Bonner Shops Pty Ltd and Commissioner For Act Revenue (Administrative Review)
[2013] ACAT 53
•7 August 2013
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
BONNER SHOPS PTY LTD & COMMISSIONER FOR ACT REVENUE (Administrative Review) [2013] ACAT 53
AT 12/100
Catchwords: Rates and land tax – determination of unimproved value of shopping centre site in Bonner: sale of subject land, special value to a particular owner, comparable sales evidence – adjustments for differences in size, location, date of sale, and lease purpose clause parking requirements
Legislation:Rates Act 2004 (ACT) ss 6, 10 and 70
Rates and Land Tax Ordinance Act 1926 (ACT) s 5
Taxation Administration Act 1999 (ACT) ss 100, 104 and 108A
Case law:Brewarrana Pty Ltd v Commissioner of Highways (No. 2)
(1973) 6 SASR 541
Boland v Yates Property Corporation Pty Limited
(1999) 74 ALJR 209
Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Limited (2002) 209 CLR 651
Commonwealth v Arklay (1951-1952) 87 CLR 159
Hamilton v DemgoldPty Ltd (1990) 97 ALR 481
Maurici v Chief Commissioner of State Revenue
(2003) 212 CLR 111Spencer v The Commonwealth (1907) 5 CLR 418
Valuer General v Fenton Nominees Pty Ltd
(1982) 150 CLR 160
List of Texts/Papers:
Hyam A. A. The Law Affecting Valuation of Land in Australia,
The Federation Press, 2009 4th edition pp 137, 188-191
Tribunal: Dr T. Foley, Senior Member
Date of Orders: 7 August 2013
Date of Reasons for Decision: 7 August 2013
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 12/100
BETWEEN:
BONNER SHOPS PTY LTD
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Dr T. Foley – Senior Member
DATE: 7 August 2013
ORDER
The Tribunal Orders that:
The decision under review is set aside and substituted with a decision that the unimproved value of Block 1 Section 12 Bonner as at 1 January 2012 is $2,231,000.00.
………………………………..
Dr T. Foley, Senior Member
REASONS FOR DECISION
This is an appeal from a decision of the Respondent to disallow an objection to the determination of the Applicant of the unimproved land value of Block 1 Section 12 Bonner (“the subject land”, also sometimes referred to as “the subject property”) at 1 January 2012.
Background
The Applicant’s objection, made pursuant to Section 70 of the Rates Act 2004 (ACT) (“the Rates Act”) and Section 100 of the Taxation Administration Act 1999 (ACT) (“the Taxation Administration Act”), was lodged with the Respondent on 13 September 2012 seeking to have the unimproved land value of the subject land as at 1 January 2012 reduced from $3,040,000 to $1,800,000.
In response to the Applicant’s objection, the Australian Valuation Office provided a valuation report dated 12 November 2012 which varied the assessment of the Unimproved Valuation of the subject land by (approximately) 10% from $3,040,000 to $2,735,000 as at 1 January 2012.
The Applicant’s objection was determined pursuant to Section 104 of the Taxation Administration Act. It was partly allowed and the Applicant was notified of the decision by letter dated 20 November 2012 that the Unimproved Valuation had been reduced to $2,735,000. An application for review of the Respondent’s decision was filed by the Applicant on 17 December 2012.
Jurisdiction of the Tribunal
The review is an application for review by the ACT Civil and Administrative Tribunal (“ACAT”) pursuant to Section 108A of the Taxation Administration Act.
The Experts
Evidence was given on behalf of the Applicant by Mr Richard Swinbourne, Director and Principal of Capital Valuers Pty Ltd. He is a Certified Practising Valuer; Registered Valuer without restriction (NSW); and a Life Fellow of the Australian Property Institute. He has been a valuer for more than 40 years.
Mr Ross Stevens registered valuer of the Australian Valuation Office gave expert evidence on behalf of the Respondent. He is a Certified Practising Valuer; Registered Valuer (NSW) and a Fellow of the Australian Property Institute. He holds an Associate Diploma of Business (Valuations) (RMIT) and has had extensive experience in property valuation and has been employed by the Australian Valuation Office since August 2012. Evidence was also given on behalf of the Respondent by Geoff McInerney. He is a registered valuer employed by the Australian Valuation Office and prepared the Review of Objection Report dated 12 November 2012 (T15-31).
