Multiplex 324 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water
[2007] QLC 36
•24 April 2007
LAND COURT OF QUEENSLAND
CITATION: Multiplex 324 Queen Street Landowner Pty Ltd & Anor v Department of Natural Resources, Mines and Water [2007] QLC 0036 PARTIES: Multiplex 324 Queen Street Landowner Pty Ltd and SPB Developments Pty Ltd
(appellants)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NO.: AV2005/0804 DIVISION: Land Court of Queensland PROCEEDING: An appeal against the unimproved value of an improved commercial property in the Central Business District of Brisbane. DELIVERED ON: 24 April 2007 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mr JJ Trickett, President ORDER: The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of Lots 1 and 2 on Registered Plan 887, Parish of North Brisbane (324 Queen Street), is determined at Eight Million and Two Hundred Thousand Dollars ($8,200,000).
CATCHWORDS: Valuation – unimproved value – CBD improved commercial site – highest and best use – methods of valuation – direct comparison with sales – analyses of sales
Valuation – statutory construction – Valuation of Land Act 1944 – unimproved value of improved land – method of valuation – relevance of sales – analyses of improved sales – comparability of sales for different purposes.
APPEARANCES: Mr R Traves SC and Mr R Anderson for the appellants
Mr T Quinn and Mr S Fynes-Clinton for the respondentSOLICITORS Gadens Lawyers for the appellants
Legal Services, Department of Natural Resources, Mines and Water for the respondent
This is an appeal by Multiplex 324 Queen Street Landowner Pty Ltd and SPB Developments Pty Ltd (the appellants) against the unimproved value applied to their improved commercial land by the Chief Executive, Department of Natural Resources, Mines and Water (the respondent), as at 1 October 2003, under the provisions of the Valuation of Land Act 1944 (the Act). It is one of five appeals against valuations by commercial landowners which were heard consecutively, with the evidence in each case being the evidence in the others. Decisions have previously been made in respect of two of those cases: Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water [2007] QLC 10 (the 240 Queen Street case), and ING Management Limited v Department of Natural Resources, Mines and Water [2007] QLC 19 (the 239 George Street case). Many of the issues between the parties have been dealt with in those cases and the reasons for the decision in the present case should be read in conjunction with the reasons for decisions in those cases.
Background
The appellants are the owners of land situated at 324 Queen Street, on the corner of Queen and Creek Streets in the Brisbane Central Business District (the CBD). It has an area of 1,820 m², and it developed with a "B" Grade commercial office complex, comprising 23 upper levels of office accommodation, with the ground floor retail and with two levels of basement car parking for approximately 96 cars.
The building was constructed in 1975, but was extensively refurbished in 2000/2001. It has a net lettable area of approximately 20,418 m². Principal tenants are the ANZ Bank and Allianz Australia.
As at 1 October 2003, the respondent assessed the unimproved value of that land at $8,700,000. The appellants objected against that valuation, but the objection was disallowed. They then appealed to the Land Court, contending for an unimproved value of $6,916,000.
The grounds of appeal were:" The respondent's valuation is excessive having regard to the following:
1. Ground 1
The appellant's assessment of the unimproved value of Lot 1 and 2 on RP 887 (the 'land') is lower than the respondent's assessment of the unimproved value of the land.
Particulars
1.1 The appellant's assessment of the unimproved value of the land is $6,916,000.
1.2The respondent's assessment of the unimproved value of the land is $8,700,000.
2. Ground 2
The appellant's assessment of the unimproved value of the land is supported by sales evidence.
Particulars
2.1The appellant's assessment of the unimproved valued of the land relies on sales of property in Brisbane including but not limited to:
(a) 175 Eagle Street Brisbane (Lot 10 on SP 151098);
(b) 75 Eagle Street Brisbane (Lot 3 on SP 140664); and
(c) 120 Edward Street (Lot 5 on SP 135597).3. Ground 3
The appellant's assessment of unimproved value of the land has been made in accordance with the Valuation of Land Act, 1944.
Particulars
3.1The market evidence relied upon by the appellant to determine the unimproved value of the land supports the assessed value."
Those grounds were similar to the grounds in the other four appeals.
