CP Reit Ontario Properties Ltd. v. Municipal Property Assessment Corporation Region 09, 2023 CanLII 28279

Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

April 04, 2023

FILE NO.:

WR 183443A

AMENDED DECISION ISSUED: April 24, 2023

Assessed Person(s):

CP Reit Ontario Properties Ltd.

Appellant(s):

CP Reit Ontario Properties Ltd.

Respondent(s):

Municipal Property Assessment Corporation Region 09

Respondent(s):

City of Toronto

Property Location(s):

352 Melrose Avenue

Municipality(ies):

City of Toronto

Roll Number(s):

1908-063-110-01400-0000

Appeal Number(s):

3220858, 3300242, 3352466 and 3401361

Taxation Year(s):

2017, 2018, 2019 and 2020

Hearing Event No.:

778726

Legislative Authority:

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

APPEARANCES:

Parties

Representative

CP Reit Ontario Properties Ltd.

Warren Hovius

Municipal Property Assessment Corporation

Megan Cyr

City of Toronto

No one appeared

HEARD:

February 22, 2023 by telephone conference

ADJUDICATOR(S):

Subuola Awoleri, Member

AMENDED DECISION

In accordance with Rule 99 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1 2021, related to the correction of minor errors and in accordance with section 21.1 of the Statutory Powers and Procedure Act regarding the correction of errors, this Amended Decision is issued to address a classification change in paragraphs 45 and 47. The amendments have been underlined for ease of reference. There are no other changes in this Amended Decision.

OVERVIEW

1CP Reit Ontario Properties Ltd. (the “Appellant”) filed an appeal of the assessment of the Subject Property for the 2017 taxation year with the Assessment Review Board (the “Board”) under s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), on the ground that the assessment is too high. The Appellant is deemed to have brought the same appeal in respect of the 2018 to 2020 taxation years, pursuant to s. 40(26) of the Act. The 2021 and 2022 taxation year assessments for the Subject Property are not under appeal by the Appellant.

2The Appellant argued that the current value of the Subject Property for the 2017 to 2020 taxation years should be $929,000 using the income approach, and it should be assessed as a surface parking lot used in connection with the adjacent grocery store for all the taxation years under appeal.

3The Municipal Property Assessment Corporation (“MPAC”) assessed the Subject Property as vacant residential land with property code 100 for the 2017 to 2019 taxation years, at a value of $2,245,000 and for the 2020 taxation year, at a value of $1,853,000. MPAC requests that the Board revise the current value of the Subject Property for the 2017 to 2020 taxation years to $1,618,000; arrived at using the direct comparison approach as a surface parking lot used in conjunction with another property under property code 482.

Background

4For the taxation years under appeal, the Subject Property has been and is still being used as a surface parking lot used in conjunction with a free standing, single occupancy No Frills grocery store located at 1811 Avenue Road.

5The Subject Property and the No Frills grocery store are owned by the Appellant.

6For the 2017 to 2020 taxation years, MPAC assessed both properties (the Subject Property and the No Frills grocery store) separately with separate roll numbers.

7For the 2021 and 2022 taxation years, MPAC initiated a consolidation of the roll numbers for the Subject Property and the grocery store under a single roll number and assessed both properties as a single property using the income approach to value.

8The Appellant filed an appeal for the two properties that were consolidated under one roll number for the 2021 and 2022 taxation years. MPAC and the Appellant resolved the appeals and minutes of settlement were executed and filed with the Board for an agreed current value assessment (“CVA”) of $5,941,000 for the entire consolidated properties for the 2021 and 2022 taxation years. The Appellant has not appealed the assessment of the Subject Property for the 2021 and 2022 taxation years.

Areas of Agreement

9The parties agree that:

a. Equity is not at issue in these appeals.

b. The highest and best use of the Subject Property for the taxation years under appeal is its current use, as a surface parking lot used in conjunction with another property.

Issues for the Hearing

10The only issue to be determined in this proceeding is:

What is the correct current value of the Subject Property for the 2017, 2018, 2019 and 2020 taxation years?

Result

11The Board determines the correct current value of the Subject Property for the 2017 to 2020 taxation years to be $991,000 (rounded).

12Pursuant to s. 44(3)(b) of the Act, the Board finds that equity is not at issue. Therefore, no equity reduction is required.

ANALYSIS

Description of the Subject Property

13The Subject Property is a 0.08-acre parcel of land used for parking in conjunction with another property. It has 23.83 feet (“ft.”) of effective frontage and 150 ft. of effective depth, for an effective site area of 3,574.50 square feet. The Subject Property abuts light traffic.

