Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 28, 2024

FILE NO.:

ID 186292

Assessed Person(s):

Hines 81 Bay St. Inc. and 45 Bay St. Property II Inc.

Appellant(s):

Hines 81 Bay St. Inc. and 45 Bay St. Property II Inc.

Respondent(s):

Municipal Property Assessment Corporation Region 09

Respondent(s):

City of Toronto

Property Location(s):

81 Bay Street

Municipality(ies):

City of Toronto

Roll Number(s):

1904-061-110-00651-0000

Appeal Number(s):

See Schedule A

Taxation Year(s):

2020 and 2021

Hearing Event No.:

783080

Legislative Authority:

Sections 33, 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31

APPEARANCES:

Parties

Counsel

Hines 81 Bay St. Inc. and 45 Bay St. Property II Inc.

Phillip Sanford

Municipal Property Assessment Corporation

Donald G. Mitchell

City of Toronto

Submissions not received

HEARD:

February 21 and 22, 2024 by video conference

ADJUDICATOR(S):

Carly Stringer, Member

INTERIM DECISION

OVERVIEW

The Subject Appeals

1Hines 81 Bay Street Inc. and 45 Bay Street Property II Inc. (the “Appellants”) have appealed the assessments of the property known as CIBC Square located at 81 Bay Street in the City of Toronto (the “Subject Property”) to the Assessment Review Board (the “Board”). In these appeals, which are listed in Schedule A to this Interim Decision, the Appellants argue that the current value returned on the assessments is too high and is inequitable with the assessments of similar lands in the vicinity.

2The Municipal Property Assessment Corporation (“MPAC”) is responding to these appeals. MPAC disagrees with the Appellants and argues that they have not met the burden of proof to establish an inequity in the assessments.

3The City of Toronto is a statutory party to these appeals but did not participate in the hearing or provide the Board with submissions.

Background

The Subject Property

4The Subject Property is an office complex built on 2.81 acres of land in the City of Toronto. There is over 1.5 million square feet (“sq. ft.”) of office, food court, fast food, retail, restaurant, bank and fitness centre components, plus the Union Station Bus Terminal and parking. It is connected to the Scotiabank Arena and Union Station via a pedestrian skybridge.

5Construction of the Subject Property began in 2017. By January 1, 2021, the development was substantially completed for some occupancy and use, with some exterior finishes of upper level offices and ground floor area still in progress: see Valuation Report of 81 Bay Street prepared by Andrew Prior, page 38. Construction of the Subject Property was complete in 2021.

Assessment History

6The Subject Property was assessed as vacant commercial land valued at $97,131,000 pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) for the 2021 taxation year.

7In November 2021, MPAC made omitted and supplementary assessments against the Subject Property with effective dates throughout 2021, pursuant to s. 33 and s. 34 of the Act. These sections of the Act provide as follows:

Change re land omitted from tax roll

33 (1) The following rules apply if land liable to assessment has been in whole or in part omitted from the tax roll for the current year or for all or part of either or both of the last two preceding years, and no taxes have been levied for the assessment omitted:

The assessment corporation shall make any assessment necessary to correct the omission.
If the land is located in a municipality, the clerk of the municipality shall alter the tax roll upon receiving notice of the change, and the municipality shall levy and collect the taxes that would have been payable if the assessment had not been omitted.
If the land is located in non-municipal territory, the Minister shall alter the tax roll upon receiving notice of the change, and shall collect the taxes that would have been payable if the assessment had not been omitted.

Supplementary assessments to be added to tax roll

34 (1) If, after notices of assessment have been given under section 31 and before the last day of the taxation year for which taxes are levied on the assessment referred to in the notices,

a) an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose;

b) land or a portion of land ceases,

(i) to be exempt from taxation,

(ii) to be farm lands the current value of which is determined in accordance with subsection 19 (5),

(iii) to be conservation land the current value of which is determined under subsection 19 (5.2),

(iii.1) to be land in the managed forests property class the current value of which is determined under subsection 19 (5.2) or (5.2.1),

(iv) to be land the current value of which is based on current use under regulations made under subsection 19 (2), or

(v) to be classified in a subclass of real property;

c) REPEALED: 1997, c. 5, s. 22 (1).

d) a pipeline increases in value because it ceases to be entitled to the reduction provided for in subsection 25 (9),

the assessor may make the further assessment that may be necessary to reflect the change, and upon receiving notice of the further assessment, the clerk of the municipality or, in the case of land in non-municipal territory, the Minister shall enter a supplementary assessment on the tax roll and the amount of taxes to be levied thereon shall be the amount of taxes that would have been levied for the portion of the taxation year left remaining after the change occurred if the assessment had been made in the usual way.

