Body Corporate for ‘Tennyson Reach' Community Titles Scheme 39925 v Valuer General

Case •

[2018] QLC 3

•

1 March 2018

LAND COURT OF QUEENSLAND

CITATION: Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 v Valuer General [2018] QLC 3
PARTIES: Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925
(appellant)
v
Valuer-General
(respondent)
FILE NO: LVA1175-16
DIVISION: General
PROCEEDING: Appeal against valuation under the Land Valuation Act 2010
DELIVERED ON: 1 March 2018
DELIVERED AT: Brisbane
HEARD ON: 17, 18 & 23 October 2017
Submissions closed 13 December 2017
HEARD AT: Brisbane
MEMBER: WA Isdale
ORDER/S:

1.   The appeal is allowed.

2.   The valuation of L3101-3117, 3201-3216, 3301-3311, 4101-4126, 4201-4227, 4301-4318 SP195376 & L5101-5116, 5201-5231, 5301-5332, 5401-5415 SP205068, as at 1 October 2015 must be reduced to Fourteen Million Five Hundred Thousand Dollars
($14, 500,000) to correctly make the valuation under the Land Valuation Act 2010.
CATCHWORDS:

REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – where site value is the basis of valuation – where the highest and best use of the land is in dispute – where the correct valuation methodology is in dispute – where the comparability of sales is in dispute – where rate per square metre of site area is the preferred method of comparison

Land Valuation Act 2010, s 22(2)(b)


Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400
Spencer v Commonwealth (1907) 5 CLR 418
APPEARANCES: DD Purcell for the appellant on a direct brief
JP Hastie (instructed by In-house Legal, Department of Natural Resources and Mines) for the respondent

Background

  1. The appellant owns three parcels of land on King Arthur Terrace, Tennyson. The land is on the Brisbane River, seven km south of the Brisbane CBD. The two larger parcels are irregular in shape and adjoin. Their areas are 10,000 m2 and 6,387 m2. They are developed, with two tower blocks on the larger parcel and one on the smaller block. The third parcel is on the other side of the road, not directly across but some distance away. It has an area of 1,931 m2. They are all valued together under one valuation. There are three easements: one for electricity, one for a right of way, and one for services. None of this is in dispute.

  1. As part of the routine valuation cycle for 2015, the respondent valued this land as a site under the Land Valuation Act 2010 (“the Act”). As at the valuation date of 1 October 2015, the respondent valued the subject land at $18,500,000. The appellant appealed to this Court contending that the correct valuation should be $14,500,000.

The appeal

  1. The appellant called one witness, Mr Coen Ladewig, a registered valuer employed by Savills. The respondent called two witness, registered valuer Ms Yi Wang and Mr John Venn, a town planning consultant. Mr Venn provided a report, gave evidence and was cross-examined. The valuers provided a joint report, gave evidence and were cross-examined. The appeal, originally expected to occupy two days of hearing time, extended into a third day.

  1. The value of the land on the valuation day will be the price that would be arrived at in a theoretical agreement on that day between a willing but not anxious buyer negotiating with a willing but not anxious seller, both perfectly acquainted with the land and aware of all the circumstances that would affect its value.[1] The roles of the vendor and purchaser merge in the Court which must ascertain at what monetary point they would agree.

    [1]Spencer v Commonwealth (1907) 5 CLR 418, 432, 441; Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400, [13].

The areas of dispute - the 3 questions

  1. The parties were in dispute in regard to three matters:

1.What is the highest and best use of the land on the valuation date? This has a major influence on its value.

2.What is the correct valuation methodology to apply?

3.What sales of the other properties are able to be used as comparable sales that provide guidance in ascertaining the value of the land the subject of this appeal? The valuers were each influenced by a number of sales which they believed were comparable, but only one sale was common to the considerations of both valuers.

The valuers and question 1

  1. The valuers agreed that the land was subject to three easements. Nothing turns on that. Neither is there any issue arising from the three parcels being the subject of the one valuation. Site 1 has two tower blocks built on it, A and B, and its 10,000 m2 area dove-tails with the 6,387 m2 of Site 2, upon which tower C stands. Site 3, on the opposite side of the road, is an irregular triangle of land which is developed with a gymnasium, swimming pool and waste disposal facility for the benefit of the residential units in the three towers.

  1. Tower A has nine levels of dwelling units, and tower B has ten. They have a common ground floor and two levels of basement parking. Tower A has 40 x 3 bedroom units and 4 x 4 bedroom units for 8,310 m2 of gross floor area (“GFA”) in total.

  1. Tower B has 15 x 2 bedroom units, 54 x 3 bedroom units and 2 x 4 bedroom units, a total GFA of 13,046 m2.

  1. Site 2 has tower C on it. It has 11 levels of dwelling units over two levels of basement parking. There are 30 x 2 bedroom units, 59 x 3 bedroom units and 3 x 4 bedroom units. There is also a 239 m2 café and an 84 m2 sales office. The total GFA is 16,249 m2.

  1. The basement parking of the three towers is interconnected with a single access point.

  1. The site has about 225 m of Brisbane river frontage and around 330 m of frontage to King Arthur Terrace.  It is across the river from the Indooroopilly Golf Club and close to parkland, the Queensland Tennis Centre and the “Yeerongpilly Green”[2] master-planned development. Water, sewerage, stormwater drainage, electricity and telecommunications are available to the site. King Arthur Terrace is a dual lane bitumen sealed road with concrete curbing and channelling, it also has designated street parking and footpath area.

