Assessment Review Board

Tribunals Ontario Tribunaux décisionnels Ontario Assessment Review Board Commission de révision de l’évaluation foncière

ISSUE DATE: December 03, 2021

FILE NO.: WR 173346

Assessed Person(s): 101 Bloor CREIF Inc.; 130 Bloor CREIF Inc.

Appellant(s): 101 Bloor CREIF Inc.; 130 Bloor CREIF Inc.

Respondent(s): Municipal Property Assessment Corporation Region 09

Respondent(s): City of Toronto

Property Location(s): 101 Bloor Street West Unit 101; 130 Bloor Street West

Municipality(ies): City of Toronto

Roll Number(s): 1904-068-590-00701-0000 and 1904-052-050-01951-0000

Appeal Number(s): See Schedule A

Taxation Year(s): 2017, 2018, 2019, 2020 and 2021

Hearing Event No.: 749664

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

APPEARANCES:

Parties Counsel/Representative*

101 Bloor CREIF Inc.; 130 Bloor CREIF Inc. Philip L. Sanford and Belinda Schubert

Municipal Property Assessment Corporation Donald G. Mitchell

City of Toronto Selena Mynttinen*

HEARD: August 10 and 11, 2021 by video conference

ADJUDICATOR(S): Pierre R. Lavigne, Member

INTERIM DECISION

OVERVIEW

1This Decision will determine the Fair Market Rent (“FMR”) of retail space with the use of confidential evidence that is prohibited from public disclosure pursuant to s. 53 of the Assessment Act, R.S.O. 1990, c. A.31 (“Act”).

2The appellants have appealed the current value assessment of two separate properties for the 2017 taxation year. Pursuant to s. 40(26) of the Act, further appeals were deemed for the 2018 to 2021 taxation years.

3Both appellants plead that their assessments are too high and therefore incorrect. These appeals were made pursuant to s. 40(1)(a)(i) of the Act.

4The appellant, 130 Bloor CREIF Inc., also filed an appeal under s. 323(8) of the City of Toronto Act, 2006, S.O. 2006, c. 11, Sched. A, for a cancellation, reduction or refund of taxes for the 2019 taxation year. This appeal was adjourned pending the disposition of the current value assessment appeals.

Background

5The current value assessment of 101 Bloor Street West was returned on the assessment roll for the 2017 taxation year at $49,936,000. The assessor for the Municipal Property Assessment Corporation (“MPAC”) submits that the correct current value assessment should be $48,001,000 using a Fair Market Rent of $310 per square foot (“sq ft”) for retail space facing Bloor Street West. The appellant, 101 Bloor CREIF Inc., submits that the correct current value assessment should be $37,052,000 using a Fair Market Rent of $250 per sq ft.

6The current value assessment of 130 Bloor Street West was returned on the assessment roll for the 2017 taxation year at $140,038,000. MPAC submits that the correct current value assessment should be $133,108,000, using a Fair Market Value of $310 per sq ft for retail space facing Bloor Street West. This appellant, 130 Bloor CREIF Inc., submits that the correct current value assessment should be $114,749,000 using a Fair Market Rent of $250 per sq ft.

Areas of Agreement

7The appellants and MPAC agree the subject properties should be valued using the direct income capitalization approach. This is an appraisal method that values income producing properties based on the sum of the capitalized values of the net operating income from various components of the property. In the direct income capitalization approach the value of the property is derived from a single year’s net operating income expectation at or near the valuation day.

8The appellants and MPAC have agreed to the values set out in the two tables below.

101 Bloor Street West (Assessment Roll No. 1904 068 590 00701)

Gross Leasable Area (“GLA”), Ground Retail Superior (Bloor St.)

7,805 square feet

Ground Retail Standard FMR (St. Thomas St.)

