Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 4, 2017

FILE NO.: WR 144492

Assessed Person(s): Menkes Developments Inc.

Appellant(s): Menkes Developments Inc.

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

Respondent(s): City of Toronto

Property Location(s): 80-86 St. Regis Crescent North

Municipality(ies): City of Toronto

Roll Number(s): 1908-033-401-01400-0000

Appeal Number(s): 2967065, 3009067, 3074542, 3149148

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

Hearing Event No. 644067

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

Heard: November 22, 2016 in Toronto, Ontario

APPEARANCES:

Parties	Representative
MPAC	Leo Ferreira and Damian Bernacik
Menkes Developments Inc.	Nathan Marks

DECISION OF THE BOARD DELIVERED BY MARILYN SHARMA

INTRODUCTION

1The Municipal address of the subject property is 80-86 St. Regis Crescent North. It is located in the City of Toronto on the north side of St. Regis Crescent. The subject property is located south of Finch Avenue West and north of Sheppard Avenue West and west of Dufferin Street and east of Keele Street.

2The subject property consists of a building area of approximately 29,278 square feet (“sq ft). It is a tandem lot with four driveways and has a lot size of 1.53 acres.

3The current assessment and tax class under appeal are as follows:

Tax Year	Current Value($)	Tax Class
2013	629,000	CT
2013	2,038,000	IT
2014	629,000	CT
2014	2,038,000	IT
2015	629,000	CT
2015	2,038,000	IT
2016	629,000	CT
2016	2,038,000	IT

4The assessor advised the Board that the Tax Classification issue was satisfactorily resolved after an inspection conducted by MPAC on October 25, 2016 and it was confirmed that 24 percent of the building was classified as Industrial (Full) IT and the remaining 76 percent as Commercial (Full) CT.

5MPAC made a recommendation to revise the 2012 current value assessment (“CVA”) from $2,667,000 to $2,228,000 broken down as follows:

IT Class: $525,000

CT Class: $1,703,000

6The offer was refused by the appellant.

ISSUE

7The appellant believes that MPAC has assessed the subject property excessively and inequitably.

DECISION

8The Board finds that the current value of the subject property as of January 1, 2012 for the taxation years 2013, 2014, 2015 and 2016 is $2,717,000 (rounded).

9Further, the Board finds that no equity adjustment is required under s. 44.(3) sub-paragraph (b) of the Act.

10At the start of the hearing, the assessor indicated that an offer was made to the appellant to reduce the assessment from $2,667,000 to $2,228,000 broken down as follows:

IT Class: $525,000

CT Class: $1,703,000

11The offer was refused by the appellant but still remains in effect. The Board accepts the assessor’s recommendation and reduces the assessment from $2,667,000 to $2,228,000 broken down as follows:

IT Class: $525,000

CT Class: $1,703,000

MPAC’s Evidence

12MPAC used the “Market Data Approach” to determine the current value of the subject property. The Assessor stated that “the Market Data Approach involves the comparison of sales of comparable properties on the basis of the quantity and quality of the space provided”.

13The Assessor explained the market data approach used by MPAC as follows:

…….market data i.e. sale price is compared and analyzed. The Direct Comparison Approach is based on the principle of substitution which implies that a purchaser will not pay more for a given property than it will cost him to buy a comparable substitute property. The sale price is adjusted for the difference between the subject and sold properties. This approach is most reliable when the differences are small but is least reliable when extreme and numerous adjustments need to be made.

14MPAC has stated that the market approach is the best indicator of value for the subject property as it is part of a large inventory of properties in the market that are smaller than 50,000 square feet which can be readily converted to other uses.

15MPAC informed the Board that

MPAC does not currently request Rental Income and Financial data for standard industrial properties. No comparative rental income is available to apply a fair market rent to the subject. No rental analysis or rental information is available for properties that have sold to develop an appropriate capitalization rate. Thus no weight was considered for the Income Approach to value.

16Table 1 below shows the seven suggested comparable properties submitted by MPAC including three comparable properties used by the appellant.

