Tribunals Ontario
Tribunaux décisionnels Ontario
Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE: March 29, 2022
Assessed Person(s): Canadian Property Holdings (Ontario) Inc, Calloway Reit (Westridge) Inc.
Appellant(s): Canadian Property Holdings (Ontario) Inc and The Forzani Group Ltd.
Respondent(s): Municipal Property Assessment Corporation Region 14
Respondent(s): City of Vaughan
Property Location(s): 110 200 Windflower Gate, 7850 Weston Road and 3900 Highway 7
Municipality(ies): City of Vaughan
Roll Number(s): 1928-000-280-40800-0000, 1928-000-280-76000-0000 and 1928-000-280-78000-0000
Appeal Number(s): See Schedule A attached
Taxation Year(s): 2017, 2018, 2019, 2020 and 2021
Hearing Event No.: 754064 and 755769
Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31
APPEARANCES:
| Parties | Counsel*/Representative |
|---|---|
| Canadian Property Holdings (Ontario) Inc., Calloway Reit (Westridge) Inc. | Stephen Longo* and Alexander Pletsch* |
| The Forzani Group Ltd. | No one appeared |
| Municipal Property Assessment Corporation | Carrie Carone and Alyssa Gee |
| City of Vaughan | Jaroslaw Wowk |
HEARD: October 5, 6, 7 and 15, 2021 by video conference
ADJUDICATOR(S): Jennifer Griffith, Member
DECISION
OVERVIEW
1The Appellants have filed appeals for the 2017, 2018, 2019, 2020 and 2021 taxation years with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (“Act”).
2The Subject Properties are located at 110 200 Windflower Gate; 7850 Weston Road; and 3900 Highway 7, in the City of Vaughan (“City”). These properties are Big Box Shopping/Power Centre (Property Code 427) greater than 100,000 square feet (“sq. ft.”) with two or more main anchors such as discount or grocery stores with a collection of box or strip stores located in a commercial concentration concept area.
3These three properties have separate roll numbers under one ownership and are part of the Westridge Shopping Centre which is comprised of five properties. The Subject Property located at 110 200 Windflower Gate has a Gross Leasable Area (“GLA”) of 214,396 sq. ft.; 7850 Weston Road has a GLA of 134,769 sq. ft.; and 3900 Highway 7 has a GLA of 83,002 sq. ft.
4The Municipal Property Assessment Corporation (“MPAC”) has assessed the current value of the Subject Properties as: 110 200 Windflower Gate at $83,358,000 for the 2017 through 2021 taxation years; 7850 Weston Road at $49,655,000 for the 2017 through 2021 taxation years; and 3900 Highway 7 at $31,905,000 for the 2017 through 2021 taxation years.
5MPAC submits that the Appellant, The Forzani Group Ltd., and MPAC have reached a settlement through the Settlement Conference process which was held prior to this hearing for the unit occupied by Sport Chek at 7850 Weston Road. The values agreed to are a fair market rent (“FMR”) of $18.00 per sq. ft. (original returned FMR is $19.80 per sq. ft.), maintaining the of 3% vacancy allowance, maintaining the expense allowance of 2%, and maintaining the Capitalization Rate (“Cap Rate”) at 5.5%, therefore, reflecting a reduction of $631,000 in the overall correct current value from $49,655,000 to $49,024,000 for the Subject Property
6In its opening statement, MPAC submits that its approach to determining the correct current value of these three properties is to determine each separately, because these three properties are legally registered with their respective municipal addresses and roll numbers as stated above. On the other hand, the Appellant, Canadian Property Holdings (Ontario) Inc, Calloway Reit (Westridge) Inc., used the approach of determining the correct current value of the three Subject Properties collectively because they are under the same ownership. The Appellant then apportioned the correct current value to each of the Subject Properties’ roll numbers.
7The Appellant believes that the returned assessments are too high and that the correct current value based on the Income Approach to value for 110 200 Windflower Gate should be $66,368,000; that the correct current value for 7850 Weston Road should be $42,903,000; and that the correct current value for 3900 Highway 7 should be $25,899,000 based on the Income Approach to value. MPAC takes the position that the correct current value based on the Income Approach to value for 110 200 Windflower Gate should be reduced to $79,309,000 for the 2017 taxation year and $82,237,000 for the 2018 through 2021 taxation years; the correct current value for 7850 Weston Road should be reduced to $49,024,000 for the 2017 through 2021 taxation years, which includes the agreed to settlement value for Sport Chek; and the correct current value for 3900 Highway 7 should be confirmed at $31,905,000 for the 2017 through 2021 taxation years.
8Pursuant to s. 40(11) of the Act, the City is a party to these proceedings. A Representative for the City was in attendance and advised the Board that he was not actively participating and was only there to observe the proceedings.
9Section 44(3)(b) of the Act directs the Board to reduce the current values of the Subject Properties if similar lands in the vicinity have been assessed at a lower value (“equitable reduction”). The Appellant presents no evidence and assert no position on equity. Therefore, equity is not at issue in these proceedings.
Issues
10The issues to be determined on these appeals are:
- A determination of the correct current value for Subject Property 1 - 110 200 Windflower Gate, Subject Property 2 - 7850 Weston Road and Subject Property 3 - 3900 Highway 7 for the 2017, 2018, 2019, 2020 and 2021 taxation years. Issues to be determined are:
a. Fair Market Rent;
b. Vacancy Allowance;
c. Expense Allowance;
d. Net Operating Income;
e. Capitalization Rate; and
f. Calculation of the correct current value.
Result
11The Board finds the correct current value is as follows for:
Subject Property 1 - 110 200 Windflower Gate - The correct current value is $79,309,000 for the 2017 taxation year, and $82,237,000 for the 2018 through 2021 taxation years.
Subject Property 2 - 7850 Weston Road - The correct current value is $49,024,000 for the 2017 through 2021 taxation years.
Subject Property 3 - 3900 Highway 7 – The correct current value is $31,905,000 for the 2017 through 2021 taxation years.
12The Board also finds that an equity reduction pursuant to s. 44(3)(b) is not required.
13The apportionment breakdown is as follows:
- Subject Property 1 - 110 200 Windflower Gate – The following is the apportionment breakdown:
| 2017 Taxation Year | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) CT | $9,247,480 |
| Commercial (Shopping Centre) ST | $70,061,520 |
| TOTAL | $79,309,000 |
| 2018 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) CT | $9,588,890 |
| Commercial (Shopping Centre) ST | $72,648,110 |
| TOTAL | $82,237,000 |
- Subject Property 2 - 7850 Weston Road - The following is the apportionment breakdown:
| 2017 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) CT | $9,094,000 |
| Commercial (Shopping Centre) ST | $39,930,000 |
| TOTAL | $49,024,000 |
- Subject Property 3 - 3900 Highway 7 – The following is the apportionment breakdown:
| 2017 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) CT | $9,610,000 |
| Commercial (Shopping Centre) ST | $22,295,000 |
| TOTAL | $31,905,000 |
PRELIMINARY MATTERS – Filing of Unredacted Evidence by MPAC
14At the commencement of the hearing Carrie Carone and Alyssa Gee, MPAC’s Representatives (“MPAC’s Representatives”) raise a motion seeking an order from the Board to file MPAC’s unredacted evidence with the Board and other parties to these appeals now that the hearing has started. For context, MPAC had redacted financial information pursuant to s. 53(1) of the Act to all proceedings prior to the start of today’s full hearing.
15Stephen Longo and Alexander Pletsch, Counsels for Canadian Property Holdings (Ontario) Inc. Calloway Reit (Westridge) Inc., the Appellant (“Counsels for the Appellant”) did not oppose the motion and agreed that the unredacted evidence should be filed with the Board and other parties to these appeals now that the hearing has started.
16Jaroslaw Wowk, Representative for the City, was in attendance and advised the Board that he was observing the proceedings and, as a party to this hearing, the City was copied on MPAC’s unredacted evidence.
17Based on the submissions of the parties and the fact that no further request was made to have the unredacted evidence sealed in the public domain pursuant to Rule 89 of the Board’s Rules of Practice and Procedure, the Board orders that MPAC file the unredacted evidence with the Board and other parties to these appeals immediately by email, because the evidence will be presented under oath at today’s hearing and forms part of the public domain. Upon receipt of the unredacted evidence the parties are allowed extra time to review the materials before the hearing resumes.
ANALYSIS
Issue No. 1 - A Determination of the Correct Current Value for Subject Property 1 - 110 200 Windflower Gate, Subject Property 2 - 7850 Weston Road and Subject Property 3 - 3900 Highway 7 for the 2017, 2018, 2019, 2020 and 2021 taxation years
18In determining the correct current value, the Board references s. 19(1) of the Act, which states that the assessment of land shall be based on its current value, which is defined as 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”.
19The valuation date for the 2017 to 2021 taxation years is January 1, 2016.
20For the reasons discussed below, the Board finds the best evidence of correct current value is presented by MPAC, based on the Income Approach. The following is the Board’s findings of the correct current value for:
Subject Property 1 - 110 200 Windflower Gate – The correct current value is $79,309,000 for the 2017 taxation year, and $82,237,000 for the 2018 through 2021 taxation years.
Subject Property 2 - 7850 Weston Road - The correct current value is $49,024,000 for the 2017 through 2021 taxation years.
Subject Property 3 - 3900 Highway 7 – The correct current value is $31,905,000 for the 2017 through 2021 taxations.
Issue No. 1a - A determination of the correct Fair Market Rent
MPAC’s Evidence
Subject Property 1 - 110 200 Windflower Gate (GLA 214,396 sq. ft.)
21MPAC’s Representatives call Eric Li, as an expert witness for MPAC, his qualifications and work experiences were unchallenged, and his Curriculum Vitae is on file. Mr. Li presents a Valuation Report, dated February 5, 2021 (“Valuation Report”) which he prepared and testifies to the information contained in the report.
22Mr. Li states that he inspected Subject Property 1 on July 11, 2019. He testifies that during the inspection he reviewed and confirmed amongst other things the building measurements, the data on the Subject Property, income and expenses, updated the tenancies and occupancy, and reviewed the sales and property data on the other properties used in his analysis.
23Mr. Li testifies that in order to determine current value for both sold and unsold income properties, MPAC creates valuation parameters from the information collected from property owners through inspections, income, expense mailouts, and sales investigations. He states that valuation parameters for fair market rate, vacancy allowance, expense allowance and capitalization rates are market derived components used in the analysis and determination of current values.
24Mr. Li testifies that the Potential Gross Income (“PGI”) is the income a property is capable of generating from rent and other sources with normal management, before allowing for vacancies, collection losses and normal operating expenses. In order to calculate PGI a FMR is determined from income information collected through MPAC’s income and expense collection program. This data is reviewed and analyzed looking at several factors (size, age, tenant type, property type and location).
25In support of the FMR, Mr. Li relies on comparable properties within its competitive market set and analyzed the rental information to determine the FMR per sq. ft. for the following tenants:
Building AA & AB - Allied Tenants, Standard Units, Occupancy Code 510;
Building AA – Fast Food Tenant, Occupancy Code 531;
Building AA – Big Box Tenant, Occupancy Code 622 (GLA greater than 20,000 sq. ft.);
Building AA – Big Box Tenant, Occupancy Code 622 (GLA less than 20,000 sq. ft.); and
Building AC, AD, AG – Restaurant Tenant, Occupancy Code 532.
26In support of FMR 1) Building AA & AB - Allied Tenants, Standard Units, Occupancy Code 510 Mr. Li presents the following 13 leases signed in 2015 and 2016 at comparable properties located within the same vicinity and also within the same Westridge Shopping Centre as Subject Property 1. The following is the analysis of these 13 leases in Table 1 below:
TABLE 1
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-220-46250 | 1840 Major Mackenzie Drive | 427 | 2,453 | $30.00 | 2016 |
| 427 | 1,431 | $28.00 | 2016 | ||
| 427 | 1,432 | $31.00 | 2016 | ||
| 1928-000-321-00101 | 8260 8300 HWY 27 | 427 | 2,211 | $24.23 | 2016 |
| 1928-000-190-48515 | 700 Centre St | 427 | 1,215 | $33.00 | 2015 |
| 427 | 3,345 | $31.50 | 2015 | ||
| 1928-000-230-50580 | 255 BASS PRO MILL Drive | 427 | 3,473 | $23.00 | 2015 |
| 1928-000-280-40800 | 110 200 Windflower Gate | 427 | 2,031 | $26.00 | 2016 |
| 1928-000-233-60500 | 7501 7575 Weston Rd | 427 | 5,584 | $25.50 | 2016 |
| 427 | 5,682 | $25.00 | 2015 | ||
| 1928-000-230-50580 | 255 BASS PRO MILL Drive | 427 | 5,230 | $23.00 | 2016 |
| 1928-000-280-76000 | 7850 Weston Rd | 427 | 5,045 | $29.00 | 2016 |
| 1928-000-280-76000 | 7850 Weston Rd | 427 | 10,311 | $18.00 | 2015 |
| MEDIAN | $26.00 |
27Mr. Li testifies that the 13 leases in the above analysis are new and renewal leases which started in 2015 and 2016 taxation years and reflect a median rent per sq. ft. of $26.00.
