AMP Macquarie Pty Ltd v Valuer-General

Land and Environment Court

New South Wales

Case Name:	AMP Macquarie Pty Ltd v Valuer‑General
Medium Neutral Citation:	[2022] NSWLEC 114
Hearing Date(s):	30 March to 6 April and 20 April 2022
Date of Orders:	21 September 2022
Decision Date:	21 September 2022
Jurisdiction:	Class 3
Before:	Moore J
Decision:	See orders at [472] and [473]
Catchwords:	VALUATION OF LAND - appeals against statutory valuations for two valuation years - major regional shopping centre - “highest and best” use - choice between hypothetical development schemes - valuation issues arising concerning the adopted hypothetical development scheme - question of whether, on appeal, a statutory valuation can be increased - unnecessary to resolve jurisdictional question concerning increase in statutory valuation - appeal upheld concerning each statutory valuation - revised valuations substituted for issued statutory valuations - costs reserved
Cases Cited:	Botany Bay City Council v Premier Customs Services Pty Ltd (2009) 172 LGERA 338; [2009] NSWCA 226 Initial Action Pty Ltd v Woollahra Municipal Council (2018) 236 LGERA 256; [2018] NSWLEC 118 Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8 Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673; (2001) 114 LGERA 376; [2001] NSWCA 78 RebelMH Neutral Bay Pty Ltd v North Sydney Council [2019] NSWCA 130 Tetzner v Colonial Sugar Refining Company Ltd [1958] AC 50 Wehbe v Pittwater Council [2007] NSWLEC 827 Zhang v Canterbury City Council (2001) 51 NSWLR 589; [2001] NSWCA 167
Category:	Principal judgment
Parties:	AMP Macquarie Pty Ltd (First Applicant) AMP Capital Funds Management Ltd (Second Applicant) Dexus Wholesale Property Ltd (Third Applicant) Valuer‑General of New South Wales (Respondent)
Representation:	Counsel: Mr A Galasso SC/Ms C Trahanas, barrister (Applicants) Dr S Pritchard SC/Mr R White, barrister (Respondent) Solicitors: King & Wood Mallesons (Applicants) Crown Solicitor’s Office (Respondent)
File Number(s):	270481 and 270482 of 2020
Publication Restriction:	No

TABLE OF CONTENTS

Introduction
The site
The hearing
Representation
Relevant provisions in the Valuation of Land Act
The required assumptions concerning the site
Relevant planning provisions
Introduction
The EPA Act
The LEP
The DCP and the 2010 study.

The role of a development control plan
The issues
The competing hypothetical development schemes
Introduction
The Southwell and Shaw schemes are only concept schemes

Jurisdictional issues - the Valuer‑General’s proposed higher valuations

The evidence
The town planning evidence
Introduction
Strategic and Statutory Planning Considerations
Relevance of the Herring Road Urban Activation Precinct Proposal
Role of, and weight to be given to, Pt 4.5 of the DCP
The Southwell scheme
Consistency between instruments
The “highest and best” use of the site based on the planning controls
The scale and form of retail development needed for the site be the “retail core” of Macquarie Park or a “regional attractor”
Whether planning controls required retail use across the entire site
Pedestrian linkages
Introduction
Pedestrian connection compliance of the Shaw and Southwell schemes

Active Frontage requirements and the Shaw and Southwell schemes
Above‑ground parking requirements and the Shaw and Southwell schemes
The approval strategy for a hypothetical development proposal
The Southwell scheme’s necessity for a cl 4.6 request

The economic evidence
Introduction
Preliminary issue - instructions to experts
The scale of retail development at the initial development stages
Long‑term GLA requirements
The optimum and maximum number of retail levels for the site
What allowance would be made for future expansion?
Allocation of part of the site for residential or other retail uses
Build the hypothetical centre as a single stage or in multiple stages?
The potential for a second department store to be attracted into an initial stage of retail development
Demand for residential development on the site
Should St Ives be included in the “main trade area”?
Optimum car‑parking design for a regional shopping centre on the site

Addressing the Southwell hypothetical development scheme
Introduction
The planning issue with the Southwell scheme
The Southwell scheme and cl 4.6 of the LEP
The position advanced for the Valuer‑General
The position advanced for the Applicants
Consideration

The Shaw hypothetical development scheme
Introduction
The planning issues with the Shaw hypothetical development scheme
Aboveground, on‑site parking for the Shaw hypothetical shopping centre
Introduction
The town planning evidence concerning parking
Mr Shaw's evidence
The terms of s 79C(3A) of the EPA Act
The Applicants’ submissions on the Shaw scheme’s proposed parking
The Valuer‑General’s submissions on the Shaw scheme’s proposed parking
Consideration

Pedestrian permeability
Introduction
Mr Shaw's evidence
The submissions for the Applicants
The submissions for the Valuer‑General
Consideration

Activation of the Waterloo Road frontage

The profile of the hypothetical purchaser
Introduction
The evidence of Messrs Jackson, Miles and Preston
The evidence
Conclusion on the “hypothetical purchaser” evidence

Conclusion on the preferred hypothetical development scheme
Introduction
The town planning evidence
The economic evidence
Conclusion

The consideration of remaining evidence after the scheme choice
The quantity surveying evidence
The construction timing issue
Static valuation versus discounted cashflow
Consideration

The detailed Shaw scheme valuation evidence
Introduction
Future costs
The Shaw scheme towers
Introduction
The use of the Shaw scheme towers
The rate‑per‑square‑metre GFA for residential space
The deferral period for building the Shaw scheme towers
Introduction
Mr Jackson's oral evidence
Mr Preston's oral evidence.
The submissions for the Applicants
The submissions for the Valuer‑General

Consideration

Build‑to‑sell v build‑to‑rent
Consideration
Valuing the build‑to‑rent option
Conclusion
Costs
Orders
Annexure A
Annexure B

Judgment

Introduction

AMP Macquarie Pty Ltd, AMP Capital Funds Management Ltd and Dexus Wholesale Property Ltd (together, the Applicants) are the joint owners of the Macquarie Shopping Centre (the Centre) located in north-western Sydney. A description of the Centre is set out later.
Land in New South Wales is valued by the Valuer‑General pursuant to the Valuation of Land Act 1916 (the Valuation of Land Act), for local government rating and, potentially, for land tax levying. Rating and land tax calculations are undertaken on, at least in part, an ad valorem basis derived from the Valuer‑General's assessment of the land value, here, relevantly, of the site upon which the Centre is located. All such valuations take effect from 1 July in the relevant year.
Valuation for these purposes is undertaken by the Valuer‑General on an annual basis. An aggrieved owner, who wishes to dispute the assessed valuation for a property, is entitled to object to the Valuer‑General's assessment through processes established by the Valuation of Land Act. If the objection is not successfully resolved through that process, then the aggrieved owner has a right of appeal to this Court to have a judge or commissioner, acting as a judicial valuer, determine what is the appropriate valuation outcome for the relevant valuation date.
In these two proceedings, the Applicants, having exhausted the objection process, have commenced proceedings seeking to have judicial determinations made of the land value of the Centre as at 1 July 2016 and 1 July 2017. As a consequence, this decision deals with my determination of the land value to be applied to the Centre for each of those dates, being the determined value from the two proceedings being heard together.

The site

The site is located in the Sydney suburb of Macquarie Park. Macquarie Park is a major mixed use precinct in Sydney’s North Shore region. The Centre, a major regional retail centre, is currently located on the site. A bus interchange is adjacent to the site on Herring Road. Macquarie University is located to its immediate west.
The bulk of the site is, effectively, square in shape (although the Macquarie University Metro Station is inserted in its south‑west on the corner of Herring and Waterloo Roads at its western frontage. In broad terms, the site has a frontage of ~330 metres to Herring Road; ~360 metres to Talavera Road; and ~270 metres to Waterloo Road.
An additional rectangular element is located at its eastern end, with the long axis of the rectangle running from Talavera Road toward Waterloo Road for a little over half of the distance between those two thoroughfares.
As the length of the site’s frontage to Talavera Road is longer than its frontage to Waterloo Road, this is a factor relevant to potential hypothetical development schemes.
The site is zoned B4 Mixed Use by the Ryde Local Environmental Plan 2014 (the LEP). It has an area of 110,700 square metres with a maximum floor space ratio (FSR) of 3:5:1. It therefore has a maximum gross floor area (GFA) of 387,350 square metres derived from these two metrics.

The hearing

The hearing was held in person with all in the courtroom, other than the person speaking, being masked. The hearing was otherwise generally conducted in accordance with the Court's Covid‑19 policy as at the time of the hearing.

Representation

The Applicants were represented by Mr A Galasso SC and Ms C Trahanas, barrister. The Valuer‑General was represented by Dr S Pritchard SC and Mr R White, barrister.

Relevant provisions in the Valuation of Land Act

A number of provisions of the Valuation of Land Act are engaged for the purposes of these proceedings.
The first of the provisions is s 6A(1), the provision that establishes the basis upon which the determination of value is to be made. The provision establishes the hypothetical framework for this valuation exercise to be undertaken in each of the relevant years. It requires the hypothetical removal of all development from the land so that it can be valued as if the Centre had not been constructed. This provision is in the following terms:
6A Land value
(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.
As can be seen, the only alterations to the hypothetical natural landform on the site to be taken into account are any “land improvements” that have been made. “Land improvements” is a defined term with the definition appearing in s 4 of the Valuation of Land Act. The definition is in the following terms:
Land improvements means—
(a)   …,
(b)   …,
(c)   …,
(d)   the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation,
(d1)   without limiting paragraph (d), any excavation, filling, grading or levelling of land (otherwise than for the purpose of irrigation or conservation) that is associated with—
(i)   the erection of any building or structure, or
(ii)   the carrying out of any work, or
(iii)   …,
(e)   …, and
(f)   …
It is to be observed, as later discussed in more detail, that there is a significant excavation on the site below what would have been the original natural ground level. This excavation falls within the definition of “land Improvements” and requires to be taken into account in these two valuation exercises.
I have already noted that that the Valuation of Land Act provides for an objection process to be undertaken by an aggrieved landowner to a statutory valuation determination made by the Valuer‑General. For the two valuation dates here involved, the Applicants have undertaken, and exhausted, that process. It is not necessary to reproduce the statutory framework of these necessary precursor processes to the engagement of the Court's jurisdiction. It is sufficient to note that there is no dispute between the Applicants and the Valuer‑General as to the undertaking and exhaustion of those processes prior to the commencement of these two proceedings.
The final relevant provision of the Valuation of Land Act necessary to be reproduced is s 40. This provision sets out the powers of the Court that are able to be exercised in proceedings such as these. This provision is in the following terms:
40   Powers of Land and Environment Court on appeal
(1)   On an appeal, the Land and Environment Court may do any one or more of the following—
(a)   confirm or revoke the decision to which the appeal relates,
(b)   make a decision in place of the decision to which the appeal relates,
(c)   remit the matter to the Valuer‑General for determination in accordance with the Court’s finding or decision.
(2)   On an appeal, the appellant has the onus of proving the appellant’s case.
It is also to be observed that the onus of proof established by s 40(2) is the civil standard; that is, the Applicants must prove all relevant material factors to which I will need to have regard on the balance of probabilities.

