Gulliver's Travels Motor Hotel Limited v. Minister of National Revenue, [1993] 1 CTC 2236, 93 DTC 183

Mogan, T.C.C.J.:—The only issue in this appeal is to determine the fair market value as at December 31, 1971 of a certain parcel of land located at the east end of the City of Hamilton, Ontario. From 1951 to 1986, the appellant owned and operated Gulliver's Travels Motor Hotel at the south-west corner of the intersection of Highway 8 and Highway 20 at the east end of Hamilton. In 1986, the appellant sold the property for proceeds of $4,140,000 to a purchaser who, immediately after the purchase, demolished the buildings in order to use the property for other commercial purposes. All of the selling price was regarded as referable to the land alone because the purchaser made no attempt to use any of the appellant's buildings. When filing its income tax return for the fiscal period ending December 31, 1986, the appellant reported a capital gain from the sale of the property computed as follows:

Because the appellant had owned the property continuously for many years prior to 1972, the appellant used Income Tax Application Rule 26(3) to compute its capital gain and determined the adjusted cost base of the land alone as its fair market value at December, 1971 (referred to sometimes as the "V-Day Value”). The respondent did not accept the appellants determination of its adjusted cost base; and the respondent determined that the V-Day Value of the same property was $409,500. Accordingly, the respondent issued a notice of assessment to the appellant in which the capital gain was computed as follows:

This appeal is from that assessment and, in particular, the respondent's conclusion that the V-Day Value was only $409,500. The difference in the appraised values is significant because the appellant’s value ($1,273,130) is more than three times the respondent's value ($409,500).

At the hearing, three expert witnesses testified, each one expressing an opinion as to the V-Day Value of the subject property. The two expert witnesses who testified for the appellant were Thomas Dowling and Patricia Budd and the expert witness for the respondent was Warren Sabourin. Each of the three witnesses was a long time resident of Hamilton and each had been granted the AACI designation as an Accredited Appraiser by the Appraisal Institute of Canada. Mr. Dowling has been a registered real estate broker since 1954; he was granted his AACI in 1977; and he came to Court with over 30 years experience in the Hamilton real estate market. Mrs. Budd started assessing real estate for the Ontario Ministry of Revenue in 1974; she was granted her AACI in 1982; and she was appraising land in the Hamilton area continuously from 1974 to 1991. Mr. Sabourin was a property negotiator for the City of Hamilton from 1964 to 1969; he was a mortgage appraiser for a trust company from 1969 to 1972; he has been appraising real estate in the Hamilton area continuously since 1972; and he was granted his AACI in 1974. In my view, each witness was well qualified to express an opinion on the issue in this appeal.

The three expert witnesses appear to be in agreement that the highest and best use of the subject property at December 31, 1971 was a commercial use like the motor hotel which the appellant actually operated on the site at that time. All three experts attempted to determine fair market value by using the sales comparison approach which involved comparing actual sales of other properties in the same area in the same period of time. The selection of other properties is important because an actual sale will not be helpful unless the property sold is similar to the subject property. None of the experts attempted to determine fair market value by using a depreciated cost analysis or valuing the stream of income which the subject property could produce. Therefore, when deciding this issue, I am required to review only those actual sales which were used by the three experts as a basis for comparison with the subject property.

Each expert witness prepared a written report containing the opinion and the comparative sales information on which it was based. All three reports were exchanged by the parties prior to the hearing and entered as exhibits. All three experts were in agreement that the subject property should be valued as land without any improvements (i.e. buildings) because the proceeds of sale in 1986 were for land alone. Mr. Dowling and Mrs. Budd determined value by the square foot but Mr. Sabourin determined value by the acre. In order to make a valid comparison among the expert opinions, I have converted Mr. Sabourin’s values to a square foot basis using one acre equal to 43,560 square feet. Both Mr. Dowling and Mrs. Budd assumed that the subject property was 5.85 acres or 254,826 square feet but Mr. Sabourin concluded that the subject property was 5.957 acres or 259,504 square feet. It is my understanding that the appellant's two experts have accepted Mr. Sabourin’s conclusion as to size and the subject property is to be regarded as being 5.957 acres. The essential elements of the three opinions are summarized below:

