ISPT Pty Ltd v Valuer-General

[2006] NSWLEC 478

Land and Environment Court

of New South Wales

CITATION:	ISPT Pty Ltd v Valuer-General [2006] NSWLEC 478
PARTIES:	APPLICANT ISPT Pty Ltd RESPONDENT Valuer-General
FILE NUMBER(S):	30043 of 2006; 30815 of 2006
CORAM:	Pain J
KEY ISSUES:	Valuation of Land :- onus of proof under s 40 of the Valuation of Land Act 1916 - determination of highest and best use - adjustment of comparable sales based on location
LEGISLATION CITED:	Fairfield Local Environmental Plan 1994 Fairfield Town Centre Development Control Plan No. 4/97 Land and Environment Court Act 1979 s 39(2) State Environmental Planning Policy No 65 – Design Quality Residential Flat Development Valuation of Land Act 1916 s 6A(1), s 40
CASES CITED:	Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGERA 410 ; Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400 ; Commissioner of Land Tax v Nathan (1913) 16 CLR 654; James Beattie Park, Elaine Park, Sue Ellen Regan and Ruby Violet Gladys Poulton v Allied Mortgage Corporation Limited, Mortage Finance Australia (Securities) Limited and Ors, Nos. NG980 of 1992 and NG663 of 1993, FED No. 462/95, Federal Court of Australia, 5 July 1995, Unreported; Spencer v The Commonwealth (1907) 5 CLR 418
DATES OF HEARING:	19/07/2006 20/07/2006 21/07/2006
DATE OF JUDGMENT:	08/07/2006
LEGAL REPRESENTATIVES:	APPLICANT D T Miller (Barrister) SOLICITORS Gadens Lawyers RESPONDENT A Pickles (Barrister) SOLICITORS Crown Solicitor

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Pain J

7 August 2006

30043 of 2005, 30815 of 2005 ISPT Pty Limited v Valuer General

JUDGMENT

1 Her Honour: ISPT Pty Limited (“the Applicant”) has lodged appeals against two land value assessments for its property at 36 Station Street, Fairfield, known as the Fairfield Forum (“the subject land”). The appeals are lodged under s 37 of the Valuation of Land Act 1916 (“the Act”).

2 In matter no 30043 of 2005 the Valuer-General’s valuation was $10,700,000 for the base date of 1 July 2003. The Applicant argues for a valuation of $9,420,000 in this appeal and the Valuer-General now argues for a valuation of $17,550,000. In matter no 30815 of 2005 the Valuer-General’s valuation of the subject land 12 months later (base date 1 July 2004) was $15,000,000. The Applicant argues for $9,420,000 in this appeal and the Valuer-General now argues for $17,550,000. I went on a view of the subject site and all the comparable sales except for the Mona Vale site.

The subject land

3 The property is identified as Lot 1031 in DP 1049068. It is a large site of 4.282ha. It is located on the north-western edge of the Fairfield Town Centre at 36 Station Street, Fairfield. It is bounded by Cunninghame and Station Streets and has a gradual fall from the corner of these streets towards Nelson Street. It currently contains the Fairfield Forum shopping centre. Within the town centre another larger newer retail centre exists known as the Neeta Centre. The existing retail and commercial land use is generally low scale within the Fairfield Town Centre (save for the Neeta Centre) and in the immediate vicinity of the site. It is characterised by two-storey development comprising a ground floor retail level with a single level (or partial level) of commercial spaces above.

4 The Fairfield Forum is at the edge of the Fairfield Town Centre. Major tenants within the Fairfield Forum include Coles, Kmart and Food for Less. There is a cinema complex and approximately 50 specialty stores, many of which are “bargain stores” selling discounted items. It was apparent on the view that several shops were vacant.

Legal principles

5 The relevant principles of land valuation are set out in s 6A(1) of the Valuation of Land Act 1916 which provides:

The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.

6 Section 6A(2) further states that notwithstanding anything in subsection (1), when determining the land value of any land, the Valuer-General (and in this case, the Court) shall assume that:

(a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and
(b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,

but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.