    [2]Ex 1, doc 5, page 11, para 25.

  1. It is clear from the foregoing that this is a significant development in an area where there is continuing development.

  1. The valuers agree on the flooding and waterway corridor aspects of this land.

  1. Sites 1 and 2 are zoned “HDR2”,[3] High Density Residential, and Site 3 is zoned Special Purpose (Utility Services) under Brisbane City Plan 2014, which was applicable at the valuation date. The Moorooka Stephens Neighbourhood Plan applies to the area but does not specifically affect the sites in question.

    [3]Ex 1, doc 5, page 16, para 29.

  1. The valuers proceeded on the basis that the current development on Site 1 is impact assessable due to the rear set-back used. Mr Venn, the planner, gave evidence that the valuers were wrong about this and the current development would be code assessable.

  1. Mr Venn confirmed that the valuers were correct in that the Site 2 development is code assessable.

  1. The valuers worked on the basis that the development presently on Site 3 is impact assessable. Mr Venn stated that the gym and pool are impact assessable and the waste facility is code assessable.

  1. Mr Ladewig was of the view that the highest and best use of the three sites was, essentially, their current use. In view of Mr Venn’s evidence, Mr Ladewig’s concern about the current development being partially impact assessable due to the matter of set-back. This is no longer a valid concern. The result is that his valuation would be more conservative than necessary. It is not thereby rendered unusable.

  1. Mr Ladewig is of the view that the cost of additional parking necessary to develop the tower blocks to the maximum permitted height would result in a development that, in his opinion, “does not appear feasible”.[4] It is noted that there is no economic evidence presented in relation to the feasibility of developments constructed to the heights permitted by the planning scheme.

    [4]Ex 1, doc 5, page 17, para 32 (a)(iii) refers to towers A and B and Site 1. Ex 1, doc 5, page 18, para 33(a)(ii) contains the same comments concerning tower C on Site 2.

  1. Mr Venn points out that the current development was a Master Plan Scheme. [5] At the time of construction, City Plan 2000 was applicable[6] and the development applications would have been impact assessable.[7]

    [5]Ex 1, doc 4, page 7, para 2.1.2.

    [6]Ex 1, doc 4, page 11, para 2.4.1.

    [7]Ex 1, doc 4, page 12, para 2.4.1.

  1. At the valuation date, Brisbane City Plan 2014 applied so increased height limits were applicable.[8]

    [8]Ex 1, doc 4, page 11, para 2.4.1.

  1. Mr Venn was of the opinion that this provided a number of opportunities:

i.“Development on Sites 1 and 2 for residential towers to fifteen (15) storeys under City Plan 2014 instead of the ten (10) storey design outcome under City Plan 2000 (by code assessable application);

ii.Development on the front portion of Site 1 approximating 600 m2 or 10% (by code assessable application);

iii.Consideration of medium density residential development to five storeys on Site 3 (by impact assessable application);

iv.Alternatively, on Site 3, development for existing indoor sport and recreation use as per existing development by impact assessable application.”[9]

[9]Ex 1, doc 4, page 18, para 2.6.2.

  1. Mr Ladewig was of the opinion that the highest and best use of Site 1 was its current development.[10] Mr Ladewig saw Site 2 as essentially already developed to its highest and best use also with the minor exceptions that the café could be converted to a three bedroom unit and the sales office to a two bedroom unit.[11]

    [10]Ex 1, doc 5, page 17, para 32(b).

    [11]Ex 1, doc 5, page 18, para 33(b).

  1. Mr Ladewig considered that Site 3 was also currently developed to its highest and best use.[12] Mr Ladewig disagreed with the town planning report where Mr Venn had considered that a 15-storey development would be “over-optimistic”,[13] and that the less rigorous option of a five-storey building with 4 x 120 m2 units per floor might be achieved.[14] Mr Venn said that a “more conservative”[15] interpretation would be the current development.[16] The proposed five-storey building would be impact assessable,[17] as would the present development.[18]

    [12]Ex 1, doc 5, page 19, para 35(b).

    [13]Ex 1, doc 4, page 38, para 4.3.2.

    [14]Ex 1, doc 4, page 38, para 4.3.3.

    [15]Ex 1, doc 4, page 38, para 4.3.4.

    [16]Ex 1, doc 4, page 38, para 4.3.4.

    [17]Ex 1, doc 4, page 38, para 4.3.3.

    [18]Ex 1, doc 4, page 38, para 4.3.4.

  1. Mr Ladewig relied on section 22(2)(b) of the Act, which provides that it must be assumed that improvements may be continued or made to the land to allow it to be used for any existing use.

The valuer versus the town planner

  1. Mr Ladewig disagreed with Mr Venn in relation to the development potential of the land regarding the height to which tower blocks could be built. Mr Ladewig preferred to accept that what was there would have been, at the valuation date, the economic optimum. In relation to Site 3, Mr Venn is not substantially in disagreement with Mr Ladewig, but Mr Venn disagrees in relation to Sites 1 and 2. Simply put, the height limits had increased under City Plan 2014 so higher buildings could be constructed at the valuation date than what were already there, the existing buildings having been built under the previous City Plan 2000.