28Using the parameters established by MPAC, Mr. Li testifies that he analyzed the gross leasable areas in the above analysis into two categories (GLA greater than 2,500 sq. ft. and GLA less than 2.500 sq. ft.) because Subject Property 1 has a number of units below 5,000 sq. ft. Based on this analysis, the median rents reflect the following:
GLA greater than 2,500 sq. ft. has a median rent of $25.00 per sq. ft.; and
GLA less than 2,500 sq. ft. has a median rent of $29.00 per sq. ft.
29Based on this analysis, Mr. Li submits that the median FMR of $25.00 per sq. ft. supports the returned FMR of $24.60 per sq. ft. for GLA greater than 2,500 sq. ft.; and the median FMR of $29.00 per sq. ft. supports the returned FMR of $29.00 per sq. ft. for GLA less than $2,500 sq. ft.
30In support of FMR for 2) Building AA – Fast Food Tenant, Occupancy Code 531, Mr. Li presents the following three leases with start dates in 2015 and 2016 at the following two comparable properties within the same vicinity of Subject Property 1. The following is the analysis of the three leases in Table 2 below:
TABLE 2
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-321-00101 | 8260 8300 HWY 27 | 427 | 1,153 | $25.00 | 2016 |
| 1928-000-233-63500 | 7621 Weston Rd | 427 | 2,321 | $31.00 | 2016 |
| 1928-000-233-63500 | 7621 Weston Rd | 427 | 2,587 | $36.00 | 2017 |
| MEDIAN | $31.00 (rounded) |
31Mr. Li submits that the above analysis reflects a median rent per sq. ft. of $31.00 which supports the returned FMR of $31.15 per sq. ft.
32In support of FMR for 3) Building AA – Big Box Tenant, Occupancy Code 622, GLA greater than 20,000 sq. ft. Mr. Li presents three leases with start dates in 2016 and 2017 at a comparable property located within the same vicinity as Subject Property 1. The following is the analysis of these three leases in Table 3 below:
TABLE 3
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-233-60800 | 67 Colossus Drive | 427 | 21,718 | $20.50 | 2017 |
| 427 | 22,434 | $20.00 | 2016 | ||
| 427 | 28,174 | $20.00 | 2016 | ||
| MEDIAN | $20.00 |
33In support of FMR for 4) Building AA – Big Box Tenant, Occupancy Code 622, GLA less than 20,000 sq. ft. Mr. Li presents three leases with start dates in 2016 and 2017 at three comparable properties in the same vicinity as Subject Property 1. The following is the analysis of these three leases in Table 4 below:
TABLE 4
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-233-63500 | 7621 Weston Rd | 427 | 10,322 | $23.50 | 2017 |
| 1928-000-220-46250 | 1840 Major Mackenzie Drive | 427 | 14,084 | $20.50 | 2016 |
| 1928-000-233-60800 | 67 Colossus Drive | 427 | 11,256 | $24.50 | 2016 |
| MEDIAN | $23.50 |
34Mr. Li states that the Big Box Tenants are broken into two categories based on GLA ranges. Based on this analysis, the median rent reflects the following:
GLA greater than 20,000 sq. ft. the median rent is $20.00 per sq. ft.; and
GLA less than 20,000 sq. ft. the median rent is $23.50 per sq. ft.
35Based on these two analyses Mr. Li is of the opinion that the median rent of $20.00 per sq. ft. for GLA greater than 20,000 sq. ft. supports the returned FMRs of $17.15 and $17.75 per sq. ft.; and the median rent of $23.50 per sq. ft. for GLA less than 20,000 per sq. ft. supports the returned assessments of $22.30 and $24.00 per sq. ft.
36In support of 5) Building AC, AD, AG – Restaurant Tenant, Occupancy Code 532, Mr. Li presents the following three leases with start dates in 2016 and 2017 at the following three comparable properties within the same vicinity of Subject Property 1. The following is the analysis of these three leases in Table 5 below:
TABLE 5
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-280-40800 | 110 200 Windflower Gate | 427 | 5,108 | $26.00 | 2017 |
| 1928-000-280-40800 | 110 200 Windflower Gate | 427 | 4,292 | $27.50 | 2017 |
| 1928-000-270-16031 | 3450 Major Mackenzie Drive | 430 | 3,035 | $27.00 | 2016 |
| MEDIAN | $27.00 |
37Based on the above analysis, Mr. Li states that two new leases at Subject Property 1 commenced in 2017, have contract rents of $26.00 per sq. ft. and $27.50 per sq. ft. However, Mr. Li recommends the median FMR of $27.00 per sq. ft. (based on the lease signed in 2016) for all three restaurant units which is lower than the returned assessments of $27.35 and $31.05 per sq. ft.
38Mr. Li presents oral evidence regarding the following two Small Discount Stores:
I. Mr. Li submits that for unit AA17 – The Dollar Tree, he reviewed the contract rent which began in 2012 for this unit and as of 2016 the rent for this unit was $17.50 per sq. ft. Based on this finding, Mr. Li concluded that the FMR is higher and supports the returned FMR of $16.50. Based on the evidence Mr. Li submits that if the FMR was to be adjusted for this unit, it would be an upward adjustment.
II. Unit AE - Payless Shoe Source, Mr. Li submits that there was a 2017 renewal lease signed at $29.00 per sq. ft. which supports the returned FMR of $28.65 per sq. ft. Based on this evidence Mr. Li is of the opinion that the returned FMR is correct.
39Based on all the above analyses, Mr. Li is of the opinion that the FMRs based on leases signed or renewed over the period 2015 to 2017 in the same vicinity as Subject Property 1 support the PGI of $4,758,083.
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
40Mr. Li, witness for MPAC, continues and presents a Valuation Report, dated January 7, 2021 (“Valuation Report”) which he prepared and testifies to the information contained therein. Mr. Li testifies that he relies on the same proposed comparable properties as presented above for Subject Property 1 - 110 200 Windflower Gate, except for the Standard Units, Property Code 510 he used different parameters of GLA greater than 5,000 sq. ft. and GLA less than 5,000 sq. ft. for calculating the FMR per sq. ft.
41Mr. Li states that he inspected Subject Property 2 on July 11, 2019, and he reviewed and confirmed amongst other things building measurements, income, expenses, updated the tenancies and occupancy, and reviewed the sales and property data on the other properties used in his analysis.
42In support of FMR 1) Building AA & AB - Allied Tenants, Standard Units, Occupancy Code 510 from Big Box properties within the same vicinity as Subject Property 2 Mr. Li presents the following 13 leases with start dates in 2015 and 2016 within the same vicinity of Subject Property 2. The following is an analysis of the leases in Table 6 below:
TABLE 6
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-220-46250 | 1840 Major Mackenzie Drive | 427 | 2,453 | $30.00 | 2016 |
| 427 | 1,431 | $28.00 | 2016 | ||
| 427 | 1,432 | $31.00 | 2016 | ||
| 1928-000-321-00101 | 8260 8300 HWY 27 | 427 | 2,211 | $24.23 | 2016 |
| 1928-000-190-48515 | 700 Centre St | 427 | 1,215 | $33.00 | 2015 |
| 427 | 3,345 | $31.50 | 2015 | ||
| 1928-000-230-50580 | 255 BASS PRO MILL Drive | 427 | 3,473 | $23.00 | 2015 |
| 1928-000-280-40800 | 110 200 Windflower Gate | 427 | 2,031 | $26.00 | 2016 |
| 1928-000-233-60500 | 7501 7575 Weston Rd | 427 | 5,584 | $25.50 | 2016 |
| 427 | 5,682 | $25.00 | 2015 | ||
| 1928-000-230-50580 | 255 BASS PRO MILL Drive | 427 | 5,230 | $23.00 | 2016 |
| 1928-000-280-76000 | 7850 Weston Rd | 427 | 5,045 | $29.00 | 2016 |
| 1928-000-280-76000 | 7850 Weston Rd (Phase 111 C3) | 427 | 10,311 | $18.00 | 2015 |
| MEDIAN | $26.00 |
43Mr. Li testifies that the analysis shows that median FMR rent is $26.00 per sq. ft. However, using parameters established by MPAC for this Subject Property, Mr. Li testifies that he analyzed the gross leasable areas in the above analysis into two categories (GLA greater than 5,000 sq. ft. and GLA less than 5,000 sq. ft.). Based on this analysis, the median rents reflect the following:
GLA greater than 5,000 sq. ft. the median rent is $25.00 per sq. ft.; and
GLA less than 5,000 sq. ft. the median rent is $29.00 per sq. ft.
44Based on this analysis Mr. Li submits that the median rent of $25.00 per sq. ft. for GLA greater than 5,000 sq. ft. supports the returned FMR of $24.45 per sq. ft. and the median rent of $29.00 per sq. ft. for GLA less than 5,000 sq. ft. supports the returned FMR of $26.30 per sq. ft. Therefore, Mr. Li is of the opinion that the returned FMRs are reasonable.
45In support of FMR for 3) Building AA – Big Box Tenant, Occupancy Code 622, GLA greater than 20,000 sq. ft. Mr. Li presents three leases with start dates in 2016 and 2017 at a comparable property located within the same vicinity as Subject Property 2. The following is an analysis of these leases in Table 7 below:
TABLE 7
| Roll Number | Address | PC | Gross Leasable Area (GLA) (sq. ft.) | FMR (sq. ft.) | Lease Start |
|---|---|---|---|---|---|
| 1928-000-233-60800 | 67 Colossus Drive | 427 | 21,718 | $20.50 | 2017 |
| 427 | 22,434 | $20.00 | 2016 | ||
| 427 | 28,174 | $20.00 | 2016 | ||
| MEDIAN | $20.00 |
46Based on this analysis Mr. Li is of the opinion that the median rent of $20.00 per sq. ft. for GLA greater than 20,000 sq. ft. supports the returned FMRs of $17.65, $19.25, and $19.80 per sq. ft.
47Regarding the Beer Store with 5,648 sq. ft., Mr. Li presents oral evidence that he reviewed three leases signed in 2017 with an average contract rent of $27.00 per sq. ft. which supports the returned FMR of $27.00 per sq. ft. Based on the evidence, Mr. Li is of the opinion that the Beer Store is assessed correctly.
48Regarding the Liquor Control Board of Ontario store (“LCBO”) with 15,438 sq. ft., Mr. Li presents oral evidence that he reviewed three leases signed over the period 2015 to 2017 with a median contract rent of $26.50 per sq. ft. The returned FMR is $20.55 per sq. ft., therefore, Mr. Li is of the opinion that the FMR supports the returned FMR.
49Regarding the Canadian Imperial Bank of Commerce (“CIBC”) with 17,789 sq. ft., Mr. Li presents oral evidence that he reviewed new leases and the median contract rent is $38.67 per sq. ft. The returned FMR is $26.60 per sq. ft., therefore, Mr. Li is of the opinion that the FMR supports the returned FMR.
50Based on the above analyses, Mr. Li is of the opinion that the FMRs based on leases signed or renewed in 2015 and 2016 in the same vicinity as Subject Property 2 support the PGI of $2,872,96.
51MPAC submits that The Forzani Group Ltd. and MPAC have reached a settlement through the Settlement Conference process which was held prior to this hearing for the unit occupied by Sport Chek at 7850 Weston Road. The values agreed to are a FMR of $18.00 per sq. ft. (original returned FMR is $19.80 per sq. ft.), maintaining the 3% vacancy allowance, maintaining the expense allowance of 2%, and maintaining the Capitalization Rate (“Cap Rate”) at 5.5%, therefore, reflecting a reduction of $631,000 in the overall correct current value from $49,655,000 to $49,024,000 for the Subject Property.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
52MPAC’s Representatives call Patrick Ho, as an expert witness for MPAC, his qualifications and work experiences were unchallenged, and his Curriculum Vitae is on file. Mr. Ho presents a Valuation Report, dated May 15, 2020 (“Valuation Report”) which he prepared and testifies to the information contained in the report.
53In preparation of his report Mr. Ho testifies that he reviewed and confirmed amongst other things the Subject Property’s building measurements through the rent roll submitted by the Appellant, the data on the Subject Property, income and expenses, tenancies and occupancy and the sales of the other properties used in his analysis.