7 Section 40 of the Act sets out the powers of this Court on appeal and which party bears the onus of proof. It states:

(a) confirm or revoke the decision to which the appeal relates,
(b) make a decision in place of the decision to which the appeal relates,
(c) remit the matter to the Valuer-General for determination in accordance with the Court’s finding or decision.
(2) On an appeal, the appellant has the onus of proving the appellant’s case.

Court’s role on appeal/Onus of proof

8 The Court has wide powers on this appeal under s 40(1) of the Act and can determine afresh what the land values are. Section 39(2) of the Land and Environment Court Act 1979 also applies, so that the Court has all the powers of the Valuer-General in determining the original land value assessment. It is presumably because of these powers of the Court on appeal that the Valuer-General is able to argue in these appeals that the original assessments were too low.

9 Under s 40(2) of the Act, the Applicant has the onus of proof in these appeals, a somewhat curious provision as the Court’s powers otherwise suggest the matter is a hearing de novo. Section 40(2) begs the question, in relation to what case does the Applicant have the onus of proof. The Applicant argued that it had to show that the base date valuations were incorrect in order to satisfy s 40(2) and that each party then had to prove its case.

10 The Valuer-General argued that because the Applicant had the onus of proof it had to prove that the valuations at the base dates were too high regardless of the fact that the Valuer-General no longer argued for the original land value. The Valuer-General submitted that if the Applicant discharged its onus and proved the figures were too high then the onus of proving the base date valuations should be higher fell on the Valuer-General. The difficulty with this submission is that presumably if the Applicant demonstrates that the base date figures are too high I do not get to the stage of considering whether the base date figures should be higher than the original figures.

11 The Applicant has appealed against particular land value assessments as provided for by the Act and bears the onus of demonstrating that the original assessments are too high. Given that the Court has three sets of figures before it, the base date figures appealed against and each parties’ figures, it is useful if I can determine whether or not the original base date figures should be confirmed. The Valuer-General refused to concede that the original base date figures were incorrect, somewhat unreasonably in my view, as it does not present any evidence to support these.

12 The valuer relied on by the Valuer-General made concessions, appropriately in my view, in response to questions from the Applicant’s counsel. He conceded that both valuers in this case agreed that the original base date figures should be the same for both 2003 and 2004 because there was no change in the market or in any planning regime, and the comparable sales would have been the same for both years. Both valuers agreed that no allowance for time is required between the respective base dates in the assessment of land values. (The only comparable sale relied on which is more recent is Beaumont Hills in 2006 and that is not a primary sale relied on by either valuer.) This suggests that one or both of the base date figures are wrong. Under s 40(1) I am able to determine the land values at any figure I consider appropriate in light of the evidence presented. I will proceed on the basis that I am unlikely to confirm one or both of the base date figures appealed against.

13 The evidence presented in these appeals requires the Court to consider at the same time whether the lower figure contended for by the Applicant or the higher figure contended for by the Valuer-General should be accepted. It is axiomatic that each party bears the evidentiary onus of establishing that its figures are correct. The competing evidence requires that both parties’ positions be considered simultaneously and tested against each other. I will arrive at a view based on all the available evidence of the appropriate land values and if those results are lower than the original figures appealed against the Applicant will have discharged its onus.

Approach to valuation under s 6A of the Act

14 Biscoe J provides a useful summary of the appropriate approach to be taken to an assessment under s 6A of the Act in Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400 at [13] and I adopt his approach. At [13] his Honour states:

…In my opinion, s 6A(1), apart from its improvements assumption and land improvements exception, reflects, partly explicitly and partly implicitly, the ordinary principle of ascertaining the value of land stated in Spencer v The Commonwealth (1907) 5 CLR 418 at 441. That is, the value of land is the price arrived at by a willing but not anxious buyer negotiating with a willing but not anxious seller, both perfectly acquainted with the land and cognizant of all circumstances which might affect its value. In Commissioner of Land Tax v Nathan (1913) 16 CLR 654 at 661 the High Court held, in the context of construing land tax legislation, that the ordinary principle of ascertaining the value of land is as stated in Spencer v The Commonwealth unless a new special rule of law is introduced by a statute which sets up some artificial standard.