  1. Mr Ladewig’s opinion that the new height limits would not have made higher buildings with more units economic to construct is not supported by any economic analysis or indeed anything at all. It is simply his opinion. Without a supporting analytical basis it is unpersuasive when the City Plan 2014 has increased height limits. The restrictions in place when the towers were approved and built have been relaxed as at the valuation date. The planning evidence is that increased development opportunities existed at the valuation date.

  1. In these circumstances, the Court could not accept that the change to the planning scheme would not result in a change to the development potential of the land without more than a bare assertion that increased development does not appear feasible. This assertion is made in the presence of the evidence of Mr Venn, the expert in town planning, that opportunities for increased development existed at the date of valuation.    

  1. Mr Venn describes the increased development potential in detail.  Under City Plan 2014 were the land vacant, there would be potential for 15 storey residential towers instead of the previous 10-storey design outcome. What was actually built was allowed in the context of a Master Plan which was impact assessable. Mr Venn identified an additional opportunity.  That was an extra residential building could be constructed on Site 1 in a 600 to 800 m2 envelope. This would be code assessable.[19]

    [19]Ex 1, doc 4, page 35, para 4.1.4.

  1. Mr Venn considers the alternatives of aboveground and underground car parking[20] for Site 1 and Site 2[21] and by this demonstrates that there are options available. Mr Ladewig is unsatisfied with this, he rules it out without having an economic analysis or other support for doing so.

    [20]Ex 1, doc 4, page 36, para 4.1.9, para 4.1.10.

    [21]Ex 1, doc 4, page 37.

  1. Mr Venn suggests that, conservatively, 14 levels of dwelling units could be achieved compared to the present tower C’s 11 levels. This could yield an additional 30 dwelling units.[22]

    [22]Ex 1, doc 4, page 37, para 4.2.4.

Conclusion on the appellant’s valuer’s opinion versus the town planning evidence

  1. In matters of town planning, there was only one expert in that field who gave evidence. That was Mr Venn, who was called by the respondent. It was not shown, nor was it suggested, that Mr Venn was not qualified to give the evidence which he gave or that the aspects to which the Court has referred were invalidated by, for instance, factual error. Cross-examined in detail, Mr Venn was a responsive witness, acknowledging areas of difficulty or doubt. At the end of his re-examination, he stated that nothing which he had been asked about in Court would be such that he would need to change his views.

  1. In relation to matters of town planning, the Court prefers the opinion of Mr Venn, the expert town planner, where there is any conflict with the opinions of Mr Ladewig. This leads necessarily, as there is no evidence which would support accepting Mr Ladewig’s opinions on the limitation of development potential to what is already built, to the Court being required to accept Mr Venn’s evidence on development potential. The Court does this with confidence.

The respondent’s valuer’s position on the development potential of the subject land

  1. Ms Wang was informed of Mr Venn’s report. She was unable to carry out a full feasibility study[23] and took the view that the highest and best use of Sites 1 and 2 was buildings in the current footprint of what was already there but 15 storeys high, comprising 12 storeys of residential dwelling and three storeys of aboveground car parking. The existing GFA of 37,605 m2 would be increased by 5,005 m2 to give a new potential GFA of 42,610 m2.[24]

    [23]Ex 1, doc 5, page 19, para 36(c).

    [24]Ex 1, doc 5, page 19, para 36(c).

  1. In respect to Site 3, Ms Wang considered that a low to medium density residential development with a maximum of 45% site cover and a building height up to three storeys would be the highest and best use.[25]

    [25]Ex 1, doc 5, page 19, para 37(b).

  1. It must be appreciated that in relation to all three sites, the proposed highest and best uses are very much the opinion of the valuer. The uses proposed by Ms Wang are not supported by any economic analyses.

  1. The Court must decide the case on the evidence which the parties choose to put before it. Clearly, there could be an economic analysis undertaken; it would be likely to be helpful, but it is not available to the Court, which is not an inquisitional body. The highest and best use and the degree of precision that can be achieved within that concept are questions of fact that the Court must resolve within the evidence put before it.[26]

    [26]ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180, [57] to [62].

  1. The Court prefers and accepts the evidence given by Ms Wang of the highest and best use of the land not because it is inherently good but because it is the better of the two competing versions. The basis of accepting this evidence is that it is consistent with the town planning evidence and more conservative than the maximum development which the planning evidence provides support for. Such a conservative approach is appropriate in a valuation for rating or taxing purposes. It is conservative but still properly able to be characterised as correct, as it is consistent with the planning evidence.

  1. The approach taken by Mr Ladewig in regard to this aspect of the case is also conservative, no doubt. It is however defective in that it is inconsistent with the planning potential which was increased in 2014, and, there is no acceptable explanation of why this increased potential should not to some extent be now found to exist in the land. Mr Ladewig’s opinion that it would make no difference is not supported by any analysis that supports the correctness of his assumption that the greater potential was not feasible. Mr Ladewig’s opinion denies the planning relaxation any effect when the expert planner’s evidence is that the development potential is increased. Mr Ladewig’s opinion cannot be favoured over that of the town planner in the absence of a relevant defect being shown in the planner’s evidence, or an economic analysis supporting Mr Ladewig’s limitation on development, notwithstanding the increased building height limits at the date of valuation compared with those at the date when the existing buildings were approved.

Answer to question one: what is the highest and best use of the land?

  1. As has been explained it is the use contended for by the respondent’s valuer, Ms Wang.

Question two: what is the correct valuation methodology?