Statutory Provisions
Sections 10 of the Rates Act provides for the annual re-determination of the unimproved value of rateable land:
10Annual redeterminations
(1)As soon as practicable after each 1 January, the commissioner must redetermine the unimproved value, as at that date, of each parcel of land rateable on that date.
(2)An annual redetermination of the unimproved value of a parcel of land applies to the parcel for the period—
(a)beginning on 1 July in the calendar year in which the relevant date when the redetermination is made falls; and
(b)ending on 30 June in the next calendar year.
Section 6 of the Rates Act sets out the meaning of unimproved value:
6Meaning of unimproved value
(1)The unimproved value of a parcel of land held under a lease from the Commonwealth is the capital amount that might be expected to have been offered on the relevant date for the lease of the parcel, assuming that—
(a)the only improvements on or to the parcel were the improvements (if any) by way of clearing, filling, grading, draining, levelling or excavating—
(i)if the Territory or Commonwealth had, before the parcel became rateable as a separate parcel, granted a development lease of land that included the parcel—made by the lessee under that lease or by the Territory or Commonwealth, or the cost of which was met by that lessee or by the Territory or Commonwealth; or
(ii)in any other case—made by the Territory or Commonwealth or the cost of which was met by the Territory or Commonwealth; and
(b)the circumstances that existed on the prescribed date also existed on the relevant date; and
(c)on the relevant date, the lease had an unexpired term of 99 years; and
(d)a nominal rent was payable under the lease for the 99 year term.
NoteRelevant date is defined in the dictionary.
(2)The unimproved value of a parcel of land held in fee simple is the capital amount that might be expected to have been offered for the parcel at a genuine sale on the relevant date on the reasonable terms and conditions that a genuine seller would require, assuming that no improvements had been made on or to the parcel.
(3)In this section:
prescribed date, for a parcel of land, means—
(a)for a determination of the unimproved value of the parcel—the date the parcel became rateable; or
(b)for an annual redetermination of the unimproved value of the parcel—the date the redetermination applies; or
(c)for a redetermination of the unimproved value of the parcel under section 11 (Redetermination—error) or section 11A (Redetermination—change of circumstances)—the date the redetermination begins to apply to the parcel.
The relevant consideration for the notional sale stipulated by Section 6 is the question of what is the "capital amount that might be expected to have been offered on the relevant date for the lease of the parcel" as vacant land having regard to the matters in (b), (c) and (d) of Section 6(1).
“Relevant date” is defined in the Dictionary to the Rates Act. It provides:
relevant date, for a parcel of land, means a date when a determination of
the unimproved value of the parcel is or is to be made.
In the present case, the relevant date is 1 January 2012 and the prescribed date is 1 July 2012. The effect of Section 6(1)(b) of the Rates Act is that, although the valuation must be as at 1 January 2012, it must assume that the circumstances existing on 1 July 2012 also existed on 1 January 2012.
Approach to Valuation
The classic test of market value as stated by Griffith CJ in Spencer v Commonwealth (1907) 5 CLR 418 at 432:
…..In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring “What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?”.
The Tribunal’s approach to determining the unimproved value of land in accordance with Section 6 of the Rates Act is to act in accordance with the observations expressed by the High Court in Commonwealth v Arklay (1951-1952) 87 CLR 159 at 169-170:
…"an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations"… It is simply an analysis of what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land. Where land has no special suitability for some business or activity carried on by the owner and has no added potential value if put to some better use, the value on a free market is usually its market value. The best evidence of this value is that of comparable sales of other land either before or after the date of acquisition but this evidence is often not available.
It is a well recognised principle that the land must be valued on the basis that the hypothetical purchaser is purchasing the land for the purpose of its highest and best use. The principle of “highest and best use” has been described by the High Court as “the most advantageous purpose for which [the land] was adapted” Spencer v The Commonwealth (1907) 5 CLR 418 at 441 per Isaacs J. The valuers proceeded on the assumption that the highest and best use of the subject land as at the 1 January 2012 valuation date was its current use as a major regional shopping centre, though the valuers for the respondent consider other uses (such as residential) could be incorporated into the current use.
As the extracts from A. A. Hyam, The Law Affecting Valuation of Land in Australia, provided to the Tribunal by Dr Jarvis on behalf of the respondent indicate, the preferred valuation methodology is the sale of the subject land and the use of comparable sales evidence. The use of a secondary hypothetical development method is not to be preferred where evidence of the other two approaches is available. Mr Swinbourne, the valuer for the applicant, undertook a hypothetical development valuation but only as a check on his primary comparable sales valuation.