Table 1

Addresses	Lot Size (acres)	Building Size Square feet	Year Built	Sale Date	Sale Amount
80-86 St. Regis Crescent (Subject Property	1.53	29,278	1972
445 Eddystone Avenue	1.08	23,850	1968	2012/09	1,750,000
250 Canarctic Drive	1.83	27,410	1973	2010/11	1,975,000
88 St. Regis Crescent S	1.74	23,386	1968	2011/09	2,500,000
601 Carnactic Drive	1.50	31,213	1961	2012/11	2,600,000
80 Orfus Road	1.11	24,747	1963	2012/03	3,399,999
68 Tycos Drive	1.53	35,474	1953	2010/06	2,375,000
120 Cartwright Avenue	1.02	25,302	1963	2012/10	2,300,000
50 Valleybrook Drive	1.41	24,465	1967	2011/04	3,100,000
150 Oakdale Road	1.67	29,545	1971	2012/02	2,005,500
40 St. Regis Crescent	1.57	38,076	1969	2011/03	2,625,000

17The Assessor stated that in his view, the Market Data Approach is the best indicator of value as the subject property is a standard industrial property. The Direct Sales Comparison Approach is the most suitable approach to value of this type of property when there are an adequate number of sales.

18The Assessor further informed the Board that MPAC gave no consideration to the Income Approach to value because:

i. The income approach does not capture the value of the selling prices for standard industrial properties and

ii. There are more than a sufficient number of sales of similar comparable properties.

19The Assessor informed the Board that MPAC submitted seven suggested comparable properties which are located at 445 Eddystone Avenue, 250 Canarctic Drive, 88 St. Regis Crescent South, 80 Orfus Road, 68 Tycos Drive, 120 Cartwright Avenue and 50 Valleybrook Drive which he believes are similar to the subject property and were used in the determination of the current value of the subject property.

20The Assessor further informed the Board that in determining the current value of the subject property, he also took into consideration three suggested comparable properties submitted by the appellant and located at 601 Canarctic Drive, 150 Oakdale Road and 40 St. Regis Crescent North because he is satisfied that the three properties are also similar to the subject property.

21The Assessor stated that the seven suggested comparable properties submitted by MPAC as well as the three he used from the appellant’s list of suggested comparable properties have the same tax class of 520/530 as the subject property.

22The Assessor indicated that MPAC identifies properties in tax class code 520 as being properties that are “purpose built” buildings with two or less tenants, with two separate hydro meters, however when there is a warehouse component, the tax class designation is 530.

23The Assessor informed the Board that in selecting suitable comparable properties, MPAC considered the following:

a) Property Code and Property Type

b) Sales close to the valuation date

c) Lot size

d) Building Area

e) Ceiling Height

f) Location

g) Gross Useable area

24The Assessor highlighted the fact that in MPAC’s opinion, value depends on “pockets” and neighbourhood and that location is an important factor in value.

25The Assessor pointed out that like the subject property all the suggested comparable properties submitted by MPAC (including the three properties used both by MPAC and the appellant) have good highway access.

26The Assessor stated that based on his analysis of the seven properties submitted by MPAC and three from the appellant (ten comparable properties), he found the following:

i. That the median and mean building sizes are 26, 356 square feet and 28,346 square feet for all the comparable sold properties. The subject property has a building size of 29,278 square feet.

ii. That the median and mean lot size of the ten comparable properties is 1.52 acres and 1.45 acres versus the subject’s at 1.53 acres.

iii. That the median and mean adjusted sale price (after the adjusted site value is calculated) is computed at $84.21 per square foot and $91.58 per square foot respectively and

iv. That the subject property is assessed at $91.09 per square foot resulting in a current value of $2,667,000.

27The Assessor informed the Board that MPAC made a revision to the number of suggested comparable properties resulting in a change in the value per square foot from $91.09 to $76.10. This revision changed the current value from $2,667,000 to $2,228,000 and the corresponding tax apportionment as follows:

IT Class

$525,000

CT Class

$1,703,000

28The Assessor stated that in his opinion, the recommended assessment of $2,228,000 is fair and equitable.

Appellant’s Evidence

29The appellant submitted Exhibit 6 in which he presented several arguments to support his claim that the subject property is excessively over assessed. They include the following:

1. A review of sales of comparable properties in the immediate vicinity of the subject property within twelve months of the valuation date indicates that the value as returned is excessive. The sales of comparable properties cited by the appellant are those located at 150 Oakdale Road, 601 Carnactic Drive, 250 Carnactic Drive, 158-182 Limestone Crescent, 144-150 St. Regis Crescent, 88 St. Regis Crescent S and 40 St. Regis Crescent North

2. MPAC has incorrectly used the Direct Market Approach to determine the value of the subject property.

3. MPAC has considered only the sales of single-tenanted industrial buildings despite the fact that the subject property is a multi-tenanted industrial building owned by an investor for its income generating potential.

4. MPAC has used comparable sales of properties that are not comparable to the subject property in terms of use and location.

5. A review of the actual income generating potential of the subject property at the valuation date indicates that the CVA as returned is significantly overstated.

6. MPAC relied solely on its comparable sales analysis without acknowledging the 2012 CVA assessments applied to similar lands in the vicinity.