The required assumptions concerning the site

In Tetzner v Colonial Sugar Refining Company Ltd [1958] AC 50 (Tetzner), the Privy Council gave its decision in a valuation case concerning a sugar mill in Fiji. The valuation process there engaged required, as here, the assumption that the sugar mill did not exist and that the land upon which it was erected was vacant.
In the then applicable circumstances, the sugar mill was in a setting defined by the nature of the general development in the area surrounding the site. The Privy Council held that, for the purposes of the valuation there being undertaken, the setting in which the sugar mill was located was to be taken into account as defining the appropriate context within which the valuation of the hypothetically vacant site was to be undertaken. In the decision in Tetzner, Lord Keith of Avonholm said, relevantly, at 57:
What … is required … is that the physical improvements, with any value which they attach to the land on which they are situated, be excluded from the valuer’s computation. The land will then be valued as land void of buildings but situated in the community with the amenities and facilities which have grown up around it. Their Lordships see no objection in the process of valuation to regarding the land as land situated in a sugar town. The valuer need not shut his eyes to the fact that there is a sugar manufacturing industry in existence, though he is not entitled to value the sugar mill and its accessories situated on the subject land.
That decision is to be applied in the present circumstances (see Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at 121-122 [20]‑[21] and Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673; (2001) 114 LGERA 376; [2001] NSWCA 78 at [29]).
That means, for the present valuation exercise I am undertaking, although the Centre, as it exists, is to be treated for each of the base dates as if it did not exist (in the fashion mandated by s 6A of the Valuation of Land Act), for each of the 2016 and 2017 base dates, the then existing position concerning relevant factors such as:

the socio-economic demographics of the catchment currently providing the retail spend demand satisfied by the existing Centre;
the dimensions of the catchment that should be taken to generate that demand;
the extent of the existing commercial, residential and retail development which actually existed in the more immediate Macquarie Park Corridor precinct as at each of the relevant base dates; and
the anticipated demand for additional residential demand in the Macquarie Park precinct as at each of the relevant base dates
are required to be taken into account in the analysis of any hypothetical development to be considered for the site.

In summary, although the existing development on the site (other than the land improvement excavation) are to be hypothetically removed, the reality, framing the site in both the immediate and broader context, is required to be considered for the purposes of my judicial valuation of the hypothetically vacant site.

Relevant planning provisions

Introduction

A limited range of planning documents require consideration for the purposes of the two valuation exercises here engaged. These are:
(1)One provision of the Environmental Planning and Assessment Act 1979 (the EPA Act);
(2)Several provisions of the LEP;
(3)A number of elements of the Ryde Development Control Plan 2014 (the DCP); and
(4)Portions of the Strategic Planning Document: The Ryde Local Planning Study 2010, which provided the strategic planning framework for the development of the LEP and, subsequently, the DCP.

The EPA Act

Only one provision of the EPA Act arises for later discussion. That provision is s 79C (as the provision was numbered as at the valuation dates in 2016 and 2017). The relevant elements of the provision are in the following terms:
1 July 2016 (unchanged as at 1 July 2017)
79C   Evaluation
(1)   Matters for consideration — general In determining a development application, a consent authority is to take into consideration such of the following matters as are of relevance to the development the subject of the development application:
(a)   the provisions of:
(i)   any environmental planning instrument, and
(ii)   …, and
(iii)   any development control plan, and
(iiia)   …, and
(iv)   …, and
(v)   …,
that apply to the land to which the development application relates,
(b)   the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality,
(c)   the suitability of the site for the development,
(d)   …,
(e)   …
(2)   …
…
(3)   …
(3A)   Development control plans If a development control plan contains provisions that relate to the development that is the subject of a development application, the consent authority:
(a)   if those provisions set standards with respect to an aspect of the development and the development application complies with those standards—is not to require more onerous standards with respect to that aspect of the development, and
(b)   if those provisions set standards with respect to an aspect of the development and the development application does not comply with those standards—is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development, and
(c)   may consider those provisions only in connection with the assessment of that development application.
In this subsection, standards include performance criteria.
(4)   …
(5)   …
(6)   Definitions In this section:
(a)   …, and
(b)   non‑discretionary development standards means development standards that are identified in an environmental planning instrument or a regulation as non‑discretionary development standards.

The LEP

Two provisions of the LEP will require consideration. The first of these is the element of the Land Use Table for the B4 Mixed Use Zone, this being the zone which applies to the site. The objectives for this zone and the use‑regulating element for the B4 Zone were (and remain):
1 July 2016 (unchanged as at 1 July 2017)
Zone B4 Mixed Use
1   Objectives of zone
•   To provide a mixture of compatible land uses.
•   To integrate suitable business, office, residential, retail and other development in accessible locations so as to maximise public transport patronage and encourage walking and cycling.
•   To ensure employment and educational activities within the Macquarie University campus are integrated with other businesses and activities.
•   To promote strong links between Macquarie University and research institutions and businesses within the Macquarie Park corridor.
2   Permitted without consent
Home occupations
3   Permitted with consent
Boarding houses; Building identification signs; Business identification signs; Child care centres; Commercial premises; Community facilities; Educational establishments; Entertainment facilities; Function centres; Hotel or motel accommodation; Information and education facilities; Medical centres; Passenger transport facilities; Recreation facilities (indoor); Registered clubs; Respite day care centres; Restricted premises; Roads; Seniors housing; Shop top housing; Waste or resource transfer stations; Any other development not specified in item 2 or 4
4   Prohibited
Agriculture; Air transport facilities; Animal boarding or training establishments; Biosolids treatment facilities; Camping grounds; Caravan parks; Depots; Eco-tourist facilities; Farm buildings; General industries; Heavy industrial storage establishments; Heavy industries; Home occupations (sex services); Industrial training facilities; Resource recovery facilities; Sewage treatment plants; Sex services premises; Signage; Vehicle body repair workshops; Vehicle repair stations; Waste disposal facilities; Water recycling facilities; Water supply systems

The second element of the LEP requiring noting is cl 4.6, a provision by which a development applicant can seek (subject to a number of tests set out in the clause) to be permitted to develop in breach of a development standard otherwise set by the LEP. In this instance, the relevant development standard is that which sets the maximum gross floor area (GFA) for the site. This requires consideration as one of the hypothetical development schemes, that advanced for the Valuer‑General exceeds the maximum permissible GFA for development set by the relevant control and LEP map demonstrating that control. The clause is in the following terms:
4.6   Exceptions to development standards
(1)   The objectives of this clause are as follows:
(a)   to provide an appropriate degree of flexibility in applying certain development standards to particular development,
(b)   to achieve better outcomes for and from development by allowing flexibility in particular circumstances.
(2)   Development consent may, subject to this clause, be granted for development even though the development would contravene a development standard imposed by this or any other environmental planning instrument. However, this clause does not apply to a development standard that is expressly excluded from the operation of this clause.
(3)   Development consent must not be granted for development that contravenes a development standard unless the consent authority has considered a written request from the applicant that seeks to justify the contravention of the development standard by demonstrating:
(a)   that compliance with the development standard is unreasonable or unnecessary in the circumstances of the case, and
(b)   that there are sufficient environmental planning grounds to justify contravening the development standard.
(4)   Development consent must not be granted for development that contravenes a development standard unless:
(a)   the consent authority is satisfied that:
(i)   the applicant’s written request has adequately addressed the matters required to be demonstrated by subclause (3), and
(ii)   the proposed development will be in the public interest because it is consistent with the objectives of the particular standard and the objectives for development within the zone in which the development is proposed to be carried out, and
(b)   the concurrence of the Secretary has been obtained.
(5)   …
(6)   …
(7)   …
(8)   …

The DCP and the 2010 study.

A range of elements of these two documents will later require consideration. Rather than producing the full suite of elements of each of them that will arise in the course of this decision, it is sufficient to note that the DCP, as is conventional for development control plans, addresses planning on a more fine‑grained basis than is possible for the LEP. The DCP also addresses such fine-grained planning on a precinct basis, including the Macquarie Park Corridor precinct within which the site is located.
The 2010 study, being a strategic planning document, has, as one of its thematic elements, consideration of the policy aspirations for the precinct within which the site is located.
Both these documents (but particularly, relevant elements of the DCP) are engaged at several points in the evidentiary evaluation process for these two proceedings.

The role of a development control plan

In Zhang v Canterbury City Council (2001) 51 NSWLR 589; [2001] NSWCA 167 (Zhang), at [75], Spigelman CJ (Meagher and Beazley JJA agreeing) stated that the development control plan in question “had to be considered as a ‘fundamental element’ in or a ‘focal point’ of the decision‑making process [of the consent authority]”. His Honour also stated that a provision of a development control plan that was directly pertinent to a development application “was entitled to significant weight in the decision‑making process but was not, of course, determinative”.

The issues

The competing hypothetical development schemes

Introduction

Although there are issues of detail requiring determination after a primary choice is made, that primary choice (what is the hypothetical development scheme that reflects the “highest and best” use of the site) defines the pathway along which the remainder of the decision‑making process must travel. This defining choice is a binary one in these circumstances.
The hypothetical development scheme advanced on behalf of the Applicants bears considerable similarity to (but is not identical with) the development, which actually presently exists on the site. Nonetheless, this model is derived from, and is to be assessed on the basis of, the assumption that, with the exception of the land improvement excavation on the site, the site is entirely notionally stripped of development. This hypothetical development scheme (subsequently referred to as the Shaw scheme, after the name of the architect who advances it on behalf of the Applicants) is founded on the assumption that the hypothetical development will be undertaken by an investment fund envisaging long‑term ownership in order to reap the benefit of a significant income stream to be derived from the development.
On the other hand, the hypothetical development advanced on behalf of the Valuer‑General (to be known as the Southwell scheme, after the architect who advances it on behalf of the Valuer‑General) is for a hypothetical development which contains a very large retail development component but not a component which is effectively the entirety of the site. This hypothetical development envisages, in the north‑eastern sector along the Talavera Road frontage, that a number of residential towers would be constructed and that the apartments in them would be sold. Similarly, the shopping centre itself would be constructed and on‑sold to a longer‑term investor who would seek to harvest the ongoing rental return. As will subsequently be revealed, each of these schemes has, as a feature in common, development elements in associated towers (although at differing locations) around the perimeter of the hypothetical shopping centre development.
The two hypothetical development schemes, despite some superficial apparent similarities, envisaged significantly divergent visions concerning the nature of the development scheme advice that would be put to, and adopted by, the prudent hypothetical purchaser as at the 2016 and 2017 base dates.
The choice between the Shaw and Southwell schemes, to be based on consideration of the town planning and economic evidence, tempered by additional consideration of the profile of the financial objectives of the hypothetical s 6A purchaser, does not resolve all of the issues requiring determination but does, necessarily, effectively define the range of further detailed matters of consideration requiring to be determined for deriving the hypothetical undeveloped transaction value of the site.
As a consequence, unlike many statutory valuation cases where choices concerning comparable sales and how they are to be adjusted to derive a valuation as at a relevant reference base date, in these proceedings the choice of which hypothetical development scheme should be preferred requires an early decision‑making, path‑determining choice in these proceedings. After making that choice, evidence given in the remaining expert disciplines concerning the discarded hypothetical development scheme is rendered irrelevant.
For the purposes of making the assessment of and determination as to which scheme is to be preferred, it is necessary not only to describe in some detail each of the Shaw and Southwell competing hypothetical development schemes to enable an understanding of the stark choice required in selecting between them, but also to address, for each of them, planning issues arising from both the strategic planning vision for the Macquarie Park Corridor precinct, as well as, for each scheme, compliance issues with either development standards set by the LEP or the more detailed planning controls set in the DCP.
It is, therefore, first, appropriate to turn to providing a general description of each of the hypothetical development schemes and describe the nature of the advice that each advances to the hypothetical purchaser.
The Southwell and Shaw schemes are only concept schemes
The Southwell and Shaw schemes of hypothetical development scenarios postulated as advice for the prudent hypothetical purchaser are purely concept ones. They are ones that differ, significantly, in their visual presentation in these proceedings. Whichever of them might be appropriate to be adopted by the hypothetical purchaser, both of them would have needed further extensive work before being able to be submitted to a consent authority for approval, even as a concept development application.
Although the information concerning the Southwell scheme was presented in a more conceptually sophisticated fashion than was provided for the Shaw scheme, nonetheless, each of them provided sufficient detail to understand all the relevant elements envisaged for that hypothetical development. In particular, it is to be noted that each provided sufficient detail in order to identify what were obvious potential planning issues which would require to be considered by the hypothetical purchaser before adopting either scheme.