Issue - What is the correct current value of the Subject Property for the 2017, 2018, 2019 and 2020 taxation years?

What is the best approach to determining the correct current value?

14The parties used different methods in arriving at the current value of the Subject Property. As a result, the Board has to first decide on the best valuation method and the best evidence presented to make a correct finding of current value.

MPAC’s Valuation Methodology – Direct Comparison

15MPAC used the direct comparison approach to arrive at its opinion of current value. MPAC’s witness, Shane Vithana, testified that MPAC assesses surface parking lots using the direct comparison approach.

16In the direct comparison approach, the value of the Subject Property is determined by reviewing the sales of similar properties within the vicinity. Mr. Vithana testified that “sold properties with features considered to be inferior to the subject property require an upward adjustment to their sales prices. Sold properties with features considered superior to the subject property require a downward adjustment to their sale prices.”

17He further testified that the income approach to value would not be the correct methodology to use to determine the current value of the Subject Property since there was lack of data for the parameters used in the income approach, such as the vacancy rate, expense rate, and the capitalization rate for an accurate valuation of the Subject Property.

18Another approach is the income approach to value; this is based on a theory that the Subject Property is only purchased for its income-generating capacity. The purchaser is seeking a rate of return from the Subject Property, which is comparable to investing in other comparable assets with a similar risk.

19Mr. Vithana testified that since the Subject Property can be used for mixed use, including residential, MPAC presented four sales of commercial properties within one kilometer of the Subject Property and eight vacant land sales, to use to determine the current value of the Subject Property since there are no parking lot sales within the vicinity of the Subject Property.

20Mr. Vithana admitted during cross-examination that MPAC’s comparable sales, which are improved properties, are superior to the Subject Property and that the vacant land sales were sold as vacant but have since had buildings built on them after sales.

Appellant’s Valuation Methodology – Income Approach

21The Appellant’s witness, Jeff Derbyshire, testified that the direct comparison approach is not the appropriate methodology to determine the current value of the Subject Property, since it is unlikely that the Subject Property would sell alone without the grocery store. He further added that due to the Subject Property’s lack of direct access to Avenue Road and exposure, it would be a further deterrent to a potential buyer. Furthermore, the Appellant argued that for the direct comparison approach, there are lack of comparable sales of parking lots to compare with the Subject Property.

22The Board notes that during cross-examination, MPAC acknowledged that the Subject Property is not technically a corner lot, and therefore does not have direct access to Avenue Road. This is contrary to what MPAC presented in its valuation report stating that: “…It is located on the north-east corner of Avenue Rd and Melrose Ave.”

23The Appellant submits that for the 2016 CVA, for taxation years 2017 - 2022, the ownership of the Subject Property is the same, the state and condition of the Subject Property did not change, it has always been a surface parking lot used in connection with the grocery store, and it was MPAC not the Appellant that initiated the consolidation in 2021.

24During cross-examination, MPAC admitted that prior to the 2021 taxation year, it did not know that the Subject Property was used together with the grocery store and that it cannot retroactively consolidate the Subject Property with the grocery store for the 2017- 2020 taxation years, which are under appeal. The Board notes that while MPAC submits that a retroactive consolidation is not possible, MPAC has acknowledged that the highest and best use of the Subject Property is its current use as a surface parking lot used in connection with another property for all the taxation years under appeal.

25The Appellant argued that the income approach is the best approach to value the Subject Property. To arrive at an appropriate current value for the Subject Property, the Appellant viewed the Subject Property and the grocery store as a single property for all the taxation years under appeal, even though it was not consolidated until the 2021 taxation year.

26Mr. Derbyshire testified that for the 2021 and 2022 taxation years, the agreed upon value for the consolidated property (Subject Property and grocery store) by MPAC and the Appellant was $5,941,000, using the income approach. The Appellant presented the Board with a table of the agreed values for the parameters of the income approach. The details are in Table 1 below:

TABLE 1

Level

Sq. ft.

FMR

Annual Rent

Less Vac. %

Effective Gross Inc

Less Expense %

NOI

Cap Rate

CVA

Grocers

13,299

$25.00

$332,475

$6,650

$325,826

$6,517

$319,309

6.00%

$5,321,817

Basement

10,458

$3.70

$38,695

$774

$37,921

$758

$37,162

6.00%

$619,372

$5,941,188

27The Appellant deducted the agreed value of the consolidated property (the Subject Property and grocery store) of $5,941,000 from the returned assessed pre-consolidation value of the grocery store for the 2017 to 2020 taxation years, which the Appellant provided as $5,012,000 to arrive at a value of $929,000. The Appellant argued that $929,000 is the correct current value of the Subject Property for the 2017-2020 taxation years.

