Bpi No 1 Pty Ltd v Valuer-General; BWP Management Ltd v Valuer-General
[2021] QLC 2
•22 January 2021
LAND COURT OF QUEENSLAND
CITATION: BPI No 1 Pty Ltd v Valuer-General; BWP Management Ltd v Valuer-General [2021] QLC 2 PARTIES: BPI No 1 Pty Ltd
ACN 162 491 072
(appellant)v Valuer-General
(respondent)FILE NO: LVA008-19
PARTIES: BWP Management Ltd
ACN 082 856 424
(appellant)v Valuer-General
(respondent)FILE NO: LVA020-19
DIVISION: General Division PROCEEDING: Appeal against valuation under the Land Valuation Act 2010 DELIVERED ON: 22 January 2021 DELIVERED AT: Brisbane HEARD ON: 17, 18 & 19 August 2020
Submissions closed 19 October 2020HEARD AT: Brisbane MEMBER: JR McNamara ORDERS: 1. Appeal LVA008-19 is allowed.
2. The valuation as at 1 October 2017 of Lot 202 on SP262172 having an area of 39,860 m2 and located at 1 Global Plaza Drive, Oxenford is Nine Million, Eight Hundred and Fifty Thousand Dollars ($9,850,000).
3. Appeal LVA020-19 is allowed.
4. The valuation as at 1 October 2017 of Lot 1 on SP108078 having an area of 35,270 m2 and located at 492 Olsen Avenue, Molendinar is Eight Million, Five Hundred and Fifty Thousand Dollars ($8,550,000).
CATCHWORDS: REAL PROPERTY – VALUATION OF LAND –
OBJECTIONS AND APPEALS – QUEENSLAND – where
appellant objects to valuation – where the site value is the basis of valuation – where there was agreement between the parties the appeal should be allowed – where the Court was asked to decide the correct valuation – where no maintenance valuation was issued by the valuer general and where the valuation was agreed to be incorrect - where the onus was on the appellant to prove on the balance of probabilities that the valuation was in error.REAL PROPERTY – VALUATION OF LAND –
OBJECTIONS AND APPEALS – QUEENSLAND – selection of sales – whether sales closer in location with different uses are to be preferred over sales with similar uses – whether market and buyer profile sales were to be preferred – whether adjustments were to be made to adjust for market movement over time – whether upper and lower parameters were to be established in the absence of sales evidence – where preferred approach is that with reduced scope for error – where sales with similar use were preferred – where large format retail (LFR) accepted as asset class – where the approach of the appellant’s valuer was preferredREAL PROPERTY – VALUATION OF LAND –
OBJECTIONS AND APPEALS – QUEENSLAND – whether assumptions made by the quantity surveyors are assumed facts – whether the appellant’s valuer could rely on the quantity surveying evidence without investigating the actual site conditions – where evidence of purchaser to be preferred – whether preliminaries, margins, contingencies and professional fees ought to be taken into account – where they should depending on the circumstances of the sale.Land Valuation Act 2010 s 22, s 44, s 75(3)(a), s 95(1), s 149
Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7
Valuer-General v Eastcote Pty Ltd [2019] QLAC 3
AMP Life Ltd & Ors v Department of Natural Resources and Mines [2002] QLC 99
Pfeffer v DNRM [2005] QLC 0059
Brisbane City Council v Bortoli [2012] QLAC 8
BWP Management Limited v Valuer-General [2014] QLC 3
Clough v Valuer-General (1981-82) 8 QLCR 70
Beedell Farms and Grazing Pty Ltd v Valuer-General (1979) 6 QLCR 322
BWP Management Limited v Valuer-General [2019] QLAC 4APPEARANCES: DD Purcell (instructed by Colin Biggers & Paisley Lawyers) for the appellant
JP Hastie (instructed by in-house legal, Department of Natural Resources Mines and Energy) for the respondent
These appeals concern the valuation of two properties with issued valuation dates of 1 October 2017. It was agreed that there are sufficient similarities between the parties, the properties, valuation approaches and principles, and evidence for the matters to be decided together. The sites are both occupied by Bunnings Warehouses, one at Oxenford, Queensland (the Oxenford site), the other at Molendinar, Queensland (the Molendinar site).
The appellant in each case objected to the issued valuation. The Valuer-General’s decisions on 28 November 2018 and 12 December 2018 in relation to each objection were that the valuation amounts were to remain unaltered. Notices of Appeal were filed for both matters in early 2019.
In the appeals the Court Managed Expert Evidence (CMEE) process facilitated the development of joint expert reports (JERs) by expert valuers. The appellants engaged registered valuer Mr Brett Schultz. The respondent engaged registered valuer Mr Derek Bale. JERs for both properties were produced in April 2020.
The qualifications and experience of Mr Schultz and Mr Bale are outlined in their respective curricula vitae.[1] Neither the expertise of Mr Schultz nor Mr Bale was challenged. In my view both valuers are suitably qualified and experienced to provide expert evidence in this matter. The JERs served as the evidence-in-chief of the valuers.
[1]Ex 5, Annexure A; Ex 6, Annexure A.
In each JER Mr Schultz assessed the valuation for each property at an amount higher than the appellant’s estimated valuation in the appeal notice. Mr Bale assessed a valuation for each property higher than the issued valuation.
The issued valuations, contended valuations and valuations analysed in the course of the JERs for the Oxenford and Molendinar sites respectively are as follows:[2]
[2]Adjusted for easements as agreed.
| Issued | JER | ||
| Appellant | Respondent | ||
| Oxenford | $11,500,000 | $9,850,000 ($250/m2) | $14,200,000 ($360/m2) |
| Molendinar | $9,200,000 | $8,550,000 ($285/m2) | $12,000,000 ($400/m2) |
In the list of matters not in dispute provided ahead of the hearing the parties agreed that the appeals should be allowed on the basis that the issued site valuations of 1 October 2017 are incorrect.[3] There was agreement ahead of the hearing that although the site valuations are incorrect, the correct valuation approach and methodology was used. I understand this to mean that the parties agree the direct comparison method of valuation is the correct methodology.
[3]List of Matters Not in Dispute [1], [3].
In Trust Company v Valuer-General, which concerned three valuation appeals, Member Isdale recently said:
“The Court also notes it has become common in relatively recent times for this respondent to abandon at hearing the values arrived at on objection and to contend for a higher value.”[4]
These appeals are yet further examples of this occurrence.
[4][2020] QLC 39 [76].
Both the appellants and the respondent submit that the evidence of the valuer engaged by them in the relevant JER be preferred over the other and that the site value be determined as assessed by that valuer in the JER.
The Land Court has said on a number of occasions that a valuation appeal is a two-step process.[5] The first step is to determine whether there is an error, and the appellants bears that onus. If the onus is discharged the Court will proceed under s 170(b) of the Land Valuation Act 2010 (“the Act”) to change the valuation so that it is correct. As has been often stated, the Court is not a third valuer and must look to the evidence of the witnesses to find the correct value.
[5]Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7 [50].
Throughout these reasons I refer to the content of the JERs. The content of the JERs regarding many issues including the principles and approach to the exercise undertaken by the valuers is largely similar. As the respondent notes in written submissions: “Perhaps somewhat regrettably, there is a great deal of overlap between the two joint reports …”.[6] Accordingly, a reference to information contained in one JER (for example a footnote reference to Exhibit 5) is not intended to distinguish between the JERs except where specifically mentioned. As two appeals are being considered together a reference to the appellant is a reference to both appellants.
[6]Respondent’s submissions filed 6 October 2020 [9].
Ought the appeals be allowed?