Each of the appellant's experts commented on Mr. Sabourin's report and he, in turn, commented on their reports. Having reviewed all three reports and other evidence, I have concluded that I cannot accept any one opinion as conclusive with respect to the issue herein. I am obliged to weigh the evidence of each expert witness. Before doing that, I should make some further observations concerning the subject property. As already stated, it is at the southwest corner of the intersection of Highway 8 and Highway 20. Highway 8 runs east and west and is known as Queenston Road. Highway 20 runs north and south and is known as Centennial Parkway. I shall refer to these highways by their municipal names because that is the way the expert witnesses referred to them. There is no doubt that the subject property is located at the busiest intersection in the east end of Hamilton about two kilometres directly south of the Stoney Creek Traffic Circle which used to be a landmark on the Queen Elizabeth Way ("QEW"). The traffic circle has been replaced by a cloverleaf but it remains the point where Centennial Parkway (Highway 20) meets the QEW. Barton Street is the only significant east-west artery between Queenston Road and the QEW, intersecting Centennial Parkway about half-way between Queenston Road and the old Stoney Creek Traffic Circle.

Around 1971, Cadillac-Fairview Corporation was assembling 50 acres of land at the north-west corner of Queenston Road and Centennial Parkway to develop what became "Eastgate Square", a large regional shopping centre. Eastgate Square is immediately north of the subject property which is at the south-west corner. In the period 1970-1973, the Eastgate development was a major driving force in the real estate market within the vicinity of the subject property. The reports of the three expert witnesses indicate that there were many sales from which one could select comparables.

Mr. Dowling selected 15 sales which he regarded as potentially comparable but then decided not to use three of the 15 for reasons which he explained in evidence. His sales covered the period from September 1967 to June 1972. In order to allow for the gap in time between a comparable sale and December 31, 1971 ("V-Day"), Mr. Dowling used three resales to determine that prices were in fact increasing and he concluded that 1.5 per cent per month was a reasonable adjustment for the rate of increase. The actual price per square foot of any comparable sale prior to December 1971 was adjusted upward at the rate of 1.5 per cent per month and any comparable sale after December 1971 was adjusted downward at the same rate.

I have two problems with Mr. Dowling’s evidence. Firstly, having regard to the size of the subject property (approximately 5.9 acres or 257,000 square feet), seven of the 12 comparable sales which he actually used were under 26,000 square feet or 0.6 acre and therefore less than one-tenth the size of the subject property. There was expert testimony to the effect that the fair market value of land zoned commercial in an urban setting is higher per square foot for a small parcel of less than one acre than for a larger parcel of 5, 10 or 15 acres. This is borne out by Mr. Dowling’s sale no. 1 of 20,200 square feet at $8.66 per square foot in August 1971 just four months before V-Day. His adjusted price of $9.64 per square foot was so far outside his range of prices that he rejected sale no. 1 when establishing his modified mean of $4.85. He also rejected his sale no. 3 of 8,800 square feet because his adjusted price of $7.52 per square foot was also far outside his range.

Of the remaining five comparable sales which he actually used (greater than 0.6 acre), three were larger than 26,000 square feet but less than one acre (43,560 square feet) and only two were larger than one acre. Even after omitting sales nos. 1, 3 and 13 as being outside his range, the nine sales used to establish Mr. Dowling's modified mean of $4.85 contained only two sales with more than 36,000 square feet (0.83 acres) and the largest parcel (No. 6) was only 98,880 square feet or 2.27 acres. In my view, the predominance of small parcels of land among Mr. Dowling’s comparable sales would influence a higher value per square foot than is justified in the circumstances.

My second problem with Mr. Dowling's evidence is the imprecise manner in which he disclosed his adjustments for corner, location and split zoning. These adjustments are subjective and, on a consolidated basis, some were truly significant—as high as 90 per cent. Mr. Dowling was loquacious in the witness box but his written report was bland and imprecise when quantifying his adjustments in dollars and cents. For example, I shall quote from his report all of his comments on his comparable sales nos. 14 and 15.