28During cross-examination, the Appellant admitted that it did not present into evidence all the analysis of the parameters of the income approach, such as a fair market rent analysis and capitalization rate study. The Appellant indicated that it was not necessary to present it into evidence since it was already provided for the appeal of the grocery store, which was settled by the Appellant and MPAC and is not the subject of this appeal.

Findings on the Best Approach to Determining Current Value

29The Board determines that the income approach would be the best approach to determine the current value of the Subject Property, since it is unlikely that the Subject Property would sell alone without the grocery store, due to the challenges in accessing it directly without the adjacent properties and lack of comparable property sales.

30MPAC argued that during the taxation years under appeal, the parking lot did not produce any income. The Appellant testified that the Subject Property could be associated with income from the grocery store. However, the Appellant has not presented into evidence at this hearing, how it arrived at the parameters used to determine current value using the income approach. There was no fair market analysis, capitalization rate study, vacancy rate and expense rate analysis presented into evidence, which the Board would use to determine the correct current value of the Subject Property using the income approach.

31Furthermore, the jurisdiction of the Board is to determine the correct current value of the Subject Property under appeal for the 2017 - 2020 taxation years. During this period, the Subject Property was a separate entity, distinct from the grocery store. The Appellant used the assessed value of the grocery store for the taxation years in question and deducted it from the agreed upon consolidated value. The Board cannot accept this method to determine the correct current value of the Subject Property. Section 19 of the Act provides that the assessment of land shall be based on its current value. MPAC provides the assessed values of properties, using its model to make an estimation, since most properties would not have been sold on the valuation day of January 1, 2016. This is what is referred to as the assessed value of properties. The legislative mandate of the Board is to determine the correct current value of the Subject Property. Current value is the market value of the Subject Property as defined under s. 1 of the Act.

32Consequently, due to the lack of sufficient data and evidence on how the Appellant arrived at the current value of the Subject Property using the income approach, the best evidence presented at this hearing to arrive at the correct current value of the Subject Property is the direct comparison approach.

Determination of Correct Current Value

33The Board reviewed all MPAC’s proposed comparable property sales to determine the correct current value of the Subject Property.

34In accordance with s. 44(3)(a) of the Act, the first mandate of the Board is to determine “the current value of the land.” For the 2017 to 2020 taxation years, the Board must determine what the Subject Property would have sold for in an arm’s length transaction on the January 1, 2016, valuation day set by the Act.

35The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the Subject Property on the valuation day or close to it. If no such transaction took place, as it is in this appeal, the next best measure of current value is arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2016.

36The Board finds the correct current value of the Subject Property for the 2017 to 2020 taxation years to be $991,000 (rounded).

37MPAC presented four proposed improved commercial sales and eight proposed vacant land sales. The Board did not consider MPAC’s proposed commercial property sales, since these properties are sales of improved properties and MPAC made no market adjustment to these sales to make them comparable with the Subject Property. MPAC is comparing commercial sales with structures at the time of sale with a vacant parking lot, which cannot be directly accessed without the adjacent properties. Furthermore, these commercial properties all have access to the road. The Board finds that these proposed commercial property sales are not comparable with the Subject Property.

38MPAC’s proposed eight vacant land sales all sold as vacant at the time of sale, however since after selling they have had structures built. MPAC also admitted that these sales are superior to the Subject Property.

39The Board notes that MPAC admitted that its evidence is not without flaws. In MPAC’s valuation report, Mr. Vithana states that: “selecting properties that have sold recently and are inferior, superior and similar to the subject property allows me to establish a probable range of current value for the subject property by bracketing the subject between sold properties that are inferior and superior to it.” During cross-examination, Mr. Vithana admitted that he did not state in MPAC’s valuation report whether the proposed comparable properties were inferior, superior or similar to the Subject Property. However, at the hearing, he admitted that they were superior to the Subject Property and MPAC did not inspect all its proposed comparable property sales.

40The Board accepted these vacant land sales as comparable to determine the correct current value of the Subject Property. The details of these eight proposed comparable sales are attached to this Decision as Attachment 1.

41These eight vacant land properties all sold within the shoulder years of January 1, 2016, which is one year on either side of the valuation day of January 1, 2016. Their effective frontages range from 25 ft. - 41.83 ft., which is superior to the Subject Property’s effective frontage of 23.83 ft. The Board also reviewed the photographs of these eight vacant land properties and finds that these properties all have direct access to the roads, as buildings were built on them after their sales while the Subject Property, as admitted by MPAC, has to be accessed through an adjacent property.

