IOOF Australia Trustee (NSW) ATF Abacus Cub Office Trust v Chief Executive, Department of Natural Resources
[2000] QLC 56
•20 September 2000
|
BRISBANE
20 SEPTEMBER 2000
Re: AV99-514
An Appeal against an Unimproved Valuation
Valuation of Land Act 1944
Local Government: BCC-Brisbane
IOOF Australia Trustee (NSW) ATF Abacus CUB Office Trust
v.
Chief Executive, Department of Natural Resources
J U D G M E N T
The Chief Executive, pursuant to the provisions of the Valuation of Land Act 1944, valued land owned by the appellant in the amount of $1,900,000 as at a relevant date of 1 October 1998. The appellant contends that the land ought to be valued at $1,280,000 and, accordingly, appealed to this Court. The grounds of appeal were expressed in rather obtuse language, however, no objection was raised by the respondent to the evidence tendered by the appellant as being other than consistent with the grounds of appeal.
Both parties were represented by Counsel. Valuation evidence was provided for the appellant's side through Geoffrey Donald Trivett, a registered valuer, whilst Alan Ross Kirby, also a registered valuer, provided valuation evidence in support of the valuation of the Chief Executive.
The land, the subject of this appeal, is described as Lot 5 on Registered Plan 891235, County of Stanley, Parish of North Brisbane, and includes a benefit access easement. The land area is 2,136 m². The subject property is located at 90 Bowen Terrace, Fortitude Valley, and is a corner site found at the intersection of Kemp Place, Martin Street and Bowen Terrace, about 1.1 km north-east of the Brisbane GPO. All services are available to the land and roads in the area are bitumen sealed and have concrete kerbing and channelling. Vehicular access is available onto the land from Martin Street, which is a one-way street. In addition, easement access may be availed of from Bowen Terrace and over the land adjoining to the south-east of the subject property. Bowen Terrace is a one-way roadway adjoining the land, but does not permit direct vehicular access other than by way of the easement. The land is well elevated and has views, which I will come to in some detail later in these reasons.
The subject property is zoned "Special Development" within the Town Plan for the City of Brisbane, gazetted in 1987 and effective at the date of valuation, and is designated as "Parcel 2 Carlton United Brewery Key Site - Precinct 2: Valley Heart" within the Fortitude Development Control Plan, gazetted on 20 December 1996. The subject land was part of a larger site owned by Carlton United Breweries (CUB) either directly or indirectly and has long been associated with that company. CUB elected to retain a presence on the subject land, and arranged for an office building to be developed on it. The property is now improved with a four-level brick and concrete building used for commercial purposes. The subject land is a prominent site with good exposure to a high traffic flow going onto and coming off the Story Bridge, as well as more proximate to the site. The balance of the previous larger CUB site has now been developed with residential apartments, retail outlets and some commercial development.
Mr Trivett valued the subject land at $600 per m², giving a figure of $1,281,600, which he rounded to $1,280,000. Mr Kirby valued the land area at $900 per m², totalling $1,922,400; then employed a second method where he valued the land by reference to the GFA potential of the site. He applied a figure of $550 per m² to the Gross Floor Area (GFA) of 3,520 m² actually developed on the site, resulting in a figure of $1,941,500. He adopted a rounded figure of $1,900,000.
Mr Trivett valued the subject land as a commercial site, but suggested that the site had a particular attraction to CUB and would not have been as attractive to another purchaser for development as a commercial building. Certainly, there has been a long association between CUB and the subject land and care must be taken not to value the land on the basis of any special value that it might hold for the appellant. In effect, the value to be determined must be one which is consistent with the principle of market value described by the High Court in the oft-cited case Spencer v. The Commonwealth (1907) 5 CLR 418.