In Pfeffer v DNRM,[7] Member Jones was faced with a situation where the legal representative for the respondent Valuer-General conceded that there was no probative evidence to support the correctness of the original valuation appealed against. Member Jones said that as far as he could see there was no statutory prohibition which prevented the respondent from contending for a valuation figure higher or lower than the one originally assessed. Member Jones referred to AMP Life Limited & Ors v DNRM[8] at [26] and [27] noting that once valuation evidence is given the Court must consider the factual issues and draw its own conclusion and in such circumstances the Court must consider the totality of the evidence.[9]
[7][2005] QLC 0059.
[8][2002] QLC 099.
[9]Note Both cases concerned the presumption of correctness (s 33 Valuation of Land Act) which is not repeated in the LVA – however under the LVA the onus remains on the objector to prove the objectors case per s 149.
In the circumstances I accept that the issued valuations are in error on the admission of the respondent that they are incorrect and after a consideration of the evidence of the expert valuers which is discussed in detail in these reasons.
Accordingly, the appeals are allowed.
The Court’s approach
In the recent decision of this Court, Eumundi Group Hotels Pty Ltd v Valuer-General, a matter which had similar issues in dispute to these appeals, Member Isdale explained the Court’s approach at [16]-[24].[10] I accept and adopt the content of those paragraphs.
[10][2020] QLC 37 [16] – [24].
Common ground
Statements of valuation principles, citing well accepted passages from NR and PG Tow v Valuer-General,[11] Spencer v The Commonwealth,[12] Qualischefski v Valuer-General,[13] and Macarthur Central Shopping Centre Pty Ltd as TTE v Valuer-General (No 2),[14] amongst others, were common to the submissions of both parties and are acknowledged and accepted by the Court.[15]
[11](1978) 5 QLCR 378 (Stable SPJ, Smith and Carter MM).
[12](1907) 5 CLR 418.
[13](1979) 6 QLCR 167.
[14][2016] QLC 80 [11].
[15]Appellants Submissions filed 7 October 2020 [9]-[17]; Respondents Submissions filed 6 October 2020 [34]-[52].
In the JERs it was noted that the subject properties are used for large format retail (LFR) as Bunnings Warehouses, and it is accepted by the parties that LFR of a generally existing nature is the highest and best use of the sites. Mr Bale in both JERs said the highest and best use is: “large format retail as currently utilised, though in accord with town planning parameters”.[16] In the JERs Mr Schultz qualified the highest and best use of the Oxenford site in a similar way,[17] although not specifically adding the qualifier in respect of the Molendinar site.[18]
[16]Ex 5 [38]; Ex 6 [46].
[17]Ex 5 para 31.
[18]Ex 6 para 41.
The valuers agreed on the direct comparison method of valuation as the appropriate methodology, the primary method being a direct comparison of rates of dollar cost per square metre ($/m2) of effective site area.[19] The parties also agreed on the impact and relevance of encumbrances (easements).[20]
[19]T 1-20 lines 17-18. Counsel for the appellants, Mr Purcell stated: “In terms of the approach, you'll see that both adopt the direct comparison method on a rate per square metre of site area accounting for easements in effective area.”
[20]The parties indicated they are in agreement regarding the easements and appropriate rates of diminution at T 3-177 lines 41-42 (per the respondent) T 3-177 line 32 (per the appellant).
The Court had the benefit of evidence from quantity surveyor Mr Malcolm Davidson (deceased). The quantity surveyor evidence was of itself not in dispute, although its use and application by the valuers in analysing sales was in issue.
In relation to the Oxenford site, the parties agreed as to the size and shape, encumbrances upon and access to the site. Access is limited to south-west bound traffic along Tamborine-Oxenford Road, but in both directions along Global Plaza. The site is subject to easements. The parties agreed upon the level of diminution in respect of the easements.[21]
[21]Ibid.
In relation to the Molendinar site the parties agreed as to the size and shape, encumbrances upon, and access to the site. Direct access is achieved to northbound traffic from Olsen Avenue, and southbound access is via the traffic signalled intersection at Crestwood Drive. The site is burdened by easements. The respondent expressed the view that the major easement is reconfigurable; the appellant asserted that reconfiguration is open to dispute. Nevertheless, the parties agreed the level of diminution in respect of the easements, consistent with an earlier decision of the Land Court.[22]
[22]T 3-177 lines 41-42; T 3-177 line 32.
Subject sites - zoning
While it was agreed that the highest and best use of the subject sites is the current large format retail use, there was disagreement about whether sales of properties with other permitted uses offer valid comparisons. This disagreement is common to consideration of the comparable sales advanced by the respective valuers in relation to both the Oxenford and Molendinar sites.
Oxenford site
Under the Gold Coast City Plan 2016 the Oxenford site is located in a District Centres Precinct of the Centre Zone.[23] The hierarchy of Centre Zone mixed-use centres is:
[23]Ex 5, page 8, para 25.
A. Key regional centres;
B. Principal centres;
C. Major centres;
D. District centres.
Services in District Centres include subregional retail facilities, full line supermarkets, secondary retailing including bulk retailing.
Molendinar site
The Molendinar site is in a Fringe Business Precinct of Mixed Use Zone Gold Coast City Plan 2016, which provides for a maximum site coverage of 70% and a maximum height of two storeys or 14 metres.[24] The Mixed Use Zone Code applies to assessing all development in the Mixed Use Zone. Land uses in a Fringe Business Precinct include high quality showrooms and bulky goods retail.
[24]Ex 6, page 9, para 33.
Issues in the Appeal
The evidence established fundamental differences in approach taken by the expert valuers to the valuation of the subject sites. The primary issues which emerged, together with subsidiary issues, were as follows:
Selection of comparable sales
· Locality, use and time: The relative importance of a consistent LFR use and proximity of sales in time and place. The respondent’s sales were more recent and in localities closer to the subject sites, however purchased for alternative permissible uses or LFR. The appellants’ sales were LFR sites in a broader region and more expansive timeframe;
· Use of sale: The relevance of markets and buyer profile in considering comparability. The respondent proceeded on the basis of a single overall property market while the appellants proceeded on the basis of a market influenced by buyer profile (including ‘owner-occupiers’ such as car showrooms versus investor sales) and price point considerations;
· Market movement: The application of adjustments to comparative sales to account for market movement, if any, over time versus more recent sales not requiring adjustment.
Analysis of comparable sales
· Parameters: The establishment of sales parameters to determine the proper place of the subject sites;
· Evidence: Including the assessment of the cost of site works in the mind of a purchaser and the basis for adopting quantity surveyor evidence in determining the analysed sale price; and
· Adjustments and allowances: Including the application of ‘on costs’, loadings, infrastructure credits, preliminaries, margins, contingencies, professional fees, and delay in determining the analysed sale price.
The application of comparable sales evidence
What follows is my consideration of the issues regarding the selection and analysis of comparable sales followed by my conclusions, and discussion of the application of the comparable sales evidence.
The selection of comparative sales
Despite agreement between the expert valuers as to methodology, the key differences in approach to the valuation of the subject sites dictated their selection of comparative sales.
The evidence of both the appellants and the respondent was largely focussed on challenging the approach taken by the other.
For example, Mr Bale, the valuer for the respondent, said that s 22 of the Act provides that the highest and best utility of a site “should not be considered to be restricting the site from any other alternative competing and legal uses available … by virtue of its zoning, location and site attributes”.[25] He said that Mr Schultz:
“has incorrectly considered only sales evidence of his determined highest and best use (existing use) and has thereby chosen not [to] consider more proximate and recent sales evidence reflective of other uses/purposes for which the subject land might be used”.[26]
[25]Ex 5, page 12, para 35; Ex 6, page 11, para 43.
[26]Ex 5, page 12, para 37.