Sale Number 14—187 Centennial Parkway North

Located on the west side of Centennial Parkway North near Barton Street East and now occupied by Parkway Toyota. A then inside parcel of $23,040 (sic) square feet sold March, 1972, instrument number 266137AB, for $60,000 or $2.60 per square feet unadjusted. A slight downward adjustment for time and an upward adjustment for location, split zoning and corner influence indicates a value of $4.72 per square feet adjusted.

Sale Number 15—191 Centennial Parkway North

Located immediately north of comparable sale number 14, the inside parcel of 9,200 square feet sold March, 1972, instrument number 266139AB to the same buyer as in comparable sale number 14, for $30,000 or $3.26 per square feet unadjusted. Similar adjustments for time, location and lack of corner influence would be required and indicates a unit value for the subject site of $4.51 per square feet adjusted.

There is no schedule or computation in his report showing how his adjustments for no. 14 raised the time adjusted price from $2.48 to $4.72 or how his adjustments for no. 15 raised the time adjusted price from $3.11 to $4.51. Using Mr. Dowling's time adjustment of 1.5 per cent per month, I have computed the quantum of his other adjustments as follows:

In the above table, line J is the quantum of Mr. Dowling's other adjustments (after his adjustment for time) and line K is the percentage of those other adjustments as a factor of his time adjusted price. Mr. Dowling stated that he would adjust the price of an inside lot by as much as 20 per cent because the subject property was a corner lot (Transcript page 201). Also, he gave his sale no. 4 a location adjustment of 10 per cent because it was so far west of the subject property. He could not identify any location adjustment greater than 10 per cent (Transcript page 202). If those are Mr. Dowling’s own guidelines, how does he achieve adjustments of 90 per cent and 45 per cent for sales nos. 14 and 15 respectively even if he includes an adjustment for split zoning on sale no. 14? When an expert witness in his written report has made significant adjustments to the actual sale price of comparable properties, he should identify those adjustments in dollars and cents and, if necessary, justify their magnitude—particularly when the adjustments are subjective and perhaps arbitrary. Sales nos. 14 and 15, although small in area, were two of the nine sales which Mr. Dowling finally used to arrive at his modified mean of $4.85 per square foot. His final prices for sales nos. 14 and 15 are suspect, however, because of the very large other adjustments which he made after his time adjustment. The other adjustments were not adequately explained.

Schedule "A" attached to these reasons [not reproduced] is my own summary of Mr. Dowling’s 15 sales showing my attempt to determine the dollar amount of his other adjustments after the time adjustment. It is worth noting in Schedule "A" that his other adjustments in sales nos. 9, 13, 14 and 15 exceed 45 per cent of his time adjusted price. Even with other adjustments in the range of 45 per cent to 90 per cent, his final prices for these four sales were all below his modified mean of $4.85 per square foot; and sale no. 13 was too low to be included in computing the modified mean. The very high other adjustments in sales nos. 9, 14 and 15 appear to have had an upward influence on Mr. Dowling's modified mean of $4.85. If a summary like Schedule "A" had been included in Mr. Dowling's report, he would have shown in an explicit manner how he used his experience andjudgment, as an expert, to adjust the raw factual information from the sales data. It is the manner in which the expert witness uses his experience and judgment which lends greater or lesser weight to his opinion as evidence. I am inclined to attach less weight to Mr. Dowling's opinion because he has not adequately explained his adjustments.

Mrs. Budd produced the longest and most comprehensive report (among the three experts) using approximately 35 sales in the following four categories:

Within Group A, Mrs. Budd performed an exercise similar to Mr. Dowling in that she made adjustments for time and location. For sales nos. 9 and 11 with split zoning, she appraised the land at the rear which was zoned residential and subtracted her appraised value from the actual price to determine the value of the land at the front which was zoned commercial. There is nothing wrong with the approach but it did require a subjective appraisal of the “residential portion” by Mrs. Budd before she could determine the value of the “commercial portion".

Within Group B, Mrs. Budd was required to appraise the depreciated value of the building in each comparable sale before she could deduct it from the actual sale price to determine the residual land value. In her report, she used sale no. 17 to demonstrate how she arrived at the residual land value.