The valuers agreed that the appropriate valuation methodology to be followed is the comparable sales method. It is the role of valuers in this exercise to assess what sales are sufficiently comparable to the subject land and to make any necessary adjustments to take account of differences between each comparable sale to the subject land that affect value.
The question of whether a sale of land is sufficiently comparable to provide a reliable basis for a determination of value is essentially a question of fact to be assessed by the expert valuer. Any adjustments which must be made to the information derived from the analysis of the sales evidence applicable to the subject land are matters for expert opinion.
In Brewarrana Pty Ltd v Commissioner of Highways (No. 2) (1973) 6 SASR 541 Wells J said at 550-551:
.....Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v. The Commonwealth of Australia and in later cases to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land.
… It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill.
The exercise of comparability is plainly an exercise in comparing “like with like” Valuer General v Fenton Nominees Pty Ltd (1982) 150 CLR 160. More recently, the High Court observed in Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at 18 “that sales to be treated as comparable sales need to be truly comparable”.
Agreed and Disagreed Matters
Mr Swinbourne and Mr Stevens provided a joint statement dated 10 May 2013. They agreed upon the following matters:
“(a)The subject property is a regular shaped site of 5365 square metres with road frontage to three boundaries, the main frontage to Mabo Boulevard, Bonner;
(b)The subject property is zoned CZ4 Local Centre under the Territory Plan. The Crown Lease provides broad use limitations of “shop” use of at least 500 square metres and a supermarket not to exceed 1500 square metres. Otherwise, there are no prescribed limits to the building size;
(c)The subject property sold as vacant land in March 2010 for a price of $3,210,000:
(d)The relevant date for the purposes of valuation is 1 January 2012;
The primary sales evidence relied upon by both valuers is:
i.Crace – Block 1 Section 48
ii.Forde – Block 1 Section 32
iii.Franklin – Block 2 & 3 Section 32
iv.Franklin – Block 1 Section 122
v.Chisholm – Block 7 Section 598.”
They disagreed upon the following matters:
“….
(a) The Applicant’s valuer does not consider the sale of the subject property in March 2010 constitutes evidence of market value.
(b) The Respondent’s valuer considers the sale of the subject property in March 2010 constitutes evidence of market value and has relied upon the sale.
(c) The Applicant’s valuer and the Respondent’s valuer have differing opinions as to the comparability of the subject property to the sales properties.
(d) The Applicant’s valuer considers the current use of the subject property to be the highest and best use of the property.
(e) The Respondent’s valuer considers other uses could be incorporated into the development of the subject land with retail uses, noting the requirement for residential uses to be first floor or above.”
Method of Valuation
In line with the principles enunciated above, the task of the Tribunal is to determine the highest and best use of the subject land and to examine the evidence of valuation from the sale of the subject land and from comparable sales evidence.
Highest and Best Use
The valuers agreed in general terms that a major regional shopping centre consistent with the purpose clause in the Crown Lease was the highest and best use of the land as at the relevant date of 1 January 2012.
As at that date, there was erected on the subject land a major regional shopping centre of approximately 2,231m2 of Gross Floor Area (GFA), and 102 at “grade surface” car parking spaces.
Sale of the Subject Land
In general terms, the best evidence of market value is considered to be a sale of the subject property. However, the Applicant contends that the subject land sold well above market value at auction in March 2010 due to the special value the site represented to its potential supermarket tenant Woolworths Limited (“Woolworths”) and that the sale price is not sound evidence of its market value. The Respondent contends that the sale price is reflective of the market value of the subject property and is evidence of its market value.