At the hearing, the appellants relied on the evidence of registered valuer, Mr G Jackson, who produced valuation reports and gave oral evidence contending for a valuation of $6,825,000.
The respondent relied on the evidence of registered valuer, Mr M Denman. Originally the respondent was to rely on the evidence of registered valuer, Mr A Kirby. However, when Mr Kirby became seriously ill, Mr Denman, who had worked with Mr Kirby in the preparation of these cases, took over Mr Kirby's responsibilities and gave evidence in this case, in addition to the appeals against the valuations of 140 Creek Street and 175 Eagle Street. Mr Denman explained that he had reviewed Mr Kirby's preparation for these cases and accepted much of his work, but on occasions he took a somewhat different view. This led to differences in some of the sales analyses and other figures in the respondent's documentary evidence.
It emerged in evidence that both Mr Denman and Mr Kirby had in turn taken over the responsibility for these cases from the original valuer, Mr Ian Smith, who also was ill.
Mr Denman produced valuation reports and gave oral evidence contending for a series of valuations. Originally the respondent had intended to lead evidence to an unimproved value of $28,390,840 made by the deduction approach under s.3(2) of the Act. However, evidence of that valuation was held to be inadmissible in a decision on preliminary issues.[1] In the 239 George Street case, the respondent argued that the deduction method of valuation was available under s.3(1)(b). However, that was also ruled to be inadmissible in that case as it was seeking to advance the s.3(2) argument in a different form.[2] However, as in the 240 Queen Street case, in this case there is a sale of the subject land or, more correctly, the sale of a half interest in the subject land on 15 October 2003, very close to the date of valuation. Mr Denman analysed that sale by the deduction method to arrive at an unimproved value of $17,082,170. (There had been an earlier sale of a half interest in that land in June 2001, which was analysed by either Mr Denman or Mr Kirby to $19,631,562.)[3] Based on his analysis of the 2003 sale, Mr Denman's contended unimproved value by the deduction method was $17,000,000.
[1]Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water [2006] QLC 30.
[2] T 912.
[3] Ex 13, p 26.
Mr Denman's second alternative valuation was arrived at by direct comparison with sales of vacant or lightly improved land suitable for development or redevelopment in the CBD. Such sales were referred to in these cases as "site sales". Mr Denman's valuation by this method was $10,000,000.
The Subject Land
The land is situated on the northern corner of Queen and Creek Streets in what is known as the "Golden Triangle", an area bounded by Edward, Adelaide, Margaret and Wharf Streets, which is the long established prime commercial office location in the CBD. The land is regular in shape, with frontages of 40.221 metres to Queen Street and 45.263 metres to Creek Street. It is surrounded by a mixture of high-rise commercial development and low-rise retail accommodation.
According to Mr Denman, the CBD is undergoing a demographic shift to accommodate more residential development, which he regarded as a broader wave of urban renewal, including large-scale residential development within fringe CBD residential localities. At the date of valuation, the subject land was designated "Multi-Purpose Centre MP1 – City Centre", under the Brisbane City Plan 2000, which allows for a wide range of activities to be clustered together. The preferred outcomes and strategies for the city centre include the location of high intensity offices and higher order retail activities in a compact city centre, linked by public transport to major centres. However, the centre is also to contain high intensity residential uses that promote the vitality of the centre and make best use of existing infrastructure.
Before proceeding to examine the evidence in this case, I will refer briefly to the legislation relevant to the determination of the valuation.
The Relevant Legislation
The valuation under appeal is the "unimproved value" of the land. The term is defined depending whether the land is "unimproved" land or "improved" land. Section 3 of the Act provides:
"3 Meaning of unimproved value
(1) For the purposes of this Act -
unimproved value of land means-
(a) in relation to unimproved land—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; and
(b) in relation to improved land—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, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.
(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.
(3) …
(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed 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 any improvements referred to in subsection (1) had not been made."