Jurisdictional issues - the Valuer‑General’s proposed higher valuations

The jurisdictional issue which potentially arises for determination will need to be considered if the valuation outcome I determine for either or both of the base years is greater than the original Valuer‑General's determination. That is because, in these proceedings, the Valuer‑General contends that, if the resulting valuation outcome is higher than that which had been originally determined, I should replace the earlier determined outcome with the higher valuation resulting from my judicial valuation conclusions.
Unsurprisingly, the position advanced on behalf of the Applicants is that there is no jurisdiction available to me which would permit me to give effect to such an outcome if it arose.
Exhibit 10 was a bundle of correspondence between the legal representatives of the parties concerning whether or not the Valuer‑General would seek to propose that I should increase the statutory valuations in the existing determinations for the 2016 and 2017 base dates. The upward determination proposed for the Valuer‑General, for each of the base dates, reflected the conclusions which Mr Preston had derived, as explained in his written evidence (although varying depending on whether or not the Southwell scheme or the Shaw scheme was adopted by me as the appropriate basis for statutory valuation determination).
Whichever scheme provided that valuation basis, it was Mr Preston's expert opinion that a significant uplift in the hypothetical valuation, on the basis mandated by s 6A of the Valuation of Land Act, would be appropriate.
Set out below is a table taken from the written submissions on behalf of the Valuer‑General showing the contended values on behalf of the Applicants for the two base dates; the Valuer‑General's statutory determinations for each of those base dates; and the values proposed, as at the date of those submissions, by the Valuer‑General as appropriate to be the outcome of these proceedings.

Valuation Date	Issued Land Value	Applicants’ contended Land Value	Valuer‑General’s contended Land Value
1 July 2016	$215,000,000	$184,000,000	$438,000,000
1 July 2017	$310,000,000	$209,000,000	$450,000,000

At the commencement of the proceedings, I had indicated to Dr Pritchard (Transcript 30 March 2022, page 25, lines 27 to 37) that I had doubts as to whether I would have jurisdiction to give effect to the increased statutory valuations sought by the Valuer‑General.
Perhaps fortunately, given the conclusions which I have reached as to the appropriate statutory valuation to be applied for each of the 2016 and 2017 base dates (being less than the current statutory determinations of the Valuer‑General but somewhat higher than those for which the Applicants contended), there is no need for me to address the question of whether or not I would have had jurisdiction to increase the statutory valuations above those originally determined by the Valuer‑General. Given that the jurisdiction point is rendered moot, it is inappropriate for me to comment further on it.

The evidence

A large volume of documentary evidence was tendered, with this material being provided, almost entirely, electronically. After hearing and dealing with objections to the documentary evidence, the following documentary material was tendered electronically:
(1)The Court Book became Exhibit A;
(2)The Evidence Book became Exhibit B;
(3)The Tender Bundle (of documents) became Exhibit C;
(4)A chapter of the Ryde Local Planning Study 2010 (Chapter 7 - Employment) became Exhibit 1; and
(5)A bundle of correspondence concerning possible higher valuation outcomes pressed by the Valuer‑General became Exhibit 10.
Two matters are to be noted. The first is that, although Exhibits A, B and C were tendered by the Applicants, for convenience, each of them included material that formed part of the Valuer‑General's case in each of the proceedings. Second, with respect to documents in Exhibit C, some material sought to be included in the exhibit relating to, or arising from, a concept development approval for development on the site and, separately, a second (and subsequent) development consent for works on the site of a more limited nature were rejected. The relevant folios in the electronic tender bundle did not, therefore, form part of the evidence in the proceedings.
Expert evidence was given on behalf of the Applicants and the Valuer‑General in seven disciplines. Each of the experts provided an individual report that was contained in Exhibit B and joint reports of the experts in their pairings/groupings were also contained in Exhibit B. The experts gave oral evidence, later discussed, in their groupings. The areas of expertise and the evidence of each of the parties are set out below:

town planning - Mr Tim Blythe for the Applicants and Mr Andrew Duggan for the Valuer‑General;
retail economics - Mr Tony Dimasi for the Applicants and Mr Sean Stephens for the Valuer‑General;
shopping centre concept designs - Mr Bruce Shaw for the Applicants and Mr Doug Southwell for the Valuer‑General;
quantity surveying - Mr Michael Gilligan for the Applicants and Mr Stephen Bolt for the Valuer‑General;
construction timing - Mr Neal Taylor for the Applicants and Mr Chris Peter for the Valuer‑General;
valuation - Mr Grant Jackson for the Applicants and Mr Gregory Preston for the Valuer‑General.

The valuers also gave evidence concerning what sort of entity might fit the profile of a purchaser of the hypothetically vacant site mandated for the valuation exercise to be conducted pursuant to s 6A of the Valuation of Land Act. With respect to evidence concerning the hypothetical purchaser profile, the Applicants also relied on additional evidence from Mr Greg Miles. Mr Miles had had extensive experience in shopping centre development and management on behalf of major investors owning such centres in Australia and New Zealand. Mr Miles did not have a counterpart expert on behalf of the Valuer‑General. Mr Miles provided an individual expert report, a report which was included in Exhibit B. Mr Miles gave his oral evidence concurrently with the valuers on this limited topic.

The town planning evidence

Introduction

Mr Blythe (for the Applicants) and Mr Duggan (for the Valuer‑General) gave concurrent evidence. They had each produced expert reports as well as a joint expert town planning report. These experts also subsequently produced two supplementary reports.

Strategic and Statutory Planning Considerations

The experts agreed that the following instruments formed part of the planning control hierarchy under the EPA Act:

strategic plans under s 75AA of the EPA Act (as it was at the time) comprising A Plan for Growing Sydney (applicable at both the 2016 and 2017 valuation dates) and the draft Towards a Greater Sydney 2056 and draft North District Plan (applicable only at the 2017 valuation date);
the LEP, which was the principal environmental planning instrument for determining the permissible use, scale, and density of development on the site; and
the DCP, particularly Pt 4.5 relating to development in Macquarie Park.

Mr Blythe suggested that the City of Ryde Local Planning Study 2010 and the City of Ryde Community Strategic Plan 2025 were also relevant documents as part of the planning control hierarchy, although not formal matters of consideration under the EPA Act. Mr Duggan considered these documents as having “significantly lesser value in light of the more contemporary Regional and District Plans” (Exhibit A, Tab A2, page 62, paragraph 78).
The experts largely agreed about the contents of these instruments. They noted that (then) s 79C of the EPA Act required a consent authority to consider various instruments when determining a development application. The experts also noted the application of s 79C(3A)(b), specifically, a provision giving flexibility in applying provisions of development control plans to consent authorities. Mr Blythe opined that the DCP remained an important guiding document to any consent authority considering the site.

Relevance of the Herring Road Urban Activation Precinct Proposal

In oral evidence, there was some discussion between the town planners as to whether the June 2014 Herring Road Urban Activation Precinct Proposal (HRUAPP) was relevant to the identification of the “highest and best” use of the site as at each of the valuation dates.
Mr Duggan opined that the HRUAPP was relevant since it was preliminary to statutory planning changes to zoning or other land use controls at the site (Transcript 1 April 2022, page 73, lines 27 to 29). He referred to a chronology in his expert report which set out the planning history of the Herring Road Priority Precinct from June 2012 to October 2015. This chronology included, amongst other events, the successful nomination of Herring Road area as an Urban Activation Precinct in November 2012; the preparation and public exhibition of the HRUAPP by the Department of Planning and Infrastructure (the Department) in June 2014; the Department’s release of the Finalisation Report for the Herring Road Priority Precinct in May 2015; and the subsequent amendment of the LEP in October 2015 to bring it in line with final recommendations for the Herring Road Priority Precinct, pursuant to State Environmental Planning Policy (Major Development) Amendment (Ryde) 2015 (the October 2015 SEPP amendment). Mr Duggan noted that the HRUAPP was the document which provided the building height controls and the 3.5:1 FSR that were relevant to the site and that were subsequently implemented by amendment to the LEP in October 2015.
Mr Duggan described the HRUAPP as “an overarching and overriding strategic piece of planning work that deals with the Herring Road corridor, which includes the subject site”. Mr Duggan suggested that “one of the main drivers” of the document was the provision of increased housing along the Herring Road corridor, which was strategically close to heavy rail (as it was proposed at the time), Macquarie University, and Macquarie Hospital. Mr Duggan noted that the HRUAPP had sought to add approximately 5,500 new homes (Transcript 1 April 2022, page 75, lines 20 to 31). He also noted that the HRUAPP and October 2015 SEPP amendment dealt with the rezoning of Macquarie University from SP2 Infrastructure to B4 Mixed Use to allow for commercial development throughout the university. In cross‑examination, Mr Duggan accepted, however, that the HRUAPP and the resulting October 2015 SEPP did not result in any change in the site’s zoning. He accepted that the principal zoning change was to portions of Macquarie University, and the principal effect of the relevant SEPP amendments was to development standards for existing zones (Transcript 1 April 2022, page 79, line 25 to page 80, line 8).

Mr Blythe generally agreed with Mr Duggan’s evidence on this issue, with some qualifications. Mr Blythe emphasised that the context of the HRUAPP was limited to the B4 Mixed Use Zone and the Macquarie University site, and that the document was not an holistic study of Macquarie Park or the Ryde LGA (Transcript 1 April 2022, page 74, lines 20 to 28). Mr Blythe agreed that the primary purpose of the HRUAPP was to drive housing supply close to the railway station and its precinct area. However, Mr Blythe opined that the HRUAPP’s intent was not to revisit the planning controls in their totality. Mr Blythe pointed out that the HRUAPP and the subsequent October 2015 SEPP amendment only amended the LEP, and not the DCP provisions that went, in his opinion, to the intent of the planning controls (Transcript 1 April 2022, page 77, lines 7 to 20). He noted that any DCP amendments that had been proposed were withdrawn on the basis of objections by the Council of the City of Ryde (the Council). In this context, he also noted that the HRUAPP proposed increased FSR and building height controls for the site and surrounding precincts, but that the B4 Mixed Use zoning of the site had been in place prior to the HRUAPP and remained unchanged since (Transcript 1 April 2022, page 74, line 30 to page 75, line 16).
In cross‑examination, Dr Pritchard put to Mr Blythe that there had been no proposal to alter the intended land uses through the DCP, and that all changes to land uses were proposed to be dealt with exclusively through amendments to the LEP. In response, Mr Blythe reiterated that the relevant SEPP amendment did not change permitted land uses or the B4 Mixed Use zoning over the site (Transcript 1 April 2022, page 77, line 47 to page 78, line 22).
On this issue, Mr Duggan pointed to differences between the DCP Structure Plan and the SEPP amendment regarding the zoning of Macquarie University, and opined that the “nuance between a very broad level structure plan and the actual provision of land uses under the LEP” needed to be “treated carefully, … with primacy given to the LEP as to what is actually permitted on land” (Transcript 1 April 2022, page 78, lines 26 to 49).
As an additional point, both town planning experts were taken by Dr Pritchard to the HRUAPPR, which was also part of material that was placed on public exhibition in June 2014. The experts agreed that this report also reflected a focus towards housing (Transcript 1 April 2022, page 75, line 33 to page 76, line 29). However, Mr Galasso later sought to point out, and Mr Duggan acknowledged, that an “illustrative master plan” for the Herring Road precinct had been included in the HRUAPPR (Tender Bundle at page 257) which showed a dense series of towers along Talavera Road, Waterloo Road, and Herring Road, comprising a large, predominantly residential corridor adjacent to the site (Transcript 1 April 2022, page 80, lines 10 to 46).