The Tribunal has regard to the following facts:
a.The subject property is Block 1 Section 12 Bonner comprising the whole of the Bonner Local Centre site zoned C24.
b.Bonner is a new suburb in the broader region of Northern Canberra known as Gungahlin, approximately 18 km north of the Canberra city centre.
c.The subject property was listed for sale by auction by the ACT Government on 19 March 2010.
d.The land offered for sale contained a purpose clause for the Gross Floor Area (GFA) for the uses “shop” of at least 500 m2 and “supermarket” not to exceed 1500 m2, and allowed the use “carpark”, among other uses.
e.The Crown lease required the construction of approximately 102 onsite parking spaces as provided for in the Parking and Vehicular Access General Code and this was known at the time of auction .
f.Prior to the date of the auction the Applicant entered into an Agreement for Lease with Woolworths providing that should the Applicant become the Crown lessee of the subject property, the Applicant would construct a supermarket and other improvements on the site and lease these to Woolworths.
g.The draft Agreement for Lease between the Applicant and Woolworths provided for a “Supermarket Interim Base Rent” to be subject to a rent escalation in line with the purchase price paid by the Applicant if the Applicant was the successful purchaser. The Interim Base Rent was to be calculated on the following formula:
a.On Land Purchase Price up to and including $2,500,000.00 (excluding GST) – initial base rent will be $540,000 p.a. (exclusive of GST); or
b.On Land Purchase Price up to and including $3,000,000.00 (excluding GST) – initial base rent will be $590,000 p.a. (exclusive of GST); or
c.On Land Purchase Price up to and capped at $3,250,000.00 (excluding GST) – initial base rent will be $615,000 p.a. (exclusive of GST); or
d.If the Land Purchase Price falls between the abovementioned values, the initial base rent will be adjusted accordingly on a pro rata basis, for example, if the Land Purchase Price is $2,750,000.00, the initial base rent will be $565,000 p.a. (exclusive of GST).
h.The Applicant purchased the subject property for $3,210,000 at the auction generating an initial base rent of $611,000 on the above formula.
i.At least one other active bidder at the auction was aware of the details of the provisions agreed to between the Applicant and Woolworths with respect to the effect of the purchase price on the rent escalation.
j.The ACT Government has introduced a Restrictive Supermarket Competition Policy in the ACT such that Canberra has a 3 tier hierarchy of retail facilities throughout its urban areas. The first tier is the 5 Town Centres in each of Canberra City, Belconnen, Woden-Weston Creek, Tuggeranong and Gungahlin. The second tier is Group Centres serving the needs of groups of surrounding suburbs. The third tier is Local Centres designed to provide the needs of an immediately surrounding suburb.
k.Relevantly, a Town Centre exists at Gungahlin; there are currently no Group Centres serving Gungahlin suburbs though several are planned (at Amaroo and Casey). Local Centres are currently established in the suburbs of Bonner (the subject property), Palmerston, Nicholls, Ngunnawal and Forde.
l.Woolworths has supermarkets in the Gungahlin Town Centre. The Restrictive Supermarket Competition Policy excludes Woolworths from establishing supermarkets in the Gungahlin Group Centres. But Woolworths is not excluded from doing so in the Gungahlin Local Centres.
The Applicant’s valuer’s evidence was that the sale price was not the best evidence of the market value. He said that the arrangement between the Applicant and Woolworths prior to the sale de-risked the purchase and added a premium to the sale price above the true market value. Additionally, he was of the view that the requirement for substantial on-site car parking on the subject land acted as a significant impediment to the value of the subject land which operated as a detriment to its market value. He quantified this as a cost burden on the subject land calculated on the basis of construction cost of $6000 per car space for each of the 102 spaces being a total of $612,000. He considered an amount of this magnitude should be deducted from the sale price to properly reflect marker value.
The Respondent’s valuer’s evidence was that the sale price was the best evidence of the market value and that the sale over the subject land should be relied upon as the best comparable market transaction. The evidence was that the sale price obtained at the auction was reflective of market value and was not conditional on Woolworths being a tenant. Additionally, the Respondent’s valuer’s view was that the requirement as to on-site car parking on the subject land was an enticement to customers and operated as an advantage to its market value.
Special Value to the Applicant
The Applicant’s evidence was that the pre-commitment of Woolworths gave a special value with respect to the purchase to the Applicant. The Applicant contends that given the commercial comfort afforded by the terms of the Supermarket Interim Base Rent clause in the draft Agreement for Lease, it paid a premium above the market value for the subject land.
As to the effect of such special value to the determination of a hypothetical value under section 6 of the Rates Act for rateable purposes, the remarks of Gleeson CJ in Boland v Yates Property Corporation Pty Limited (1999) 74 ALJR 209 at 213 are instructive:
In some circumstances, land may have a “special value”, which reflects a value to the owner over and above the price which a hypothetical purchaser may pay.