15 As his Honour identified, although not stated explicitly in s 6A(1) the highest and best use of the land must be identified as that is the basis on which the hypothetical purchaser is purchasing the land. That phrase is not defined in the Act. Biscoe J refers at [15] to Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGERA 410 at 415 where Jacobs J said:

Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is and then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value.

16 The Valuer-General referred to Hill J in James Beattie Park & Ors v Allied Mortgage Corporation Limited, Mortage Finance Australia (Securities) Limited & Ors, Nos. NG980 of 1992 and NG663 of 1993, FED No. 462/95, Federal Court, NSW District Registry, General Division, Hill J, 5 July 1995, unreported). In particular, it relied on Hill J’s findings at [70], that:

As Spencer’s case (1907) 5 CLR 418 itself makes clear the valuation must proceed by reference to the best use of the property. For this purpose the valuer will take into account not only the present use to which the land is applied, but any more beneficial use which may reasonably be applied. This is the process which a purchaser negotiating to purchase the property would undertake. Thus it is not inappropriate in valuing property to take into account a potential development of the property, for among the range of hypothetical purchases can be assumed to be a person who would undertake such a development as would maximise the usage of the land.

Town planning

17 The key planning controls applicable to the site as at both relevant base dates (1 July 2003 and 1 July 2004) were as follows:

(a) The land was zoned 3(a) Sub-regional Business Centre in the Fairfield Local Environmental Plan 1994 (“LEP 1994”).

(b) The site was subject to the provisions of the Fairfield Town Centre Development Control Plan No. 4/97 (“Town Centre DCP”), and also to the State Environmental Planning Policy No 65 – Design Quality Residential Flat Development (“SEPP 65”), and the Residential Flat Design Code.

(c) Pursuant to the LEP 1994 and the Town Centre DCP the following development controls applied to the site:

(i) Permissible land uses included retail, commercial and residential (and others) though the objectives of the DCP emphasise that retail was to be the dominant use on the site.

…

18 In relation to town planning issues, the Applicant relied on the expert evidence of Andrew Wilson. The Valuer-General relied on the expert evidence of Silvija Smits. The planners prepared a joint report, filed 29 June 2006, (Exhibit 3) and agreed on the most relevant matters. The town planners agreed that the subject site has development potential for a mixed development of retail/commercial and residential uses.

Expert valuation evidence

19 In relation to expert valuation evidence, the Applicant relied on Anthony Dominic Dimasi, economist and retail analyst, and Grant Jackson, a certified valuer, whilst the Valuer-General relied on Michael O’Leary, a certified valuer. The valuers have prepared two joint statements, filed 11 July 2006 and 18 July 2006 and a comparative sales table, filed 18 July 2006. Each of the valuers also prepared their own reports. These are the reports of Michael O’Leary, filed 23 March 2006 and 23 June 2006 and the reports of Grant Jackson, filed 11 November 2005, 13 January 2006 and 1 June 2006. It is clear from the valuers’ reports and joint statements that in the course of preparing for this hearing a number of different comparable sales based on differing views of the highest and best use were considered and then discarded by the valuer, Mr O’Leary. Consequently the most useful document I will consider is the final table of comparable sales which became Exhibit K. These sales were largely those identified by Mr Jackson in his original report.

20 The initial expert report of Anthony Dimasi, economic analyst, is dated November 2005. His supplementary report is dated 31 May 2006. His additional table 2.1 was filed in Court 19 July 2006.

21 The two valuers agreed the comparable sales method is the correct approach. This involves a comparison of the subject site with sales of land around the base dates with the highest and best use determined by the valuers. Section 6A requires that the subject site is valued as a vacant site as at the base dates of 1 July 2003 and 1 July 2004. Mr O’Leary, the valuer for the Valuer-General, calculated his figures as follows:

Base date 01/07/2003 and 01/07/2004:
Value per m2 = $410
Area of site = 42,820 m2
Adopts = $17,550,000 (rounded) for each base date

Mr Jackson, the valuer for the Applicant, calculated his figures as follows:

Base date 01/07/2003 and 01/07/2004:
Value per m2 = $220
Area of site = 42,820m2
Adopts = $9,420,000 (rounded) for each base date

22 The Valuer-General’s valuation of $10.7M for the base date of 1 July 2003 equates to about $250/m2. The valuation of $15M for the base date of 1 July 2004 equates to $355/m2.