Role of, and weight to be given to, Pt 4.5 of the DCP

The next issue addressed by the town planners related to the role and weight of Pt 4.5 of the DCP, and whether at each of the valuation dates, the DCP fixed a core planning purpose of the subject land at all, let alone a “retail core”.
In their Joint Expert Report, Mr Duggan and Mr Blythe agreed that the elements of the DCP (amongst others) that were relevant for the purposes of providing advice to a hypothetical purchaser on the “highest and best” use of the land were:
-   That the site is designated as retail core for Macquarie Park as per the Urban Structure Plan.
-   The role of the site as providing retail and services that could be described as a “regional attractor”.
-   The requirement to ‘activate’ the Herring and Waterloo Road frontages.
-   The provision of a public plaza and community infrastructure as part of any development.
-   Other specific design criteria such as treatment of car‑parking structures and the like.
The experts also agreed that “the site’s characteristics which include accessibility to a railway station (future Metro), bus interchange, adjacent road network and its adjacency to Macquarie University, made it suitable to fulfil the planning objectives as expressed in the DCP as the ‘retail core’ of Macquarie Park”, and that “the characteristics of a regional attractor would include larger scale retail tenants together with uses such as cinemas and potentially other recreational offers”.
The main point of disagreement between the experts was the “scale and form of retail development required to meet the consent authority’s requirements of satisfying the role as the retail core of Macquarie Park” (Exhibit A, Tab A3, page 89, paragraph 14).
Mr Duggan proposed that the LEP and B4 Mixed Use zoning remained the primary land use controls for the site. He also expressed the view that (Exhibit A, Tab A3, page 89, paragraph 17):
… a development which is consistent with the land use provisions and development standards set out in the RLEP 2014 and which can satisfy (amongst other relevant DCP provisions):
a) being described as the retail core of Macquarie Park and
b) provide retail and services that could be described as a “regional attractor”
would be considered acceptable by the consent authority and would form part of my advice to a hypothetical purchaser.
With regards to the role and weight of the DCP, in oral evidence, Mr Duggan referred to s 74BA(1)(b) (as it was then) of the EPA Act, which provided that the principal purpose of a development control plan was to provide guidance on “facilitating development that is permissible under [any environmental planning instrument applying to the development]”. Mr Duggan also made reference to s 79C(3A)(b) (as it was then) of the EPA Act, the terms of which are repeated below:
(3A)   If a development control plan contains provisions that relate to the development that is the subject of a development application, the consent authority:
(a)   …
(b)   if those provisions set standards with respect to an aspect of the development and the development application does not comply with those standards—is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development, …
(c)   …
Mr Duggan referred to cl 3.1 of Pt 4.5 of the DCP, a provision in the following terms:
The Structure Plan sets out the broad framework for development within the Macquarie Park Corridor. It underpins the development controls within this Plan, and is supported by Ryde LEP 2014.
He also referred to cl 3.2 of Pt 4.5 of the DCP, which stated:
The Urban Structure Plan reflects and builds on the existing land uses and functions within the Corridor to implement the vision for Macquarie Park as Australia’s premier technology park and premier location for globally competitive business with strong links between Macquarie University and business. …
It is to be noted that Mr Duggan opined, with reference to zoning changes within Macquarie University, that what might be provided in a broad level structure plan may differ from the actual provision of land uses under the LEP and, as such, primacy ought to be given to the land use controls in the latter (Transcript 1 April 2022, page 78, lines 26 to 49 and page 83, lines 16 to 21).
On the issue of whether the DCP fixed a core planning purpose of the site as “retail core”, Mr Duggan noted (Transcript 1 April 2022, page 83, lines 23 to 28):
… I think both Mr Blyth and I still give credence to the term, “retail core”, and it’s certainly my evidence in my first report - and in the joint report - that the - the DCP can still be read to note the role of that site as the retail core. And - and I don't think I've ever said otherwise in evidence. But it's the strict interpretation of that applying across the site, almost like a - a de facto zoning plan, I think is where Mr Blyth and I differ.
In his expert report, Mr Duggan noted (Exhibit A, Tab A2, page 61, paragraph 75):
Because the RLEP 2014 permits and promotes a mix of uses, and does not identify a primacy for just one use, this does not mean in my opinion that ‘the primary role of the Site’ should be inferred from the RDCP 2014. The uses that are permitted and may be pursued on the Site should be taken first and foremost from the RLEP 2014 which is an Environmental Planning Instrument.
Mr Blythe, acknowledged that the DCP was not to be given the same weight as the LEP; however, he opined it was still necessary to have regard to the DCP, saying (Exhibit A, Tab A3, page 89, paragraph 18):
… in the context of a B4 Mixed Use Zone where a range of land uses are permitted with no specific floor space controls relating to individual land uses, it is appropriate and indeed necessary to look to the DCP for guidance as to the planning intent and direction. The DCP designates the entirety of the site as retail core and therefore from a policy perspective this is the primary driver for the use of the site and any mixed use development should have regard to this planning policy intent.
Mr Blythe observed that, in the absence of any guidance regarding core purpose in the LEP, it became more important to turn to the DCP to understand the planning authority’s strategic intent. In his opinion, the DCP clearly expressed a core planning purpose of retail or retail core, though he recognised this was not at the exclusion of other uses such as residential or commercial (Transcript 1 April 2022, page 83, line 44 to page 84, line 7). Mr Blythe also took me to the following extract from the DCP (Tender Bundle at page 454):
This DCP will seek to reinforce the role of the shopping centre as a regional attractor and hub for recreation facilities for families and youth - which currently include one of only two ice skating rinks in Sydney, cinemas and restaurants.
Mr Blythe noted that, whilst references in the DCP to the Macquarie Centre as it actually existed would need to be excluded, this did not change the clear sentiments in the DCP, which, in his opinion, a hypothetical potential purchaser of the site could not have ignored, saying (Transcript 1 April 2022, page 84, lines 34 to 45):
So clearly what the - the mindset of the planning authorities is that, whilst it was obviously thinking about Macquarie Centre as it exists, clearly what the planning controls ultimately seek to do is to provide a regional or a significant shopping centre that has a regional attraction to it, and - and a hub for recreational facilities does - does bring forward concepts of that. It has a critical - it will attract a critical mass of people from a - a relatively wide catchment. Which means it needs to be of scale - it can't just be a - it’s not a local centre. It's not something like Lachlan’s Line or other - other centres of a smaller scale, including some like Marina Square that we visited yesterday. We're talking about a major attractor - and to get major attractors, you need major tenants that will draw from a wide catchment, even well outside of Ryde LGA.

The Southwell scheme

The planners’ oral evidence also addressed the relationship between the planning purpose of the DCP and the Southwell scheme.
Mr Blythe contended that the DCP “informed the need to provide retail services to be a regional attractor, to activate streets, deliver a park[,] plaza and community infrastructure” (Transcript 1 April 2022, page 85, lines 1 to 4). He expressed the view that this intent could not have been achieved by “shoehorning” those various uses into a smaller development footprint on the site in order to make available other parts of the site for residential or other development, as was the case in Mr Southwell’s scheme (Transcript 1 April 2022, page 85, lines 4 to 13). He opined that “as a matter of practical application, the consent authority in determining any development application for the site would seek to be satisfied that the development would not derogate longer term planning objectives for the site, as expressed in the DCP as the ‘retail core’ and to act as a regional attractor” (Exhibit A, Tab A3, page 89, paragraph 20).
Furthermore, Mr Blythe’s evidence was that, having regard to the surrounding development existing as at the base dates, there was no other precinct which could conceivably have fulfilled those functions. Whilst Mr Duggan did not concede this point, he agreed that the site was a “large site in single ownership that would fulfil that role” (Transcript 1 April 2022, page 85, lines 17 to 28).
Mr Duggan accepted that the general proposition in the Southwell scheme that the site’s south-eastern quadrant be comprised of retail/commercial components at ground level, with residential components above, was more consistent with a “mixed use/residential” description than a “retail core” description as designated in the DCP Urban Structure Plan (Tender Bundle, page 455; Transcript 1 April 2022, page 86, line 7 to page 87, line 31).
Mr Duggan said that his advice to a potential purchaser would still have been to purchase the vacant parcel of land and implement the Southwell scheme, it being permissible under the land’s zoning, notwithstanding the inconsistency with the “broad structure” of the DCP. Mr Duggan explained that he would have advised a potential purchaser that there was flexibility afforded to consent authorities in applying DCP provisions under s 79C(3A)(b) (as it was then) of the EPA Act which could have applied, as long as the objective of the development control for the site, being the function of “retail core”, was achieved (Transcript 1 April 2022, page 86, line 45 to page 89, line 17). He said (Transcript 1 April 2022, page 89, lines 19 to 23):
WITNESS DUGGAN: As - as for - as I've said in my - my evidence in chief and in the joint report, as long as the role the subject site plays can be described as a retail core for Macquarie Park as per the Urban Structure Plan and is a regional attractor, then yes, residential could be achieved in - in that south-eastern corner.

Consistency between instruments

The town planners’ oral evidence also turned to whether there was an inconsistency or incompatibility between the DCP and the LEP. Mr Duggan considered there was no such inconsistency in terms of the provision of residential use together with retail use, the site being zoned B4 Mixed Use and afforded significant floorspace (387,000 square metres) and developable height. Mr Blythe also opined that there was no inconsistency between the DCP and the LEP in the sense that they were layered controls, with the LEP setting out a range of potential uses for the site, and the DCP providing further detailed guidance to the landowner as to what can be conceived for the land.
Mr Duggan however suggested that there was some inconsistency insofar as there is a reading that retail was to occur across the site, but there was a residential flat building with retail extending all the way to the ground (Transcript 1 April 2022, page 90, lines 33 to 37).
Mr Blythe responded that there was no conflict since the retail core mapping under the LEP did not prevent a residential tower being built on the site, nor did the DCP expressly prevent a residential building on the site. According to Mr Blythe, the planning intent of the DCP was for development conceived under it to be holistically retail, with a podium to accommodate other uses. Mr Blythe also referred to the fact that one of the B4 Mixed Use objectives under the LEP was to integrate compatible uses, though, on this point, Mr Duggan opined that this is not limited to vertical integration, but also included horizontal integration of retail and residential uses such as that which occurred at Wentworth Point.

The “highest and best” use of the site based on the planning controls

In their Joint Expert Report, the town planners agreed that the “highest and best” use of the site, based on planning controls at the relevant dates, was as follows (Exhibit A, Tab A3, page 87, paragraph 1):
(a)   A mixed use development comprising retail premises, housing, commercial premises, community facilities, and possibly other uses such as tourist and visitor accommodation and student housing (although these uses are not listed in any particular order).
(b)   A maximum gross floor area of up to 387,450 sqm in accordance with maximum FSR of 3.5:1 and heights in accordance the maximum height controls which range from 120m to 65m in accordance with the RLEP 2014 development standards.
(c)   Built form including a retail shopping centre with good connections to the rail station (and future Metro station). A series of towers to take advantage of the significant height afforded. The distribution and massing of this built form is discussed below individually by the experts as this is an area of disagreement.
(d)   The detailed characteristics of the “highest and best” use development outcome would be informed by a master planning (or Concept DA) process. Key development outcomes required to meet controls would include:
-   the provision of a public plaza This plaza is required to have a minimum 0.67 ha in area with dimensions of a minimum 80m x 80 m;
-   the provision of a community space of not less than 3,000m2, which may include a branch library or other function in accordance with Council’s Social and Cultural Infrastructure Framework. The community space must be directly accessible from the public domain and within a short walk of the station and bus interchange;
-   the community centre and the public plaza should be located in proximity to each other to maximise wayfinding and activation;
-   active retail frontages to Herring Road and Waterloo Road;
-   car‑parking to be provided below ground level and/or sleeved with other uses to create a suitable street interface at pedestrian level.
The experts primarily disagreed about the expected layout of development and quantum of retail floor space, especially whether retail land uses were likely to have been required to be provided across the entirety of the site and, consequently, how other land uses might have been provided.
Mr Blythe proposed that a retail centre of regional scale covering essentially the entire site with residential, commercial, and/or hotel uses located above a retail podium level would be the “highest and best” use of the land. He suggested that this approach reflected “the strategic planning intent in terms of the site’s role as a major regional shopping destination as well as an attractor for other recreational activities” and that this approach acknowledged “the strategic importance of this site as a retail and community hub”. Mr Blythe also opined that his approach would also have contributed to the overall success of the Macquarie Park Strategic Centre in terms of employment and services as envisaged under metropolitan and subregional strategies. Mr Blythe suggested that the “strongest indicator as to the core planning purpose of the site”, from a policy perspective, was the designation of the entirety of the site as “retail core” in the DCP. He also noted the DCP’s emphasis upon creating a vibrant street interface to the frontages of the site and the site’s role in delivering housing and broader employment objectives for the precinct. Mr Blythe said that the designation of the site as a B4 Mixed Use Zone under the DCP meant that it could have supported a mixture of other integrated uses including residential, commercial, and hotel. However, he suggested that “the planning and layout for such uses should not act to constrain or compromise the planning intent expressed in the DCP”. Mr Blythe proposed that zone objectives were most appropriately delivered by vertical integration of non‑retail uses, opining that “[a]ny proposal to develop the land that sought to limit the footprint of the retail centre and associated facilities in favour of the development of independent residential or commercial office towers should be approached with caution” as it would have compromised the potential to utilise the whole of the land as “retail core”.

