B
billy corgan19982
Guest
Well this will basically kill the Trump Tower and any other condo-hotel projects in the works.
From The Star
Condo hotel buyers face tax shock
Oct. 11, 2006. 01:00 AM
JENNIFER WELLS
BUSINESS COLUMNIST
In an interview in mid-September, Harry Stinson laid out, as he is wont to do, the hurdles that he has had to clear at The Suites at One King West, the striking condo hotel that presides over the southwest corner of one of the busiest intersections in the downtown core.
Before leading a quick-paced tour of numerous aesthetic elements he finds displeasing and is in the process of rectifying, Stinson addressed the more fundamental issue of the financial architecture of the building. Not in terms of his own capital structure, but rather the hoped-for investment returns awaited by some of the purchasers of the tower's 540-odd condos.
At the time of its inception, when Stinson envisioned a sky-high sliver rising from what seemed an impossibly narrow site, the plan was for up-market condominiums. It was autumn, 1998, when I first met Stinson, and he was marketing "the most exclusive residential address in Canada."
The kitchen of the display suite featured yards of bird's eye maple, top-of-the line counter tops and a mini wine cellar. It seemed very New York in a fabulous way.
The project then morphed, as these projects often do. The adjacent property, the Dominion Bank building, was purchased. And, as it was ultimately conceived and realized, One King emerged as something new in the city: a condo hotel. I revisited Stinson when he announced a plan to launch a private club in the historic Dominion space, and again last month to talk about why the Dominion Club failed.
As we spoke, that evening in September, the lights automatically dimmed, pre-programmed in acknowledgment of Happy Hour. And Stinson talked of there being just a "couple dozen" full-time owner occupants at One King. The vast majority of suites — he put the number at 440 — have been placed by their owners in the hotel "pool." In other words, the owners are not resident in these pads, but rather they have turned their units over to Stinson to manage and rent out as hotel rooms.
In this way, these owners have become investors, whose return on funds invested is paid to them as a cash-flow share of hotel operations. "Everything's pooled. Every suite," said Stinson. At the end of each month investors are sent a statement itemizing a full account of revenue in and costs out. "Right now, they're at the stage where they're finally getting revenues from it," said Stinson of the investors. "A few hundred bucks went out in March. April was a little better. June was very good." Owners, he said, were seeing "$1,200, $1,800 a month."
But Stinson was bothered. The Municipal Property Assessment Corporation had put owners on notice that units rented out as hotel rooms were being assessed not at the residential rate, but rather would be taxed as commercial space. "So you take a $300,000 suite and put a 4 per cent mill rate on it and that's $12,000 a year in taxes," said Stinson, before adding, "Well, you'll choke to death."
Last week, Piers Hemmingsen, who invested in the project when the sliver was all that Stinson had in mind, received his tax bill from the city. Hemmingsen owns a one-bedroom unit at One King and until two weeks ago was living happily in it. He had not planned to be resident in the building but rather found himself in a "transitional" phase in his life, so what had been purchased purely as an investment became a short-term residence. He has since acquired a home in the city's west end and has put his unit into the One King hotel pool.
The tax bill: for 2006 Hemmingsen has been levied a tax of $11,264.19. Additionally, he received a further supplemental bill which he understands to be a "catch-up" for 2005. This additional sum: $2,362.70.
Hemmingsen has nothing but good things to say about One King. "There wasn't anything cheap in that place," he said. "It was all first-class." King-sized bed. Two armoires. A concierge service. And he admires Stinson's vision immensely.
But he had been paying $83 a month in taxes. And now he's got this zaftig bill. "I can't think of a tax situation where they treat every unit in the building as a separate commercial enterprise," he said. "It doesn't make sense. It just doesn't add up."
Larry Hummel, vice-president of property values at MPAC, said the situation is straightforward. "There's a definition contained in our regulations which says that a hotel is included in the commercial property class and not in any other property class," said Hummel. The definition, he goes on to specify, is "one or more furnished, self-contained units operated or managed in the manner to provide transient living accommodations for fee or charge for minimum periods of less than 30 days."
Legal counsel has been retained. "The fundamental problem arises from the fact that MPAC is looking at the property for valuation purposes as if it's one kind of animal and for tax class purposes they're saying it's a completely different kind of animal," said lawyer David Fleet, who has until Nov. 16 to appeal to the Assessment Review Board on behalf of the owners at One King.
The different animals he refers to is the fact that while units such as Hemmingsen's are being taxed commercially, they have been appraised residentially — in Hemmingsen's case, at $294,000. That, said Stinson in an interview yesterday, is unjust, and has left his investors facing tax rates many times that paid by other downtown hoteliers.
In our interview in September Stinson was clearly frustrated by the tax hurdle. "The whole history of this building has been arguments with bureaucracies who don't know what to do with it," he said then. Now that the city has sent out the tax bills, it's easy to see the vapourization of the cash flow paid to his hotel investors. Yesterday, Stinson called it a "boot to the head."
Piers Hemmingsen is watching patiently. "I don't think Toronto is ready to wrap its head around (One King)," he said. "That's the fundamental issue."
He intends to wait until he has a full year of financial statements before he can assess with clarity this particular investment. "With this one you have to be patient. Is it a bad investment? I don't know."