54Mr. Ho testifies that in order to determine current value for both sold and unsold income properties, MPAC creates valuation parameters from the information collected from property owners through inspections, income, expense mailouts and sales investigations. He states that valuation parameters for FMR, expenses and capitalization rates are market derived components used in the determination of current values; that these parameters are assembled for analysis of the data inputs.
55In support of FMR, Mr. Ho testifies that he analysed the following 22 new leases for Standard Units (Occupancy Code 510) including 14 units less than 5,000 sq. ft. and nine units greater than 5,000 sq. ft. These leases commence over the period 2015 to 2017 at comparable properties within the same vicinity as Subject Property 3. The following is the market analysis for Occupancy Code 510 in Table 8 below:
TABLE 8
| LOCATION | PROPERTY CODE | GROSS LEASABLE AREA | FMR ($) | LEASE START DATES |
|---|---|---|---|---|
| Standard Units (Occupancy Code 510) | ||||
| 427 | Units less than= 5,000 sq. ft. | Returned FMR @ $23.60 | ||
| Centre Street, Bass Pro Mill, Major Mackenzie Drive West, Hwy 27, Weston Road, and Colossus Drive | 427 | 1,159 | 30.00 | 11/1/2017 |
| 427 | 1,159 | 30.00 | 11/1/2017 | |
| 427 | 1,215 | 33.00 | 1/8/2015 | |
| 427 | 1,431 | 28.00 | 2/5/2016 | |
| 427 | 1,432 | 31.00 | 7/14/2016 | |
| 427 | 1,799 | 20.00 | 9/3/2017 | |
| 427 | 2,211 | 24.23 | 12/30/2016 | |
| 427 | 2,453 | 30.00 | 2/5/2016 | |
| 427 | 2,865 | 25.00 | 8/18/2017 | |
| 427 | 3,345 | 31.50 | 1/29/2015 | |
| 427 | 3,473 | 23.00 | 10/14/2015 | |
| 427 | 4,210 | 26.00 | 11/13/2017 | |
| 427 | 4,876 | 25.00 | 8/8/2017 | |
| Westridge Phase 11 AA23 | 427 | 2,031 | 26.00 | 9/27/2016 |
| Median | 27.00 | |||
| Units greater than 5,000 sq. ft. | Returned FMR @23.60 | |||
| Bass Pro Mill Drive and Weston Road | 427 | 5,584 | 25.50 | 10/21/2016 |
| 427 | 5,682 | 25.00 | 8/27/2015 | |
| 427 | 9,674 | 17.00 | 5/24/2017 | |
| 427 | 5,230 | 23.00 | 8/1/2016 | |
| 427 | 10,322 | 23.50 | 11/30/2017 | |
| 427 | 5,472 | 26.50 | 11/30/2017 | |
| 427 | 5,045 | 29.00 | 1/1/2016 | |
| Westridge Phase 111 C3 | 427 | 10,311 | 18.00 | 12/24/2015 |
| Median | 24.25 |
56Based on the above analysis, Mr. Ho testifies that the median rate of $27.00 per sq. ft. for units less than 5,000 sq. ft. supports the returned FMR of $23.60 per sq. ft.; and the median rate of $24.25 per sq. ft. supports the returned FMR of $23.60 per sq. ft. for units greater than 5,000 sq. ft.
57Mr. Ho also agrees to delete Westgate Phase II – AA7 with a GLA of 5,584 sq. ft. at a FMR of $25.50 per sq. ft., with lease signed October 21, 2016, because it was a duplicate comparable property. The Board accepts Mr. Ho’s agreement to remove this comparable property and it was removed. With the removal of this comparable property, the Board finds that there was no change in the median rate of $24.25 per. sq. ft. for the remaining eight units. Therefore, Mr. Ho is of the opinion that the returned FMRs are fair for Subject Property 3 for the reasons stated above.
58In support of FMR for Big Box Store (Occupancy Code 622), Mr. Ho testifies that he analysed the following five leases of comparable properties which commenced in 2016 and 2017 in the vicinity of Vaughan. The following is the market analysis in Table 9 below:
TABLE 9
| LOCATION | PROPERTY CODE | GROSS LEASABLE AREA | FMR ($) | LEASE START DATES |
|---|---|---|---|---|
| Big Box Store (Occupancy Code 622) | ||||
| 427 | Returned FMR @ $18.55 | |||
| Major Mackenzie Drive West and Colossus Drive | 427 | 11,256 | 24.50 | 12/14/2016 |
| 427 | 14,084 | 20.50 | 11/21/2016 | |
| 427 | 21,718 | 20.20 | 3/4/2017 | |
| 427 | 22,434 | 20.00 | 10/30/2016 | |
| 427 | 28,174 | 20.00 | 10/30/2016 | |
| Median | 20.50 |
59Based on the above analysis, Mr. Ho testifies that the median FMR of $20.50 per sq. ft. supports the returned FMR of $18.55 per sq. ft. Therefore, Mr. Ho is of the opinion that the returned FMR is fair for these units.
60In support of FMR for Restaurant (Occupancy Codes 701 and 532), Mr. Ho testifies that he analysed the following four leases of comparable properties which commenced in 2016 and 2017 in the vicinity of Vaughan. The following is the market analysis in Table 10 below:
TABLE 10
| LOCATION | PROPERTY CODE | GROSS LEASABLE AREA | FMR ($) | LEASE START DATES |
|---|---|---|---|---|
| Restaurant (Occupancy Codes 701 and 532) | ||||
| 427 | Returned FMR @ $26.45 | |||
| Westridge Phase 11 AD (701) | 427 | 5,108 | 26.00 | 1/23/2017 |
| Westridge Phase 11 AG1 (532) | 427 | 4,292 | 27.50* | 3/1/2017 |
| Bass Pro Mill Drive and Colossus Drive (532) | 427 | 3,189 | 23.00* | 5/11/2016 |
| 427 | 5,548 | 39.00 | 11/28/2016 | |
| Median | 26.75 |
61On cross-examination due to errors in the calculation, Mr. Ho agrees to revise the FMR of $28.25 per sq. ft. for Westridge Phase II AGI (532) stated in his report to $27.50* per sq. ft., and to revise the FMR of $20.00 per sq. ft. for Bass Pro Mill Drive and Colossus Drive (532) to $23.00* per sq. ft. which the Board accepts. The revisions are shown in Table 10 above.
62Based on the above analysis, Mr. Ho testifies that the median FMR of $26.75 per sq. ft. supports the returned FMR of $26.45 per sq. ft. Therefore, Mr. Ho is of the opinion that the returned FMR is fair for these units.
63Based on the above analyses, Mr. Ho is of the opinion that the FMRs based on leases signed and renewed leases over the period 2015 through 2017 taxation years in the same vicinity as Subject Property 3 support the returned PGI of $1,846,020.
MPAC’s Submissions on FMR
64Based on all of the evidence presented in support of FMR for Subject Property 1 – 110 200 Windflower Gate, Subject Property 2 - 7850 Weston Road, and Subject Property 3 - 3900 Highway 7, MPAC’s Representatives argue that the current values are correct, except for 110 200 Windflower Gate which should be reduced for vacancy, expenses and the FMR applied to the restaurant units.
65MPAC’s Representatives agree with Counsels for the Appellant that all income parameters and revenue levels to be determined by the Board need to be representative of a property’s market potential as of the valuation date of January 1, 2016. However, MPAC’s Representatives disagree that the main issue in dispute as characterized by Counsels for the Appellant is a theoretical discussion around “Leased Fee” versus “Fee Simple” valuations. MPAC’s Representatives are of the opinion that every property is unique and actual evidence can sometimes be utilized to help determine how each unique property would transact as of the valuation date.
66MPAC’s Representatives argue that the FMRs presented for Subject Property 1 – 110 200 Windflower Gate, Subject Property 2 - 7850 Weston Road, and Subject Property 3 - 3900 Highway 7 are based on tangible evidence (e.g. market rents of comparable properties within the City and from leases within the relevant time period of the valuation date; and also the Subject Properties historic rent level), that the Board can use to review, deconstruct and weigh to determine the appropriate FMR for each of the units within the Subject Properties.
67On the contrary, MPAC’s Representatives argue that Counsels for the Appellant have not provided any tangible evidence (e.g., comparable properties, addresses, unit types, unit sizes) in their FMR analysis; and have not provided tangible evidence to show how the criteria used to select the 500 plus rents from Durham Region to Halton Region used in their analysis were determined.
68MPAC’s Representatives argue that due to the lack of tangible evidence in the Appellant’s FMR analysis, the Board cannot properly review the Appellant’s FMR analysis. MPAC’s Representatives argue that there is no indication of which comparable properties the rents used in the analysis were taken from, and their physical locations, except that they span from Durham to Halton Regions, with the majority being outside of the City.
69MPAC’s Representatives submit that it is necessary for the Board to review, deconstruct, quantify, or weigh the evidence of comparable properties in order to determine the correct FMRs. MPAC’s Representatives argue that there is an inferential gap in the Appellant’s evidence between its mass appraisal summary and its final conclusions of FMRs.
70MPAC’s Representatives argue that the Board cannot simply rely on the Appellant’s opinion that the FMRs should be lower than market leases of comparable power centres in Vaughan and every actual rent achieved at this location between 1998 and 2013 without being provided data and evidence which demonstrates that the FMR should be revised to the lower level.
71Finally, MPAC’s Representatives argue that the Appellant has not provided the comparable properties used in its mass FMR analysis and has only provided subjective ranges of FMR. MPAC’s Representatives argue that it is unknown how the analysis mirrors what has taken place in the market since the evidence is not provided.
72In support of the above arguments, MPAC cites a number of cases to assist the Board in its determination of FMR, the most relevant of which are discussed below.
Appellant’s Evidence
73Counsels for the Appellant call Michael Bradley as an expert witness for the Appellant. His qualifications and work experiences were unchallenged, and his Curriculum Vitae is on file.
74Mr. Bradley presents a 2016 Current Value Assessment Report of Westridge Shopping Centre, for Roll Numbers 1928-000-280-78000; 1928-000-280-40800; and 1928-000-280-76000, dated March 31, 2020 (“2016 CVA Report”) which he prepared and testifies to the information contained in the Expert Report.
75Mr. Bradley testifies that the Subject Property is commonly referred to as Westridge Shopping Centre and it is located on the northwest corner of Highway 7 and Weston Road in Woodbridge, City of Vaughan, Ontario. He describes the Subject Property as a large format retail complex comprised of three parcels of land with a GLA of 432,167 sq. ft., on a total site area of 41.95 acres. The Subject Property has approximately 48 retail units with a number of medium and large format box stores, however, it has no anchor tenants.
76Mr. Bradley testifies that in determining the current value of the Subject Property, he conducted a review and analysis of comparable market retail transactions (500 plus transactions), with specific focus on ensuring adjustments were made to reflect the definition of current value within the context of the Act for the three parcels that comprise Westridge Shopping Centre in the City of Vaughan.
77Mr. Bradley testifies that FMR which is an aspect of the Income Approach was reviewed in light of both leasing activity at the Subject Property and rental analysis of comparable retail centres in the Greater Toronto Area (“GTA”) inclusive of the municipalities in the Regions of Halton, Peel, York, Durham and the City of Toronto.
78In determining the FMR, Mr. Bradley utilizes the GLA of 432,167 sq. ft. for the combined three Subject Properties. He describes the GLA as the amount of space leased by tenants and the rent paid by tenants typically applied against the space they occupy. He states for the purpose of this report, FMR is the amount of rent agreed upon by a willing landlord and a willing tenant in an arm’s length transaction, for a specific space, at property, at an agreed upon time.
79Mr. Bradley testifies that to determine the FMR for the combined Subject Properties he used a two-step analysis. The first step was a review of the rental activity at the Subject Property by analyzing the rent roll and lease amending agreements. This analysis provided an overall indication of existing new and renewed lease transactions, and what the market is willing to bear for certain retail spaces at the Subject Property. The second step was incorporating a review of other large format and neighbourhood retail shopping centres (approximately 90 comparable properties) completed for the purpose of establishing FMRs throughout the GTA inclusive of municipalities stretching from the Regions of Durham to Halton.
