AMP Life Ltd and Valuer General
[2007] WASAT 257
•10 OCTOBER 2007
AMP LIFE LTD and VALUER GENERAL [2007] WASAT 257
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2007] WASAT 257 | |
| VALUATION OF LAND ACT 1978 (WA) | |||
| Case No: | DR:322/2005 | 6, 7, 8, 9, 10 NOVEMBER 2006 AND 14 DECEMBER 2006 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) MR J JORDAN (MEMBER) MR R J PRIEST (SENIOR SESSIONAL MEMBER) | 10/10/07 | |
| 51 | Judgment Part: | 1 of 1 | |
| Result: | Unimproved land valuations affirmed Application dismissed | ||
| A | |||
| PDF Version |
| Parties: | AMP LIFE LTD VALUER GENERAL |
Catchwords: | Valuation of land Site in Perth central business district "Unimproved value" Comparable sales approach Challenge to methodology and assumptions of Valuer General Concept of "standard inside lot" |
Legislation: | City of Perth City Planning Scheme No 1, cl 48, cl 137, cl 138 City of Perth City Planning Scheme No 2, cl 33 City of Perth Town Planning Scheme No 16, cl 8, cl 12, cl 15 State Administrative Tribunal Act 2004 (WA), s 27(2) Town Planning and Development Act 1928 (WA) Valuation of Land Act 1978 (WA), s 4(1) |
Case References: | Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 Clive Elliot Jennings & Co Pty Ltd v Western Australian Planning Commission [2002] WASCA 276; (2002) 122 LGERA 433 Duffy v The Minister for Planning [2003] WASCA 294 Luton v Valuer-General [1971] 1 NSWLR 280 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Mt Lawley Pty Ltd v Western Australian Planning Commission [2005] WASAT 57 Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63 Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610 Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 Spencer v The Commonwealth (1907) 5 CLR 418 St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218 Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69 Weld Club Trustees and Valuer General [2007] WASAT 256 Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 |
Orders | 1. The valuations and land value assessments of the Valuer General be reviewed and reduced as follows:,(1) 1 August 1999 from $27,000,000 to $23,400,000;,(2) 1 August 2000 from $22,000,000 to $17,000,000; and,(3) 1 August 2003 from $22,000,000 to $17,000,000.,The Tribunal will hear from the parties as to the terms of the final orders to be made in light of these reasons. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : DEVELOPMENT & RESOURCES ACT : VALUATION OF LAND ACT 1978 (WA) CITATION : AMP LIFE LTD and VALUER GENERAL [2007] WASAT 257 MEMBER : JUSTICE M L BARKER (PRESIDENT)
- MR J JORDAN (MEMBER)
MR R J PRIEST (SENIOR SESSIONAL MEMBER)
- Applicant
AND
VALUER GENERAL
Respondent
Catchwords:
Valuation of land Site in Perth central business district "Unimproved value" Comparable sales approach Challenge to methodology and assumptions of Valuer General Concept of "standard inside lot"
Legislation:
City of Perth City Planning Scheme No 1, cl 48, cl 137, cl 138
City of Perth City Planning Scheme No 2, cl 33
(Page 2)
City of Perth Town Planning Scheme No 16, cl 8, cl 12, cl 15
State Administrative Tribunal Act 2004 (WA), s 27(2)
Town Planning and Development Act 1928 (WA)
Valuation of Land Act 1978 (WA), s 4(1)
Result:
Unimproved land valuations affirmed
Application dismissed
Category: A
Representation:
Counsel:
Applicant : Mr MN Solomon
Respondent : Mr BP King and Ms CA Ide
Solicitors:
Applicant : Phillips Fox
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575
Clive Elliot Jennings & Co Pty Ltd v Western Australian Planning Commission [2002] WASCA 276; (2002) 122 LGERA 433
Duffy v The Minister for Planning [2003] WASCA 294
Luton v Valuer-General [1971] 1 NSWLR 280
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Mt Lawley Pty Ltd v Western Australian Planning Commission [2005] WASAT 57
Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63
Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610
Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243
Spencer v The Commonwealth (1907) 5 CLR 418
St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218
(Page 3)
Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69
Weld Club Trustees and Valuer General [2007] WASAT 256
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
(Page 4)
Summary of Tribunal's decision
1 The Valuer General assessed the unimproved land value of Lot 29 and Lot 30 on the north-western corner of the intersection of St Georges Terrace and William Street, Perth, at $27,000,000 on 1 August 1999, and at $22,200,000 on 1 August 2000 and 1 August 2001. The applicant, the registered proprietor of the land, objected to the valuations. At the hearing, the Valuer General's expert valuer suggested that the valuations should be reviewed as follows: 1 July 2000 to $23,400,000 and 1 July 2001 to $17,000,000.
2 The Tribunal considered the competing methodologies of the expert valuers called by the parties and examined the comparable sales put forward by both valuers.
3 The Tribunal preferred the approach of the Valuer General's valuer and affirmed the assessments.
Issues
4 The primary issues for determination in these proceedings are the unimproved land values of the subject land (the AMP site) under the Valuation of Land Act 1978 (WA) (VL Act) as at 1 August in each of the years 1999 to 2003 (relevant dates).
5 The Valuer General's unimproved value assessments were made as at:
• 1 August 1999 $27,000,000;
• 1 August 2000 $22,200,000; and
• 1 August 2003 $22,200,000.
6 However, at the hearing of these proceedings the Valuer General relied on the amended valuation recommendations of Mr Lindsay Collins, a valuer called by the Valuer General, to the effect that the values should as at the date of the hearing be reviewed and applied as follows:
• 1 July 2000 from $27,000,000 to $23,400,000;
• 1 July 2001 from $22,200,000 to $17,000,000; and
(Page 5)
- • 1 July 2004 from $22,200,000 to $17,000,000.
7 There are two subsidiary issues that bear on the determination of the primary issues:
(1) the development potential of the AMP site, especially having regard to the operation of City of Perth Town Planning Scheme No 16 (minor TPS 16); and
(2) the value of the AMP site by reference primarily to that potential, utilising the comparable sales methodology.
Facts
8 The subject land: The AMP site, of which the registered proprietor is the applicant, comprises two lots of land, Lot 29 and Lot 30, which are more particularly described as follows:
(1) Estate in fee simple in all that piece of land being Lot 29 on diagram 78377 and being the whole of the land comprised in Certificate of Title Volume 1957 Folio 825.
(2) Estate in fee simple in all that piece of land being Lot 30 on diagram 78377 and being the whole of the land comprised in Certificate of Title Volume 1957 Folio 826.
9 For valuation purposes the two lots are effectively treated as one.
10 The AMP site is a corner lot with three significant frontages to St Georges Terrace, William Street and Hay Street in the heart of the Perth Central Business District (CBD).
11 The intersection of St Georges Terrace and William Street is accepted as one of Perth's premier office locations, if not the best, and the site of four major high rise office towers, being 111 St Georges Terrace, the Challenge Bank building, the BankWest tower, and the AMP tower. To the west, within 100 metres of the corner, is Perth's tallest office tower, Central Park. Like the AMP site, Central Park, together with the Commonwealth Bank Building
(Page 6)
- at 150 St Georges Terrace, is within the scheme area of minor TPS 16.
12 The AMP site is substantially rectangular in shape; the St Georges Terrace frontage is 47.78 metres in length; the Hay Street frontage is 47.71 metres; and the William Street return frontage is 107.95 metres. This yields a total site area of 5,167 square metres.
13 The site is level with the road on all frontages although the land falls naturally about 3 - 4 metres from Hay Street to St Georges Terrace. The land comprises of sandy soils which are sometimes an impediment to high rise development, although no party suggests they provide a particular impediment to the realisation of the highest and best use of the land in this case.
14 Planning controls: At all relevant dates the AMP site was subject to the planning provisions of City of Perth City Planning Scheme No 1 (CPS 1). Under CPS 1, Lot 29 was zoned "Office (Central Area)" (denoted CO on the scheme map) and Lot 30 was zoned "Shopping (Central Area)" (denoted CS on the scheme map).
15 Table No 2 of CPS 1 included the following use designations for these two zones:
Use Class | Zone |
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A "P" designation meant "the land may be used for the purpose indicated in accordance with the town planning approval of the Council". An "AA" designation meant "the land shall not be used for the purpose indicated unless the Council has first approved of that use by the issue of a town planning approval". Thus for each existing use, if it were to be replicated at relevant dates, it would have been necessary for an application for town planning approval to be lodged with and determined by the Council.
16 Clause 137 of CPS 1 provided, by reference to Figure No 1, that the stipulated plot ratio for the AMP site was 5:1. However, cl 138(1) of CPS 1 provided that:
(Page 7)
- "The Council may permit a building to have a plot ratio up to 20% in excess of that prescribed by Clause 137 if, in the opinion of the Council, the proposed development includes a community or other facility or amenity and that facility or amenity and the design, standard and nature of the proposed development as a whole constitute a significant improvement to the amenities or environment of the Central Area."
- This would enable a plot ratio of 6:1 to be entertained in the consideration of an application for town planning approval at the relevant dates.
17 Also material at relevant dates was cl 48(1) of CPS 1 which gave the City the power to approve an application for planning approval that did not comply with a standard or requirement of CPS 1 which would include cl 138 - if an absolute majority of the Council was satisfied that the:
(1) development would be consistent with the orderly and proper planning of the locality and the preservation of the amenities of the locality; and
(2) non-compliance would not have any adverse effect on the occupiers or users of the development, the inhabitants of the locality or the likely future development of the locality.
18 Minor Town Planning Scheme No 16: At the relevant dates the AMP site was also within the "scheme area" of minor TPS 16, gazetted 2 October 1987, which included the AMP site, the Commonwealth Bank site (Lot 26) and the Central Park Development (CPD) site (which comprised Lot 27 together with Lots 24 and 28 which are two 4.88 metre wide lots along the Hay Street frontage). The total scheme area of minor TPS 16 was 15,334 square metres.
19 The "objectives" of minor TPS 16 in summary were to:
(a) ensure vehicle access off St Georges Terrace and exit onto William Street;
(b) ensure adequate pedestrian movement throughout;
(c) ensure landscaped areas accessible to the public; and
(Page 8)
- (d) ensure the scheme area of the minor scheme as a whole was developed in a coordinated manner.
20 Clause 12 of minor TPS 16, under the heading "Development", provided:
"For the purpose of:
(a) determining plot ratio; and
(b) ascertaining car parking requirements,
pursuant to the City of Perth Planning Scheme with respect to the land within the Scheme Area, the Scheme Area shall be treated as one site."
