Parkside Development Pty Ltd v The Crown
[1996] QLC 4
•1 February 1996
|
BRISBANE
1 February 1996
Re: Determination of Compensation -
Resumption of Land at Townsville for
School Purposes -
Acquisition of Land Act 1967.
(A94-39)
B E T W E E N
Parkside Development Pty Ltd - Claimant
and
The Crown - Respondent
(Hearing at Townsville)
J U D G M E N T
Parkside Development Pty Ltd, as one of a group of companies, has been involved in the development and sale of residential land in Townsville for many years. One of its projects is a residential estate known as "The Palms" in the suburb of Condon. The marketing strategy had been to develop land in stages, for sale predominantly, but not exclusively, as house and land packages.
By May 1993, the balance area of the major part of the estate was described as Lot 100 on RP 812595, as contained in Certificate of Title, volume N1504, folio 244, being an area of 76.7536 hectares. Lot 100 was an irregular, inverted "L" shaped parcel, westerly of Ross River Road, bounded by Vickers Road and Gollogly Lane in the south-west and the surveyed Beck Road to the west. The parcel was severed by the 15.07 hectare site of the Thuringowa State High School which was surveyed off Vickers Road through to Beck Road, northerly of Gollogly Lane. The southern severance, between the High School and Gollogly Lane, contained an area of 9.96 hectares.
Land described as Lot 300 on Plan 855254, containing an area of 7.547 hectares, was taken by the Crown for School purposes by Proclamation published in the Government Gazette as from 21 May 1993. That land adjoins the High School site to the north. It fronts Vickers Road (and the designed northerly extension of that road, as its eastern boundary) and has depth of 360 metres as its southern boundary adjacent to the High School. Its western boundary is separated from Beck Road by a distance of about 120 metres.
By letter dated 27 April 1993, through its solicitor, the claimant was advised that the Department of Transport was prepared to purchase an area required from Lot 100 for the "Townsville - By-Pass", but at that date "plans for the taking of this land by acquisition have not been finalised ... and will not be completed by at least late June, 1993". That land was located in the extreme north-eastern corner of Lot 100. The evidence is that an area of 4.7716 hectares was subsequently taken by agreement.
It was established during the hearing in this matter that, at the date of resumption, the parent parcel (Lot 100) accommodated 28 fully developed residential lots as Stage 4 of the overall development - being an extension of the earlier Stages 1, 2 and 3. Subdivision approval was in place for Stage 9 (adjoining Stage 4) and progressive orderly extension of subdivision approvals and construction had proceeded subsequent to the date of resumption.
Thuringowa City Council had conditionally approved the rezoning of that part of Lot 100 northerly of the High School and westerly of Vickers Road (including the land the subject of the resumption) to "Residential B" on 29 April 1993.
Various infrastructure, including roadworks and major drainage, had been constructed prior to the resumption.
There is no disagreement between the parties that the northern severance of Lot 100 should, for practical purposes, be regarded as being within the "Residential A and B" zones. Indeed, there is agreement on many aspects of this matter.
Valuation evidence for the claimant was given by Mr GW Eales and for the respondent by Mr PG Simmonds. Both are senior in their profession with long local experience, Mr Eales being in private practice and Mr Simmonds employed by the Department of Lands. There was no argument that, due to the absence of sales evidence of in globo residential land which was capable of direct comparison, the valuation approach should be on the "hypothetical development" methodology, both before and after the resumption. The Court was advised at the outset that agreement had been reached between the valuers as to the value of the hypothetical lots, the anticipated rate of sale, the selling costs, the major development costs and the rate of interest which should be adopted, based on Court precedent.
The major issues in dispute are the profit/risk of realisation allowance which should be made and the manner in which the land, which was subsequently acquired by the Department of Transport, should be dealt with in the hypothetical development exercise. There were other differences, some of which were resolved during the hearing, but those remaining related to the extent of holding costs and were of relatively minor consequence.