As with split zoning, the expert witness must perform an initial subjective appraisal before arriving at what should be acomparable sale.

Mrs. Budd's Group C is interesting because it is five sales in the Eastgate land assembly representing 41.078 acres in the aggregate. Mr. Dowling did not use any of these five sales but he did use the sale of the Fowler Motel (797 Queenston Road—his sale no. 6) which was demolished to become part of Eastgate. Mr. Sabourin did not use any of the sales in the Eastgate land assembly because of what he called the "motivation factor"; and he also thought that some of the sales were not at arm's length. Mr. Dowling, in his Oral testimony referred to land assembly in the following words (Transcript, page 313):

. . . I've had a great deal of experience in this, in assembling properties, and I have found in assembling for example four, what inevitably happens is when we get one or two there is always trouble getting the third or fourth and you get into all kinds of trouble and it turns out there's a little old woman in the tennis shoes who will never sell forever. . . .

It is common knowledge that in any land assembly the last parcels of land to be acquired are frequently purchased at a premium because the vendors have taken a “holdout” position. Notwithstanding these limitations, Mrs. Budd listed her five sales in Group C as follows:

The only adjustment that Mrs. Budd made to the Eastgate land was for time at 1.5 per cent per month. It did not need a location adjustment because it was on the same intersection of Centennial Parkway and Queenston Road. When asked why her appraised value of $4.50 per square foot for the subject property was $1.45 higher than the time adjusted sale price of $3.05 in the above assembly, Mrs. Budd explained:

The size factor definitely has a bearing on it, and there is no question we are looking at 41 acres versus five acres and, secondly, I really do think that even though it was conditional on rezoning, Cadillac did not pay the full price for the property because it was not already zoned. They also had substantial engineering costs incurred for servicing a site of 41 acres. I think all those things are actually part of the ultimate price they paid for the property. There are always several factors and it’s never cut and dried, unfortunately, and the reality of appraisal is not simple. (Transcript, page 427)

If Mrs. Budd could increase the time adjusted price ($3.05) of the Eastgate land by 47.5 per cent to reach her appraisal value of $4.50 because Eastgate was 41 acres and the subject property was only 5.9 acres, it seems that the time adjusted price of Mr. Dowling’s smaller comparable sales having less than 0.6 acres should have been decreased to reach his appraisal value because the subject property was about 10 times greater than those smaller sales.

I would not ordinarily place much emphasis on the Eastgate assembly but Mrs. Budd used the entire assembly (more than 40 acres) as one of the“ eight best indicators” in her report (page 15) when arriving at her final opinion. Therefore, the sales in the Eastgate assembly bear greater scrutiny. As they are listed in her report (see above), the area of each individual parcel is missing. This information came from Mr. Sabourin who, although he did not use the Eastgate land to form his own opinion, had gone to the Registry Office and examined the deeds for each of the five sales listed by Mrs. Budd. The additional information concerning area as provided by Mr. Sabourin in oral testimony is set out below:

Time

Adjusted

		Area in Sale Sale		Price	Price	Price per
No.	Date of Sale Acres		Price	per Acre	per sq. ft.	sq. ft.
1.	June 10/71	3.885 $ 300,000 $ 77,220			$1.77	$1.93
2.	Sept. 23/71	3.868	1,429,880	369,669	8.49	8.87
3.	Sept. 23/71	1.102	78,750	71,460	1.64	1.71
4.	May 15/72	36.810	3,655,000	99,294	2.28	2.14
5.* Aug. 10/72		0.658 $ 150,00 $173,410 $3.98				$3.50

*Mr. Sabourin calculated the price at $173,410 per acre but I think it should be $227,964 per acre or $5.23 per square foot unadjusted and $4.60 per square foot after the time adjustment at 1.5 per cent per month.