7. A review of decisions issued by the Board in reference to equity analysis and its implications indicates that the value as returned should be adjusted based on equity consideration.

ANALYSIS

Analysis of MPAC’s Evidence

30The Board considered the submission by MPAC that the “Market Data Approach” is the best method to determine the value of the subject property. The premise of this approach is stated as follows:

The Market Data Approach involves the comparison of sales of comparable properties on the basis of the quantity and quality of the space provided.

In this approach market data i.e. sale price is compared and analyzed. The Direct Comparison Approach is based on the principle of substitution which implies that a purchaser will not pay more for a given property than it will cost him to buy a comparable substitute property. The sale price is adjusted for the difference between the subject and sold properties. This approach is most reliable when the differences are small but is least reliable when extreme and numerous adjustments need to be made.

31The Board accepts that the methodology described would yield a fair determination of value because there are an adequate number of sales of similar comparable properties.

32The Board has considered the argument by MPAC that in this instance, the determination of current value by means of the Income Approach would not result in an appropriate CVA. The Board also noted the Assessor’s claim that MPAC does not currently request rental income and financial data for standard industrial properties. This being the case, the Board notes that no comparative rental income is available to apply a Fair Market Rent which is one of the key factors used in determining value based on the Income Approach. The Board accepts the Market Data Approach as an acceptable method of establishing current value and finds that there exist an adequate number of sales of similar and comparable properties that can be used to establish the current value of the subject property applying the Market Data Approach.

33The Board reviewed the property details of the seven suggested comparable properties submitted by MPAC located at 445 Eddystone Avenue, 250 Canarctic Drive, 88 St. Regis Crescent South, 80 Orfus Road, 68 Tycos Drive, 120 Cartwright Avenue and 50 Valleybrook Drive. In addition, the Board also reviewed the seven suggested comparable properties that the appellant used in its Direct Sales Comparison analysis and selected the three properties located at 601 Canarctic Drive, 150 Oakdale Road and 40 St. Regis Crescent North. The Board accepts the combined ten properties as being sufficiently similar and comparable to the subject property because:

• They are of similar age;

• All are located in the same vicinity and neighbourhood of the subject property;

• Their respective site areas are similar;

• Their building square footage are comparable;

• They all have the same building code 520/530 and

• All the properties have good highway access

34The Board notes that the appellant objected to the inclusion the property located at 80 Orfus Road as a similar and comparable property because at the current time it is used as a single tenanted retail space. The Board rejects the appellant’s argument based on the evidence presented by MPAC which showed that at the time of sale the property was designated with a tax class code of 520 being a standard industrial property with two or less tenants. The Board therefore deems that the ten properties listed above are suitable and sufficiently similar and comparable properties that can be used in the determination of the current value of the subject property.

35The Board considered the information provided by MPAC regarding the designation of the tax classification code of properties such as the subject property. The Board notes that in the case of a “purpose built” building being designated a tax class code of 520 there are specific conditions that such buildings have two or less tenants, with two separate hydro meters. The Board is satisfied that the subject property meets these conditions and that it is correctly assigned the appropriate tax class code of 520.

Analysis of Appellant’s Evidence

36The appellant advanced the argument that based on his analysis of sales of comparable properties in the immediate vicinity of the subject property the current value as returned is excessive because based on his analysis it ought to be $69.00 per square foot. The Board examined the totality of the appellant’s argument and makes the following observations:

i. Two of the properties used in the appellant’s analysis and located at 158-182 Limestone Crescent and 144-150 St. Regis Crescent North are of a tax class 580 while the subject property is of a tax class 520, and are therefore not comparable properties.

ii. The property at 250 Canarctic Drive which was also used by the appellant in the analysis has a sale date of November 2010 which is too far removed from the valuation date of January 1, 2012 and therefore not suitable for use in the determination of current value. This is also the case with the property located at 144-150 St. Regis Crescent North and mentioned immediately above.

iii. The Board finds that by using only the valid sales of those properties presented by the appellant that are similar to the subject property results in an average value per square foot of $78.25 and results in a current value of $2,291,000 (rounded) and this value is higher than the offer of $2,228,000 made by MPAC.