  1. Mr Ladewig and Ms Wang both used a direct comparison basis. This is uncontroversial. Where they differ is that Ms Wang used a rate per m2 of site area. The comparison was to be made with vacant and lightly improved sales, in fee simple, but with existing use rights, allowing for any encumbrances.[27]

    [27]Ex 1, doc 5, page 20, para 44.

  1. Mr Ladewig stated that his direct comparisons were made on five bases:[28]

(a)         Rate per m2 of site area

(b)         Rate per potential/approved unit

(c)         Rate per potential/approved 2 bedroom equivalent unit
(d)        Rate per potential/approved bedrooms
(e)         Rate per m2 of GFA

[28]Ex 1, doc 5, page 20, para 43.

  1. In view of the Courts conclusion in relation to question one, the usefulness of methods (b), (c), (d) and (e) has fled. Mr Ladewig’s self-imposed limitation on development, which would allow these methods to be readily applied, has been shown to be erroneous. A method of comparison based on this erroneous assumption will not be able to be used as it would only be reliable in the event that what was built represents the highest and best use. That has not been accepted and methods (b) through to (e) accordingly are not able to be applied as the units of measurement they used cannot be accepted as having been quantified by the existing buildings.

  1. Mr Ladewig’s method (a) remains. It does not suffer from the defect which renders the other methods which he employed inapplicable. Happily, it is also the method used by Ms Wang, although her description of the method refers to rights of use and encumbrances, the approach actually taken is identical to the approach described as (a) by Mr Ladewig. The appellant’s submission that Ms Wang made an error in not having regard to the Respondent’s values applied to sales is not relevant as both valuers used the same, acceptable method, that being Mr Ladewig’s approach (a).

Answer to question two: what is the correct valuation methodology?

  1. The approach taken by Ms Wang and Mr Ladewig as approach (a) is the correct valuation methodology. Again, this question is answered on the basis that this is a valid methodology and has the advantage that the valuers are using the same method which should make comparison of their conclusions at least possible if not necessarily easy.

Question three: which sales are comparable such that they can be used to value the subject land?

  1. Eleven sales are considered in the joint valuation report.[29] Mr Ladewig used sales 1, 2, and 3 to arrive at his valuation. While cognisant of all eleven of the sales, he regarded sales, 1, 2 and 3 as the most comparable.[30] I will consider the sales seriatim.

Sales relied on by the appellant

[29]Ex 1, doc 5.

[30]Ex 1, doc 5, page 46.

Sale 1

  1. Sale 1, 600 Coronation Drive, Toowong. This is the former Australian Broadcasting Corporation (ABC) site. It has an area of 14,999 m2. It is zoned Major Centre and there is a Neighbourhood Plan. It has 130 m2 of Brisbane River frontage. Purchased for $20,876,669 in September 2013, Mr Ladewig analyses it at $21,425,658. It was approved in July 2015 for three large residential towers. It must be borne in mind that planning risk still exists as the approved development has been before the Planning and Environment Court but is still the subject of an appeal to the Court of Appeal.

  1. This legal position introduces sufficient planning uncertainty as to make a detailed consideration of the development potential unhelpful. Mr Ladewig notes that, like the subject land, it is a large parcel. It is a single site with a superior shape in a superior location near the Toowong shops and railway station. It has superior river and CBD views. Closer to the CBD, it is superior overall to the subject land.

  1. Ms Wang does not use this sale. She considers that Mr Ladewig has not analysed it correctly to allow for the costs necessary to achieve a state of the site comparable to the subject land. The sale, in September 2013, settled in November 2013, nearly two years prior to the valuation date. The cancer cluster associated with the site has attracted a negative perception of it, and the pending appeal introduces a good deal of uncertainty. The heritage listed house on the site must be accommodated, some fig trees preserved and some public access allowed for so that the heritage building and river are accessible. The heritage listed building will also have to be renovated.

  1. The shortcomings of the sale are significant. Especially influential is the existence of the appeal in relation to the development approval which puts a question mark over the highest and best use of the site, and therefore its comparability to the subject. It will be necessary to use considerable caution in applying it as a comparable sale; caution not extended to it by Mr Ladewig, who analysed the sale to show $1,428 per m2.

The joint sale

Sale 2

  1. Sale 2 is the sole common sale; used by both valuers. It is zoned Mixed Use (Inner City). It is the sale of 20 Festival Place, Newstead. Announced in March 2014, the date of contract is described as 15 May 2015. Sold vacant, the purchasers obtained development approval (DA). It has an area of 8,184 m2 and sold for $23,350,000, the contract settled on 15 June 2015. Analysed to $22,922,495, this shows a rate per m2 of land area of $2,801. Smaller than the subject, it has a superior shape, is a single site, and has a superior location with views over the river and CBD. It is not riverfront. It is considered by the valuers to be superior overall to the subject land. It was effectively sold with approval for a 25-storey development, obtained by the purchasers while it was under contract. Due to it being used by both valuers, it is not necessary to go into more detail.

Sale 3

  1. Sale 3 is used only by Mr Ladewig; it is at 295 Fairfield Road, Yeronga and has an area of 16,860 m2.  It was formerly the RSPCA site. Before that it was a rubbish dump. It is zoned  Mixed Use (Inner City). It sold in August 2014 and settled in June 2015. The sale price was $4,500,000. Mr Ladewig analysed it to $5,828,247 and a rate of $346 per m2 of land area.[31] Mr Ladewig adjusted his analysis to take into account improved information which he received on the evening of the first day of the hearing. Originally the developer was expecting to get 240 units from the site. However the yield now in prospect has reduced to 192 units in a mix of one, two, three, and four bedroom units. The developer also has to provide a community hall on the site.