Mr Duggan opined that development should have taken the form of a retail shopping centre towards Herring Road and Waterloo Road with a series of towers located above them (to take advantage of the height afforded by the LEP). He suggested that the remainder of the site would have accommodated individual shop top housing towers and/or residential flat building towers located in a master‑planned manner. Mr Duggan suggested that the Urban Structure Plan in the DCP was a “broad framework for development” and was not to be read “as a form of zoning map which would require retail premises to be spread horizontally across the site from edge to edge”, as long as the site satisfied its role and function as the “retail core” of Macquarie Park and its associated “regional attractor” functions. He also would have had regard to the flexibility afforded to decision‑makers under s 79C(3A)(b) of the EPA Act when providing any advice to a hypothetical purchaser in relation to the application of the DCP.

The scale and form of retail development needed for the site be the “retail core” of Macquarie Park or a “regional attractor”

On the quantum of retail that would have been required by the consent authority, the experts agreed that the “planning controls set a maximum FSR or floor area limit across the entirety of the site but do not specify minimum or maximum FSR’s relating to particular uses”. The experts disagreed on “whether relevant strategic planning documents can be interpreted to establish a quantum of retail that would be required by the consent authority”.
Mr Blythe contended that a shopping centre of regional scale was required to meet DCP planning objectives that the land function as “retail core of Macquarie Park” and provide retail and services such that it could be described as a “regional attractor”. Mr Blythe’s evidence was that planning controls would “give effect to planning policy and require the establishment of a major retail or super‑regional centre” on the site, thus “reflecting the strategic planning intent in terms of the site’s role as a major shopping destination, as well as an attractor for other recreational activities”.
In his expert report and in his oral evidence, Mr Blythe referred to the 2010 study in order to determine the scale of retail floor space required for a shopping centre at the site. This study contained an estimation of retail floor space capacity of 140,000 square metres gross leasable floor area (GLFA) at the site and suggested that a centre of 120,000 square metres GLFA would have met the retail sector definition of a “super regional” shopping centre (this second figure was calculated based on a shopping centre of 88,000 square metres GLFA, with consent for an additional 32,000 square metres GLFA). Based on this information, Mr Blythe estimated that “a centre accommodating in the order of 120,000‑140,000 [sqm] GLFA would meet the expectations of the planning policy framework for the site” (Exhibit A, Tab A1, page 25, paragraph 96).
It is noteworthy, however, that there was some disagreement as to the relevance of the 2010 study for identification of the “highest and best” use of subject land at each of the valuation dates. In oral evidence, Mr Blythe opined that it was relevant to the extent that it was a study that informed both the Ryde Local Environment Plan 2010 (the 2010 LEP), the 2014 LEP, and the DCP. Mr Blythe suggested that the Council had used the 2010 study to inform its strategic intent and, specifically, to “inform a position in terms of the long‑term supply of retail floor space provision that would be needed to support the Ryde community in the long‑term” and to inform a position that there was enough suitable land zoned to meet long‑term retail floor space requirements, on the assumption that existing centres or zoned precincts (such as the Macquarie Centre site) were capable of achieving or supporting a key component of that floor space requirement. In the Joint Expert Report, Mr Blythe noted that the 2010 study was produced to guide future growth in Ryde and to review and respond to the City of Cities: Sydney’s Metropolitan Strategy 2005 and Draft Inner North Subregional Strategy, the latter of which set targets of 12,000 dwellings and 21,000 jobs for the City of Ryde. Despite the 2010 study being superseded by 2017, Mr Blythe considered that it remained relevant to “inform an understanding of the provision of retail services to meet current and future demand” because “fundamentally the employment and housing targets relevant to Macquarie Park remain broadly consistent”. Mr Blythe also suggested that the 2010 study was necessary for ensuring planning controls aligned with higher order instruments or strategic studies.
Mr Duggan disagreed on the relevance of the 2010 study and opined that even though it did inform the 2010 and 2014 LEPs, it was outdated by the 2016 and 2017 valuation dates. In particular, Mr Duggan suggested (Exhibit A, Tab A2, page 68, paragraphs 116 to 117):
116. The 2010 Local Planning Study is drafted with reference to the draft ‘Inner North Subregional Strategy’ that seeks to implement the “City of Cities: Sydney’s Metropolitan Strategy 2005”. In effect, this 2010 Study therefore relies on an outdated 2005 Regional Strategy and a 2007 District Plan that was never finalised, and which were subsequently superseded by ‘A Plan for Growing Sydney’ and the associated north subregion chapter and later new draft Regional plan titled ‘Towards our Greater Sydney 2056’ and draft district plan titled ‘North District Plan’. This is evidenced by the following quote taken from a summary of the 2010 Local Planning Study released by Ryde Councill:
This Local Planning Study Overview is a summary of the various studies which have been prepared in response to the actions and directions within the State Government’s Metropolitan Strategy and the Inner North Subregional Strategy.
117. Having regard to advice that would be given to a hypothetical purchaser in 2016 and 2017, the reliance that would be put on this 2010 study would in my opinion not be significant and certainly not be determinative of a quantum of retail that must be provided on the Site.
Mr Duggan explained that he would have advised a hypothetical purchaser to look to more contemporary documents, including the precinct‑specific Herring Road Urban Activation study, the new metropolitan plan, and, by 2017, the draft district plan. In addition to disagreeing as to the study’s relevance, Mr Duggan also contested Mr Blythe’s reliance upon page 46 of the 2010 study to inform his 120,000 square metres GLFA estimate for the required amount of retail use at the site. In his expert report and in oral evidence, Mr Duggan suggested that on his reading of the 2010 study, the 120,000 square metres GLFA figure was in fact a reference to the shopping centre that actually existed at the site, the figure simply being an aggregation of the existing and approved floorspace of Macquarie Shopping Centre at the time. For this reason, Mr Duggan suggested that this reference to the 2010 study was impermissible, given the assumption that the actual Macquarie Centre did not exist. Mr Duggan also noted that on the same page of the 2010 study, the reference to “Specialised Centre” did not require a shopping centre, making reference to the definition and characteristics in the Draft Inner North Subregional Strategy 2007.
Mr Duggan also suggested that Mr Blythe’s reliance upon the 140,000 square metres GLFA figure in the 2010 study was incorrect for two reasons. First, Mr Duggan suggested that the 140,000 square metres GLFA figure reflected estimated retail floorspace for the entirety of Macquarie Park, rather than the site alone. It is to be noted that, in cross‑examination, Mr Galasso challenged this by suggesting that there was no material indicating that the strategic planning intent for the provision of retail in the Macquarie Park precinct could have been accommodated by retail “sprinkled” throughout the precinct (Transcript 1 April 2022, page 69, line 17 to page 70, line 24). To this contention, Mr Duggan responded by stating that retail premises were permissible in B4 Mixed Use and B3 Commercial Core zones and referred to examples of retail at the nearby Masters North Ryde (13,000 square metres of retail) and at Lachlan’s Line (6,000 square metres of retail) (Transcript 1 April 2022, page 70, lines 26 to 33). He also referred to “Chapter 7 - Employment” from the 2010 study, which suggested, at page 7-26, that it would have been “reasonable to assume that further retail development activity will occur” in the “Macquarie Park Corridor in the Delhi Road area and within the 3 station precincts” (the three station precincts being those along the Epping to Chatswood rail link). Second, Mr Duggan suggested that reliance could not be placed upon the table from which the 140,000 square metres GLFA figure was taken as it also suffered from the impermissible assumption that Macquarie Centre actually existed in 2010.
Mr Duggan also challenged Mr Blythe’s reliance upon the 2010 study’s contention that the City of Ryde “requires 200,000sqm of retail floor space to meet current population demands, but with housing growth this is projected to grow to 250,000sqm by 2031”. Mr Duggan suggested that this statistic was based on inadequate or otherwise outdated sources and that “no reasonable planning authority would seek to apply this document in place of the more contemporary Regional and District Plans”. He also sought again to rely upon Chapter 7 of the 2010 study to suggest there were other areas within the City of Ryde where retail development could reasonably have been assumed to occur in future.
Overall, Mr Duggan disagreed with Mr Blythe’s conclusion that the 2010 study quantified that the site would have been expected to accommodate between 120,000 and 140,000 square metres GLFA. Mr Duggan instead opined (Exhibit A, Tab A2, pages 62 to 63, paragraph 84):
In advising a hypothetical purchaser I would advise that there are no specific retail targets that are set by the relevant planning controls or that can be meaningfully ascertained from background planning studies such as the Local Planning Study 2010. There is certainly no specific quantum of minimum retail that can be applied as a minimum floor space standard that a consent authority must uphold in the assessment of a development application.
As to the distribution of retail uses in the local area, Mr Duggan also suggested that (Exhibit A, Tab A2, page 71, paragraphs 126 to 127):
126.   … I would advise that a more reasonable reading of the Local Planning Strategy is that retail demand will be addressed across the entire Local Government Area to 2031. The Strategy nominates several locations both existing and approved for further retail floor space within the LGA, other than the site of Macquarie Centre. There are also further locations for new retail floor space and expansion that occurred between the time the Strategy was drafted and the dates in question, with B4 Mixed Use areas in the LGA comprising Eastwood, West Ryde, Meadowbank, Ryde, and Gladesville. Other significant examples of growth in retail include, but are not limited to:
-   Bunnings Gladesville (LDA 2015/214, as modified) that provided some 16,000m2 of additional retail,
-   Masters North Ryde (LDA2015/144) that provided some 13,000m2 of retail, and
-   Lachlan’s Line (LDA 2016/0395) that provided some 6,000m2 of retail.
127.   I would not advise a hypothetical purchaser that a planning authority would assume or enforce on a future applicant the need to accommodate all demand for retail floor space in Ryde to 2031 on a single site, in a single development.
Both experts agreed that the specific quantum and type of retail to be provided at the site would also be informed by economic expert assessment. In this respect, Mr Blythe noted that Mr Dimasi’s economic evidence advised a super‑regional shopping centre in the order of 125,000 square metres Gross Leasable Area (GLA) or more.
With regards to how the site would have satisfied the role of “regional attractor”, Mr Blythe suggested that this would have been partially achieved through a concentration of retail uses. However, he noted that the planning intent went beyond the provision of retail services, and envisioned the co‑location of other uses, including community and recreational facilities, as further attractors for Macquarie Park.
Mr Blythe further noted that the DCP required community facilities to be provided on the site. Specifically, the DCP, at s 5.9, required that future development:
Provide community space of not less than 3,000sqm within the Macquarie Park Shopping Centre (which may include a branch library or other function in accordance with the Social and Cultural Infrastructure Framework). The community space must be directly accessible from the public domain and within a short walk of the station and bus interchange. Community space must be discussed with City of Ryde prior to the lodgement of a Development Application.
Mr Blythe also noted the requirement for a public station plaza with a minimum size of 0.67 hectares and 80 metres by 80 metres in dimension under s 5.7 of the DCP. Mr Duggan concurred with these observations in his expert report. Mr Blythe noted that there was no specified timing for delivery of community facility infrastructure. He suggested that it would have been subject to negotiation at the time of a development application and clarified in any concept development application prepared for the site.