The subject land in this case is improved land so the provisions of s.3(1)(b) and (2) apply. In the 240 Queen Street case, I explained in some detail how the provisions of the Act had been judicially interpreted, including the line of authority to the effect that the best basis for unimproved value is by comparison with sales of vacant or lightly improved land (site sales). However, where there are no such sales, it is necessary to have regard to improved sales and ascertain the unimproved value of improved land by comparison with unimproved values deduced from the analyses of sales of comparable improved land.
The method of valuation prescribed in s.3(2) of the Act sets the minimum figure for the unimproved value, as the valuation arrived at under s.3(1)(b) "… shall in no case be less than …", the valuation arrived at under s.3(2). Both Mr Denman and Mr Jackson made valuations under s.3(2), but for the reasons in my decision on preliminary points relating to the CBD appeals, I held that the evidence of the valuations made under s.3(2) of the Act was not admissible in these cases.[4]
[4] [2006] QLC 30.
In the 240 Queen Street case, I discussed what was referred to as "Mr Denman's theory". His theory is that for each successfully developed income producing property, such as the CBD appeal lands, the unimproved value of such land should be arrived at by deducting the value of improvements from the improved value of the property itself (the deduction method), or by comparison with unimproved values derived from sales of similar improved land. Only by such methods, according to the theory, could the true unimproved value of such properties be ascertained.[5]
[5] [2007] QLC 10 at [34] to [43].
However, for the reasons explained in that decision, I found I could have no confidence in the analyses of the improved sales by either Mr Jackson or Mr Denman, as the evidence in that regard was unreliable. Therefore, Mr Denman's theory was irrelevant to that case and I had to rely on the site sales.[6]
[6] [2007] QLC 10 at [155].
The Valuers' Methodology
Mr Jackson's approach
Mr Jackson had no doubt that the highest and best use of the subject land was for commercial office use with ground-floor retailing, consistent with the existing use. His initial approach was to adopt the traditional method of direct comparison with sales of sites purchased for commercial development in the locality. Commercial site sales upon which Mr Jackson relied were:
6 Queen Street, 7,348 m², for $25,480,000, in June 2003, analysed to $3,467 per m², adjusted to $3,121 per m²;
175 Eagle Street, 3,459 m², for $21,500,000, in October 2000, analysed to $2,746 per m²;
75 Eagle Street, 3,663 m², for $15,000,000, in December 1998, analysed to $3,893 per m²;
120 Edward Street, 1,822 m², for $6,000,000, in May 1998, analysed to $2,841 per m².
However, there had been few sales of commercial office development sites in the three years prior to the date of valuation and only one (6 Queen Street) in the 12 months preceding that date. Therefore, Mr Jackson was of the opinion that it was necessary to undertake the analyses of some improved commercial sales in the CBD to ascertain whether any scarcity premium had been paid by the purchasers of those scarce commercial sites in accordance with the decision of the High Court in Maurici v. Chief Commissioner of State Revenue (2003) 212 CLR 111. The improved commercial sales to which Mr Jackson had regard were:
324 Queen Street (the subject land), area 1,820 m², the sale of a half interest for $38,630,000, in June 2001, analysed to $3,650 per m²;
260 Queen Street, area 1,384 m², for $24,000,000, in December 2002, analysed to $3,863 per m²;
145 Eagle Street, area 2,121 m², for $29,000,000, in March 2003, analysed to $2,387 per m².
Mr Jackson said that he was aware that a small number of sites were purchased in 2003 in the CBD for high rise residential development, with the level of development varying significantly. However, although he did give consideration to the three such residential sales, he regarded them as irrelevant because of their location and attributes and the level of density achieved or proposed, which made comparison with the subject land difficult. He did not regard the location of the subject land to be desirable for residential development. Nevertheless, Mr Jackson referred to the following residential site sales:
420 Queen Street, Aurora, area 3,099 m², for $12,000,000, in August 2001, analysed to $3,284 per m²;
45 Eagle Street, area 4,206 m², for $16,000,000, in January 2004, analysed to $2,675 per m²;
26 Felix Street, area 1,589 m², for $5,550,000, in November 2001, analysed to $3,411 per m².
There was a further reason for Mr Jackson's rejection of the residential sales. He regarded the commercial and residential markets as separate and distinct and thought that the residential sales would be relevant only if the subject land had potential for residential development. However, he refused to consider that it had any such potential, because of his interpretation of the Land Appeal Court decision in Department of Natural Resources and Mines v QNI Metals Pty Ltd [2002] QLAC 71. He understood that case to establish the proposition that for land to have a higher and better use than its present use, it must be demonstrated that the land would have an unimproved value higher than the value for its present use, plus the cost of demolishing the structures on that land. In the present case, he said, that could not be demonstrated.