21 Clause 8 provided that "[t]o the extent of any inconsistency between provisions of this Scheme and the City of Perth City Planning Scheme [CPS 1], the provisions of this Scheme shall prevail."
22 Draft City Planning Scheme No 2: Raised as an issue by the parties was the weight to be accorded at relevant dates to the draft City of Perth City Planning Scheme No 2 (draft CPS 2) when considering the development potential of the AMP site at relevant dates. Like CPS 1, draft CPS 2 proposed a plot ratio of 5:1 for the AMP site and, like CPS 1, provided that a plot ratio in excess of this could be considered. However, cl 33 of draft CPS 2 provided the increase could only be up to 20%. In that sense, it put a "cap" on the potential plot ratio of the site. Draft CPS 2 had no equivalent to cl 48 of CPS 1 which provided the Council with the discretion to approve an application for development approval that did not comply with a standard or requirement of the CPS. Accordingly, if CPS 2 were to become operative, it would be no longer open to consider a development with a plot ratio greater than 6:1.
23 In 1997 the City resolved to adopt draft CPS 2. In 1998 it resolved to adopt amendments to it. On 30 November 1999, in accordance with the requirements of the Town Planning and Development Act 1928 (TPD Act) and relevant regulations, the City sent draft CPS 2 to the Western Australian Planning Commission (WAPC) for consideration. In July 2000, the WAPC instructed the City to make modifications to the draft. In August 2000, the City resolved to incorporate the required amendments into draft CPS 2.
(Page 9)
- The amended draft was advertised between October 2000 and February 2001. The City adopted amended draft CPS 2 for final approval in June 2001. CPS 2 was eventually gazetted under the TPD Act and became operative on 9 January 2004. It may be noted that the plot ratio provisions of draft CPS 2 remained unchanged throughout this scheme making process.
24 Mr Gregory Rowe, an experienced town planner called by the applicant, was of the opinion that draft CPS 2 was to be considered a "seriously entertained" planning proposal from 1999 onwards and accordingly should be afforded considerable weight in assessing development potential from that year on. By contrast, Ms Margaret Smith, a town planner in the employ of the City called by the Valuer General, contended that draft CPS 2 could not be considered seriously entertained until 2001, given the amendments that were made up to that time and having regard also to the delay in its ultimate finalisation. It was her view that prior to 2001, draft CPS 2 was simply a matter to be considered rather than to be given any weight greater than that given to other relevant considerations.
25 The Tribunal notes that CPS 2 was a long time in gestation with public comment invited on an early draft as far back as 1994. Subsequent to adoption by the City in 1997, the City either adopted amendments to it or was instructed to do so by the WAPC. After the City adopted CPS 2 for "final" approval in June 2001 it took another three years before it was gazetted on 9 January 2004.
26 Given the length of time it took for draft CPS 2 to be given final approval and the series of amendments adopted, the Tribunal finds that, while draft CPS 2 was a factor to be considered in the development approval process at all relevant dates from 1 August 1999 onwards, not until after June 2001, when it was adopted for final approval, should it have been afforded greater weight as a "seriously entertained planning proposal".
27 In so finding, it must be noted that in Western Australia the principle that a seriously entertained planning proposal is to be afforded particular weight "… is merely intended to enable a planning proposal that does not yet have a formal status in the planning process to be regarded as a relevant town planning factor": Clive Elliot Jennings & Co Pty Ltd v Western Australian Planning Commission [2002] WASCA 276; (2002) 122 LGERA 433 at [88]. It is not determinative of any particular planning outcome.
(Page 10)
28 The 1987 Central Park Development approval: In 1987 the City passed a resolution (the 1987 CPD approval) in two parts concerning the application for planning approval in respect of the CPD site, a site comprising 15,039 square metres of land within the minor TPS 16 scheme area and 296 square metres of road widening on the Hay Street frontage.
29 The first part of the resolution was that the City lease on a commercial basis a short term car park comprising 450 bays. The second part was that the City approve an application submitted "… on behalf of Central Park Developments, the Australian Mutual Provident Society and the Commonwealth Bank for the development of an office tower, extensions to an existing building, a car park and a landscaped park" as set out on accompanying plans.
30 The application for this approval was made in accordance with CPS 1 and minor TPS 16, and was signed by all land owners within the TPS 16 scheme area as required by minor TPS 16 cl 15(1)(a).
31 The approval was subject to conditions, one of which, "condition (ii)(D)", significantly provided that: "[t]he plot ratio for the development not exceeding 6:1 over the total area within the boundaries of [TPS 16] plus the road widening area which has been excised from the site along the Hay Street frontage".
32 The resolution included further "advice" to the applicants that included:
• the short term car park would not be included in the plot ratio calculations;
• the development approval at ground level and above did not extend beyond the boundaries of TPS 16; and
• the park was awarded bonus plot ratio, but not the additional car parking.
33 The 1987 CPD approval to commence development applied in part to the AMP site, as well as to the CPD land (being Lots 24, 27, 28 and land below the road widening in Hay Street). On the AMP site, development approved comprised, on Lot 30 at ground level, the Qantas tenancy and park and, below ground, parking, including fee paying parking spaces and a vehicle exit ramp up to William Street
(Page 11)
- from underneath the Qantas tenancy. On the CPD lots the approved development comprised, above ground, Central Park tower, the low rise office and retail building fronting Hay Street, and park and, below ground, parking, including fee paying parking with an entrance down from St Georges Terrace.
34 In granting the 1987 CPD approval the City plainly was aware of the existing development, comprising about 28,055 square metres of floor space in the AMP office tower, on Lot 29. The allocation of plot ratio to the whole of the site of 6:1 was given by the Council under the terms of minor TPS 16, bearing in mind the requirements and powers of the Council under CPS 1, cl 48.
35 The effect of the Council’s approval was to accord notional plot ratios to the three properties within the minor scheme area. There is some confusion as to exactly what the notional plot ratio of the AMP site then was. Mr Jackson in his valuation for example refers to it as 5.53:1. Mr Collins relies on a plot ratio of 5.43:1, which seems closer to the mark. The position of the Council was that the approval was for 6:1 over the total area of minor TPS 16 plus the road widening area excised from the site along the Hay Street frontage. The second point of advice mentioned above was that the actual development at ground level and above was not to extend beyond the boundaries of minor TPS 16. So the plot ratio included the CPD land and road widening Lot 15 adjacent thereto, the Bank site, and the AMP site (including Qantas tenancy) and adjacent road widening Lots 14 and 16. The total AMP site was 5,167 square metres but with the area of Lots 14 and 16 of 232.8 square metres was 5,399.8 square metres. The 1987 CPD approval said this area was 5,398 square metres. The total gross lettable area (GLA) on the AMP site was 28,340 square metres. On these numbers the plot ratio for the AMP site with the road widening is 5.25:1. Without the road widening the site area is 5.48:1. This tends to support the plot ratio assumption ultimately made by Mr Collins.
36 The status of the 1987 CPD approval at relevant dates and its relevance for valuation purposes is discussed below.
37 Improvements: At all relevant dates, the AMP site was in fact improved in the following ways: the AMP office tower was on Lot 29 and the single storey Qantas tenancy was on Lot 30.
(Page 12)
38 Highest and best use: The parties agree, as do the experienced expert valuers called to give evidence Mr Jackson for the applicant and Mr Collins for the Valuer General that, provided there was sufficient gross floor area (GFA) available, the highest and best use of the AMP site at all relevant dates was a premium office building.
39 The parties also agree that the likely extent of development on the AMP site is affected not only by CPS 1 but, more particularly, also by minor TPS 16.
40 The applicant says that the development potential of the AMP site is severely constrained by virtue of minor TPS 16, whereas the Valuer General contends that, having regard to the existence of minor TPS 16, the 1987 CPD approval in respect of the whole of the land in the minor TPS 16 scheme area, and the development actually carried out under that approval, the development potential of the AMP site at relevant dates would reflect, more or less, the extent of the improvements actually carried out on it at relevant dates.
41 Comparable sales approach: The valuers gave assessments of value that reflected the respective positions of the parties who called them concerning the development potential of the land. They both adopt the comparable sales approach, which they agree is appropriate, but they differ in the application of that approach.
42 Mr Collins for the Valuer General said he applied a methodology used in the Valuer General's office for yearly valuations and revaluations of CBD property. That methodology is to identify the value of a "standard inside CBD lot" and then to apply the dollar rate per square metre to the land the subject of valuation having regard to the attributes of the subject land for example, location, corner influence, shape and size. A feature of this approach is to verify the standard rate by reference to comparable sales, and to make deliberate adjustments to it on account of each of the attributes of the subject land.
43 By contrast, Mr Jackson for the applicant applied what he referred to as a holistic approach, which comprises of consideration of all of the sales evidence and the attributes of the subject land, to arrive by way of professional judgment at a value per square metre of GFA. He did not purport to assign percentage increases or decreases in value according to the particular identified attributes of the subject land.
(Page 13)
44 In addition to the differences in the use of the comparable sales methodology, the valuers also differed on the use to be made of comparable sales, especially in relation to the development potential underlying some of the sales.
45 Another issue - or a related issue - between the parties was the proper difference, if any, between the value of the AMP site on the relevant date in 1999 and the value of the subject site on the later relevant dates. The Valuer General contends there was a drop in value from 1999 to 2001, which only became apparent in late 2001, which was then applied to the values after 1999.
46 The applicant argues that there was no such drop in values and that the lower values adopted later by the Valuer General indicate that the value assessed for 1999 was excessive.
47 These issues are largely common to the proceedings in Weld Club Trustees and Valuer General [2007] WASAT 256, which was heard at the same time as these proceedings. Our findings and observations on these issues will also be relevant to the decision in the Weld Club proceedings.
Competing valuations
48 Under s 4(1) of the VL Act the "unimproved value" of land is the "site value", which in turn is "the capital amount that an estate of fee simple in the land might reasonably be expected to realize upon sale assuming that any improvements to the land, other than merged improvements, had not been made".
49 Put another way, it is often said that, under this formula, in determining unimproved value it is necessary to assume that the subject site is stripped of any development or improvements but to assume that development on neighbouring lots existed: Luton v ValuerGeneral [1971] 1 NSWLR 280 at 283.
50 In addition, it is recognised that planning controls affecting the development of the subject land at relevant dates must also be taken into account: see for example Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610 at 625.
51 The hypothetical nature of the valuation exercise arising from those principles is well understood, at least in the familiar property context where a parcel of land is within a single title and has its own
(Page 14)
- individual development potential under relevant planning controls. An issue that arises in this case is whether this approach applies in an unaltered way where a town planning scheme like minor TPS 16 controls the allocation or transfer of plot ratio between a number of individual sites.