In Hamilton v Demgold Pty Ltd (1990) 97 ALR 481, the Full Court of the Federal Court rejected the inclusion of the effect of contractual rights such as pre-commitments when determining the unimproved value of land under section 5 of the Rates and Land Tax Ordinance Act 1926 (ACT), a provision similar in effect to section 6 of the Rates Act. While such pre-commitments may give the property special value to a purchaser, Neaves J at 491-492 said
[the relevant section] did not require that a valuation be made of the
totality of the rights in relation to the subject parcel of land which resided,
or were assumed to reside in the owner at the relevant date but only of the
hypothetical lease to which the provision relates.In Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651 the High Court considered the test in Spencer v The Commonwealth, the court saying what is “to be valued is an estate in fee simple in the land…[and in determining such value] there is no warrant, either in the language of the statue or in principle, for departing from the hypothetical inquiry as to the point at which a desirous purchaser and a not unwilling vendor would come together. The purpose of making the inquiry hypothetical is to isolate the value of the estate or interest to be transferred from factors that are extraneous to the purpose for which such a value is to be ascertained. [Words within square brackets added]
Such an extraneous factor which needs to be discounted in this matter was the premium the Applicant was prepared to pay above the market value for the subject land. The price of $3,210,000 paid by the Applicant included a premium which must be discounted. Nonetheless, as Dr Jarvis submitted on behalf of the Respondent, while the effect of the Woolworth’s pre-commitment may mean the Tribunal should be critical of the 2010 sale of the subject land as evidence of the unimproved value, it should not disregard the sale as a measure. Other comparable sales need to be used to adjust down the sale price as a measure of unimproved value.
Direct Comparable Sales
Both valuers assessed the unimproved value (in accordance with section 6 of the Rates Act) by the comparable sales (direct comparison) method. Additionally, the valuer for the Applicant undertook a secondary hypothetical development valuation exercise as a check on his direct comparison exercise.
The valuation method agreed was one of direct comparison of comparable sales evidence adjusted for comparison to the subject land. The valuers agreed that in comparing sales to the subject land, the use or purpose clause in the Crown lease was to be considered.
The primary sales evidence relied upon by both valuers as potential comparable sales are listed in the following table:
| Division | Sale date | Sale price | GFA (Gross Floor Area) | Equates to |
| Crace | July 2012 | $1,700,000 | 2122 m2 | $806/m2 GFA |
| Chisholm Block 7 Section 598 | Sept 2011 | $1,500,000 | 1,500 m2 | $1000/m2 GFA |
| Forde Block 1 Section 32 | Dec 2010 | $600,000 | 1,750 m2 | $343/m2 GFA |
| Franklin Block 2-3 Section 32 | Oct 2011 | $2,604,545 | 11,489 m2 | Not specified |
| Franklin Block 1 Section 122 | Mar 2011 | $3,850,000 | 1,426 m2 | $344/m2 GFA |
The Crace Sale
The Crace site is comparable to the subject land. Crace is a Local Centre site of 3828m2 which sold in July 2012 for $1,700,000. The Crace site is zoned CZ4: Local Centre Use with permitted uses including community use, non-retail community use, residential and shop. The Development Application site plan shows a proposed local centre based on a GFA of 2122m2 which includes a Supa Barn Express Supermarket.
The crucial point of difference between the subject site and the Crace site is the requirement as to onsite car parking. The Crown lease of the Crace site makes no requirement for the provision of onsite parking and the Development Application site plan shows no onsite parking will be constructed. The effect of the non-requirement for onsite parking on the Crace site as a comparable sale was subject to conflicting evidence.
Mr Swinbourne’s evidence on behalf of the Applicant was that the Crace Local Centre was currently under construction with no onsite parking provided other than service parking. His evidence was that the Crace site had adequate offsite parking and that the Parking Assessment Study (Exhibit 7) for the site indicated that the parking requirements of the ACT Parking and Vehicular Access General Code could be sufficiently met by offsite parking. His evidence was that by contrast the effect of the requirement for onsite parking on the Bonner site would be to add a significant cost burden to its development costs. This was a cost burden that the Crace site does not bear. The effect of this was that the larger gross site area of 5365m2 of the Bonner site as compared with the total gross site area of the Crace site of 3828m2 could be discounted as virtually the whole of the extra site size was allocated for car parking. As such, the GFA of shopping space capacity was virtually the same for each site. Mr Swinbourne’s evidence was that the Crace site was the best equivalent site in terms of indicative value as compared to Bonner. His evidence was that the GFA value of $800 per square metre attributed to the Crace site was comparable to the GFA value that should be attributed to the subject land.