80Mr. Bradley further testifies that the Subject Property with a GLA of 432,167 sq. ft. with 48 units has an average unit size of 8,975 sq. ft., which is considered a small/mid-box retail unit. This average size is higher than the average size of units compared to most retail properties. He also testifies that the Subject Property is unique with many retail units greater than 5,000 sq. ft. The following Table 11 summarizes this review:
TABLE 11
| Size of Unit | GLA | % Of total GLA |
|---|---|---|
| Greater than 5,000 sq. ft. Units | 394,100 | 91.50 |
| Less than 5,000 sq. ft. Units | 36,692 | 8.50 |
| Grand Total | 430,792 | 100 |
81Mr. Bradley testifies that the current retail environment has experienced significant pressure from online shopping and larger units are no longer preferred. Having 91.5% of units greater than 5,000 sq. ft. puts a shopping centre in a higher risk category, very challenging to backfill vacancies, and rental rates steadily decreased over the past 5 -7 years. The following is a summary of the market rental rates achieved by the Subject Property between these two categories of units in Table 12 below:
TABLE 12
| Units greater than 5,000 sq. ft. | ||||||
|---|---|---|---|---|---|---|
| Building # | Unit | Tenant | GLA | Start Date | Rent per sq. ft. ($) | Annual Rent ($) |
| 32700 | CA6 | Ren’s Pets Depot (Westridge Phase I) | 6,033 | December 2013 | 26.00 | 156,858 |
| 32710 | AA8 | Vaughan Health Clinic (Westridge Phase II) | 5,127 | December 2015 | 18.00 | 92,286 |
| 32720 | C3 | Sleep Country Canada (Westridge Phase III) | 5,045 | January 2016 | 29.00 | 146,305 |
| 32710 | AA7 | Vaughan Health Clinic (Westridge Phase II) | 5,184 | May 2017 | 18.00 | 93,312 |
| 32710 | AA14 | Suzy Shier (Westridge Phase I) | 6,133 | July 2017 | 15.00 | 91,995 |
| 32710 | AA5 | Sleep and Snoring (Westridge Phase II) | 5,641 | May 2018 | 20.00 | 112,820 |
| 32710 | AA13 | K. Jamson (aka Luggage City) (Westridge Phase II) | 5,146 | June 2019 | 17.00 | 87,482 |
| 32710 | AA15 | Pennington’s (Westridge) | 7,042 | September 2019 | 15.00 | 105,630 |
| Average | 19.75 | |||||
| Median | 18.00 |
| Units less than 5,000 sq. ft. | ||||||
|---|---|---|---|---|---|---|
| Building # | Unit | Tenant | GLA | Start Date | Rent per sq. ft. ($) | Annual Rent ($) |
| 32710 | AO3 | Centro Dental (Westridge Phase II) | 1,453 | January 2014 | 29.00 | 42,137 |
| 32720 | B2 | Cairo Glitz (Westridge Phase III) | 3,582 | October 2014 | 27.50 | 98,505 |
| 32710 | AA23 | Artzzy (Westridge Phase II) | 2,031 | January 2017 | 27.00 | 54,837 |
| 32710 | AB2 | Nails for You (Westridge Phase II) | 1,160 | February 2018 | 32.00 | 37,120 |
| 32710 | AA19 | Roma Optical (Westridge Phase II) | 4,569 | June 2018 | 20.00 | 91,380 |
| Average | 27.10 | |||||
| Median | 27.50 |
82Mr. Bradley testifies that the other two spaces occupied by the LCBO store and the CIBC are larger units greater than 15,000 sq. ft., and are inconsistent with typical spaces they would occupy in the range of 5,000 - 8,000 sq. ft. The existing rents achieved by these spaces are $19.00 per sq. ft. for the LCBO; and $28.50 per sq. ft. for the CIBC which are lower than the typical market rents these tenants pay, which is indicative of the size of the units they occupy.
83Mr. Bradley presents the following summary of the comprehensive rental data reviewed for the purpose of determining FMRs. The summary shows the occupancy types and rent ranges below in Table 13:
TABLE 13
| GTA Large Format Retail CAP Rate Study – Rental Analysis | |||||
|---|---|---|---|---|---|
| Occupancy Type | Low ($) | Low/Medium ($) | Medium ($) | Medium/High ($) | High ($) |
| Building Centres | 11.50 | 12.15 | 12.75 | 13.40 | 14.00 |
| Office 2nd Floor | 14.00 | 14.75 | 15.50 | 16.25 | 17.00 |
| Drug Store | 26.00 | 27.75 | 29.50 | 31.25 | 33.00 |
| Brewers / LCBO | 26.00 | 27.75 | 29.50 | 31.25 | 33.00 |
| Commercial Retail Units - Fast Food | 28.00 | 30.00 | 32.00 | 34.00 | 36.00 |
| Commercial Retail Units - Restaurant | 26.00 | 28.00 | 30.00 | 32.00 | 34.00 |
| Commercial Retail Units - Ground Floor | 20.00 | 23.00 | 26.00 | 29.00 | 32.00 |
| Big Box / Other | 16.50 | 18.90 | 21.25 | 23.65 | 26.00 |
| Grocers | 13.50 | 15.00 | 16.50 | 18.00 | 19.50 |
| Banks | 30.00 | 32.50 | 35.00 | 37.50 | 40.00 |
84Mr. Bradley testifies that these FMRs represent relevant lease transactions throughout the GTA (including Regions from Durham to Halton). He also testifies that in order to apply these rates to individual properties, the range must allow for property specific differences, by applying different quality parameters. Mr. Bradley testifies that in order to determine the appropriate FMR applicable to the Subject Property, these factors as well as the actual rents, were considered.
85Mr. Bradley further testifies that the Subject Property rental analysis is consistent with the low to mid-range rental analysis completed above in the CAP Rate Study. Specifically, the ground floor Commercial Retail Units (“CRU”) greater than 5,000 sq. ft. are consistent with the low range of the CAP Rate Study. Also, the large units occupied by the LCBO and CIBC are at lower rates than typical market rents for these spaces. It is Mr. Bradley’s opinion that a negative 10% adjustment to the low range of the market rents indicated in Table 13 above is warranted. Applying the FMR model from the CAP Rate Study to the individual Subject Properties is demonstrated below in the following Table 14:
TABLE 14
| 3900 Highway 7 – Phase I (Roll 1928-000-280-78000) | ||||
|---|---|---|---|---|
| Occupancy Level | GLA | Level | Adj. FMR ($) | Annual FMR ($) |
| 622 – Big Box Franchise | 25,840 | Low/Mid | 18.90 | 488,376 |
| 510 – Allied greater than 5,000 sq. ft. | 50,964 | Low | 20.00 | 1,019,280 |
| 701 - Restaurant | 6,198 | Low | 26.00 | 161,148 |
| Total | 83,002 | 20.11 | 1,668,804 |
| 110-200 Windflower Gate - Phase II (Roll 1928-000-280-40800) | ||||
|---|---|---|---|---|
| Occupancy Level | GLA | Level | Adj. FMR ($) | Annual FMR ($) |
| 622 - Big Box Franchise | 13,304 | Low/Mid | 18.90 | 251,446 |
| 622 - Big Box Franchise | 12,537 | Low/Mid | 18.90 | 236,949 |
| 622 - Big Box Franchise | 34,085 | Low | 16.50 | 562,403 |
| 622 - Big Box Franchise | 29,997 | Low | 16.50 | 494,951 |
| 622 - Big Box Franchise | 10,219 | Mid | 21.25 | 217,154 |
| 531 - Allied Fast Food | 6,951 | Low | 28.00 | 194,628 |
| 532 - Allied Restaurants | 4,292 | Mid | 30.00 | 128,760 |
| 612 - Small Discount Store | 8,286 | Low | 16.50 | 136,719 |
| 510 - Allied greater than 5,000 sq. ft. | 66,375 | Low | 20.00 | 1,327,500 |
| 510 – Allied less than 5,000 sq. ft. | 14,743 | Mid | 26.00 | 383,318 |
| 704 - Other | 3,020 | Low/Mid | 28.00 | 84,560 |
| 701 - Restaurant | 5,108 | Low/Mid | 28.00 | 143,024 |
| 701 - Restaurant | 4,104 | Low/Mid | 28.00 | 114,912 |
| Total | 213,021 | 20.07 | 4,276,323 |
TABLE 14 - Continued
| 7850 Weston Road - Phase III (Roll 1928-000-280-76000) | ||||
|---|---|---|---|---|
| Occupancy Level | GLA | Level | Adj. FMR ($) | Annual FMR ($) |
| 622 - Big Box Franchise | 22,556 | Low/Mid | 18.90 | 426,308 |
| 613 – Brewers - LCBO | 15,438 | Low | 23.40 | 361,249 |
| 611 - Bank | 17,789 | Low | 27.00 | 480,303 |
| 510 – Allied less than 5,000 sq. ft. | 3,582 | Mid | 26.00 | 93,132 |
| 622 - Big Box Franchise | 30,820 | Low | 16.50 | 508,530 |
| 622 - Big Box Franchise | 20,287 | Low/Mid | 18.90 | 383,424 |
| 510 – Allied greater than 5,000 sq. ft. | 18,649 | Low | 20.00 | 372,980 |
| 613 – Brewers - LCBO | 5,648 | Low/Mid | 27.75 | 156,732 |
| 704 - Other | 3,020 | Low/Mid | 28.00 | 84,560 |
| 701 - Restaurant | 5,108 | Low/Mid | 28.00 | 143,024 |
| 701 - Restaurant | 4,104 | Low/Mid | 28.00 | 114,912 |
| Total | 134,769 | 20.65 | 2,782,659 |
| Summary of all 3 Parcels and Roll Numbers (ending in 78000; 40800; and 76000) | ||||
|---|---|---|---|---|
| Occupancy Level | GLA | Level | Adj. FMR ($) | Annual FMR ($) |
| Grand Total | 430,792 | Low/Mid | 20.26 | 426,308 |
Appellant’s Submissions on FMR
86The Appellant’s main argument is that the Act requires the determination of current value be based on the fee simple if unencumbered value a property would achieve on the open market. The Appellant submits that in the Income Approach, “Fee Simple” is determined by establishing the rental income that a property could command and generate on the open market, known as the FMR. In contrast “Lease Fee” is the rental income actually received by the owner, or contract rents which can be below or above market. The Appellant argues that Lease Fee is an incorrect approach to determine current value under the Act.
87The Appellant further submits that in order to determine the correct rental rate to be used in a property’s valuation, leases need to be considered to establish whether they reflect FMRs or not. The Appellant also argues that if the terms of the leases do not reflect FMRs they are encumbrances for the purpose of establishing current value under the Act and should be disregarded as they result in a leased fee rather than a fee simple value.
88The Appellant submits that FMR is the determination of what the typical tenant would be willing to pay for occupancy of a particular property at a specific period of time, in this case, the legislated valuation date of January 1, 2016. By having reference to the typical rent that a unit would rent for if available in the open market, the projected income of all properties can be appropriately compared to each other.
89The Appellant further submits that reference must be made to leases in place at the Subject Property, or contract rents from relevant tax years. Concurrently, a review of leases in similar shopping centres in the same time period should be analyzed to establish the FMR for similar units and properties in the market. Therefore, a comparison of the actual rents and the FMRs should be analyzed to determine the correct FMR.
90Based on the above approach of “Fee Simple” market rents, the Appellant is of the opinion that its findings of FMRs is the best evidence, because it is based on the analysis of 90 similar properties and over 500 units of signed leases to establish a range of market rates for various retail unit types in the market; and that the FMRs were further stratified based on unique factors to allow for the most accurate comparison and applicability to the different occupancy levels at the Subject Property to determine the PGI.
91On the contrary, the Appellant argues that MPAC used actual rents of non-comparable properties in its FMR analysis and did not consider the inferiority of the Subject Property indicated by its own market leases. Therefore, the Appellant argues that the potential incomes are inflated.
92The Appellant argues that MPAC only uses Colossus and Vaughan Mills shopping centres which are not comparable and do not constitute a sufficient data set to conclude what the market rental rates are for similar units.
93In support of the Appellant’s argument that its FMR represents the best evidence of the Fee Simple approach based on market evidence, as opposed to FMR based on actual or contract rents at the Subject Property, the Appellant cites a number of cases to assist the Board in its determination of FMR, the most relevant of which are discussed below.
Findings on Issue No. 1a - A Determination of the Correct FMRs
Subject Property 1 - 110 200 Windflower Gate (GLA 214,396 sq. ft.)
94In reviewing the evidence presented in support of FMR for Building AA & AB – Allied Tenants, Standard Units, Occupancy Code 510, the Board finds that the 13 leases signed in 2015 and 2016 taxation years at seven comparable properties located at 1840 Major Mackenzie Drive, at 8260 8300 Highway 27, at 700 Centre Street, at 255 Bass Pro Mill Drive, at 110 200 Windflower Gate, at 7501-7575 Weston Road, and 7850 Weston Road analyzed above in Table 1 show that the median FMR is $26.00 per sq. ft.
