Tribunals Ontario

Assessment Review Board

ISSUE DATE: August 02, 2023 FILE NO.: WR 184745

Assessed Person(s): Cosmetica Investments Inc. Appellant(s): Cosmetica Investments Inc. Respondent(s): Municipal Property Assessment Corporation Region 09 Respondent(s): City of Toronto

Property Location(s): 1960 Eglinton Avenue East Municipality(ies): City of Toronto Roll Number(s): 1901-031-060-00551-0000 Appeal Number(s): 3247014, 3295737, 3354502, 3398320, 3441277, 3487134 and 3512285 Taxation Year(s): 2017, 2018, 2019, 2020, 2021, 2022 and 2023 Hearing Event No.: 779912

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

APPEARANCES:

Parties	Representative
Cosmetica Investments Inc.	Jason Crane, Shane Edson
Municipal Property Assessment Corporation	Felicia Nacini, Jonathan Langille
City of Toronto	No one appeared

HEARD: July 24, 2023 by telephone conference call

ADJUDICATOR(S): Christopher Voutsinas, Vice-Chair

DECISION

OVERVIEW

1Cosmetica Investments Inc. (“Appellant”) is the owner of 1960 Eglinton Avenue East in the City of Toronto (“Subject Property”). The Appellant appealed its assessment for the 2017 taxation year, and further appeals were deemed for the 2018 to 2023 taxation years pursuant to s. 40(26) of the Assessment Act, R.S.O. 1990, c. A.31 (“Act”). The Appellant takes the position that the assessed value of $22,798,000 is incorrect and too high.

2The Municipal Property Assessment Corporation (“MPAC”) opposes the appeals.

3MPAC takes the position that the correct current value of the Subject Property for the 2017 - 2023 taxation years is $22,284,000.

Description of the Subject Property

4The Subject Property is an improved industrial property comprising of 281,782 square feet of floor area on a land lot area of 11.37 acres. The structure was originally built in 1961 and has had a number of upgrades and an addition added over the years. The property includes a two-storey office component and is owner-occupied.

Areas of Agreement

5While the Appellant and MPAC use different methodologies for calculation of sale price time-adjustment factors (the Appellant uses a paired-sale analysis and MPAC uses a sales trend analysis), the resulting factors are close – the Appellant at 0.9% per month and MPAC at 1.0% per month, approximately. Neither party disputed nor challenged the other party’s analysis, and both accept their respective use of their time-adjustment factors.

6Further, the parties also agreed that the direct sales comparison approach is the appropriate valuation methodology for the Subject Property.

7The parties did not dispute the property classification and apportionment of value for taxation purposes for the Subject Property. The Appellant submits the following per Section 12 of its expert report. The property is owned and occupied by the Appellant. For the 2017 to 2019 taxation years, the Appellant occupied the majority of the property. Only the second-floor office area of 17,430 square feet, representing 6.19% of the total building area of 281,782 square feet was leased out to a tenant (Centennial College) who would qualify for commercial taxable status. From 2020, the Appellant took over the tenanted area to occupy the entire property, and as a result the correct property classification as of that date is 100% in the large industrial property class. MPAC did not present any evidence on the matter and did not challenge the Appellant’s evidence as submitted.

Issue for the Hearing

8At issue in this proceeding is:

1. What is the correct current value of the Subject Property for the 2017 to 2023 taxation years?
2. Is an equity reduction of the current value required, and if so, how much?

Result

9The Assessment Review Board (“Board”) finds that the correct current value of the Subject Property for the 2017 to 2023 taxation years is $18,873,000.

10The Board finds that with reference to similar lands in the vicinity, per s. 44(3)(b) of the Act, that no equity reduction is required for the 2017 to 2023 taxation years.

ANALYSIS

Issue 1 - What is the correct current value of the Subject Property for the 2017 to 2023 taxation years?

11Section 19(1) of the Act provides that the assessment of land shall be based on its current value. Section 1 of the Act defines current value 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.” For the 2017 to 2023 taxation years in question, the statutory valuation date is January 1, 2016.

12MPAC takes the position that the correct current value of the Subject Property for the 2017 to 2023 taxation years is $22,284,000. The Appellant takes the position that the correct current value of the Subject Property is $16,061,000.