$105.00 per square foot (GLA – 901 sf)

Storage FMR

$19.80 per square foot (GLA – 7,335 sf)

Vacancy and bad debt allowance

5%

Non-Recoverable expenses

5%

Capitalization Rate

5%

Equity

No issue respecting equity of the assessment.

130 Bloor Street West (Assessment Roll No. 1904 052 050 01951)

GLA Ground Retail Superior (Bloor St.)

12,526 square feet

GLA Ground Retail Standard (Cumberland St.)

7,131 square feet

GLA Office

137,626 square feet

GLA Storage

1,155 square feet

Total GLA

158,438 square feet

Retail Ground Standard FMR (Cumberland St.)

$105.00 per square foot

Office Fair Market Rents

$19.00 per square foot

Storage FMR

$17.10 per square foot

Parking

$300 per stall

Vacancy and bad debt allowance

5%

Non-Recoverable expenses

5%

Capitalization Rate

5%

Equity

No issue respecting equity of the assessment.

9The parties agree that the only remaining issue is the determination of the Fair Market Rents of the retail space facing Bloor Street West. Once this issue is decided, this value will be used in the income capitalization valuation grid together with other agreed upon values to arrive at the total correct current value of each subject property.

Issues for the Hearing

10At issue in this proceeding is:

1. A determination of the current value of the subject properties:

i. Fair Market Rents for Bloor Street West facing retail space

a. Over which valuation period should comparable leases be considered?

b. What methodology should be used to arrive at Net Effective Rent?

c. Should the Net Effective Rent calculation account for the increase in property taxes as a result of the 2016 general reassessment?

d. Which leases are comparable for the calculation of Fair Market Rent?

2. Whether an equity reduction of the current values should be made pursuant to s. 44(3)(b) of the Act?

Result

11The Board finds that the correct Fair Market Rent for ground floor Bloor Street West facing retail space is $ 305.00 per sq ft.

12The Board finds that the correct current value for the subject property at 101 Bloor Street West is $47,298,000.

13The Board finds that the correct current value for the subject property at 130 Bloor Street West is $131,979,000.

14The Board makes no equity adjustments pursuant to s. 44(3)(b) of the Act.

15There was insufficient evidence and no submissions with respect to the apportionment of the current value of 130 Bloor Street West between classifications. The parties may agree with respect to the apportionments and submit Minutes of Settlement with respect to that issue. If the parties are unable to settle the apportionment, MPAC is to serve and file evidence and submissions on the issue within 15 days of the issue of this Decision and the Appellants are to serve and file evidence and submissions in response within 15 days of receipt of MPAC’s submissions.

PRELIMINARY MATTERS

Combined hearings

16Pursuant Rule 84 of the Rules of Practice and Procedure (“Rules”) of the Assessment Review Board (the “Board”), these appeals relating to two separate subject properties were combined in a single proceeding as they involve similar questions of fact and law.

Pre-hearing disclosure of confidential information

17Section 11 of the Act requires that a person who may be subject to assessment produce required information to the MPAC assessor. Section 13 of the Act makes it an offence to fail to provide the required information.

18Pursuant to s. 53(1) of the Act, employees of MPAC are prohibited, under penalty of law, from releasing certain types of proprietary commercial information or income and expense information to persons who are not entitled to have access to the information in the course of their duties. Section 54 of the Act also imposes civil liability for damages sustained by the release of information that is prohibited from public disclosure. There is an exception under s. 53(2)(b) with respect to evidence given in assessment appeals.

19Pursuant to Rule 89 of the Rules, the appellants, to have pre-hearing disclosure of relevant information collected by MPAC, sought a confidentiality order from the Board to permit the release of s. 11 information, subject to non-disclosure agreements in terms satisfactory to MPAC.

20Section 53(5) of the Act provides as follows:

(5) Subject to subsection (1) and to any requirement of the Assessment Review Board concerning the disclosure of evidence, the assessment corporation may disclose any information acquired by it and may do so on such terms as it determines.