However, in the 240 Queen Street case, I found that Mr Jackson's interpretation of the QNI Metals case was mistaken.[7] Therefore, in my view, the decision in QNI Metals does not prevent regard being had to the residential sales and they should be considered as part of the overall sales pattern in the CBD.
[7] [2007] QLC 10 at [51] to [59].
Mr Jackson also relied on the settlements of the valuations of nine other properties in the CBD, as he did in the 240 Queen Street and 239 George Street cases. I dismissed the respondent's objection to the admissibility of relativity evidence,[8] but in my view, the circumstances of those settlements are such that they are of no assistance in determining the unimproved values in these cases.
[8] T 1195.
Mr Denman's approach
Mr Denman's opinion as to the highest and best use of the land and, indeed, his whole approach to the valuation depended upon how s.3(1)(b) of the Act was to be interpreted. If the interpretation was that the valuation must be made on the assumption that the improvements did not exist at the time as at which the valuation was made, but the impact that the prior existence of those improvements had on the value on the land was not to be ignored, then as I understand Mr Denman's reasoning, he would agree that the highest and best use of the land was for commercial office development with ground-floor retailing. He would therefore value the land by the deduction method (that is, taking the added value of the improvements from the improved value), or by direct comparison with the unimproved values derived from the analyses of improved sales.
On the other hand, if it was to be assumed that the words "did not exist" meant "had never been made", then he was of the opinion that the site was equally well suited for commercial office development with ground-floor retailing, or residential tower development with ground-floor retailing. In those circumstances, he said, the unimproved value could be ascertained by direct comparison with sales of vacant or lightly improved land (site sales), including sales for residential development. However, after he adjusted the sale of 6 Queen Street, which he regarded as his most relevant sale, he changed his opinion, contending that the highest and best use was for residential purposes.
Mr Denman's deduction method (the analysis of the sale of the half interest in the subject land) resulted in an unimproved value of $17,000,000 (rounded). His alternative method, where the impact of the prior existence of the improvements was not ignored, resulted in the same unimproved value of $17,000,000.
Mr Denman had analysed the sales of three improved commercial properties, in addition to the sale of the half interest in the subject land, 240 Queen Street, 157A Ann Street and 157 Eagle Street. His analyses of those sales produced unimproved values ranging from $6,605 per m² to $15,539 per m² (if the sale of 157A Ann Street is excluded), supporting his unimproved value of $17,000,000 by the deduction method.
For his unimproved value by direct comparison with site sales, Mr Denman reasoned that the designation of the subject land under the Brisbane City Plan allowed it to be developed for retail, commercial, residential or a mixture of those uses.
Therefore, he thought that in assessing the unimproved value, regard must be had to what a prudent purchaser would pay for those uses "… given that competition among these purchasers exists."[9] To arrive at an unimproved value by that method, he had regard to nine site sales:
[9] Ex 53, p 26.
175 Albert Street (Cnr Elizabeth Street), which he had regarded as a dominant use retail sale in the 240 Queen Street and 239 George Street cases;
6 Queen Street, the sale of a large site for commercial development, with a ground floor retail component and large open space plaza area, which was discussed in detail in the 240 Queen Street case;
70 Eagle Street, the sale of a half interest in the site of the proposed Central Plaza 3 commercial office development to the adjoining owner, a sale which I discussed and rejected in the 240 Queen Street case;
89 Charlotte Street, area 2,711 m², for $13,250,000, in January 2003, analysed to $4,990 per m², the site of the Festival Towers residential development;
420 Queen Street, area 3,099 m², for $12,000,000, in August 2001, analysed to $3,872 per m², the site of the Aurora residential tower, on the corner of Queen and Wharf Streets;
120 Charlotte Street, area 2,273 m², for $11,500,000, in December 2001, analysed at $5,059 per m², the site of the Charlotte Towers 44 level residential development;
131 Mary Street, area 5,478 m², for $24,000,000, in March 2004, analysed to $4,382 per m², the site of the Vision Tower mixed commercial and residential development with a retail component; the sale was six months after the date of valuation but should not be disregarded as it confirms a trend;
64 Mary Street, area 1,523 m², for $6,488,000, in January and November 2003, analysed to $4,260 per m², the site of the 44 level M on Mary residential development;
