it equitable with the assessments of similar lands in the vicinity.

40Section 44.(3)(b) of the Act states that:

…the Board shall…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.

41The parties provided no evidence of similar properties in the vicinity and therefore the Board assumes that equity was not in issue. Therefore, the Board will not adjust the current value as determined above under equity.

42The Board will therefore reduce the assessment for the subject property for the 2013, 2014 and 2015 taxation years from $3,172,000 to $2,917,000 and deem the same value for the 2016 taxation year.

2016 DEEMED APPEAL

43An appeal for the 2015 taxation year is presently before the Board. Section 40.(26) of the Assessment Act 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 2015 appeal before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

44Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

(26) 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.