Mirage Resorts Holdings Pty Ltd as trustee for the Gold Coast Resort Trust v Chief Executive, Department of Natural Resources; Pacific Mirage Pty Ltd v Chief Executive, Department of Natural Resources
[1997] QLC 99
•27 June 1997
|
LAND COURT
BRISBANE
27 JUNE 1997
Re: Appeals against determinations of Chief Executive,
Department of Lands - Gold Coast City Council
(AV95-317)
Mirage Resorts Holdings Pty Ltd as trustee for the Gold Coast Resort Trust
v.
Chief Executive, Department of Natural Resources
(formerly Department of Lands)
(AV95-318)
Pacific Mirage Pty Ltd
v.
Chief Executive, Department of Natural Resources
(formerly Department of Lands
(Hearing at Coolangatta)
D E C I S I O N
Introduction
These appeals concern contiguous parcels of land near Surfers Paradise on the Gold Coast which comprise two of three parcels developed together on the eastern side of The Spit. The larger of the subject blocks is the site of the Pacific Mirage International Hotel Resort (the “Mirage”). In the annual valuation of the area as at 1 January 1995, the respondent Chief Executive determined the unimproved value of that land to be $14,800,000. The appellant objected to the valuation but the objection was disallowed. The appellant then appealed to the Land Court, estimating the unimproved value of the land to be $11,000,000.
The smaller of the two subject parcels is the site of a condominium development. In the annual valuation of the area as at 1 January 1995, the respondent determined the unimproved value of that land to be $5,250,000. The appellant objected to the valuation but the objection was disallowed. The appellant then appealed to the Land Court, estimating the unimproved value of the land to be $3,750,000.
The two appeals were heard together. The grounds of appeal in each were the same and were expressed in the following very general terms:“(a)The valuation is excessive and does not comply with the provisions of the Valuation of Land Act.
(b)The valuation is wrong in law and contrary to law”.
The appellants were represented at the hearing by Mr GR Allan, a barrister, and valuation evidence was given on their behalf by Mr Russell G Brown, a registered valuer in private practice. Mr PD Grennan appeared on behalf of the respondent and valuation evidence was given by Mr IL Hawley, a registered valuer with the Department of Natural Resources.
The law
The Valuation of Land Act 1944 provides that the unimproved 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 (s.3(1)). The Act also provides that the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be on the owner (s.45(4)).
The legal principles to be applied in this case were usefully summarised in Grahn v The Valuer General (1992) 14 QLCR 327 at 328. In its reasons for judgment, the Land Appeal Court relied on decisions of the High Court of Australia and the Land Appeal Court as authority for a series of propositions which, in summary (updated to reflect legislative and administrative changes), include the following:(a)The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land.
(b)Section 33 of the Valuation of Land Act 1944 creates a presumption that the value in money terms shown by the Chief Executive in his notice of valuation is correct.
(c) Once it is shown that:
in making the valuation the Chief Executive acted upon a wrong principle, or made a serious error of fact; or
the valuation was made by a method fundamentally erroneous,
the presumption created by section 33 is rebutted.
The subject parcels
The subject parcels are situated at Seaworld Drive, Main Beach. They are, practically speaking, beach-front lots with views of and unrestricted access to the Pacific Ocean in the east. The land is situated about 1 kilometre north of the intersection of Seaworld Drive and Main Beach Parade, some 4.5 to 5 kilometres north of the Surfers Paradise central business district (the “CBD”).
Development on the western side of Seaworld Drive comprises tourist-oriented facilities, including upmarket retail outlets, restaurants and marina facilities. The northern most of the two blocks has the condominium development. Adjacent to it to the south is the larger block on which the Mirage is located. Immediately to the south of that block is the Sports Mirage Complex which is used in conjunction with the hotel and is contained within a park and recreation reserve. The park and recreation reserve adjoins the blocks to their south and north and their eastern boundary extending to the high water mark. A public walkway has been developed close to the eastern boundary of the subject parcels and extends along the entire frontage of those sites. For that reason the subject parcels may not be considered to be “absolute” beach front properties.
Seaworld Drive comprises a four lane full-width bitumen sealed roadway with concrete kerbing and channelling, divided by a central grassed median strip. Access to each subject parcel is available from the south bound lanes.
Services available or connected to the land include electricity, water, sewerage and telephone.The appellants described the subject parcels together as a low density beach front site with the following characteristics:
beach frontage (public thoroughfare in front);
limited height to three storeys affording only a small percentage of the developed rooms with a beach view or any significant aspect;
isolated location outside of the CBD, with poor surrounding development infrastructure, limited retail and poor visual amenity; and
fragile environment which necessitates an expensive sea wall for protection of the site. (The relevance of the sea wall will be discussed later in these reasons for decision.)
As most of the discussion at the hearing concerned the site of the Mirage, it is appropriate to consider first its features.
The hotel land
Features: The southern of the two parcels is Lot 239 on Plan WD 6317 in the Parish of Gilston, County of Ward (the “hotel land”). It comprises 3.45 hectares of undulating sand dune, with medium elevation, rising slightly from the road frontage to coastal dunes in the east. The site is well drained.
The hotel land is zoned “Special Facility International Hotel” under the Town Planning Scheme of the Gold Coast City Council effective at the date of valuation.
The hotel land is developed with a 296 bed five star international hotel built to a height of three storeys. The improvements are confined to a hotel construction. The regulations which controlled development of the site were under the Town Plan of Gold Coast City Council gazetted as at March 1982, and were the same as for the adjacent block to the north. According to Mr Hawley, the maximum density permitted at the time of its construction was equivalent to 345 beds.
The valuation of the hotel land at $14,800,000 is an average of $430/m² for the site.
The features of the hotel land which Mr Brown described as relevant to the valuation of that land were:
(a)the restrictive town planning considerations, in particular:
• the low density rate; and
•the three storey height limit on building with consequently limited ocean views (According to Mr Brown, the development was allowed on the basis that it could not be seen from the beach. Dune heights were lowered to enable ocean views to be obtained from some rooms but, if the dunes had remained in their original condition, no hotel rooms would provide such a view);
(b) the inferior tourist location, in particular:
•unlike many international hotels it is outside the CBD and away from the main tourist facilities, such as restaurants and night clubs, so patrons need to travel to the CBD to avail themselves of the full range of entertainment available at the Gold Coast;
•it is opposite a “poor site”, the Fishermans Wharf retail/hotel development which has a chequered history (being, from time to time, in receivership and for sale) and which does not provide an attractive view from the subject land;
•it has very limited international tourist infrastructure; and
•it is in an area of bushland that is said to be dangerous at night, and the Fishermans Wharf area “is not a most salubrious place to be walking around in the middle of the night”;
(c)the beach frontage (although that is “hindered” to a limited extent by the public walkway along the eastern side of the hotel land and the revegetated buffer area); and
(d) the large size of the site, which lends itself to resort style use.