8These omitted and supplementary assessments were made to reflect the increased value of the new construction and to assess land liable to assessment that had been omitted from the assessment roll when it was returned in December 2020. The various effective dates reflect the increased value as other levels of the office tower were occupied.

9The primary dispute between the parties relates to an omitted assessment effective January 1, 2021 in the amount of over $600,000,000 (the “Partial Assessment”). The Partial Assessment was intended to add a value to reflect 80% of the full value of the office tower on the Subject Property.

Areas of Agreement

10The parties have reached agreement on the current value of the land.

Issues for the Hearing

11The sole remaining issue in this proceeding is whether the current value requires a reduction to make it equitable with the assessments of similar lands in the vicinity. Specifically, the Board must determine whether the current value reflected on the Partial Assessment should be equitably reduced on the basis that properties in the vicinity at the same stage of development as the Subject Property were not partially assessed at 80% of their full value.

Result

12For the reasons that follow, the Board finds there is insufficient convincing evidence that a reduction is required to make the current value equitable with the assessments of similar lands in the vicinity. Accordingly, the Board finds that no equitable reduction is required.

ANALYSIS

Issue - Does the current value require a reduction to make it equitable with the assessments of similar lands in the vicinity?

Applicable Law

13 Section 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”.

14An equitable reduction should only be made where there is clear evidence that such a reduction is warranted: see Tse v Municipal Property Assessment Corporation, Region 09, 2018 CanLII 62978 (ON ARB) at paragraph 32; Vale Canada Limited v Municipal Property Assessment Corporation, Region 30, 2022 CanLII 48461 (ON ARB) at paragraph 84.

Evidence and Submissions of the Parties

a) Appellants

15The Appellants take issue with the Partial Assessment. Specifically, the Appellants submit that the current value reflected on the Partial Assessment should be equitably reduced on the basis that properties in the vicinity, at the same stage of development as the Subject Property, were not partially assessed at 80% of their full value as of January 1, 2021. The Appellants say that an equity reduction is required because MPAC has not been consistent in the way it has treated similar properties. According to the Appellants, three other office developments near the Subject Property were substantially complete as of January 1, 2021, but were not partially assessed effective January 1, 2021 in the same way as the Subject Property. The Appellants submit that equity is a flexible tool to make sure all taxpayers are treated fairly and should be applied in this instance.

16In support of this argument, the Appellants relied on the following expert evidence.

The Well (462 Front Street West)

17The Appellants’ expert testified that The Well is a property under construction for a mixed-use development consisting of office, retail and multi-residential buildings. He testified that the office tower, when complete, would have a total gross leasable area of 1,000,000 sq. ft. of commercial office space. According to the Appellants’ expert, MPAC did not make a partial assessment of The Well as of January 1, 2021 despite substantial completion of the lower office and retail components. The Appellants state that MPAC valued The Well based on a land value only as of January 1, 2021.

18The Appellants’ expert testified that, at the time of his expert report, there was no completed valuation of The Well. Therefore, he had to estimate the full property value and adjust it to 80% to correspond to what MPAC did for the Subject Property. He estimated a 2016 current value assessment (“CVA”) of $508,681,000 if fully valued, with 80% of this value being $406,944,000.

Daniels Waterfront (143 Lakeshore Boulevard East)

19The Appellants’ expert testified that Daniels Waterfront is a mixed-use development that was completed in late 2020. The upper portion of the building is residential, while there is 12,883 sq. ft. of ground floor retail space and almost 60,000 sq. ft. of office space. He testified that MPAC assessed Daniels Waterfront on a land-only basis at $4,741,000 as of January 1, 2021 despite completion and partial occupancy of the units. He testified that MPAC made omitted assessments effective March 18, 2021 (for the retail component) and September 1, 2021 (for the office component).

20The Appellants’ expert testified that the total 2016 CVA currently returned for the property is $31,427,000, and that an estimated 80% partial valuation as of January 1, 2021 would be $25,141,000.

LCBO Sugar Wharf (100 Queens Quay East)

21The Appellants’ expert testified that this development consists of an office and residential tower with retail space, with the office tower being substantially complete as of January 2021. He said that this development was at, or likely ahead of, the Subject Property, in terms of the exterior at the start of January 2021. The Appellants’ expert testified that MPAC assessed LCBO Sugar Wharf at $64,296,000 (office) and $64,295,000 (residential) on a land-only basis as of January 1, 2021, notwithstanding substantial completion of the office tower. He testified that occupation began in late 2021.

22He testified that MPAC valued the building effective January 1, 2022 at $332,461,000 which represents an estimated 80% partial valuation that would have been applied as of January 1, 2021 of $265,968,000.