Whether planning controls required retail use across the entire site

In oral evidence, Mr Blythe was asked by Dr Pritchard whether his evidence was, in effect, that there must be retail use over the entire site and that no other development could have proceeded unless it was over the retail podium. In response, Mr Blythe explained his view that the primary purpose set out by the DCP was to ensure that retail provision was achieved on the site, it being nominated in its entirety as “retail core”.
He opined that any development proposal which would have irreversibly carved off parcels of land for non‑retail uses would have been “approached with abundant caution” to avoid erosion of retail core objectives. Mr Blythe did not exclude the possibility that such development might have occurred. However, he contended that a planning authority would have been “very cautious” before allowing it to proceed. He also noted, in his expert report, that “[w]hile a subdivision is permissible with development consent, the probability of obtaining development consent for a standalone subdivision of the land is considered to be low having regard to the objectives and requirements of the Ryde LEP and Ryde DCP”. In particular, he suggested that (Exhibit A, Tab A1, pages 28 to 29, paragraph 116):
•   the preferred planning outcome under the LEP zone objectives was the integration of retail/commercial uses with residential uses above;
•   a site-specific DCP for the Macquarie Park Corridor had been adopted which nominated the entire site as “retail core”;
•   there were no other available sites in Macquarie Park in one title with equivalent characteristics to the site;
•   if subdivision was undertaken without a clear understanding of future development, there was a risk posed to the delivery of DCP objectives to “reinforce the role of the shopping centre as a regional attractor and hub for recreation facilities”;
•   subdivision would have imposed limitations upon site accessibility; and
•   a prospective land subdivision, such as excising the northern portion of the site fronting Talavera Road, would have had “the likely outcome of limiting loading and vehicle movements to Waterloo Road”, which would haven likely been “unacceptable from a traffic management and urban design perspective” and potentially compromised the Waterloo Road frontage in terms of visual appearance, street‑level activation, and pedestrian-vehicle conflicts.
Consequently, Mr Blythe opined that the consent authority would have expected that the site contained:

a regional shopping centre in accordance with applicable planning policies and controls;
activated street edges in accordance with the DCP;
an integrated retail podium across the entire site;
mixed use tower developments integrated into the development above the retail podium; and
ideally, the form of the podium broken down to allow through-site and cross-site access in accordance with the DCP.

Mr Blythe suggested that, should a subdivision application nonetheless have been pursued, a consent authority would have been expected to “require demonstrable evidence regarding the likely future floor space capacity of the centre and how such floor space would be reasonably planned and delivered on a reduced land parcel” in order to be confident that the centre would continue fulfilling its role and the planning objectives for Macquarie Park.
Mr Duggan disagreed and proposed that a shopping centre as part of a mixed use development would have functioned satisfactorily as a “retail core” of Macquarie Park and as a “regional attractor”. In his expert report, he noted, at paragraph 83:
83. There is no requirement to provide exclusively retail land uses from edge to edge on the Site if the overarching objective or function of the ‘retail core’ is achieved and development complies with the permitted land uses and development standards in the RLEP 2014. The urban structure plan in the RDCP 2014 is identified as a “broad framework for development” in Section 3 of Chapter 4.5 of the DCP, and it must be applied flexibly.
Mr Duggan also made reference to page 35 of the HRUAPPR to further suggest that the B4 Mixed Use Zone was to be used flexibly.
In his oral evidence, Mr Duggan additionally suggested that if the planning authority had intended a shopping centre to occupy the entire site, it could have zoned the site B3 Commercial Core, and permitted shop top housing via Sch 1 of the LEP. Mr Duggan’s advice to a hypothetical purchaser would have been that the B4 Mixed Use zoning implied that the site could be used for non‑retail uses so long as its role as a “retail core” and “regional attractor” could be fulfilled. In his opinion, these designations did not exclude residential uses.
Mr Duggan opined that the development of surplus land on the site “could also include the subdivision of this land [to allow for a residential development on the site], noting that there is no minimum lot size applying to the site in the RLEP 2014”. He suggested that a sound approach consistent with the DCP would have been for the initial development application to be a “concept approval” within the meaning of Div 2A of the EPA Act, and for development to be physically delivered in stages pursuant to that concept proposal, potentially by multiple developers. In his opinion, subdivision would have been “pursued as a product of the Concept Proposal rather than an initial standalone process for the subdivision of land”. Mr Duggan suggested that the satisfaction of the LEP and DCP would have been considered at the time of concept plan development application assessment and determination, and that landowners would have been bound by s 83D(2) (as it was then) of the EPA Act to develop the site in a manner not inconsistent with the Concept Plan consent. In light of this suggested approach, Mr Duggan rejected Mr Blythe’s proposition that subdivision without a clear understanding of future development would have put at risk the delivery of various DCP objectives.
As to the amount of residential development which would have been appropriate at the site, Mr Duggan opined, at paragraph 95 of his report:
95. The specific quantum and type of residential floor space provided on the Site would in my opinion be subject to architectural and urban design testing having regard to the consideration of RLEP 2014, RDCP 2014 and urban design assessment at the time a development application is lodged and assessed. This would include consideration of State Planning Policy No. 65 - Design Quality of Residential Apartment Development and the Apartment Design Guide.