21The Board ordered that the information pertaining to identified leases be disclosed as requested, treated as confidential and not be disclosed to the public. This Order applies to the leases, income and expense reports relating to the subject properties as well as the leases, income and expense reports of purportedly similar properties in the subject properties’ market area. The Order also applies to the pleadings and expert reports where they refer to the confidential information contained in such leases and income and expense reports.

22The Order was made to allow the appellants’ experts and counsel to determine Fair Market Rents from leases and operating expenses of comparable properties.

Hearing closed to the public

23The leases, income and expense information that would be evidence in the hearing is that of the owners of over twenty potentially comparable properties. The owners of these properties were not parties to these appeals. They were however given notice of the appellants’ request for disclosure of their confidential leases, income and expense information and provided the opportunity to make submissions.

24Pursuant to Rule 88, the Board has already ordered that this hearing would not be open to the public, on the basis that, if the hearing was open to the public, intimate financial matters may be disclosed such that the prejudice to the persons involved would outweigh the interest in conducting an open hearing. There was no part of the hearing that could be open to the public without disclosing information that is prohibited from public disclosure pursuant to s. 53 of the Act.

25The only remaining issue to be addressed by the Board is the anonymization in this Decision of the identity and lease information of each of the comparable properties described above. The Board finds that such anonymization is required to ensure the continued confidentiality of the intimate financial information. Therefore, this Decision will give reasons while maintaining the confidentiality of the leases, income and expense information. This will be achieved using anonymized information and a Confidential List of Leases.

26Accordingly, pursuant to Rule 89 and s. 2(2) of the Tribunal Adjudicative Records Act, 2019, S.O. 2019, c.7, Schedule 60, the Board orders that the leases referred to in these reasons for decision be anonymized and that the Confidential List of Leases referred to below remains confidential and is not to be disclosed to the public.

ANALYSIS

Description of Subject Properties

27Commercial Condominium Unit 101, at 101 Bloor Street West is located on the ground floor of an office building that was originally constructed in 1970. The building underwent extensive renovations and alterations around 1997 and was registered as a commercial condominium building in 2010. This subject property is the commercial condominium unit located on the ground floor on the south-west corner of Bloor Street West and St. Thomas Street. The condominium unit of 7,805 sq ft is divided and rented to two retail tenants.

28130 Bloor Street West is a 10-storey office building. The building was originally constructed in 1960 and underwent extensive renovations and alterations around 2009 and 2010. It has updated Office Space, Storage Space and 38 Underground Parking Stalls. This subject property is located between 110 Bloor Street West and 146 Bloor Street West and has frontage on both Bloor Street West (south side) and Cumberland Street (north side). It has about 115 ft of frontage along Bloor Street West with 12,766 sq ft of street-front retail space across three units including the main entrance to the office tower component.

The Governing Statutory Provisions

29Section 19(1) of the Act provides that “the assessment of land shall be based on its current value.”

30Section 1(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;

31Section 19.2 of the Act stipulates that January 1, 2016 is the day as of which land shall be valued for the 2017 to 2020 taxation years. Section 48.6 of O. Reg. 282/98 extended this valuation day to the 2021 taxation year.

32Section 40(17) of the Act places the burden of proof as to the correctness of the current value upon MPAC.

Issue 1 – What is the correct current value assessment of the subject property at 101 Bloor Street West, Suite 101 and the subject property at 130 Bloor Street West?

i. Fair Market Rents for Bloor Street West facing units

a. Over which valuation period should comparable leases be considered?

The Valuation Day Period of Comparison

33In the present appeals, to determine the value of Bloor Street West retail space, we are comparing comparable leases of comparable space to determine Fair Market Rents at the January 1, 2016 valuation day.