Equitable Reduction

23The Appellants’ expert summarized his evidence as follows:

Property

Assessment as of January 1, 2021

Valuation as if fully occupied

Partial building valuation (80%)

Level of Assessment

The Well

$68,244,500*

$508,681,000

$406,944,000

16.77%

Daniels Waterfront

$4,741,000

$31,427,000

$25,141,000

18.86%

LCBO Sugar Wharf

$64,296,000

$332,461,000

$265,968,000

24.17%

Average

19.93%

*Land value of the office tower is estimated at 50% of the returned 2016 CVA for the purpose of this report

24The Appellants’ expert opined that the equitable value of the Subject Property should be based on 80% of the Value As If Fully Occupied multiplied by a 19.93% Equitable Level of Assessment.

b) MPAC

25MPAC makes four general submissions in response to the Appellants’ position on equitable adjustment:

a. The Appellants have not provided convincing evidence to discharge their onus that an equity adjustment is required.

b. The Appellants rely on properties that are not similar lands in the vicinity.

c. The Appellants rely on portions of the assessed values, which does not allow the Board to have reference to the value at which similar lands in the vicinity are assessed per s. 44(3)(b) of the Act.

d. The Appellants have not established that there is a general underassessment of similar lands in the vicinity such that an equitable adjustment is warranted.

26MPAC’s expert testified that MPAC makes partial assessments of new office buildings when it gets information from the owners. He testified that MPAC typically assesses new developments within a taxation year after first occupancy. In the subsequent year, occupied space is assessed at full value and unfinished and unoccupied space are assessed at 80% of full value.

27He testified that MPAC made a partial assessment of 16 York Street, which is one block west of the Subject Property, at 80% of the full value for the 2021 taxation year.

Findings of the Board

28The Board finds that there is insufficient convincing evidence for it to determine, on a balance of probabilities, that an equitable reduction is required.

29The crux of the Appellants’ argument is that the Subject Property was treated inequitably because it was partially assessed effective January 1, 2021, whereas The Well, Daniels Waterfront, and LCBO Sugar Wharf – three properties that the Appellants say were complete or substantially complete as of January 1, 2021 – were not partially assessed effective January 1, 2021.

30For the Board to accept the Appellants’ submission, the Board must be satisfied that The Well, Daniels Waterfront, and LCBO Sugar Wharf were at the same or similar stage of development as the Subject Property when it was partially assessed. The evidence shows, and the Board finds, that the Subject Property was substantially complete, and at least partially occupied, as of the January 1, 2021 effective date of the Partial Assessment.

31The Board finds that the Appellants have not provided sufficient convincing evidence to substantiate that The Well, Daniels Waterfront and LCBO Sugar Wharf were substantially complete and at the same stage of development as the Subject Property as of January 1, 2021. The Board finds as follows:

a. With respect to The Well, the Board is not satisfied, based on the best available evidence, that the building was at the same stage of development as the Subject Property as of January 1, 2021. The Board relies on photographs adduced by MPAC that show large sections of the exterior of the building, including lower levels, do not appear substantially complete, which contradicts the Appellants’ expert’s evidence that lower levels were substantially completed. The Appellants’ expert stated that he had no information with respect to the interior conditions of The Well, nor did he know based on occupancy permits or rent rolls when it was first occupied or capable of occupation. The Board finds, based on the evidence, that omitted assessments were made in November 2023 for The Well, with the first effective dates being October 2022. A reasonable inference could be that first occupancy occurred in October 2022, which would be over a year after office tenants began occupying the Subject Property. That said, first occupancy was ultimately unknown. The Board finds that the Appellants provided insufficient convincing evidence on which the Board can rely to determine whether The Well was at the same stage of development as the Subject Property and, therefore, that it was treated inequitably with respect to partial assessment.

b. With respect to Daniels Waterfront, the Board is not satisfied, based on the best available evidence, that the building was at the same stage of development as the Subject Property as of January 1, 2021. The Appellants’ expert stated that he had no information with respect to the interior conditions of the property at that time. He stated that he assumed that the property was fully complete and operational because there was an omitted assessment issued on March 18, 2021. The Board does not accept this as sufficient evidence of substantial completion as of January 1, 2021, as an omitted assessment on March 18, 2021 could just as well reflect that first occupation and substantial completion occurred in March 2021. Overall, the Board finds that the Appellants provided insufficient convincing evidence on which the Board can rely to determine whether Daniels Waterfront was at the same stage of development as the Subject Property and, therefore, that it was treated inequitably with respect to partial assessment.

c. With respect to LCBO Sugar Wharf, the Board is not satisfied, based on the best available evidence, that the building was at the same stage of development as the Subject Property as of January 1, 2021. While the Appellants’ expert testified that the office tower was substantially complete by January 1, 2021, he stated that he had no information with respect to the interior conditions of the property as of January 1, 2021. The Appellants’ expert testified that he did not investigate occupancy permits, but did receive verbal confirmation that occupancy commenced in December 2021. If correct, this is much later than the Subject Property where occupancy commenced in December 2020. Overall, the Board finds that the Appellants provided insufficient convincing evidence on which the Board can rely to determine whether LCBO Sugar Wharf was at the same stage of development as the Subject Property and, therefore, that it was treated inequitably with respect to partial assessment.