Generally speaking, the respondent did not take issue with the above descriptions. Mr Hawley gave opinion evidence to the effect that:
(a)views were available from more of the hotel rooms than Mr Brown might have suggested and the flattening of the sand dunes resulted in a more open view of the ocean than might otherwise have been obtained;
(b)development of the Spit (as demonstrated by the Development Control Plan) was tourist oriented and, although there were vacancies at Fishermans Wharf, that site contained operating business ventures with restaurants and other facilities for tourists and so did not detrimentally affect the hotel land;
(c)the beach frontage was superior to, say, the broadwater frontage of the Fishermans Wharf site, and throughout the Gold Coast region beach front properties attract a higher level of value.
There was no dispute that the beach frontage is an advantage and has a significant effect on the value of the hotel land. Mr Hawley argued that an esplanade frontage site is worth about 50% more than a comparable site well back from the ocean. An absolute beach frontage site would be worth substantially more. Mr Brown’s evidence was that the hotel land had the advantage of being, in a practical sense, a beach front property but the disadvantage of being outside of a CBD. In his opinion, an ideal location would be “adjacent to Gold Coast Highway if it ran close to the beach, right in the centre of CBD with a beach front site”. He concluded that the subject site should carry a premium of approximately 50% over the rates it would have attracted had it been in or close to the CBD. That figure takes into account a number of factors including the larger land area per room than on the sale properties. He said that he also made an allowance of 15% to account for the height restrictions on buildings on the subject land. His evidence concerning the comparability of sale sites can be assessed in light of those observations.
Highest and best use: The hotel land was characterised by Mr Grennan as “difficult”, “special” and “hard to value”. Mr Hawley was unwilling to describe the hotel land as unique, but agreed that the land and location are “quality and prestige” and described the land as “certainly a prestige property”.
There was no dispute that the highest and best use of the hotel land was for hotel purposes. During the hearing (though not in the written valuation reports) there seemed to be some disagreement about the type of hotel development that was most suitable for that land. In summary, the appellant contended that the highest and best use of the hotel land was for a five-star luxury international hotel. The respondent’s position was less clear, contending on one hand that the site had a capacity for a 690 room development which would not be of five-star standard while, on the other hand, apparently accepting that it was a five-star site. It is necessary to consider the basis for the respondent’s apparent ambiguity on this point.
In his valuation report prepared before the hearing, Mr Hawley stated that the “highest and best use of the subject land at the relevant date would be development of a five star International Hotel” (Exhibit 4). In his oral evidence, Mr Hawley initially baulked at the appellant’s assertion that the highest and best use of the hotel land was for a five star hotel. He then said that “it quite probably could be and probably is a five-star site”. Having given that description, Mr Hawley was unwilling to nominate a number of bedrooms that would be suitable for the site. He did, however, mention industry guidelines which, he said, nominate an area of 74.5m² for a high class facility hotel room. On that basis, I calculate that about 555 high standard bedrooms could be constructed on the hotel land. The matter was not pursued and I cite it only to show that on Mr Hawley’s evidence, the hotel land would not support a high standard hotel of 690 rooms.
Mr Hawley’s apparent equivocation about the highest and best use of the hotel land seems linked to the change in the planning restrictions which applied to that land between the time when the Mirage development was approved and the relevant date of valuation. Details of those changes can be ascertained from information provided in Mr Hawley’s valuation report.
Approval for development of the hotel land was given under the Town Plan of Gold Coast City Council gazetted as at March 1982. Regulations which controlled development of the site were set out in the Development Control Plan for The Spit Precinct 4 Seaworld Drive East. In summary they are:
Site coverage shall not exceed 25% (though the Town Planning Permit No 6/1173 for the land allowed site coverage not to exceed 40%.).
Building height not to exceed RL 13 metres (though the Town Planning Permit allowed a greater height but not exceeding 3 storeys)
Plot ratio not to exceed 1.0
Population density not to exceed 200 people/hectare (or 1 bed/100m²). This is equivalent to 345 beds for the net site area, as compared with the 296 that have been constructed.
20% landscaping.
At the date of valuation the development conditions for Precinct 4 Seaworld Drive Central were, in summary:
Site coverage shall not exceed 40%.
Building height not to exceed 3 storeys RL 13.5.
Plot ratio - basic plot of .8:1, maximum plot of 1.2:1.
Population density is equivalent to 1 bed/50m² of net site area or 400 people per hectare. This is equivalent to 690 beds for the net site area.
20% landscaping.
Putting to one side concerns about whether there was documentary authority for those figures (a matter to which reference will be made later in these reasons for decision) the latter conditions indicate that the hotel land was capable of a greater density of development at the date of valuation than at the time when approval for the present development was given.
The respondent argued that, having regard to the Town Plan and particularly the building height and building area restrictions, the subject land was capable of supporting a 690 room development. In Mr Hawley’s opinion that would be the maximum development allowable. He came to that view on the basis that the Development Control Plan which was operative at the time of the approval (4 April 1986) allowed, in effect, half of what is permitted under the planning scheme said to be operating at the relevant date of valuation. He considered that the land owner believed that it did the best it could with the hotel land at the time when the Mirage was developed. The current Town Plan had doubled the density of possible development. The land had to be valued as at the relevant valuation date irrespective of what had actually been constructed on the site in compliance with conditions which existed at some earlier time.
Mr Hawley did not attempt to ascertain from the Gold Coast City Council whether it was possible to achieve 690 suites to a five star international resort standard on the hotel land. He conceded, however, that a 690 room development would not be to a five star standard. A development to that standard “would perhaps warrant larger rooms”. He did not know how many rooms of that type could be developed. Rather, a 690 room development “probably would be closer related to maybe a three-star hotel where the room sizes would be inferior to that of a five-star”.
Mr Hawley said that the constraints for the site were set down in the Town Plan and he had valued the hotel land accordingly. In his opinion, however, the value of the land should not vary by reference to whether the land was to be used for a five-star or a three-star hotel. Mr Grennan later described Mr Hawley’s evidence as agreement “that it’s possible that the highest and best use is as an international hotel”. He submitted that the value of land is not influenced by the lawful use of the land which is actually adopted.
Although the permit allowing development of the hotel land, and the application for that permit, did not specify the number of rooms which could be developed there, Mr Brown described the maximum development of the site to be for 296 bed rooms. In his opinion, the site could not be developed for more bed rooms (certainly not the 690 calculated for the net site area) and retain its international hotel status. Indeed he noted that the ancillary areas (such as restaurants and foyers) are smaller than comparable facilities in other five star resorts throughout Australia. Consequently, the ratio of rooms to total building area at the Mirage is greater than at those other resorts, suggesting that the maximum number of rooms have been achieved on the hotel land. Mr Brown acknowledged that, under the relevant planning constraints at the date of valuation, it may have been possible to apply for a new type of development on the land. In light of the history of the development of the site, however, he thought that the Council would have great difficulty in allowing any extra height or density of development on the land. I do not understand the respondent to be suggesting that a greater height was possible. Indeed the instrument summarised above shows that, in effect, a three storeys height is one of the constants in the consecutive Development Control Plans.