52 In St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218, the former Land Valuation Tribunal of Western Australia accepted in relation to a minor town planning scheme that had a similar operation to minor TPS 16, that the subject land within the minor scheme area should be assessed for value on the basis that the improvements on the other lots in the scheme area affected at relevant valuation dates the available plot ratio and so the development potential of the subject land.
53 Accordingly, the approach advocated by the applicant in this case is that the GFA available to the AMP site is to be ascertained by determining the GFA available under minor TPS 16 and by then deducting the GFA actually used by the other existing developments (on the Commonwealth Bank site and the Central Park site) that are affected by the minor TPS 16 as at the relevant dates. The applicant says that development approval under which the Central Park development was constructed does not give any development approval to the applicant and must effectively be ignored. As a consequence, whereas Mr Collins for the Valuer General valued the AMP site on the basis that Lot 29 alone could support a development with a buildable area of 28,300 square metres, Mr Jackson conducted his valuation on the basis that the relevant buildable area was only 11,267 square metres.
54 The Valuer General says that the approach of the former Tribunal in this regard is wrong and the applicant's contention is a non sequitur because the result of the applicant's approach is that only a minor development of the AMP site would, in fact, be possible at the relevant dates because the other two sites had effectively swallowed up the available plot ratio and development potential in the minor TPS 16 scheme area.
55 The Valuer General argues that while it may be accepted that the 1987 CPD approval does not constitute an approval to develop or redevelop the whole of the AMP site at relevant dates it does not follow it is therefore open to ignore its existence. The Valuer General says the 1987 development application allowed for a plot
(Page 15)
- ratio of 6:1 over the whole of the minor scheme area and recognised and took into account the GFA of the existing AMP and CBA buildings at the time it was granted in order to calculate the GFA available to the Central Park development and other related developments, which included public car parking and the Qantas tenancy on Lot 30 of the AMP site. In other words, the GFA of the CPD approval in the minor scheme area was predicated on the GFA of the existing AMP and CBA buildings. Thus, the Valuer General contends, in order to use the Central Park development logically as the basis of a deduction of GFA available to the applicant, the availability of the GFA of the AMP tower recognised when the 1987 CPD approval was issued, must also be assumed to subsist at the relevant dates, but not including public car parking spaces also approved at that time.
56 The Valuer General contends a more logical and consistent approach to that of the applicant would be to accept the existence of the 1987 CPD approval and the allocation of plot ratio under the development approval as a proper basis for assessing the development potential of the subject site.
57 The Valuer General also says that, even if the applicant's primary approach is followed, the same result is reached once the 1987 CPD approval is taken into account. In applying the applicant's approach, the Valuer General says it is necessary first to ascertain the total GFA available under minor TPS 16. It is contended that this is done by first ascertaining the scheme area of TPS 16. The Valuer General says the applicant wrongly assumes that this area is 15,039 square metres. That figure is derived by adding the areas within TPS 16 without taking into account the 296 square metres in the Hay Street road widening land in Lots 14, 15 and 16. When those lots are added in, the scheme area for determining GFA is 15,334 square metres, which equates with the scheme area used in the 1987 CPD approval as the basis for distribution of plot ratio by the City (see Annexure LC6 to Exhibit 4, page 89). The Valuer General argues it is appropriate that the road widening land also be taken into account as it was included in the 1987 CPD approval assessment and it would have been taken into account at the relevant dates as a matter of practice.
58 The Valuer General contends that even if minor TPS 16 may be interpreted to exclude road widening, this interpretation is "overcome" by the terms of the 1987 CPD approval.
(Page 16)
59 In the Tribunal's view, in relation to the land taken for road widening that would otherwise have fallen within the usable land within minor TPS 16, given the broad discretionary powers of the Council under CPS 1 to grant bonuses (under cl 138) and otherwise to relax scheme standards or requirements (under cl 48), it does not seem improbable or unreasonable to conclude that at the relevant dates it would have been open to the Council to determine whether or not the road widening land should be taken into account (directly or indirectly) for the purpose of calculating the scheme area and consequently for the purposes of calculating the GFA on the AMP site.
60 The primary question, however, is what the development potential of the AMP site was at the relevant dates, applying the usual hypothetical approach discussed above. Would a hypothetical purchaser have assumed that the Council, in light of minor TPS 16, would simply reject out of hand any development of the site save for a minor redevelopment, on the basis that most of the plot ratio needed to support a major development of the AMP site had already effectively been allocated to the existing developments within the minor scheme area on the Central Park and Commonwealth Bank sites? To this issue we now turn.
The development potential of the AMP site having regard to minor TPS 16
61 As noted, the applicant says that if one assumes for the purposes of valuation at relevant dates, as one must, that the AMP site is stripped of all improvements, then its potential for development is controlled by the terms not only of CPS 1, but also minor TPS 16, and is limited.
62 The starting point in the valuation exercise, as all accept, is the understanding derived from Spencer v The Commonwealth (1907) 5 CLR 418 of the way value is assessed by a court or tribunal under legislation like the VL Act. We are here to assess what the willing, but not anxious, hypothetical purchaser would have been prepared to pay for the property. In the carrying out of this hypothetical exercise, as Isaacs J said at 441 in Spencer, it is also assumed that both buyer and seller are:
"perfectly acquainted with the land and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation,
(Page 17)
- character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."
63 Part of this exercise involves identifying the "highest and best use" to which the subject land can be put, for the true value of the land will reflect this use. This is inherent in what Isaacs J said in the quoted passage from Spencer, and it has been repeated in one way or another many times, including recently in the High Court of Australia by Callinan J in Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 at 649; see also Mt Lawley Pty Ltd and Western Australian Planning Commission [2005] WASAT 57.
64 Current land use controls imposed by statute and found in various forms of planning instruments bear on the identification of the highest and best use. In Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69, at 94 - 95, Wells J, after surveying a number of authorities including the Royal Sydney Golf Club case referred to above, and PortMacquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63, observed:
"It seems to me that the cases in which the land to be valued is subject to restrictions may be ranged along a notional scale within which they differ from one another in degree. At the lower end of the scale, there would appear the sort of restrictions exemplified by those in the Royal Sydney Golf Club Case [footnote omitted], which are so far reaching and so securely entrenched in the structure of the relevant parts of our law, that the possibility of relaxation, although it exists, is remote. At the upper end of the scale, one would find the sort of restrictions that Else-Mitchell J was concerned with the Port Macquarie West Bowling Club Case [footnote omitted], which, either because they are obviously intended to be temporary, or because, in the circumstances, they are unlikely to remain in force for long, may soon be relaxed, in whole or in part. Where land that is to be valued is subject to restrictions of the kind appearing towards the lower end, a reliable starting point for the valuer will probably be found in the value of the subject land in its unrestricted state and
(Page 18)
- adjustment can then be made, with some reasonable assurance, to allow for the chances of relaxation. In such a case, the possibilities of error or of disagreement would be much greater if the land were first valued in its unrestricted state, and allowances were made in respect of the figure so arrived at.
The situation, to my mind, would be far otherwise if the restrictions were more like those ranged at the upper end. There the restrictions would have a far less secure lodgement in the relevant law, and the possibilities of error or of disagreement would be greatly reduced by initially arriving at a value for the land in its unrestricted state, and making a deduction in recognition of the restrictions, as qualified by the likelihood of relaxation."
65 This approach is well-established in Australian compensation law. See for example, Sandhurst Trustees Ltdv Roads and Traffic Authority of NSW [2006] NSWLEC 243, where Biscoe J, after surveying these and other relevant authorities, stated at [71] [72]:
"Spencer v The Commonwealth was affirmed by the High Court in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 650 [17]. "In determining that value, there must be attributed to the parties a knowledge of all matters that affect its value. Those matters will include the predicted impact of future events as well as the experience of the past …": Kenny and Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at 436 [49] per McHugh J. The only events to be taken into account are those occurring up to the acquisition date: "All circumstances subsequently arising are to be ignored". Spencer v The Commonwealth at 440. It has been said by the NSW Court of Appeal that the statutory test in s 56(1) "depends upon states of knowledge about that which has happened and that which might be anticipated": Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 141 LGERA 243 at 254 [32].
In Multari v Roads and Traffic Authority of NSW [2004] NSWLEC 649 at [30] Talbot J cited with approval the following passage from the judgment of the Full Court of
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- the NSW Supreme Court in Longworth v Commissioner of Stamp Duties [1953] SR (NSW) 342:
A tribunal which is called upon to make such an assessment of value must in each case decide what facts affecting values would have been in the contemplation of the notional buyer and seller at the relevant date, and what, if any, effect on values the existence of those facts would have had on the sum which the one was prepared to give, the other to take. One such relevant fact may be the probability or possibility that an event will later occur, and the existence or non-existence of that contingency may have its effect on values. If so, it is relevant. But the value must surely be ascertained in the light of the facts, including the probabilities then existing, and without taking notice of subsequent happenings."
67 In those circumstances, Biscoe J noted there are two competing valuation methodologies. The first he called the "bottom up" method, whereby the subject land should be valued on the basis of a restrictive zoning in force at the relevant date and, if appropriate, an addition made for the chance of rezoning. The second he called the "top down" methodology, whereby the land should be valued as though it had the relevant zoning, where a deduction should be made for the chance that rezoning and such development may not eventuate, as well as for the time required before it may eventuate. In so finding, Biscoe J expressly relied on the authorities of Royal Sydney Golf Club, Port Macquarie West Bowling Club and Wattle Park, to which I have referred, as well as to other authorities to similar effect.
68 The applicant's case in these proceedings is effectively based on the view that the provisions of minor TPS 16 that relate to the AMP
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- site put the site for valuation purposes at the lower end of the scale referred to by Wells J in Wattle Park, such that they are entrenched and unlikely to be relaxed. The Valuer General by contrast effectively says that the planning authorities would allow development of the site to the same level as it was improved at the relevant dates, and a prudent purchaser would pay a price based on this expectation.
69 The Tribunal has little doubt that in the hypothetical purchasing scenario posited, the prudent purchaser would, with the benefit of professional advice, look closely to see what the constraints on development of the AMP site really were and ask what the prospects would be for relaxation or removal of any apparent or perceived limitations on development by amendment to the minor scheme. In particular, that prudent purchaser would ask if the requirement of cl 15, that every owner sign a development application to develop the AMP site, would mean that the other owners in the minor scheme area could effectively hold the owner of the AMP site to ransom before they agreed to sign the development application at the relevant dates. Depending on the answers to these questions, the land may fall at the lower end of the scale suggested by Wells J, as the applicant would contend, or at the higher end of that scale, as the Valuer General would contend.