Mr Stevens gave evidence on behalf of the Respondent that there were other development proposals on sites adjacent to the Crace Local Centre site in the form of a childcare centre (Block 5 Section 26) and an aged care facility (Block 8 Section 21) that would affect access to offsite parking. His evidence was that these sites would compete for the available offsite parking in the immediate vicinity and, therefore, make it less convenient for customers of the Local Centre to obtain parking. His evidence was that the resultant parking amenity at the Crace site was substantially inferior to the Bonner site and, as such, the Crace site was a significantly inferior site as compared to Bonner. His evidence was that this was reflected in a substantially lower GFA value of $806 m2 as compared with the Respondent’s assessment of $1225m2 for the subject land.
The Tribunal has concluded that the sale of the Crace site is comparable in some respects. The Tribunal does not accept the evidence of Mr Stevens that the non-requirement for onsite car parking spaces means that the Crace site should be treated as an inferior site in value assessment terms. The Tribunal prefers the evidence of Mr Swinbourne that the absence of this parking requirement is an attribute rather than a detriment of the Crace site as it makes it less costly to develop.
The Tribunal finds that the Bonner Local Centre site of a GFA of 2222m2 with a restrictive maximum permissible supermarket GFA of 1500m2 together with the requirement to provide 106 onsite car parking spaces is comparable to the Crace Local Centre site of a GFA of 2122m2, subject to adjustment for the absence of the requirement of accommodating onsite car parking.
The Chisholm Sale
The Chisholm site forms part of an existing Group Centre and was sold by direct ACT Government sale to Aldi Foods Pty Limited in September 2011 for $1,500,000 (net of GST) which price included ancillary works cost.
The site is zoned C23: Services Land Use with a permitted use of supermarket with a maximum GFA of 1500m2. On site car parking spaces (26 on the Applicant’s calculations; 23 on the Respondent’s calculations) are provided with the additional benefit of 54 space car parking spaces available in an adjacent overflow.
Mr Swinbourne’s evidence on behalf of the Applicant was that the Chisholm sale was in a Group Centre and not a Local Centre site. It was a good level site, with good access and with the benefit of ample parking spaces, both on and off site. It was purchased directly by Aldi Pty Ltd to operate a supermarket which occupied a site size equivalent to the Woolworths supermarket on the subject land. His evidence was that these matters supported an assessment that the GFA value of $1000 m2 attributed to the Chisholm site was comparable to the GFA value that should be attributed to the subject land.
Mr Stevens’ evidence on behalf of the Respondent acknowledged that the sale represented a direct sale to encourage particular supermarket entrants to join the supermarket scene in Canberra. It was further acknowledged that the Aldi Supermarket constructed on the site has the benefit of additional car parking on the west of the site and that customers could access the site from a main large neighbour centre car parking. His evidence was that the site lacked the same level of accessibility and adaptability as the Bonner site, which made it poor in comparison terms.
The Tribunal has concluded that the sale of the Chisholm site is comparable in some respects. The Tribunal prefers the evidence of Mr Swinbourne that the two supermarket sites are comparable and that the GFA value of $1000 per square metre attributed to the Chisholm site provides guidance as to the GFA value that should be attributed to the subject land.
The Forde Sale
The Forde site is a Local Centre site of 2,391m2 which sold in December 2010 for $600,000. The Forde site is zoned CZ4: Local Centre Use with permitted use “local centre in community centre”. The maximum GFA is 2100m2 , however, the lease requirement was that the purchaser would construct as part of the local centre a community centre of 350m2, the construction costs of $700,000 of which would be borne by the vendor. The maximum available retail GFA was therefore 1750m2.
In their evidence before the Tribunal, Mr McInerney and Mr Stevens, on behalf of the Respondent, both accepted that their analysis of the Forde site as a comparable sale was erroneously based on the assumption that it was the purchaser who was required to bear the construction costs of $700,000 for the community centre when in fact it was a burden placed on the vendor. They accepted that this made their analysis unreliable. It was then common ground between the parties that the Forde sale was not reliable in terms of comparable sales.
The Tribunal has concluded that the Forde site is a poor comparison sale.
