Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

January 11, 2022

FILE NO.:

WR 174645

Assessed Person(s):

Bridgestone/Firestone Canada; Urban Cliff Developments Inc.

Appellant(s):

Firestone Textiles Company

Respondent(s):

Municipal Property Assessment Corporation Region 23

Respondent(s):

City of Woodstock

Property Location(s):

1200 Dundas Street

Municipality(ies):

City of Woodstock

Roll Number(s):

3242-050-040-03800-0000

Appeal Number(s):

3230922, 3312411, 3365965, 3410129 and 3448100

Taxation Year(s):

2017, 2018, 2019, 2020 and 2021

Hearing Event No.:

754164

Legislative Authority:

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

APPEARANCES:

Parties

Representative

Firestone Textiles Company

Drew Samuels

Municipal Property Assessment Corporation

Michael Radan

City of Woodstock

Diane Campbell (observing only)

HEARD:

October 5 and 6, 2021 by video conference

ADJUDICATOR(S):

Dan Weagant, Member, Subuola Awoleri, Member

DECISION

OVERVIEW

1Firestone Textiles Company (the "Appellant") filed an appeal of the assessment of the subject property for the 2017 taxation year with the Assessment Review Board (the "Board"). Subsequently, the same appeal was deemed for the 2018 through 2021 taxation years, pursuant to s. 40(26) of the Assessment Act R.S.O. 1990, c. A.31 (the "Act").

2The Appellant is a subsidiary of Bridgestone/Firestone Canada (Bridgestone"). Its status as Appellant continued through the transfer of ownership from Bridgestone to Urban Cliff Developments Inc. ("Urban Cliff").

3The Appellant believed the value returned by MPAC for 2017 through 2020, of $7,649,000, was too high and that the current value of the subject property should be no more than $5,783,000. Prior to the hearing, the Municipal Property Assessment Corporation ("MPAC") adjusted its estimate of current value for the 2017 through 2020 taxation years to $7,363,000 and recommended this revised value to the Board.

4In 2019, the subject property was sold by Bridgestone to Urban Cliff. In 2020, Urban Cliff severed and sold two separate portions of the subject property to two different purchasers. As of the 2021 taxation year, these two severed portions no longer form part of the subject property.

5In response to those sales and the resultant reduction in land size, MPAC reduced the current value assessment of the subject property to $6,472,000 for the 2021 taxation year. The Appellant believes the 2021 assessment should be no more than $2,189,000.

6For all years under appeal, the Appellant believes the value of the subject property rests entirely with the land portion, due to the age and relative condition of the subject improvements.

Background

7From 2017 through 2019 the subject property was an industrial operation making synthetic textiles used in the production of automobile tires. The tires themselves were manufactured at a different site. The textile production at the subject property had been ongoing for decades.

8In June of 2018, Bridgestone announced that production of its industrial activity would cease and that the subject property would be sold. A purchase and sale agreement was signed by Bridgestone and Urban Cliff, with a closing date in April of 2019.

9At the time of closing, all production of textiles had stopped and Bridgestone had vacated the property. Later in 2019, Urban Cliff initiated improvements and amendments to portions of the subject building complex.

10After the 2019 closing, Urban Cliff severed two parcels of vacant land from the subject property. On March 20, 2020, the first parcel of 1.92 acres was sold for $288,249. The second parcel, comprising 28.79 acres, sold for $4,277,700 on June 25, 2020. The resultant land area, after the two sales was 30.71 acres.

Issues for the Hearing

11At issue in this proceeding is:

1. The current value of the subject property, for the 2017 through 2020 taxation years.

2. The current value of the subject property for the 2021 taxation year, after the sale of two separate portions of the land in 2020.

3. The correct classification and apportionment of values for the years under appeal.

4. Whether a reduction in the current value determined is necessary for the assessment to be considered equitable when reference is made to the assessments of similar properties in the vicinity.

Result

12The Board finds that the current value of the subject property is as follows:

• For the 2017 through 2020 taxation years: $5,615,000.

• For the 2021 taxation year: $3,706,000.

13The Board also finds that there is no evidence to support a reduction in the current value for the purposes of equitable assessment when reference is made to the assessments of similar properties in the vicinity.

