Port Marina Pty Ltd v Valuer General

[2004] NSWLEC 338

Land and Environment Court

of New South Wales

CITATION:	Port Marina Pty Ltd v Valuer General [2004] NSWLEC 338
PARTIES:	APPLICANT Port Marina Pty Ltd RESPONDENT Valuer General
FILE NUMBER(S):	31526 of 2003
CORAM:	Moore C
KEY ISSUES:	Valuation of Land :-
LEGISLATION CITED:	Valuation of Land Act 1916
CASES CITED:
DATES OF HEARING:	21, 22 and 23 April 2004
EX TEMPORE JUDGMENT DATE :	04/23/2004
LEGAL REPRESENTATIVES:	APPLICANT Mr J Maston, barrister INSTRUCTED BY Stevens Legal RESPONDENT Mr A Pickles INSTRUCTED BY I V Knight Crown Solicitor

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Moore C

23 April 2204

31526 of 2003 Port Marina Pty Ltd v Valuer General

JUDGMENT

1 COMMISSIONER: The first decision I propose to give is in matter 31526 of 2003 which relates to the “wet area” as it has been described. It is an appeal against the valuation as at the base date of 1 July 2002 concerning permissive occupancy 1979/4 in the Port Macquarie Land District. It covers an area of 8,837 sq m of an inlet which has been artificially created on the banks of the Hastings River.

2 Pursuant to the principles relating to valuation under s 6A of the Valuation of Land Act 1916, the expert valuers have agreed that the highest and best use for the land is that of a marina. The valuation which is appealed against is a valuation of $337,000 being approximately $40 per sq m.

3 During the course of the appeal, there were two quite distinct bases advanced as being appropriate for assessment of the valuation in the matter. That which was advanced by Mr Turpino, on behalf of the Valuer General, is one of the more traditional nature comparing what the Valuer General’s representative expert witness considered were appropriate comparative sales being two sales in the industrial area of Port Macquarie and an area of tidal land at Hawkes Nest - some significant distance to the south of the subject site.

4 The applicant, on the other hand, considered that there were, through its expert witness, no comparative and relevant sales and that the appropriate basis was using a capitalisation of net rents approach.

5 With respect to the Hawkes Nest site, I indicated during the course of closing submissions of counsel, that I did not consider I needed to be addressed extensively on the Hawkes Nest site as I did not consider it to be appropriate in the present circumstances. I therefore record why I reached this conclusion.

6 The first element is that the sale that was relied upon took place in February 1997, some five and a half years prior to the base date. The title extracts which were tendered in evidence show that the relevant land is noted as mud flat and show that there are possibly some buildings erected on it which would need to have some accounting treatment to be discounted in value to bring one back to the vacant land value. It is significantly larger in size and there is no table of adjustments in evidence from the applicant to demonstrate how one would come from that marina site as designated by it, back to the Port Macquarie site. I reject the Hawks Nest comparison for the reasons that:

1. It is too remote geographically.
2. The sale is too remote in time.
3. It is not yet developed so that a satisfactory comparison of assumption as to the highest and best use is not yet properly established.

7 Even if I were wrong with respect to all of the above, there is no proper basis of adjustments to get from that site, in the traditional valuation process, to an accurate comparison with the Port Macquarie site. Although a table was produced which gave some analysis, no evidence was given that fleshed out or supported that.

8 The other two comparative sales that were relied on by Mr Turpino, with respect to the wet area in this appeal, were 215 Lake Road and 174-180 Lake Road, Port Macquarie, were not substantially pressed. They are industrial sales and I am satisfied that it is not possible for me to draw any useful conclusions from considering them.

9 That leaves the capitalisation of net rents method to be considered. Mr Turpino accepted in evidence that it was a valid method capable of an application to the subject site. I accept, in the absence of any other appropriate method, that it is, in fact, the appropriate method to apply in the present case.

10 There were a number of matters that were in common between the two expert witnesses. They relate to the assumptions that I should make in considering how this method should be applied. The first is that an appropriately conservative basis of estimate would be on a 100% mooring occupancy on a permanent (that is on the monthly rental) basis rather than on some higher casual rental basis - that being the basis that has been applied by Mr Jeffrey, the applicant’s valuer, in his calculations. Secondly, that the maximum aggregate length of boat capacity for the marina, which is the basis upon which charges are levied and which is derived from an examination of an actual mooring plan is 1,402 linear feet of boat.

11 Thirdly, that the rental rate of $78 per linear foot of boat per annum is the appropriate basis to deal with the carrying capacity calculations for the marina.

12 Finally, to that resultant sum should be added the rental that is derived from the outboard dinghy hire business operated from the marina.

13 On that basis, on my calculation (which was not disputed by the parties) there is an annual rental of $118,156 as the appropriate starting point.

14 If I applied Mr Turpino’s variables as to rates of rental return and capitalisation to that, it would give a maximum valuation of $295,390 against a valuation of $337,000 for which the Valuer General contends. I am therefore satisfied that as a consequence of the Valuer General’s own expert calculations not supporting the contended for valuation, the applicant has satisfied its onus pursuant to s 40(2) of the Valuation of Land Act and that it is therefore appropriate for me to determine what is the resultant value to be applied to these premises.

15 Mr Jeffrey’s approach applies a rental return of 10% per annum and a capitalisation rate of 8%, giving a valuation of $147,695. Mr Turpino’s approach postulated a rental return of 15% and a capitalisation range of 6-7%, giving a range of values $253,191.40 to $295,390. What should I accept are the appropriate factors to be applied?

16 With respect to the rate of rental return, Mr Turpino gave evidence of one industrial ground rent in the Port Macquarie vicinity of which he was aware that gave a ground rental return of 15%. Mr Jeffrey gave evidence of two such rates of return being 9 and 13% respectively. I accept that somewhere between 9 and 15% is the appropriate range which I should apply. I am not satisfied however, albeit on the scarce evidence that is before me, that either extreme of the range is appropriate to adopt. I therefore have concluded that it would be fair and appropriate, under the circumstances. to adopt a rate of 12.5%.

17 Capitalisation rates were put as a range by Mr Jeffrey of 8 to 10%, but he adopts 8% on the basis that investment in an activity such as that which could be carried out on the site essentially reflects amongst other things, lifestyle alternatives.

18 Mr Turpino took, perhaps, a more less relaxed attitude to the basis of investment and suggests that a 6-7% capitalisation range would be appropriate.

19 Given the unique nature of the site as it comprises the only Hastings River private wet berth site that will have some land access to it and that the opportunities this provides, I am satisfied that I should accept a capitalisation rate of 7%. That is at the top of Mr Turpino’s range rather than the rates advocated by Mr Jeffrey. On my calculation that, using the formula that was agreed upon, gives a valuation for the wet area of $210,992.90 which I round to $211,000.

20 The orders of the Court are therefore:

1. The appeal is upheld.
2. Pursuant to s 40(1)(b) the Valuation of Land Act 1916 , a valuation of $211,000 is substituted for that of $337,000 for permissive occupancy 1979/4 in the Port Macquarie land district.

Commissioner of the Court