Before I discuss the individual valuations, there are two matters that I ought to address. The first of these relates to access to the subject land. Martin Street is a narrow one-way street leading from Brunswick Street and is used by such a volume of traffic during peak times that the street becomes virtually blocked, impeding access onto the subject property from that road. There was some debate between the parties as to whether the carriageway was 5 metres wide or narrower, however, the real point is that Martin Street is one way and that access to the subject land from that street would be difficult during peak times. The alternative would be to go into the subject land from Bowen Terrace, via the easement referred to above. The easement access was apparently not developed at the relevant date but, in my view, it was clearly designed to meet the Martin Street problem referred to, whether the use of the subject land was to be commercial or residential.
The second issue I will discuss at this juncture is that of the highest and best use of the subject land. I have already set out Mr Trivett's views that the land has a highest and best use for commercial development. Mr Kirby did not disagree that the subject land was open to commercial development and he noted that the zoning of the land would have allowed either a mixed use of retail and residential units or commercial uses. I doubt that the subject land was well located to allow attractive retail usage. In any event, I do not understand Mr Kirby to have suggested such a usage to be part of the highest and best use of the land. He opted for residential apartments on the land, though said that the choice was really a matter for a developer, who would have the choice of commercial if that was his wont. I will come to his sales shortly, but should mention now that in support of his residential apartment usage Mr Kirby referred to the nearby Petrie Point and Medina Apartments and also to residential apartment developments at Cathedral Place and the proposal for the McWhirters building in the Valley. Neither Cathedral Place nor McWhirters was the subject of further discussion. I inspected the subject property as well as Petrie Point and Medina. These inspections assisted me in my appreciation of the evidence.
Medina Apartments are located across the eight to 10 lanes of traffic, which separate the subject land from land on the other side of Kemp Place. The land on which the Medina Apartments have been developed slopes away from the road and provides a natural and ready aspect to the city and to the river upstream of the Story Bridge. The structure of the building takes advantage of that aspect. Whilst the Medina property abuts the busy Story Bridge thoroughfare, the topography of the land and the style of development ensure that it is only the rear wall of the property, which suffers any impact from that thoroughfare. The Petrie Point development, which is yet to be completed, is a little further removed from the busy roadway than the subject property and has an aspect both towards the city through the Story Bridge and towards the downstream river reach below the bridge. Those river views are expansive and cannot be built out. The Petrie Point site is substantially larger than the subject property, having an area of 9,666 m², so has the capacity, in addition to taking advantage of the river aspect and city views, to create an internal environment for residents. It would not be as easy to create such an environment on the subject land without a considerable sacrifice to the GFA.
The back of the Petrie Point development is high and abuts the subject riverside boundary as a monolithic wall. It is difficult to see that the subject property could be developed to overlook the Petrie Point structure to obtain river views: even if that was allowable it would only be the top floor or two that might enjoy the available view, with the bulk of the building being behind the Petrie Point building. There is some prospect of balconies at the corner of an apartment building on the subject land affording some aspect of the river and the city, however, the angle of the Story Bridge from that point presents largely as a barrier to expansive views. Such balconies would be close to the noise, fumes and dust of the roadways. The side boundary of the subject land fronting Martin Street faces towards Kemp Place, which offers no particular scenic attraction, and towards a fire station on the opposite side of Martin Street.
Residential apartments have been constructed in recent years in locations that would have been roundly rejected not that long ago. I should be hesitant, therefore, before saying that the subject land is not a suitable site for residential apartments. I am of the view, however, that compared with the Medina site and the Petrie Point development, the subject land is clearly inferior. I would agree with Mr Trivett that residential apartments constructed on the subject land would be difficult to sell except, perhaps, at the lower end of the city residential market. This brings me to my consideration of the sales evidence.
Mr Trivett referred to two sales in his valuation, which he said that he had compared with the subject land, though no written comparison appeared in his valuation report and his comparisons in oral evidence were overly economical.