14Accordingly, for the 2017 through 2020 taxation years, the assessment of the subject property is reduced from $7,649,000 to $5,615,000, apportioned as follows:

2017-2020 Taxation Year - $5,615,000

Industrial

$3,756,000

Industrial, Excess land sub-class

$1,808,500

Commercial

$50,500

15For the 2021 taxation year the assessment of the subject property is reduced from $6,472,000 to $3,706,000, apportioned as follows:

2021 Taxation Year - $3,706,000

Industrial

$2,579,400

Industrial, Excess land sub-class

$1,074,700

Commercial

$51,900

ANALYSIS

Description of Subject Property

16The subject property is located in an industrial area of the City of Woodstock, located on the southeast corner of Dundas Street and Beards Lane. It is approximately 1.8 kilometers north of Highway 401. It has a total land area of 49.43 acres, with 44.57 acres zoned as industrial (M2‐11 and M3) and 3.857 acres zoned as commercial (C4). The subject property is improved with a freestanding industrial building of 283,602 square feet and a small commercial storage building of 3,724 square feet.

Issue 1 – What is the current value of the subject property for the 2017 through 2020 taxation years?

What is the best approach to determining current value?

17The Parties took different paths to determining the current value of the subject property. They do not agree on a specific method or approach. As a result, the Board has to first decide on the best valuation method to make a correct finding of current value.

MPAC's Approach

18In preparation for the hearing, MPAC used its Automated Cost System ("ACS") to determine the value of the improvements on the subject property. It then added the land value as determined by its market analysis of vacant industrial land sales in Woodstock to arrive at a total value.

19In order to determine the land value, MPAC considered the sales of six vacant industrial properties. Those six properties range in size from 1.3 to 47.96 acres, with sale dates from March 2013 through July 2017. MPAC determined that one property, 1515 Commerce Way, was the best indicator of industrial land value in this case because it comprised an area of 47.96 acres; nearly the same as the subject property. 1515 Commerce Way sold in 2013 with a time-adjusted land rate per acre of $60,064. MPAC submitted that this was the best indication of land value for the subject property, noting that the returned value of the subject property for the years under appeal, based on a mass appraisal method, indicated a land rate per acre of $44,563.

20The result of MPAC's valuation of the improvements on the property is as follows:

Total, Depreciated Cost of Building Improvements

$5,129,932

Total, Depreciated Cost of Yard Work

$60,780

Total Improvements

$5,190,712

21By using the cost approach, MPAC determined the value of the subject property to be the value of the land component ($2,172,288) and the value of the improvements of $5,190,712 for a total of $7,363,000, rounded.

The Appellant's Approach

22The Appellant took the position that the best indication of the subject property's value is the sale of the subject property that closed in 2019 for $6,100,000. The Appellant noted that the negotiated price was determined in June of 2018 or 29 months after the valuation day.

23To account for the effect of the passage of time on property values between the valuation day and the sale date, the Appellant undertook an analysis of sales of industrial properties in Woodstock. This analysis looked at sales from 2014 through 2020. The purpose of the analysis was to determine a trend line or indication of how industrial land in the Woodstock area changed in value over that time period. As the valuation day falls within the time frame of the study, the Appellant determined an annual increase in value of approximately 6.67%.

24When applied to the 29 months from the valuation day to the sale date, the Appellant determined the time-adjusted sale value to be $5,376,834 ($5,377,000 rounded). The Appellant's testimony was that the entire value of the subject property rests with the value of the land component. The Appellant cited discussions with the purchaser that indicate the motivation for the purchase was the value of the land and that the buildings attributed no value for the purchaser in the transaction.

Findings on the Best Approach to Determining Current Value

25The Parties took different approaches to the question of current value. MPAC took issue with the use of the subject sale, owing to the sale date and the nature of the sale. It submitted that there was no evidence of the sale having been an arm's length transaction on the open market. MPAC's position is that this needs to be demonstrated by the Appellant for that sale to represent current value. Further, MPAC submitted that the sale occurred too far after the valuation day to be an accurate reflection of current value. As a result, MPAC disregarded the subject sale and applied the cost approach.

26The Appellant submitted that the vendor's public disclosure that it was vacating and that the property would be sold was evidence enough that the sale was made on the open market; adding that the purchaser, a land development company, was definitely an arm's length party to the sale agreement.

27The Board has widely held that the best indicator of a property's current value is an open market transaction of the property, with a sale date in reasonable proximity to the valuation day. There is no dispute as to the amount of the transaction. The Parties disagree on the effective date of the sale. The Appellant submitted that the sale should be determined as the date the agreement was reached. MPAC submitted that sale ought to be considered to have occurred a year later, on closing day.

28As in all considerations the Board makes, the context of the subject property and the evidence available to determine current value must be considered. In this case, there is a general lack of timely evidence with respect to the current value question. Comparable land sale evidence available has a wide range of sale dates, values and property sizes.

29By contrast, the subject sale is a specific value related solely to the subject property. For that reason, the Board prefers the subject sale as the best indication of current value for the 2017 through 2020 taxation years.