The appellants do not assert that a different highest and best use between a sale and the subject property renders the sale incapable of comparison, but say the preferable starting point is sales of the same highest and best use, and only where necessary, great care needs to be taken in any direct comparison between land of different highest and best uses.[27]
[27]Appellants Submissions filed 7 October 2020 [46], citing Aronis v Chief Executive, Department of Natural Resources and Mines [2002] QLC 46 [64].
The appellants submit that Mr Bale misused the planning scheme to regard sales as comparable merely because their use falls within similar permissive zones, which ignores “market fundamentals”.[28]
[28]Ibid, para 47.
Localities (sales)
A feature of the sales chosen by the appellants is their regional spread. While all within South East Queensland, they extend from the northern reaches of the Gold Coast north to North Lakes and west to Springfield. The respondent’s sales are closer to the subject site locations, and the dates of sale generally more proximate to the issued valuation dates.
The appellant says that Mr Schultz adopted a conventional approach. Mr Schultz considered vacant land sales purchased for LFR uses or similar lots consistent with the highest and best use of the Molendinar and Oxenford properties. He valued those properties on a notionally vacant, site improved basis.
In contrast, the appellant says that Mr Bale selected sales within a more temporal and geographical range “but in doing so, is required to make significant compromise in comparability”.[29] The appellant says Mr Bale adopts a mix of vacant and improved land sales which, other than the common sale, were purchased for:
“either mixed use commercial/industrial or commercial/residential developments purchased on a mixed/blended rate and a commercial subdivision use dissimilar to the highest and best use of the Molendinar and Oxenford properties on both small and large lot sizes”.[30]
[29]Ibid, para 32.
[30]Ibid, para 24.
The respondent valued those sales on a notionally vacant, site improved basis.
While the respondent accepts that sales in different localities can be used as part of the valuation exercise, it says that it necessitates a valuer turning his or her mind to differences between the localities, including any differences in underlying land values and making necessary adjustments to account for those differences.[31] The respondent says Mr Schultz did not properly turn his mind to this and failed to properly explain or set out the adjustments made to account for the differences in location.
[31]Respondent’s Submissions filed 6 October 2020 [102] – [104], citing Brewarrana v Commissioner of Highways (No 1) (1973) 32 LGRA 170, 550.
The preferred approach is that which offers less scope for error. That is to be determined on the evidence.
The respondent in written submissions summarised evidence of Mr Schultz as follows:[32]
a)Mr Schultz accepted that the use of sales from a different locality introduced “a requirement for adjustment” and that there was “some need to make an adjustment or allowances for difference in locality”[33];
b)Mr Schultz agreed that it was not as simple as saying that any large format retail site in South East Queensland has the same value because localities do differ[34]; and
c)before making use of a sale in a different locality, it was necessary for a valuer to satisfy themselves of the adjustment which needs to be made.[35]
[32]Ibid, para 106.
[33]T 1 – 106, line 10-11, line 15-18.
[34]T 1 –106, lines 20 – 24.
[35]T 1– 106, lines 26 – 30.
The respondent concludes that Mr Schultz failed to explain the factors which would inform the adjustment and failed to identify or quantify the adjustment said to be necessary.[36] The respondent contends that Mr Schultz conceded this. Mr Shultz’s explanation was in fact: “I haven’t discussed it in detail, or I haven’t raised it, but I have considered it”.[37] Mr Schultz did not accept the suggestion put to him that to make an informed assessment of the differences in underlying land value (of comparable sales in locations removed from the subject site) he needed to look at the body of sales evidence in those localities and determine variances. Mr Schultz said:
“I don’t think it’s difficult. It’s our job. It’s a judgment. It’s experience. It’s knowing – now, we looked at, you know, household incomes and things like that. We had a look at that, just to make a judgment call, and some were a little bit higher, but typically there wasn’t a large variation in that, the subject locations, you know, because they're all in South East Queensland. So, you know, when we were having a look at, you know, the ‑ and when I was looking at that, the subject locations, you know, you could form an opinion on, you know, the desirability of North Lakes or the desirability and the locational attributes of Underwood. You know, because they're ‑ these markets where we've identified the sales, they have large format ‑ you know, they're desirable for large format users because there's large format users in that, you know, locality; in that suburb. …”[38]
[36]Respondent’s Submissions filed 6 October 2020 [107].
[37]T 1 – 106 lines 37-38
[38]T 1 – 107 line 23 - 33.
It was put to Mr Schultz by counsel for the respondent, with whom he agreed, that other factors which ‘feed into’ the purchase price of a large format retail site are the underlying value of the land, the locality, availability, the demographics of the catchment, and yield. Mr Schultz characterised these factors as ‘buyers’ feasibility’.[39] The respondent accepts there was “some discussion about the demographics” but says there was no analysis or discussion by Mr Schultz regarding the availability of land and underlying land values in the localities of his sales evidence.[40]
[39]T 1-108 lines 14 – 43.
[40]Respondent’s Submissions filed 6 October 2020 [112].
In evidence Mr Schultz said:
“They know what they can buy land for in different locations, what transactions have occurred, and they turn their mind to that on a rate per square metre of site, which is essentially what we've done here.”[41]
[41]T 1-108 lines 43 – 45.
In context the ‘they’ Mr Schultz refers to are purchasers, not valuers.
The appellants in written submissions accept that as a matter of ordinary valuation principle, adjustments need to be made to reflect the differences between a subject properties and comparable sales in terms of the market, locality and economic contexts and say: “(however) that is the task which a valuer ordinarily and properly undertakes and expresses their opinion on, as Mr Schultz has done, where relevant”.[42] Accordingly, they submit there is no basis for rejection of Mr Schultz’s sales evidence.
[42]Appellants Submissions filed 7 October 2020 [36].
I note that Exhibit 7 is Mr Shultz’s annexure to both the JERs incorporating the supporting documents to his sales. The documents include a range of source material including census information, trade area profiles, Council Issues Register, plans of development and correspondence.
In Brisbane City Council v Bortoli the Land Appeal Court observed:
“The nature of the valuation exercise does not require a point by point comparison of each characteristic of the sale properties and the property to be valued. What is called for is a weighing up of the effects of the similarities and differences, for the purpose of applying the evidence to the land to be valued. This is rarely a precise exercise.”[43]
[43]Brisbane City Council v Bortoli [2012] QLAC 8 [54].
The respondent argues that Mr Schultz has identified sales which he regarded as inferior to the subject property without articulating to a sufficient degree the similarities and differences for the purpose of applying the evidence to the land to be valued. In submissions they cite Barker J in Australian Executor Trustees Ltd v Propell National Valuers (WA) Pty Ltd:
“What is required of a valuer adopting this “weighted” comparative approach is that as far as possible the weighting be accounted for and explained in the valuation: see Western Australian Planning Commission v Arcus Shopfitters Pty Ltd (Arcus) [2003] WASCA295, McLure J at [70]. What a court does not expect a valuer to do is simply to list a number of property sales said to be broadly comparable to the subject property and then simply nominate the value that the subject property is said to carry. To do this has an air about it of speculation, something which good valuation practice is designed to avoid. As far as possible the detail of the reasoning behind the valuation ascribed to a subject property by way of comparison to broadly comparable properties which have been sold needs to be laid out in the valuation.”[44]
[44]Respondent’s Submissions filed 6 October 2020 para 109 citing Australian Executor Trustees Ltd v Propell National Valuers (WA) Pty Ltd [2011] FCA 522 [127].
The respondent contrasts this with Mr Bale’s sales evidence which concerns properties in comparatively close proximity to the subject sites and requires less dependence upon subjective judgment and assumption, rendering it safer and more reliable evidence.[45]
[45]Respondent’s Submissions filed 6 October 2020 [114].