21 Mary Street, area 908 m², for $4,000,000, in April 2001, analysed to $4,626 per m²; an older sale of a small site.
From those sales, Mr Denman derived a range of unimproved values from $4,062 per m² to $8,253 per m². He felt that there was a discrepancy between the analyses of the improved commercial sales and the vacant or lightly improved sales, which he attributed to his theory that the land value component of a successfully developed improved property reflects its proven ability to attract tenants and that the component for the risks and profits from the development is imbedded in the land value. By contrast, he reasoned, the unimproved value of the subject land based on sales of vacant or lightly improved land "… includes only a conservative allowance for likely costs incurred in gaining and implementing development approval … and does not contain profit and risk allowances, as the risks are yet to be encountered."[10]
[10] Ex 53, p 30.
Mr Denman also had regard to what he called "minimum use sales evidence", comprising three sales which he regarded as significantly inferior to the subject land. Those sales were:
107 Astor Terrace in October 2003 for $3,400,000 or $3,055 per m², which had previously sold in March 2002 for $2,100,000. This 1,113 m² site at Spring Hill is proposed for residential development and although he regarded it as considerably inferior to the subject land, Mr Denman thought it was a good illustration of the continued rise in value of land on the periphery of the CBD.
181 Elizabeth Street in September 2002, for $1,250,000 or $2,760 per m², a site of only 453 m², with a five level commercial office and retail building on it. It is very narrow and easement affected, which limits development height, but situated only one street from the Queen Street Mall. Mr Denman regarded it as inferior on a rate per m² basis.
120 Edward Street in May 1998, for $6,000,000 or $3,293 per m². The sale of this 1,822 m² site had also been considered by Mr Jackson. Although an old sale on a rising market, Mr Denman regarded it as "still handy" as a floor to value. This site had been used as a car park for 22 months between the date of sale and the date of settlement. Mr Denman conducted an exercise based on its continued use as an open- air car park, so that the sale reflected $4,285 per m². On the other hand, Mr Jackson adjusted the sale price for extended settlement and the present value of income received for the 22 months, to reflect an unimproved value of $2,841 per m².
Mr Denman placed little reliance on those sales and I do not regard them as of any assistance.
Mr Denman stated that if s.3(1)(b) of the Act was to be interpreted to mean that it must be assumed that the improvements on the subject land had never been made and that their prior existence could not be taken into account, then his assessment would be based on the site sales only. He concluded that based on the site sales, the subject land should be valued at $5,500 per m², or $500 per m² for the 20,418 m² net lettable area, which resulted in an unimproved value of $10,000,000 (rounded). However, after he adjusted the sale of 6 Queen Street, Mr Denman amended his valuation to $9,400,000. At no stage in his evidence did he attempt to support the respondent's valuation under appeal of $8,700,000. Indeed, he said that he did not agree with that valuation.[11]
The Valuation Evidence considered
[11] T 1318.
As in the 240 Queen Street case, in this case there is the sale of the subject land, or more precisely two separate sales of half interests in the land, in June 2001 for $38,630,000 and in October 2003 for $40,000,000. Mr Jackson analysed the earlier sale, while Mr Denman analysed the later one. Both valuers proceeded on the assumption that the sale of a half interest was evidence that a 100% interest in the property would sell for twice that amount. Support for that assumption was provided by a valuation by Colliers International Pty Ltd made as at 1 December 2003, for $80,000,000 for a 100% interest, or $40,000,000 for a 50% interest. The Colliers valuation was made for the purpose of "Acquisition of a 50% interest in the property and first mortgage purposes".[12] It was relied on by Mr Denman as supporting the transaction which he analysed.