70 The applicant points to the decision of the former Land Valuation Tribunal in St Martins' to say that while a planning authority may have a discretion to provide a bonus plot ratio and so enhance a primary plot ratio of 5:1 to 6:1, for valuation and planning purposes in circumstances like those that arise under CPS 1 and minor TPS 16, it cannot be assumed a bonus will be awarded. Thus the applicant says the prudent purchaser would start out believing they could only develop the AMP land on the basis that the whole of the land in the scheme area would be accorded a 5:1 plot ratio.
71 This means, according to the applicant’s contention, that when the terms of minor TPS 16 are applied to this scenario, and the notional plot ratios already accorded the Commonwealth Bank site and the Central Park site under the 1987 CPD approval are taken into account, there is only a little plot ratio left, just enough to support a development of 11,267 square metres buildable area on the AMP site. The result is that the site has a relatively low value at the relevant dates when compared with those assessed by the Valuer General.
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72 This argument has at best a superficial attractiveness to it, but on immediate closer inspection of the sort a properly advised prudent purchaser would give it, the argument breaks down. While it is necessary to assume the removal of all improvements from a subject site to achieve the proper valuation of its unimproved value, that does not mean that the existence of minor TPS 16, or the reasons for its making, or the existence of the developments on the Commonwealth Bank site or the Central Park site, or the means and basis of their approval under the 1987 CPD approval must be or would be ignored. The reality is that the reason those two sites have the notional plot ratio they do have, is because in 1987 the Council of the City of Perth allocated a plot ratio to the whole development area of 6:1 and approved the Central Park development and the other minor forms of development, as referred to above. Accordingly, the prudent purchaser would be amazed, having taken professional advice, if anyone were to suggest that somehow the Council could or would ignore the 1987 allocation of a plot ratio to the area. Rather they would rightly assume the Council would treat that plot ratio as given and confirm that the AMP site was entitled under minor TPS 16 to the remaining plot ratio entitlement of 5.43:1, as Mr Collins has calculated it.
73 The prudent purchaser would also regard such professional advice as that the Tribunal received from Ms Smith, planner from the City of Perth, that the Council could be expected to approve a 6:1 development on the whole of the site in any event, given its historic attitude to sites of this landmark nature and that the terms of draft CPS 2 would not have any material influence on this approach. Taking into account the objectives of minor TPS 16 to achieve park, pedestrian and traffic enhancements in the scheme area and the immediate locale, the prudent purchaser would expect the Council to be quite anxious to confirm the decision it made in granting the 1987 CPD approval in order to secure these central city planning outcomes. For these same reasons the prudent purchaser would also have the confidence that what Ms Smith said in evidence would in fact transpire, that the Council would not second guess their decision in granting the 1987 CPD approval to not count the public car parking spaces on the AMP site as part of the GLA for plot ratio purposes.
74 The Tribunal also accepts that the Council for similar reasons would be prepared to grant approval to a minor use of the Hay Street frontage to support a small development of about 250 square metres,
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- such as the AMP tenancy that was approved in the 1987 CPD approval on the AMP site.
75 The Tribunal also accepts that there is a sound contention available to the owner of the AMP site that, because the CPD development in fact proceeded on the adjoining Central Park lots within the minor scheme area, and the 1987 CPD approval included development approval relevant to the AMP site concerning public parking spaces and the Qantas tenancy, then the 1987 CPD approval at the relevant dates would continue to support the carrying out of the car parking and Qantas building as initially approved. The argument is not that the office tower on the AMP site was thereby approved, but that the minor works were. This would mean the owner of the AMP site would not require a further approval for that work but would at relevant dates for the office tower proposal.
76 To the extent that one of the owners of the Commonwealth Bank site or the Central Park site might withhold its signature to a development application initiated by the owner of the AMP site is concerned, the prudent purchaser would reasonably assume, in the absence of any contractual rights it may have against such an owner if the owner refused to sign a development application, that the Council would initiate an amendment to minor TPS 16 modifying that requirement, especially in circumstances where the development outcome in favour of the owner of the AMP site reflects the plot ratio assumption the Council made in 1987 when it granted the 1987 CPD approval. As Ms Smith mentioned in evidence, albeit after these relevant dates, the Council has been prepared to modify minor schemes and the prudent purchaser would expect this course of action to occur here, if it were necessary, without controversy or real delay.
77 For the Tribunal to find that the development potential of the AMP site at relevant dates to the hypothetical purchaser was limited in the manner suggested by the applicant would require an artificial approach to the planning and development issues raised and, fundamentally, would fail to pay any or any proper attention to the reasons why minor TPS 16 was gazetted in the first place, as well as to the basis of the City's actions in 1987 in approving the development of the Central Park site and the grant of a 6:1 plot ratio over the whole development area.
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78 In these circumstances the Tribunal finds the prudent purchaser would purchase the AMP site on the relevant dates on the basis that it could be developed for office and some minor shopping use at a plot ratio of 5.4:1.
79 In this case there is no valuation evidence of comparable sales, in the sense that no land like the AMP site within a minor scheme area has been sold, to provide guidance as to how this land should be valued. In those circumstances, the Tribunal considers that the relevant restrictions imposed on the AMP site by CPS 1, taking the nature of minor TPS 16 into account as explained above, place this case much at the upper end of the scale suggested by Wells J. As stated, the AMP site value would reflect an entitlement to develop an office tower with a plot ratio of 5.4:1. Accordingly, the proper method of valuation to be adopted is to begin with the valuation of the subject land in its unrestricted form with a plot ratio entitlement of 5.4:1; then to assume any restrictions created by the minor scheme would be modified with only a slight delaying effect on the development of the land.
80 We turn then to the valuation of the AMP site.
The question of methodology
81 Once the question of the development potential of the land is resolved a question of valuation remains.
82 While Mr Jackson, the valuer called by the applicant, made his initial valuation on the basis that minor TPS 16 constrained the development potential of the land, in evidence Mr Jackson and Mr Collins dealt with the broader valuation questions.
83 Mr Jackson and Mr Collins accepted that it is necessary to analyse comparable sales to derive a "rate per buildable square metre".
84 The applicant says Mr Collins adopted a process that he says is necessary in order to justify the continuous and contemporaneous value of each piece of land in the Perth CBD. From that Mr Collins derives a rate per buildable square metre for a "standard inside lot" in the CBD.
85 However, the applicant says that Mr Collins conceded that this is not a method that is adopted in the market place and by "private
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- valuers". The applicant says Mr Collins defended his method by saying it is necessary for the broader and continuous task he and the Valuer General must maintain. The applicant says the distinguishing hallmark of Mr Collins' approach is to attribute particular percentages to various factors of different parcels of land. Thus, in analysing a sale Mr Collins adds on percentages for factors that include location, corner, shape and throughlot. In addition, Mr Collins subtracts or deducts a percentage for size.
86 The applicant says Mr Collins then deduces the underlying rate per buildable square metre for a particular piece of subject land after adding and subtracting these various factors.
87 By contrast, the applicant says the approach taken by Mr Jackson is preferable. He takes these same factors into account in a more general way by considering them all together and making a professional judgment about how one sale compares to another in light of all the various factors.
88 The applicant says Mr Collins criticises Mr Jackson's methodology as being subjective and not open to review by reason of the unexplained subjectivity. Mr Collins says that his method permits precise application and review at any time because it applies precise formulae and calculations. However, the applicant questions whether the methodology of Mr Collins actually provides any greater precision or accountability than the general professional judgment method that it says Mr Jackson employs.
89 For example, the applicant points to the evidence of Mr Collins concerning the influence of shape in relation to various sites in the CBD including the AMP site. The applicant notes that precise percentages were ascribed by Mr Collins for shape, ranging from minus 10% for Bible House at 161 St Georges Terrace to plus 10% for the AXA site at 100 St Georges Terrace. For the AMP site Mr Collins ascribes plus 3% for shape.
90 The applicant says that it is clear from Mr Collins' concessions that these factors are purely matters of subjective judgment at best. The applicant goes further to suggest that to some extent it may be said that the "add-on" factors are driven more by the need to "coordinate" values between lots in the CBD rather than to make any professional judgment. The applicant refers to the evidence of Mr Collins [T 8.11.06, 95] as well as his answer to a question from
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- the President [T 8.11.06, 97] and submits that Mr Collins' methodology is no less subjective than the methodology adopted by Mr Jackson although it has the "guise and appearance of mathematical precision".
91 The applicant indeed submits that the identification of the add-on factors by Mr Collins is subjective and even arbitrary. The applicant says Mr Collins said in evidence, for example, that in his view the site of Dwyer Durack House at the corner of Barrack Street and St Georges Terrace (40 St Georges Terrace) would warrant a higher corner allowance than the corner of the Weld Club site because of the level of "professional exposure". The applicant says that Mr Collins then accepted that when the Dwyer Durack House site was assessed in relation to the St Martins' proceedings the Valuer General placed a 15% premium on the corner, the very same percentage the Valuer General then attributed to the corner influence of the Weld Club site, notwithstanding Mr Collins' present judgment that the corner of the Weld Club site warranted a lesser premium.
92 The applicant also drew attention to the discount factor in respect of size. It says it needs to be appreciated that the entire basis of the formula suggested by Mr Collins for this discount is based solely on the single analysis of two comparative sales, namely, 240 St Georges Terrace in 1996 and 54 58 Mounts Bay Road in 1997 (See page 21 of Mr Collins' report, Exhibit 3). The applicant says Mr Collins himself accepted [T 8.11.06, 48] that these two sales took place "in the deepest, darkest, gloomiest period of our market situation". Therefore, the applicant contends, to develop a mathematical discount formula based on a single comparison of two sales at the most depressed time of the market is not helpful. The applicant says that far from being an accountable, mathematically precise formula this is an inappropriately slavish option and a questionable formula; and it cannot be said that Mr Jackson's judgment method, that takes size into account, is in some way less reliable and subjective than that of Mr Collins.
93 The applicant says that, in the final analysis, Mr Jackson's methodology should be preferred because:
• it involves professional judgments appropriate to each property and market conditions rather than the slavish adoption to questionable formulae and
- unexplained subjective judgments regarding add-ons; and
- • it reflects commercial reality in the sense that land developers do not go through a process of reducing for size and adding for corner and the like. In other words, the approach of Mr Jackson is more "marketbased".