That appellants contend that the sales advanced by Mr Bale, while being in closer proximity, do not permit a like for like comparison, and that reliance on underlying permissive zoning “is apt to mislead from the outset of the comparative exercise”.[46] They say that while planning schemes provide for a wide range of uses in particular zones, subject to relevant assessment, a particular use might be more advantageous over others “having regard to the legal, physical and economic characteristics of the land (and its surrounds).”[47] Mr Bale accepted in evidence that some sites are more suited to specific forms of development, and in those circumstance it is less likely that other potential users may compete directly to purchase that site,[48] and that particular parcels of land are more attractive for one form of development than another.[49] The appellant says that it is the market and not merely the permissive planning scheme which most influences development potential and price. On that basis the appellant contends that the respondent’s evidence therefore only informs the Court what a purchaser might pay for the alternative use in that particular location – and in the choice of comparative sales that includes residential use, or mixed commercial/industrial use.
[46]Appellants Submissions filed 7 October 2020 [27].
[47]Ibid, [28].
[48]T 1 – 76 lines 1 – 10.
[49]T 1 – 73 lines 20 – 34.
Uses – markets conditions and buyer profile
Two ‘use of sales’ aspects were raised in the evidence. The first concerned market conditions, the other concerned buyer profile.
The appellant submits that Mr Bale’s approach fundamentally misconstrues and misuses the planning scheme to regard sales as necessarily comparable merely because the uses of those sales fall within similar permissive zoning under the planning scheme.[50] They say this ignores ‘market fundamentals’ and necessarily assumes that commercial and economic drivers are equal.
[50]Appellants Submissions filed 7 October 2020 [47].
The respondent accepts that, generally speaking, it is preferable to use sales which are bought for the same or similar use as the land being valued.[51] The appellant says that the sales relied upon by Mr Bale, other than the common sale, reflect a use different to the highest and best use of the subject properties.
[51]Respondents Submissions in Reply filed 20 October 2020 [11].
Mr Schultz expressed his view that buyers are dictated by end users (tenants) and therefore values do not fluctuate widely between metropolitan and greater metropolitan areas.[52] He said:
“Large format sites sales in outer metropolitan areas, analysed to a site improved state, may be expected to reflect not too wide a range of value. The level of rental on a like for like tenancy area basis would be similar, be it a national large format retailer or private businesses”.[53]
[52]Ex 6, page 80, para 376.
[53]Ex 5, page 7,5 para 307.
Mr Schultz noted that Mr Bale selected two car sales yards as evidence which he (Schultz) did not consider comparable.[54] He said further:
“Cars are a major capital investment with customers in the market very infrequently, maybe one every 3 to 7 years. They offer no comparison between themselves let alone the subject.”[55]
[54]Ex 6, page 81, para 379.
[55]Ex 6, page 81, para 379.
In written submissions the respondent says a car dealership is a form of large format retail use and it is too narrow an approach to exclude those sales because they involve a difficult type of good to some other large format retail uses such as hardware or furniture stores.[56]
[56]Respondent’s Submissions filed 6 October 2020 [29].
At the hearing this issue was the subject of some inquiry. Mr Bale declined to accept the proposition that a car yard customer was ‘infrequent’. It was put to Mr Bale in cross examination and the following exchange took place:
MR PURCELL: Yeah. Sorry. And – but they operate in a different market because they look for different and particular site attributes dependent upon the particular use, they want to put the site to, i.e., a car retail showroom or a large-format retail bulky goods sale - - -
MR BALE: No, I – sorry. No. I believe that a lot of the site attributes overlap with both large-format retail and vehicle showrooms, particularly with regard to exposure, main road exp - - -
MR PURCELL: You’re suggesting exposure for a car retail showroom is the same as a – for instance, a Bunnings site.
MR BALE: That would be essential to both uses in many cases.
MR PURCELL: Mr Bale, there’s a – people – Mr Schultz explained his
understanding of the difference between those markets. You would appreciate – or you accept on the first basis that a car yard or a car sale is a once-in-seven-years type of expenditure. You’d accept that.MR BALE: Not necessarily.
MR PURCELL: And is one of – well, it’s the second-largest expenditure up behind house purchase for most of the average people – persons.
MR BALE: It could be.
MR PURCELL: It could be, whereas – and they – and they’re limited, I suggest to you, to a particular asset or an offering, cars; correct? Cars and related services; correct?
MR BALE: That is correct, yes.
MR PURCELL: Versus – other types of developments have a – large-format retailers have large types of offerings. For instance, Harvey Norman has white goods. They have electronics. They have furniture. They have all that kind of different – differential in offerings; correct?
MR BALE: That’s one example.
MR PURCELL: And so people - - -
MR BALE: But the other examples, which are – offer a very limited range.[57]
[57]T 3-70 lines 24 - T 3-71 line 18.
I found Mr Bale’s responses somewhat guarded. In my view the questioning was clear that in the context of what might be considered large format retail operators such as Bunnings or Harvey Norman, the customer was a more regular or frequent visitor than the customer of a car yard retailer. I don’t think there can be any doubt that visitation to a large format retail outlet such as Bunnings or Harvey Norman is something the average customer would do more regularly than visit a car showroom.
In evidence there was questioning about service station sites. In relation to the sale of 501 Olsen Avenue, Southport, Mr Bale was questioned on whether its use as a service station placed it within the same market as large format retail:
MR PURCELL: And so, again, are you suggesting that a service station and fast food outlet use is the same use as – or is the same market as a large format retail market? You’re not suggesting that, are you, Mr Bale, surely?
MR BALE: The Molendinar property under its mixed-use fringe business zone permits, service station, fast food and other uses to which these sits were put.
MR PURCELL: I’m not interested, Mr Bale, with respect, in the permissive uses. I’m talking about the markets. How the property market use these properties and how it works. Are you suggesting that a service station – a drive thru market is the same as a large format retail market? Is that your evidence to this court?
MR BALE: Sorry, these resales and sales evidence have been reflective of a general locational and situational factors that relate also to the subject properties as much as they do to the sale properties. It’s independent of the use to which they are then put as such.
MR PURCELL: Okay. I don’t think you quite answered my question though. You accept, do you not, that they are different markets. You accept that?
MR BALE: They are a different use for which land – the market we’re talking about is a market for vacant land. And it comes with a given zoning. And it comes with given attributes. The attributes of these sites in this location are relevant to those uses and permittable on the subject site.[58]
[58]T 2-86 lines 18 – 41.
The appellants submit that the use of sales of differing uses introduces greater reliance on subjective judgment and that the price paid by a purchaser intending a particular use does not demonstrate what a would-be-purchaser intending for a different use would pay for the same site.[59] The appellants submit that comparing the rate for a different use, including mixed use developments, to the subject properties does not provide a sound basis for comparison as it is not comparing like with like: “… it fails to consider the separate and distinct market and economic drivers for a particular use which drive price and which are particular to a site”.[60] The appellant says that each of the sales relied upon by Mr Bale, other than the common sale, reflect a use different to the highest and best use of the subject properties which they say is commercial/retail development.
[59]Appellants Submissions filed 7 October 2020 [52].
[60]Ibid, [54]; T 2-57 lines 5-46; T 2-56 lines 1-7.
Throughout, the appellant describes the highest and best use of the subject site as commercial/retail LFR, in contrast to the comparable sales advanced by the respondent (other than the common sale), which they say include other forms of LFR such as mixed commercial/industrial or mixed commercial/residential. They say that in those circumstances the manner of comparison needs to be explicit and must take into account all relevant factors[61] – and that Mr Bale has not exposed his reasoning and seemingly assumes that those different and mixed uses are equivalent to the commercial/retail use of the subject properties “due to them being competing uses on the permissive underlying zoning of the subject properties”.[62]
[61]Appellants Submissions filed 7 October 2020 [57] citing Macuga and Ors v Chief Executive, Department of Lands (V95-64), 8 August 1996, unreported [12].