30MPAC submits that there was some concern about whether the sale was an open market transaction. In addition, MPAC submits that the sale was too far removed from the valuation day of January 1, 2016 to be reliable indication of current value. It submits that, while the sale price was negotiated in 2018, the transaction was not registered until a year later, meaning the sale occurred over 36 months after the valuation day. The Board notes that, concurrent with this concern, MPAC has advanced an opinion of current value that depends on a time-adjusted value for the sale at 1515 Commerce Way in Woodstock. That sale occurred 33 months before the valuation day.

31The Appellant submits that the negotiated price of $6,100,000 was negotiated and agreed to by the Parties to the transaction in 2018, that no amendments were made to that agreement prior to the closing, and that it was an open market sale. The Appellant also submitted that this is a common approach to property sales in the industrial category that normally have long closing periods.

32There was some question at the hearing as to whether the property was 'listed' by a real estate broker prior to it being sold. According to MPAC, such listings would indicate that the property was offered in the open market. It was evident that the property was being vacated in 2019 and that Bridgestone's plans to vacate the property in 2019 was commonly known.

33In Toronto (City) v. Municipal Property Assessment Corporation, Region No. 9, [2013] O.A.R.B.D. No. 11, the Board determined that exposure to open market is not the legal test. The Board determined at paragraph 25 that:

...the Act's definition is the notion of an arm's length transaction between a willing seller and a willing buyer. While exposure on the open market is a good indicator that these two ingredients are present in the transaction, it is not part of the legal test.

34The Board finds that there is no evidence to suggest that the subject property sale was not an arm's length transaction meeting the definition of current value in the Act. The Board finds it credible that the transaction was negotiated in 2018 for the value of $6,100,000 and finds the sale value is correctly determined in June 2018; 29 months after the valuation day stipulated in the Act for the 2017 through 2021 taxation years.

What is the correct time-adjustment factor to apply to the subject sale?

35Having determined that the best evidence of the current value of the subject property is the time-adjusted sale of the subject property, the Board must determine the correct time-adjustment factor ("TAF") from the evidence.

36The Board heard from both Parties regarding time adjustments. The Appellant submitted a 6.67% annual adjustment (a reduction for the time period after the valuation day and an increase for sale prior to the valuation day). MPAC's evidence suggests a TAF of between 1.6 and 1.9% annually.

37MPAC's time-adjustment study of 79 properties sold in the region from 2013 through 2017 indicates a TAF of 0.968 for December 2017, the last month in the study. This represents a time span of 23 months and an average downward adjustment to sale values of 0.139 % per month. Extrapolating this monthly adjustment over 29 months (from the valuation day to the time of the negotiated sale amount in June 2018) the result is a total time adjustment of 4.03%.

38The Appellant's TAF was derived from a sales study using 40 industrial property sales that took place between March 2014 and November 2020. The result is a downward adjustment applied to the subject sale price of 11.9 % over the 29-month time frame from the valuation day to the sale agreement date. The average of these two approaches is 7.965 % or 8 % rounded.

Findings on the correct time-adjustment factor to apply to the subject sale

39From the best evidence available at the hearing, the Board finds that the adjustment factor to be applied to the subject sale is 8%. This is the average of the two positions on time adjustment for the industrial land market in the Woodstock area. The Board finds both positions on time adjustment to be equally compelling. The average, therefore represents a reasonable time-adjustment factor. When applied to the subject sale, the result is a time-adjusted sale value of $5,615,000.

Finding on Issue 1

40The Board finds that, on a balance of probabilities, the best indication of the current value of the subject property for the 2017 through 2020 taxation years is $5,615,000.

Issue 2 – What is the current value of the subject property for the 2021 taxation year, after the sale of two portions of the land in 2020?

41The Parties agreed that the sale of two portions of the subject property in 2020 would have the effect of reducing the current value of the property for the 2021 taxation year, as the lot would be smaller. They disagreed on the amount of that reduction and the means to determine the reduction.

MPAC's Evidence

42MPAC's approach to the 2021 value was to reduce the total value of land by $60,064 per acre, as determined by the land value study it completed in its current value estimate for 2017 through 2020. Using this rate on the total land sold in 2020 of 30.71 acres, the value determined by MPAC was $1,844,565. By subtracting this amount from its estimated current value of the entire property prior to the two 2020 sales, MPAC arrived at a value of $5,518,435 for the 2021 taxation year.

Appellant's Evidence

43Holding to its testimony that the value of the property is entirely within the land, and not the improvements, the Appellant took the position that the subject sale and associated time-adjusted sale value represented a value of $117,000 per acre.

44To determine the reduced value of the subject property for the 2021 taxation year, the Appellant applied the same $117,000 to the 30.71 acres sold, calculating a reduction in value from the 2017 - 2020 of $3,593,070. When this is deducted from the Appellant's opinion of the 2017 - 2020 current value the value adduced is $2,189,000.