When the area for each parcel is factored into the five sales in Mrs. Budd's Group C, there are some obvious inconsistencies in the time adjusted price per square foot. For example, sales nos. 1 and 2 are almost the same size and only three months apart but the price of no. 1 is less than one quarter the price of no. 2. Also, sales nos. 2 and 3 were on the same date but the price of no. 2 is five times the price of no. 3. Although no. 2 is almost four acres and no. 3 is only one acre, this difference in area should not indicate such a dramatic change in price. And lastly, the price of no. 2 is significantly out of line with the other four prices whether one uses Mr. Sabourin's price of $3.50 for no. 5 or my price of $4.60. By looking at the deeds in the Registry Office, Mr. Sabourin learned that Loblaws (the grocery store chain) was the purchaser in sale no. 2 (Transcript pages 712-18). It is a fact that Loblaws became a principal tenant in Eastgate Square.

One could speculate that Loblaws paid a premium for the land in sale no. 2 in order to secure a site (perhaps an exclusive food store site) in Eastgate Square but such speculation is not helpful. If Mrs. Budd wanted to use the Eastgate land assembly as one of her 8 best indicators, she should have performed a more thorough analysis of the five sales and probably excluded sale no. 2 as being outside the range of the other four. Her inclusion of sale no. 2 has had an unwarranted upward influence of her average price of $3.05 per square foot.

I note that the total area determined by Mr. Sabourin from the deeds is 46.323 acres but Mrs. Budd has simply stated the area to be 41.078 acres. If Mr. Sabourin's total area is correct, his larger area of 46.323 acres might produce a smaller average price per square foot than Mrs. Budd's amount of $3.05 (her report—Chart C). Mr. Sabourin was cross-examined at length on his research of the Eastgate assembly at the Registry Office but, in my opinion, the net result of his testimony is that he and Mr. Dowling were prudent in not using the Eastgate assembly as comparable sales and Mrs. Budd, by using those sales, has introduced a questionable factor into her report and opinion.

Mrs. Budd explained the basis of her sales in Group D but I am not persuaded that it is necessary to look at any sales which occurred in 1986, 1987 and 1988 to determine the fair market value of the subject property at December 31, 1971 when there were so many sales of unimproved land in the vicinity of the subject property in and around 1971. Mrs. Budd includes among her eight best indicators the following sales which in my view are not good comparables for the reasons stated below:

Sale no. 18: improved with a building Sale no. 21: improved with a building Sale no. 22: improved with a building Sale no. 24: Eastgate assembly

As I have already observed with respect to sales nos. 18, 21 and 22, Mrs. Budd was required to appraised the depreciated value of the building on each site at the time of sale (a subjective determination made about 18 years after the event) before she could deduct such depreciated value from the actual sale price to determine the residual land value. And with respect to the Eastgate assembly, I have already shown the inconsistencies in the time adjusted price per square foot. If the actual sale of a particular property close in location to the subject property occurs close in time to the valuation date, and if an expert witness relies on that actual sale as a comparable sale, the expert's opinion will have a stronger foundation if there is a minimum of subjective adjustments to the actual sale price. In other words, the actual sale will be a more truly comparable sale if there are fewer such adjustments.

In the end result, Mrs. Budd has only four sales of unimproved land (nos. 3, 5, 6 and 9) among her eight best indicators. Her sales nos. 3, 5, 6 and 9 were included among Mr. Dowling's list of 15 comparables. Mr. Dowling did not use her no. 3 because the grantor (City of Hamilton) undertook to rezone but Mr. Sabourin did use her no. 3 as his best comparable. In Mr. Dowling's final analysis, he dropped her no. 5 because the high time adjusted price was outside his range.

Mrs. Budd was very thorough in her report and earnest in her oral testimony but she seems to have had a "machine gun" approach, wanting to shoot at every sale in sight. I think her opinion would be stronger if she had restricted herself to sales of unimproved land and omitted the Eastgate assembly.

Mr. Sabourin used only sales of unimproved land as his comparable sales. Therefore, he adopted the same approach as Mr. Dowling. The main difference between the comparable sales of Messrs. Dowling and Sabourin is one of emphasis. Mr. Sabourin concentrated on sales of larger parcels of land in some cases bigger than the subject property whereas Mr. Dowling concentrated on smaller parcels. Mr. Sabourin decided that his best comparable was a sale in July 1968 of 4.511 acres of land at the north-east corner of Queenston Road and Nash Road, a few hundred yards west of the subject property. The vendor was the City of Hamilton; the purchaser was the Ford Motor Company, and the price was $393,000. At the time of the sale agreement, this land was zoned “agricultural” but the vendor (City of Hamilton) undertook to zone it "commercial" so that the purchaser could establish a Ford dealership on the site.