    [31]Ex 1, doc 5, page 27.

  1. This sale is smaller than the subject land but has a superior shape as it is a single site. It is only 1.54 km from the subject but in an inferior location with views over parkland. The development of this site will be impact assessable. Mr Ladewig considers it to be inferior overall when compared to the subject.

  1. Ms Wang agrees that this land is inferior in location. It is contaminated as it was once a Council dump and development will be impact assessable. The cost of the required community hall also must be borne by the developer. Ms Wang’s major concern was the difficulty in verifying the costs related to decontamination, coping with flooding, and of constructing the community hall.

  1. The Court notes that the new information in Exhibit 10, an e-mail with new information, and Exhibit 11, his incorporation of that information, has significantly reduced the uncertainty surrounding this sale, and allowed Mr Ladewig to provide his revised analysis. In it the rate per m2 of land area is now $346. In the joint expert report his analysis showed $327 for the rate per m2 of land area.

Sales relied on by the respondent

  1. As well as sale 2, which has already been considered, Ms Wang used sales 4 to 11.

Sale 4

  1. Located at 24 Kurilpa Street, West End, the sale has an area of 7,630 m2. It is zoned High Density Residential for up to seven storeys of development. It sold on 28 September 2015 and settled on 30 October 2015. The sale price was $10,800,000. It is located about 4.5 km north of the subject. The land is rectangular and has two street frontages. The site is significantly flood affected. The neighbourhood plan limits height to seven storeys with 70% site coverage. A code assessable DA was made before sale and approved after settlement for 80 townhouses over three to four storeys. There is no river view and the site is considered superior in location, shape, access, exposure, and freedom from easements. It has comparable flood impact and is inferior in area, zoning, potential building height, and views. Ms Wang considers it to be inferior overall. The analysed sale price of $10,639,820 allows for demolition of the existing development and for infrastructure credits. The rate derived is $1,395 per m2 of land area.

  1. Mr Ladewig notes that while seven levels were in prospect, a significantly less dense development was achieved. He sees the location as superior and finds the site difficult to compare due to its small size and scale of development.

Sale 5

  1. At 51 Ferry road, West End, this 6,381 m2 block with two roads and a laneway is zoned High Density Residential development up to eight storeys. It sold on 27 June 2014 for $19,000,711 and settled on 10 November 2014. The neighbourhood plan limits height to seven stories with 70% site cover. On 12 November 2014 a code assessable DA was made. It was approved on 27 February 2015 and allowed demolition of the existing development and for 77 units over seven levels. Ms Wang analysed the sale price as $18,647,099 once the demolition costs and infrastructure credits were allowed for. This showed $2,922 per m2 as the rate applicable to the land area.

  1. Ms Wang considered this sale comparable in riverfront position and view, superior in location and shape, less flood affected, and free of easements. It is inferior in zoning, building height, and access, and superior overall.

  1. Mr Ladewig noted that 5,128 m2 of improvements needed to be demolished and that the site is yet to be developed. It has a superior location and amenity when compared to the subject site.

Sale 6 - the respondent’s valuer’s best sale

  1. This is at 25 Donkin Street, West End. On cross-examination, Ms Wang said it was a high sale, but useable. Ms Wang had included it as its 16,823 m2 size is comparable, as is the riverside location and its very similar development potential. Ms Wang said that she regarded it as the best sale available at the time for the purpose of comparison with the subject. There was a two-level convenience centre on the site.

  1. This land is zoned Mixed Use and High Density Residential, up to 15 storeys. The applicable neighbourhood plan limits height to 12 storeys with 70% site cover in the mixed use area and 60% in the residential area.

  1. Sold on 18 September 2015 for $82,500,000, it settled on 27 November 2015. The analysed sale price is $80,545,300 which yields a rate of $4,788 per m2 of land area. The property was sold subject to development approval. The purchaser lodged a caveat on the land on 5 November 2014 pursuant to a put-and-call option. On 2 December 2014 a code assessable development application was made. It was approved on 24 June 2015 and allowed for demolition of the existing improvements and construction of seven buildings each comprising of 12 storeys. This allowed for 982 residential units and 1,044 basement car parks. The developer’s spokesman told Ms Wang that they saw the value of the DA to the purchaser as $3,000,000. They believe that site decontamination would be a $5,000,000 cost and demolition $2,000,000.

  1. Analysis allowed for demolition, rental income, holding charges, and infrastructure credits. Ms Wang considered the sale comparable in regard to riverfront position and view, superior in location and shape, less flood affected, and free of any easement. It is smaller; and inferior in zoning, maximum building height, and access. Ms Wang considered it superior overall.

  1. Mr Ladewig points out that a local developer bought it for $25,650,000 only six months before this sale, which he considered to be above market value. The purchaser is an overseas developer and the sale an off-market transaction.

  1. Exhibit 33 is an estimate dated January 2010 to remedy contamination of this site. The estimate is that it would cost $22,682,604 to remediate the hydrocarbon contamination. It is a preliminary estimate[32] and was prepared for the purpose of a land tax objection.[33] Mr Ladewig points out that the site is yet to be developed. The cost of remediation must be regarded as uncertain at present and the range of the cost estimates is wide.