Findings on Issue 2

45There are two points of dispute between the Parties on the question of the reduction in value after the two subject sales. The first of these is the value of improvements. The Appellant submits the improvements were not a motivating factor in the original 2018/2019 sale and therefore, hold a net value of zero. This led to the Appellant's view of the time-adjusted land value of the subject property of $117,000.

46MPAC's perspective is that the improvements do have value and need to be included in the current value for 2021. In addition, MPAC submitted that the same value used for land in its 2017 - 2020 valuation should still stand.

47The second point of dispute is the correct land value to apply to reflect the reduced lot size after the two severed parcels were removed from the subject property in 2020.

48The Appellant submitted that the improvements have no value, yet the Board heard that shortly after the 2019 sale closing, Urban Cliff was making physical changes to parts of the building. This is clear evidence that those improvements held some value, even if only as a shell for future improvements. For that reason, the Board disregards the Appellant's position of the land value adjustment in determining the 2021 current value.

49As a result, the Board finds that the best approach to determine the current value of the subject property for 2021 is the current value determined for 2017 - 2020, less the value of the land severed in 2020. While the Board did not adopt MPAC's Cost Approach for 2017 - 2020, that analysis included the direct comparison approach to the land value of the property. That analysis included the sale of 1515 Commerce Way with an unadjusted value per acre of $56,950 per acre. That sale was for a 49-acre parcel which was very close in size when compared to the subject property. That sale occurred in 2013, some 33 months prior to the valuation day.

50In making its determination for 2017 - 2020, the Board adopted a TAF of 8% and applied that to the subject sale value in June 2018. That represents a TAF of 0.276% per month. When that monthly adjustment is applied to the sale of 1515 Commerce Way, over 33 months, the result is a time-adjusted, per acre value of $62,149. The Board finds that this is the best evidence of the land portion of the subject property.

51The two parcels sold in 2020 comprised 30.71 acres. When that area is multiplied by the time-adjusted land value of $62,149 per acre, the total is $1,908,596 When this value is subtracted from the 2017 - 2020 current value determined, of $5,615,000 the result is $3,706,000 rounded. The Board finds that this is the current value of the subject property for 2021.

Issue 3 – What is the correct classification and apportionment for the subject property?

52For the 2017 - 2020 current value, the Board did not receive specific submissions regarding classification and apportionment. The Board notes that the physical attributes of the property did not change from the date of the returned assessment to the date of the hearing. For that reason, the Board accepts the classifications and applies the same percentage for each of the three classifications represented, as reflected in the returned value for 2017.

53Specifically, those percentages are:

Industrial property class

66.9%

Industrial Excess land sub-class

32.2%

Commercial

0.9%

54For the 2021 taxation year, the apportionment changed because the area of Industrial excess land was reduced due to the 2020 land sales. The Board finds that the 2021 apportionment percentages are as follows:

Industrial property class

69.6%

Industrial Excess land sub-class

29.0%

Commercial

1.4%

Findings on Issue 3

55The Board finds that the classification and apportionment of the subject property is as follows:

2017-2020 Taxation Year - $5,615,000

Industrial

$3,756,000

Industrial (Excess land)

$1,808,500

Commercial

$50,500

2021 Taxation Year - $3,706,000

Industrial

$2,579,400

Industrial (Excess land)

$1,074,700

Commercial

$51,900

Issue 4 – Does the current value determined need to be reduced, when reference is made to the assessments of similar properties in the vicinity, for it to be equitable?

56Neither party advanced a case to address the question of whether the current value can be considered equitable when compared to similar properties in the vicinity.

Findings on Issue 4

57The Board finds that there is no evidence to support a reduction in the current value of the subject property when reference is made to the assessments of similar properties in the vicinity.

CONCLUSION

58The Board finds that the current value of the subject property is as follows:

• For the 2017 through 2020 taxation years: $5,615,000

• For the 2021 taxation year: $3,706,000

59The Board also finds that there is no evidence to support a reduction in the current value for the purposes of equitable assessment when reference is made to the assessments of similar properties in the vicinity.

ORDER

60The Board orders that for the 2017 through 2020 taxation years, the assessment of the subject property at 1200 Dundas Street is reduced from $7,649,000 to $5,615,000 apportioned as follows:

2017-2020 Taxation Year - $5,615,000

Industrial

$3,756,000

Industrial (Excess land)

$1,808,500

Commercial

$50,500

61The Board further orders, for the 2021 taxation year, the assessment of the subject property is reduced from $6,472,000 to $3,706,000 apportioned as follows:

2021 Taxation Year - $3,706,000

Industrial

$2,579,400

Industrial (Excess land)

$1,074,700

Commercial

$51,900