Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 21, 2019

FILE NO.: RD 2019M09

Assessed Person(s): HAC Toronto Airport Limited

Appellant(s): HAC Toronto Airport Limited

Respondent(s): Municipal Property Assessment Corporation Region 15

Respondent(s): City of Mississauga

Property Location(s): 6080 Viscount Road

Municipality: City of Mississauga

Roll Number(s): 2105-050-113-50250-0000

Appeal Number(s): 2965298, 3032502, 3087155 and 3151906

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

Hearing Event No.: 679769

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

Request by: HAC Toronto Airport Limited

Request for: A review of the Board’s Decision WR 149992 issued on September 24, 2018

Heard: By written submission

Parties

Representative

Submissions

HAC Toronto Airport Limited

Paul Chmeleski

Requester

MPAC

No one appeared

Not Received

City of Mississauga

No one appeared

Not Received

DECISION OF THE BOARD DELIVERED BY PAUL MULDOON AND ORDER OF THE BOARD

INTRODUCTION

Background

1On October 23, 2018, HAC Toronto Airport Limited (the “Requester”) filed a written Request for Review with the Assessment Review Board (the “Board”) respecting Decision No. WR 149992 HAC Toronto Airport Limited v Municipal Property Assessment Corporation, Region 15, 2018 CanLII 91619 (ON ARB), a decision made by Member Marcelle Bourassa issued on September 24, 2018 (“Member’s Decision”). The Member’s Decision relates to the property located at 6080 Viscount Road, Mississauga, which is a limited service, 153 Room Hotel that opened for business in June 2012. Known as the Alt Hotel (the “Hotel”), it is located at the end of the Terminal LINK Train line at Pearson International Airport. The Member’s Decision indicates that this is prime location as it integrates the Hotel into Terminal 3 at Pearson Airport. The Hotel did not open for business until July 2012.

2The Requester, appealed MPAC's general assessment of the Hotel for the 2013 to 2016 taxation years. The valuation date for this assessment cycle is January 1, 2012 (Valuation Date). The background to this Request for Review is as follows.

The Member’s Decision

3The parties agreed that the applicable valuation method to determine the current value of the Hotel is capitalization of net operating income. Although the Member’s Decision addressed a number of issues raised respecting the various components of the calculation of the Hotel’s net operating income, this Request for Review challenges the Member’s determination of the Hotel’s gross income. One component of gross income is estimated room revenue. One metric to calculate estimated room revenue is to estimate the Average Daily Rate (“ADR”) for room rental.

4As is explained in the Member’s Decision, a Hotel’s income will stabilize once it has reached market occupancy, which typically requires three to five years of operation. The determination of current value on the valuation date is typically based on the valuations of comparable properties, in order to determine a “pro forma” estimate of income as of the valuation date. MPAC's expert witness chose a competitive set of hotels in the market area. From this set, he selected one hotel that he considered to be superior to the Hotel, which had an assessed ADR of $150, and three other hotels that he considered to be inferior, which had assessed ADR’s of $105 to $120. Although not stated in the Member’s Decision, the Requester, in its Request for Review, confirms that these assessed values were based on results two to three years prior to the Valuation Date.

5MPAC's expert indicated that he did not rely on the Hotel’s 2012 operating results to determine the stabilized ADR, because this was the Hotel’s start up period when operating results were unstable. Therefore, MPAC's expert opined that the Hotel’s ADR should fall with the range of assessed 2012 ADR values for the above-referenced comparable properties (the competitive set), i.e. a value between $105/$120 and $150. As the hearing of this appeal did not occur until August 21, 2017, there was available data on the Hotel’s annual performance from the date the Hotel opened to an including 2016. In determining a value within this range, MPAC's expert considered the performance of the Hotel, in order to determine whether the Hotel is more closely comparable to the inferior hotels or the superior hotel.

6As the hearing of this appeal did not occur until August 21, 2017, there was available data on the Hotel’s annual performance from the date the Hotel opened to and including 2016. In part, this data showed that the Hotel’s actual ADR’s were $125.58 in 2014, $139.83 in 2015 and $151.60 in 2016. As noted at para. 23 of the Member’s Decision, MPAC's expert stated that another metric used when valuing hotels, Revenue Per Available Room (“RevPAR”), is a good indicator of how a hotel is performing. The RevPAR for the Hotel was $60.82 in 2013 versus a RevPAR of $121.87 in 2016 which represents a 200% change. He testified that the nearby airport hotels had around a 30% change over the same period.

7Part of this success is attributed to the Hotel’s superior location. Based on this performance, MPAC's expert witness concluded that the Hotel’s ADR should fall within the high end of the range of ADR values for the competitive set of hotels. He then made a qualitative assessment that an ADR of $140 was reasonable (this being the rounded value of the Hotel’s actual ADR for 2015).

8The Appellant's expert witness also based his analysis on a competitive set of hotels in the airport area. As the Hearing Member observed, the Appellant's set was the same as MPAC's, subject to the exception that MPAC's list included an additional hotel. In overview, the approach adopted by the Appellant's expert was to consider the average 2012 assessment ADR’s of the six hotels, which is $118. He considered the actual results of operations, as well as other metrics, to conclude that the Hotel’s ADR should be $120.

9One of the metrics he considered is the Hotel Valuation Study for Toronto Airport West. This study provides a Hotel Valuation Index. In overview, this index indicates that the RevPAR for hotels in this market have been increasing from year to year. This document was entered in evidence, although it was not discussed in detail in the Member’s Decision

10In the analysis and findings, the Hearing Member’s clearly indicates that she accepts the analysis of MPAC's expert witness. In overview, the Hearing Member found that the evidence indicates that the Hotel performed at the high end of the competitive set of hotels, as it was outperforming other hotels (with the exception of the one superior hotel). At para. 102, the Member states that “Given the quality, age, design, and superior location of the Alt hotel, the Board finds an ADR of $140 and an occupancy level of 73% to be fair and reasonable in comparison with hotels in its competitive set.”