    [32]Ex 33, para 1.2.

    [33]Ex 33, para 1.4.

Sale 7

  1. Located at 90 Waldheim Street, Annerley, this sale is zoned Low-Medium Density Residential development in a two-to-three storeys mix. It sold on 13 May 2015 for $4,200,000 and settled on 11 August 2015. The land area is 5,147 m2. Allowing for demolition cost and for infrastructure credits, the sale analysed to $4,156,320, which yields $808 per m2.

  1. Ms Wang said that she would not have used this sale if any better ones had been available. An application for an impact assessable development was made on 14 May 2014 and decided on 4 November 2015. The analysis allowed for demolition and infrastructure credits. Development was to be two buildings, each of three to four storeys yielding 66 units of one and two bedroom size, plus car and bicycle parking.

  1. Ms Wang considered the site to be superior in shape, not affected by flood or easements, and with inferior location, zoning, building height, and view. It was seen as inferior overall.

  1. Mr Ladewig notes that the development scheme is relatively small-scale, making it difficult to use this sale for comparison.

Sale 8

  1. This 6,553 m2 block at 30 Johnston Street Bulimba sold on 16 November 2015 for $9,650,000 and settled on 30 November 2015. It has two street frontages and is zoned Low-Medium Density Residential development, up to three storeys. Allowing for demolition costs and infrastructure credits, the sale was analysed at $9,728,538, which is $1,485 per m2.

  1. On 30 November 2015 a code assessable development application was made for demolition of the existing improvement and for construction of a three storey, 80 residential unit development with 137 basement car parks and 100 bicycle parks.

  1. This site is close to the river but does not have river views. Considered superior in location, shape and access, it is less impacted by flood and is inferior in zoning, building height, and views. Ms Wang considers it as inferior overall.

  1. Mr Ladewig notes the superior location and small scale of the development. He finds this sale difficult to compare for those reasons.

Sales comparable to Site 3

Sale 9

  1. Located at 75 Waverley Street, Annerley and zoned Low-Medium Density Residential for two or three storeys, this land has an area of 2,289 m2. It sold on 11 May 2015 for $2,000,000 and settled on 17 July 2015. It was sold with an impact assessable DA allowing for two to three storey construction of 22 residential units and 40 lower ground level car parks. Allowing $6,300 for the demolition of the post-World War Two house that was there and $28,000 for infrastructure credits, the valuer also allowed $100,000 for the cost of the DA. The analysed sale price is $1,878,300 and the deduced rate is $820 per m2.

  1. Ms Wang considered it comparable to Site 3 in location, superior in zoning, free of flood risk and easement, larger in area but inferior in topography and view. It was seen as superior overall.

  1. Mr Ladewig found it difficult to use for comparison due to its size and scale of development.

Sale 10

  1. This 1045 m2 block is located at 26 Stevens Street, Yeronga. It is zoned Low-Medium Density Residential of two to three storeys. It sold on 9 February 2015 for $780,000 and settled on 10 August 2015. It has two-street access and is affected by river flooding. Allowing $8,200 for demolition and $28,000 for infrastructure credits, the sale was analysed at $760,200 which is a rate of $727 per m2. Townhouse development was not approved and eventually a code assessable subdivision into three residential blocks was approved on 9 August 2017.

  1. Ms Wang considered this comparable to Site 3 in location, and superior in shape and zoning. It is free of easement, is smaller, and inferior in flood impact and view. Overall, she considered it to be inferior.

  1. Mr Ladewig finds it difficult to compare given the size of the land and scale of development. He is of the opinion that its location is inferior.

Sale 11

  1. Located at 126-130 School Road, Yeronga, this 1,619 m2 block is zoned Low-Medium Density Residential for two or three storey development.  There were two houses on a corner. Allowing for their demolition and infrastructure credits, the sale was analysed at $1,742,250 and $1,076 per m2. The two properties sold and settled on different dates. After the contracts were signed, an impact assessable development application was made to replace the two existing houses with 14 townhouses over three storeys. This was approved on 23 December 2014.

  1. Ms Wang considered this sale superior to Site 3 in shape and zoning. It is flood free and has no easements. It is smaller and inferior in location and views. It was seen as inferior to Site 3 overall but superior in rate per m2 due to its smaller area.

  1. Mr Ladewig found this difficult to compare due to its size and scale of development. He agrees that it is in an inferior location.

Some aspects of sale 6

  1. To provide a useful comparison, a sale must be indicative of the market. This sale is notable for several of its features. Ms Wang reports that the purchaser “believed the decontamination would be $5,000,000”.[34] Mr Ladewig’s comments on that sale, which he dates to a caveat lodged in November 2014 with settlement in November 2015, according to his commentary, includes an analysis that lists the cost of decontamination at $5,000,000.[35] This is a sale for $82,500,000. Mr Ladewig shows the previous sale as occurring in May 2014 and settling in June 2014 for $25,650,000. The analysis of this sale also shows cost of decontamination as $5,000,000. Mr Ladewig says that the earlier sale occurred “6 months prior”.[36] This is consistent with the sale dates that he reports. Ms Wang’s report shows the $82,500,000 sale as occurring on 18 September 2015 and settling on 27 November 2015. She does not say anything about it being an “off market transaction”[37] as reported by Mr Ladewig.