37The Board considered the appellant’s claim that MPAC incorrectly used the Direct Market Approach to value when it should have used the Income Approach in this particular case. The Board carefully reviewed the basis of the appellant’s arguments and rejects them for the following reasons:

i. The appellant’s categorization of the subject property as “effectively an industrial mall” is inconsistent with MPAC’s definition of an industrial mall which consists of three or more tenants as opposed to the subject property having two tenants.

ii. The Board is unconvinced by the appellant’s argument that the property, since its inception has been operated as a multi-tenanted industrial property since no evidence of such tenancies was presented to the Board to support this argument.

iii. The Board places no weight on the appellant’s analysis of the CVA of the subject property from an income perspective and as stated earlier, the Board is of the view that in the case of properties in the tax class 520/530, the sales approach is an acceptable approach and in addition, there is an adequate number of sales of similar and comparable properties in the vicinity (of the same tax class code) to derive an assessed value of the subject property.

38The appellant has indicated that MPAC classified the subject property as having a tax classification code 520 (standard industrial) and determined the CVA using the Direct Market Approach and as a result, the CVA arrived at is overstated. The appellant implies in this argument that both the tax code and the methodology chosen to determine the CVA of the subject property is incorrect. The Board is satisfied that the tax classification code applied by MPAC is consistent for standard industrial properties having two or less tenanted facility. The Board is similarly satisfied that MPAC presented an adequate number of sales of similar and comparable properties that are suitable for determining the current value of the subject property. The Board therefore places no weight on the appellant’s argument.

39The Board reviewed the claim made by the appellant that MPAC has considered only the sales of single-tenanted industrial buildings despite the fact that the subject property is a multi-tenanted industrial building owned by an investor for its income generating potential. The Board accepts that the tax classification code that applies to the subject property is identical to the similar and comparable properties used by MPAC and it is applicable to standard industrial buildings with two or less tenants. Further, the Board notes that no evidence was submitted by the appellant to support his claim that the property is a multi-tenant industrial building.

40The Board also notes that the appellant appears to suggest in his argument that the property is “owned by an investor for its income generating potential” and as he contends the Income Approach to value should be used to establish current value. The Board has no doubt that the subject property is used to generate income. However, because it generates income or has the potential to generate income does not mean that the method by which its current value is determined should be the Income Approach. The Board is guided by the established methodology for determining the current value of standard industrial buildings with two or less tenants such as the subject property and therefore sees no merit in the argument advanced by the appellant.

41The Board studied the claim by the appellant that MPAC

in completing their comparable sales analysis, MPAC has included comparable sales that are not comparable to the subject in terms of use or location, producing an overstated sales rate per square foot.

42The Board reviewed the analysis of comparable properties conducted by MPAC and finds that all seven are similar to the subject property in site area, building size, year built and tax class code. In addition, all seven comparable properties are located within the same neighbourhood as the subject property (i.e. North York), all seven have the identical Industrial/Commercial Tax classification and all are designated as standard industrial type properties as the subject property.

43The Board is satisfied that the comparable properties used by MPAC in its analysis comply with the elements that must be present for inclusion in their analysis and finds that the appellant’s claim to the contrary does not have merit.

44The Board considered the appellant’s argument that based on his:

review of the actual income-generating potential of the subject property at the valuation date indicates that the CVA as returned is significantly overstated. This is particularly true when we consider the subject property’s 2012 CVA relative to other comparable properties in the vicinity that MPAC has valued using the Income Approach to value.

45The Board is not convinced that the appellant has made a plausible case because of the following reasons:

i. The correct methodology for determining the current value of properties such as the subject’s is the Market Data Approach and not the Income Approach.

ii. The comparable properties which the appellant cites and for which he claims that MPAC has valued using the Income Approach to value are not properties that are comparable because all are of a different tax class than the subject property.

iii. The subject property’s tax classification is 520 and fits the specification for standard industrial properties with two or less tenants. The properties referred to by the appellant fall into the tax class 580 that are applicable to standard industrial properties having three or more tenants.

iv. As stated by the Assessor, MPAC uses the Income Approach to value for properties in the tax class 580 and not for the properties in the tax class 520.

46The appellant claims that the CVA as returned should be adjusted based on equity considerations as outlined in s. 44(3)b of the Assessment Act, and submitted Case Law decisions in support of his claim. In addition, the appellant submitted a Table in Exhibit 6 which shows properties that he considers similar to the subject property for the purpose of his equity adjustment claim. The Board has reviewed the appellant’s list of seven comparable properties that he used to establish that an equity adjustment is warranted. The Board finds that six of the seven properties in the table are of a different property code and that only one of the seven properties is similar to the subject (i.e. the property located at 40 St. Regis Crescent North. The Board therefore rejects the remaining six properties from consideration because they are all of a different property code than the subject’s and are assessed using a different approach to value than that used for the subject property. The Board therefore rejects the appellant’s claim for an equity adjustment based strictly on the assessed values based on the one comparable property.