Mr Jackson also gave the following pertinent evidence on this point (Transcript 6 April 2022, page 367, line 17 to page 371, line 1):
HIS HONOUR: Then with respect to that, Mr Preston explained why he felt that some elements of Shaw retail plus combination could be developed simultaneously, but you have all of them running a regularised sequence.
WITNESS JACKSON: Yes.
HIS HONOUR: So it's my assumption that given the rests between towers 1, 2 and 3 in Mr Preston, and the time that it's likely to take to construct what I'll call a six‑year tower, some of the construction would overlap with the two floors, would it not?
WITNESS JACKSON: Yes.
HIS HONOUR: So you would be building three towers at least for some of the time simultaneously.
WITNESS JACKSON: Yes.
HIS HONOUR: You say to me, do you, that that would end up with an inappropriate disruption, having three construction sites operating at the same time‑‑
WITNESS JACKSON: I‑‑
HIS HONOUR: ‑‑for the purposes of operating the retail?
WITNESS JACKSON: I do. I think that would be - that's a very significant undertaking, three major towers at once.
HIS HONOUR: Is there any reason why there couldn't be some overlap of some of the towers?
WITNESS JACKSON: It - it's‑‑
HIS HONOUR: Given the different uses.
WITNESS JACKSON: It's possible, your Honour. Again it gets back to risk and capital required. I mean, to develop three major towers would be an enormous capital required to do it. But assuming all that can be accommodated and there was a - and a stronger appetite for risk that - that would be possible, and again it would be a matter of what would be - the approach that I - I've adopted, and it's - it's not the only way that it might be done, but the approach I've adopted is that prudently, I believe, you would want to minimise your risk, undertake to develop a particular tower. Let that - let that formulate within the overall development and then move to the next.
HIS HONOUR: Your deferment rate accommodates a higher degree of risk, doesn't it?
WITNESS JACKSON: That the - the number of years you mean in the deferment rate or the‑‑
HIS HONOUR: Well, both.
WITNESS JACKSON: Or the percentage.
HIS HONOUR: The rate compared to Mr Preston's three and a half‑‑
WITNESS JACKSON: Yes. Yeah, well‑‑
HIS HONOUR: ‑‑it reflect - prices in combined with the period of deferment, a greater degree of risk, doesn’t it?
WITNESS JACKSON: Yes, it's a - yes, it's a high rate, yes, correct. Yes.
HIS HONOUR: But then Mr Shaw's towers are spread round the perimeter to considerable extent, are they not?
WITNESS JACKSON: Yes.
HIS HONOUR: Why wouldn't a developer, assuming availability of capital, build - let's just call it a residential tower in the Herring Road, Talavera Road corner of the site and build the hotel in the tower that is postulated to have a frontage to Waterloo Road in the Shaw plan? Pick the locations‑‑
WITNESS JACKSON: Yes.
HIS HONOUR: ‑‑but well apart.
WITNESS JACKSON: Yes.
HIS HONOUR: Why wouldn't they happen - either couldn’t they happen coincidentally, rather than 20 years apart?
WITNESS JACKSON: Yeah, I think on the proviso of capital and subject to market demand, of course, that that is a possibility, and again it would just be a - a careful issue of not disturbing the - as best you could, the - the trading capacity of the - the retail shopping centre.
HIS HONOUR: Do you want to recast the deferment period in years in the lowest element of the table to reflect the possibility that there might be some either simultaneous or overlapping development?
WITNESS JACKSON: I - I could - there's - there's many combinations, your Honour. I could - I could do that.
HIS HONOUR: What would you advise the hypothetical purchaser if they were going to adopt Shaw retail plus combination?
WITNESS JACKSON: Well, my - my advice would be, as I've set out, that you would - you would minimise your risk and undertake each development - particularly of a different asset class - simultaneously, not - not as one and in a way - and the reason for doing them individually and not multiple towers at once would be to ensure you are not impacting the retail centre.
But I accept, your Honour, you might say, "Well, but there's a possibility that" - depending on market conditions, which is - which is the critical factor - that you might expedite one particular stage of the development. I accept that. I mean, it is a - it is a bit of a - a - a bit of an unknown, you can't be definitive about it and I'm not suggesting to your Honour that I am being definitive about it. But the view I took was that when - when these sorts - and these are large towers, 33,930 square metres of development, they - they would take some time to develop and have them either rented or in the case of the residential apartments sold.
HIS HONOUR: Yes, I understand all of that. But assume I'm going to get the spreadsheets electronically. They are base identical apart from the data inputs in the various cells. So assume I have a sudden rush of blood to the head and decide to play round with some of the factors that you've applied. You are fortunately making it entirely possible for me to do so without the need for me to construct a spreadsheet. I might not be able to construct a spreadsheet, but I don't need to.
So if I wanted to play with the deferment period of years in the Shaw retail plus combination as if you were advising me as a prudent hypothetical purchaser of the vacant site contemplating developing over a period of time Shaw retail plus combination, what would you say would be a prudent mix of development times if it is not going to be a linear sequence of five plus five plus five plus five plus five?
WITNESS JACKSON: Yes. Understand your question, your Honour. Look, I think there would be an opportunity if you wanted to expedite the program to bring potentially the commercial and/or the hotel forward. I don't think you would be trying to do competing residential in the - in the process forward.
But I think there's - there's a - there's a prudent prospect that you might say that there's demand for office, let's try and bring the office tower forward, say, or alternatively you might say, you know, a major hotel operator has shown some interest in locating from Macquarie Park, and we might be able to sign them up and - and look at something like that. So they - they would be the - the ones that would immediately spring to mind where you might expedite that process if you were minded to, and you might be able to then bring that development period forward.
As - as to that timeframe partly - partly, your Honour, it's going to be dependent on construction timeframes and everything else, but giving you my best guess to try and assist, you might bring each of those forward, you know, up to - I mean, you could bring the - the commercial to - to ten years and maybe the hotel to 15 years, say, as a 0 as a guide in that process. But again it's - you know, I'm just trying to work with the best I can with your scenario, but once again depending on the - the appetite. But if it's a - if you're a hypothetical developer that says, "Mr Jackson, I - I want to get on with this pretty quick and I've got - I've got an appetite - higher appetite for risk," then that's perhaps the advice I'd give you.
…
WITNESS JACKSON: Well, it may not, and consistent with my first report under “highest and best” use, I did refer to the fact that I think you would - you'd be more likely to build a commercial hotel, and then in my report - I can go to the exact part of it - I - I did say, and if you had some GFA left at all, you might then consider residential as the last alternative because in - in my opinion, it's paramount for the shopping centre to retain ownership to make sure that they can capture the retail opportunity as it evolves into the future.
Mr Preston's oral evidence.
During the course of his oral evidence, Mr Preston also addressed this issue, as set out in the passages in the following paragraphs.
Mr Preston’s explanation of his deferment periods under the Shaw build-to-sell scenario was (Transcript 6 April 2022, page 352, lines 10 to 23):
WHITE: Thank you, Mr Preston. Sorry, just to go back to the first item if we may; residential build to sell. If you could just explain, perhaps you've already done it, but just for my benefit, please, and the Court's benefit. Why it is that your deferment period years, that's the right hand pink shaded column, differs from Mr Jackson's.
WITNESS PRESTON: What I did, Mr White, was went firstly to my discounted cashflow with the time that each of the Southwell towers were being constructed, and then looked at the quantum of GFA in the five Mr Shaw towers, which is much greater than allocated to the ten separate towers in Mr Southwell's design. I've - I've extended the time compared to my discounted cashflow timing to reflect the larger towers. Put simply, there'll be more apartments in each of the Shaw towers than there would in the separate Southwell towers, your Honour.
Mr Preston again explained his deferment periods under the Shaw build-to-sell scenario (Transcript 6 April 2022, page 357, lines 4 to 12):
GALASSO: The deferment period in years, I mean, you’ve got four, seven, ten, 13 and 16 for the bill to sell. Is there any market basis for the election of those years, or is it just a pick a date?
WITNESS PRESTON: No. I - I think I mentioned earlier, Mr Galasso, I went back to my discounted cashflow analysis of the Southwell scheme and looked to the size of each of the towers in that relative to the size of these and have increased the time for this because each of the towers would take longer to build and sell.
Mr Preston also explained his concurrent/staggered deferment periods under the Shaw retail‑plus combination scenario as follows (Transcript 6 April 2022, page 351, line 41 to page 352, line 8):
Turning to the combination scenario, your Honour, I've applied the same rates per square metre for each of the relative uses that we've contemplated in the five towers. I've applied the same deferment rates relative to that use, which again is tied to the underlying capitalisation rate. With my deferment period in the case of the combination scenario, in each of the earlier scenarios, each of the five towers would be - the second one would be competing with the first one, and the third with the first two, and the fourth with the first three. But in the combination scenario, they're exclusive - mutually exclusive uses, your Honour. That could be developed concurrently.
Mr Jackson last night made the point that that would be - require a lot of capital, which I agree with. So I've - what I've done is chosen to do the build to sell apartments in the commercial because they don't compete with each other at one point in time, in terms of deferment, and then moved on beyond that, but not to overlap, just because of the capital that would be required in terms of developing the entirety of it at once. But the point with my differential deferment rates, your Honour, is that the towers wouldn't be competing with each other. different uses, different markets for sale on completion et cetera.
Mr Preston also explained the residential deferment periods under the Shaw retail‑plus combination scenario (Transcript 6 April 2022, page 358, line 20 to page 359, line 44):
GALASSO: His Honour can see the result of that. The next column is the commercial, which you defer at different periods to the deferment of the residential in either build to sell or build to rent.
WITNESS PRESTON: That is correct, yes.
GALASSO: Why have you picked different periods?
WITNESS PRESTON: I think the commercial offices will take a lot longer to take up in the market in Macquarie Park.
GALASSO: Then the last column you have adopted for the residential - this is in the Shaw retail plus combination - you've roll out the residential towers at the same rate as you did for the purely residential scenario.
WITNESS PRESTON: Yes, I do.
GALASSO: You include a commercial tower at year 4 and a build to rent, that is, you actually bring three - you bring an additional residential component earlier than what would happen if it was either exclusively build to sell or build to rent.
WITNESS PRESTON: Sorry, which one are you referring to?
GALASSO: The last column, Shaw retail plus combination.
WITNESS PRESTON: Yes. Sorry. I'm looking at that.
GALASSO: Sorry, I don't mean this critically. You followed the order of tower 1, 2, 3, 4 and 5, but if we did it in sequence its towers 1 and 3 are built four years after the retain.
WITNESS PRESTON: Yes.
GALASSO: Then tower 2, then tower 5, then tower 4.
WITNESS PRESTON: Correct, yes.
GALASSO: You’ve actually delivered three residential towers earlier than you would have done if they were build to sell or build to rent.
WITNESS PRESTON: That is correct because they're not competing with each other.
GALASSO: They residential, aren't they? They're all residential.
WITNESS PRESTON: We're building one to see it and the other is to - to rent it.
GALASSO: Building two to sell and one to rent.
WITNESS PRESTON: Yes, but the - the second build to sell I've deferred for seven years.
GALASSO: Yes. But you’ve actually included between the first one and the second build to sell, you've put in a build to rent.
WITNESS PRESTON: Yes, I have. Yes.
GALASSO: You didn't distinguish the build to rent in the purely build to rent scenario. Build to rent you still went four, seven, ten, 13, 16.
WITNESS PRESTON: Well, you’re building the same product and building them so that they don't compete with each other once complete.
GALASSO: Do you say that there's a different call for property depending upon if someone is renting or someone is buying?
WITNESS PRESTON: It's a completely different market, Mr Galasso.
GALASSO: Someone might be buying to rent it, rent it out, would they not?
WITNESS PRESTON: An investor could do that, but it - it - it's a completely different proposition. They don’t - they're exclusive of each other and don't compete with each other.
The submissions for the Applicants
The deferral intervals for the Shaw scheme towers were addressed in the closing submissions for the Applicants. First, in the written closing submissions at paragraphs 218 and 223 to 224 and 227, this topic was addressed in the following terms:
218.   There are four points of general agreement between the valuations of Mr Jackson and Mr Preston.
…
223.   Fourthly, in the combination scenario, Mr Preston provides for the concurrent development of certain of the towers: Tr 351:41-49 (Preston). At the hearing, Mr Jackson scheduled tower development in the combination scenario sequentially so as to minimise disruption and because building three towers at once is a significant undertaking: Tr 367:23-368:11, 369:13-30 (Jackson). However, he accepted that it was possible that the development of non‑competing towers in the combination scenario could overlap, if that could be accommodated and there was a stronger appetite for risk: Tr 367:46-369:11, 369:40-370:20 (Jackson).
224. The differences between Mr Jackson and Mr Preston in the valuation of the towers of the Shaw scheme on a built-to-sell basis, built-to-rent basis and combination basis are significantly different. The source of this difference is that Mr Jackson and Mr Preston adopt different residential GFA rates, deferment rates and deferment periods: Tr 349:45-47 (Jackson). Mr Jackson’s approach should be preferred because Mr Preston’s approach to valuation is unreliable. This is revealed by the problems with his prehearing valuations (see above at [202]-[211] and by the problems with the valuation he undertook of the Shaw scheme.
…
227.   Secondly, according to Mr Preston’s valuation, the value of the Site is driven by residential development, not retail development: cf Tr 357:25-358:6 (Preston). This is clear from the following features of Mr Preston’s valuation:
…
(c)   Mr Preston’s deferment periods prioritise maximising residential opportunity rather that prioritising retail opportunity or engaging in prudent development: Tr 364:48-365:35.
The submissions for the Valuer‑General
The deferral intervals for the Shaw scheme towers were also addressed in the closing submissions for the Valuer‑General. First, in the written closing submissions at paragraphs 348 to 352, this topic was addressed in the following terms:
Deferment period
348.   The deferment period is the period of time in which the developer might action the particular component of development. It is also market driven and reflects level of risk and appetite in the market for the asset class. Mr Jackson’s deferment periods are the same for commercial, residential and the combination option. Mr Preston’s deferment periods vary and, in particular, are less for residential than they are for commercial. In other words, Mr Preston’s deferment periods assume that the market evidence demonstrates that a developer would build residential GFA in the towers before building commercial GFA. This reflects Mr Preston’s opinion that it would take a lot longer to absorb commercial space into the market than residential.
349.   Mr Preston’s evidence on the appropriate deferment rates and deferment periods should be preferred. Given that both elements are market based and reflect future opportunity for development, the objective market evidence available to the parties demonstrates a significant demand for residential development and no particular demand for commercial. The evidence includes the following:
•   the Herring Road Planning Precinct Proposal identified Herring Road as an area with strong market demand for additional housing;
•   the evidence of Sean Stephens concerning residential demand (EB 320-332);
•   AMP Residential Market Assessment (TB 1-32, in particular pp 6-7); and
•   the 2014 Colliers report ‘Analysis of the Macquarie Park/North Ryde Residential Apartment Market’ (TB 33-157 (the Colliers report)).
350.   All of this is evidence of a strong demand for residential development at Macquarie Park and Herring Road, in particular. The Colliers report provides a particularly useful analysis for the hypothetical parties because it identifies not only why the subject land is a superior location for new residential development to meet the demand, but it also analysed the market for other uses, such as hotels. The analysis demonstrates that the market “did not see” the Macquarie Park area as an accommodation destination, that lower value non‑residential uses would be best suited to the University land, that the “highest and best” use of the subject land “to be clearly residential apartments in the current market place” and accordingly “should be considered as the primary use on the subject site”.
351.   Mr Jackson criticised the Colliers report, dated 2014, as not representing market evidence as at the valuation dates. However, it, along with the other evidence set out above, is the best and only evidence tendered at the hearing on this issue. Mr Jackson was unable to provide any reasons why the analysis in the Colliers report was no longer apposite at the valuation dates. Mr Jackson in his reports provides no evidence of market demand for 169,000 sqm of GFA for commercial uses.
352.   The evidence set out above is the most convincing market evidence that demonstrates that the bulk, if not all, of the balance of 169,450 sqm of GFA would be taken up by residential GFA and not by commercial GFA.
During the course of his oral closing submissions, Mr White touched on this topic, submitting (Transcript 20 April 2021, page 518, line 9 to page 519, line 1):
WHITE: I believe these are my instructions because I haven't done the exercise myself, but you will find that the deferment period is--
…
… more sensitive than the deferment rate. Coming then to the deferment period, that is as we know from - and I've set out in 348 - we know from the evidence that the deferment period is the period of time which the developer might action the particular component of development. It's also market driven and reflects the level of risk and appetite in the market for the asset class. Again, looking at Mr Jackson's analysis for the moment, his analysis taking Shaw retail plus or commercial, in the first instance, his deferment period is exactly the same, five, ten, 15, 20 and 25, as it is in the Shaw retail plus all residential, which is the first grouping.
We say, your Honour, that that just simply doesn't reflect the evidence in this case which shows (a) no demand for commercial, the analysis showing this is not an appropriate site for commercial and, yet, very high demand for residential, and the planning controls all suggesting that residential should take place on the site. Again, the precise numbers may not be the right ones but, certainly, your Honour is going to find a difference in the deferment period between commercial and residential, and that your Honour would prefer the evidence of Mr Preston set out in exhibit 8 compared to Mr Jackson. If goes back to our inputs in 354 for 1 July 2016, I accept your Honour's recognition that this is not the base case, but what we've sought to do there is to just identify that the deferment periods are likely for the residential towers to be very much less than was suggested by Mr Jackson.
There is simply no rational support, your Honour, for the evidence of Mr Jackson that the retail would get built and then no residential towers would be provided for at least the first five years, but then only one would be provided at a time, and they would only be provided in every five years. That's just not the way on this evidence that a rational hypothetical purchaser is going to be looking at the site.
HIS HONOUR: I understand that but, equally, Mr Preston says four, then three, plus three, plus three, plus three, does he not? That gives me the--
WHITE: Yes.
HIS HONOUR: That's the spread in a marketing sense of the valuation evidence on deferment periods, isn't it?
WHITE: Yes. …