The end result, with both valuers altering original calculations during the hearing, was an amended claim of $755,595, made up as:Difference in land value before and after $708,000
"Disturbance"
Development work $ 32,500
Valuation fees to prepare claim $ 6,000
Legal fees to prepare claim $ 4,000
Loss of prepaid survey and
engineering fees $ 5,095 $ 47,595
TOTAL CLAIM $755,595
Then, the valuation finally put in evidence by the constructing authority was:
Difference in land value before and after resumption $366,000
"Disturbance"
Development work $ 32,500
Valuation and legal fees $ 10,000 $ 42,500
TOTAL VALUATION $408,500
Mr Eales had originally based his hypothetical development exercise on a yield of 530 residential lots (together with the one lot southern severance) before the resumption and 440 lots after. There was no dispute that the resumed land had a yield potential of 90 residential lots. On a pro rata basis this was significantly superior to the average yield capable from the parent parcel overall. Mr Eales had excluded from consideration that part of the parent parcel which was, at the relevant date, proposed to be acquired by the Department of Transport for Road purposes. It was not disputed that that area, which was subsequently acquired, would have been capable of producing 50 residential lots.
Mr Eales' valuation exercise was based on an allowance for profit/risk of realisation of 20 per cent (20%).
Mr Simmonds had based his calculations on a yield from the total parent parcel including the area subsequently acquired by the Department of Transport of 580 lots (together with the southern severance) before the subject resumption and 490 lots after. His allowance for profit/risk of realisation was 40 per cent (40%).
Mr Eales and Mr Simmonds were the valuers involved in another school resumption which had come before the Court, and in which I handed down a judgment on 24 August 1995. That matter was WF McLachlan v. The Crown, and related to the resumption of land at Deeragun which was at the time considered to be a "satellite" suburb of Townsville. The valuation methodology had also been by hypothetical development and the profit/risk allowance had been a major issue. Although widely apart, the valuers based on their own considered opinions, see the allowance decided in that matter as either supporting their opinion here or at least capable of distinction on the facts.
Mr Eales remains adamant that in Townsville, developers of residential subdivisions are prepared to accept a margin for profit including risk of realisation, in the range of 20% to 25%. In deference to the views I expressed (and maintain here) in the McLachlan matter, relative to the market place deciding the quantum of profit which a developer is permitted, Mr Eales produced an analysis of a sale of a large parcel of in globo land in the locality of the subject land, purchased for subdivision by an experienced developer. The sale had taken place well after the relevant date in this matter, when sales volume of residential land had declined. He had conducted a valuation of the land prior to the purchase and was therefore well informed as to the best estimates of yield, gross realisation, and development costs. As I understood his evidence, the property had been purchased at a price somewhat in excess of his valuation. His analysis of the purchase price which was not challenged, showed a profit/risk margin of 20.61% if a commercial borrowing rate of interest, said to be current at the time (10%) was used in the analysis, or 23.5% if the then gilt-edged investment rate (adopted as 8%) was used in the analysis. The exercise was based on a potential yield of 820 lots and an estimated development and selling period of 10 years. In cross-examination, Mr Eales agreed that the developer/purchaser was aware of an opportunity to dispose of a significant proportion of developed lots as they were progressively produced, to a particular end user (Defence Homes Authority). He saw that as a normal business consideration and did not agree that a developer would pay a premium for any advantage which was not seen to be specific to the land itself. Mr Eales did not analyse the sale on a unit of area basis because he saw that result being distorted by the overall nature of the land, which produced a relatively low yield (compared to its total area) and involved abnormal development costs in comparison with the subject. However, for comparison, the potential lots were valued at $45,000 and the development costs estimated at about $24,000. The sale indicated a raw land value of about $6,800 per potential lot.
Mr Eales also produced (with his client's approval) a copy of a valuation which he had provided in connection with the acquisition of a proposed private school site being in globo land within a large balance area of a good quality Townsville residential estate. The site was capable of producing 47 lots, valued at near $50,000 each, with development costs, estimated at about $21,000. Mr Eales had allowed 25% for profit and risk. His evidence was that after negotiations, a contract had recently been signed at a price only slightly in excess of his valuation with settlement deferred to allow the necessary rezoning procedures to be completed. His discussions with a representative of the vendor development company indicated that the developer required a margin of 25% for
profit/risk of realisation, on its operations, but saw very little risk in progressively developing its holdings.