34In the direct comparison approach to evaluating comparable sales, the Board normally limits its consideration to sales within one year of the valuation day to provide the strongest indication of market value, unless the sample size is too small to draw realistic conclusions. In the income approach, value is a function of net income indications at or near the valuation day. Accordingly, the Board should also limit its consideration to income derived from leases or renewals with commencement dates within one year of the valuation day, unless the sample size is too small to draw a Fair Market Rent conclusion.

35Steve Filiantris, the expert testifying for MPAC, was of the that opinion that the three leases commencing within one year of the valuation day of January 1, 2016 were too small a sample for a meaningful comparison. Accordingly, he based his opinion on fifteen leases that commenced two years out from the valuation day. Evan Hovius, testifying for the appellants, considered leases which had commencement dates even further out from the valuation day.

36As there were insufficient leases commencing within one year of the valuation day, but a sufficient number within two years, the Board will include for consideration only leases or renewals commencing in 2014, 2015, 2016 and 2017, two years from the January 1, 2016 valuation day.

b. What methodology should be used to arrive at Net Effective Rent?

The Market Area

37The Bloor Street Corridor submarket in question is that portion of Bloor Street West between Avenue Road and Yonge Street. It is described by Mr. Filiantris as an exclusive high-end submarket in the Bloor-Yorkville neighbourhood on the periphery of Downtown Toronto. It was described in documents introduced by MPAC as the fifth most expensive retail market in North America. This evidence was not disputed by the appellants

Typical Leases

38A review of the leases presented as comparable for this submarket indicates that they are generally five or ten-year leases. Almost all leases are triple net leases.

39A triple net lease provides the owner a stable base rent income stream unaffected by changes in property taxes, insurance and common area management expenses, as these are reimbursed by the tenant as additional rent. Fair Market Rents are thus reflected by the base rent.

Net Effective Rent

40Fair Market Rents are those indicated by comparable leases for comparable space, with the same treatment of expenses as of the day of valuation. Any rent attributed to specific leases is disregarded unless they are indicative of market rent or adjusted to compensate for lease terms, treatment of expenses, etc.

41Leases often have inducements or concessions, such a free-rent period, to attract tenants and financially assist their moving in. As these are usually at the beginning of a rental period, they would artificially depress early year rental income if only that income was considered. To adjust for this effect and the increase in base rent over the term of the lease, the experts have agreed to value the Fair Market (Base) Rent of the leased space on the basis of Net Effective Rent of comparable leases. Net Effective Rent is the total rent, net of additional rent (property taxes, insurance, common area maintenance, etc.), over the lease term period minus lease inducements, concessions and other adjustments, the whole annualized on a sq ft basis.

42Though the experts agreed on this method to compare the income generated by the base rent of the individual leases submitted as comparable, they did not agree on the methodology to arrive at the Net Effective Rent.

Average vs. Present Value Net Effective Rent

43The parties' experts disagreed on the method of annualizing the lease income streams. Mr. Filiantris took the annual base rent income for each year of the lease term, minus any free-rent periods, divided by the lease term to arrive at an average annual Net Effective Income per sq ft. Mr. Hovius also used the average value of annual base rents, net of concessions, but with base rents beyond five years discounted to present values using a 10% discount rate. Mr. Hovius indicated that this discount rate was an “industry standard”.

44Mr. Filiantris agreed that sometimes rents are discounted in the direct capitalization method; however, he disagreed with the 10% size of the annual discount to achieve present values. He indicated that Mr. Hovius gave no explanation for the discount rate he used and that it was improper to discount the future rents as that factor had already been taken into consideration in arriving at the agreed upon capitalization rate. Mr. Hovius acknowledged in cross-examination that the low interest rate environment may affect the 10% discount rate used.

45The Board finds that the Net Effective Rent evidence of Mr. Filiantris is preferable because the time value of money was taken into consideration in the agreed upon capitalization rate, because no quantitative evidence was provided to support Mr. Hovius’ proposed discount rate and Mr. Hovius’ acknowledgment that the low interest rate environment could lead to a lesser discount rate.