[62]Appellants Submissions filed 7 October 2020 [59].
As the appellant rightly notes whether a sale is truly comparable is a question of fact, not law, and necessarily involves questions of judgment.[63]
[63]Chief Executive, Department of Natural Resources and Mines v Kent Street Pty Ltd [2009] QCA 399 [154].
Market movement
In the JERs, perspectives on market conditions included, for example, a comment by Mr Bale in relation to the Oxenford site that the location was considered to have continued residential growth through infill with decreasing commercial land sales, which meant that sites were tightly held. This, in his view, supports a preference for sales evidence “more proximate” to the date of valuation, for example, between two and six months, requiring nominal adjustment. The respondent says that because of Mr Bale’s choice of more proximate sales it was not necessary for him to consider market movement as part of his valuation. He did however opine that there had been movement in the market between 2013/14 and 2017.
Addressing the subject of market movement in evidence Mr Bale said:
“Sorry, my position to the court was to avoid the unnecessary position where there was a vacuum. And this is my way of filling that vacuum – a statement made by Mr Schultz in saying that there’s been no market movement. Mr Schultz entered the JR process with no recent sales at all and no current – no local sales to great extent as well. So, yes, I did my duty to the court and trying to express a movement in the market utilising sales evidence, in this case paired sales evidence, in respect of lot 2 Old Pacific Highway resales evidence from a wider perspective to 65 Morayfield. And then in respect of 33 Hinkler Drive, which Mr Schultz sought to utilise to demonstrate no market movement between 10 and 17, I utilised to sale the subject property in respect of Oxenford to indicate, well, on that basis alone it should be a minimum of what it sold for on a gross site one and a half times its size, and within theory, site attributes and inferior competition. So, yes, that’s all I was trying to do.”[64]
[64]T 2-98 lines 11-23.
Mr Schultz made no allowance for market movement and contended that the market was stable and subdued from 2012 up until the date of valuation.[65] Mr Schultz confirmed that the valuation figures in his report, relying on the 2013 and 2014 sales, were dependent on the Court concluding that there had been no market movement.[66] Mr Schultz suggested that the Court could alter those valuations by a percentage in line with the degree of market movement found.[67]
[65]Appellants Submissions filed 7 October 2020 [84].
[66]T 2-58 lines 36-41.
[67]T 2-58 lines 20-22.
The respondent says the appellants’ case for there being no movement in the market is based on the observations of Mr Schultz in the JERs regarding the former Masters Home Improvement site at 33 Hinkler Drive, Highland Park.
Mr Schultz in the JERs referred to 33 Hinkler Drive Highland Park as a highly improved site which achieved a vacant possession sale price in December 2017 only slightly higher than the initial purchase price in January 2010.[68] He said this does not support a rising large format site market.
[68]Ex 5, page 22, para 79-80.
In response, Mr Bale said Mr Schultz failed to take into account that the sale involved a financially distressed vendor, a failed business model, that the site was repurposed to a gym and church and ‘is hardly reflective’ of the LFR market.[69]
[69]Ex 5, page 22, para 81.
When asked if he relied on the sale and resale of Hinkler Drive, Highland Park in support of his theses as to market movement Mr Schultz said it was “anecdotal” evidence of no market movement.[70] When questioned, Mr Schultz agreed that the Court could disregard the relevance of Highland Park to the question of market movement.[71] Mr Bale said that he didn’t believe the sale was relevant to the question of market movement.[72]
[70]T 2-59 line 46.
[71]T 2 – 60 lines 28 – 31.
[72]T 2-60 line 36.
The respondent says in written submissions that after Hinkler Drive was ‘jettisoned’ by Mr Schultz in cross-examination the appellant had no paired sales to support the proposition that there was no market movement in the relevant period and consequently the opinion of Mr Schultz in that regard is unreliable and unsafe.[73] The respondent referred to the decision of Member Isdale in Sentinel Homemaker 2 Pty Ltd v Valuer-General[74] where at [19] his Honour said:
“To summarise, the sales Mr Ladewig chose were said by him to be comparable because there was one market with stable values in respect of the sort of land he was valuing. Mr Ladewig stated this market was stable throughout the entire period between the earliest sale, in November 2012 and 1 October 2016. According to Mr Ladewig, the market was also showing the same values throughout all of Queensland during that period. This was the fundamental starting platform for his valuation. Mr Ladewig did not perform any comparison studies of paired sales or do anything else which appeared in his valuation to attempt to show the objective existence of this precondition.”[75]
[73]Respondent’s Submissions filed 6 October 2020 [71].
[74][2018] QLC 47.
[75][2018] QLC 47 (Ibid) [19].
I would note that the market the subject of discussion in that matter is not the same market the subject of consideration in these appeals. More recently, in Eumundi Group Hotels Pty Ltd v Valuer-General Member Isdale himself cited the same passage from Sentinel Homemaker saying “the same shortcoming was repeated”.[76] In that case the market being considered was the Gold Coast market for retail and commercial properties.
[76][2020] QLC 37.
In these appeals the sales and resales which were canvassed in evidence were the common sale (Lot 2, Old Pacific Highway); the 2010 sale of the Oxenford site; 265 Morayfield Road, Morayfield; and the sales of 501 Olsen Avenue and 383 Southport – Nerang Road.
While Mr Bale considered that the sale of Lot 2, Old Pacific Highway for $4,000,000 on 8 October 2014 and resale for $8,000,000 on 5 August 2017 “demonstrates an increasing Gold Coast large format retail market”,[77] Mr Schultz said the increase was a direct result of construction commencing on the Coomera regional shopping centre in early 2017. The respondent says that there is no evidence which demonstrates that this was a significant factor and differential between the two sales. The appellant says that the ‘context’ of the two transactions was critically different.
[77]Ex 6, page 20, para 92.
The context is described in terms of ‘ripeness for development’. The appellant points to the fact that at the date of re-sale the development of the Coomera Town Centre had commenced with the added certainty of that development proceeding, and notes recording conversations with the purchaser indicative of a consideration of the impact of the surrounding development in the purchase.[78] The appellant notes that Mr Bale accepted that the development of the Coomera Town Centre would have an impact but “not to the extent it consumed all market movement”.[79]
[78]Appellants Submissions filed 7 October 2020 [94].
[79]T 2 – 117, lines 5 – 26.
Another example was an earlier sale of the Oxenford site on 18 May 2010 for $14,500,000 of a larger area (5.313 hectares) in need of site works. Mr Bale said that the pro-rata value ($247/m2) determined by Mr Schultz was 10% less than the mortgagee-in-possession sale “in what was a softer market”. Mr Bale said this did not seem logical.
In cross examination, as noted in the appellants submissions, Mr Bale “resiled from placing any weight on that circumstance (a mortgagee in possession sale) and gave evidence that he had no reason to feel the sale was lower as a result of it and indeed reflected the large format retail market at that time”.[80]
[80]Appellants Submissions filed 7 October 2020 [88]; T 2 – 122 lines 11 – 13.
In the Molendinar JER Mr Bale said the retail and commercial market was increasing from the end of 2012 to the end of 2017, assisted by low interest rates, and even from mid-2010. He asserted that the sale and resale of 265 Morayfield Road, Morayfield demonstrated an increase in the LFR marketplace.[81] The 2018 sale represented a 63% increase over the 2013 sale price.
[81]Ex 5, page 21, para 73.
Mr Bale said:
“It is considered that the market for a variety of retail and commercial utilities (inclusive of large format retail) which are all permitted on the subject sites has increased from Mid 2010 through to 1/10/2017 being the date of valuation.”[82]
[82]Ex 6, page 21, para 98.