The Request for Review

11In its Request for Review, the Requester attached a copy of the Hotel Valuation Study for Toronto Airport West. Based on the Requester’s analysis of the data provided in this document, the Requester concludes that there has been a 19.6% market increase in RevPAR over the period from 2012 to 2015. The Requester maintains that this indicates that the Hotel’s room revenue (which was based on an ADR of $140) should be reduced by 19.6% to reflect the correct value as of the Valuation Date.

12The Requester asserts that Hearing Member has not referenced the Hotel Valuation Study, nor has the Hearing Member adjusted the 2015 room revenue results to a 2012 level.

13The Requester submits that the Hearing Member’s failure to apply a time adjustment is a significant a significant error of law. Pursuant to Rule 123(c) the Requester asks that the Board vary the Member’s Decision to reduce the Member’s finding on estimated room revenue, which in turn, leads to the request that the Board reduce the correct current value of the Hotel from $20,614,00 to $17,066.00.

14The Board has reviewed the Request for Review record and has found the issues raised by the Requester can be addressed without further submissions from the Requester or the other parties to the Member’s Decision.

15For the reasons that follow, the Board concludes that the Request for Review should be dismissed.

RELEVANT RULES

16The Board’s Rules of Practice and Procedure (the “Rules”):

Request for Review

120. A party may request a review of any final decision of the Board, other than a decision pursuant to Rule 122, by filing a request in writing no more than 30 days after the decision was issued, including:

(a) a copy of the decision to be reviewed;

(b) the written reasons for the decision, as set out in Rule 112;

(c) the reasons for the request, addressing the factors set out in Rule 121;

(d) notice of any appeals or applications for judicial review that have been filed in relation to the decision;

(e) proof of service on all other parties to the proceeding;

(f) the remedy or relief sought; and

(g) the fee specified by the Board.

Grounds for Review

121. A request for review will not be granted unless the Board is satisfied that:

(a) the Board acted outside its jurisdiction or violated the rules of natural justice or procedural fairness;

(b) the Board made a significant error of law or fact such that the Board would likely have reached a different decision;

(c) the Board heard false or misleading evidence from a party or witness, which was discovered only after the hearing and would have affected the result;

(d) there is new evidence that could not have reasonably been obtained earlier and would have affected the result; or

(e) any of the situations in Rule 122 exist.

Review Order

123. Upon consideration of a request for review, or on its own initiative, the Board may:

(a) dismiss the request;

(b) reinstate the appeal, with or without conditions; or

(c) after providing all parties an opportunity to make submissions,

i. confirm, vary, or cancel the decision,

ii. order a rehearing on all or part of the matter, or

iii. order a motion to decide the review.

DISCUSSION, ANALYIS AND FINDINGS

17The Board begins its analysis by noting that the Requester is incorrect in asserting that the Hearing Member has not referenced the Hotel Valuation Study. The Member’s Decision records the Appellant's expert’s analysis regarding the impact of this evidence, stating at para. 64:

64In oral testimony, he referenced the Hotel Valuation Index for Toronto Airport West that indicates RevPARs steadily increasing year over year and which he opines tells of the need to make an adjustment. He applied the average market differential with a resulting RevPAR of $87. He concluded that his RevPAR of $84 is reasonable and in line with the market and the performance of the Alt.

Therefore, it is clear that Hearing Member did consider this evidence.

18Regarding the Board’s Member’s finding on estimated room rental income, the Requester characterizes this finding as a decision to chose the 2015 actual operation result as the estimated room rental estimate on the Valuation Date (January 1, 2012). Based on this characterization, the Request asserts that the 2015 result should be time adjusted (in this case reduced) to reflect the value as of the Valuation Date. However, the Board does not accept this characterization.

19The Hearing Member’s finding is based on the Hearing Member’s acceptance of the opinion evidence of MPAC's expert. The assessed ADR’s in the competitive set of hotels were all determined as of the Valuation Date, and the Requester has confirmed that these assessed values were based on results two to three years prior to the Valuation Date. Therefore, the ADR for the Hotel would fall within range of ADR’s values that were based on values assessed as of the valuation date, not future values (emphasis added).

20Because the Hotel only began operations in 2012, it was necessary to qualitatively assess where the Hotel’s ADR should fall in this range. This, in turn, required a qualitative evaluation of the Hotel’s stabilized performance. There was ample evidence to support the conclusion that the Hotel was performing in the higher end of the range of hotels in the competitive set. Consequently, it was reasonable to reach a qualitative conclusion that a stabilized ADR of $140 reflected the Hotel’s income potential, for the purpose of determining where the Hotel’s ADR should fall within the range of the assessed 2012 ADR’s for the competitive set. Neither MPAC's expert witness nor the Board simply chose 2015 actual operating results as the estimated room rental estimate on the Valuation Date.

21The Board recognizes that the Requester’s expert witness did not agree with this analysis. However, as is often the case, the Hearing Member was presented with two conflicting expert opinions, and was required to made a determination of correct current value based on a consideration of these opinions. There was clear evidence to support the Hearing Member’s decision to accept MPAC's assessment.

22Based on the above analysis and findings, the Board finds that the Requester has not established that Hearing Member made an error of law or fact. Therefore, the Request for Review must be dismissed.

ORDER

23The Request for Review is dismissed.