94 In response to the applicant's "full frontal assault" on the methodology or approach of the Valuer General and Mr Collins, particularly in identifying a rate for a "standard inside lot" and attributing precise percentages to various factors and different parcels of land, the Valuer General submits that the applicant's submission places too great an emphasis on that aspect of Mr Collins' methodology, but says that in any event the methodology is not unique and is supported by authority. The Valuer General says that the approach taken by Mr Collins clearly identifies what were regarded as the relevant adjustments to be made and it provides a percentage from which a dollar figure can be calculated.
95 As to the applicant's submission that Mr Collins' adjustments are no less subjective than Mr Jackson's, the Valuer General says that argument is undone by the fact that the size factor used by Mr Collins was derived from analysis of two comparable sales, not on the basis of mere judgment. Additionally, Mr Collins derived a location premium from comparable sales. The Valuer General says the fact that, in the former case, the sales took place in a depressed market has no logical bearing on a determination of the size discount factor. The Valuer General submits that, while Mr Collins accepts that there is an element of subjectivity in his adjustments, most of the adjustments for the subject land, such as the hypothetical development analysis in Exhibit 3, support the results. Moreover, the Valuer General contends, there is a tried and tested coordination process that is subject to scrutiny every 12 months by owners and their private valuers, who may choose to seek review of valuations made by the Valuer General (see [T 9.11.06, 95 97, 102]). The Valuer General points out that at least some of the adjustments adopted by Mr Collins favour the applicant [T 9.11.06, 104].
96 The Valuer General says that comments of McLure J at [70] in Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 support the approach taken by Mr Collins
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- rather than that taken by Mr Jackson, because Mr Collins does what her Honour suggests a valuer should do, and discloses "the weight he attributed to particular sales or the inferences he drew as to relativities from his basket of sales evidence." The Valuer General says that if the applicant's position were to be accepted the Tribunal would abdicate its role in determining the value of the land to an expert of potentially questionable objectivity who has provided no testable reason for his conclusion, which would be an inadmissible approach by the Tribunal: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 729 744 per Heydon JA: Duffy v The Minister for Planning [2003] WASCA 294 at [27] per McLure J.
97 In responding to these submissions, the Tribunal should say at the outset it has some concerns with aspects of the valuation approach utilised by Mr Collins in these proceedings. It seems to us that the method he has described may be very helpful in making annual assessments in a CBD area for rating purposes, especially where or when there is a dearth of sales. There may be no real, practical alternative but to undertake this methodology when producing "bulk valuations" for rating purposes. The concern of the Tribunal is, however, that unless special care is taken this methodology may fail to provide the best assessment of value of a particular property by reference to agreed comparable sales. When matters proceed in this Tribunal it is expected direct evidence of relevant sales will be produced and relied on by the parties when the comparable sales method is apposite to the valuation at hand.
98 Mr Collins explained aspects of his methodology in different parts of his evidence. For example Mr Collins explained [T 8.11.06, 21-22]:
"Each sale includes all the features and benefits, detriments, that run with each site. No two blocks of land are identical. What we're trying to do is use very limited sales evidence to value diverse blocks within the CBD. Frontages [are] an essential component in CBD land, corner location is another matter that we take into account, throughlot exposure from St Georges Terrace to Hay Street, lot shape can affect building costs. So, to make a subjective judgment between two sites without actually ever quantifying what the difference was between these two sites, leaves you open to either double counting, or a mission [sic] of consideration of the benefits.
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- By going through this process you have to actually identify and consider the full benefits and detriments of the various lot features, such that we end up with … or can assess a set of coordinated values which accurately reflect the way that the sites would be prioritised or attract value were they for sale or had sold at a point in time.
In undertaking that analysis, we've looked at features and benefits of the sales history of the various lots and analysis over many many years in looking at the scale of the allowances, etc. In a number of instances we've undertaken hypothetical exercises to test the sensitivity of … disclosed land value to lot variables."
99 One can understand, from the Valuer General's point of view, the importance of reviewing and keeping under review the relative values of different sites within the CBD, so that the values overall are quite coordinated.
100 As Mr Collins put it, if the values of various lots were not coordinated, and did not bear a proper relationship each to the other, then there would be grounds to challenge the reliability of the values of each and every property in the CBD area.
101 However, the fact that the values of all properties can be shown to be coordinated, in this sense, does not of itself mean that the values ascribed to each property by the Valuer General at material times, are, by reason thereof, necessarily correct and preferable.
102 In other words, the values ascribed must be justified by sales evidence. Of course not any sales evidence will do, but sales evidence of comparable properties.
103 One can further understand that if there are not many comparable sales in the CBD area then the task of producing annual assessments may be made all the more difficult. It may suggest that some other working techniques are required to make the assessments more reliable and the task in one sense easier to complete.
104 For that reason, one can understand the further process explained by Mr Collins and typically undertaken by the Valuer General of comparing and contrasting particular properties with a standard property to which the Valuer General, by reference to sales
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- evidence, has ascribed a certain base value, or dollar rate per square metre, in order to help identify the underlying unimproved value.
105 In this particular case Mr Collins has used a "standard inside lot" base value to help analyse sales of improved land that he considers relevant, as well as to support the inside lot base rate for use in valuation of the subject land. In this context, the "standard inside lot" is a lot that is rectangular in shape with a 3:1 depth to frontage ratio. The notion of the "inside lot" simply means it is a lot in the CBD not found on a corner and not having a through-way to some other street or road, not having any other remarkable features and not being located in the very heart of the CBD. In other words, it is a hypothetical, largely featureless lot of land in the CBD. The thinking is that if one can assume the existence of such a featureless lot and ascribe to it a reasonably reliable value per square metre, then one can more easily compare and contrast any other lot in the CBD with it and suggest an unimproved value for that other lot, taking into account its particular features. The utilisation of the standard inside lot with a base value in this way also helps to confirm the coordinated valuation of all land within the given CBD area.
106 However, logic tells one that the utilisation of the standard inside lot in this way for valuation purposes is only as good as the sales data that underlies the deduction of the base rate per square metre. In this case, Mr Collins has utilised the standard inside lot approach on the basis that such a lot has a base rate value of $600 per square metre. Unless it is demonstrated that such a hypothetical lot can be said to have a value in that order, by reference to comparable sales, the utilisation of that approach will be rendered utterly worthless.
107 In any event, the utilisation of the standard inside lot even when supported generally by comparable sales and adjusted periodically to reflect current sales, runs the risk of not conforming to the accepted comparable sales methodology. This is because it involves a comparison of the subject land to be valued with an entirely hypothetical lot, the value of which hypothetical lot has been calculated by reference to actual sales. The interposition of the hypothetical standard inside lot into the application of the comparable sales methodology may have such an effect on the comparable sales methodology that it ceases to produce a true comparison of relevant sales with the value of the subject land. It certainly raises a concern that it may be less than totally reliable.
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108 Nonetheless, we would accept, especially for what we call bulk valuation purposes, from the evidence we have heard from Mr Collins, that the utilisation of the standard inside lot approach by the Valuer General to assess the unimproved value of land in the CBD of Perth seems to have produced relatively reliable outcomes. This can be said because, as Mr Collins points out, it seems to have stood the test of time and does not usually produce a rash of objections from land owners when values are assessed and reassessed from year to year. The Valuer General also gains some comfort that the values assessed in this way are supported by hypothetical redevelopment scenarios.
109 Nonetheless, in a valuation context like that which arises upon review in this Tribunal, whether it be a valuation that has implications for rating or land compensation, the application of the comparable sales method requires a comparison, as far as possible, of like with like. As the former Land Valuation Tribunal in the St Martins' case explained at [22] by reference to authority, the direct comparison method of valuation is applicable in cases where sales evidence of other properties directly comparable to the subject is available, or where minor adjustments can be made when applying the evidence to take into account the difference between the evidence and the subject properties. The method rests on the principle that evidence of market price is the best indicator of value. If acceptable evidence exists, direct comparison of comparable sales of other land provides the most straightforward and reliable guide to market values. The proposition is well known to valuers and both Mr Jackson and Mr Collins agreed that the comparable sales method is the most appropriate in this case.
110 While we have expressed concern that the utilisation of a base rate of value for a hypothetical standard inside lot may lead the Valuer General and the Tribunal into error in the utilisation of the comparable sales method, because of the concern that it may not involve a direct comparison of comparable sales, we do not think, in the final analysis, that Mr Collins has purported only to rely on an assumed base rate of value for a standard inside lot in this case. Rather, he, along with Mr Jackson, not only in his report but also in his pre-hearing conferences with Mr Jackson and in the joint report of the experts, has identified the agreed relevant sales for the purposes of adopting the comparable sales method, as well as identifying those other sales that he claims are relevant and those sales relied on by Mr Jackson that he says are not relevant. While
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- there remain some concerns that Mr Collins' analysis has been informed by some assumptions as to the base rate of the standard inside lot, we consider on balance that that is not so. Rather what he has tended to do is use comparable sales to justify a base rate for a CBD lot that requires adjustment according to the features it holds. He has also drawn attention to the particular differences between comparable sales and the subject property as required by the proper application of the methodology.
111 Mr Jackson was concerned, by way of comment, that an analysis of the underlying value of some of the improved sales by Mr Collins may have indirectly been influenced by a need to ensure that the resultant analysis maintained coordination in the value of properties in the CBD. Certainly, if it were the case that an analysed sale were "stripped down" by reference to the attributes or detriments of location, corner influence, size, shape and throughlot aspects so as to produce a result that coordinates with other valuations in the CBD, then that would be a real concern. However, on balance the Tribunal does not consider that that is the approach that Mr Collins has adopted here.
112 The other concern expressed by Mr Jackson, which is related to the use of the standard inside lot approach, is that Mr Collins in this case tends to make explicit the "add-ons" and "discounts" that should be made on account of the identified attributes and detriments of subject land to be valued. This is perhaps an age-old methodological debate between valuers operating in the environment of a Valuer General's Office and those operating in the private sector. To some extent one can understand that the debate is born of the different end purposes for which each may be preparing a valuation.
113 Nonetheless, the Tribunal considers that it is helpful to the Tribunal for a valuer to make as explicit as possible the extent to which relevant attributes and detriments have been accommodated in the formation of their valuation opinion. This makes more transparent their reasoning approach and helps the Tribunal to form its own considered view. While it may be open to adopt the approach that Mr Jackson has adopted here, expressing a considered professional judgment without disclosing the extent to which particular factors of benefit or detriment have served to form that judgment, we much prefer the approach attempted by Mr Collins. He has revealed or attempted to reveal the extent to which, in his opinion, relevant factors affect the application of the comparable
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- sales evidence to the subject land. By contrast, Mr Jackson points to the relevant factors but does little to reveal their actual influence in the ultimate formation and expression of his valuation opinion.