The critical issue is whether more units could have been built as at the relevant date of valuation. In Mr Brown’s opinion, because of its position and the need for any development there to draw its own clientele, the hotel land could not be developed for anything other than a five star hotel. To attract people to and keep them at the resort, any such development must include appropriate landscaping and facilities such as swimming pools. Given the height constraints, most additional rooms constructed on the site would probably not have sea views. The lack of a sea view would influence the commercial viability of a lower standard of development (say a three or three and a half star development) on that land, even though it would have many more rooms than the Mirage. By comparison, although the nearby Fishermans Wharf area is inferior overall, it has the advantages of a retail component, a pleasant outlook to a hotel, and a potential marina development. Most of the rooms on a hotel development there would have a water view. In summary, the subject property “has been developed to its maximum density and it is utilised presently at its highest and best use”.
The concept of highest and best use is fundamental to the valuation of land under the Act. Indeed the Land Appeal Court has stated that it is axiomatic that the law requires land to be valued for its highest and best use (see Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands, AV93-561, unreported decision dated 26 April 1996). The concept of highest and best use has been variously described but carries with it the notion that it is the use of the land that will realise the highest price (see Goode v Valuer General (1979) 22 SASR 247 at 256, cited with approval in the Caltex judgment). As Carter J said in Stubberfield v Valuer-General:“It is also a well recognised principle that land be valued for its highest and best use. What it can best be used for will be reflected in its true market value which takes account of any detriment the land possesses relevant to its use as well as any potential it has for its present or other use.” ([1991] Qd R 278 at 283, (1989) 12 QLCR 328 at 331)
There is no statutory definition of what constitutes highest and best use. It was described by Isaacs J as “the most advantageous purpose for which [the land] was adapted” (Spencer v The Commonwealth (1907) 5 CLR 418 at 441).
It is also important to remember that the land to be valued has to be taken as it exists at the date of valuation and be valued in its unimproved state having regard, among other things, to the uses permitted by the planning instruments in operation at the date of valuation.
The evidence shows that the Mirage development was an expensive use of the hotel land. I have concluded, however, that, having regard to its size, location and other features, the highest and best use of the hotel land is for a five star international hotel with possibly a few more rooms than the 296 beds currently at the Mirage but nowhere near the 690 contended for by the respondent. I note that the existing Mirage development was not to the maximum density apparently permitted by the relevant planning instruments then in force. Mr Brown’s evidence suggests, however, that the Mirage development was an optimum if not maximum use of the land. The evidence, such as it is, indicates that it is unlikely that a 690 bed development would have been approved on the hotel land at the relevant valuation date and that a development of that order could not be of five star standard or anything close to that standard.
Having made that finding, I note that Mr Allan took issue with so much of Mr Hawley’s evidence as related to the development of the hotel land as of right to 690 hotel suites. His attack was two pronged. First, he said, Mr Hawley lacked town planning qualifications and so could not give expert evidence as to the development potential of the land. Second, the relevant Development Control Plan was not in evidence and so the Court could not, on the basis of Mr Hawley’s evidence alone, make a finding of fact that the land had such development potential. The only firm evidence of potential was the 1986 Town Planning Permit No 6/1173 copied in Mr Brown’s report (Exhibit 3). In Mr Allan’s submission, such evidence as there is could lead to findings that a different Development Control Plan was in force at the relevant date of valuation and that it was at some variance with the 1986 Town Planning Permit. The evidence could not support, however, a finding that the site could be used for a 690 rooms development, particularly as the approval given in 1986 was not for the maximum development which the plan suggested was permissible.
At the end of the hearing, and after he had made his submissions, Mr Grennan sought to tender a copy of what I understood to be the Development Control Plan for Precinct 4 applicable to the subject land at the relevant date of valuation, together with a copy of the Town Plan. He said that these were the documents on which Mr Hawley relied. The tender was opposed and, after some discussion of the difficulties of accepting such evidence at that stage in the proceedings, the tender was withdrawn. Consequently, there is no documentary material against which to assess Mr Hawley’s assertions about the maximum development potentially permissible on the hotel land.
Given my conclusion about the highest and best use of the hotel land, the absence of such material is not fundamental to an assessment of the respondent’s case. Its absence is, however, an unsatisfactory aspect of these appeals.
Valuation approaches
Having concluded that the highest and best use of the hotel land is for a five star international hotel, I agree with Mr Allan’s submission that, broadly speaking, the issue in these cases is to be resolved by reference to valuation methodology. The rejection or acceptance of each valuer’s conclusion depends on which methodology is thought appropriate. Accordingly, before turning to the sales evidence it is appropriate to consider the different approaches taken by each party’s valuer.
Mr Brown compared the hotel land and the condominium land with other sites by reference to their notional “room rate” value as indicated by sales in the district of the subject land. . The sales, most of which were hotel sites, varied substantially in regard to yields. Mr Brown calculated the notional sale price per room of each parcel of land sold. The room rate was a common denominator which tended to eliminate the variations between them. The methodology was adopted because of the low density approval of 296 rooms for the 3.45 hectares of the hotel land. In Mr Brown’s opinion, the method “eliminates the large density variances from the comparison and allows site quality per room to become the determining unit of comparison” (Exhibit 3 page 5). Because it eliminates the need to compare large areas with small areas it is, he suggested, the best means of comparing and achieving relativity between the sales and the subject land. In his opinion, the analysis demonstrated a clear pattern on room rates, “irrespective to some extent of the size of the development”. The methodology reflects what happens in the market place “in that in looking at these sites potential purchasers look at firstly the amount of building or the amount of rooms that they can actually achieve from the individual site”. Because the principal concern of the purchaser is the number of rooms that can be achieved on the site, that is reflected in the sale prices. Importantly, he considered that the sale blocks and the hotel land had been developed to their highest and best use.
When calculating the unimproved value of the subject parcels, Mr Brown had tried to ascertain what the subject land would have been worth if it had been located close to or within the CBD. Sales evidence indicated a range in values of between $16,130 and $21,600 per room for hotel sites close to the CBD on major thoroughfares. Other high rise residential properties with beach frontage or views over the beach showed a rate of between $24,000 and $62,300 per room. He concluded that the property, if located in the CBD in a reasonable location with 294 rooms would attract a value of $25,000 to $26,000 per room. That amount would reflect the overall standard of the development. As noted earlier, he had then added approximately 50% to the CBD room rates to make allowance for such factors as the particular location of the land and the larger land area per room. Although he said that he had made a further allowance of about 15% for the height limitations and other development constraints on the subject land, the resulting values per room which he assessed ($38,500 on the hotel land and $37,000 on the condominium land) reflect the increase for beach frontage but little, if any, allowance for development constraints.
By contrast, Mr Hawley based his valuation on a rate per square metre value of the subject land, which rate was calculated by reference to sales of land used for multi-unit residential development. He had valued the subject land in its unimproved state as a beach front site taking into consideration the potential allowed by the current Town Plan. He had not attempted to calculate how many units would have a beach front view. Mr Hawley was aware of the sales referred to in Mr Brown’s report and argued that, although they support the level of valuation that he had nominated, the sales on which he relied gave a better indication of the value of the subject land. In his opinion, purchasers of sites for five star hotels (even where there are relatively low building height restrictions) and purchasers of sites for multi-unit residential uses pay similar rates per square metre for suitable land. It should be noted that Mr Brown had initially analysed the sales on a rate per square metre basis but, because the rates varied substantially from one to the other and, consequently, he had found it difficult to realistically compare the sites.