[12] Ex 53, Annex 5.
Mr Jackson analysed the earlier sale to an unimproved value of $3,650 per m², while Mr Denman's analysis of the later sale resulted in an unimproved value of $9,396 per m². The differences in the sale prices and in their estimates of the replacement costs of intangible improvements were not sufficient to result in such large differences in analysed unimproved values. Those differences stemmed from their different opinions as to the added value of intangible improvements ($13.9 million by Mr Jackson and $11.3 million by Mr Denman) and in the rates of depreciation applied to the tangible improvements (7.5% by Mr Jackson and 15% by Mr Denman).
Furthermore, Mr Denman relied on a reinstatement cost assessment for insurance purposes by quantity surveyors, Napier and Blakeley Pty Ltd, as at 8 December 2003, as the starting point for his replacement cost of tangible improvements. As pointed out in the 240 Queen Street and 239 George Street cases, valuers cannot simply adopt the reports of other experts made for other purposes, without evidence from those experts. Without such evidence, the valuation by Colliers and the cost assessments by Napier and Blakeley are of no weight.[13]
[13] [2007] QLC 10; [2007] QLC 19.
Therefore, quite apart from the reservations I have about using sales of half interests in the subject land as a basis for the unimproved value, the analyses by the valuers were so different that they inspire little confidence in either valuer's conclusion. Quite apart from the other differences, their approaches to the depreciation of the building reflect the difficulty of such an exercise with an improvement almost 30 years old which was extensively refurbished in 2000/20001, at a cost of approximately $18,000,000.
Nor are the analyses of the other improved sales any more reliable. Mr Jackson analysed two improved sales which he had analysed in the 240 Queen Street case (the sale of 240 Queen Street itself and the sale of the subject land), in addition to the sale of 145 Eagle Street. Mr Denman analysed the sales of 240 Queen Street, the sale of the subject land and the sale of 157A Ann Street, the same three sales he relied on in the 240 Queen Street case, as well as the improved sale of 175 Eagle Street, another of the appeal properties.
In the 240 Queen Street case, I examined the relevance of the improved commercial sales and explained my reasons for rejecting them.[14] Of the additional sales introduced in this case, Mr Denman attacked Mr Jackson's analysis of the sale of 145 Eagle Street because of what he described as "fundamental errors", but did not attempt an analysis himself, while Mr Jackson attacked Mr Denman's analysis of the sale of 175 Eagle Street for insufficient allowance for the added value of improvements and for being inconsistent with other departmental analyses of that sale.[15]
[14] [2007] QLC 10 at [155].
[15] Ex 52, p 23-24.
Introduction of those other sales has not caused me to reconsider the findings in respect of the analyses of highly improved sales which I made in the other two cases.[16] The August 2002 sale of the 19 level commercial office tower at 175 Eagle Street was considered by the Land Court in Perpetual Trustee Co Ltd v Department of Natural Resources, Mines and Water [2006] QLC 17, in determining the unimproved values of that land as at 1 October 2001 and 1 October 2002. Mr Jackson was the valuer for the appellant and Mr Kirby the valuer for the respondent. Their respective analyses resulted in unimproved values of $3,170,000 and $18,700,000 (later revised to $22,090,000). The Court found that it could have no confidence in the analyses of the sale by either of the valuers and rejected that evidence.[17]
[16] [2007] QLC 10, at [155]; [2007] QLC 19 at [47].
[17] [2006] QLC 17, at [74].
In the present case the situation is no better. Mr Denman analysed the sale to $15,700,480.[18] Another analysis to $25,034,830 appears in the Volume of Common Documents.[19] Mr Jackson did not analyse the improved sale, but had made a deduction valuation under s.3(2), adopting the sale price of $95,950,000, as the improved value, to arrive at an unimproved value of $1,220,000.[20] The differences between the valuers demonstrates to me that no reliance can be placed on their analyses of such a highly improved sale. As in the other cases, I must rely on the site sales.
[18] Ex 89, p 23.
[19] Ex 13, p 9.
[20] Ex 77, p 30.