Mr Eales expressed the view that the larger developers in Townsville saw less risk in the larger progressively staged developments with medium term development and selling periods, than in the smaller short term developments. He realised that such an opinion was contrary to the results of decided cases generally, but the explanation was that, provided the period involved was not excessively long, developers saw the potential for the lows in any economic cycle to be offset and levelled out by the buoyant periods. This perception was confirmed by two witnesses called for the claimant, Mr JA Tapiolas, a director of the claimant company and a principal of the Parkside group of companies, and Mr JE Read, the managing director of a company involved in two large residential developments. Mr Read's evidence was that in his opinion, local developers of residential subdivisions would have been prepared to accept a net profit of 25% "clear of all expenses whatsoever" at the relevant date of valuation here. Mr Tapiolas' evidence was that his group of companies looked "for 25% return on capital per year". This statement was supported by the group's financial controller for 14 years, Mr EJ Keenan, a Bachelor of Economics (Sydney University) majoring in Accounting.
Mr Keenan analysed the mathematical results of the hypothetical subdivision exercises put before the Court. He showed that Mr Eales' profit allowance of 20% would have produced, on the figures, an average annual return of 27.7% in line with the company's requirements. A profit allowance of 25% produced an average annual return of 35.4% while on the 40% used by Mr Simmonds the average annual return rose to 68.1%. In his opinion, such a latter result would be seen to be exceptional and well above normal business expectations. It is relevant that the accounting approach adopted by Mr Keenan is based on the in globo land value constituting the "investment capital" on which the annual return is calculated. Development costs, as I understood his evidence, if financed on borrowed funds, are not accepted in his methodology as investment capital but a "cost of sale" of the end product, the developed block of
land. The accounting principle involved in Mr Keenan's analysis may be acceptable for reporting purposes, but it is not the basis involved in the hypothetical development valuation approach to in globo land where the analysis involves the calculation of profit, not only on the land but all costs other than direct selling expenses.
Mr Simmonds was the only witness for the respondent. Weighing heavily in his considerations in adopting an allowance of 40% for profit/risk of realisation was the size of the subdivisional project and the resultant development and selling period involved. He was not influenced to accept that realisation of the predicted results was any less of a risk for the reason that two valuers had agreed on so many of the potentially variable criteria. His evidence contained a statement that the profit/risk allowance had been derived from "an opinion based on Market discussions". It was his recollection, from discussions held with developers during 1993 that at that time they sought a margin of 30% as a minimum for the projects requiring only a short development and selling period. In his opinion, with consideration to the much larger scale of the subject project, and to the commercial rate of interest cost to developers generally, allowance of 40% was a fair interpretation of market considerations. While the in globo sales evidence was not directly comparable, he felt his resultant valuation fell within a market range, which his experience suggested to him as being reasonable.
When pressed as to the specific developers with whom he had discussed the question of profit/risk, Mr Simmonds referred to discussions he had had with Mr Tapiolas, Mr Read and Mr McLachlan as well as the person who represented the developer referred to by Mr Eales in the private school site negotiations. Mr Simmonds admitted that at least Mr Tapiolas and Mr McLachlan had suggested that an allowance of 25% was sought as the profit margin but he recalled from his notes that Mr Read had told him that he budgeted for 30%. As it was pointed out, such a suggestion had not been put to Mr Read when he had appeared in this matter as a witness. Mr Simmonds' discussions with real estate agents at about the time of the resumption indicated to him that while sale volumes were then continuing at a high level at buoyant prices, there was a general perception that a down-turn would occur if for no other reason than the cyclical nature of the real estate market. In his opinion the risks involved in realising the valuation criteria relevant at the date, for a medium term development, were increased because of the unlikelihood of the buoyant conditions remaining through the whole of that period.