Mr Hawley’s oral evidence was unclear on one important factor to be considered when valuing the subject land, namely, whether land with high rise potential was more valuable than similar land with height restrictions of three storeys. In his written valuation report on each of the subject parcels he stated, in relation to Sales 1-3, that the sale land had “superior development density and high rise potential” when compared with the subject parcel (Exhibit 4). Sales 1 and 2 were not beach front properties (and he later withdrew Sale 2 from consideration in this case). Sale 3 is an absolute beach front site. Sale 4 was described as having “similar height and coverage restrictions” to the subject, and Sale 5 was described as having “similar area density and height controls” as the subject land. When cross-examined about absolute beach front sites, he expressed the view that “when you look at the sites as vacant sites the market pays the same irrespective of the height” of building permitted. Later, when re-examined, he agreed that he had made allowance in his written reports for beach front sites with high rise potential as compared with a site that is restricted to buildings of three storeys. Indeed, he said, “Quite probably the restrictions placed on the site due to its three-storey nature of the subject would have an effect on the application per room per square metre. ... If the subject hotel site didn’t have the three-storey height restriction then I believe it would be on a rate pro rata to that of the beach front sites.” Such a rate would be substantially more than the $430/m² which he had calculated for the hotel land and more than the $700/m² which he had calculated for the condominium land. I am satisfied that Mr Hawley’s considered opinion was that building height restrictions do influence the value of a site and I have considered his evidence in that light.
Although he had not used the rate per bedroom method of analysis, Mr Hawley said that the approach is not incorrect and it can be used as a check on the approach which he had adopted. He agreed that an analysis of the appellants’ sales evidence on a rate per room basis showed a trend. But he drew a distinction between the analysis of consent uses of land which have been achieved and the “as of right” uses of land stipulated in the Town Plan which permit a greater number of bedrooms for the hotel land. Whether a developer would achieve (or had achieved) the maximum number of rooms permitted on a site was not taken into account in his analysis. It is necessary, he said, to look at the permitted density of development - the as of right use - “so we’re comparing like with like”. In other words, “if you look at what’s achieved and what is achievable you get a distorted picture in the bottom line dollar per unit”. If a developer did not achieve what was permitted, the rate per bedroom would be greater than the rate per bedroom calculated by the as of right use. Thus, although a prospective purchaser of a site will take into consideration the number of rooms which he can develop on the site, the rate per square metre approach “brings everything back to a common denominator” or “the same level”. Mr Grennan made submissions to the same effect.
Apart from the factor just mentioned, there are difficulties in employing both approaches as checks on each other. One factor complicating any attempt to make a direct comparison between the trends indicated by the different methods of analysis is the size of the subject land. According to Mr Hawley, the market dictates that little allowance is made for the size of beach front properties up to about one hectare, or possibly 1.5 hectares. The hotel land is so much larger than that, “we’re in an area that’s unknown to us” when making allowance for the greater size.
In Mr Grennan’s submission, the respondent’s valuation approach should be preferred because it is the simplest way to reduce all matters of valuation to the lowest common denominator. He expressly did not deny that the land could be looked at in various ways but submitted that if properties were to be analysed on a rate per room basis then one should look at the maximum as of right use or maximum allowed use. A higher class of use (in this case, one with fewer rooms) should not be the basis of reducing the value of the land.
The basis of Mr Grennan’s argument is sound. If a site is not developed to its potential then its value cannot be calculated by reference to the relatively low number of rooms constructed there. In my opinion, however, the argument cannot be taken as far as he submitted. The evidence in this case points to two important qualifications. First, it seems that, although planning instruments provide a basis for calculating the maximum as of right use for a site, what is permitted will often be less than the maximum. In any case, a developer may construct an optimum number of rooms on a site, rather than the maximum permitted. If a developer developed, or gained approval to develop, land to its highest and best use then the approved optimum rather than the calculated maximum may provide a better guide to the market value of the land. Second, different land uses require different types of facilities. Earlier I concluded that the highest and best use of the hotel land was for a five star international hotel. The evidence showed that the size of rooms suitable for such a development, and the need to provide related facilities for a resort of that standard, are such that there will be fewer bedrooms on the site of such a resort than there would be if, say, a three star hotel were developed on the same site.
For the appellants it was submitted that Mr Brown’s method of valuation should be preferred because it accords with sound valuation practice and principle to compare like with like. By contrast, it was submitted, a valuation method which compared multi-unit residential sites with sites where the highest and best use is for a five-star international resort is wrong and should be disregarded. (I note that clause 21 of the Town Planning Permit for the hotel land provided that the consent granted “is restricted to the uses applied for which are not to be taken or interpreted as including multi-unit buildings as defined in the Town Planning Scheme”.) Once the methodology is ignored then the sales which were examined using that methodology should be ignored.
Furthermore, it was submitted, the specialised nature of a hotel development was different from that of a multi-unit residential development. Reliance on sales evidence of land of a different type premised on the as of right use of such land is flawed. Thus the only evidence on which a finding could be made about the development potential of the hotel land was the Town Planning Permit. That permit demonstrates the error of valuing sites such as the hotel site on the basis of as of right, or maximum development, potential.
Although there are factors for and against Mr Hawley’s approach, most weigh against accepting it in preference to Mr Brown’s. In summary:
The rate per square metre approach brings everything back to a common denominator, but only if there is a comparison of like with like. In this case there were significant variables (such as different height restrictions on building, differences in areas of sites, and the relative lack of proximity of many sale blocks to the subject land) which show, at least, that such an approach must be significantly qualified.
Although the respondent considered that the highest and best use of the hotel land was for a five star international hotel, the sales on which he relied were of multi-unit residential sites rather than hotel sites.
The analysis was made by reference to the as of right uses rather than what a developer would achieve on the land.
Most of the sales on which the respondent relied were located further away from the CBD and the subject land than the sale properties on which the appellants relied. It is possible that at least some of the sales on which the respondent relies were influenced by local market circumstances.
In summary, the following factors favour Mr Brown’s approach to valuing the subject land:
Most of the sales on which he relied were of hotel development sites, and so were more comparable to the subject land.
The room rate approach reduced the significance of variables such as site size and building height restrictions in determining comparability in the values of sites.
The room rate reflected a market based approach to the development potential of each site.
The room rate was calculated on Mr Brown’s assessment that the sale blocks and the subject land had been developed to their highest and best use.
Mr Allan submitted that, by showing that the respondent’s valuer had adopted the wrong method of valuation, the appellants had demonstrated that the respondent had acted upon a wrong principle and so they had rebutted the presumption of the correctness of the respondent’s valuations found in section 33 of the Valuation of Land Act.
A decision in favour of one approach over another does not, of itself, resolve these appeals. It is necessary to check whether the evidence on which the appellants rely supports valuations at or about the amounts for which the appellants content. Again it is appropriate to look first at the evidence concerning the hotel land.
Sales evidence
Given the unusual size and location of the hotel land, it is not surprising that neither party’s valuer could find sales of land which were directly comparable. Each valuer, however, relied on sales of land in the Gold Coast region which had some common features with the subject land. In light of the conclusions reached earlier, it is appropriate to concentrate on the sales evidence produced by the appellants.