MPAC’s Analysis

13At the hearing, MPAC reviewed the valuation report prepared by its expert, Patrizia Tempio, dated December 15, 2022. The valuation report is entered in the record as Exhibit 1.

14MPAC derived a value of the Subject Property using the direct comparison approach. In order to do so, MPAC searched its corporate database for industrial property sales consisting of properties that sold during the shoulder years of the statutory valuation date (i.e., 2015 and 2016), with buildings over 100,000 square feet, in excess of 10 acres of land, and in proximity to the Subject Property. This search yielded four property sales for valuation comparison purposes: 1865 Birchmount Road, 165 Milner Avenue, 1051 Tapscott Road, and 28 Underwriters Road. MPAC calculated the time-adjusted sales price per square foot of built area for each sale property at $53.63, $96.87, $67.00, and $91.16, respectively.

15Two of the property sales identified by MPAC are also used by the Appellant, namely 1865 Birchmount Road and 1051 Tapscott Road.

16MPAC then calculated the median time-adjusted sale price per square foot of built area of all four property sales at $79.08 and applied that to the built area of 281,782 square feet for the Subject Property, resulting in a current value of $22,284,000 (rounded) for the Subject Property as of January 1, 2016.

17Of the four property sales, MPAC takes the view that 165 Milner Avenue is the most comparable to the Subject Property as it was purchased by a cosmetic manufacturing company (same use as the Subject Property) and has a similar quality of construction and finishes. MPAC asserts that both properties are subject to use regulation (as cosmetics manufacturers) and as such have above average lighting, ventilation, and other requirements including maintaining a clean and sterile production environment. This property sale has the highest time-adjusted sale price per square foot of built area at $96.87. MPAC takes the view that the higher standard of construction and finishes is reflected in the sale price per square foot.

18MPAC notes that 1865 Birchmount Road and 1051 Tapscott Road are inferior properties of traditional industrial construction and do not reflect the quality of the Subject Property. MPAC also notes that while 28 Underwriters Road uses standard sandwich panels and has brick veneer that it too is much closer in construction and finishes to 1865 Birchmount Road and 1051 Tapscott Road than it is to the Subject Property.

19MPAC also asserts that the general neighbourhood of the Subject Property (known as the Golden Mile) has continued to evolve and improve from a mostly industrial area to include commercial and ‘big box’ retail properties.

20The Appellant testified that MPAC typically uses the cost approach for valuation purposes in connection with industrial properties but did not do so here.

21The Appellant challenged MPAC’s use of 165 Milner Avenue for valuation comparison purposes asserting that it may not have been an open market sale as RealNet reported that the property was not available in the open market, and the Appellant noted that the purchaser may have been the tenant at the time (based on the address used by the purchaser) – though no evidence was provided to support the same. MPAC testified that it had contacted a representative of the purchaser who confirmed that the transaction was an open market sale and that a real estate broker was involved.

22The Appellant also challenged MPAC’s use of 28 Underwriters Road for valuation comparison purposes as it consisted of two separate buildings with two separate tenants at the time of sale and comprised of three additional parcels of vacant land. MPAC confirmed that it made no adjustments to the sale price to reflect the vacant land. Further, the Appellant testified that the South Building has been demolished and two new buildings built on the property evidencing development value in the price paid by the purchaser.

23In connection with the foregoing, the Appellant asserted that MPAC’s property sales comprises of varied amounts of vacant or excess land, and that, where significant, MPAC should have adjusted the sale price to reflect the same. The Appellant asserted that the Subject Property has a 57% land utilisation ratio, whereas MPAC’s four property sales have ratios of 41%, 38%, 42%, and 19% - all lower than the Subject Property signalling excess land. 28 Underwriters Road had the lowest land use of 19%, significantly lower than the Subject Property.

24MPAC stated that it did not adjust sale prices for excess land given the overall similarity of the properties for valuation comparison purposes and that a purchaser may or may not pay for excess land.

The Appellant’s Analysis

25At the hearing, the Appellant reviewed the valuation report prepared by its expert, Shane Edson, dated August 29, 2022. The valuation report is entered in the record as Exhibit 3.