In the McLachlan matter, I had commented that no hypothetical development analysis had been provided relative to one in globo sale which had been discussed. In so far as it is relevant here, that sale was identified by both valuers as part of the available sales evidence. As Mr Eales had done on the later sale already discussed, Mr Simmonds provided an analysis of this particular sale. The profit margin was analysed to be 38% for a development of 171 lots with a gross realisation based on $40,000 per lot and estimated development costs at about $22,000 per lot. Critical to this type of analysis is the necessity to avoid mixing fact (subsequent events) with supposition (the best information available at the date of sale) as was referred to in the McLachlan matter. Mr Simmonds felt that he had done this, particularly with regard to one item - the actual $250,000 cost of external drainage requirements. He had interviewed the purchaser at a time subsequent to the sale and had understood that some form of informal agreement had been negotiated with the owner of land over which drainage rights were required - prior to the sale. Such an agreement would have been a critical element in the price a developer could have afforded to pay, because the alternative option was, on Mr Eales' evidence, well known to be far more expensive (potentially $1 million). Mr Eales had suggested that the best estimates available at the date of sale even for the drainage scheme which was in fact put into effect was a minimum $300,000 with a range up to $500,000. As it happened, one of the Parkside group of companies was the owner of the land through which the actual drainage scheme was directed. Mr Tapiolas was recalled and gave evidence to the effect that no negotiations had taken place with the purchaser/developer prior to the date of sale and certainly there had been no agreement until subsequent to the sale.
It seems to me that the profit margin sought by the purchaser would have, on the evidence, involved consideration of the risk that more expensive drainage costs than were actually incurred, were a distinct possibility. In other words a
greater profit than might otherwise have been acceptable, was achieved as a result of events subsequent to the sale. Mr Simmonds' analysis of the sale mixed fact with supposition and does not, in my opinion, assist the case of the respondent.
Mr Simmonds had also prepared a hypothetical development check valuation of the subject land on a stand alone basis, i.e. as if it was an individual surveyed lot. Using the same criteria for gross realisation and development costs but then reducing the profit and risk allowance to 30% because of the smaller size, on his figures (which appear to contain an excessive calculation of holding interest) he arrived at an in globo valuation of about $575,000. This assumed that the land was immediately ripe for subdivision. He then effectively deferred that in globo value to account for the various holding costs until it was seen to be ripe for subdivision within the parent parcel. That resulted in a valuation of about $420,000. Criticism was levelled at this approach for the reason that it was wrong in principle to treat the school site as an individual parcel, although clearly Mr Simmonds intended it as nothing more than a check against his primary valuation. In an atmosphere clouded by the lack of sales evidence, Mr Simmonds was, in my opinion, prudent to use any market related check available. Indeed, Mr Eales' evidence was that the market had been satisfied by that very same approach (except for the extent of discounting as an end result) when the contract was signed for the private school site.
The purpose of a hypothetical subdivisional valuation exercise is to assess the in globo value based on the component parts estimated at a particular date, based on the best evidence then available. With professional opinion being as one with regard to much of the potentially variable criteria, the Court is provided with a firm base for consideration of the profit/risk of realisation factor.
As Dixon C.J. said in Turner v. Minister of Public Instruction H.C. of A. (1955-1956) 95 CLR 245 at 264:
"To no small extent the 'risk' is of the estimate of the net proceeds of sub-divisional sale proving too low. The reason may be found in the estimate of the prices for blocks being too high, the sale of the blocks being too slow, the estimated costs attending sub-division and sale proving too low or in any or all of such causes. It is therefore evident that the degree of faith felt in the estimates, whether by the court or the hypothetical purchaser, must bear upon the fixing or allowance of the percentage. In coming to a reliable determination there is no reason why it should not be done by fixing provisional figures and then reducing them, but it would seem that there is equally no reason why it should not be done by making definitive estimates in the first place. It must be borne in mind, of course, that while the estimate of the expenditure may prove too high and the estimate of the return may prove too low, the contrary is equally possible. At some point fixed reliance must be placed on the figures produced by the use of the hypotheses which the use of the formula requires. "
Risk assessment, as far as developers are concerned, should clearly be the "risk" of estimates in feasibility studies being too optimistic. Without foresight, the best estimates might be later proved to have been too optimistic but as His Honour recognised in the quoted passage above, "the contrary is equally possible". However, when the relevant date of valuation represents a period of sustained real estate market buoyancy and with the real estate market being historically cyclical, it would seem to be a cavalier valuation approach to discount any risk of decline, at least in the estimated gross realisation based on evidence derived from those buoyant conditions.