Sale 1: The “Zarrow Arrow” site is 5,482 m² of land bounded by the Gold Coast Highway, Clifford Street, Hamilton Avenue and Remembrance Drive. Excellent access is available from the four street frontage. The land is zoned Comprehensive Development and had Council approval for a resort hotel comprising 417 rooms. It was described as a fringe CBD site with an aspect over the CBD and Nerang River to the north and south respectively. The land was sold in January 1994 for $9,000,000 which shows an average value per room of approximately $21,600. The unimproved value of the land in 1995 was $8,100,000 (an average of about $19,500 per room).
Mr Brown described the sale land as a good site which forms a good comparison with the subject land. There is a “very little retail capacity” at the ground floor and some retail on the Gold Coast Highway. He stated that, on a rate per room basis, the sale site is overall inferior to the subject land. The sale site is a superior hotel location with high density usage and no costly internal site works. Its CBD location gives it some advantages over the subject site, particularly in relation to nearby tourist oriented facilities which could be enjoyed by patrons of the hotel. The block is smaller than the subject but has a larger room yield. It is not, however, a beach front location and so lacks those advantages enjoyed by the subject.
Mr Hawley considered that Sale 1, on a rate per square metre basis, supported his valuation of the hotel land. On a rate per bedroom basis it also supported his valuation, if the number of bedrooms on the hotel land was calculated under the current town planning scheme.
Sale 2: The “Legends Hotel” site has an area of 5,413 m² and is located on the corner of Laycock Street and the Gold Coast Highway. The land is zoned Comprehensive Development and had approval for 403 rooms with a building height of 23 storeys. It is a level, fringe CBD site with a retail component at the lower level. Surrounding development is retail/multi-residential. The land is on the beach side of the Gold Coast Highway and has an aspect over the CBD on the beach side of the highway.
The land was sold in December 1994 for $6,500,000, an average of approximately $16,130 per room. Its unimproved value in 1995 was $6,000,000, an average of about $14,900 per room.
Mr Brown described the sale land as “not overly a brilliant site” for a hotel, but it is being developed in that way. It has a larger room yield than the subject but is overall inferior to it. Mr Hawley considered that Sale 2 supported his valuation of the hotel land.
Sale 3: The Chevron Hotel site has an area of 19,620m² and has frontages to three streets - the Gold Coast Highway, Elkhorn Avenue and Ferny Avenue. The land is zoned Comprehensive Development and had approved hotel development with a reported capacity of 1,570 rooms.
The site has features which make it more difficult to compare directly with the sale land and the subject land, in particular its very large retail component. The sale land is classified as a retail site (the retail area being focussed on the Gold Coast Highway) with a hotel component (to Ferny Avenue).
Mr Brown described the sale land as a “premium site” with “high density characteristics”. It is superior to the subject land, though inferior on a room rate basis because of its size.
The land was sold in October 1994 for $42,150,000. When considered on a rate per room basis, the sale price reflects an average of approximately $26,850 per room. Such an analysis effectively ignores what Mr Brown described as the site’s “very heavy retail component”. By contrast, he analysed the sale price on the basis of 800 rooms and a large retail component. A figure of about $52,700 per room is calculated by reference to the 800 rooms, but that figure disregards the value of the retail component. Mr Hawley also had reservations about using the sale because of the large retail component in it.
Mr Brown recognised that, because of the significance of the retail component, the sale land was “probably a very poor” comparative property for the purpose of valuing the subject land. For the same reason, Mr Hawley had reservations about using it, though he thought that the sale supported his valuation. In my opinion, that site is of no practical relevance to the valuation of the hotel land.
Sale 4: The “Bermudan” land, with an area of 6,765m², is a corner block located at the junction of Birt Avenue and Ferny Avenue. It lies adjacent to the Marriott Hotel on Ferny Avenue with excellent exposure to that road. It is zoned Resort Residential 1 D2 (D2) H7 (H12). On that basis, a building could be 7 storeys (and possibly 12 storeys) high. Approval has been given to resort apartments to 205 rooms. Because fewer than 250 guest rooms could be constructed, the site can only be developed to a resort style hotel (rather than an international hotel) under the Town Plan. Mr Brown understood that the land was to be developed in that way, with strata titled units in a resort atmosphere. The land was sold in August 1994 for $4,200,000, an average of approximately $20,500 per room.
Mr Brown described the sale land as a fair site but one which “really lives off the Marriott”. In more general terms he described the land as inferior to the subject in terms of site quality and yield.
Mr Hawley considered that the sale supported his valuation of the subject land.
Sale 5: The “Corniche” site, with an area of 2,353 m², is a beach front property on the corner of Northcliffe Terrace and Markwell Avenue. It is on the fringe of the CBD, has two street access and is zoned Residential D3 (D3) H40 (HX). It is capable of development to 94 rooms and was sold in June 1994 for $5,857,000, an average of approximately $62,300 per room. Although Mr Brown considered it to be a high sale, the unimproved value of the land in 1995 was $5,700,000, or about $60,600 per room. The site was vacant at the time of the hearing, but Mr Brown referred to a proposal to develop the site with permanent luxury residential units. He described the land as overall superior to the subject on a room rate and due to size.
Mr Brown included the sale because, although the block has a small area and a small yield and is not a hotel site, it is an absolute beach front site and he expected that it would attract a “fair premium”. Because of the comparatively low number of rooms, a premium would be expected on a price per room analysis.
Mr Hawley said that the rate applied to the “Corniche” site reflected its potential and beach front location. Although Mr Hawley considered that the sale supported his valuation of the subject land, he also stressed that the sale site was different from the subject land. Thus the unimproved value of the sale and subject parcels could change from year to year out of relativity with each other.
In my opinion, the only relevance which this sale could have to the valuation of the hotel land is as a guide to the premium which is placed on absolute beach front sites.
Sale 6: The only sale on which both parties relied was the sale in June 1994 of a 1.172 hectares parcel in Main Beach described as the “Nizeki” site. The land has frontages to Lennie Avenue, Stafford Avenue, Hughes Avenue and Tedder Avenue and comprises Lots 61 and 62 M 73832. It was zoned Residential Multi Unit with development density category of D2 (D2) and height controls of H20 (HX), that is, 20 floors by right. That allowed 1 bed per 33 m² of net site area or 355 beds for the site. Apparently it was intended to develop two multi-unit buildings on the site with a total of 316 beds.
The land is a large, rectangular site at road level. It is centrally located in Main Beach about 300 metres north of the Main Beach commercial precinct and about 300 metres west of the ocean at Southport Surf Life Saving Club. The CBD is about 3 kilometres to the south. The surrounding development is predominantly of a residential nature, comprising a mixture of multi-unit residential properties and single unit residences.
The sale land is about 1.5 kilometres south of the subject land. It is smaller than the hotel land. It has superior development density and high rise potential than the subject land, but is in an inferior location away from the beach frontage.