95When the leasable area of these 13 units was further analyzed to determine the FMR for units greater than 2,500 sq. ft. and units less than 2,500 sq. ft., the Board finds that the analysis shows that the median FMR for units greater than 2,500 sq. ft. is $25.00 per sq. ft., and units less than 2,500 sq. ft. is $29.00 per sq. ft.
96Based on this analysis, the Board finds that the median FMR of $25.00 per sq. ft. based on the signed leases of comparable properties in the same vicinity of Subject Property 1 supports the returned FMR of $24.60 per sq. ft. for units greater than 2,500 sq. ft. and the median FMR of $29.00 per sq. ft. for units less than 2,500 sq. ft. supports the returned FMR of $29.00 per sq. ft. Therefore, the Board finds that the returned FMRs are fair, and no changes are required.
97In reviewing the evidence presented in support of FMR for Building AA – Fast Food Tenant, Occupancy Code 531, the Board finds that the three leases signed in the 2016 and 2017 taxation years (two signed in 2016 and one in 2017), at two comparable properties at 8260 8300 Highway 27 and at 7621 Weston Road analyzed above in Table 2 show that the median FMR is $31.00 per sq. ft. Based on this analysis, the Board finds that that the median FMR based on three leases supports the returned FMR of $31.15 per sq. ft. Therefore, the Board finds that the returned rate is fair, and no change is required.
98In reviewing the evidence presented in support of FMR for Building AA – Big Box Tenant, Occupancy Code 622, GLA greater than 20,000 sq. ft., the Board finds that the three leases signed in the 2016 and 2017 taxation years (two signed in 2016 and one in 2017), at 67 Colossus Drive analyzed above in Table 3 show that the median FMR is $20.00 per sq. ft.; and that the FMR for Building AA – Big Box Tenant, Occupancy Code 622, GLA less than 20,000 sq. ft. based on the three leases signed in the 2016 and 2017 taxation years (two signed in 2016 and one in 2017) at 7621 Weston Road, 1840 Major Mackenzie Drive and 67 Colossus Drive analyzed above in Table 4 show a median FMR of $23.50 per sq. ft.
99Based on these analyses, the Board finds that the median FMR of $20.00 per sq. ft. based on the signed leases of comparable properties supports the returned FMR of $17.15 per sq. ft. and $17.75 per sq. ft. for units greater than 20,000 sq. ft.; and the median FMR of $23.50 per sq. ft. supports the returned FMR of $22.30 per sq. ft. and $24.00 per sq. ft. for units less than 20,000 sq. ft. Therefore, the Board finds that the returned rates are fair for both GLA greater than and less than 20,000 sq. ft. and no changes to the returned FMR are required.
100In reviewing the evidence presented in support of FMR for Building AC, AD, AG – Restaurant Tenant, Occupancy Code 532, the Board finds that the three leases signed in 2016 and 2017 taxation years (one signed in 2016 and two in 2017), at this Subject Property 1 (110 200 Windflower Gate) and at 3450 Major Mackenzie Drive analyzed above in Table 5 show that the median FMR is $27.00 per sq. ft. The Board finds that even if the two leases signed in 2017 at Subject Property 1 were excluded, the lease signed in 2016 at Major Mackenzie Drive shows a FMR of $27.00 per sq. ft. which is lower than the returned FMRs of $27.35 and $31.05 per sq. ft.
101Based on this finding, MPAC has revised the returned FMR of all three restaurants to the FMR of $27.00 per sq. ft. Therefore, the Board finds that the finding of a FMR of $27.00 per sq. ft. is correct and that no other adjustment is necessary.
102In consideration of the oral evidence presented in support of FMR for Small Discount Store - Unit AA17- Dollar Tree, that the FMR for this unit as of the 2016 taxation year is $17.50 per sq. ft., based on contract rent signed in the 2012 taxation year; as there are no other leases of comparable properties presented to the contrary, the Board accepts the FMR of $17.50 per sq. ft. and finds that it supports the returned FMR of $16.50 per sq. ft. Therefore, the Board finds that the returned FMR is fair, and no change is necessary.
103In consideration of the oral evidence presented in support of FMR for Small Discount Store - Unit AE- Payless Shoe Source, that there was a renewed lease in 2017 and that the FMR for this unit is $29.00 per sq. ft. as compared to the returned FMR of $28.65 per sq. ft.; as there are no other leases of comparable properties presented to the contrary, the Board accepts the FMR of $29.00 per sq. ft. and finds that it supports the returned FMR of $28.65 per sq. ft. Therefore, the Board finds the FMR is fair and that no change is necessary.
104Based on all of the evidence, the Board finds that MPAC’s FMRs when applied to the respective units at Subject Property 1 reflect a PGI of $4,758,083 for Subject Property 1. The Board finds that MPAC’s PGI of $4,758,083 for Subject Property 1 represents the best evidence because it is based on leases signed over the period of 2015 to 2017 taxation years at comparable properties located within the same vicinity as the Subject Property 1.
105On the contrary, the Board rejects the Appellant’s FMRs for Occupancy Code 622 - Big Box Franchise at $16.50, $18.90 and $21.25 per sq. ft; Occupancy Code 531 – Allied Fast Food at $28.00 per sq. ft.; Occupancy Code 532 – Allied Restaurants at $30.00 per sq. ft.; Occupancy Code 612 – Small Discount Store at $16.50 per sq. ft.; Occupancy Code 510 – Allied greater than 5,000 sq. ft. at $20.00 per sq. ft.; Occupancy Code 510 – Allied less than 5,000 sq. ft. at $26.00 per sq. ft.; Occupancy Code 704 – Other at $28.00 per sq. ft.; and Occupancy Code 701 – Restaurants at $28.00 per sq. ft. for reasons stated below.
106The Appellant’s analysis of FMRs is determined based on the combined GLA of 430,792 sq. ft. (Subject Property 1, Subject Property 2 and Subject Property 3), as opposed to a determination based on the GLA of each individual Subject Property. The Board finds that the FMRs based on the combined GLA of the three Subject Properties are inaccurate, because of economy of scale (meaning that the larger the GLA, the lower the rate per sq. ft.).
107The Subject Properties are legally registered as three separate properties with their own Roll Numbers, separate addresses and assessed individually. Therefore, the Board finds that a determination based on each individual Subject Property’s GLA is more accurate and more reflective of the true FMR for units within the individual Subject Properties.
108The Appellant relies on rental data it obtained from reviewing and analyzing third-party reports and studies of 500 plus lease transactions throughout the GTA (includes municipalities in the regions of Halton, Peel, York, Durham and the City of Toronto).
109The Board finds that the Appellant presents no specific comparable properties for comparison to the Subject Properties; relies on lease transactions which occurred mostly outside the Subject Properties’ vicinity in municipalities ranging from Durham to Halton Regions, that would most likely be impacted by different market influences (taxes, location, access, unit sizes, demand, etc.), and applied a negative 10% adjustment to the low range of the market rents based on its opinion and provides no quantitative evidence to justify the 10% adjustment. For these reasons, the Board relies on MPAC’s evidence of FMRs that are based on signed leases at comparable properties in the same vicinity and exposed to the same market influences as the Subject Property 1. These findings are supported by Amalie at para. 26 which states:
(26) Board finds best evidence of FMR is the rent of $14.00 in the subject lease, for the following reasons:
The comparable properties in Mr. Galle’s study are too far from the subject property to be reliable indicators of FMR;
Mr. Galle did not provide any documentary evidence of his assertion the socio-economic factors in Newmarket and Burlington being similar; an assumption he relied on for comparison; and
There is no evidence of the value of adjustments for exposure and access that differ between the Newmarket and Burlington locations and;
The rents in the lease in force on the valuation date most reasonably reflect the cost of improvements for the tenant. Mr. Galle made no such adjustment for any other units at the subject property or in his analyses to reflect these types of improvements.
110The Appellant also relies on third-party reports and studies and summarized the results into groups of different occupancy types (building centres, office 2nd floor, drug store, etc.) and with rate levels per sq. ft. classified into categories of (low, low/medium, medium, medium/high, high) based on the combined GLAs which was applied to each individual Subject Property. The Board finds that the unit types are general in nature and the Appellant presents no factual information (comparable properties, addresses, dates of signed leases, specific unit types and unit sizes, etc.), for comparison to the Subject Property 1 and to quantify the FMR. This finding is supported by Armstrong v. Municipal Property Assessment Corp., Region No. 09, [2007] OARBD No. 774 at para. 30 which states:
(30) … The Board perceives that Mr. Grigatos’s argument that the best evidence of value is the current assessment which is the product of the mass appraisal system model used by MPAC, without evidence of specific sales or properties, is nothing more than a circular argument. In effect, what Mr. Grigatos argues is that the assessments are correct because the assessments are correct. The task before the Board is not to judge the MPAC mass appraisal system. The task before the Board simply is to determine the current value of the subject property based solely on the evidence provided to the Board at the hearing.
111The Appellant also presents no factual information or analysis to show how the rate levels (low, low/medium, medium, medium/high, high) were determined. Therefore, the Board puts no weight on the FMR based on the Appellant’s opinion of unit types and rate levels. This finding is supported by Horri v. The College of Physicians and Surgeons, 2018 ONSC 3193. The Divisional Court in para. 74 states:
(74) Where an inferential gap exists, it can only be properly overcome by evidence. If there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation and conjecture.
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
112In reviewing the evidence presented in support of FMR for Building AA & AB – Allied Tenants, Standard Units, Occupancy Code 510, the Board finds that the 13 leases signed in the 2015 and 2016 taxation years at seven comparable properties at 1840 Major Mackenzie Drive, at 8260 8300 Highway 27, at 700 Centre Street, at 255 Bass Pro Mill Drive, at 110 200 Windflower Gate, at 7501 7575 Weston Road, and at 7850 Weston Road analyzed above in Table 6 show that the median FMR is $26.00 per sq. ft.
113When the leasable area of the 13 units was further analyzed to determine the FMR for units greater than 5,000 sq. ft. and units less than 5,000 sq. ft., the Board finds that the analysis shows that the median FMR for units greater than 5,000 sq. ft. is $25.00 per sq. ft. and units less than 5,000 sq. ft. is $29.00 per sq. ft.
114Based on this analysis, the Board finds that the median FMR of $25.00 per sq. ft. based on the signed leases of comparable properties supports the returned FMR of $24.45 per sq. ft. for units greater than 5,000 sq. ft. and the median FMR of $29.00 per sq. ft. supports the returned FMR of 26.30 per sq. ft. for units less than 5,000 sq. ft. Therefore, the Board finds that the returned rates are fair, and no changes are required.
115In reviewing the evidence presented in support of FMR for Building AA – Big Box Tenant, Occupancy Code 622, GLA greater than 20,000 sq. ft., the Board finds that the three leases signed in the 2016 and 2017 taxation years (two signed in 2016 and one in 2017), at 67 Colossus Drive analyzed above in Table 7 show that the median FMR is $20.00 per sq. ft.
116Based on this evidence, the Board finds that the FMR of $20.00 per sq. ft. supports the returned FMRs of $16.05, $17.05 and $16.83 per sq. ft. Therefore, the Board finds that the returned FMRs are fair, and no changes are necessary.
117In consideration of the oral evidence presented in support of FMR for Beer Store based on three signed leases in the 2012 taxation year with an average FMR of $27.00 per sq. ft.; as there are no other leases of comparable properties presented to the contrary, the Board finds the FMR of $27.00 per sq. ft. supports the returned FMR of $27.00 per sq. ft. Therefore, the Board find the returned FMR is correct, and no change is necessary.
118In consideration of the oral evidence presented in support of FMR for LCBO based on three signed leases over the period 2015 to 2017 taxation years with a median FMR of $26.50 per sq. ft.; as there are no other leases of comparable properties presented to the contrary, the Board finds the FMR of $26.50 per sq. ft. supports the returned FMR of $20.55 per sq. ft. Therefore, the Board finds that the returned FMR is fair, and no change is necessary.
119In consideration of the oral evidence presented in support of FMR for CIBC based on new signed leases with a median FMR of $38.67 per sq. ft.; as there are no other leases of comparable properties presented to the contrary, the Board finds the FMR of $38.67 per sq. ft. supports the returned FMR of $20.55 per sq. ft. Therefore, the Board finds that the returned FMR is fair, and no change is necessary.
120Based on all of the evidence the Board finds that MPAC’s FMRs, when applied to the respective units at Subject Property 2 reflect a total PGI of $2,872,968. The Board finds that MPAC’s PGI of $2,872,968 for Subject Property 2 represents the best evidence based on leases signed over the period 2015 to 2017 taxation years at comparable properties located within the same vicinity as the Subject Property 2.