In his statement Mr Jackson said his analyses of improved sales range from $2,387 per m² to $3,863 per m² and he would adopt $3,750 per m², consistent with his unimproved value by direct comparison with site sales.[21] However, on several occasions in his oral evidence he made it clear that he had no confidence in his analyses of such highly improved sales. He analysed them, he said, only to ascertain whether the site sales included a scarcity premium.[22]
[21] Ex 51, p 24.
[22] T 286; T 297; T 1183; T 1224.
Conclusions from the Sales Evidence
I have rejected Mr Denman's deduction method and the method based on the analyses of the improved sales. The only acceptable method is direct comparison with site sales. Mr Jackson relied on the same commercial site sales that he relied on in the 240 Queen Street and 239 George Street cases, of which I found only the sale of 6 Queen Street to be relevant. Mr Denman did not differentiate in this case between retail, commercial and residential site sales. However, apart from the sale of 6 Queen Street and the more recent residential sales, I found the other sales referred to by him to be of little or no assistance.
The residential development site sales referred to by Mr Jackson are in areas which he regarded as having significant residential amenity. He said that their location and the level of development density able to be achieved on those sites make them difficult to compare with the unknown level of residential development that could be achieved on the subject land. In any case, he said, those sales reflected a rate per m² ranging from approximately $2,675 per m² to $3,411 per m², which was less than the rate of $3,570 per m² which he derived from the sales of commercial sites.
Mr Jackson did not accept that the residential sales are relevant, because the highest and best use of the subject land is commercial. In his opinion, the assumption cannot be made that purchasers of residential land do not distinguish between the considerations they have regard to. There are, he contended, different "market drivers" for commercial and residential purchasers.[23]
[23] Ex 52, p 6.
I found in the 240 Queen Street case that the residential sales were appropriate as a basis of valuation. That was consistent with the findings of the Land Court in the Perpetual Trustee Company case.[24] Although I accept that purchasers of commercial sites and purchasers of residential sites were competing in the same market, that does not mean that they will not have regard to the particular attributes of each site. As was said in the Perpetual Trustee Company case, "… that does not necessarily mean that residential buyers and commercial buyers will be prepared to pay the same price for the same site or sites. Nor does it necessarily mean that the same sites will be of equal interest to each …".[25] The real issue is what would a developer be prepared to pay for the land if it was unimproved.
[24] [2007] QLC 10 at [166].
[25] [2006] QLC 17, at [39].
I found in the 240 Queen Street case that the distinction between the commercial and residential markets was no longer so apparent, given the encouragement of the planning scheme for residential development and the trend for mixed residential and commercial uses in the same complex.[26] Mr Denman was convinced that there had been a merging of the markets. When he adjusted the sale of 6 Queen Street, it caused him to rethink the highest and best use of the subject land from commercial to residential and alter his contended unimproved value. Furthermore, although it is situated in the Golden Triangle and in the area traditionally regarded as the commercial precinct, the subject land is only one block removed from the site of the Aurora residential development. Although I find that the highest and best use of the subject land is commercial with ground-floor retailing, it does have certain attributes which indicate that the residential sales cannot be ignored. In addition to being one block removed from Aurora, it is in reasonable proximity to the river, although without Aurora's river views. On the other hand, it is "closer to the action", as Mr Denman put it, being only one block from the Mall.
[26] [2007] QLC 10, at [71].
The most Relevant Sales
In the 240 Queen Street case, I found the sale of 6 Queen Street to be relevant, but difficult to compare with that land because of its location, size, aspect, views, open-space area and various other attributes. It is even more difficult to compare that sale with the subject land. However, both valuers considered it to be very important in arriving at the unimproved value of 324 Queen Street. Mr Denman went so far as to alter his opinion of the highest and best use of the subject land and to reduce his contended unimproved value from $10,000,000 to $9,400,000, simply as a result of adjusting the sale for GST. Mr Jackson also quite clearly regarded the sale as significant in arriving at his contended unimproved value.
As in the other cases, I find the other commercial site sales are either to be rejected, or of little assistance. The same with the sales comprising the site of 175 Albert Street, which has a significant retail influence. Mr Jackson did not rely on the sale of 259 Queen Street in this case.