114 The Tribunal has the obligation to make the correct and preferable decision in a case such as this under State Administrative Tribunal Act 2004 (WA) s 27(2). The Tribunal will always have greater comfort in making a valuation decision where it understands as far as it possibly can the significance of all of the factors going to the ultimate expression of valuation opinion.
115 Nonetheless, there is weight in the applicant's observations that Mr Collins' attempts to be precise about the extent factors such as location, corner, shape and size influence value must be approached cautiously as they themselves involve some subjective assessment. However, the adoption of Mr Collins' process at least involves the valuer indicating to the Tribunal their reasoning process so that the Tribunal can form an opinion on the relative influence that each of these factors has or should have in the application of the comparable sales evidence. We do not think there is anything particularly novel in this. For example we note that in the St Martins' case, the "private" valuer for the applicant, Mr Kennedy, sought to ascribe percentage premiums on account of the relevant benefits or detriments: see for example at [89] and [93]. It is also reasonable to say that the authorities generally speaking encourage this more explicit type of approach: see Arcus at [70] per McLure J.
116 We do think, however, that when a valuer attempts to ascribe addons or discounts there can be a danger in adopting too formulistic or rigid an approach, as though science can replace judgment in all cases. For example, in this case, Mr Collins has attempted to produce a formula for discounting the base rate per square metre on account of size. He says in respect of the AMP site that it should be discounted by 15.2%, being 1.67% for each 1,000 square metres in excess of 19,200 square metres for land entitled to a plot ratio of 6:1. He has produced this formula by comparing the sales of 240 St Georges Terrace in 1996 and 54 58 Mounts Bay Road in 1997. If there were some more extensive sales data than this to develop a precise formula, the Tribunal feels sure it would have received the relevant data supporting the formula. Rather, whilst it is well recognised that size is a discount factor and each valuer supports that proposition here - the literature and general valuation practice does not appear to offer a ready formula for calculating that
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- discount. Sales comparisons no doubt assist in fleshing out what an appropriate discount should be in a particular case. But we think it is not easy to confidently adopt a formula to replace the judgment call that is usually required in considering the discount required in a particular case. Perhaps the creation of a reliable formula is a work in progress. We prefer to say that, as in the case of the other factors that should properly lead to an addon or a discount, there is a question of judgment to be exercised although it must always be informed by actual relevant sales data.
117 As noted, in Mr Collins' assessment of the AMP site, which on his workings is a site that would justify a small shopping development on the Hay Street frontage as well as an office tower on the remainder of the site with a buildable area of 28,300 square metres on a 5.4:1 plot ratio, he allows a discount of 15.2% applying his discounting formula for a large building with a buildable area over 19,200 metres in the case of a plot ratio entitlement of 6:1. On the other hand, on the subject land in the Weld Club proceedings, which has a buildable area of 28,895 square metres on a plot ratio assumed by Mr Collins of 5:1, he provides for a much greater size discount of 26%. We remain unclear as to how the Weld Club discount can be nearly twice that provided for in the case of the AMP assessment, at least if the same formula is applied. This perhaps serves to illustrate the difficulty with the use of a precise formula, as well as to emphasise the exercise of discretion that may be called for in a given case. In any event, in evidence Mr Collins explained that he had rounded off his figures after devising his formula, so that its application did not involve the 'pure' application of the formula.
118 The question for the Tribunal then is not whether the primary approach suggested by Mr Collins to the assessment of value should be rejected, but what the direct comparison of comparable sales suggests a base rate per buildable square metre of the AMP site is and then what allowances and adjustments are appropriate having regard to those comparable values. It is to these issues we now turn.
Comparable sales evidence
119 Agreed relevant sales: Despite the differences in methodology, the valuers agree that four particular sales are relevant to the application of the comparable sales approach and each expressed their opinion as to the rate per buildable square metre to be derived from them, as seen in the following table.
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Property | Rate per buildable square metre |
Mr CollinsMr Jackson | |
| $610$508 |
| $676$697 |
| $309$307 |
| $632$632 |
120 The applicant says that the table demonstrates that there is not a lot of difference between the valuers and the only significant difference relates to the analysis of the sale of Mounts Bay Road. The applicant says that difference is simply a product of analysing the sale at a 5:1 ratio or 6:1 ratio. However, the Valuer General says the result is coincidental as fundamentally different methods of analysis were employed by the valuers.
121 The applicant says that Mr Collins refused to accept the history of the grant of plot ratio bonuses in relation to Mounts Bay Road meant that the purchase could be analysed on the basis of an expectation of receiving a bonus. In the applicant's submission that approach is not realistic.
122 The Valuer General does not accept that the Mounts Bay Road sale can be analysed on the basis of an expectation of receiving a bonus. It refers to Mr Collins' evidence to the effect that the history of grants must be considered carefully and it is not possible to take a blanket approach as suggested by the applicant.
123 The applicant says that the Valuer General's position flies in the face of Mr Collins' own submission that the AMP site can be analysed on the basis of 90% expectation that a plot ratio bonus will be granted to the purchaser. As a result Mr Collins wishes to have it both ways. On the one hand he attributes no value to a property that has consistently attracted a plot ratio bonus of more than 5:1, but wishes the Tribunal to accept his submission that the AMP site can be valued on the basis of a 90% certainty of a granted plot ratio bonus well in excess of 6:1.
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124 In response to this submission the Valuer General submits that the applicant failed to take into account the fact that the development approval and minor TPS 16 already exist in relation to the AMP site and the value of the AMP site must be analysed in accordance with that identified potential. It cannot apply in respect of the Mounts Bay Road sale because that sale did not occur with an intention to develop it in accordance with current development approval.
125 As explained in the reasons handed down concurrently in the Weld Club proceedings, the Tribunal considers the general approach taken by the former Land and Valuation Tribunal in the St Martins' decision essentially to be correct. That is, unless there is clear evidence that a sale has proceeded on the basis of a particular approved plot ratio allocation, as in a case such as the Mounts Bay Road sale, the relevant analysis should be that the sale occurred in respect of a lot that had a plot ratio of 5:1 with a potential of 6:1. That is the approach we adopt here.
126 The applicant points out that in any event at the end of the day the difference concerning the AMP site is moot. This is because Mr Collins accepts that when it comes to valuing the AMP site the figure must be adjusted. At page 31 of his report, Exhibit 3, he adjusts the rate to a factor of 5/6. In effect this overcomes any error in analysing a sale at 5:1 rather than 6:1. The applicant says that in these circumstances there is very little difference between Mr Collins and Mr Jackson on the sale of the land at 100 St Georges Terrace at a time fairly approximate to the valuation dates. The applicant says Mr Collins agrees that the most comparable sale would be the land opposite the AMP site if it were vacant and sold. The applicant says the reality is the same at 100 St Georges Terrace, which is the land directly adjacent to the property that Mr Collins considers would be the best comparable sale.
127 However, while accepting the first point the Valuer General says Mr Collins never had it put to him that 100 St Georges Terrace would in fact be the best comparable sale. In fact, there are differences between 100 St Georges Terrace and the AMP site which were taken into account by Mr Collins in his analysis in Exhibit 3 [25] [27].
128 Sales not agreed: The sales in respect of which the valuers disagree are the sales at 12-14 The Esplanade and 161 St Georges
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- Terrace. Most of the evidence concerns the sale of 12-14 The Esplanade.
129 As the applicant puts it, initially the dispute between Mr Jackson and Mr Collins in relation to 12-14 The Esplanade concerned whether a premium had been paid by reason of the sale with an adjoining owner. However, as the evidence unfolded the more important issue became whether the land was purchased for the purposes of a complete redevelopment and ought to be analysed on that basis.
130 The Valuer General agrees that the critical question is whether the sale was undertaken for the purpose of a complete redevelopment.
131 The applicant points to a board paper of the purchasing company (Exhibit 8, page 37) and submits that the document makes clear that the redevelopment was not the primary reason for acquiring the property. As a result the applicant says it was inappropriate to use the sale to derive an underlying land value, as Mr Collins did.
132 The Valuer General says the applicant's submission ignores the evidence that the purchase price reflected market value and also ignores detailed explanations provided by Mr Collins in his evidence. He makes it clear that he took into account the value of the property as an investment property and the fact that the purchasers paid market value for it. The Valuer General says that whatever the reason for the purchase, the underlying value of the property remains the same.
133 The Valuer General says Mr Collins took the view that even if the property were purchased as an investment property with the income stream from the car bays, it was still an underdevelopment of the site and the property would need to be redeveloped to realise its maximum utility.
134 A further question was raised by the applicant concerning the sale being one to an adjoining owner and so to be treated with caution.
135 The applicant says that Mr Collins' insistence that his analysis as a complete redevelopment site was appropriate notwithstanding the board paper is simply untenable. The applicant says in light of
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- the board paper, one cannot say, as Mr Collins did in the joint statement of the expert valuers, "that the buildings were (a) relative underutilisation of the site but capable of generating a holding income until market circumstances improved warranting demolition of the existing improvements and redevelopment of the site".
136 The applicant emphasises that an appreciation of all this is important because Mr Collins uses the sale as the sole basis to assert that the relativity of the west end of the CBD to the centre of the CBD was maintained well into the 1990s and that justified a premium. The applicant said this assertion rests solely on Mr Collins' analysis of the sale at 1214 The Esplanade.
137 The other property upon which the valuers do not agree is the sale of 161 St Georges Terrace. The applicant says that this reflects a rate higher than other properties and needs to be treated with caution.
138 Mr Jackson says that proper analysis of the sale in light of the plot ratio approval in place at the time of the sale reveals an underlying rate of $694 per buildable square metre. Taking account of the negative impact of the battleaxe shape of the site, the true value is $503 per buildable square metre.
139 Mr Collins analysed the sale and previous options as indicating a value of $700 per square metre.
140 There is also a question of this being a sale to an adjoining owner, although Mr Collins considers no premium was paid for it.
141 The final site in relation to which there is disagreement is 125 St Georges Terrace. Mr Collins says that the sale does not reflect land value because the vendor insisted on an unconditional sale. Mr Jackson says the objection has no merit because an unconditional sale is precisely what is contemplated by the test in Spencer's case. The applicant says that the sales upon which both valuers rely such as the AXA sale of 100 St Georges Terrace reflect conditional sales with pre-commitments. The applicant therefore suggests that 125 St Georges Terrace might be said to be the only vacant land sale under the test in Spencer's case.
