Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 13, 2016

FILE NO.: WR 141742

Assessed Person(s): Disco Road Nominee Ltd.

Appellant(s): Disco Road Nominee Ltd.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 96 Disco Road

Municipality(ies): City of Toronto

Roll Number(s): 1919-038-360-00650-0000

Appeal Number(s): 2989761, 3014014, 3079395 and 3146836

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

Hearing Event No.: 631769

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

Heard: July 19, 2016 in Toronto, Ontario

APPEARANCES:

Parties

Counsel+/Representative

Disco Road Nominee Ltd.

C. Ratnasingham

MPAC

A. Rank

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY SONIA LIGHT

ISSUE

1The subject property municipally known as 96 Disco Road is located in a neighbourhood bounded by Rexdale Boulevard on the north, Highway 409 on the south, Highway 427 on the west and Highway 27 on the east. It is situated on a 12.67 acres site zoned Employment Industrial which permits the current distribution/sorting warehouse building use on the subject property. The 163,715 square foot warehouse building is comprised of 151,340 square feet of 30 foot high warehouse space of which 18,540 square feet is office space as well as an additional office area of 12,375 square feet on the mezzanine level of the building.

2MPAC returned the assessment for the 2013, 2014, 2015 and 2016 taxation years at a value of $18,474,000. Following an inspection of the property on February 24, 2015 to verify the assembly components of the building, MPAC revised the assessment value as $21,610,000 based on the cost approach to value. However, MPAC did not issue at Notice of Increase based on this finding and is recommending that the returned assessments for the respective taxation years be confirmed at $18,474,000.

3The representative for the Appellant argues that the assessments as returned are too high. He argues that the direct comparison approach to value is the appropriate valuation method to use in this situation and the assessments should be reduced to $14,610,000 based on an analysis of comparable sales. In the alternative, if the cost approach is used then the property should be assessed at no more than $16,195,000.

4The representative for the Appellant further argues that the current value as determined should be reduced based on the equity considerations in the legislation.

5The Assessment Review Board (“Board”) must determine whether the 2013, 2014, 2015 and 2016 assessments are correct and equitable.

DECISION

6For the reasons stated below and as directed by s. 44.(3)(a) of the Assessment Act (“Act”) the Board finds that the current value of the subject property is $18,474,000.

7The Board finds that the current value should not be adjusted for equity pursuant to s. 44.(3)(b) of the Act.

8Accordingly, the assessment of the subject property for the 2013, 2014, 2015 and 2016 taxation years is confirmed at $18,474,000.

REASONS FOR DECISION

Legislation

9Section 19.(1) of the Act states:

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

10Section 1 of the Act defines “current value” as:

“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.

11Section 19.2(1)2 states:

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. 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.

12Section 44.(3) 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.

13Section 40.(26) of the Act directs:

40.(26) 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.

Current Value Analysis

14Imran Asmal is a Property Valuation Specialist with MPAC. Since 2008, his responsibilities have included the collection and verification of data for thousands of industrial and commercial properties and the investigation of sold industrial/commercial properties to determine the nature of sales. The Board finds that he is highly qualified to provide expert opinion evidence respecting the valuation of the subject industrial property.

15Mr. Asmal believes that the best indicator of value of the subject property would be determined using the cost approach to value, as the property is a purpose built single tenant property.

16Mr. Asmal inspected the subject property and the building’s assembly components on February 24, 2015 to ensure that the data in MPAC’s Automated Cost System (“ACS”) system respecting the subject property was correct and if necessary, make revisions as revealed by his inspection. After a thorough inspection of all assembly components, review of relevant building plans on file with the City of Toronto and verifying the measurements of the property, Mr. Asmal made some corrections to MPAC’s ACS database. These revisions respecting the data for the subject property are shown on pages 21-23 of his valuation report filed as Exhibit 2 at the hearing.