The land was sold for $8,600,000 and the applied unimproved value as at 1 January 1995 was $8,200,000. That amount gives an average value of $700/m² or $24,000 per bed as of right. The site is not being developed to the as of right level of development and each valuer made the calculation based on the as of right use. Mr Hawley described the sale land as superior to the hotel land on a rate per square metre basis but overall inferior.
Mr Brown described the sale land as inferior to the subject land with a larger yield.
The sale land is different from the hotel land in some key respects. It is a residential unit site rather than an international hotel site, and it has the advantage of being used for high rise development.
Summary of Sales: Key elements of the information about each of the sale blocks is set out in the following schedule which lists the sale blocks and the hotel land by reference to the room capacity for each site, commencing with the site with the greatest capacity (the Chevron Hotel site) and finishing with the site with the smallest room capacity (the “Corniche” site). The schedule also notes the price per square metre for which each of the sale parcels was sold.
| Site (Sale No) | Room Capacity | Sale Price | Sale Price per Room | Area m² | Sale Price per m² |
| Chevron Site (3) | 1,570/800 | $42,150,000 | $26,850/$52,700 | 19,620 | $2,148 |
| Zarrow Arrow Site (1) | 417 | $9,000,000 | $21,600 | 5,482 | $1,642 |
| Legends Hotel (2) | 403 | $6,500,000 | $16,130 | 5,413 | $1,201 |
| Nizeki Site (6) | 355 | $8,600,000 | $24,000 | 11,720 | $ 734 |
| Subject | 296 | ($11,000,000) | ($37,160) | 34,500 | ($319) |
| Bermudan (4) | 205 | $ 4,200,000 | $20,500 | 6,765 | $ 621 |
| Corniche (5) | 94 | $ 5,857,000 | $62,300 | 2,353 | $2,489 |
As indicated earlier, I do not regard the sale of the Chevron Hotel site to be of any assistance in the valuation of the hotel land. Similarly, the “Corniche” site is of limited relevance, its value being to indicate that a premium is paid for absolute beach front sites.
It is apparent from all the evidence just summarised that the three remaining hotel properties referred to by Mr Brown (Sales 1,2 and 4) are sufficiently comparable with the subject land to provide a firm basis for the valuation of that land. The room rate average prices for those blocks were $21,600, $16,130 and $20,500 respectively. Those average prices do not support Mr Brown’s statement that the higher the number of rooms per site the lower the price paid for the site on a per room basis, a trend which he described as “consistent with normal valuation logic.” Rather, they show a range from which the room rate for the hotel land might be calculated.
It is relevant to observe that the sales show no uniform trend in the price per square metre when sites are ranked in order of room capacity. The variations in value are not surprising given the range of factors that could influence the market for each block. Putting aside the Chevron Hotel site sale, however, the sales show that, allowing for relevant factors, there is the usual trend of a reduction in the value per square metre from the smallest to the largest areas.
The sales evidence relied on by the appellants supports a valuation in the order of $38,500 per room for the hotel land. Before deciding whether to adopt such a figure, it is appropriate to consider the respondent’s sales evidence. As noted earlier, the respondent also relied on the sale of the “Nizeki” site, Sale 6 on the appellants’ list. That site, like one other relied on by the respondent, was zoned Residential Multi Unit. The remaining two sale sites were zoned “Resort Residential” and “Special Residential” respectively.
The sales were listed in an order which reflects their increasing distance from the subject land. The main features of those sites were as follows.
Sale 1: The “Nizeki” site has been described already and it is not necessary to repeat that description.
Sale 2: Evidence was given about a site at Main Beach Parade, Main Beach but was later withdrawn and no reliance was placed on the sale.
Sale 3: The land at the corner of Garfield Terrace and Frederick Street, Surfers Paradise is a rectangular shaped beach front corner lot with medium elevation. It has an area of 2,932m², is level with the road and has unrestricted views of and access to the ocean. Garfield Terrace is a two lane bitumen sealed roadway with concrete kerbing and channelling.
The land is about 1 kilometre south of the CBD. It is zoned Resort Residential 1 with a development density category of D2 D2 and height controls of H30 (HX). The permitted number of bedrooms based on the net site is 88 beds.
The subject land is about 5.5 kilometres north of the sale land.
The sale land is much smaller than the hotel land, and has a greater development density and high rise potential. Although the two properties have a comparable beach front location, Mr Hawley considered the sale land to be superior to the hotel land on a rate per square metre basis.
The land was sold in October 1993 for $4,650,000, an average of $1,585/m² or $52,841/bed as of right. The applied unimproved value was slightly higher ($4,940,000) with consequently higher values on an area ($1,685/m²) and room ($56,136/bed) rates.
Mr Hawley relied on the sale to demonstrate the higher value on a per square metre basis and on a per room basis of beach front land. He argued that absolute beach front properties are worth at least 50% more than comparable sites with a beach frontage.
The land has the same zoning as the appellants’ Sale 4 land and is similar to it in some key respects. Although Mr Brown did not reject the sale, he had not relied on it because it occurred in 1993. He also noted the comparative smallness of the site and the number of beds permitted there. It is also relevant to note the building height permitted on the sale land is much higher than on the hotel land.
Sale 4: The land is an irregularly shaped site with an area of 1.473 hectares at Great Hall Drive, Miami, a full width bitumen sealed roadway with concrete kerbing and channelling. It is located just off the Gold Coast Highway on the northern boundary of Miami State High School, about 150 metres from the ocean. The CBD is about 7 kilometres to the north.
Although views of the coastline and surrounding areas are available, the site rises from west to east and is difficult to develop. The Nobby’s Beach commercial area is located at the base of the mountain.
The land is zoned Special Residential. Development conditions for this zone are non-specific in that development of the site is to be compatible with the residential density of the surrounding area. The density and height control maps indicate a density category of D1 D1 and a height control of H3 (H3) for internal multi unit development sites away from the ocean and D2 D2 H3 (H7) for those sites fronting the ocean. The site has been developed with approximately 401 beds, almost equivalent to the D2 density.
The sale land is smaller than the subject land and superior views are available from it. The sale land has superior development density to the hotel land. It has similar height and site coverage restrictions. When, however, the sale land is compared with the subject, it is inferior in terms of location, situation, topography, access and commercial potential. Beach access from the sale land is limited because of the steep embankment and there are no direct walking track to the beach. Rather the walk to the beach, via the roadway, is a distance of about 500 metres. Mr Hawley considered the sale land as inferior to the subject on a rate per square metre basis, and inferior overall. He used the sale to “demonstrate a bottom value”.
Mr Brown had not relied on the sale largely, it seems, because the land is further away from the subject land than other comparable sites.
The land was sold in February 1994 for $5,460,000, an average of $370/m². On the basis that 401 bedrooms can be built on the land, the sale price shows an average of $13,616/room.
Sale 5: The land has an area of 7,872m² and medium elevation. It is level with Cooinda Avenue, Currumbin, and lies just west of Teemangum Street. Access to the land is from either Teemangum Street or Cooinda Avenue, which are bitumen sealed having concrete kerbing and channelling.
The Tugun commercial area is about 1 kilometre to the south, and the CBD is about 22 kilometres to the north. The ocean is about 150 metres to the east.
The land is zoned Residential Multi Unit with a density category of D1 D1 and a height control of H3 (H3), equivalent to 157 beds as of right for the net site area.