142 The Valuer General points out that Mr Collins' evidence went further than pointing to the unconditional sale requirements but also
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- identified that the sale was within an unusually short period of time and for all these reasons, the sale does not meet the test in Spencer.
143 The Tribunal's finding is that the sale of 12-14 The Esplanade does need to be treated with considerable caution. We accept the applicant's submission that the content of the board paper is relevant to understanding the purpose of the purchase. However, no doubt there is also something in the observations of Mr Collins that the purchaser will have acquired the property not just for the purpose of buying a car park but with future prospects in mind. The reality remains though that the value paid was supported by the car park cash flow, and that, in our view, makes the sale less helpful as a true indicator of its underlying value as a vacant development site.
144 It is also correct, on our view, to observe, as the applicant does, that this sale is relied upon to establish the proposition that a premium continued to be paid well into the 1990s for properties at the centre of the CBD when compared with those in the western CBD. A sale like this, with its ambiguous purposes, may be regarded but in our view must be treated with caution in that regard as well.
145 As to the sale of 125 St Georges Terrace, we think that the Valuer General and Mr Collins are right in suggesting that this is a sale that must be treated with caution. We consider the points made by Mr Collins to have weight. It is not just a question of the fact of an unconditional sale that is important here - which suggests purchasers who required financing were effectively not invited to bid - but that the vendor wished to achieve a cash sale within a relatively limited period of time. These circumstances suggest a sale by a vendor who was to some degree anxious not the sort of vendor that the Spencer principle relies upon.
146 In those circumstances we do not think that much should be drawn from those two sales.
147 The sale at 161 St Georges Terrace is also in our view a little problematical. It is a sale that reflects a rate higher than other properties. Mr Collins says that it was a sale to an adjoining owner but it does not appear that a premium was paid. However, having regard to the various other sales in the "basket" of sales we are looking at, the sale of 161 St Georges Terrace is one that tends to
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- stand alone as a little high and we think, as Mr Jackson suggests, that it should be treated with appropriate caution.
148 Rate for AMP land: The position of the two valuers having analysed the sales evidence is then as follows:
| Rate per buildable square metre |
19912000 on | |
| $708$500 |
| $600$625 |
149 Mr Collins suggests on behalf of the Valuer General that the base figure for the AMP site is $850. He then adjusts that to arrive at his rate of $708 for a property with a 5:1 plot ratio. Mr Collins' base figure of $850 is derived in the first instance by applying a 40% premium to a base rate of $600 a square metre for an inside lot, as confirmed by the sale of Mounts Bay Road. The 40% premium is said to reflect the premium for a location in the central CBD compared with the western end of the CBD.
150 The applicant says that in order to arrive at the figure of $850 per square metre, Mr Collins has ignored all of the sales evidence in his own report and applied a premium derived from sales in the "heady" days of the 1980s. The applicant says this figure of $850 is not reflected in a single sale in the basket of sales that Mr Collins has analysed. It is well in excess of any analysed by Mr Collins, including that of 12-14 The Esplanade. The applicant says the only sale that reflects such a rate is 84 St Georges Terrace, which was from the "heady days" of 1989, and that is not the subject of any detail or analysis in either valuer's report or evidence.
151 The applicant says that Mr Collins' methodology or approach is, word for word, that adopted by the Valuer General in the St Martins' case. The applicant says that the former Land Valuation Tribunal in
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- the St Martins' case rejected this approach and did not accept that there was a premium to be paid in the central CBD.
152 The Valuer General rejects the analysis made of the $850 per square metre calculation. First, the Valuer General says that Mr Collins made it clear that the base rate of $600 per square metre is verified on an ongoing basis every time a new sale occurs. Mr Collins relies in particular on the sale of 161 St Georges Terrace (Bible House) in December 2003 as a sale which reaffirms that base rate. The sale of 54 - 58 Mounts Bay Road is another that Mr Collins particularly relies on.
153 The Valuer General says that the premium for location of 40% applied by Mr Collins is supported by the 1996 sale of 240 St Georges Terrace when compared with the 1997 sales of 54 - 58 Mounts Bay Road and 12-14 The Esplanade, so it is not derived solely from late 1980s sales.
154 The Valuer General says that the applicant's reliance on the St Martins' decision is misplaced. The former Tribunal at [49] indicates that, in that case, the rate of $850 per square metre for GFA was derived by the Valuer General by first assuming an agreed land value in the central CBD of $4,250 per square metre and then dividing by 5 to reflect an underlying 5:1 plot ratio in accordance with CPS 1. In applying that rate to the land the subject of those proceedings, the Valuer General adjusted the rate to reflect the existing plot ratio of the developments in the scheme area.
155 The Valuer General says it appears that the Land Valuation Tribunal at [64] and [115] accepted that the agreed land value of $4,250 per square metre had an underlying plot ratio of 6:1, from the evidence of Mr Kennedy discussed at [36]. That evidence was apparently to the effect that a guaranteed plot ratio of 5:1 with a potential of 6:1 meant that it should be assumed that purchasers were aware they could develop land to 6:1 and that, therefore, the underlying land value reflected that figure. The Valuer General says that evidence, apart from being illogical, is in marked contrast with the evidence in the present matter and inconsistent with the evidence of Mr Kennedy to the former Tribunal (referred to at [34]), to the effect that it was not open to find any plot ratio bonus would be granted by the City of Perth to any proposed development.
(Page 41)
156 Accordingly, the Valuer General says the former Land Valuation Tribunal in the St Martins' decision erred in holding that the underlying plot ratio in the land value of $4,250 per square metre was 6:1 although the methodology in question gave rise to different considerations from the present matter.
157 The Valuer General says that the evidence in the present case is different, especially given that the plot ratio calculated by Mr Collins was not derived from an agreed land value. St Martins' therefore does not support the contentions.
158 We will deal with the resolution of the appropriate rate shortly. First though we should deal further with the issue whether the market dropped from 1999 2000.
159 Drop in market from 1999 2000: Mr Collins expressed the view that the rate for 1999 was considerably higher than the rate for the years thereafter because there was a drop in the market in excess of 30% in that time. Mr Collins explained that the primary reason for the drop was that Woodside finalised its requirements for leasing 240 St Georges Terrace.
160 The applicant says that this issue was dealt with in the St Martins' case and that that Tribunal concluded that the more probable explanation for the disparity of values was the earlier development values were excessive.
161 Mr Jackson in the current proceedings suggested that there is not a single statistic suggesting that the market was heading down between 1999 and 2000, and certainly not to the extent asserted by Mr Collins. The applicant says that Mr Collins' assertions reflect a level of volatility in the market that bears no relationship to commercial reality and certainly bears no relationship to the assessments issued by the Valuer General's main office. Mr Jackson said that it was not tenable to suggest that the Perth market is so fragile that a single tenancy can create such volatility and that Mr Collins conceded that there is nothing in numerous newspaper reports to suggest otherwise.
162 Mr Jackson further contended that gross rental values in the relevant period went up and the applicant refers to the table of these values in Exhibit 33, at page 2, in the Weld Club proceedings.
(Page 42)
163 The applicant in short submits that, in all the circumstances, the Tribunal should reach the same conclusion reached by the Tribunal in St Martins' that there was no drop in the market and the more probable explanation is that the 1999 rate was excessive.
164 The Valuer General says the applicant relies on evidence in findings in St Martins' which is not now before the Tribunal. However, the Tribunal does not think that is the applicant's position. The applicant is entitled to refer to findings made on evidence in an earlier land valuation decision. However, the applicant also relies on the evidence given by Mr Jackson in the current proceedings which tends to reflect or adopt the expert evidence given to the former Tribunal in St Martins'.
165 As to Mr Jackson's point that no single tenancy can create such volatility of the Perth market, the Valuer General simply submits those assertions by Mr Jackson are unsupported and that Mr Collins has demonstrated a perceived drop in the market by reference to evidence.
166 The Valuer General also says in any event that the former Tribunal in St Martins' found that the land value in 1997 of $4,250 per square metre for St Georges Terrace land was within acceptable valuation margins and should be adopted: [111].
167 The Valuer General says that figure equates with $850 per square metre - which was the base figure used by Mr Collins - on the basis of 5:1 plot ratio which, as the evidence in the present matter establishes, is the only guaranteed plot ratio.
168 In the final result, whether or not there was a drop in the market in the relevant period does not need finally to be established by the Tribunal. What does need to be established by reference to comparable sales is what the values were at relevant times.
Tribunal's findings on valuation
169 The Tribunal has dealt with a number of issues concerning the proper basis for the valuation at relevant dates in the reasons to this point. It may be helpful, however, briefly to summarise the Tribunal's findings.
170 As to the question of methodology, the Tribunal considers that, when reviewing a valuation, it is most helpful to the Tribunal, where
(Page 43)
- the comparable sales approach is adopted, for the valuer not only to identify the comparable sales and form and state his or her opinion as to the value of the subject land, but also to disclose as far as possible the reasoning that lies behind the ultimate expression of valuation opinion.
171 To that extent, while it may be open to adopt the approach of Mr Jackson in expressing a considered professional judgment, it is preferable that the valuer indicate, where that is possible, the extent to which particular factors have served to form that judgment.
172 For this reason, we prefer the general approach in this regard undertaken by Mr Collins because he has revealed or attempted to reveal the extent to which relevant factors, in his opinion, affect the application of comparable sales evidence to the subject land. By contrast Mr Jackson points to the relevant factors but does little to reveal their actual influence in the ultimate formation and expression of his valuation opinion.
173 Nonetheless, there is some weight in the applicant's observations that Mr Collins' attempt to be precise about what the extent of the influence of location, corner, shape and size, itself involves some subjective assessment. However, the adoption of that process at least involves the valuer indicating to the Tribunal their reasoning process so that the Tribunal can form an opinion on the relative influence that each of these factors has or should have in the application of the comparable sales evidence.
174 As to the comparable sales evidence, as demonstrated earlier, there is not in fact a lot between the valuers. The agreed relevant sales are 54 58 Mounts Bay Road, 100 St Georges Terrace (AXA), 240 St Georges Terrace and 181 St Georges Terrace.
175 Mr Collins' lowest rate per buildable square metre is for Mounts Bay Road at $610 per square metre. Mr Jackson derived a rate of $508 per square metre for the same sale, but that was on the basis of an allocated plot ratio of 6:1. In the Tribunal's opinion the appropriate plot ratio to be used in the analysis of this sale is 5:1. In those circumstances the appropriate rate is that specified by Mr Collins at $610 per square metre.