It is accepted on the evidence that developers see greater risk in the financial management of small projects, as opposed to larger on-going developments, should declining market conditions occur in the short term. However, it is also clear that if small parcels of in globo land command higher levels of pro rata value than do larger otherwise equivalent parcels - as at least Mr Read was prepared to accept as a historical fact - then other market forces clearly come into play and cannot be ignored in assessment of in globo values.
I do not agree with the suggestion that Mr Simmonds should be seen as a messenger of "doom and gloom" because of his opinion that estimates relative to longer term developments carried greater risk of realisation than those relative to shorter term developments. There is, however, sufficient alternative industry opinion to influence me to accept that in the circumstances of this particular property, with the purpose of the valuation being for determination of a once only claim for compensation, his approach to the question of profit/risk has been overly cautious in both his primary and check valuation exercises. This
conclusion has been reached whilst recognising that Mr Simmonds has taken into consideration the effect of adopting investment rather than commercial lending rates of interest.
Mr Read's evidence was intended to represent the opinion of an experienced developer. His feasibility calculations are said to be based on a requirement of no less than 25% profit. He would, as a matter of prudence, not be calculating holding costs other than on commercial lending rates, whereas for the reasons given in the McLachlan judgment, there are reasons in these matters for using investment interest rates. The exercise conducted by Mr Eales, in his analysis of the sale referred to earlier, shows the significantly different profit result that a difference of 2% in the adopted interest rates creates in a medium to long term development. There was no direct evidence in this matter as to commercial lending rates at the relevant date but in McLachlan Mr Eales had produced evidence indicating a commercial lending rate of 11.75% at about the same date. That is 4.5% higher than the investment rate applicable in this matter. I am left in no doubt that Mr Read's evidence, when fully analysed, did not support Mr Eales' profit/risk allowance of 20%.
The analyses produced by Mr Keenan, again leave me in no doubt that had the accountancy methodology sought profit on development costs as in the accepted valuation methodology, then again Mr Eales' profit/risk allowance would fall well short of providing the annual rate of return which the claimant company required. As I understood the evidence of Mr Tapiolas, as a developer, he sought profit on all aspects of the company's activities, not only the raw land content of a project.
The opinion of Mr Eales as to profit/risk gains general support from his analysis of the sale which was discussed earlier. However doubt has been created as to the level of value shown by that particular sale. It is clear that the sale price was higher than Mr Eales' own opinion and the advice that he gave to the purchasing company prior to the sale. Then, in terms of general application of the results of Mr Eales' analysis of that sale, some further doubt is caused by the narrow margin adopted as existing between the lending and investment rate of interest at that time.
After consideration of the evidence overall, I am influenced to accept that a profit/risk allowance no less than 25% might have been acceptable to establish the value of an individual and relatively small parcel of in globo land of equivalent quality to the subject land, at the relevant date. This is on the basis of the application of commercial lending rates. The adoption of an investment interest rate would increase that allowance. Further I am not persuaded that a project requiring a development and selling period of at least five years would not further increase the requirement for increased profit in terms of the risk of realisation of the component parts of the hypothetical development exercise. After some analysis of the evidence I would have no difficulty in accepting that for raw in globo land of the size and quality of the subject, an allowance of 331/3% for profit/risk of realisation was not unreasonable at the relevant date. The subject land was however in a physical condition which removed some of the risks involved. Certain infrastructure was already in place and 28 lots had been developed to allow immediate selling and generation of cash flow.