Tenant Improvement Allowances

46The expert witnesses also disagreed with respect to the deduction of tenant improvement allowances. Mr. Filiantris was of the opinion that the amount of tenant improvement allowance that includes the owner’s portion is not to be deducted as a rent concession to the extent that it represents the owner’s cost of re-instating vacated space to a fully furnished, move in ready condition. Mr. Hovius was of the opinion that all tenant improvement allowances should be deducted to arrive at Net Effective Rent. He indicated this was a legitimate difference of opinion.

47The Board prefers the opinion of Mr. Filiantris as the owner’s cost of making space fully finished, move in ready, is an expense of the owner. If instead of fitting up the space to make it ready for market the owner avoids this expense by granting a rent credit for the expense avoided, this is not a rent concession but simply an allowance to reimburse the tenant for executing an expense which is the owner’s to bear.

c. Should the Net Effective Rent calculation account for the increase in property taxes as a result of the 2016 general reassessment?

The 2016 General Reassessment

48Pursuant to s. 1(1) of the Act “General reassessment” means the updating of assessments as a result of the application of a new valuation day under subsection 19.2. General reassessments are normally conducted every 4 years.

Appellants’ Principal Argument

49The appellants submitted that Net Effective Rent calculations must take into account the effect of escalating property taxes on both the subject properties and on comparable leases as a result of the 2016 general reassessment, especially in light of their claim that the assessments of the subject properties doubled from the 2012 general reassessment to the 2016 reassessment. According to the appellants, the Net Effective Rents should be decreased by the additional rent above the tenants’ expectations at lease signing.

50The appellants submitted that tenants approach a net lease negotiation with a total rent figure in mind. As Mr. Hovius testified: “The tenant will look at whether they can afford the base rent and the additional rent”. The higher the additional rent (which would include re-imbursement of property taxes), the lower the base rent they will negotiate.

51The Board rejects the submission that the Net Effective Rent calculation must take into account the effect of the escalating property taxes as a result of the 2016 general reassessment for the following reasons:

Retroactivity

52The Board notes that whatever the tenant’s expectations of future property taxes were when negotiating the lease, once the tenant signs a net lease the tenant is obligated by the terms of the lease to indemnify the owner for property taxes for the term of the lease regardless of the amount of any increase. As the tenant assumed this obligation, it was the tenant’s obligation to forecast and budget for future property tax increases before signing the lease. It does not matter that, in hindsight, the tenant underestimated the future increases in additional rent from increased property taxes. The tenant has assumed the risk of the increases. The gross income stream from the base rent remains unaffected. It is this income stream that a prospective buyer is purchasing, and which may be received pursuant to the terms of the lease.

53To accede to the appellants’ submissions would have the effect, for assessment purposes, of retroactively re-writing the appellants’ leases and by extension the leases of comparable space, by introducing a clause that would cap the tenants’ property tax obligation at an undetermined amount in line with tenants’ expectations existing at the signing of the lease. This would shift any annual property tax expenses in excess of those expectations back upon the owner contrary to the express terms of the leases.

54The Board must analyze the leases as concluded. Had tenants wanted to limit their exposure to rising property taxes, a clause limiting or capping the amount of property tax increase the tenant would be required to pay as additional rent could have been negotiated. The owner, if inclined to offer a lease with a capping clause, could also have asked for a greater base rent to reflect its increased assumption of risk.

55In the absence of an express capping clause, the Net Effective Rent generated by leases under consideration cannot be adjusted based on any tenant’s claim that the Additional Rent was greater than forecast at the time of the signing of leases. For this reason, the Board rejects the appellants’ submissions that Net Effective Rents should be decreased by the additional rent above the tenant’s expectations at lease signing.

No Comparison Between General Re-assessments

56The amount of increase in assessed current value between general re-assessments is not a factor that has any influence in determining Fair Market Rents as the 2016 current value is a function of values at or near the legislated valuation day (see Stringer v Municipal Property Assessment Corporation Region 16, 2016 CanLII 40914 (ON ARB) para. 24-26).