23 Mr Jackson considered Mr Dimasi’s evidence when undertaking his comparable sales analysis. Mr Dimasi’s evidence was that the income levels in the Fairfield catchment area were substantially lower than for the catchment areas of the other sales (see the table in Annexure A to this judgment). For example, the average income per person within the 3km radius of the Fairfield Forum is $14,946. The other comparable sites all demonstrate higher incomes, with Revesby being the next highest at $20,932, and Mona Vale the highest at $30,544. The average income per person in the greater Sydney Metropolitan area is $24,999. The average household income for those living within 3km of the Fairfield Forum is also lower than the comparable sites, at $45,488, compared to Revesby, the second highest at $59,185 and Kellyville being the highest at $101,839 per household. This gives those in the 3km radius of the Fairfield Forum an average retail spending per capita of $8,142, compared with the other comparable sites which have average retail spending per capita ranging from $10,429 (Greystanes) to $19,994 (Mona Vale).

24 Mr Dimasi also provided figures showing the indicative retail floorspace provision within a 3km radius of comparable sites and the subject site.

Fairfield Forum	Kellyville	Greystanes	Beaumont Hills	Revesby	Mona Vale
Indicative retail floorspace (m2)
·Within 3km radius	128,000	40,500	12,300	19,800	41,099	44,670
Retail provision per person (m2)
·Within 3km radius	1.78	1.17	0.30	0.80	0.71	1.59

25 These figures suggest that the subject site has a substantially greater supply of retail floorspace (1.78m2) than any of the other comparable sales (ranging from 0.30m2 to 1.59m2). This suggests it is located in a highly competitive retail market.

26 There are six comparable sales relied on by both valuers as follows:

(i) Lot 250, Greystanes Road, Greystanes. This site is 1.9083 ha (45 per cent of size of subject site), with a sale price of $7,452,000, purchased by Fabcot Pty Ltd (a wholly owned subsidiary of Woolworths) on 27 June 2003. A Woolworths supermarket and carpark now operate on the site. At the time of this purchase the site was vacant land. Mr Jackson considered the sale while generally comparable was in a superior position in a rapidly growing retail market. Its catchment area is a developing suburb and it is also accessible to an older established urban catchment area that is similar to the subject sale. He considered there was less competition here than at the subject site. This sale showed a value of $372.06/m2. After adjustment downwards by 40 per cent he derived a value of $223/m2 when applied to the subject site ($9,558,937). According to Mr O’Leary, the site is not located in a town centre and is not a subregional centre such as the subject site. In the hierarchy of retail sites, this is a district centre, and ranks in size after Mona Vale, Revesby and Kellyville. The sale of $372.06/m2 adjusted upwards by 20 per cent shows a value of $446/m2 ($19,117,875) when applied to the subject site.

(ii) 48-70 Marco Avenue, Revesby. This site is 1.194 ha (28 per cent of size of subject site), with a sale price of $6,345,000 at 1 June 2001. The site was originally purchased as vacant land by Fabcot Pty Ltd, a wholly owned subsidiary of Woolworths. Woolworths then on sold the land, together with a binding lease agreement for a term of 20 years with four additional options each of five years, to Sanwick Pty Ltd for $6,345,000, who developed the site for Woolworths’ occupation. Mr Jackson considered this sale was in a different locality to the subject site as it is a freestanding supermarket, compared to a subregional shopping centre. The sale included a valuable long-term lease to Woolworths. The sale price of $531.41/m2 when adjusted downwards by 60 per cent showed a value of $213/m2 ($9,101,940) for the subject site. Mr O’Leary argued that this was the most comparable sale, as it is located in a town centre with a train station and has the most comparable sized catchment area to that of the subject site. The sale also has potential for residential development. When adjusted downwards by 25 per cent this sale at $531.41/m2 showed a value of $399/m2 ($17,066,137) when applied to the subject site.