There may appear to be a certain impracticality in considering the total parent parcel on the basis that no Department of Transport road requirements existed as was the approach which Mr Simmonds took. However the purpose of the exercise is to establish the in globo value of that parent parcel immediately before and after the resumption. The component of that parent parcel which was subsequently taken for road purposes, should not be ignored, in my opinion. Its worth was related to its potential for subdivision as part of the parent parcel and Mr Simmonds' basis of valuation is considered to be correct in principle. Similarly I accept that the 28 unregistered constructed lots are properly dealt with as part of the on-going development and should not be considered as a separate entity as Mr Eales did in his amended valuation. Apart from the cash flow generation which could result from the sale of the constructed lots, it could also be argued that further cash flow was imminent due to the probability of the road requirements.
In the condition in which the parent parcel existed at the date of resumption, I will adopt an allowance for profit/risk of realisation of 30%. Neither valuer saw the need to adjust the allowance in the lower yield after resumption valuation and I will adopt the same approach.
I have come to my decision in this matter based on the evidence as it was presented. Although there are a number of similarities between this and the McLachlan matter, there are also circumstances which are able to be distinguished in terms of in globo value. Having heard the evidence in both matters and having viewed both sites, at the request of the parties in each matter, I have no difficulty in accepting that the parent parcel in this matter, although much larger in size, provided a more desirable development project with no argument existing as to its potential. An allowance of 30% for the profit/risk of realisation component in the subject matter is not seen to be in conflict with the basis of determination in McLachlan.
Interest on Development Costs
Both valuers recognised that the development would be constructed and sold in stages. Mr Eales envisaged stages averaging 50 lots. He averaged the total development costs over the resultant number of stages then allowed interest on that averaged result over half of the total estimated development and selling period, based on the agreed sales volume of 9 lots per month.
Mr Simmonds adopted stages comprising 45 lots. He allowed a development and selling period of 9 months for each of these stages. This was based on 1 month for approval, 3 months construction and 5 months selling (9 lots/month). The interest calculation was based on the total development costs over half the development period for each stage (9 months ¸ 2).
The differing approaches provide significantly different calculations of interest. As I see it, Mr Simmonds' approach assumed that each individual stage required approval, development and sale independently of the subsequent stage or stages. This does not appear to reflect the reality of the situation when the approvals and construction of the various stages (after the first stage) would need to overlap if the overall sales volume in the period allowed, was to be achieved.
For the purposes of the calculation I will adopt Mr Eales' methodology, including his acceptance of 50 lot stages. The effective development and selling period of the total project is then in keeping with the sales volume and recognition is given to the generation of cash flow from the on-going development
rather than from individual stages.
As already discussed, it is my opinion however that the 28 constructed lots, providing immediate cash flow potential as part of the on-going stages of development need to be considered as part of that total development, rather than as a separate entity.
I will allow a total holding and selling period of about 64 months before resumption and 54 months after. The allowance for profit/risk of realisation has taken into consideration the potential for that period to be reduced by near 6 months in each case with the imminent road resumption.
Rates and Land Tax
As I understand the evidence, Mr Eales used actual payments at the relevant date for the aggregated holdings of the claimant and then apportioned the total on an area basis. Mr Simmonds apparently took a similar approach, but based on the actual area of the parent parcel and a consequently longer selling period. I have adopted Mr Simmonds' approach to the total area of the parent parcel, for the reasons given.
Disturbance Items
The one remaining issue in dispute is the cost of engineering and survey fees claimed to have been thrown away. The claim was based on an apportionment of fees actually expended on the parent parcel. The fees relate to such matters as drainage design, overall planning, engineering services relating to rezoning and Council lodgment fees. The respondent argued that the subject land has been valued on the basis that the rezoning had been effected and the outlays generally were necessary to bring the parent parcel to the status reflected in the valuation.
I agree with the respondent's submissions and do not accept that the engineering and survey fees, as identified, were "thrown away". No award is made for those items.
In Globo Sales Evidence
Little is served in discussing evidence which the valuers have in the end result, discarded. In the circumstances surrounding the sale analysed by Mr Simmonds, no comfort can be gained by an analysis of the sale based on the
actual costs of external drainage. The question which is left in doubt is what price the land would have fetched had the actual drainage expenditure been generally known in the market place at the date of sale.