BOARD’S SUMMARY OF EVIDENCE

47The Board has deliberated on the totality of the evidence presented both by MPAC and the appellant and concludes as follows:

a) The tax classification code is fundamental to the type of industrial building under consideration. In this case the subject property is designated a tax class code of 520 which defines it as a standard industrial building having two or less tenants. The Board finds that the suggested comparable properties submitted by the appellant have a tax class code of 580 which defines them as standard industrial properties having three or more tenants. The Board is satisfied that the comparable properties provided by MPAC complies with the 520 categorization and are suitable for consideration in establishing the current value of the subject property.

b) The seven suggested properties submitted by MPAC located at 445 Eddystone Avenue, 250 Canarctic Drive, 88 St. Regis Crescent South, 80 Orfus Road, 68 Tycos Drive, 120 Cartwright Avenue and 50 Valleybrook Drive in addition to three suggested comparable properties from the appellant’s list that the appellant used in its Direct Sales Comparison analysis and located at 601 Canarctic Drive, 150 Oakdale Road and 40 St. Regis Crescent North are similar and comparable to the subject property and therefore are acceptable for consideration in determining the current value of the subject property.

c) Properties such as the subject property, where among other things, the square footage of the building is less than 50,000 square feet the use of the Market Data Approach to determine current value is appropriate. The appropriateness of this methodology is reinforced when there are an adequate number of sales of similar comparable properties. The Board accepts the Market Data Approach as a valid method for determining current value in this instance.

d) On the basis of the evidence before it, the Board rejects the contention by the appellant that the Income Approach to value is the correct method to be applied in this case.

48The Board also considered the Case Law presented and has given due consideration to the sections highlighted by both parties. The Board is satisfied that adequate and appropriate considerations have been given to all sections as it pertains to this appeal.

DETERMINATION OF CURRENT VALUE

49The Board finds that the best method to determine the current value of the subject property is based on the sales of similar properties in the neighbourhood. The Board finds that the seven suggested comparable properties submitted by MPAC and located at 445 Eddystone Avenue, 250 Canarctic Drive, 88 St. Regis Crescent S, 80 Orfus Road, 68 Tycos Drive, 120 Cartwright Avenue, 50 Valleybrook Drive in addition to the three properties from the appellant’s comparable properties located at 601 Canarctic Drive, 150 Oakdale Road and 40 St. Regis Crescent North are similar to the subject property and are therefore suitable for determining the current value of the subject property .

50The Board rejects the sales of the properties located at 250 Canarctic Drive and 68 Tycos Drive because their sales, having occurred in 2010 are well outside the valuation date of January 1, 2012.

51The Board finds that using the sales of the remaining eight properties, the resulting median sales value per square foot is $92.79. When this value is applied to the subject property it results in a current value of $2,716,706.

52The Board finds that the current value of the subject property as of January 1, 2012 for the taxation years 2013, 2014, 2015 and 2016 is $2,717,000 (rounded).

EQUITY WITH SIMILAR LANDS IN THE VICINITY

53The Board is required under s. 44(3) sub-paragraph (b) of the Act, to 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.

54The Board considered the equity analysis submitted by both the appellant and MPAC and only accepts the twenty-nine properties submitted by MPAC and used in its analysis. The twenty-nine properties are of the same property code, are located within North York (like the subject property) and is an acceptable representation of similarity of lands in the vicinity for the purpose of determining equity.

55The analysis of the assessment to sales ratio (“ASR”) of the twenty-nine properties results in an average ASR of 0.99 and median ASR of 1.00. Further, an ASR of less than 1.00 would indicate that MPAC may be producing values less than the values demonstrated in the marketplace. A median ASR of greater than 1.00 would indicate that MPAC may be producing values greater than those in the marketplace. In this instance, the median ASR of 1.00 suggests that MPAC is producing values at market values. The Board therefore finds that no adjustment for equity is required.

56The Board finds that no adjustment is required for equity.

CONCLUSION

57The Board finds that the current value of the subject property as of January 1, 2012 for the taxation years 2013, 2014, 2015 and 2016 is $2,717,000 (rounded).

58Further, the Board finds that no equity adjustment is required under s. 44.(3) sub-paragraph (b) of the Act.

59At the start of the hearing the assessor indicated that an offer was made to the appellant to reduce the assessment from $2,667,000 to $2,228,000 broken down as follows:

IT Class

$525,000

CT Class

$1,703,000

60The offer was refused by the appellant but still remains in effect. The Board accepts the assessor’s recommendation and reduces the assessment from $2,667,000 to $2,228,000 broken down as follows:

IT Class

$525,000

CT Class

$1,703,000