His Sale 1 was of a property located at 50 James Street, Fortitude Valley, having an area of 1,573 m². Mr Trivett said that the property had a "Commercial" zoning and sold in February 1998 for $530,000. His valuation report records that the land was vacant at the time of sale. He analysed the sale to an unimproved value of $336.93 per m². The manner by which that sale at that level supports the $600 per m² placed on the subject property by him was not explained. He said that he did not pay any regard to the GFA potential of that sale in his comparison, saying that GFA can give a distorted view as the extent of development on a property was very much a matter for the individual developer. Mr Kirby, on the other hand, said that development in James Street in the vicinity of Mr Trivett's Sale 1, generally achieved a plot ratio of 0.7 and not the allowable plot ratio of 1. On that basis he said that the sale price ought to be analysed at $482 per m² GFA. Mr Trivett said that he was not aware of any physical impediment to restrict development of the full potential plot ratio of 1, whilst Mr Kirby did not provide any cogent evidence as to why a plot ratio of 0.7 only was achievable.
Whilst the evidence on the matter of GFA with respect to this sale is incomplete, I should indicate my general views on the matter thus far. The subject property has a potential GFA of 2.25 though that GFA has not been fully utilised. The potential GFA is 4,806 m² whereas the site has been developed to 3,530 m² only. The extent to which the developer's view of potential development influenced the achieved GFA on the subject property, or for that matter on Mr Trivett's Sale 1, was not made known to me, however, it is certainly clear that the potential of the subject property for commercial development is substantially greater than that of Mr Trivett's sale. That being the case, this would be a matter to which a hypothetical prudent purchaser would direct his mind when considering the price to be paid for the subject property.
Mr Trivett's report said that his first sale was vacant land, however, Mr Kirby gave evidence that there was a garage on the site and he said there was the possibility of decontamination costs being faced by a purchaser, following sale. Whilst Mr Trivett did not explain why he had not referred to the improvements in his valuation, he did say that the purchaser had advised him that the land had been sold as a decontaminated site, though he had not seen the certificate of clearance. I accept the evidence that the site was decontaminated.
Mr Kirby estimated that demolition costs of the order of $20,000 to $30,000 would need to be taken into account in addition to the sale price in order to determine the unimproved price that the incoming purchaser would pay for the land in this sale. No estimate was provided by Mr Trivett who would have had a better knowledge of the improvements than Mr Kirby, on my understanding of the evidence. The addition of Mr Kirby's estimate would increase the unimproved price of the land to $350 to $356 per m² for land or $500 to $508 per m² GFA, based on a plot ratio of 0.7. It appears that the improvements are used as a site for a four-wheel drive hire centre, therefore providing a holding income that would provide an offsetting benefit to the purchaser. There was no evidence, however, on the level of revenue from that source.
Mr Kirby said that this sale was in an inferior location to the subject property, had no outlook and "very little prominence". He said its use was confined to commercial development, whereas the subject property had the potential for being developed as residential apartments. None of this comparison was put to Mr Trivett, however, that is not a matter of concern to me as it was a matter for Mr Trivett to initially provide his own comparison.
Mr Trivett's second sale is located at 168 Robertson Street, Fortitude Valley and has an area of 1,765 m². It is zoned "Commercial" and sold for $500,000 on 19 March 1999, the purchaser moving into possession on 23 March: a time frame, which in my experience, is unusually brief. The land was not improved at the time of sale, according to Mr Trivett's valuation, so his analysis of the sale price yields an unimproved figure of $283.28 per m².
Mr Kirby said that the sale had a plot ratio of 1.1 and had achieved that ratio in a building development constructed following the sale. That, therefore, shows a GFA value of $257 per m². If Mr Trivett's Sale 1 had achieved its potential plot ratio of 1, that sale could have been analysed at a rate of about $337 (the figure included in Mr Trivett's valuation), thus pointing to an apparent inconsistency in level between Mr Trivett's two sales. Both sales are located in a similar area on the locality map appended to his valuation. There was certainly no evidence forthcoming from Mr Trivett as to any distinctions that might be made between his two sales.