Mr. Sabourin produced a copy of the City of Hamilton By-law No. 68-115 dated April 9,1968 amending Zoning By-law No. 6593 (Exhibit R-4). The effect of Exhibit R-4 was to change the zoning of the Nash Road property from agricultural to commercial. Mr. Sabourin also confirmed that the amending by-law had been approved by the Ontario Municipal Board on June 27, 1968 and the deed from the City to Ford was registered on July 3, 1968. He regarded it as his best comparable because it was close inlocation and close in size to the subject property (4.511 acres v. 5.957 acres); it was on a corner bordering one of the main arteries (Queenston Road) which serviced the subject property; it was zoned commercial when the deed was registered; and it was on the Hamilton side of the subject property to benefit from urban development as it moved east toward Stoney Creek.

Mr. Sabourin's decision that the Nash Road property was his best comparable is reinforced by Mrs. Budd's decision to include the property among her eight best indicators (her sale no. 3). Mr. Dowling listed the Nash Road property among his 15 comparables (his sale no. 8) but did not make any adjustment for time or location and did not use it in the formation of his opinion for two reasons. Firstly, he regarded it as a tainted sale because the land was not zoned commercial when Ford agreed to buy it from the City and the City undertook to rezone it. And secondly, Ford did not need the whole 4.511 acres and Mr. Dowling said that the price may have been lower because Ford was purchasing some excess land. Ford did in fact sell the easterly 2.166 acres in May 1972 and that sale appears as no. 9 in Mr. Sabourin's comparables.

I do not accept Mr. Dowling's reasons for excluding the Nash Road property from the formation of his opinion. He admitted that he used the Real Estate Board files for his information and had not gone to the Registry Office. A little more research on his part would have shown that the land was rezoned before the deed was registered on July 3, 1968. More importantly, the undertaking to rezone by the City of Hamilton (as vendor) is significantly different from an agreement between two private persons which is conditional upon rezoning. A private person seeking to rezone might be opposed by the City which could block the rezoning. But when the City, as vendor, undertakes to rezone it is almost a fait accompli subject to extraordinary arguments from adjoining owners. The south side of Queenston Road at Nash Road was already zoned commercial because Mr. Sabourin described a Towers Department Store at the south-west corner which had been there since 1956; and the Queenston Mall (containing a Steinberg’s Food Market) was on the south-east corner. It seems to have been City policy to have commercial zoning on Queenston Road running east to the Stoney Creek boundary, and Mr. Dowling should have known that.

Concerning the so-called excess land, there is no reason to believe that the City of Hamilton would sell the 4.511 acres for less than prevailing market prices just because the purchaser needed only one-half of the parcel. The unadjusted 1968 price of $2 per square foot for the Nash Road property might have been below the range of prices which Mr. Dowling accepted from other sales in which the land was only one-tenth the size of the subject property but that 1968 sale of the Nash Road property was a fact which he had to come to terms with. Mr. Dowling’s rejection of the 1968 sale of the Nash Road property puzzles me. It could not have been the early date of the sale (1968) because his sale no. 3 was in September 1967. I am wondering if his rejection of the Nash Road property as a comparable sale is a reflection on the objectivity of his report, particularly when Mrs. Budd used it as one of her eight best indicators.

Mr. Sabourin's 11 sales are really reduced to about 8 because some of them were resales of all or part of a prior parcel. For example, his sale no. 6 in March 1971 was 24.627 acres at the south-east corner of Centennial Parkway and Barton Street. His sale no. 10 in December 1972 was a resale of part of no. 6 being only 1.241 acres at the very south-east corner of Centennial Parkway and Barton Street. Sale no. 10 became a Sunoco Gasoline Station. Mr. Sabourin's sale no. 11, also in December 1972, was also a resale of part of no. 6 being 12.822 acres behind and around the Sunoco Station on the corner. Sale no. 11 is actually comparable to the subject property in exposure because it surrounds the Sunoco Station and has extensive fronting on both Centennial Parkway and Barton Street. It was later developed into a shopping centre with an A & P store.