121The Board rejects the Appellant’s FMRs for the same reasons in the Board’s findings under Subject Property 1 – 110 200 Windflower Gate at paragraphs 105 through 111.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
122In reviewing the evidence presented in support of FMR for Building AA &AB – Allied Tenants, Standard Units, Occupancy Code 510, MPAC relies on 22 leases signed in the 2015 to 2017 taxation years at eight comparable properties (Centre Street, Bass Pro Mill, Major Mackenzie Drive West, Weston Road, Colossus Drive, Westridge Phase II AA23, and Westridge Phase III C3) located in the same vicinity as the Subject Property. The analyses in Table 8 shows the median FMR for units less than 5,000 sq. ft. is $27.00 per sq. ft. and units greater than 5,000 sq. ft. is $24.25 per sq. ft.
123Based on the above analyses, the Board finds that the median FMR of $27.00 per sq. ft. based on the signed leases of comparable properties supports the returned FMR of $23.60 per sq. ft. for units less than 5,000 sq. ft. and the median FMR of $24.25 per sq. ft. supports the returned FMR of $23.60 per sq. ft. for units greater than 5,000 sq. ft. Therefore, the Board finds that the returned rates are fair, and no changes are required.
124In reviewing the evidence presented in support of FMR for Building AA – Big Box Tenant, Occupancy Code 622, the Board finds that the five leases signed in the 2016 and 2017 taxation years (four signed in 2016 and one in 2017), at Major Mackenzie Drive West and at 67 Colossus Drive analyzed above in Table 9 show that the median FMR is $20.50 per sq. ft.
125Based on this evidence, the Board finds that the median FMR of $20.50 per sq. ft. supports the returned FMR of $18.55 per sq. ft. Therefore, the Board finds that the returned FMR is fair, and no changes are necessary.
126In reviewing the evidence presented in support of FMR for Restaurants, Occupancy Code 701 and 532, the Board finds that the four leases signed in the 2016 and 2017 taxation years (two signed in 2016 and two in 2017), at Westridge Phase II AD (701), at Westridge Phase II AG1 (532), at Bass Pro Mill, and at Colossus (532) analyzed above in Table 10 show that the median FMR is $26.75 per sq. ft. which supports the returned FMR of $26.45. Therefore, the Board finds that the returned FMR is correct, and no change is necessary.
127Based on all the evidence presented in support of FMR, the Board finds that MPAC’s FMRs, when applied to the respective units at Subject Property 3, reflect a total PGI of $1,846,020. The Board finds that MPAC’s PGI of $1,846,020 for Subject Property 3 represents the best evidence because it is based on leases signed over the period 2015 to 2017 taxation years at comparable properties located within the same vicinity as the Subject Property 3.
128The Board rejects the Appellant’s FMRs for the same reasons in the Board’s findings under Subject Property 1 – 110 200 Windflower Gate at paragraphs 105 to 111.
Issue No. 1b - A Determination of the Correct Vacancy Allowance
MPAC’s Evidence
Subject Property 1 – 110 200 Windflower Gate (GLA 214,396 sq. ft.)
129Mr. Li explains that vacancy refers to the amount of lost revenue from space that is typically vacant. Collection loss represents outstanding rental and other payments owed by tenants.
130He states that MPAC reviews the vacancy and collection amounts for each comparable property and converts these into a combined percentage adjustment. The comparable properties are grouped into categories (major, standard and other retail), meaning that tenants in standard retail properties in the same market area receive the same vacancy and collection loss allowance, and so forth.
131Mr. Li testifies that the vacancy and collection loss allowances assigned to Subject Property 1 is the average vacancy and collection percentage of similar properties in the market area. The comparable properties are grouped by building classes (AA, A, B, and C). He explains that building classes in the same market area receive the same vacancy and collection loss allowance. Mr. Li further explains that the only exception to this rule is for anchor tenants, who receive an anchor specific allowance.
132Mr. Li testifies that a summary of Subject Property 1’s vacancy based on information provided through the Appellant’s Statement of Issues (“SOI”) shows that unit code AA5 was occupied as of May 21, 2018; and unit code AA11 was occupied as of June 1, 2018. Therefore, both units are no longer eligible for chronical vacancy (vacant for a continuous 6 months) in the 2018 taxation year. Based on this evidence Mr. Li testifies that the 2016 standard vacancy allowance is 3%, and the actual chronic vacancy rate is 6.46%, making the average vacancy rate 4.73% or 5%, rounded (3% + (6.46% - 3%) / 2%).
133Based on this evidence, Mr. Li is of the opinion that the eligible vacancy allowance for the 2017 taxation year should be 5%; and the eligible vacancy allowance for the 2018 through 2021 taxation years should be the standard vacancy allowance of 3%, because there was no chronic vacancy for that period of time for Subject Property 1.
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
134Mr. Li testifies that he determined the vacancy and collection allowance for Subject Property 2 by using the same methodology that was used for Subject Property 1 – 110 200 Windflower Gate. The only exception is that Subject Property 2 had no chronic vacancy and only receives the standard allowance of 3%.
135Based on the evidence, Mr. Li determines that the vacancy and collection loss allowance to be 3%, which accurately reflects the returned vacancy allowance of 3% for Subject Property 2.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
136Mr. Ho uses MPAC’s same methodology as described above under Subject Property 1 – 110 200 Windflower Gate for determining the vacancy and collection loss allowances for Subject Property 3.
137Based on these parameters, Subject Property 3 receives a vacancy allowance of 3%, because it does not suffer from chronic vacancy (vacant for a continuous 6 months). Mr. Ho explains that Unit CA3 became vacant May 2, 2016, and although no long-term lease was acquired to present time, this unit has short term leases over the period 2016 to 2018 taxation years, which Mr. Ho testifies, does not fulfill the requirement of chronic vacancy allowance.
138Based on the evidence Mr. Ho determines the vacancy allowance to be 3% for Subject Property 3 which supports the returned vacancy allowance of 3% for Subject Property 3.
MPAC’s Closing Arguments
139Based on the evidence presented in support of vacancy allowance, MPAC agrees that there is a vacancy issue that should be acknowledged and argues that the vacancy issue was only concentrated with the Allied tenants at Subject Property 1 - 110 200 Windflower Gate.
140MPAC argues that the Westridge Shopping Centre is made up of five properties, three of which are under appeal and only Subject Property 1 - 110 200 Windflower Gate is experiencing vacancy issues. Given the fact that these three Subject Properties can legally transact separately, are across the street from each other, and the issue of vacancy is confined to only 110 200 Windflower Gate during the relevant years in relation to the valuation date of January 1, 2016, MPAC submits that the larger vacancy reduction should be only applied to the property with the actual vacancy issue, as opposed to all three properties.
141Based on the evidence, MPAC submits that Subject Property 1 – 110 200 Windflower Gate suffered chronic vacancy in 2017, and that a larger vacancy allowance of 5% should be applied to the 2017 taxation year. However, for the 2018 through 2021 taxation years there was no chronic vacancy, therefore, the returned standard vacancy allowance of 3% is supported.
142In regard to Subject Property 2 - 7850 Weston Road; and Subject Property 3 - 3900 Highway 7, MPAC submits that these two properties operated below the market levels of vacancy (no chronic vacancy) and are only eligible for the standard vacancy allowance of 3%. Therefore, no change to the returned 3% standard vacancy allowance is necessary.
143On the contrary, MPAC argues that the Appellant’s suggestion that the small unit in the corner of Subject Property 1 - 110 200 Windflower Gate should impact the vacancy of the entire property, including Subject Property 2 - 7850 Weston Road and Subject Property 3 - 3900 Highway 7 is incorrect.
144In support of MPAC’s argument that the increased vacancy allowance of 5% should only be applied to the Subject Property 1 - 110 200 Windflower Gate that experienced increased vacancy in the 2017 taxation year and should not be applied to all three Subject Properties as suggested by the Appellant, MPAC cited the Amalie case at paras. 32 and 33.
Appellant’s Evidence
145Mr. Bradley testifies that allowances from the total FMR need to be made to allow for market vacancy and non-recoverable operating expenses that reflect the typical loss in revenue as of the valuation date of January 1, 2016. He testifies that a review of these allowances was completed in the CAP Rate Study, and a number of sources were also reviewed including third-party publications, and REIT occupancy statistics. Overall, the study found that for power centres in the GTA, the appropriate vacancy and expense allowances are 3% each.
146In addition, Mr. Bradley states that he reviewed the combined rent rolls (Subject Property 1, Subject Property 2, and Subject Property 3) for the period between 2015 and 2017 and during that period, the review showed vacancy ranging from 4.5% to 6.3%, which is higher than the 3% determined by the CAP Rate Study analysis. The following Table 15 is a summary of this analysis:
TABLE 15
| Vacancy Summary (2015 – 2017) | ||||||
|---|---|---|---|---|---|---|
| Vacancy/Occupied | 2015 (sq. ft.) | % | 2016 (sq. ft.) | % | 2017 (sq. ft.) | % |
| Vacant | 19,519 | 4.53 | 20,115 | 4.67 | 27,194 | 6.31 |
| Occupied | 411,273 | 95.47 | 410,677 | 95.33 | 403,598 | 93.69 |
| Total | 430,792 | 100.00 | 430,792 | 100.00 | 430,792 | 100.00 |
147Mr. Bradley testifies that vacancy is increasing as a result of the ongoing and increased pressure from online retail platforms being experienced by retail tenants, especially the mid/large size box stores and fashion retailers which are indicative of power centres like the Subject Property. Considering these issues, Mr. Bradley is of the opinion that a slight increase in the vacancy allowance from 3% based on his CAP Rate Study is warranted. Therefore, Mr. Bradley increases the vacancy allowance to 4% and determines that expense allowance is 3% for the Subject Property.
Appellant’s Closing Arguments
148The Appellant argues that it presents the best evidence of vacancy allowance based on analyses of industry publications to establish a vacancy allowance of 3%, and vacancies experienced at the Subject Property for the period 2015 to 2017 taxation years due to changing market and tenant sentiments toward power centres which accounted for a vacancy allowance of 1%. Based on the combined vacancies, the Appellant argues that the correct vacancy allowance should be 4% for the Subject Property.
149On the contrary, the Appellant argues that MPAC’s vacancy allowance is singularly focused on whether chronic vacancy applies to the Subject Property. The Appellant argues that other than an adjustment for chronic vacancy, MPAC simply re-states the returned vacancy allowance as its opinion, without any description of the required independent market analysis.
Findings on Issue No. 1b - A Determination of the Correct Vacancy Allowance
150In reviewing the evidence presented in support of vacancy allowance for Subject Property 1 – 110 200 Windflower Gate, the Board finds that MPAC presents the best evidence of 5% for the 2017 taxation year, which is the standard vacancy allowance based on comparable properties in the same vicinity, combined with the allowance for chronic vacancies experienced at Subject Property 1 and the standard vacancy allowance of 3% for 2018 through 2021 taxation years.
151In reviewing the evidence presented in support of vacancy allowance for Subject Property 2 – 7850 Weston Road, and for Subject Property 3 - 3900 Highway 7, the Board finds that MPAC presents the best evidence of 3% vacancy allowance for the 2017 through 2021 taxation years, because these two Subject Properties did not experience any chronic vacancies during the period. Therefore, the Board finds that the standard vacancy allowance of 3% is fair.
152The Board also finds that MPAC provides evidence of how the standard vacancy allowance was determined, which MPAC stated was based on reviews of the vacancy and collection amounts for each comparable property and converted the amounts into a combined percentage adjustment. MPAC further explained, that the comparable properties were grouped into categories (major, standard and other retail), meaning that tenants in standard retail properties in the same market area receive the same vacancy allowance. Based on this evidence the Board finds that MPAC has applied a consistent and equitable approach in the determination of vacancy allowance.
153The Board finds that although there were no chronic vacancies at Subject Property 2 – 7850 Weston Road, and at Subject Property 3 - 3900 Highway 7, the standard vacancy allowance was given to each property regardless of whether or not chronic vacancy exists.
154The Board finds that the Appellant’s own finding of 3% vacancy allowance, based on market evidence supports MPAC’s finding of 3% standard vacancy allowance. Therefore, the Board accepts the 3% vacancy allowance, based on the review of comparable properties in the open market and within the same vicinity.
155Based on the evidence, the Board finds the 5% vacancy allowance for Subject Property 1 – 110 200 Windflower Gate for 2017 taxation year is higher than the returned vacancy allowance of 3%, therefore, the vacancy allowance for the 2017 taxation year is increased to 5%. The Board finds that the standard vacancy allowance of 3% for 2018 through 2021 taxation years supports the returned vacancy allowance of 3%, therefore, the Board finds the 3% vacancy allowance is fair.