(iii) 10 Park Street, Mona Vale. This was a development site (28 per cent of size of subject site), which comprised an older style retail development which was subsequently demolished and developed for a new Coles supermarket, specialty shops, office space, gymnasium and car park. The site was sold on 1 November 2002 for $9,800,000 by an AMP entity (Mona Vale Shopping Centre Pty Ltd) to a Multiplex entity (Multiplex Pittwater Place Pty Ltd). This site has three street frontages, is located in the town centre and has transport links. It is surrounded by an established residential catchment area. Mr Jackson considered this sale was quite different to the subject site because the retail catchment area was much more affluent than the subject site. He considered the location required significant adjustment and any comparison was highly speculative. He adjusted the sale of $850/m2 downwards by 75 per cent so a value of $213/m2 ($9,105,402) applied to the subject site. Mr O’Leary considered this sale was highly comparable because it is a similar level in the retail hierarchy being a large district centre similar to the subject site. He adjusted the sale figure downwards by 55 per cent to $383/m2 ($16,389,724) for the subject site.

The two Kellyville sales are next door to each other, one is a Coles supermarket and the other a Woolworths supermarket.

(iv) 48 Wrights Road, Kellyville (47 per cent of size of subject site). This site was purchased by Playful Pty Limited, a wholly owned subsidiary of Woolworths, for $4,850,000 on 28 February 2000, and subsequently transferred to Fabcot Pty Ltd, another wholly owned subsidiary of Woolworths. This site is not located in a town centre, but in a developing suburb catchment area. When adjusted downwards by Mr Jackson by 30 per cent this sale at $287 showed a value of $201/m2 ($8,612,868) for the subject site. When adjusted upwards by Mr O’Leary by 15 per cent this sale showed a value of $330/m2 ($14,149,712) for the subject site.

(v) 50 Wrights Road, Kellyville. This site was purchased as a vacant site by Coles Myer Property Developments Limited, on 1 March 2000, for $5,325,000. This site is not located in a town centre, but in a catchment area that is comprised of a developing suburb. Mr Jackson considers these sites are superior because they are not subject to the same level of retail competition as the subject site. Mr Jackson adjusted the sale figure of $324.58/m2 downwards by 30 per cent to derive a value of $227/m2. Mr O’Leary considers these sales have inferior commercial potential to the subject site because of their proximity to larger commercial centres at Castle Hill and Bella Vista. Mr O’Leary adjusted the sale figure upwards by 15 per cent to arrive at a value of $373/m2 ($15,983,464) for the subject site.

(vi) 1496 The Parkway, Beaumont Hills (30 per cent of size of subject site). This site was offered for public auction on 1 June 2006. Neither valuer placed great weight on this sale and I do not need to consider it in my view, given that the sale date is much later than the rest of the comparable sales.

Adjustments

27 The table (Exhibit K) identifies several heads of adjustment for size, location, flexibility of planning controls, topography (really frontage) and time. Because the subject land is 4.282 ha it is much larger than any other of the comparable sales. All sales were substantially reduced by 20 to 25 per cent by both valuers for that reason.

28 There was otherwise fundamental disagreement between the two valuers on the correct approach to the comparable sales, reflected in the different adjustments made by them. Mr O’Leary made a number of adjustments for location, flexibility of planning controls and topography (frontage) that Mr Jackson considered inappropriate. Some of the disagreement related to the different views of the valuers on highest and best use.

29 The Applicant’s valuer, Mr Jackson, particularly relied on the Greystanes sale and the Kellyville sales as the most comparable sales. The Valuer-General relied on the Mona Vale sale and the Revesby sale as the most comparable sales.

Highest and best use

30 Mr Jackson considered the highest and best use was for retail use across the whole site, the same use as exists on the land now. Mr O’Leary considered that as the subject site is zoned to allow a range of uses there is potential for part of the site to be developed for other than retail use. He accepted the predominant use would be retail, but considered there was also potential for other unspecified commercial uses on an undefined area on the northern part of the site. He did not adopt a hypothetical development approach but argued this possibility for mixed retail/commercial development should be valued. This approach was criticised by the Applicant for failing to identify what was the highest and best use to be relied on, the first fundamental task to be undertaken on a valuation exercise.