The Franklin Block 2 and 3 Sale
Blocks 2 and 3 Franklin were sold as a combined lot at auction in October 2011 for $3,050,000 plus costs of ancillary works. The Applicant’s valuer’s evidence, which was not refuted, was that based upon a pre-sale valuation, the value of the two blocks can be split at $2,180,000 for Block 2, and $870,000 for Block 3. Adding an equivalent proportion of the associated works costs, the Applicant’s valuer calculated a sale price of $2,604,545 for Block 2. Block 2 is the Franklin local centre site and it is therefore potentially useful for sale comparison purposes. The Crown lease permitted uses for Block 2 “shop” provided that the GFA for supermarket does not exceed 1500m2, but no total retail GFA is available. Permitted uses also include residential dwelling which is to be developed. There is a similar requirement for the provision of onsite parking spaces though these are to be provided underground.
Mr Swinbourne in his evidence on behalf of the Applicant did not consider the Franklin site strongly as to its sales comparability. His evidence was that the requirement as to residential dwelling use, the absence of any clearly specified GFA for the local centre site and the alternative provision of underground parking, made comparison difficult.
Mr Stevens’ evidence on behalf of the Respondent was that the Franklin site is primarily residential and so, was not directly comparable.
The Tribunal finds that the Franklin Block 2-3 sale is not suitable as evidence of comparable sale.
The Franklin Block 1 Sale
Block 1 Franklin was sold in March 2011 for $3,850,000. It is zoned CZ5 Mixed Use Land Use. The Crown Lease permitted use is “multi-unit housing” and relevantly, in addition, “shop”.
Mr Swinbourne in his evidence on behalf of the Applicant indicated the site was primarily valued for its residential use. However, it could be re-analysed to reflect commercial GFA use. The site was not zoned local centre, but had some similarities to the subject land. Mr Stevens gave no evidence as to its comparability. The Tribunal finds that the Franklin Block 1 sale is not suitable as evidence of comparable sale.
The Tribunal finds that the sale of this site is not comparable to the notional sale.
Conclusion
The Sale Price of the Bonner Land
In finding “the capital amount that might be expected to have been offered on the relevant date”, the sale price of the subject land of $3,210,000 as a measure of unimproved value requires adjustment down. The Tribunal is satisfied that the Applicant paid a premium price beyond market value because of the special value to it of the Woolworths pre-commitment. The Tribunal finds that two comparable sales – the Crace sale and the Chisholm sale – provide guidance as to the appropriate adjustment.
Adjustments to the Bonner Sale Price
The Tribunal concludes that the sale price for the Bonner site of $3,210,000 is not a good and sufficient indicator of the unimproved value of the subject land. The Tribunal concludes that adjustment should be made to the assessed unimproved value.
The experts agreed that adjustment is required to make the Bonner sale comparable to the notional sale. The Applicant’s valuer considered a discount of approximately 44% (not 78% as calculated by Mr Stevens in his evidence) to $1,800,000 was appropriate. The Respondent’s valuer considered a discount of approximately 15% to the re-assessed unimproved value of $2,735,000 was appropriate.
Using Crace and Chisholm sales as comparable sales, an adjustment of the value of the subject land down to within the range of GFA value of $800-$1000 per square metre is warranted. The top of that range provides the best guidance. Having regard to these matters, the Tribunal considers a GFA rate of $1000 per square metre for the subject land on the relevant date is appropriate. This results in an unimproved value for the subject land of $2,231,000 on the relevant date. The Tribunal finds that the unimproved value of Block 1 Section 13 Bonner is as at 1 January 2012 is $2,231,000.00.
………………………………..
Dr T.Foley
Senior Member
PUBLICATION DETAILS
FILE NUMBER: | AT 12/100 |
PARTIES, APPLICANT: | BONNER SHOPS PTY LTD |
PARTIES, RESPONDENT: | COMMISSIONER FOR ACT REVENUE |
COUNSEL APPEARING, APPLICANT | Mr Philip Walker |
COUNSEL APPEARING, RESPONDENT | Dr Douglas Jarvis |
SOLICITORS FOR APPLICANT | Mr Phelps, Phelps Reid Lawyers |
SOLICITORS FOR RESPONDENT | Ms Banks, ACT Government Solicitor |
TRIBUNAL MEMBERS: | Dr A. Foley – Senior Member |
DATES OF HEARING: | 13 – 14 May 2013 |
PLACE OF HEARING: | ACAT Canberra |
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