    [34]Ex 1, doc 5, page 34.

    [35]Ex 1, doc 5, page 35.

    [36]Ex 1, doc 5, page 35.

    [37]Ex 1, doc 5, page 35.

  1. Although acknowledging that this was a high sale, there was the sale of the same property six months before for $25,650,000 to, as Mr Ladewig says, “a local developer”.[38] The Chinese developer lodged a caveat on 5 November 2014.[39] There was no other evidence that indicates that the market for this sort of property increased by the amount indicated by this sale, namely a little over 320% in that six month period. The earlier sale to a local developer indicates a sale to a purchaser familiar with the market. The “off market transaction to an overseas developer”[40] indicates that the transaction was not in the conventional market where comparable sales would be expected to be found.

    [38]Ex 1, doc 5, page 35.

    [39]Ex 1, doc 5, page 34.

    [40]Ex 1, doc 5, page 35.

  1. For these reasons, the Court could not place any reliance on this sale for the purpose of comparing it to the subject land. Ms Wang’s description of it as the best sale available at the time shows that significant reliance was placed on it when it is not useful at all.

  1. There is another consideration. Both valuers referred in their joint report to a remediation cost which was estimated to be $5,000,000.[41] Exhibit 33, which appeared in the re-examination of Ms Wang, is an estimate, dated January 2010, of remediation costs. It estimates $22,682,604 at that time. The respondent chose to put this before the Court. Ms Wang gave evidence that the purchasers obtained their own study which puts these costs at $5,000,000. There is no better evidence on this point. The result is that the range of estimated costs of remediation is huge. That the purchaser may have relied on a $5,000,000 estimate does nothing to remove the uncertainty of this cost when the purchaser’s decision on price is not able to be shown to be consistent with the market.

    [41]Ex 1, doc 5, pages 34 and 35.

  1. The respondent relies on sales 2, 4, 5, 6, 7 and 8 to value Sites 1 and 2. The analysed sale price per m2 used for this was:

·Sale 2:    $2,801

·Sale 4:    $1,395

·Sale 5:    $2,922

·Sale 6:    $4,788

·Sale 7:    $808

·Sale 8:    $1,485

  1. Sale 6 must be excluded from consideration. Sale 7 is inferior in zoning, location and view. It is no more than a “guard-rail” below the lower limit of value. Sales 2, 4, 5 and 8 are comparable to Sites 1 and 2 in their proximity to the river, river views and flooding risk. Their zoning is inferior but their locations are superior. Ms Wang reports that they show a range of $1,372 to $2,922.[42]

    [42]Ex 1, doc 5, page 49, para 71(c).

  1. This is incorrect. The range is $1,395 to $2,922. This error is not significant to the valuation.

  1. From this, Ms Wang adopted an unadjusted rate of $1,615 “after considering sales evidence”.[43] Unfortunately, it was not explained with any particularity how this figure was arrived at, so the Court has no basis upon which to be satisfied that it was properly arrived at.

    [43]Ex 1, doc 5, page 49, para 72.

  1. After making a further allowance for flood, easement, shape, and planning risk, an “appropriate rate of $1,050 m2 has been adopted for Site (sic) 1 and 2”.[44]

    [44]Ex 1, doc 5, page 49, para 72.

  1. The unadjusted rate of $1,615 is reduced as follows:

10% for planning risk $162 per m2
5% for easements $80
15% further for flooding $242
5% further for shape $80
=$564 ($565 adopted)

  1. This explains the reduction to the adopted rate of $1,050 but the weakness remains that it is not explained how the $1,615 point was reached from the figures derived from the sales, either when including sale 6 or if it is excluded.

  1. The respondent relies on sale 9, 10 and 11 to find a rate for Site 3. These sales show analysed sale prices per m2 as follows:

·Sale 9:    $820

·Sale 10:  $727

·Sale 11:  $1,076

  1. Ms Wang uses these figures to arrive at a rate $770 per m2. An amount of 10% is deducted for planning risk and, in the joint report, $700 is used. In Court, Ms Wang deducted a further 5% to allow for shape, arriving at $665 per m2 for Site 3.

  1. There was no explanation as to why $770 was correct although by inference it is explicable as conservatively in the range shown by the sales. This explanation, even though it is necessary to infer it, is more likely to be open in the case of Site 3.  The range of values of sites comparable to site 3 is compact and by inference more safe, than in the case of Sites 1 and 2 where there is a figure sitting in a much broader range, the upper limit of which is much less than Ms Wang used, once sale 6 is disregarded.

  1. The respondent’s value is expressed in the following table: [45]

    [45]Ex 1, doc 5, page 53, this table has been adjusted in accordance with the evidence of Ms Wang.

Subject – 205 King Arthur Terrace, Tennyson     Land Area       Applied Rate

           Site 1 & 2  16,387m2          $1,050/m2               $17,206,350

           Site 3  1,931m2          $665/m2                   $1,284,115

Total  $18,490,465

Adopt      $18,500,000

  1. The preceding discussion has been introduced at this stage not because of any misunderstanding of the Court’s role. The respondent does not have to justify the valuation, it is for the appellant to prove that valuation for which it contends is correct. The discussion has occurred as once the respondent introduces evidence, it is legitimate to consider it together with the appellant’s evidence to see whether or not it has some weight in the appellant’s case. Additionally, section 170(b) of the Act instructs the Court to “correctly make the valuation” so it must endeavour to do so within the constraints of the evidence before it.