Flexibility of planning controls

31 Because of Mr O’Leary’s view of highest and best use, he adjusted some of the comparable sales on the basis of whether he considered there was flexibility of use, meaning mixed retail/commercial, enabled by the zoning of a particular site. The value of this development potential was about ten per cent greater than for Greystanes and five per cent greater than for Kellyville. No adjustment was made for the Mona Vale or Revesby sales on this basis because these were said to be comparable to the subject site in that the zoning of those sites allowed for flexibility of use similar to the subject site. Essentially what was being allowed for was a “chance” that a wider range of purchasers would be interested in the property, meaning more competition in the market, according to the Valuer-General’s counsel.

32 Mr Jackson considered no adjustment should be made on this basis and considered to do so was methodologically flawed.

33 I agree with Mr Jackson’s criticism of Mr O’Leary’s approach to the identification of the highest and best use in this case, which was that Mr O’Leary failed to identify a highest and best use with sufficient precision. There was no attempt by Mr O’Leary to identify how much of the site would be used for unspecified commercial uses in addition to a dominant retail use. Mr O’Leary’s approach did not accord with the usual valuation practice of identifying the highest and best use in a way that could be analysed in a comparable sales analysis. While the Valuer-General’s counsel relied on Hill J in Park (see quotation at par 16) presumably because his Honour states that it is not inappropriate to value a property taking into account a potential development because potential purchasers would include a person who would maximise usage of the land, I do not think that overcomes the responsibility of the valuer to specify what that potential development is with sufficient specificity to enable its assessment in terms of comparable sales. I do not consider that has been done in this case by Mr O’Leary.

34 If I am wrong and Mr O’Leary’s approach was correct I would still have difficulty with Mr O’Leary’s approach to the adjustment of sales on the basis of flexibility of zoning because all but one of the comparable sales he relied on are for retail sites only. Only Mona Vale has a mixed retail and commercial (non retail) use although the retail use is dominant. All the other comparable sales such as Revesby, which the Valuer-General also relied on, are exclusively retail. Mr O’Leary made no adjustment for Revesby because he considered it was similar to the subject site as it had potential for residential development. It was argued that Mr O’Leary’s experience enabled him to discern this difference between the comparable sales but given that Mr Jackson, another experienced valuer, saw no basis on which this adjustment could be made I do not find Mr O’Leary’s evidence convincing. An analysis of the history of the comparable sales does not suggest that this was a relevant factor in the price paid for those sales.

35 It follows that I should not make the adjustments as Mr O’Leary does for flexibility of planning controls.

Topography/frontage

36 Another adjustment made by Mr O’Leary was based on whether the frontage of the comparable sales was similar to the subject site, which he called “topography” in the table Exhibit K. It was his view that the subject site had superior frontage because it was bounded by roads on four sides, albeit with pedestrian access only on one side. He adjusted most of the sales upwards in comparison to the subject site on this basis, by five per cent for the Greystanes and Kellyville sales. There was no adjustment made to the Mona Vale and Revesby sales on this basis.

37 Mr Jackson did not agree that any adjustment to these sales was necessary on the basis of the subject site having superior frontage and I agree. There was no evidence that the sales at Greystanes, Kellyville or any other were in any way disadvantaged by their frontage compared to the subject site, as was clear from the view of both sites. I do not consider any adjustment on this basis is warranted.

Location/demographics
(i) Valuers’ approach

38 The area of major difference between the two valuers was that Mr O’Leary considered that a location in a town centre area was generally superior to any other site for a retail facility and made a substantial adjustment of several sales on this basis. Mr O’Leary considered the subject site, being a subregional centre located in a town centre with a railway station, would draw from a wider catchment area than the 3kms identified by Mr Dimasi. He therefore considered the site was substantially superior to Greystanes and adjusted the sale upwards by 25 per cent, adjusted the Revesby sale upwards by ten per cent, and adjusted the Kellyville sales upwards by 25 per cent.