In regard to the Morayfield sale, Mr Schultz said the increase is attributable to the circumstances of the 2013 sale rather than the proximate sale. The respondent in submissions says that in cross examination Mr Schultz said that the circumstances of the sale and resale related to the existence of pre-commitments of agreements for lease but that there was no acceptance which supported the existence of the agreements and no suggestion that Mr Schultz had made enquiries with the purchaser to confirm those facts.[83] The respondent notes that the tender of certain documents late in the hearing was refused. The respondent concludes that there was no evidence which established that the 63% increase in the Morayfield sale and re-sale was wholly explicable by reference to any pre-commitments or agreements for lease.
[83]Respondent’s submissions para 94.
During the hearing Mr Bale was questioned about 501 Olsen Avenue and 383 Southport Nerang Road (sites accommodating some or all service station, fast food, and self-storage uses) in the context of market movement:
MR PURCELL: Okay. Can I suggest to you on that basis, Mr Bale, that they
provide no assistance to the court in delineating market movement for the large format retail market.MR BALE: Why I’ve included them is because they’re reflective of land values within that given location, within proximity of the subject property with similar attributes to the subject property. And potential uses that could be undertaken on the subject property.
MR PURCELL: Mr Bale, all those sales do is tell you what someone in the market is willing to pay for that use in that location, that particular use in that location. Correct?
MR BALE: And over a period of time. Correct.[84]
[84]T 2-91 line 43 – T 2-92 line 10.
The appellant in written submissions says that Mr Bale had gone to great lengths to allege various grounds for market movement but did not quantify it, and his allegations unfairly colour the evidence of Mr Schultz.[85] The sales that might suggest market movement in the relevant period and the arguments that oppose that conclusion have been set out in these reasons. As noted in their submissions, Mr Bale relied on two paired sales – the 2017 sale of 2 Old Pacific Highway sale ($8 million) and the earlier sale of that land in 2014 ($4,000,000), and the 2013 and 2018 sale and resale of 265 Morayfield Road, Morayfield ($2.4 million and $3.9 million respectively) which they say provides cogent evidence of movement in the market during the period in question.[86] The respondent says that Mr Schultz has not demonstrated the absence of market movement which is fundamental to the use of the comparable sales upon which he valued the subject sites.
[85]Appellants Submissions filed 7 October 2020 [87].
[86]Respondent’s Submissions filed 6 October 2020 [84].
Of course the sales relied upon by the respondent do not require any adjustment for market movement. In that regard it was not necessary for Mr Bale to quantify market movement between 2012 and 2017.
The evidence provides explanations for at least some of the increase in the sales discussed however, the evidence is not, in my view, sufficient to establish a trend. As noted by the appellants in reply submissions, even if the Court were to accept that an adjustment to the valuations is necessary to account for market movement, there is nothing before me which would enable me to make that adjustment.[87]
Analysis of sales
[87]Appellants Submissions in Reply filed 20 October 2020 [8].
Parameters
In the Oxenford JER Mr Bale said Mr Schultz relied on large format retail site sales to establish site value, and where an upper parameter could not be set, utilised supermarket site sales, which are considered superior yet still fundamentally retail.[88]
[88]Ex 5, page 75, para 306.
In the Molendinar JER Mr Schultz said he was of the opinion the appellants’ selection of sales closely aligned with the agreed highest and best use, which is paramount for comparability.[89] Mr Bale however said in relation to the appellants sales that neighbourhood shopping centres are not a permitted use under the fringe business zoning applicable to the Molendinar site.[90]
[89]Ex 6, page 80, para 375.
[90]Ex 6, page 82, para 389.
In the hearing, Mr Schultz said that he preferred sales which had similar market drivers, market participants, scale, and metropolitan, south-East Queensland location as primary evidence,[91] although he accepted that sales which were bought for a different use could be of some use as primary sales in the valuation exercise.[92]
[91]T 2-6 lines 14-17.
[92]T 2-5 lines 12-20.
Mr Schultz accepted that where one was to use a sale bought for a different use from the highest and best use of the subject property, the zoning of the subject site ought to be permissive of the use of that sale.[93]
[93]T 2-11 lines 34-38.
In written submissions the respondent comments that “there is clear tension in Mr Schultz rejecting of sales bought for a different use on one hand and then seeking to marshal those sales in support of an upper parameter for his valuation”.[94]
[94]Respondent’s Submissions filed 6 October 2020 [158].
In cross examination Mr Schultz disagreed that it was fundamental to the valuation exercise that valuers find within parameters set by an inferior and superior sale.[95] Mr Schultz said that while having an upper parameter is ideal, “there are some instances where you are required to make a call without an upper parameter.”[96] Mr Schultz accepted that it is subjective “how much more superior” a sale is where there is no upper parameter.[97]
[95]T 2-22 lines 7-10.
[96]T 2-21 lines 12-13.
[97]T 2-24 lines 38-39.
In evidence Mr Bale said that while it would generally be preferable if there was a superior sale and an inferior sale, there was some margin for subjectivity where there was no superior sale.[98] Mr Bale said that any upward adjustment would need a sales basis or would be unreliable.[99]
[98]T 2-56 lines 7 – 28.
[99]T 2-56 lines 41-42.
The parties agree that it is not the case that a valuer must, in all cases set an upper and lower parameter. They say it is desirable (appellant) or strongly preferable (respondent) for a valuer to do so.[100]
[100]Respondents Submissions in Reply filed 20 October 2020 [31].
The parties both cite the observations of Member PG Stilgoe OAM in YFG Shopping Centres Pty Ltd v Valuer-General adopting the approach of Sugerman J in Best v Housing Commission of New South Wales that:
“The best approach to valuation is to assign the subject land, by comparison, to its proper place in the scale of values disclosed by sales proved. Using the market continuum method of valuation, the analysed sale rate for the subject site must be somewhere between the worst of the superior sites and the best of the inferior sites.”[101]
[101][2020] QLC 10 citing Best v Housing Commission of New South Wales (1949) 17 LGR (NSW) 129, [12].
The appellant says the respondent is attempting to suggest that the superior or inferior sales must be of the same use to be reliable – however Best is not authority for the proposition that the upper and lower parameters are to be set by sales of the same highest and best use. They say that Mr Schultz utilised both primary and secondary proved sales, and given there were no superior primary LFR sales, he utilised secondary sales of what he considered to be a higher use to set his upper parameters.[102]
[102]Appellants Submissions filed 7 October 2020 [67].
In cross examination Mr Schultz agreed that he had not identified any primary sales he considered superior to either the Oxenford or Molendinar subject property.[103] He did accept that setting an upper parameter was … “good methodology and you should do it, and I believe I have done it in my report by use of secondary sales”.[104] The respondent says that opinion cannot be accepted because:
1) Mr Schultz had accepted that the Court need not seriously concern itself with those (secondary) sales because his valuation is essentially based on primary sales;[105]
2) Mr Schultz’s view that sales bought for a different use were not reliable indicators of value; and
3) the secondary sales relied upon were in the nature of properties bought for neighbourhood shopping centre use which Mr Schultz had agreed was of no use in valuing the Molendinar land (as the Molendinar site did not permit shopping centre use).[106]
[103]T 2-29 lines 25-30.
[104]T 2 – 22 lines 7-8.
[105]T 1-120 lines 3 – 25.
[106]T 2 – 12 lines 30-34.
The appellant says in reply:[107]
1) Mr Schultz relied on his primary sales in setting the value of the subject properties and the secondary sale provided the upper parameter;
2) Mr Schultz said sales bought for a different use could be used, he chose not to rely on the sales adopted by Mr Bale because his primary sales provided better evidence of value;
3) Mr Schultz did not rely on (secondary) sales as primary evidence of value but acknowledged their utility in setting an upper parameter.