Mr Kirby suggested that the inconsistency in sale analyses probably arises out of the circumstances of the sale. He said that Kevin Miller and David Blanck are directors of Property Solutions. Kevin Miller signed the transfer document of Mr Trivett's Sale 2 on behalf of the vendor, James Street Precinct Pty Ltd, a company vehicle employed by the principals of Property Solutions. The purchasing company, Robertson Street Properties Pty Ltd, has a registered address, which is the same as Western Computers Pty Ltd, a company that was mentioned in a "Courier-Mail" article (30 April 1999) in a statement attributed to Mr Blanck:
" Property Solutions, meanwhile, has started work on a new 2000sqm, two-level office building directly opposite Millennium's Robertson Street project.
Mr Blanck said the 168 Robertson Street property was -re-released to Western Computers and pre-sold to an investor for $3.15 million.
Construction is due for completion by June 1999."
Mr Kirby reasoned that the purchase price of the land was probably part of an overall land sale and building design and construct contract, therefore, did not show a reliable market price. He made no inquiries with the parties, simply relying on the evidence to which I have referred. Mr Trivett said that he knew nothing of such a design and construct contract. Given, however, that there was no attempt by him to demonstrate relativity between the prices achieved in his two sales and the indication by the GFA analysis carried out above that the sale prices do not align, I am led to the conclusion that Sale 2 is probably a low sale for the reasons advanced by Mr Kirby.
Mr Kirby referred to three sales in his valuation. The first of these involved the sale of two properties totalling an area of 1,798 m². The properties are located at 34 and 36 Moray Street, New Farm, and sold respectively for $680,000 and $630,000 on 24 and 31 December 1997. Mr Kirby added demolition costs in the amount of $20,000 overall to the two sale prices, resulting in an analysed unimproved figure of $1,330,000. He said that the sale land had a plot ratio of 1, thus both the land area analysis and the GFA analysis show a figure of $740 per m². In his written valuation he said that the sale property (treated as an amalgamated site) is similar in elevation and access to the subject property, inferior in location, prominence and total GFA and, therefore, overall inferior. His valuation records, however, that in his view the sale is "superior per m² GFA", the overall superiority apparently being reliant largely on the GFA achieved on the subject land.
Mr Trivett said that Mr Kirby's Sale 1 enjoys a superior location for residential apartment development than the subject land. Both Mr Trivett and Mr Kirby agreed that the sale property is in an area which is noted for residential apartment development activity. A luxurious apartment building "Casa De La Vista" has been built on the land. Mr Kirby said that the lower two floors of that development do not enjoy an expansive outlook, but the balance of the property does have river views and other views from its elevated position.
I have noted that Mr Kirby said that the subject land is superior to the sale property in "prominence". I accept such a criterion of comparison as relevant for commercial purposes, but find it difficult to accept equal relevance when considering residential apartment development. The subject property appears to me, also because of this prominence, to be located much closer to heavy traffic than is the sale property.
Mr Kirby's second sale also involved the purchase of two properties: 650 and 652 Brunswick Street in separate contracts. The total land area purchased for amalgamated development was 1,096 m², the dual purchase taking place on 25 June 1998 for prices of $357,500 and $357,000 respectively. Mr Kirby added demolition costs totalling $20,000 to the aggregated sale price, resulting in an unimproved total figure of $734,000. The sale land has a plot ratio of 1, thus both the land and GFA analyses show $670 per m². In his written valuation Mr Kirby compared the sale land with the subject property, saying that the sale was similar in access, but inferior in elevation, location, prominence and total GFA, thus inferior overall. Again, however, he concluded that the sale is superior per m² GFA for the same reason discussed in reference to his Sale 1. I make the same comment concerning his inclusion of the word "prominence" as I made above.
Mr Kirby's Sale 2 land is being developed for retail outlets on the ground-floor level and with residential apartments on upper floors. It is in an area noted for this type of development.