176 The highest rate derived by the valuers from these agreed relevant sales is in respect of 100 St Georges Terrace (AXA). Mr Jackson has it as $697 per square metre. Mr Collins draws a
(Page 44)
- number of differences between this site and the AMP site and does not accept this.
177 The valuers are in close agreement as to the rate per buildable square metre derived from the sale of 240 St Georges Terrace and 181 St Georges Terrace.
178 As to the sales not agreed by the valuers, we have already explained that we do not consider the sale of 12 - 14 The Esplanade, which Mr Collins relies upon, is a sufficiently reliable sale for us to take full account of it.
179 Similarly, we do not think that the sale of 125 St Georges Terrace, a sale that Mr Jackson relies on, is sufficiently reliable for us to take account of under the Spencer principle.
180 We also think that the sale of 161 St Georges Terrace must be approached with caution, as explained earlier.
181 Thus, we are left with the agreed relevant sales, as noted. They must be applied, in accordance with our earlier findings concerning the development potential of the AMP site, in respect of a site that has a 5:1 plot ratio with a potential for 6:1, but not an allocated 6:1 plot ratio.
182 As of the relevant date in 1999, Mr Collins says the rate per buildable square metre is $708, whereas Mr Jackson says in his further statement in Exhibit 17, assuming a 20% plot ratio bonus, that the rate is $600. As at the relevant date in 2000 Mr Collins says the rate is $500 and Mr Jackson says it is $625. (Mr Collins assesses the 2001 rate in this way because he no longer considers a 40% premium appropriate on account of a central CBD location having regard to the later exercise of option over the AXA site at 100 St Georges Terrace. In fact he seemingly makes no allowance for location at all from that point on.) Having regard to the agreed relevant sales, the highest rate is the $697 per square metre identified by Mr Jackson for 100 St Georges Terrace, in respect of which Mr Collins provides a rate of $676.
183 Mr Jackson, in settling on a rate of $600 per square metre, seems largely to have regarded the Mounts Bay Road sale and the 100 St Georges Terrace (AXA) sale and drawn a line somewhere between the two. He has exercised his professional judgment in
(Page 45)
- suggesting that taking into account all of the features of the AMP site, $600 per square metre is the appropriate rate.
184 Mr Collins supports his rate of $708 essentially by proceeding from the acceptance of a base rate of $600 per square metre GFA at a 5:1 plot ratio where there is a potential to achieve maximum bonuses of 20% under CPS 1. His analysis helps to support his opinion of a base rate of $600 per square metre GFA for a standard CBD inside lot, according to the methodology discussed earlier.
185 As we have noted there is some force in the submissions of the applicant that this base rate is supported by Mr Collins on the basis of a continuous assessment process. In part Mr Collins also supports that base rate on the basis it is used in other valuations which have not been challenged. He also seeks to draw comfort from the hypothetical development scenario.
186 As to the latter we find the hypothetical development scenario not to be particularly helpful in this setting because of the variables involved and do not give it any great weight. We think this is a case where the valuation effort is properly concentrated on a comparative sales analysis.
187 As explained above it is important when the comparable sales approach is adopted and review proceedings are conducted in the Tribunal for all relevant evidence to support the rate contended for to be adduced in evidence. It is not sufficient for the Valuer General to refer generally to the maintenance and utilisation of a standard inside lot rate that satisfies a coordinated assessment process to support a rate contended for, without adducing the sales evidence to support that rate. The danger is that a statement of the rate in these circumstances might be misconstrued as a mere assertion as to what the relevant value is. In any event we remain concerned that an effort to justify the base rate for a hypothetical standard inside lot in the CBD may well lead into error when applying the comparable sales technique, for the reasons discussed earlier.
188 As noted earlier, the responsibility of the Tribunal in review proceedings is to make the correct and preferable decision. It is not the function of the Tribunal merely to accept an unreasoned expression of opinion of an expert or for that matter an assertion by one of the parties as to what is the relevant rate per buildable square metre for land in the central Perth CBD.
(Page 46)
189 When the comparable sales approach to valuation is agreed, as it is here, the responsibilities of the valuers, and the parties, is to adduce in evidence relevant comparable sales and then from those sales to form a considered opinion by reference to the particular features of the subject land, as to the appropriate rate per buildable square metre in a case like this.
190 The question for the Tribunal is whether the Valuer General through the expert evidence of Mr Collins has simply taken a base rate of $600 per square metre generally accepted within the Valuer General's office as applicable to a hypothetical comparable sale and standard inside lot and applied it in various ways in respect of the AMP site, or whether Mr Collins has ultimately directly relied on comparable sales to support his opinion that a rate of $600 per square metre, typically relied on by the Valuer General's office in conducting coordinated valuations, is applicable here. In the end, the Tribunal is satisfied that Mr Collins has relied on a base rate of $600 per square metre, because he considers in his professional judgment it is supported by the directly comparable agreed sales.
191 Mr Jackson having considered all of the comparable sales has expressed the opinion that the rate for the AMP site is $600 per square metre if a plot ratio of 6:1 is assumed; as we do assume over the whole of the minor TPS 16 scheme area. His assessment, however, takes into account the attributes of location, corner influence, shape, through-lot and size of the subject land.
192 Mr Collins commenced his consideration of the assessment of value on the basis of a base rate of $600 to which appropriate adjustments on account of those factors is made. For the valuation as at 1 August 1999 Mr Collins takes the base rate of $600 per square metre and then increases it by 40% to $850 per square metre on account of a historic premium for location said to be supported by comparison with the sale of 181 St Georges Terrace and 84 St Georges Terrace. However, for the subsequent years, 2001 and following, the 40% premium is removed by Mr Collins because of the market correction he says became apparent by the exercise of the AXA option (100 St Georges Terrace) in late 2001.
193 Because the base rate of $600 per square metre as adjusted with a premium for location to $850 per square metre assumed land with a plot ratio of 5:1, Mr Collins then adjusted his rates by a factor of 5/6 to accord with his view that the AMP site as part of the minor
(Page 47)
- scheme had a demonstrated plot ratio of 6:1 at the relevant dates. This produced for him the following buildable rates per square metre:
• 1999 - $850 per square metre by 5/6 = $708 per square metre GFA; and
• 2001 - $600 per square metre by 5/6 = $500 per square metre GFA.
195 Following the late 2001 AXA dealing, while an automatic premium could no longer be assumed for the central CBD, ordinary valuation principles would support the application of a premium for at least some of central CBD sites by reference to their superior location when compared with other relevant sales. It is not clear to the Tribunal whether from 2001 onwards, the Valuer General has taken location into account at all. However, it is not something the Tribunal need review in this case.
196 Once the premium factor is accepted as at 1999, the $850 per metre calculation for a base rate value remains relevant for the AMP site. On Mr Collins' analysis and to an extent on Mr Jackson's, one
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- is reasonably reliant on a $600 per square metre base rate. In the end the Tribunal is content to accept that the sales evidence supports a base rate for the subject site of $600 per square metre with a 40% premium for location in 1999, taking the rate to $850, to be reduced to $708 when applied in a 6:1 plot ratio context.
197 As to size we are a little perplexed. Size is relevant. A discount should be allowed. In Weld Club, Mr Collins generously allowed a 26% discount for size, which does not seem to come from the application of his formula and seems to exceed it. In the Weld Club decision we say that the applicant should have the benefit of Mr Collins' judgment in that regard and we do not seek to adjust that allowance. We think here it can properly be said that whatever the discount for size at the Weld Club site, the AMP site would attract a lesser discount. In this case we are prepared to consider the guidance that is drawn from the sales evidence identified by Mr Collins although we are not attracted to the unthinking use of the formula he suggests for a size discount. Nonetheless, we think the outcome suggested of a discount in the region of 15% is reasonable in this case. We are content to apply Mr Collins' estimate in this particular case.
198 We are also satisfied that Mr Collins' account of influence for corner, shape and through-lot is reasonable and would apply it. We do not consider Mr Collins has improperly permitted location and corner influence issues to be conflated in this instance, as suggested by Mr Jackson.
199 Similarly we think it is appropriate on a site like the AMP site, which has a discrete zoning for shopping on the Hay Street frontage, to value that portion of the land separately in the way Mr Collins does, and then applying the balance of available plot ratio to the office tower that would be supported on the remainder of the land at the corner of St Georges Terrace and William Street. While one can contend about the relative merits of hypothetical development scenarios, in this case the theoretical development is small (242 square metres) and we think the margins for error are limited. Therefore we have sufficient confidence to adopt the outcome suggested by Mr Collins in this particular instance to adopt his indicated value of the notional Hay Street lot.
200 Ultimately then the Tribunal considers the AMP site should be valued on the following basis that, at the relevant dates:
(Page 49)
- • the AMP site had an effective 5.4:1 plot ratio;
• the site would be developed on a notional Hay Street lot for shopping in the manner envisaged by Mr Collins;
• the remainder of the site would be developed for office and would use the plot ratio remaining from the small shop usage on Hay Street with a GFA of 28,300 square metres;
• a base rate per buildable square metre of $600 is relevant from comparable sales;
• location is a significant attribute, and a 40% add-on for location was appropriate in 1999;
• size is a discounting factor, but the formula for discounting on account of size advanced by Mr Collins is not fully tested or established and provides a rough guide that might be regarded when considering an appropriate discount; and
• corner influence, shape and through-lot attributes are real and considerable.
Conclusion as to unimproved values
201 The Tribunal then makes the following unimproved value assessments of the AMP site:
As at 1 August 1999:
| $1,657,406 |
| |
| |
| $20,036,400 |
| |
| $3,045,533 |
$16,990,867 |
(Page 50)
| |
| $4,757,443 |
| |
$21,748,310 | |
| $23,405,716 |
|
| $1,657,406 |
| |
| |
| $14,150,000 |
| |
| $2,150,800 |
$11,999,200 | |
| |
| $3,359,776 |
| |
$15,358,976 | |
| $17,016,382 |
|
202 In these circumstances the Valuer General’s valuations and assessments recommended by Mr Collins should apply and to that extent the earlier assessments should be set aside and replaced by them.
203 The Tribunal therefore would order that:
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- 1. The valuations and land value assessments of the Valuer General be reviewed and reduced as follows:
(1) 1 August 1999 from $27,000,000 to $23,400,000;
(2) 1 August 2000 from $22,000,000 to $17,000,000; and
(3) 1 August 2003 from $22,000,000 to $17,000,000.
I certify that this and the preceding [204] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT
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