In the 240 Queen Street and the 239 George Street cases, I found that the residential sales close to the date of valuation were also relevant, reflecting unimproved values ranging from $4,300 per m² to $5,000 per m². Those sales included 64 Mary Street (M on Mary) in 2003 at $4,260 per m², 89 Charlotte Street (Festival Towers) in January 2003 at $4,990 per m² and 131 Mary Street (Vision Tower) in March 2004 at $4,382 per m². Based on those residential sales and the sale of 6 Queen Street, I found that the prime commercial site at 240 Queen Street had an unimproved value of $6,300 per m² as at 1 October 2003.
However, 239 George Street is not in such a prime commercial location, but along George Street from the less-trafficked end of the Queen Street Mall in what might be termed the legal and administrative precinct. It is opposite the site of the Brisbane Square development, which had just been purchased. In that case, that sale of 6 Queen Street, was the most important sale for both valuers.
Although it is located in a different part of the CBD to the subject land, both valuers regarded the sale of 6 Queen Street as an important sale in this case, no doubt because it is the only sale of a commercial development site in 2003. Both valuers agreed that the market for such sites was subdued at the date of valuation, with few sales in the three-year period to that date. However, Mr Denman considered that there had been growth in the market on the fringes of the CBD for residential development. The residential sales referred to above tend to confirm his view. However, those sales are located in an area of significant residential amenity out of the heavily trafficked city centre, but close to it, in a quieter locality, close to the river and Botanical Gardens. The subject land does not enjoy those attributes to the same extent. On the other hand, it has other advantages, including its commercial highest and best use and is "closer to the action". While the residential sales indicate some increase in value, there is no evidence to support the rate of $5,165 per m² now contended by Mr Denman. It is far too close, in my view, to the rate of $6,300 per m² which I have determined for the prime commercial site at 240 Queen Street.
On the other hand, the rate per m² must be more than the rate per m² derived from the Aurora sale. That sale was in August 2001 and the later residential sales confirm Mr Denman's opinion that the market had risen by October 2003. Mr Jackson analysed the sale by allowing for deferred settlement to $3,284 per m². Mr Denman did not allow for deferred settlement to arrive at $3,872 per m², or if the easement affected area of 414 m² providing access to Adelaide Street is excluded, to $4,469 per m².
Another analysis of the Aurora sale was provided by Mr Denman in the Volume of Common Documents[27], which showed $4,031 per m², after including allowances for Council contributions, but excluding external works, amounting to $493,985. A somewhat similar analysis was provided by Mr Kirby in the Perpetual Trustee Company case, where he derived $4,082 per m². However, in that case the Court accepted Mr Jackson's evidence of the adjustment for deferred settlement and adopted a rate of $3,800 per m² for comparison purposes with 175 Eagle Street.[28] I will accept that figure as the unimproved value derived from the sale of Aurora in August 2001.
[27] Ex 13, p 2.
[28] [2006] QLC 17 at p 30.
In my view, the unimproved value of the subject land must be more than the $3,800 per m² derived from the Aurora sale, for two reasons: first, the date of valuation is over two years later on a steadily rising market and second, the subject land is superior as its highest and best use is for commercial purposes and it is nearer to the Queen Street Mall. Therefore, it must be higher than Mr Jackson's contended unimproved value of $3,750 per m².
Having regard to all the evidence, I have come to the conclusion that a rate of $4,500 per m², or $8,200,000 (rounded) is appropriate for the unimproved value of the subject land as at 1 October 2003.
The Statutory Presumption of Correctness
In the 240 Queen Street case, I considered the effect of s.33 of the Act. In this case, the valuation made by the respondent of $8,700,000 is deemed to be correct until proved otherwise. For reasons similar to those in the 240 Queen Street case, I find that the evidence has proved the respondent's valuation not to be correct. The statutory presumption has therefore been rebutted.
Order
The appeal is allowed, valuation of the Chief Executive is set aside and the unimproved value of Lots 1 and 2 on Registered Plan 887, Parish of North Brisbane (324 Queen Street), is determined at Eight Million and Two Hundred Thousand Dollars ($8,200,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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