42MPAC has acknowledged that the highest and best use of the Subject Property is its current use - a surface parking lot used in conjunction with another property. The Board finds that these vacant land properties are superior to the Subject Property. The time-adjusted sale prices of these vacant land properties range from $991,441 - $1,598,088.

43On a balance of probabilities, the Board finds that the Subject Property would sell at the low end of this range, as it is an inferior property to these eight vacant land properties. The Board finds that the current value of the Subject Property is $991,441.

44The Board determines the correct current value of the Subject Property for the 2017 - 2020 taxation years to be $991,000 (rounded).

CONCLUSION

45The Board finds that the correct current value of the Subject Property is $991,000 (rounded) for the 2017, 2018, 2019 and 2020 taxation years.

46The Board also finds that there is no evidence to support a reduction in the current value for the purposes of equitable assessment when reference is made to the assessments of similar properties in the vicinity, as this is not at issue in this appeal.

ORDER

47The Board orders as follows:

a. As agreed by the parties, the classification of the Subject Property for the 2017, 2018, 2019 and 2020 taxation years is changed from Commercial Full to Parking Lot Full.

b. For the 2017, 2018 and 2019 taxation years, the assessment of the Subject Property is reduced from $2,245,000 to $991,000. For the 2020 taxation year, the assessment of the Subject Property is reduced from $1,853,000 to $991,000.

"Subuola Awoleri"

SUBUOLA AWOLERI

MEMBER

Assessment Review Board

Website: www.tribunalsontario.ca/arb

Attachment 1

MPAC’s Proposed Vacant Land Sales

Subject Property

Property #5

Property #6

Property #7

Property #8

Property #9

Property #10

Property #11

Property #12

Roll Number

190806311001400

190806312001100

190806221002300

190806245001600

190411621003200

190806251000200

190806158001303

190806213000600

Address

352 MELROSE AVE

360 DELORAINE AVE

431 MELROSE AVE

67 DUNBLAINE AVE

245 BROOKDALE AVE

225 JOICEY BLVD

541 WOBURN AVE

583 ST GERMAIN AVE

Neighbourhood

S43 - 4027

C45 - 813

C38 - 801

C36 - 801

C45 - 813

C36 - 801

C38 - 801

Property Code & Desc.

(482) Surface Parking Lot - Used In Conjunction With Another Property

(100) Vacant Residential Land Not On Water

Distance in km

0.1412

0.3298

0.6322

0.6507

0.7128

0.7341

0.7505

Valuation

Current Value Assessment

$1,853,000

$1,905,000

$1,888,000

$2,176,000

$1,741,000

$1,624,000

$1,673,000

$2,226,000

Sale

Sale Date

20151027

20160819

20151019

20160421

20151119

20150901

20160503

20160815

Sale Amount

$1,190,000

$1,265,000

$1,220,000

$1,105,800

$985,000

$1,220,000

$1,050,000

$1,650,000

Time Adjusted Sale Amount

$1,203,026

$1,225,201

$1,233,354

$1,089,287

$991,441

$1,238,778

$1,029,926

$1,598,088

Time Adjusted Sale Ratio

1.5835

1.541

1.7643

1.5983

1.756

1.311

1.6244

1.3929

Time Adjustment Factor

1.0109

0.9685

1.0109

0.9851

1.0065

1.0154

0.9809

0.9685

Site

Effective Frontage (F)

23.83

41.83

Actual Frontage

23.83

41.83

Effective Depth (F)

150

119

150

130

110

111

133.07

115

Effective Site Area (Acres)

0.08

0.07

0.09

0.12

0.06

0.08

0.11

Actual Site Area (Acres)

0.08

0.07

0.09

0.06

0.08

0.11

Effective Lot Size Unit of Measurement

3574.5

2975

3750

5437.9

2750

3330

3326.75

4600

Lot Size Unit of Measurement

Abuts Variable(s)

(K) Traffic Pattern Light

(W) Abuts Place of Worship

C) Abuts Commercial , (O) Abuts Sports Field/Playground

Proximity Variable(s)

(E) Proximity to Educational Inst.

On Site Variable(s)

(S) Zoned For Commercial Use , (35) Free On Site , (27) Rear Access - Lane , (68) Transit - Bus , (79) Offical Plan Designated - Mixed Use (Including Residential) , (24) Predominant Exposure - South

(76) Offical Plan Designated - Residential

(76) Offical Plan Designated - Residential , (B) Cul-De-Sac/Court/Dead End

Assessment / Land Sqft

518.394181

TAS/ Land Sqft

404.3784874

326.7202667

226.8070395

396.1043636

360.524

372.0054054

309.5892387

347.4104348

MEDIAN

353.9672174

AVERAGE

342.9424045

$1,265,255.82