The sale land has density and height controls similar to those on the hotel land. Yet Mr Hawley described the block as overall inferior to the subject on a rate per square metre basis given the prestigious nature of the subject land. The sale land is in a far inferior location, with inferior proximity to the ocean (having limited ocean front views) and surrounding amenities. It has far inferior commercial potential. As with Sale 4, this sale was included by Mr Hawley “to indicate a bottom level of value”.
Again Mr Brown had not relied on the sale primarily because it is “very well removed” from the subject land, and also because it is a unit development site.
Summary of sales: The features of these sales are summarised in the following schedule by reference to the same criteria as for the appellants’ sales and by listing the sites in order of the room capacity, commencing with the site which (as it is developed) has the greatest capacity and finishing with the site with the smallest room capacity.
| Site (Sale No) | Room Capacity | Sale Price | Sale Price per Room | Area m² | Sale Price per m² |
| Great Hall Dr (4) | 401 | $5,460,000 | $13,616 | 14,730 | $370 |
| Nizeki Site (1) | 355 | $8,600,000 | $24,000 | 11,720 | $734 |
| Cooinda Ave (5) | 157 | $2,716,593 | $17,303 | 7,872 | $345 |
| Garfield Tce (3) | 88 | $4,650,000 | $52,841 | 2,932 | $1,585 |
As with the previous schedule, this schedule shows a wide range of values on a rate per area basis but indicates that, generally speaking, small sites attract a higher value per square metre than large sites. The schedule shows a more consistent range of values per room for the sites with greater capacity than the Sale 3 land. Although the sites are zoned differently from the hotel land, they do not detract from the value per room advanced by the appellants.
Other checks on valuation
The appellants also referred to three other factors which, it was submitted, could support their case. First, Mr Brown’s valuation report noted that the 1994 unimproved value of the hotel land was $10,500,000. In his opinion, the sales evidence and the restrictions on the site were such that a large increase in the valuation of the hotel land to $14,800,000 (an increase of 46%) could not be supported.
Although the increase is substantial, it is not uncommon for property values to rise at such a rate between some annual valuations. The fact that an increase is much greater than, say, an accepted measure of inflation, is not of itself a reason to allow an appeal. Rather, it is necessary to determine whether sales of comparable land support the disputed valuation of the land and, if appropriate, that market trends support an increase of that magnitude. In this case there was little evidence of market trends and there was no evidence of what sales supported the 1994 valuation of the hotel land. Consequently, it is not possible to check the disputed valuation by reference to market trends. It is possible, however, to check the valuation against sales within a year or so before the relevant date of valuation. That evidence has been discussed in detail earlier in these reasons for decision.
Second, the unimproved value of the nearby Fishermans Wharf site increased by 5% from 1994 to 1995. The proportionately greater increase in the valuation of the subject parcels was out of line with the previously agreed relativity. Thus, it was submitted, an increase of some 5% on the valuation of the subject land in 1994 was appropriate.
Relativity is an issue that is often raised in cases such as these. It is sufficient to respond to the appellants’ submission by quoting the following summary of the law from the decision of the Land Appeal Court in Grahn v The Valuer General, to which reference was made earlier.“ (e)Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (if not ideal) sales evidence (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p. 46).
(f)If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at pp. 16-17 and cases cited in it).” (1992-1993) 14 QLCR 327 at 328-9)
There was little evidence in this case of the basis on which a relativity could be established between the hotel land and the Fishermans Wharf site. Mr Brown spoke of his involvement in negotiations with the respondent’s representatives over the previous two or three years as a result of which “in past years we have settled on a reasonable relativity on the whole Spit”. The increase in 1995 of the valuation of the Fishermans Wharf land was, in Mr Brown’s opinion “probably a better reflection of what’s happened on The Spit area during the period ‘94 to ‘95.” The increase in valuation of the hotel land had “substantially changed” its relativity to other land on The Spit.
Mr Brown described the Fishermans Wharf site as inferior overall to the hotel land, but having some superior advantages. It has a large area of water which could be developed as a marina and which provides a pleasant outlook. It has a retail component along the boardwalk as it fronts Marina Mirage to the south. In Mr Brown’s opinion, the retail component adds significant value to the site and would place it in a better category than the hotel land. It has approval for 448 rooms. In Mr Brown’s opinion, a development of that size is possible and it would be of a three and a half star standard. Like the hotel land, there is a height restriction of three storeys. Although the land does not have a sea frontage, it is possible that most of the rooms in such a development would have water views. In that sense, the aspect of the rooms would be superior to the hotel land. The site has been for sale for about seven years and has been marketed as a redevelopment site.
The 2.22 hectares comprising the sound land in the Fishermans Wharf site was valued at $430/m², the same rate as the respondent applied to the hotel land. In Mr Hawley’s opinion, the rate per square metre applied to the hotel land was, relative to the Fishermans Wharf land, “perhaps ... a little bit low” given the ocean frontage enjoyed by the hotel land.
Although the evidence just summarised gives an indication of the features of the two parcels of land, the decision in this case is based on sales evidence and does not turn on the relativity of the hotel land and the Fishermans Wharf land. Whether the decision will influence the relative valuations of those parcels in the future is a matter for the respondent to consider.
Third, the appellant submitted that the valuation of the hotel site at $11,000,000 sits comfortably with the values ascribed to the land on which waterfront hotels have been constructed elsewhere in Queensland. Mr Brown’s written report contained a schedule of such “Prestige Hotels”, namely, the Sheraton Noosa, Townsville Sheraton, Cairns Hilton, Cairns Raddison, and Port Douglas Mirage. The schedule lists the unimproved capital value for each site in 1995, and the consequent rate per square metre and rate per room, followed by a brief description of each site.
All of the blocks are far away from the hotel land and are in different local markets. There is no unifying trend in either the value per room rate or in the value per square metre. In my opinion, there are so many variables affecting the valuation of each of the prestige hotel sites that, on the information contained in the schedule, it is not possible to compare them with each other or to compare them with the hotel land. That much seemed to be conceded by Mr Brown who described each site as having unique characteristics and said that he had not endeavoured to determine the relativity of each to the others. He had described them for the limited purpose of showing that the $11,000,000 valuation for which the appellant contends fitted in the range of values for other prestige hotel sites.
In my opinion, the schedule does not help determine this case.
The conclusions just reached indicate that the three additional factors on which the appellants rely neither support nor detract from their case.
The hotel land - interim assessment of value
There is no need to repeat, in detail, the salient features of the hotel land. In summary, it is an unusually large, beach front site located away from the CBD but near to some tourist related development. The highest and best use of the land is for a five star international hotel. Although the hotel land does not have an “absolute” beach frontage, its proximity to the beach means that it is worth about 50% more than comparable sites away from the waterfront but nearer to the CBD. Development on the hotel land is limited by height and density constraints. At the relevant date of valuation, a much greater density of development was permitted than when the Mirage was constructed. At all relevant times there was a height restriction of three storeys which, despite some flattening of nearby sand dunes, meant that ocean views could not be obtained from most of the rooms which could have been constructed on the land in its unimproved state at the relevant date of valuation. The increased density of development apparently permitted by relevant town planning instruments at that date would have resulted in fewer, if any, additional bedrooms of a five star international standard being constructed on the site.