[107]Appellants Submissions in Reply filed 20 October 2020 [22].
In relation to the location of sales over a broader area Mr Schultz said that LFR is an asset class and buyers are ‘dictated’ by end users (tenants) “and therefore values do not fluctuate widely between metropolitan and greater metropolitan areas”.[108] He went on to say:
“It can be seen in the suburbs where large format site sales have occurred, the household incomes vary slightly over and under the state average. The socio-economic standing of a suburb does not dictate if a large format retailer could be attracted to the location, as proven at North Lakes, Springfield or Underwood”.[109]
[108]Ex 6, page 80, para 376.
[109]Ex 6, page 80, para 376.
He concluded that those sales are therefore comparable.
In contrast, Mr Bale selected sales in closer proximity to the subject sites. He said he considered local sales evidence with similar site attributes and zoning suited to similar LFR uses or alternate uses legally permitted on the sites. He suggested that a “sales evidence based adjustment made by the market for (these) significantly different localities … are so significant that it renders the sales … of no utility in support of land values on the Gold Coast”.[110] In support of this conclusion he compared and analysed[111] the Molendinar site at $840/m2 relative to the Yarrabilba sale at $240/m2 and concluded that Mr Schultz’ adjustment for location remains unquantified and without a supporting sales basis, “yet remains necessarily inherent in establishing a value for the subject property in direct comparison with almost two thirds of the sales (Schultz) relies on.”[112]
[110]Ex 6, page 80, para 373.
[111]Ex 6, page 80, para 372.
[112]Ex 6, page 80, para 374.
The appellant accepts that adjustments need to be made to reflect the differences in locality. They say it is a task the valuer ordinarily and properly undertakes and expresses their opinion on. They submit that Mr Schultz properly considered the issue of location and made an adjustment in his application of the sales evidence to the subject properties.[113] The respondent says Mr Schultz failed to appreciate the differences or make any appropriate adjustment (if there was a difference).[114] They say he failed to properly explain or set out any adjustments he made to account for the differences in location – although accepting that Mr Schultz said that location was not as important as selecting a sale bought for the same use as the property being valued.[115]
[113]Appellants Submissions in Reply filed 20 October 2020 [19].
[114]Respondents Submissions in Reply filed 20 October 2020 [23].
[115]Appellants Submissions filed 7 October 2020 [105].
When the subject was canvassed in evidence the following was said:[116]
[116]T 1-106 line 32 to T 1-107 line 34.
MR HASTIE: Now, where in your report do you set out your opinion about how the differences in the underlying value of land differ between ‑ compare between, for instance, Molendinar and Oxenford on one hand and the locations of your various sales?
MR SCHULTZ: I haven't discussed it in detail, or I haven't raised it, but I have considered it. I do consider the locations and I talk about superior locations and preferred locations.
MR HASTIE: But it's the case, though, isn't it, Mr Schultz, that in order for you to form a concluded view about the differences in underlying land value, it would be necessary to look at sales evidence from each of those localities to see how that compares with sales evidence in the other locality you're concerned about? That's effectively what's required, isn't it?
MR SCHULTZ: No, it's not required, because I've got a sale that I apply to the subject. I don't have to analyse other sales in that location to work out something that I'm not being asked to do here.
MR HASTIE: But in order for you to make an informed assessment of the differences in underlying land value, which you've accepted you need to do in order to make use of sales from different localities, I would suggest to you that you need to look at a body of sales evidence in each of those localities and determine what those variances in underlying land value are.
MR SCHULTZ: If that was the case ‑ I disagree with that because vacant land sales in the location ‑ like, you know, Molendinar, where, you know, there is a lack of sales evidence, essentially, of this nature and we've had to go further out. That same issue with vacant site sales, to establish a level of market in ‑ with what you're suggesting, North Lakes or Underwood, those sales aren't there for me to establish that, that premise.
MR HASTIE: No. And that rather demonstrates the point, though, doesn't it, Mr Schultz, that it's very difficult to make an informed quantifiable assessment of differences in underlying land value, in comparing a sale from a different locality? It's a very difficult exercise to do with certainty and with clear quantification, isn't it?
MR SCHULTZ: I don't think it's difficult. It's our job. It's a judgment. It's experience. It's knowing ‑ now, we looked at, you know, household incomes and things like that. We had a look at that, just to make a judgment call, and some were a little bit higher, but typically there wasn't a large variation in that, and that's, you know, because they're all in South East Queensland. So, you know, when we were having a look at, you know, the ‑ and when I was looking at that, the subject locations, you know, you could form an opinion on, you know, the desirability of North Lakes or the desirability and the locational attributes of Underwood. You know, because they're ‑ these markets where we've identified the sales, they have large format ‑ you know, they're desirable for large format users because there's large format users in that, you know, locality; in that suburb. So ‑ ‑ ‑
MR HASTIE: But, Mr Schultz, essentially though it is a subjective exercise in your judgment. What I'm suggesting ‑ you agree with that proposition first?
MR SCHULTZ: I am making a judgment, that's correct.
MR HASTIE: Yes. And it's not a judgment which is capable of clear and quantifiable ‑ I'll withdraw that. It's not the sort of judgment or adjustment that can be made in clearly quantifiable terms, is it?
MR SCHULTZ: No, I don't think it is a quantifiable thing, that's correct.
For the reasons enunciated earlier, and accepting the observations of the appellant outlined at [171] – [172] above, there are insufficient points of similarity to render this an acceptable comparable sale when compared to the appellants alternative methodology and comparative sales which present a lower risk of error.
Respondent Sale – 383 Southport Nerang Road
Mr Bale noted that this site has a gross site area of 8,084 m2, and an effective useable site area of 7,828 m2. The sale settled on 23 May 2017 at a sale price (ex GST) of $5,350,000 ($662/m2) and Mr Bale analysed its sale price to be $6,567,182 ($812/m2) and based on effective useable site area $839/m2. Mr Bale noted the site is on a traffic signalled intersection with 60m of main thoroughfare frontage and is one metre above Southport Nerang Road with a western rear slope. He said that overall it is significantly smaller; of inferior shape, frontage and exposure; and of similar topography. Mr Bale said that upon completion of site works it would provide superior site situation in a similar Gold Coast location (to Molendinar); with inferior surrounding development and inferior low impact industrial zoning. Mr Bale noted that it was purchased subject to obtaining an impact assessable Material Change of Use authority to develop a service station, drive through fast-food outlet and self-storage facility, which are uses permitted under the subject sites Mixed Use Fringe Business Zone.
Mr Schultz said that the site was not lightly improved as it had a 2300 m2 existing industrial building on site. It was sold as an industrial zoned site in an established industrial zoned precinct “at a mixed commercial/industrial rate requiring an impact assessable development approval for a material change of use”.[178] Mr Bale was of the view that the purchase subject to approvals rendered the on-site buildings of sacrificial value only. Mr Schultz said the proposed uses are different to the highest and best use of the subject sites, while Mr Bale said that service station and self-storage are alternate legal competing uses for the subject site. Mr Schultz said that his alternative analysis of this site would exclude items including Preliminaries, Margins, Contingency, and Professional Fees.
[178]Appellants Submissions filed 7 October 2020 [162].
Again, the appellant maintained that Mr Bale has not made any adjustment in respect of differentials in market drivers or purchasers, or economic drivers.[179] On that basis the appellant said this sale is ‘fraught with uncertainty and is not an otherwise reliable comparator to the Molendinar property’.[180] They say that the sale is reflective of a mixed rate with no differential applied by the purchaser between the three uses where intensity of the industrial component (4 storey development) exceeded the retail/commercial element (service station and fast food outlet) such that the derived rate cannot be properly compared to the Molendinar site. The appellant says that failure to provide a sound basis to compare is self-evident from the determined site value of Molendinar at $400/m2 and the analysis of this sale at $839/m2.[181]
[179]T1 – 81 lined 3 – 7.