156The Board finds that that the standard vacancy allowance of 3% for Subject Property 2 – 7850 Weston Road and Subject Property 3 – 3900 Highway 7 for the 2017 through 2021 supports the returned vacancy allowance of 3%, therefore, the Board finds the 3% vacancy allowance is fair.
157In reviewing the Appellant’s evidence in support of vacancy allowance the Board rejects the 4% vacancy allowance, because it was determined based on the combined vacancies of Subject Property 1 – 110 200 Windflower Gate, Subject Property 2 - 7850 Weston Road, and Subject Property 3 - 3900 Highway 7 as opposed to a determination based on each individual Subject Property.
158The Board finds that the Subject Properties are legally registered as three separate properties with their own separate Roll Numbers, separate addresses and assessed individually. Therefore, the Board finds that a determination based on vacancy at each individual Subject Property is more accurate and more reflective of the true vacancy for the specific units and specific periods at the individual Subject Properties. This decision is supported in the Amalie case in paragraphs 32, 33 and 34 which state:
(32) Mr. Grosman submits that the difficulty in leasing Unit 5 reflects a special case and that its continued vacancy provides rationale for a higher vacancy allowance for the entire property …
(33) By dividing the leasable area of Unit 5 into the total leasable area of the building, Mr. Grosman submits an appropriate vacancy allowance would be that percentage, or roughly 6%. Ms. Mattat submitted that, to apply a 6% over the entire property would suggest that the vacancy allowance should be twice what is normally applied in the market place, …
(34) The Board finds that any special considerations of this subject property, brought on by its location and access issues are adequately reflected in the reduced rents found above for the three Units in dispute. … The Board finds that the applicable vacancy allowance is 3%.
Issue No. 1c - A Determination of the Correct Expense Allowance
MPAC’s Evidence
Subject Property 1 – 110 200 Windflower Gate (GLA 214,396 sq. ft.)
159Mr. Li explains that operating expenses can be categorized as recoverable and non-recoverable expenses. Recoverable expenses are those operating expenses that are recovered from the tenant as outlined within a lease and are typically recorded as recoverable income. He further explains that under a triple net lease arrangement, the landlord includes the cost of most operating expenses in a lease, therefore, expenses such as utilities, property taxes, building insurance and administration costs are recoverable expenses.
160Mr. Li also explains that there are expenses associated with operating buildings that are not necessarily passed to the tenant and recovered by the owner. These expenses are referred to as non-recoverable expenses such as marketing costs, large capital cost projects, legal, auditing fees and expenses associated with vacant areas of the building such as ongoing heat and hydro, insurances, or security that continues to occur as the space remains vacant.
161Mr. Li states that a non-recoverable expense is determined by subtracting the total of all recoverable income from the total of typical expenses, including capital cost projects amortized over a ten-year period. The recoverable amount is calculated as a ratio of effective gross income.
162Taking into consideration the revised 2017 chronic vacancy rate, Mr. Li determined the expense allowance of Subject Property 1 is 3.5% for 2017 taxation year, and 2% for the 2018 through 2021 taxation years. Mr. Li is of the opinion that the expense allowance is accurate for Subject Property 1.
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
163Mr. Li testifies that he determined the expense allowance for Subject Property 2 by using MPAC’s methodology of a standard allowance of 2% discussed above under Subject Property 1 - 110 200 Windflower Gate. Based on MPAC’s methodology and the fact that there is no chronic vacancy that could have increased the amount of the expense allowance, Mr. Li determined that the expense allowance of 2% is fair and supports the returned expense allowance of 2% for Subject Property 2.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
164Mr. Ho testifies that he determined the expense allowance for Subject Property 3 by using the MPAC’s methodology as discussed above under Subject Property 1 – 110 200 Windflower Gate.
165Based on MPAC’s methodology and the fact that there is no chronic vacancy that could have increased the amount of the expense allowance, Mr. Ho determined the expense allowance of 2% for Subject Property 3, because it is supported by evidence based on Operating Statements for the period 2014 to 2017 taxation years with a median expense rate of 0.28% which was provided by the Appellant.
166Based on the evidence Mr. Ho is of the opinion that a 2% expense allowance is fair and supports the returned expense allowance of 2% for Subject Property 3.
167Based on all the evidence, MPAC submits that the expense allowance of 3.5% is appropriate for Subject Property 1 - 110 200 Windflower Gate, because of the increase in vacancy for the 2017 taxation year, however, the standard expense allowance of 2% returned for Subject Property 2 - 7850 Weston Road and Subject Property 3 - 3900 Highway 7 requires no change, because these two Subject Properties did not experienced any chronic vacancy over the period 2017 through 2021 taxation years, therefore, there is no justification to increase the expense allowance.
Appellant’s Evidence
168Based on the evidence the Appellant is of the opinion that the expense allowance should be 3%, because of increased expenses brought on by the increased vacancy at the Subject Properties. Therefore, the Appellant is or the opinion that the 3% expense allowance is correct.
Findings on Issue No. 1c - A Determination of the Correct Expense Allowance
169In reviewing the evidence presented in support of expense allowance, the Board finds that MPAC presents the best evidence based on MPAC’s methodology for determining non-recoverable expenses presented above and taking into consideration chronic vacancies that occurred for the periods under appeal at the respective Subject Properties. Like vacancy, MPAC has determined a standard expense allowance of 2%, which is applied to properties whose value is determined by the Income Approach even when there are no chronic vacancies.
170Based on the evidence and taking into consideration the chronic vacancy rate in the 2017 taxation year at Subject Property 1 – 110 200 Windflower Gate, the Board finds that the expense allowance of 3.5% for the 2017 taxation year is reasonable, because the expenses would likely increase over the standard expense allowance of 2% due to the chronic vacancy and other related costs to maintain the vacant space. The Board finds that the standard expense allowance of 2% for the 2018 through 2021 taxation years is reasonable, because there were no chronic vacancies during that period.
171Based on the evidence, the Board finds that that the expense allowance of 2% for Subject Property 2 - 7850 Weston Road for the 2017 through 2021 taxation years is reasonable, because there were no chronic vacancies for that period, therefore, an additional allowance that would have resulted for chronic vacancies is not necessary.
172Based on the evidence, the Board finds that that the expense allowance of 2% for Subject Property 3 - 3900 Highway 7 for the 2017 through 2021 taxation years is reasonable, because there were no chronic vacancies for that period, therefore, an additional allowance that would have resulted for chronic vacancies is not necessary.
173In reviewing the Appellant’s evidence, the Board rejects the Appellant’s argument that the 3% expense allowance is due to increased vacancies and the impact they have on expenses. The Board rejects this argument, because the Appellant’s determination of the expense allowance is based on the combined expenses of the three Subject Properties, as opposed to a determination based on the individual expenses at each Subject Property.
174The Board finds that the Subject Properties are legally registered as three separate properties with their own separate Roll Numbers, separate addresses, assessed individually and transact separately. Therefore, the Board finds that a determination of expense allowance based on each individual Subject Property is more accurate and more reflective of the true expense experienced at each Subject Property as opposed to combined expenses of the three Subject Properties.
Issue No. 1d - Calculation of Net Operating Income
MPAC’s Evidence
Subject Property 1 – 110 200 Windflower Gate (GLA 214,396 sq. ft.)
175Based on the PGI (FMR) vacancy allowance and expense allowance, Mr. Li determines the NOI for Subject Property 1 to be as follows in Table 16.:
TABLE 16
| 2017 Taxation Year | |
|---|---|
| Potential Gross Income | $4,758,083 |
| Vacancy Allowance | $237,904 (-5%) |
| Expense Allowance | $158,206 (-3.5%) |
| Net Operating Income | $4,361,973 |
| 2018 – 2021 Taxation Years | |
|---|---|
| Potential Gross Income | $4,758,083 |
| Vacancy Allowance | $142,742 (-3%) |
| Expense Allowance | $92,307 (-2%) |
| Net Operating Income | $4,523,034 |
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
176Based on the PGI (FMR), vacancy allowance, and expense allowance, Mr. Li determines the NOI for Subject Property 2 to be as follows in Table 17:
TABLE 17
| 2017 – 2021 Taxation Years | |
|---|---|
| Potential Gross Income | $2,872,968 |
| Vacancy Allowance | $86,189 (-3%) |
| Expense Allowance | $55,736 (-2%) |
| Net Operating Income | $2,731,043 |
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
177Based on the PGI (FMR) vacancy allowance and expense allowance, Mr. Ho determines the NOI for Subject Property 3 to be as follows in Table 18:
TABLE 18
| 2017 – 2021 Taxation Years | |
|---|---|
| Potential Gross Income | $1,846,020 |
| Vacancy Allowance | $55,381 (-3%) |
| Expense Allowance | $35,813 (-2%) |
| Net Operating Income | $1,754,826 |
Finding of Issue No. 1d – Calculation of Net Operating Income
178In reviewing the calculation of the NOI, based on the Board’s findings of PGI (FMR), vacancy allowance and expense allowance, the Board finds that MPAC presents the correct calculation for Subject Property 1 – 110 200 Windflower Gate with an NOI of $4,361,973 for the 2017 taxation year; and an NOI of $4,523,034 for the 2018 through 2021 taxation years, for Subject Property 2 – 7850 Weston Road with an NOI of $2,731,043 for the 2017 through 2021 taxation years and for Subject Property 3 - 3900 Highway 7 with an NOI of $1,754,826 for the 2017 through 2021 taxation years as stated above
179On the contrary, the Board rejects the Appellant’s NOI of $3,982,112 for the 2017 through 2021 taxation years for Subject Property 1; NOI of $2,782,659 for the 2017 through 2021 taxation years for Subject Property 2; and NOI of $1,553,990 for the 2017 through 2021 for the 2017 through 2021 taxation years, because the FMR, vacancy allowance, and expense allowance are rejected for the reasons stated above by the Board.
Issue No. 1e - A Determination of the Correct Capitalization Rate
MPAC’s Evidence
Subject Property 1 – 110 200 Windflower Gate (GLA 214,396 sq. ft.); and Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
180Mr. Li testifies that the direct capitalization method provides an assessment of the market levels of annual net operating income and expenses for properties to determine the Cap Rate for sold properties using the income and sales information. Mr. Li also testifies that he investigated the sales of sold properties to ensure they meet the conditions set out in the Act.
181Mr. Li testifies that he derived a Cap Rate by analysing the relationship between the NOI and the sale prices of retail properties that transacted over the period January 2015 to 2017. Mr. Li explains that the formula for determining the Cap Rate as (Cap Rate = NOI / sale prices).
182In support of the Cap Rate, Mr. Li testifies that he only uses base and shoulder year comparable properties in his analysis, which were taken from the Appellant’s Cap Rate analysis. He also testifies that due to insufficient Big Box sales he extended the vicinity to include sales in the GTA; and extended property types to include Property Codes 425 and 426 which he deemed comparable properties for determining the Cap Rate. The following Table 19 is an analysis of the sales used to determine the Cap Rate:
TABLE 19
| Roll #s | Property Code | Address | Sale Date | Sale Price ($) | Time-adjusted Sale Price ($) | Capitalization Rate (%) |
|---|---|---|---|---|---|---|
| 1901-011-030-02600 | 425 | 1089 Kingston Road | 2015/07/14 | 10,800,000 | 11,426,400 | 6.03 |
| 1901-124-451-01000 | 425 | 240 -250 Alton Tower Circle | 2015/03/16 | 25,641,410 | 28,205,551 | 5.04 |
| 1901-112-480-00200 | 425 | 5661 Steeles Avenue West | 2017/07/18 | 45,000,000 | 38,655,000 | 8.88 |
| 1914-052-010-00301 | 425 | 601-605 Rogers Road | 2015/09/10 | 25,800,000 | 26,599,800 | 4.89 |
| 1919-036-575-00400 | 425 | 201 Lloyd Manor Road | 2017/10/10 | 25,750,000 | 21,449,750 | 5.42 |
| 1946-000-051-98800 | 425 | 14800 Yonge Street | 2017/08/22 | 42,240,000 | 35,904,000 | 4.50 |
| 2124-010-003-08410 | 427 | 12720 – 12788 Highway 50 | 2016/07/15 | 39,686,789 | 37,623,076 | 4.68 |
| 2402-020-204-04850 | 426 | 1200 Brant Street | 2015/09/22 | 40,545,000 | 41,801,895 | 5.63 |
| MEDIAN | 4.97 |
183Based on the above analysis, the median Cap Rate is 4.97%, which is lower than the returned Cap Rate of 5.5%. Although the Cap Rate is lower, Mr. Li is of the opinion that the returned Cap Rate is reasonable and should be maintained at 5.5% as returned for Subject Property 1 and Subject Property 2.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
184Mr. Ho determined the Cap Rate for Subject Property 3 by using the same methodology that was used for Subject Property 1 – 110 200 Windflower Gate and the same eight sales sold over the period 2015 to 2017, which were used to determine the Cap Rate of 4.97%. However, Mr. Ho testifies that if the three sales in 2017 were to be removed from the analysis it would result in a Cap Rate of 5.04% which he believes supports the returned Cap Rate of 5.5%.