26The Appellant derived a value of the Subject Property using the direct comparison approach. In order to do so, the Appellant searched for large industrial property sales in the vicinity of the Subject Property and that occurred within 18 months of the statutory valuation date. This search yielded four property sales for valuation comparison purposes: 375 Kennedy Road, 1865 Birchmount Road, 1051 Tapscott Road, and 2265 Markham Road. Two of the four sale properties, namely 1865 Birchmount Road and 1051 Tapscott Road, are common with MPAC’s sale properties. The Appellant calculated the time-adjusted sales price per square foot of built area for each sale property at $53.47, $53.74, $66.96, and $53.89, respectively.

27The Appellant then calculated the median time-adjusted sale price per square foot of built area of all four property sales at $57.01 and applied that to the built area of 281,782 square feet for the Subject Property, resulting in a current value of $16,061,000 (rounded).

28The Appellant testified that, unlike MPAC’s property sales, the Subject Property’s land utilization ratio of 57% fell within the range of land utilization ratios of its property sales which range from 41% to 64%, indicating a similar utility of land.

29As a secondary valuation methodology, the Appellant also used the cost approach to derive a value for the Subject Property. The Appellant relied largely on data from MPAC. The cost approach resulted in a value of $15,747,000 or approximately $56 per quare foot which the Appellant asserted supported the results of its preferred valuation methodology, the direct comparison approach.

30The Appellant also reviewed industrial land rates used by MPAC and concluded that MPAC’s assessment records for the Subject Property indicate a land rate of $616,745 per acre and an adjusted land rate value to $1,233,351 per acre. The Appellant reviewed industrial land assessments in Scarborough between 9-acres and 14-acres and found 25 properties with an average site area of 11.2 acres and an average 2016 CVA land rate/acre of $613,224. The Appellant asserted that if this land rate is used for the Subject Property (rather than the adjusted land rate), the resulting current value is $57 per square foot of built area. The Appellant asserted that this analysis also supported the results of its preferred valuation methodology, the direct comparison approach.

31MPAC asserted that the use of assessment values (as opposed to actual sale prices) is inappropriate and not reflective of market values nor consistent with the provisions of the Act.

32MPAC challenged the Appellant’s use of 375 Kennedy Road for valuation comparison purchases as the property sale occurred 14.5 months after the statutory valuation date i.e. outside of the shoulder years, and its’ lot area at 7.37 acres is significantly smaller than the Subject Property’s 11.37 acres.

33MPAC also challenged the Appellant’s use of 2255 Markham Road for valuation comparison purchases as the land area was the smallest at 6.94 acres and MPAC was of the view that the land area was too small for an intended use similar to the Subject Property (11.37 acres site) and that a purchaser/user would need 10 acres or more. MPAC took the view that for similarity purposes property sales greater than 10 acres is necessary (e.g. all of MPAC’s property sales for valuation comparison purposes are greater than 10 acres).

34While the Appellant used property sales in Scarborough, MPAC asserted that the Appellant’s property sales are not within the same vicinity or neighbourhood of the Subject Property.

35MPAC also noted that the Appellant did not adjust its property sales for excess land.

The Board’s Analysis

36MPAC and the Appellant each present four property sales for valuation comparison purposes. Two of the property sales, 1865 Birchmount Road and 1051 Tapscott Road, are common to both resulting in six distinct property sales for the Board’s consideration.

37Of the six distinct property sales, the Board will not use three in its determination of the current value of the Subject Property as follows. The Board will not use MPAC’s 28 Underwriters Road as the property differs in characteristics to the Subject Property – the property consists of two separate building (totalling 127,220 square feet compared to the Subject Property’s 281,782 square feet) with two different tenants (compared to the Subject’s owner occupier). Further, a significant portion of the property is represented by three parcels of vacant land. Also, the Board will not use the Appellant’s 2255 Markham Road as it is the smallest of the Appellant’s property sales both in terms of built area and land area (162,837 square feet of built area compared to the Subject Property’s 281,782 square feet, and 6.94 acres of land area compared to the Subject Property’s 11.37 acres). Lastly, the Board will not use the Appellant’s 375 Kennedy Road as the sale occurred outside of the shoulder years (albeit by 2.5 months) coupled with the relatively small land area of 7.37 acres (compared to the Subject Property’s 11.37 acres) – the combination of these factors reduces the reliability of this property for valuation comparison purposes.