Post Valuation Day Effect

57The evidence of Mr. Filiantris for MPAC indicates that commercial property owners would have received their 2016 general reassessment notices in October or November 2016. Assessment rolls were returned to the municipalities in December 2016. The assessments on the roll form the base upon which municipalities will determine taxes to levy on properties for the 2017 and subsequent taxation years.

58To attenuate the effect of increases in assessment from the last general reassessment in 2012, the increase in assessment values is phased in over the next four year (s. 19.1(3) of the Act and s. 49 of O.Reg. 282/98). Subject to certain statutory exceptions, only 25% of the increase between the 2012 and 2016 valuation days is added to the annual assessment roll for each of the next four years to determine the assessment for the 2017 taxation years onwards.

59The following example illustrates how phase-in operates. A property assessed at $1,000,000 on the January 1, 2012 valuation day and $1,400,000 on the January 1, 2016 valuation day would be taxed on a phased in assessment of $1,100,000 for the 2017 taxation year, $1,200,000 for the 2018 taxation year, $1,300,000 for the 2019 taxation year and $1,400,000 for the 2020 taxation year and subsequent years until the next general reassessment.

60At the hearing, the Board sought the opinion of each expert of the effect of the 2016 re-assessment on the base rents of new leases or renewals. Mr. Filiantris’ evidence was that the reassessment would eventually have an effect, but it would be delayed and only start to show up in negotiated base rents several years after the 2016 reassessment notices. Mr. Hovius also agreed that the impact was delayed because of the smoothing effect of the phase-in.

61The Board concludes that most of the downward pressure on base rents caused by the 2016 general reassessment would begin to affect fair market base rents after 2017 and would not materially affect the average value of Net Effective (Base) Rents for leases commencing in the period from 2014 to 2017.

Conditions at Roll Return

62In their Statement of Issues, the appellants pleaded that the 2016 reassessment does not “reflect the conditions at roll return”.

63The Board notes that it is not the market conditions at the annual roll return dates that govern the valuation but rather the market conditions at the legislated valuation day, in this case January 1, 2016. While the condition of the property at annual roll return, also known as the “state and condition date” (see Simmatis v Municipal Property Assessment Corporation Region 06, 2017 CanLII 39816 (ON ARB) at paragraph 15), govern the condition of the property to be valued, the property is valued according to the market conditions prevailing at the legislated valuation day not those prevailing at each assessment roll return date for each taxation year.

d. Which leases are comparable for the calculation of Fair Market Rent?

Comparable Leases

64The remaining issue is the determination of Fair Market Rents, using the Net Effective Rent calculation, for Bloor Street West facing retail space of comparable leases of comparable space.

65Mr. Filiantris, for MPAC, submitted leases with commencement dates from 2014 to 2017 as comparable leases of comparable space to the subject properties. Mr. Hovius also submitted additional leases. All of the leases are detailed in a list that is part of the hearing’s adjudicative record but that is confidential and ordered by the Board not to be released to the public. Also, in the Confidential List of Leases are their calculations of Net Effective Rent per sq ft for each lease.

66Mr. Hovius’ report and evidence consisted of testing the Net Effective Rents of the subject properties against his calculated median Net Effective Rent of comparable leases in the vicinity.

67It was Mr. Hovius’ opinion that the properties submitted by Mr. Filiantris were not competing on the same level as the subject properties and that inadequacies in the information from the submitted comparable properties rendered comparison unreliable. In his opinion only the Net Effective Rents of actual leases of the subject properties should be retained for purposes of determination of Fair Market Value.

68With respect to the criticism that the properties submitted by Mr. Filiantris were not competing on the same level as the subject properties, the appellants provided no evidence or submissions to support such a conclusion. On the evidence all leases are for properties in a very tightly defined market area with similar attributes and retail street level access to Bloor Street West. There is no support for this criticism. The submitted leases are for comparable space.