39 Mr Jackson did not agree there should be any presumption that location of a retail centre in a town centre was always better, and considered the circumstances of each individual sale had to be analysed. He took into account the information on demographics and income levels of Mr Dimasi to use as a comparison between the various comparable sale sites. This suggested that in his view the subject site was an inferior retail outlet compared to sites such as Kellyville and Greystanes. Mr Dimasi’s evidence suggested that with a retail floorspace provision of 1.78m2 per section within a 3km radius, Fairfield Forum was in a highly competitive retail environment. This level of provision was the greatest of any of the comparable sales, with Greystanes lowest at 0.30m2 per person and Kellyville at 1.12m2 per person. Fairfield also has substantially the lowest income level of any of the comparable sales sites.

40 This analysis is also confirmed by the rent paid by the principal tenants at all the comparable sale sites according to Mr Jackson. The rent paid generally reflects what the tenant considers worthwhile paying in light of sales volume. Mr Jackson obtained rents paid by the principal tenants at several of the comparable sale sites as follows:

Property	$/m2
Fairfield Forum, Fairfield (subject) - Coles	$120/m2
48 – 70 Marco Avenue, Revesby – Woolworths	$280/m2
10 Park Street, Mona Vale – Coles	$232/m2
48 Wrights Road, Kellyville - Woolworths	$278/m2
Neeta - Woolworths	$100/m2

41 The rents showed that at $120/m2 for the subject site and $100/m2 for the Neeta Centre, also in the Fairfield town centre, these developments had substantially the lowest rents of the comparable sale sites at Revesby, Mona Vale and Kellyville.

42 Mr Jackson adjusted the Greystanes sale downwards by 15 per cent, the Revesby sale down by 25 per cent, Mona Vale down by 40 per cent, Kellyville by 15 per cent when comparing it to the subject site because he considered it to be inferior to these sales as a retail outlet.

(ii) Parties’ arguments

43 The Applicant submitted in argument that information about average household income and likely population growth rates would drive the decision about which retailers find which locations desirable. Premises that command high rents offset site development costs, which increases yield, a figure that drives land value on retail sites. Higher income demographics do not always translate into higher land values because there are other relevant factors such as competition and development controls. Analysis of the subject site makes clear that it is the least valuable of all the comparable sales, based on Mr Dimasi’s information. Further the likelihood of growth of the retail market is a relevant factor a purchaser of a retail site will consider. A retailer will be interested in securing a market share in a retail catchment area that is growing. The subject site is in an area with substantial supply of retail provision. Even if the current development on the site is ignored, as it must be for the purpose of this exercise because the land is assumed to be vacant, there will be a lot of retail outlets on offer in Fairfield. The subject site is inferior on this basis to the other comparable sales.

44 The Valuer-General argued that the Applicant had not made good its argument that there is a connection between demographic characteristics and land values. The Kellyville sales at $287.34/m2 and $324.58/m2 were less than the Mona Vale sale, yet they had the highest household incomes for the population in the catchment area. An adjustment should be made up, not down, in respect of sites which are located in existing and established commercial centres. The demographic factors are subsumed by the wider locational criteria adopted by Mr O’Leary.

45 Nor should it be assumed that a greater amount of retail floor space per capita results in lower land values. This is also clear when Kellyville and Greystanes sales are considered because while they have arguably less floorspace per capita than the sales in subregional and town centres, their land values were less. Subregional centres have the capacity to attract a range of shoppers beyond their immediate catchment area as there is a wide range of retail options available.

(iii) Finding on location/demographics

46 While the parties’ counsel made general submissions as set out immediately above on the appropriate approach that should be taken, it is the valuers’ analysis of the chosen comparable sales which is particularly important in determining what the appropriate value of the subject site should be. I consider the overall analysis and reasoning of Mr Jackson was the most cogent on the issue of location. His analysis is supported by relevant demographic information from Mr Dimasi and confirmed by the rental information he obtained as set out in par 40. I consider such information is relevant when assessing a retail market and that Mr Jackson’s use of this information was correct.