38The remaining three property sales include the two in common by both MPAC and the Appellant, as well as MPAC’s 165 Milner Avenue. The Board notes the Appellant’s assertions as well as MPAC’s testimony regarding this property. Notwithstanding the highest time-adjusted sale price per built square foot, the Board accepts MPAC’s position that this is the most comparable property to the Subject Property – in terms of construction, use and related features (both properties are used in the manufacturing of cosmetics) whereas the other two properties represent traditional industrial construction, use and related features (i.e., exhaust system manufacturing in the one case and a sheet metal manufacturing in the other).

39Of the three properties relied upon by the Board, 1865 Birchmount Road has a time-adjusted sale price per square foot of built area of $53.61 per MPAC or $53.74 per the Appellant (small difference due to slightly different time-adjustment factors used by MPAC versus. the Appellant); 1051 Tapscott Road has a time-adjusted sale price per square foot of $67.00 per MPAC or $66.96 per the Appellant; and 165 Milner Avenue is at $96.87 per MPAC only.

40The resulting median time-adjusted sale price per square foot of built area for the three property sales relied upon by the Board is $67.00 per MPAC or $66.96 per the Appellant. Applying the average of these two figures, or $66.98, to the Subject Property’s 281,782 square feet results in a value of $18,873,000 (rounded).

Findings on Issue 1

41Based on the above analysis and evidence received, the Board finds that the Subject Property’s correct current value for the 2017 to 2023 taxation years is $18,873,000.

Issuer 2 - Is an equity reduction of the current value required, and if so, how much?

42Section 44(3)(b) of the Act directs that after determining current value, the Board shall have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

43At the hearing, MPAC reviewed its Equity Analysis Report. The Equity Analysis Report is entered in the record as Exhibit 2.

44MPAC used an assessment to sales analysis to determine equity. The Assessment to Sales Ratio (“ASR”) is a tool used to determine whether a reduction of the assessment is required to make it equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the time-adjusted sale price. The Level of Appraisal (“LOA”) measures the overall ratio at which a sample set of properties is assessed. LOA is established by determining the median ASR of the property sales in the sample set. The variation or dispersion of the ratios (measured by the Coefficient of Dispersion or “COD”) indicates the consistency of assessments relative to current values.

45MPAC searched its corporate database and identified 30 property sales (within four kilometers of the Subject Property) for equity comparison purposes with the property code 530 (Warehousing), 540 (Other Industrial), 520 (Standard Industrial), and 510 (Heavy Manufacturing / Non-Automotive), and sale dates between January 1, 2015 and December 31, 2016 - representing one year on either side of the January 1, 2016 statutory valuation date.

46MPAC asserts that its ASR of 1.01 and COD of 12.8 indicate that similar properties in the vicinity are assessed at or near their current values and therefore, an equity adjustment is not required.

47At the hearing, the Appellant reviewed its equity analysis contained in Section 11 of its expert report. The Appellant reviewed comparable industrial assessments (property codes 520, 530, 540) located in Scarborough with a gross floor area greater than 150,000 square feet. The review consisted of 25 properties and resulted in an average 2016 assessment per square foot of floor area of $61.27 and an average 2016 assessment land rate/acre of $617,551.

48As a result, the Appellant concluded that the assessed rate of the Subject Property should be no greater than $61.27 per square foot and that an equitable land value for the Subject Property not more than $617,551 per acre.

49The Board has considered both the Appellant’s and MPAC’s equity analysis and prefers MPAC’s. In these facts and circumstances, the Board prefers the use of actual sales relative to assessment values to determine equity, whereas the Appellant uses only assessment values. The use of assessment values only, requires that the properties used for equity determination purposes are substantially similar to the Subject Property. The Board has already taken note of the above average construction and features of the Subject Property relative to traditional industrial uses. In addition, MPAC’s sales used for equity determination purposes are located within four kilometers of the Subject Property whereas the Appellant’s are located in the broader Scarborough area.

Finding on Issue 2

50Based on the above analysis and evidence received, the Board finds that an equity reduction of the current value of the Subject Property is not required.

ORDER

51The Board orders the assessment of the Subject Property for the 2017 to 2023 taxation years be reduced from $22,798,000 to $18,873,000 and apportioned for the 2017 to 2019 taxation years as $1,168,240 in the commercial property class and $17,704,760 in the large industrial property class, and from the 2020 to 2023 taxation years entirely in the large industrial property class.