  1. It has become apparent while considering the sales used in the joint report in order to answer the parties’ question 3 that the sales relied upon by the respondent do not support the value claimed to be deduced from the sales. It has also become apparent that the sales relied upon by Mr Ladewig present some difficulties.

  1. Mr Ladewig uses sales 1, 2 and 3. Sale 1 is analysed to a rate of $1,428 per m2 on the only usable basis, the rate per m2 of land area. The development potential is uncertain, however, due to the pending appeal to the Court of Appeal. The rate used, $1,428 per m2 when applied to the 14,999 m2 land area indicates a value of $21,418,572. Mr Ladewig analysed the sale to $21,425,658.[46]

    [46]Ex 1, doc 5, page 21.

  1. Sale 2 is common to the valuers. It is analysed to a rate of $2,801 per m2 for the land area.

  1. Sale 3, the old RSPCA site, is now better understood due to evidence which became available during the course of the hearing. This sort of surprise is undesirable as it presents a challenge to the parties to consider the new material properly under the pressure of a hearing. As a result of the new material, Mr Ladewig arrived at a rate of $346 per m2.

  1. Mr Ladewig has adjusted his rates per m2 to take into account the differences from the sale dates to the date of valuation. Mr Ladewig has not explained how this was calculated but it is clear that this is what has been done.[47] The rates, so adjusted, and corrected from the evidence are:

·Sale 1:    $1,300 per m2

·Sale 2:    $2,688 per m2

·Sale 3:    $237 per m2

[47]Ex 1, doc 5, page 47.

  1. Mr Ladewig, using these 3 sales, values the whole area of 18,318 m2 of the subject land in the range of $775 to $825 per m2 of land area. He does not consider Site 3 separately, as Ms Wang did. At the rates applied by Mr Ladewig, he arrives at the site value in the range $14,196,450 to $15,112,350. He then selects the half-way point, $14,654,400, and adopts $14,500,000. [48]

    [48]Ex 1, doc 5, page 52.

  1. It is uncontentious that sale 2 is superior on a rate per m2 of land area basis. The rate used for sale 1 is currently supportable. It may be changed by the result of the appeal to the Court of Appeal, or it may not. The Court is entitled to decide this case on what is known now, while acknowledging the possibility of a future change.

  1. Sale 3 is clearly inferior to the subject, as is sale 1, for the reasons that have been given in detail.

  1. The difficulties of using any of the sales relied upon by Ms Wang have been discussed. None of these sales are readily comparable to the subject, apart from sale 2. The sales used by Ms Wang to value Site 3 are not of any assistance as Mr Ladewig did not use a separate figure for Site 3. The reasons for the differing approaches of the valuers in relation to Site 3 were not exposed. In the case of Mr Ladewig it is readily inferred that he did not distinguish Site 3 as he has valued all of the land as if it were one sale. This would seem unobjectionable. Ms Wang did not explain why she proceeded as she did, so it is not possible to prefer her method, which might have been possible if the reasons for using it had been explained.

  1. The Court is satisfied on the evidence put before it that the value of the land will be, on a rate per m2 basis, higher than that of sale 3 and less than that of sale 1. It is also satisfied that it will be much less than that of sale 2.

  1. The Court is satisfied that the range contended for by Mr Ladewig is within the range of possible values of the land, that is to say, between the values shown by the rates per m2 of the land in sales 1 and 3. The land is clearly significantly superior to that in sale 3 and somewhat inferior to that in sale 1.

  1. It is open to Mr Ladewig to hold the opinion that it is valued in the range of $775 to $825 per m2 and therefore to have a site value of $14,500,000. Mr Ladewig was repeatedly cautioned in relation to avoiding an argumentative approach when being questioned.[49] Such behaviour is inconsistent with the duty of an expert witness. Unfortunately, he appeared to have difficulty in heeding to the Court’s warning. His evidence must therefore be examined with caution. However, the Court will not exclude it on the basis of his behaviour in Court, looking instead at the evidence itself, however much its bearer did to weaken his own claim to being an independent expert.

    [49]T 2-15, lines 1-10; T 2-40, lines 10-30; T 2-51, lines 35-45; T 2-52, lines 6-11; T 2-59, lines 25-45 and T 2-60, lines 1-30.

  1. The evidence called by the respondent does not support a finding that the Court should reject the appellant’s evidence. Additionally, it does not establish a satisfactory basis upon which the respondent’s value of $18,500,000 could be accepted as correct.

  1. On the whole of the evidence, the Court finds that the appeal must be allowed and the valuation as at 1 October 2015 must be reduced to $14,500,000.

Orders

The appeal is allowed. 1.          

The valuation of L3101-3117, 3201-3216, 3301-3311, 4101-4126, 4201-4227, 4301-4318 SP195376 & L5101-5116, 5201-5231, 5301-5332, 5401-5415 SP205068, as at 1 October 2015 must be reduced to Fourteen Million Five Hundred Thousand Dollars ($14,500,000) to correctly make the valuation under the Land Valuation Act 2010.2.          

WA ISDALE
MEMBER OF THE LAND COURT


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Statutory Material Cited

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Commonwealth Custodial Services Ltd v Valuer-General (NSW) [2006] NSWLEC 400
Spencer v The Commonwealth [1907] HCA 82
Spencer v The Commonwealth [1907] HCA 82