In its closing written submissions at pages 98 to 99, paragraph 354, the Valuer‑General set out new, adjusted land valuation assessment spreadsheets for the “Shaw Retail Plus Combination” scenario, which it suggested was the most likely combination of development in the event that the Court preferred the Shaw scheme as representing the most likely town planning outcome. Adjusted spreadsheets were set out for both the 1 July 2016 and 1 July 2017 valuation dates, copied below:
1 July 2016
1 July 2017
These spreadsheets converted Tower 2 from build-to-rent to build-to-sell residential and introduced new deferment intervals for the five towers under the “Shaw Retail Plus Combination” scenario. This was explained at paragraph 355 as follows:
355. In this scenario, 2 residential towers are delivered when the shopping centre opens, reflecting the market demand for new housing, tower 4 is constructed and opened at the same time as those first two towers, and a third residential tower and office tower are delivered 4 years subsequently.
The Applicants’ written closing submissions in reply addressed the Valuer‑General’s adjustments at paragraph 29 onwards, advancing that they were made in submissions rather than by Mr Preston himself and were an attempt by the Valuer‑General to increase the value of the scheme without justification. With respect to the Valuer‑General’s newly contended deferment periods, the Applicants submitted, at paragraph 31(b):
31 …
(b) The Valuer‑General changes the deferment period for all residential developments and the hotel. He considers that two of the residential towers and the hotel would be constructed as part of the base development - that is, at the same time that the initial shopping centre is constructed. On this timing, the Valuer- would have competing residential towers being constructed simultaneously because of “the market demand for new housing”. Mr Preston was well aware of the market demand for new housing, yet he structured his deferment periods to avoid such competition: Tr 351:41-8 (Preston). In addition, such a development - constructing three towers simultaneously at the same time as the base shopping centre - would require a developer to have a stronger appetite for risk than constructing just the base shopping centre and then deferring the tower development, or even constructing the base shopping centre and one tower: 370:11-20 (Jackson).
Mr Galasso also addressed this change in his oral closing submissions in reply as follows (Transcript 20 April 2022, page 537, lines 4 to 33):
There’s then the matter of deferment period, and in combination with the 2,650 this is now what gets the Valuer‑General’s yet again bigger number. At p 98 of the written submissions your Honour sees the Excel spreadsheet with some numbers. Can I note the following - and I’ll just deal with 2016 because the 2017 just follows on over the next page. The first is that in this combination Mr Preston in exhibit 8 had build to sell, build to rent, commercial, hotel, build to sell.
The Valuer‑General converts tower 2 from build to rent to build to sell, so there’s nothing rented, and that ends up increasing the rate to 2,650 because there was an agreement by Mr Preston that at build to rent 2,650 becomes 2,054, so again this artificial inflation. But have a look at the deferment period in years. For three of the five towers, no deferment period. Not even Mr Preston did that in exhibit 8. And for the last of the two towers, notwithstanding that the expansion retail is ten years deferred, in this table let’s only defer it for four years, notwithstanding that Mr Preston in exhibit 8 had the first of the towers deferred for four years.
The Valuer‑General now just fudges the table and comes up with a number, and what pops out? As we saw in para 356, a bigger number, 442 and 465, and as we’ve observed in the written submission that I handed up at para 29 - and, your Honour, we on pp 12 and 13 - I think the numbering restarted because we inserted a table, but in red we identify the difference between Mr Preston’s - so we called it Preston versus Valuer‑General, because it’s really the Valuer‑General having an issue with his own witness. In red we’ve identified the difference between the two, and as we say at the end of para 29, magically in submission and in spite of the evidence - they’re my words; they’re not in 29 - but magically we now have a valuation that’s between a 17 and 18% of increase in value that Mr Preston, the Valuer‑General’s witness, presented in exhibit 8. Your Honour, they would be our submissions.
Consideration
The evidence of both Mr Jackson and Mr Preston on this point is potentially credible. However, I have earlier explained why I am unable to accept Mr Preston's evidence on either of the other valuation components for the tower elements of the Shaw hypothetical development scheme, as his reasoning was, as earlier explained, flawed on each count. As a consequence, I am satisfied that this unreliability provides a sufficient basis as to why Mr Jackson's timing interval evidence should be preferred.
I should also address the basis for Mr Preston’s derivation and application of his rate‑per‑square‑metre GFA for residential elements derived from his Southwell scheme analysis, but differentially applied to the residential components of the Shaw scheme.
In this regard, I was taken to the spreadsheet in Mr Preston's expert valuation report (Evidence Book, folio 1531) where he reproduced the spreadsheet which he had used to derive his rate‑per‑square‑metre GFA for residential elements of the Southwell hypothetical development scheme. That spreadsheet was based on a comparable sales analysis involving five properties in the immediate vicinity of the site that were either mixed use (but significantly dominantly residential) or purely residential. Those five properties were at:
(1)101‑107 Waterloo Road, Macquarie Park;
(2)112 Talavera Road, Macquarie Park;
(3)13‑15 Halifax Street, Macquarie Park;
(4)82‑84 Waterloo Road, Macquarie Park; and
(5)80 Waterloo Road, Macquarie Park.
It was accepted by the parties that we had viewed all three of the Waterloo Road properties during the course of the site inspection, but that we had not travelled to or viewed the Talavera Road and Halifax Street properties (even though they had originally been on the proposed site inspection itinerary but were not actually included in the site inspection).
As a consequence, I indicated to the advocates that, in my consideration of Mr Preston's evidence on the question of what was the appropriate rate‑per‑square‑metre GFA to be applied to the residential tower component of the Shaw hypothetical development scheme, I did not consider it appropriate to have regard to the two properties which had not been inspected (and about which I had no significant descriptive evidence), as they appeared to have what I described as “outlier” valuations (being significantly above the values of the Waterloo Road properties) as analysed by Mr Preston. Having offered that observation to the advocates, this proposition was accepted by them as appropriate (Transcript 20 April 2022, page 514, lines 39 to 48 (Mr Galasso); page 514, line 50 to page 515, line 31 (Mr White)). Mr Preston's spreadsheet, from which he derived his $1,250 per‑square‑metre GFA for “Southwell residential”, as described above, is reproduced as Annexure B to this decision.
As can be seen from the final stage of his analysis shown in Annexure B, Mr Preston made substantial adjustments for each of these sales upon which he relied for comparison purposes to take account of the difference in site areas. These adjustments for the three Waterloo Road properties inspected (in the order that they are set out earlier) were -60%, -75% and -75%.
Although I expressed some concern to the advocates about the extent of the adjustments which Mr Preston had made for this factor (it being my experience that adjustment factors of much greater than 30% were, in conventional valuation practice, regarded as being of considerable uncertainty and/or unreliability), these adjustment factors applied by Mr Preston are the only evidence that I have available to me on this point. Neither Mr Preston nor Mr Jackson was questioned on this point during the course of their oral evidence.
Although I have reservations about the extent to which Mr Preston adjusted the comparable sales in his rate‑per‑square‑metre GFA residential calculation and the necessity for me to set aside, for present purposes, the two of his comparable sales sites which were not inspected during the course of the site inspection, nonetheless, his comparison evidence and his resulting rate of $1,250 per‑square‑metre GFA for residential is the best (indeed, only) evidence which I have on this point.
Given that Mr Jackson was content to adopt this rate as appropriate and Mr Preston's inadequate explanation as to why he more than doubled the rate‑per‑square‑metre GFA residential for the purposes of the his analysis of the residential tower element of the Shaw scheme (given that the agreed residential GFA for this scheme was a very large area in total square metres - although not as large as that for the Southwell scheme), I am satisfied that I should accept it as the appropriate rate to be adopted for the purposes of my consideration of the valuation outcome as to be derived from the process that led to the development of Exhibits D and 8.

Build‑to‑sell v build‑to‑rent

As can be seen from the above section discussing the derivation of the appropriate rate‑per‑square‑metre GFA for each of the build‑to‑sell and build‑to‑rent hypothetical residential tower options for the Shaw scheme, a build‑to‑rent model is a less valuable one and would result, on Mr Jackson's calculations in Exhibit D, in a lowering of his overall valuation of the Shaw scheme with five residential towers by a total of approximately $19 million.
However, as Mr Jackson explained in his oral evidence, the monetary value difference between these two options would not be the determining factor for a hypothetical purchaser automatically preferring a build‑to‑sell model. He explained why, in his opinion, adopting a build‑to‑rent model over a build-to sell model, if the hypothetical towers were to be residential, would be appropriate. This was because the retail centre owner would retain ownership and control over the towers and not need to deal with several hundred owners of individual apartment owners over future development or management issues.
It is also to be noted that Mr Shaw provided the following opinion with regards to build-to-rent compared to build-to-sell (Evidence Book, Tab C1, page 435, paragraph 2.4.3):
2.4.3 The nature of the towers can impact on the ability to modify podium conditions. For example, if the towers are ‘build to sell’ apartments, you may potentially need approval from several hundred owners to undertake any significant renovations to the podium. This can be managed better if they are ‘build to rent’ apartments and therefore controlled by a single entity. Build to rent was an emerging asset class in Australia, in 2016, but would certainly be a strong consideration for this location by 2021, in particular, for the reasons noted above.]
There was nothing in the written or oral closing submissions for the Valuer‑General specifically addressing the relative merits of build-to-sell compared to build-to-rent in any detail.

Consideration

Although, as earlier discussed, when addressing the timing differences between Mr Jackson and Mr Preston as to how long after completion of the Shaw hypothetical development scheme’s super‑regional shopping centre had been constructed would construction of each of the hypothetical towers have been undertaken, using that centre as the podium upon which the towers were to be erected, it was accepted that the necessary facilities to service those towers at the retail outlet levels and in the basement parking levels could be provided as part of the build of the shopping centre. Thus, incorporation of entrance lobbies, lift shaft elements through the retail levels and provision for residential parking in the basement levels could be constructed as part of the build for the super‑regional shopping centre in the Shaw hypothetical development scheme. Those spaces in the retail levels would be set aside until the expiry of the relevant deferral period for the construction for each of the hypothetical towers, whilst the basement‑parking provision for the future residents would be able to be utilised, on an interim basis, for additional retail patron‑parking.
However, for the reasons advanced by Mr Jackson, I accept that the forgoing of the retention of ownership and control of the hypothetical towers, if constructed for residential purposes, outweighs, in the long run, the immediate value premium which would accrue to the hypothetical purchaser, if such hypothetical residential tower development was constructed on a build‑to‑sell basis.
As a consequence, I am satisfied that the prudent hypothetical purchaser would be given, and accept, advice that the preferable hypothetical development scheme for residential towers should be on a build‑to‑rent basis.

Valuing the build‑to‑rent option

Mr Preston and Mr Jackson each adopted a lower rate‑per‑square‑metre GFA for the build‑to‑rent option compared to the rate which each had adopted for the purposes of the hypothetical build‑to‑sell development. Mr Preston’s rate‑per‑square‑metre GFA was $2,054 per square metre (a discount of 22.5% on the rate that he had adopted for the build‑to‑sell model). Mr Jackson adopted a rate of $969 (this being the 1 July 2016 rate) per square metre GFA (a discount of 22.5% on the rate which he had adopted for the build‑to‑sell model). Mr Jackson and Mr Preston agreed that residential built-to-rent would be 22.5% less than residential built-to-sell. For the reasons I have explained in my consideration of the rate to be accepted for valuing the build‑to‑sell residential tower model, I am satisfied it is also appropriate to adopt Mr Jackson's rate‑per‑square‑metre GFA for the purposes of a valuation for the hypothetical purchaser of the Shaw scheme on the assumption that the five towers were to be developed for a residential purpose and that that residential purpose was build‑to‑rent.

Conclusion

I have concluded that:
(1)The Shaw hypothetical development scheme is that which would have been accepted by the prudent hypothetical purchaser as the basis upon which the hypothetical purchase would have been undertaken;
(2)The hypothetical purchase would have been based on the valuation model incorporating the five tower elements provided for along the Herring Road frontage of the site;
(3)The five hypothetical towers would all have been constructed for residential purposes on a build-to-rent basis;
(4)The deferral rates and deferral intervals for these hypothetical towers would have been those proposed by Mr Jackson in Exhibit D;
(5)As a consequence, on these bases, the appropriate valuations (rounded to the nearest hundred thousand dollars) for each of the base dates are:
(a)for 1 July 2016, $188,600,000; and
(b)for 1 July 2017, $209,000,000.

Costs

As these are proceedings where, by virtue of r 3.7(1)(c)(ii) of the Land and Environment Court Rules 2007, a special presumption is created for the purposes of considering whether to make a costs order, the appropriate costs outcome in each of these proceedings is that costs should be reserved.

Orders

The orders of the Court in Matter No 270482 of 2020 are:
(1)The appeal is upheld;
(2)Pursuant to s 40(1)(a) of the Valuation of Land Act 1916, the valuation of Lot 100 in Deposited Plan 1190494, known as 197‑223 Herring Road, Macquarie Park NSW 2113 as at 1 July 2016 is determined to be $188,600,000;
(3)Costs are reserved; and
(4)The exhibits are returned.
The orders of the Court in Matter No 270481 of 2020 are:
(1)The appeal is upheld;
(2)Pursuant to s 40(1)(a) of the Valuation of Land Act 1916, the valuation of Lot 100 in Deposited Plan 1190494, known as 197‑223 Herring Road, Macquarie Park NSW 2113 as at 1 July 2017 is determined to be $209,000,000;
(3)Costs are reserved; and
(4)The exhibits are returned.
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Annexure A

Annexure B

Amendments

23 September 2022 - Formatting case name in 'Case Cited', the first initial of 'Tetzner' appeared on the line previous.

[2022] NSWLEC 114

21 September 2022