17Among his adjustments, Mr. Asmal removed the 15% economic obsolescence allowance initially granted to the subject property in the mass appraisal process on the basis that the building did not meet the criteria for this type of allowance (as outlined on page 23, Exhibit 2). He explained that since the building was constructed in 2007 as a purpose built single tenant building, the building should be ideally suited for the tenant’s business purposes and there would be no reason at this point for economic obsolescence to be a factor. This adjustment alone significantly increased his valuation of the property and the Board finds it to be appropriate based on his testimony and the analysis in his report.

18Mr. Asmal initially relied on the sale of the subject property in June, 2007 at $23,900,000 to support his revised value of $21,610,000 based on the cost approach analysis. However, Mr. Asmal acknowledged at the hearing that he was not aware that the terms of this sale included a leaseback arrangement meaning that the sale may not be an appropriate sale between unrelated parties as required to calculate current value for assessment purposes. However, in Exhibit 2B he shows how he calculated the fully adjusted sale price respecting 100 Disco Road being the property next door consisting of 11.85 acres with a 30 foot high building of 260,547 square feet constructed in 2009 to be $31,006,567. Mr. Asmal also calculated in the same Exhibit 2B a fully adjusted sale price of what he has determined to be the most similar comparable sale in terms of building size (182,967 square feet), date of construction (2006) and use (distribution warehouse) being 205 New Toronto Street to be $31,586,406.

19Due to the extent of adjustments required respecting the comparable sales at 100 Disco Road and 205 New Toronto Street he believed these sales could not be relied on to determine the current value of the subject property using the direct comparison approach to value and the Board agrees with this finding. However, these comparable sales, whether merely time adjusted or fully adjusted as described above, both tend to support the revised value of $21,610,000 obtained by Mr. Asmal using the cost approach to value.

20The Board does not agree with the witness for the Appellant, Chandelle Hamilton, that the direct sales comparison approach would be the most appropriate method for valuation of the subject property. Again, this is a purpose built tenant building and the cost of the building and the land would therefore be the best indicator of the property’s value for its current use. Furthermore, as demonstrated by Mr. Asmal in his Exhibit 2B submitted to the Board, the best comparable sales presented at the hearing by either party require far too many adjustments to be relied on for the purpose of determining current value. The Board also does not consider, 77 Fima Crescent, being a further suggested comparable sale presented by the representative for the Appellant, to be a suitable comparable sale based on its property data, especially the fact that it was constructed in 1964 and has a 7 foot lower ceiling height than the subject property.

21Accordingly, the Board prefers the opinion evidence of Mr. Asmal that the cost approach to value is the most appropriate methodology to calculate current value of the subject property and also prefers his adjustments to the ACS values for the subject property, including the removal of the value of Economic Obsolescence. Ms. Hamilton increased the value for Economic Obsolescence to 20% based on what the mass appraisal system uses as a default in generating its assessments for similar sized buildings rather than the consideration of generally accepted criteria for Economic Obsolescence cited on page on page 23 of Mr. Asmal’s report. Therefore, the Board finds that the value of the returned assessment has been supported by Mr. Asmal’s evidence at the hearing and the Board is confirming the assessment as returned being $18,474,000 for the 2013, 2014, 2015 and 206 taxation years.

Equity Analysis

22Mr. Asmal prepared an equity analysis shown in Appendix 4, Tab 5 of Exhibit 2. He used 34 sales of properties between August 1, 2011 and May 30, 2012 he considered to be similar properties in the vicinity. The Board has reviewed the analysis and counts only 11 properties with Assessment to Sales Ratio (“ASR”) values between 0.9 and 1.05. The remaining properties have ASR values either higher or lower than this standard resulting in an average ASR of 1.01 with a wide variation in ASR values ranging from a low of 0.57 to a high of 1.58. However, the Board could not detect a trend to under assess similar properties in the vicinity.

23Ms. Hamilton calculated the median Current Value Assessment and median ASR for three comparable sales. The Board does not consider the sample that she presented demonstrates a trend that similar properties in the vicinity are being under assessed. As mentioned in the previous paragraph, it appears to the Board that properties are being both under assessed and over assessed with no trend in either direction.

24Accordingly, the Board finds that there is no basis to reduce the assessment any further on the basis of equity pursuant to s. 44.(3)(b) of the Act.