185On cross-examination, Mr. Ho gave oral testimony that the following three comparable properties should be removed for the reasons stated:
I. 240 - 250 Alton Tower Circle should be removed because of issues relating to vacancy.
II. 14800 Yonge Street should be removed because a large portion (20.5% of the leasable area) is under the lease.
III. 1089 Kingston Road is too small as compared to Subject Property 3.
186Based on the evidence, Mr. Ho is of the opinion that the Cap Rate is 5% and that the returned Cap Rate of 5.5% is reasonable and no change is necessary.
Appellant’s Evidence
187In support of the Cap Rate Mr. Bradley presents a GTA Large Format Capitalization Rate Study, based on various retail property types, because Mr. Bradley is of the opinion that the Subject Property meets the criteria as a large format retail/power centre. He also states that the study suggests that power centres have been on a consistent decline with respect to the general market sentiment making these assets less desirable and high risk, because of shifting retail conditions, higher vacancy rates and retail closures.
188Mr. Bradley testifies that the Cap Rate study identifies sales included in the analysis such as a combination of power centres and neighbourhood shopping centres in the GTA. He continues by saying that on average, power centres tend to transact at a higher capitalization rate than neighbourhood shopping centres, because of the inherent risk factors for reasons discussed above. The following Table 20 summarizes the analysis of the Cap Rate of the 12 sales analyzed:
TABLE 20
| 12 Comparable Properties (GTA) | GLA (sq. ft.) | Sale Date | Sale Price ($) | Time Adjusted Sale Price ($) | Time Adjusted Fee Simple Cap Rate (%) |
|---|---|---|---|---|---|
| Burlington Shopping Centre, 3060 Davidson Court, Burlington | 128,126 | 10/12/2018 | 26,500,000 | 24,698,000 | 6.83 |
| 410 @ 7 Centre, 148 – 156 West Drive, Brampton | 248,744 | 10/4/2018 | 59,000,000 | 55,020,000 | 7.53 |
| Thickson Centre, 1751 Victoria St E, Whitby | 114,634 | 1/9/2018 | 31,100,000 | 29,546,000 | 6.47 |
| Lloyd Plaza, 201 Lloyd Manor Road, Etobicoke | 73,320 | 10/10/2017 | 25,750,000 | 24,618,000 | 5.79 |
| Aurora Shopping Centre, 14800 Yonge Street, Aurora | 123,154 | 8/22/2017 | 42,240,000 | 40,521,000 | 6.04 |
| Fifty South Shopping Centre, 12720 Highway 50, Caledon | 174,242 | 7/15/2016 | 39,686,789 | 39,151,000 | 6.89 |
| Brant Power Centre, 1250 Brant Street, Burlington | 115,077 | 9/22/2015 | 40,545,000 | 40,829,000 | 5.29 |
| Midland Square, 3740 Midland Avenue, Scarborough | 108,391 | 3/3/2014 | 25,475,000 | 26,684,000 | 5.97 |
| Eagles Landing Shopping Centre, 1460 Major Mackenzie Drive West, Vaughan | 177,054 | 11/22/2013 | 60,000,000 | 63,290,000 | 6.63 |
| Milliken Crossings, 5661 Steeles Avenue East, Scarborough | 149,618 | 8/30/2013 | 43,450,000 | 46,100,000 | 6.13 |
| Brookdale Centre, 1105 Kingston Road, Pickering | 233,739 | 3/28/2013 | 65,920,000 | 70,697,000 | 5.02 |
| Whitby Shores Shopping Centre, 619 Victoria Street West, Whitby | 84,229 | 3/28/2013 | 28,700,000 | 30,780,000 | 5.35 |
| Average | 6.16 | ||||
| Median | 6.09 |
189Based on the above summary, Mr. Bradley is of the opinion that the Cap Rate applicable to power centres in the GTA is 6.00%. He also states that the comparable properties used in the analysis are not all defined as power centres or big box shopping centres, and that it is important to note that neighbourhood shopping centres transact at a lower CAP Rate than power centres, because of the smaller format retail spaces as opposed to the large format retail boxes that are experiencing higher risk of vacancy and lower rents in the current retail environment.
190Mr. Bradley testifies that demographics are an important component for retail property investors as they have a large impact on the vehicle and pedestrian traffic and sale volume. He states that typically, the higher the population and household income, the higher the sales volume and traffic. Mr. Bradley is of the view that the 12 comparable properties used in the Cap Rate analysis above are located within 0 - 5 kilometers of the Subject Property, are demographically well aligned with the Subject Property, and further support the comparability for determining the Cap Rate for the Subject Property.
Findings on Issue No. 1e - A Determination of the Correct Capitalization Rate
191MPAC has presented the same evidence in support of the Cap Rate for all three Subject Properties, therefore, the Board’s analysis is the same for all three Subject Properties.
192In reviewing the evidence presented in support of the Cap Rate, the Board finds the best evidence are the four time-adjusted sales (“TAS”) presented by MPAC (including two sales also presented the Appellant) which sold in the 2015 and 2016 taxation years. These four sales are located at:
I. 1089 Kingston Road with a Cap Rate of 6.89%.
II. 601 - 605 Rogers Road with a Cap Rate of 4.89%.
III. 12720 - 12788 Highway 50 with a Cap Rate of 4.68%.
IV. 1200 Brant Street with a Cap Rate of 5.63%.
193The Board finds that these four sales demonstrate a median Cap Rate of 5.26%, which the Board finds supports the returned Cap Rate of 5.5%. Therefore, the Board finds that the Cap Rate of 5.26% is fair, and no change is necessary, therefore the Board will accept the Cap Rate of 5.5%.
194The Board did not exclude the sale of the comparable property at 1089 Kingston Road as suggested by Mr. Ho, because this comparable property is smaller in size. The Board finds that the determination of the Cap Rate is not based on size of the comparable property and instead is the fraction of the NOI and the sale (NOI / sale price). Therefore, the Board included this comparable property in its determination.
195The Board excluded the sale of the comparable located at 240 250 Alton Tower Circle as suggested by Mr. Ho, because of issues relating to vacancy which could negatively impact the accuracy of the Cap Rate.
196MPAC’s remaining three sales of comparable properties sold in 2017 at 5561 Steeles Avenue West, 201 Lloyd Manor Road and 14800 Yonge Street were not relied upon because the sales are too far removed from the valuation date of January 1, 2016, to provide any accurate finding of Cap Rate. Instead, the Board relies on the four sales which occurred closer to the valuation date of January 1, 2016.
197In reviewing the Appellant’s 12 sales sold over the period 2013 through 2018 in support of the Cap Rate of 6%, the Board rejects the Cap Rate of 6%. However, the Board relies on the two sales at 12720 Highway 50 and 1250 Brant Street (also used by MPAC) which occurred in 2015 and 2016 respectively. These two sales are included in the Board’s determination of the correct Cap Rate with a median CAP Rate of 5.26% as stated above.
198The remaining 10 sales of comparable properties sold in 2013, 2014, 2017 and 2018 taxation years were not relied on by the Board, because the sales are too far removed from the valuation date of January 1, 2016, to provide any accurate findings of Cap Rate. Therefore, the Board relies on the four sales as stated above, which occurred in 2015 and 2016 closer to the valuation date of January 1, 2016.
199Based on all the evidence the Board finds that the Cap Rate of 5.26% supports the returned Cap Rate of 5.5%, therefore, no change in the returned Cap Rate is necessary.
Issue No. 1f - Calculation on the Correct Current Value.
MPAC’s Evidence
Subject Property 1 – 110 200 Windflower Gate (GLA 214,396 sq. ft.)
200Based on the above determination of the NOI of $4,361,973 for the 2017 taxation year, and the NOI of $4,523,034 for the 2018 through 2021 taxation years, Mr. Li determines the correct current value by dividing the NOI by the Cap Rate of 5.5% to arrive at the following correct current value:
2017 Taxation Year
Correct Current Value
= ($4,361,973 / 5.5%)
= $79,309,000 (rounded)
2018 - 2021 Taxation Years
Correct Current Value
= ($4,523,034/ 5.5%)
= $82,237,000 (rounded)
Subject Property 2 - 7850 Weston Road (GLA 134,769 sq. ft.)
201Based on the above determination that the NOI is $2,731,043 for the 2017 through 2021 taxation years, Mr. Li determines the correct current value by dividing the NOI by the Cap Rate of 5.5% to arrive at the following correct current value:
2017 – 2021 Taxation Years
Correct Current Value
= ($2,731,043 / 5.5%)
= $49,655,000 (rounded)
202Although the correct current value is $49,655,000 based on the above analysis, MPAC and the Representative for The Forzani Group Ltd. had reached an agreement for the unit occupied by Sports Chek prior to today’s hearing to reduce its FMR from $19.80 per sq. ft. to $18.00 per sq. ft.; maintaining the vacancy and collection allowance at 3%, the non-recoverable expense allowance at 2% and the CAP Rate at 5.5%, thereby reducing the returned assessment from $6,942,000 (rounded) to $6,311,000 (rounded) reflecting a reduction in value of $631,000 (rounded). When the reduction is subtracted from the correct current value of $49,655,000 determined above, it results in a revised correct current value of $49,024,000 ($49,655,000 minus $631,000).
203Based on the above evidence, Mr. Li determines that the correct current value for Subject Property 2 is $49,024,000 for the 2017 through 2021 taxation years.
Subject Property 3 - 3900 Highway 7 (GLA of 83,002 sq. ft.)
204Based on the above determination that the NOI is $1,754,826, Mr. Ho determines the correct current value by dividing the NOI by the Cap Rate of 5.5% to arrive at the following correct current value:
2017 – 2021 Taxation Years
Correct Current Value
= ($1,754,826 / 5.5%)
= $31,905,000 (rounded)
205Based on the above evidence, Mr. Ho determines that the correct current value for Subject Property 3 is $31,905,000 for the 2017 through 2021 taxation years.
206In reviewing the above calculations of the current value, the Board finds that the above current values are correct for Subject Property 1, Subject Property 2 and Subject Property 3.
CONCLUSION
207Based on all the above evidence in support of the correct current value, the Board finds the correct current value as of the valuation date of January 1, 2016, for each of the three Subject Properties is as follows:
Subject Property 1 – 110 200 Windflower Gate, the correct current value is $79,309,000 for the 2017 taxation year and $82,237,000 for the 2018 through 2021 taxation years.
Subject Property 2 - 7850 Weston Road, the correct current value is $49,024,000 for the 2017 through 2021 taxation years.
Subject Property 3 - 3900 Highway 7, the correct current value is $31,905,000 for the 2017 through 2021 taxation years.
208The Board also finds that equity pursuant to s. 44(3)(b) is not at issue and no further reduction is required.
ORDER
209The Board orders the following:
- 110 200 Windflower Gate -The returned assessment of $83,358,000 is reduced to $79,309,000 for the 2017 taxation year; and the returned assessment of $83,358,000 is reduced to $82,237,000 for the 2018 through 2021 taxation years with the following apportionments:
| 2017 Taxation Year | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (FULL) CT | $9,247,480 |
| Commercial (Shopping Centre) St | $70,061,520 |
| TOTAL | $79,309,000 |
| 2018 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) Ct | $9,588,890 |
| Commercial (Shopping Centre) St | $72,648,110 |
| TOTAL | $82,237,000 |
- 7850 Weston Road - The returned assessment of $49,655,000 is reduced to $49,024,000 for the 2017 through 2021 taxation years with the following apportionment:
| 2017 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) Ct | $9,094,000 |
| Commercial (Shopping Centre) St | $39,930,000 |
| TOTAL | $49,024,000 |
- 3900 Highway 7 – The returned assessment of $31,905,000 is confirmed for the 2017 through 2021 taxation years with the following apportionment:
| 2017 - 2021 Taxation Years | |
|---|---|
| CLASSIFICATION | VALUE |
| Commercial (Full) | $9,610,000 |
| Commercial (Shopping Centre) | $22,295,000 |
| TOTAL | $31,905,000 |
"Jennifer Griffith"
JENNIFER GRIFFITH MEMBER Assessment Review Board Website: www.tribunalsontario.ca/arb
Schedule A Schedule A - Continued