Mr Trivett suggested that access to this Sale 2 property is superior to that available to the subject land, though in making that comparison appears to me to have disregarded the easement access available to the subject. The sale land is an inside lot with one point of access. Given the imperfect access available to the subject land from Martin Street, but the potential for suitable easement access to be developed, I accept Mr Kirby's description of the access between these two properties as being similar. The only other point that I would add is to say that whilst Brunswick Street is no doubt a busy thoroughfare, I would think that traffic impact on this sale property would not be as great as that on the subject property.
Mr Kirby's third sale is located at 8 Gardiner Close, Milton, and has an area of 3,135 m². The property is in the Milton Development Control Plan Precinct 1 and sold in December 1998 for $1,900,000. Mr Kirby deducted improvements in the form of clearing and fill in the amount of $100,000, leaving an analysed figure of $1,800,000, though applied at $1,700,000. He compared the Sale 3 property with the subject in these words:
"Sale is superior in total Gross Floor Area; Similar in Access; Inferior in Elevation, Location, Prominence, per square metre Gross Floor Area. Overall sale is marginally inferior."
The sale land shows an unimproved figure, based on the applied value, of $542 per m². The sale property enjoys a plot ratio of 1.5, therefore a potential GFA of 4,702 m², thus allowing the sale to be analysed at a potential GFA figure of $362 per m². He said that the potential GFA of the Sale 3 property was quite similar to the potential available on the subject at 4,806 m². In his comparison between the sale property and the subject, Mr Kirby stressed that the sale land, whilst at a good address, enjoyed no natural prominence at all as a site. He contrasted that particularly with the prominence afforded the subject property.
The Milton sale was selected by Mr Kirby on the basis that he sought a larger site used solely for commercial purposes and proximate to the city. Mr Trivett said that the sale property is located in a well-regarded area where there are a number of new modern one and two-storey developments to be found. He said that the Milton area is one of great interest to both investors and owner/occupiers, whereas there would be few purchasers who would have an interest in developing the subject property for commercial purposes. He was of the view that this sale supported the $600 per m² land content that he had placed on the subject property. I do not agree with that conclusion. I think that any comparison between the Sale 3 property included in Mr Kirby's valuation and the subject property needs to take into account the prominent exposure of the subject property and its potential development, if one is valuing the land for commercial purposes. The Sale 3 property is located in a cul-de-sac in an area without topographic advantage.
Interestingly, Mr Kirby said of Mr Trivett's Sale 1 in James Street that that sale would support the $900 per m² land value that he had placed on the subject property. I have difficulty drawing a similar conclusion and think that it would rely a little too greatly on a slavish application of the GFA values. I am more comfortable in setting aside both Mr Trivett's Sale 1 and Mr Kirby's Sale 3. First, because I have difficulty carrying a sale from Milton in a cul-de-sac, two-level but well-regarded commercial area, to Fortitude Valley to a prominent site capable of four-storey development and a higher GFA; and on the other I am left wanting in so far as Mr Trivett's comparison between his Sale 1 and the subject property is concerned. His sale is certainly better located for comparison purposes than a property at Milton, but it has substantially less development potential and exposure and is in an inferior location to the subject property in Mr Kirby's view.
I am less comfortable with Mr Kirby's comparison between his Sales 1 and 2 and the subject property as my earlier comments on the subject's residential apartment potential would show. I do not reject the suggestion that the subject could be put to apartment usage, but I do not see such development being at the same level as envisaged by Mr Kirby in his comparison with his sales. I approach the comparison on the basis not of comparing GFA's, but comparing land area values, but with potential GFA well in mind. In the result I conclude that a land value for residential development on the subject property would be at $780 per m². Accordingly, I allow the appeal and determine the value of the subject land at One Million Six Hundred and Fifty Thousand Dollars ($1,650,000).
RP SCOTT
MEMBER OF THE LAND COURT
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