32In addition, the Board does not accept the Appellants’ expert’s evidence with respect to the assessed values of The Well and LCBO Sugar Wharf. The Appellants’ expert relied on a portion of the assessed values of these properties, removing the assessed value of the residential portion of these mixed-use developments. The Act directs the Board to “have reference to the value at which similar lands in the vicinity are assessed”. It does not direct the Board to have reference to a portion of the assessed value, and accordingly the Board does not accept the Appellants’ expert’s evidence in this regard.

33Overall, the Board is not satisfied that the Appellants have shown, on a balance of probabilities, that an equitable reduction is required.

CONCLUSION

34The parties have reached an agreement with respect to the determination of current value, and the Board finds that no equitable reduction is required.

ORDER

35In light of the parties’ agreement with respect to the determination of current value and the Board’s finding that no equitable reduction is required, the parties are directed to confer and, within 10 days of this Interim Decision being issued, advise the Board of their position on the current value determinations that are required in the final column of Schedule A attached.

"Carly Stringer"

CARLY STRINGER

MEMBER

Assessment Review Board

Website: www.tribunalsontario.ca/arb

SCHEDULE A

Roll Number: 1904-061-110-00651-0000

Assessed Person: HINES 81 BAY STREET INC

Address: 81 to 0 BAY ST

Appeal

Section

Tax Date

Property Classification

Assessment Value

Change Assessment Value to:

3500792

05-Dec-20

Commercial New Construction

$97,131,000

3500793

05-Dec-20

Commercial New Construction

$325,000

3500801

01-Jan-21

Commercial Vacant Land

$97,131,000

3500794

01-Jan-21

Commercial New Construction

$97,131,000

3500795

01-Jan-21

Commercial New Construction

$602,132,000

3500796

26-Apr-21

Commercial New Construction

$3,565,000

3500797

16-Jul-21

Commercial New Construction

$691,272,900

3500798

16-Jul-21

Commercial New Construction

$3,526,000

3500799

15-Sep-21

Commercial New Construction

$567,200

3500800

08-Oct-21

Commercial New Construction

$3,491,100

3507055

09-Oct-21

Commercial New Construction

$1,079,700

3507056

09-Oct-21

Commercial New Construction

$12,200

3507057

09-Oct-21

Commercial New Construction

$290,900

3507058

09-Oct-21

Commercial New Construction

$229,300

3507059

09-Oct-21

Commercial New Construction

$332,000

3507060

09-Oct-21

Commercial New Construction

$10,800

3507061

09-Oct-21

Commercial New Construction

$9,200

3507062

09-Oct-21

Commercial New Construction

$140,100

3507070

09-Oct-21

Commercial New Construction

$42,400

3507071

09-Oct-21

Commercial New Construction

$20,161,000

3507072

09-Oct-21

Commercial New Construction

$560,800

3507073

09-Oct-21

Commercial New Construction

$660,200

3507074

09-Oct-21

Commercial New Construction

$8,506,900

3507075

09-Oct-21

Commercial New Construction

$13,922,700

3507076

09-Oct-21

Commercial New Construction

$65,564,300

3507077

09-Oct-21

Commercial New Construction

$4,364,000

3507078

09-Oct-21

Commercial New Construction

$738,800

3507079

09-Oct-21

Commercial New Construction

$17,666,100

3507063

13-Nov-21

Commercial New Construction

$55,800

3507080

13-Nov-21

Commercial New Construction

$3,393,200

Hines 81 Bay St. Inc. and 45 Bay St. Property II Inc. v. Municipal Property Assessment Corporation Region 09, 2024 CanLII 50111

Case Summary

Tribunals Ontario

INTERIM DECISION

OVERVIEW

The Subject Appeals

Background

The Subject Property

Assessment History

Areas of Agreement

Issues for the Hearing

Result

ANALYSIS

Issue - Does the current value require a reduction to make it equitable with the assessments of similar lands in the vicinity?

Applicable Law

Evidence and Submissions of the Parties

Findings of the Board

CONCLUSION

ORDER

SCHEDULE A