From The Star
Condo hotel buyers face tax shock
Oct. 11, 2006. 01:00 AM
JENNIFER WELLS
BUSINESS COLUMNIST
In an interview in mid-September, Harry Stinson laid out, as he is wont to do, the hurdles that he has had to clear at The Suites at One King West, the striking condo hotel that presides over the southwest corner of one of the busiest intersections in the downtown core.
Before leading a quick-paced tour of numerous aesthetic elements he finds displeasing and is in the process of rectifying, Stinson addressed the more fundamental issue of the financial architecture of the building. Not in terms of his own capital structure, but rather the hoped-for investment returns awaited by some of the purchasers of the tower's 540-odd condos.
At the time of its inception, when Stinson envisioned a sky-high sliver rising from what seemed an impossibly narrow site, the plan was for up-market condominiums. It was autumn, 1998, when I first met Stinson, and he was marketing "the most exclusive residential address in Canada."
The kitchen of the display suite featured yards of bird's eye maple, top-of-the line counter tops and a mini wine cellar. It seemed very New York in a fabulous way.
The project then morphed, as these projects often do. The adjacent property, the Dominion Bank building, was purchased. And, as it was ultimately conceived and realized, One King emerged as something new in the city: a condo hotel. I revisited Stinson when he announced a plan to launch a private club in the historic Dominion space, and again last month to talk about why the Dominion Club failed.
As we spoke, that evening in September, the lights automatically dimmed, pre-programmed in acknowledgment of Happy Hour. And Stinson talked of there being just a "couple dozen" full-time owner occupants at One King. The vast majority of suites — he put the number at 440 — have been placed by their owners in the hotel "pool." In other words, the owners are not resident in these pads, but rather they have turned their units over to Stinson to manage and rent out as hotel rooms.
In this way, these owners have become investors, whose return on funds invested is paid to them as a cash-flow share of hotel operations. "Everything's pooled. Every suite," said Stinson. At the end of each month investors are sent a statement itemizing a full account of revenue in and costs out. "Right now, they're at the stage where they're finally getting revenues from it," said Stinson of the investors. "A few hundred bucks went out in March. April was a little better. June was very good." Owners, he said, were seeing "$1,200, $1,800 a month."
But Stinson was bothered. The Municipal Property Assessment Corporation had put owners on notice that units rented out as hotel rooms were being assessed not at the residential rate, but rather would be taxed as commercial space. "So you take a $300,000 suite and put a 4 per cent mill rate on it and that's $12,000 a year in taxes," said Stinson, before adding, "Well, you'll choke to death."
Last week, Piers Hemmingsen, who invested in the project when the sliver was all that Stinson had in mind, received his tax bill from the city. Hemmingsen owns a one-bedroom unit at One King and until two weeks ago was living happily in it. He had not planned to be resident in the building but rather found himself in a "transitional" phase in his life, so what had been purchased purely as an investment became a short-term residence. He has since acquired a home in the city's west end and has put his unit into the One King hotel pool.
The tax bill: for 2006 Hemmingsen has been levied a tax of $11,264.19. Additionally, he received a further supplemental bill which he understands to be a "catch-up" for 2005. This additional sum: $2,362.70.
Hemmingsen has nothing but good things to say about One King. "There wasn't anything cheap in that place," he said. "It was all first-class." King-sized bed. Two armoires. A concierge service. And he admires Stinson's vision immensely.
But he had been paying $83 a month in taxes. And now he's got this zaftig bill. "I can't think of a tax situation where they treat every unit in the building as a separate commercial enterprise," he said. "It doesn't make sense. It just doesn't add up."
Larry Hummel, vice-president of property values at MPAC, said the situation is straightforward. "There's a definition contained in our regulations which says that a hotel is included in the commercial property class and not in any other property class," said Hummel. The definition, he goes on to specify, is "one or more furnished, self-contained units operated or managed in the manner to provide transient living accommodations for fee or charge for minimum periods of less than 30 days."
Legal counsel has been retained. "The fundamental problem arises from the fact that MPAC is looking at the property for valuation purposes as if it's one kind of animal and for tax class purposes they're saying it's a completely different kind of animal," said lawyer David Fleet, who has until Nov. 16 to appeal to the Assessment Review Board on behalf of the owners at One King.
The different animals he refers to is the fact that while units such as Hemmingsen's are being taxed commercially, they have been appraised residentially — in Hemmingsen's case, at $294,000. That, said Stinson in an interview yesterday, is unjust, and has left his investors facing tax rates many times that paid by other downtown hoteliers.
In our interview in September Stinson was clearly frustrated by the tax hurdle. "The whole history of this building has been arguments with bureaucracies who don't know what to do with it," he said then. Now that the city has sent out the tax bills, it's easy to see the vapourization of the cash flow paid to his hotel investors. Yesterday, Stinson called it a "boot to the head."
Piers Hemmingsen is watching patiently. "I don't think Toronto is ready to wrap its head around (One King)," he said. "That's the fundamental issue."
He intends to wait until he has a full year of financial statements before he can assess with clarity this particular investment. "With this one you have to be patient. Is it a bad investment? I don't know."