My problems with Mr. Sabourin's report are his failure to make any adjustment for location, and his time adjustment for inflation is too conservative. All three experts were in agreement that the intersection of Queenston Road and Centennial Parkway is the busiest and best commercial intersection in that area of Hamilton and Stoney Creek. Because the subject property occupies one of the four corners at that intersection, any comparable sale not on or immediately adjoining that intersection should have a positive (upward) adjustment for location.

With respect to inflation and the rising values of land in the vicinity of the subject property, each expert examined resales of certain properties trying to determine the rate at which prices were increasing. Mr. Dowling and Mrs. Budd settled for 1.5 per cent per month and Mr. Sabourin used 7 per cent per annum compound which he said was approximately 9 per cent per annum (not compound). I question whether either rate should be used in a uniform manner over the span 1968 to 1972 but there was not enough evidence to determine when the rate might have changed. There was a consensus that the assembly and development of Eastgate Square during 1971 and 1972 was the driving force in the local real estate market. Therefore, I assume that the market was more volatile in 1971-72 than in 1968-69. In an ideal world, actual sales in 1968 and 1969 should probably have a lower time adjustment until mid-1970 and then an increased time adjustment to the end of 1972. We are not in an ideal world, however, and having regard to the relative shortage of really good time indicators, I am inclined to think that the rate was closer to 1.5 per cent per month (18 per cent per annum) than to Mr. Sabourin's 9 per cent per annum. I have concluded that 1.25 per cent per month (15 per cent per annum) is a more reasonable rate to apply to all sales as a time adjustment than the rates used by any of the three experts.

Although Mr. Sabourin did not adjust for location and his time adjustment was too low, I have concluded that his approach in looking only for sales of unimproved land which were closer in area to the subject property is preferable to Mr. Dowling's approach which accepted too many small parcels of less than 0.6 acres with some unexplained adjustments. Also, I prefer Mr. Sabourin's approach to that of Mrs. Budd whose sales in Group B (land plus building) permitted too many subjective adjustments; and her sales in Group C (the Eastgate assembly) required further analysis to exclude the Loblaws sale.

Schedule "B" attached to these reasons [not reproduced] is my own summary of Mr. Sabourin's 11 sales showing my attempt to convert his price per acre to a price per square foot and my attempt to adjust his price per square foot for time at the rate of 1.25 per cent per month. At page 20 of his report, he selected his sales nos. 1, 2, 7 and 9 as the best indicators for size alone. But for corner influence, he thought his best indicators were his sales nos. 1 and 10. Mr. Sabourin's sale no. 1 is the comparable which I have called the Nash Road property—also relied on by Mrs. Budd as one of her best indicators. I accept the Nash Road property as the best comparable sale. I might also state that the Nash Road property withstood extensive cross-examination by appellant's counsel.

Looking at Schedule "B", it does not seem unfair to select sale no. 1 as the best comparable because from the last column (time adjusted price per square foot at 1.25 per cent per month) there are only three other sales (nos. 3, 5 and

9) with a higher price per square foot; and two of those sales (nos. 3 and 5) were less than 0.81 acre. In other words, the time adjusted price for sale no. 1 in Schedule “B” is by no means the lowest price among Mr. Sabourin's comparables.

What is lacking in Mr. Sabourin’s report and in Schedule "B" is an adjustment for location. I cannot find any property in the reports of Mr. Dowling and Mrs. Budd which has a location adjustment greater than ten per cent. Therefore, I would adjust the price of the Nash Road property as follows:

Applying a value of $3.40 per square foot to a total area of 259,504 square feet produces a total value of $882,314. Rounding that amount upward, I conclude that the fair market value of the subject property at December 31, 1971 was $890,000. The appeal is allowed with costs because the value determined herein ($890,000) is closer to the value reported by the appellant in its 1986 income tax return ($1,273,130) than the value used by the respondent in the assessment ($409,500). The assessment under appeal will be referred back to the respondent for reassessment in accordance with these reasons.

Appeal allowed.