69With respect to alleged inadequacies in the lease information submitted by Mr. Filiantris, the information is confidential information compelled by s. 11 and provided by the owners with the reasonable expectation that it will be kept confidential. The amount of information provided by s. 53 disclosure orders provides a depth and breadth of otherwise commercially confidential market information than would not be available without the Board’s tightly controlled disclosure procedure. It is the best evidence available. Some of Mr. Hovius’ purported lease information inadequacies relate to matters that are the subject of agreement between the parties and do not relate to the calculation of Net Effective Rent.

70Any alleged remaining inadequacies of any particular lease information is attenuated by the sheer amount of lease information available for analysis under s. 53. As the lease analysis will show, where appellants’ counsel were able to demonstrate impacts on Net Effective Rent, these have been taken into account.

71In light of the Court of Appeal of Ontario’s direction in BCE Place Limited v. Municipal Property Assessment Corporation, 2010 ONCA 672 para. 23, that for purposes of the Assessment Act, market rents are to be used and not the subject property’s actual rents, the Board will analyze all leases submitted, including the subject properties’ leases, in order to determine January 1, 2016 Fair Market (Base) Rents.

Lease Analysis

72Leases numbered 1 to 12 in the Board’s Confidential List of Leases are found by the Board to be comparable leases of comparable space within the valuation period of comparability retained by the Board.

73In the analysis of leases where Mr. Filiantris’ calculation of Net Effective Rent differs from the calculation of Mr. Hovius, except for lease numbered 5, the Board prefers the calculation of Mr. Filiantris, for reasons indicated above.

74Lease 5 had a provision capping the tenant’s obligation to indemnify for property taxes. As the effect of the clause was to transfer some of the property taxes to the owner’s expenses it produced a rent lower than the face base rent. In cross-examination Mr. Filiantris was asked whether the base rent should have been adjusted to reflect the capping clause’s effect on rent collected. Mr. Filiantris replied that when he completed his analysis, he only had the 2017 lease renewal, not the original and was unaware of the capping clause. He testified that had he been aware of it he would have adjusted the face rent accordingly. As the total rent received by the owner in 2017 was reduced by the amount of property taxes exceeding the cap clause, the Board retains the face base rent minus the property tax over the cap clause limit. No amount was provided by the appellants to estimate future taxes to provide a more accurate calculation of Net Effective Rent.

75Leases 13 to 15 have been excluded as comparable leases because the owner benefitted from property tax exemptions under s. 3 of the Act. This resulted in less additional rent charged to the tenants, which may have affected the base rents agreed upon. The exemption feature made these leases atypical of the market.

76Mr. Filiantris acknowledged in cross-examination that leases 13 to 15 could have been adjusted to offset the tax exemption but in calculating the Net Effective Rent he did not do so. In the absence of evidence of the amount of the adjustment these leases cannot be used as comparable leases.

77Lease 16 was excluded as an atypical lease in this market. It was a three-year short-term lease with a right to terminate by the tenant on one year’s notice. The lease also contained an owner’s termination clause for redevelopment. It was more in the nature of temporary or contingent space and the rental rate was not reflective of rents of long-term stable tenancies.

78Lease 17 was excluded as an atypical lease in this market. It includes an owner’s redevelopment termination clause which is not typical for the market and could affect the base rate accordingly.

79Leases numbered 18 and 21 have been excluded because the Net Effective Rents did not reflect only the value of ground floor Bloor Street West facing space and were not comparable spaces to that occupied by the subject properties. In these leases the rents were a blended rent which included the rent for multiple floors with different values. Where, as in lease numbered 4, the lease broke out the rental rates per floor, the ground floor rental rate was included to determine a Net Effective Rent.