The $38,500 rate per room, for which the appellants contend, is supported by the sales of hotel development land in the region as adjusted to take account of the beach front location and other relevant features of the hotel land.
The condominium land
Features: The northern subject parcel is Lot 286 on Plan WD 6317 in the Parish of Gilston, County of Ward (the “condominium land”). It has an area of 7,796m². It is also a large beach-front parcel of undulating sand dune, almost rectangular in shape, with medium elevation rising slightly from the road frontage towards the eastern boundary. The site is well drained.
The condominium land is zoned “Special Facility International Hotel” under the Town Planning Scheme of the Gold Coast City Council effective at the date of valuation.
The property is used as a condominium site containing 54 two-bedroom units. Approval for the site was given under the Town Plan of Gold Coast City Council gazetted as at March 1982. The respondent’s valuation of the condominium land at $5,250,000 is an average of $675/m² for the site.
The features of the condominium land which Mr Brown described as relevant to the valuation of that land were:
(a) its small frontage to depth ratio;
(b)the building height limitation which allows sea views from front blocks only;
(c) its poor location outside the CBD and mainstream tourist areas;
(d) its beach frontage with a public esplanade at the front; and
(e) the danger of the area at night with poor development directly across Seaworld Drive.
Those features are substantially the same as for the hotel land.
Highest and best use: There seemed to be no dispute that the highest and best use of the condominium land was for condominium purposes. Again, there was a change in Development Control Plans between the time when the current development was approved and the relevant date of valuation.
Regulations which controlled development of the site in 1982 were set out in the Development Control Plan for The Spit Precinct 4 Seaworld Drive East. In summary, they are as follows:
Site coverage shall not exceed 25%
Building not to exceed RL 13 metres over AHD
Plot ratio not to exceed 1.0
Population density not to exceed 200 people/hectare (or 1 bed/100m²). This is equivalent to 77 beds for the net site area, as compared with the 108 beds that have been constructed.
20% landscaping.
At the relevant date of valuation, development of the site was controlled by Development Control Plan No. 14 Precinct 4 Seaworld Drive, Central. In summary, development conditions for this precinct are as follows:
Site coverage shall not exceed 40%.
Building height not to exceed 3 storeys and RL 13.5.
Plot ratio - basic plot of .8:1, maximum plot of 1.2:1.
Population density is equivalent to 1 bed/50m² of net site area or 400 people per hectare. This is equivalent to 155 beds for the net site area.
20% landscaping.
Although the appellants criticised the evidence concerning the second Development Control Plan, it seems that, even with the apparently more generous development controls, the condominium land was developed at or near to its optimum level for a development of that kind and standard.
Relatively little separate oral evidence was given in relation to the valuation of the condominium land. Each valuer relied on the same series of sales as for the hotel land, with appropriate comparisons being made between each parcel of sale land and the smaller condominium land.
Mr Brown expressly stated that his evidence concerning the relativity of the hotel land and other sites applied equally to his assessment of the condominium site. Mr Grennan acknowledged that both parties were close in terms of their assessment of the relative values of the hotel land and the condominium land. Accordingly, the respondent’s case concentrated on the valuation of the hotel land on the basis that the valuation of the condominium land would flow from that valuation.
Each party assessed the value of the condominium land to be about 35% of the value of the hotel land and I am content to proceed on that basis.
The $37,000 rate per room for which the appellants contend is supported by the sales of hotel development land in the region as adjusted to take account of the beach front location and other relevant features of the condominium land. Using the rate per room valuation method, a value of the land is achieved which is consistent with its value relative to the hotel land.
Beach wall protection
When valuing the land Mr Brown made a deduction for a concrete and rock sea wall constructed within the boundaries of the subject land as a requirement of the approval process for the hotel and condominium developments to provide protection of the fragile environment (see clause 15 of Town Planning Permit No 6/1173 reproduced in Exhibit 3). He described the wall as an improvement and calculated the cost of construction as at the date of valuation. He then calculated the deductions to be $369,000 in the case of the hotel land and $81,000 in the case of the condominium land. Mr Hawley was aware that the wall existed within the boundaries of the subject land and did not disagree with the value that had been apportioned to it. He regarded it as a legitimate allowance, agreed that a deduction should be made, and thought the amount was “quite conservative”. The absence of any reference to it in his report was an oversight. In the absence of any dispute on this matter, Mr Allan urged that the deductions as calculated by Mr Brown should be allowed.
Mr Brown also stated that development approvals required the acquisition of easements over adjoining lands for the disposal of stormwater into the broadwater. Mr Grennan referred to stormwater drains, easements and other external infrastructure as adding value to the subject land and, in that sense, forming part of the unimproved value of that land. I do not propose to make any allowance for those items.
Conclusion
For the reasons given, I am satisfied that the most appropriate way to value the subject parcels is on a rate per room basis, the rates calculated by the appellants are appropriate, and a reduction should be made for the sea wall cost.
Consequently, the values of the two parcels can be calculated as follows:Hotel land:
296 rooms @ $38,500/room $11,396,000
less sea wall cost $ 369,000
$11,027,000
Adopt $11,000,000
Condominium site:
108 rooms @ $37,000/room $3,996,000
less sea wall cost $ 81,000
$3,915,000
Adopt $3,900,000
The resulting amounts are such that the value of the condominium land is about 35% of the value of the hotel land, thus maintaining the relativity between the two properties as agreed by the parties.
I note also that the rates per square metre for the two subject parcels are $319/m² for the hotel land and $500/m² for the condominium land. These reflect the usual trend of smaller sites to have a higher value per square metre than larger but otherwise comparable sites.
CostsAt the conclusion of the hearing, Mr Allan formally applied for an order for costs in the appellants’ favour. He relied on the decision of the Land Court in Queensland Landmark Developments Limited v Valuer General (1992) 14 QLCR 168, in particular the passage quoting from the judgment of the Land Appeal Court in Hymix Industries Pty Ltd v The Valuer-General (1990-1991) 13 QLCR 173 at 186 which suggests that costs may be awarded where a party “has completely disregarded principles which given certain facts, should be applied”. First, in Mr Allan’s submission, the primary and sole method of valuation should have been the rate per room method. Second, sound valuation principle was disregarded in the arbitrary increase of valuation without any real basis on which the increase could be made.
This is not a case where it is obvious that an award for costs should be made. The decided cases make it clear that the Land Court should be restrained in deciding whether costs should be awarded in annual valuation cases. I make no order for costs at this stage, but will deal with any application that might be made by a party within 14 days of the date of this decision.
Order
The appeal in AV95-317 is upheld, the valuation of the Chief Executive is set aside and the unimproved value of the subject land as at 1 January 1995 is determined to be Eleven Million Dollars ($11,000,000).
The appeal in AV95-318 is upheld, the valuation of the Chief Executive is set aside and the unimproved value of the subject land as at 1 January 1995 is determined to be Three Million Nine Hundred Thousand Dollars ($3,900,000).
GJ NEATE
MEMBER OF THE LAND COURT
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