Special Value to Owner
It has been raised in a broad sense that Mr Eales' valuation, including the adoption of a profit/risk allowance of 20%, recognised special value of the land to the claimant. Because the claimant is in the business of developing residential land, it is submitted that the resumed land represented stock in trade and the claimant has been interrupted in its business by having had taken from it, a valuable part of the stock in trade. I am unable to accept that the business has been interrupted. Developed lots have not been taken. The result of the resumption is that the bank of land available to be developed has been diminished. The effect of that has been to bring forward, but still to some years hence, the expiration of that particular source of potential stock in trade.
The criteria adopted in the basis of valuation is to recognise the inherent potentialities of the land some of which have been identified as a result of the efforts of the claimant. I do not accept however that the claimant would, in the position of a potential purchaser of such land, be prepared to have paid a premium over and above the value it possessed in the market place, to any other experienced developer. That value relates to its exposed potentialities as part of a medium term development project.
It is that value which has been determined and furthermore, that is the value, in my opinion, to the owner. The comments of Lord Moulton in Pastoral Finance Association v. The Minister [1914] A.C. 1083 at 1089 are considered relevant:
"Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it. "
Before and After Resumption Valuations:
Based on the adjusted calculations of Mr Simmonds, the before and after resumption valuations become as follows:
Before Resumption:
Yield: 580 equivalent residential lots (28 constructed)
1 large lot (southern severance)
Gross Realisation - agreed values - $23,060,000
Less Selling Costs 1,084,875
Net Realisation $21,975,125
Less Profit/Risk of Realisation 30% 5,071,180
$16,903,945
Less Estimated Development Costs
(excluding 28 lots) $10,865,850
Add interest 7.25% p.a. over half
development and selling period of
5.37 years in 50 lot stages $ 182,340
$11,048,190
Land including Acquisition and Holding Costs $ 5,855,755
Less Rates and Land Tax $ 90,925
$ 5,764,830
Less Interest on Land & Acquisition Costs @ 7.25% for
½ development and selling period of 5.37 years $ 939,340
$ 4,825,490
Less Acquisition Costs:
Legals - $10,000
Stamp Duty - $170,440
$4,645,050
After Resumption:
Yield - 490 equivalent residential lots (28 constructed)
1 large lot (southern severance)
Gross Realisation $19,505,000
Less Selling Costs $ 917,250
Net Realisation $18,587,750
Less Profit/Risk of Realisation 30% $ 4,289,480
$14,298,270
Less Estimated Development Costs
(excluding 28 lots) $ 9,072,335
Add interest 7.25% p.a. over half
development and selling period
of 4.53 years in 50 lot stages $ 152,020
$ 9,224,355
Land including Acquisition and Holding Costs $ 5,073,915
Less Rates and Land Tax 69,000
$ 5,004,915
Less Interest on Land and Acquisition Costs @ 7.25% for
half development and selling period of 4.53 years $ 705,945
Land including Acquisition Costs $ 4,298,970
Less Acquisition Costs
Legals - $10,000
Stamp Duty - $151,410 $ 161,410
In Globo Value - $ 4,137,560
DETERMINATION
Compensation under all heads is determined as follows:
In globo valuation of parent parcel of 76.75 ha
before resumption $4,645,050
In globo valuation of balance area of 69.203 ha
after resumption $4,137,560
Effect of loss of land $ 507,490
In practical figures adopt $ 507,500
Add - Development Work - as agreed $32,500
Add - Legal and Valuation fees - as agreed $10,000
$ 42,500
Total Compensation - $ 550,000
Interest
An advance payment of $370,000 was made on 16 March 1994. No advice was provided as to whether the agreed legal and valuation fees had been paid or if so at what dates.
It is ordered that interest at the rate of 8.5% per annum be paid to the claimant by the respondent calculated as follows:On the amount of $540,000 from 21 May 1993, up to and including 16 March 1994, then from that date on the amount of $170,000 up to and including the date on which final payment is made.
(RE Wenck)
Member of the Land Court
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