80Leases numbered 19, and 22 to 26 have been excluded because their commencement dates are outside the 2014 to 2017 valuation day period of comparability retained by the Board.

81Lease 20 was excluded as an atypical lease in this market as well because its November 2018 commencement date was outside the period of comparability. Additionally, it was for a short two-year lease period with an early termination clause. The interior space had no finishes. The space was used by the tenant to set up an island platform for display of merchandise. The tenancy was more in the nature of temporary space for the creation of a presence pending the availability of a tenancy on the Bloor Street West corridor. The tenant eventually secured such space with a complete fill-out of the space with signage and high-end finishes.

Bloor Street West Fair Market Rent Conclusion

82As the average value of the Net Effective Rents retained by the Board in Leases 1 to 12 is $304.84, the Board finds that the January 1, 2016 Fair Market Rent for ground level Bloor Street West facing retail space was $305.00 (rounded) per sq ft.

Findings on Issue 1

Correct 2016 Current Value of 101 Bloor Street West

83The January 1, 2016 correct current value of the subject property at 101 Bloor Street West is $47,298,000 (rounded) as per the following calculations.

ARB Valuation

Location

Type

GLA (sq ft)

Rate

PGI

Vacancy

EGI

Expenses

NOI

Cap Rate

Value

Ground

Retail Superior

7,805

$305.00

$2,380,525

5.00%

$2,261,499

5.00%

$2,148,424

5.00%

$42,968,476

Ground

Retail Standard

901

$105.00

$94,605

5.00%

$89,875

5.00%

$85,381

5.00%

$1,707,620

Basement

Storage

7,335

$19.80

$145,233

5.00%

$137,971

5.00%

$131,073

5.00%

$2,621,456

Total

16,041

Total

$2,364,878

Total

$47,297,552

Correct 2016 Current Value of 130 Bloor Street West

84The January 1, 2016 Correct Current Value of the subject property at 130 Bloor Street West is $131,979,000 (rounded) as per the following calculations.

ARB Valuation

Location

Type

GLA (sq ft)

Rate

PGI

Vacancy

EGI

Expenses

NOI

Cap Rate

Value

Ground

Retail Superior

12,526

$305.00

$3,820,430

5.00%

$3,629,409

5.00%

$3,447,938

5.00%

$68,958,762

Ground

Retail Standard

7,131

$105.00

$748,755

5.00%

$711,317

5.00%

$675,751

5.00%

$13,515,028

Floors 2-10

Office

137,626

$19.00

$2,614,894

5.00%

$2,484,149

5.00%

$2,359,942

5.00%

$47,198,837

Basement

Storage

1,155

$17.10

$19,751

5.00%

$18,763

5.00%

$17,825

5.00%

$356,497

Underground

Parking

38

$300.00

$136,800

5.00%

$129,960

25.00%

$97,470

5.00%

$1,949,400

Total

158,438

Total

$6,598,926

Total

$131,978,524

Issue 2 – Is an equity adjustment pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)(b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) required?

85The parties have agreed that no equity reduction is required and presented no evidence or submissions with respect to similar properties in the vicinity. No adjustment will be made.

CONCLUSION

86The January 1, 2016 correct current value of the subject property at 101 Bloor Street West is $47,298,000 (rounded).

87The January 1, 2016 correct current value of the subject property at 130 Bloor Street West is $131,979,000 (rounded).

ORDER

88The Board orders that the Confidential List of Leases referred to in this Decision is confidential and is not to be released or disclosed to the public.

89The Board orders that the assessment of current value for 101 Bloor Street West, assessment roll number 1904-068-590-00701-0000, for taxation years 2017 to 2021 inclusive is reduced from $49,936,000 to $47,298,000.

90The Board orders that the assessment of current value for 130 Bloor Street West, assessment roll number 1904-052-050-01951-000, for taxation years 2017 to 2021 is reduced from $140,038,000 to $131,979,000.