47 In terms of individual sales, Mr O’Leary relied on Mona Vale as another similar sized development compared to the subject site. Mr O’Leary deducted 20 per cent while Mr Jackson deducted 40 per cent for location. I agree with Mr Jackson that the demographics and income level of Mona Vale are very different to Fairfield and the subject site. While they may be of a similar size there are a number of other factors which suggest this is not a comparable sale and that Mona Vale is a substantially superior location to the subject site. I do not accept Mr O’Leary’s assumption that the location of a retail outlet in a town centre is always a superior location to a district or neighbourhood centre. Such a conclusion is not demonstrated by this comparable sale, in my view.

48 The other primary sale relied on by Mr O’Leary was the Revesby sale. Mr Jackson reduced this sale by 25 per cent for location partly because there is less competition than the subject site and also because it was sold subject to a valuable long-term lease to Woolworths. Mr O’Leary adjusted this sale up by ten per cent for location because the subject site was in a larger town centre and therefore superior. I agree with Mr Jackson’s analysis of this sale at par 25(ii). For the reasons he gives I do not consider this sale supports Mr O’Leary’s conclusions.

49 I also consider the overall analysis and reasoning of Mr Jackson in relation to the Greystanes and Kellyville sales is to be preferred. I consider his application of Mr Dimasi’s evidence is appropriate and that his conclusions are confirmed by that evidence.

50 While the Valuer-General argued that the demographic information Mr Jackson relied on was not reflected in the land values for the Greystanes and Kellyville sales, or that the availability of retail floorspace necessarily drives land value, I accept the Applicant’s submissions that the demographic information and retail floorspace availability are factors taken into account by a particular retail market. They are not the sole determinants of land value but are clearly significant matters to take into account in a retail market, as Mr Jackson has done.

51 While Mr Jackson’s adjustment of sales did result in there being substantial adjustment of the comparable sales in relation to the subject property to a greater extent than is generally considered desirable, this was due in large part to the initial substantial adjustment both valuers had to make to allow for the substantial size of the subject property compared to the comparable sales which were all much smaller. As I have otherwise accepted his reasoning process I do not consider this factor undercuts his analysis and application of the sales.

Conclusion

52 I consider the value Mr Jackson has derived of $9,420,000 should be the land value assessment at the base dates 1 July 2003 and 1 July 2004.

53 I make the following orders pursuant to s 40 of the Valuation of Land Act 1916:

(a) In proceedings 30043 of 2005, in respect of the claim for the base date of 1 July 2003:
(i) appeal allowed;

(ii) the decision of the Valuer-General to which the appeal relates is revoked

(iii) the land value of the subject land, 36 Station Street, Fairfield, as at 1 July 2003, was $9,420,000.

(b) In proceedings 30815 of 2005, in respect of the claim for the base date of 1 July 2004:
(i) appeal allowed;
(ii) the decision of the Valuer-General to which the appeal relates is revoked;
(iii) the land value of the subject land, 36 Station Street, Fairfield, as at 1 July 2004, was $9,420,000;

(c) The exhibits may be returned.

(d) Costs are reserved.

ANNEXURE A

Table 2.1

Key characteristics of catchment within 3km radius of Fairfield, Kellyville, Greystanes, Beaumont Hills, Revesby and Mona Vale

Fairfield Forum	Kellyville	Greystanes	Beaumont Hills	Revesby	Mona Vale	Sydney Metro area
Population within 3km of site
Population 2001	71,000	30,590	39,750	15,817	56,934	27,459	4,154,700
Population 2005	72,040	34,550	41,110	24,820	57,694	28,179	4,260,800
Population 2016	73,100	41,890	46,300	45,820	59,510	29,000	4,699,400
Socio-demographics
Average income per person	$14,946	$29,898	$22,020	$27,593	$20,932	$30,544	$24,999
Variation from Sydney average	-40.2%	19.6%	-11.9%	10.4%	-16.3%	22.2%	na
Average household income	$45,488	$101,839	$63,683	$86,459	$59,185	$78,596	$67,419
Variation from Sydney average	-32.5%	51.1%	-5.6%	28.2%	-12.2%	16.6%	na
Retail spending information
Average retail spend per capita ($) 2005	$8,142	$11,994	$10,684	$11,402	$10,429	$12,994	$10,974
Variation from Sydney average	-25.8%	9.3%	-2.6%	3.9%	-6.0%	17.1%	na