[180]Appellants Submissions filed 7 October 2020 [163].
[181]Ibid, [163]-[164].
The differences between this sale and the Molendinar site which are apparent in [175] – [177] above render this sale less comparable in my view than the sales advanced by the appellant.
Appellant Sale – 111, 56 & 85 North Lakes Drive, North Lakes
The appellant noted that this sale constituted three sites in one line acquired for large format and ancillary retailing. It was noted that North Lakes is a well-regarded market, but Molendinar is preferred; that exposure is predominantly to locals within the estate; and that Bruce Highway access is close by. The appellant considered this a primary sale and used it to set a lower parameter at $243/m2.[182]
[182]Ex 5, page 23, para 87.
The respondent highlighted that the sale took place 42 months prior, is in excess of 120 km north of the subject site and it is in an inferior large format retail market. As three sites separated by roads it is incapable of single large-scale large format retail use similar to the subject site.
The respondent said that the Oxenford site is in a superior catchment of a higher socioeconomic profile than this comparable sale. The respondent commented that the appellant failed to take into account cost penalties associated with development of one part of the sale property.[183]
[183]Ex 5, page 31, para 117.
The respondent said advice from the purchaser proximate to the date of sale indicates that infrastructure benefits, while available, remained unquantified and did not influence the price paid. The respondent said that the infrastructure benefits calculated by the appellant are “contrary to the advice of the purchaser”.[184] The respondent said that in the absence of further clarification from the purchaser the respondent is guided by the quantity surveyor’s itemised, quantified and costed site works as proposed and undertaken by the purchaser.
[184]Ex 5, page 24, para 95.
The respondent included in each JER copies of file notes and a series of email correspondence with the purchaser. A further request for clarification and supporting information was sent to the purchaser in the form of approximately two and a half A4 pages of text containing a considerable amount of information and with numerous questions interspersed. In the second paragraph it reads:
“I am seeking clarification and supporting documents where available to assist in understanding your considerations and the information available to you as at the time of your negotiating a sale price”.[185]
[185]Ex 5, page 27.
In response the purchaser said by email:
“… we have been providing information on our purchase ad nauseam for an extended period of time and will not be providing anything further. Our team are too busy with new projects …”.[186]
[186]Ex 5, page 26.
Having read the correspondence I am entirely sympathetic to the purchaser. The correspondence from the respondent is badgering and detailed but not well structured. It contains no headings to denote subject matter or to separate background information from information sought, and no bullet points or tables to make clear the question to be addressed. It seeks a response within ten days, which might be disproportionate to the nature and scale of the information requested.
I note the nature of the site as described at [179] above and in preferring the methodology and approach taken by Mr Schultz. I accept this as a comparable sale as analysed by the appellant.
Appellant Sale – 115 Compton Road, Underwood
The appellant considered this site a primary sale, although inferior, and analysed it at a rate of $238/m2. It is a large format retail site acquired by an owner-occupier. The location is considered comparable, and it has unrestricted exposure to Compton Road in both directions. The site is of an irregular shape.[187]
[187]Ex 5, page 33, para 120.
The respondent noted that the sale took place 39 months prior to the valuations in question. Based on the quantity surveyor estimates there were significant costs to develop the site, and rear roadworks were a likely cost to the purchaser “as extension of this road was a condition of the prior approval to Energex”.[188]
[188]Ex 5, page 33, para 122.
Mr Bale was of the view that the analysed sale price ought to be $287/m2, and suggested the sale is in a lower order surrounding development and a lower socioeconomic economic setting.
In the hearing the appellant maintained that the sale is ‘quite comparable’ noting, amongst other things, a Bunnings nearby. The respondent considered it significantly inferior taking into account the surrounding development (industrial shed and undeveloped land), socioeconomic factors, and the fact it was a ‘dated’ sale.
For the reason outlined earlier and my preference for the methodology and approach taken by Mr Schultz, I accept this as a comparable sale as analysed by the appellant.
Appellant Sale – 1 Main Street, Springfield Central
The appellant said that this sale is in a slightly inferior location, has good exposure, and is of a regular shape and over three hectares in size.[189] The appellant considered it a primary sale at a rate of $237/m2.[190]
[189]Ex 5, page 34, para 128.
[190]Ex 5, page 34, para 129.
The respondent noted that the sale took place 54 months prior and that the site required significant costs to develop based on quantity surveyor estimates. Mr Bale analysed this sale at a rate of $287/m2. He said the purchaser articulated that no premium was paid for a delayed settlement and no account was made for the fact that no interest was paid on land, rates and taxes as the site was settled after site works were completed by the purchaser.[191]
[191]Ex 5, page 34, para 133.
In questioning concerning the ‘premium’ and the advice from the purchaser Mr Schultz agreed that the purchaser did not pay any additional amount on account of the delayed settlement, but disagreed to the suggestion that it was inappropriate to make any allowance for the delayed settlement.[192]
[192]T 3 – 138 lines 3 – 8.
In written submissions the respondent says Mr Schutz made an allowance of $1,563,433 for the value he considered was added by the fact that the property was bought with a delayed settlement date.[193] The respondent says there was clear evidence that no additional amount was paid for the benefit of the delayed settlement.[194]
[193]Respondent’s Submissions filed 6 October 2020 [177].
[194]Ibid [183].
The evidence the respondent points to is an email from a representative of the purchaser, Mr Somerville, to an employee of the State Valuation Service, Mr Carey, where Mr Somerville agreed with the assertion that:
“As per our discussions relating to the Bunnings approval and the delayed settlement can you confirm a) the contract for sale as not subject to Bunnings obtaining Council approval; and b) Bunnings did not pay any premium for the delayed settlement.”[195]
[195]Ibid [182], ref Ex 6, page 55 para 243.
The appellant relied on a later email from Mr Somerville to another valuer in Mr Schultz’s office to conclude that there was a benefit. In response to the question: “You state no premium was paid for a delayed settlement, however did you see a benefit in having a delayed settlement?” Mr Somerville wrote: “No holding costs, rates, land tax is paid during this time, which is standard industry practice”.[196]
[196]Ibid [184] ref Ex 7 page 44.
The respondent argues the question asked whether the purchaser saw a benefit in the delayed settlement, not whether the purchase price was affected by the value associated with that benefit. The appellant in submissions in reply says there was a basis to conclude that the purchaser paid additional money for that benefit, and says there is a difference between paying a premium and the value of a benefit being factored into the purchase price.[197]
[197]Appellants Submissions in Reply filed 20 October 2020 [35].
On balance I agree with that interpretation place on the correspondence by the appellant.
For the reason outlined earlier I accept this as a comparable sale as analysed by the appellant.
Determination
Having carefully considered all of the evidence in these appeals, having outlined my conclusions in relation to the issues raised by the parties in evidence, and having provided my analysis of the evidence relating to each of the sales, I accept the valuation evidence and opinion of Mr Schultz as to the analysis of comparable sales in these matters.
Orders
Appeal LVA008-19 is allowed. 1.
The valuation as at 1 October 2017 of Lot 202 on SP262172 having an area of 39,860 m2 and located at 1 Global Plaza Drive, Oxenford is Nine Million Eight Hundred and Fifty Thousand Dollars ($9,850,000).2.
Appeal LVA020-19 is allowed.3.
The valuation as at 1 October 2017 of Lot 1 on SP108078 having an area of 35,270 m2 and located at 492 Olsen Avenue, Molendinar is Eight Million, Five Hundred and Fifty Thousand Dollars ($8,550,000).4.
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