Silverfields Pty Ltd v Chief Executive, Department of Natural Resources

[1999] QLC 94

[1999] QLC 94

 

LAND COURT BRISBANE

10 SEPTEMBER 1999

Re:Appeals against Annual Valuations – Valuation of Land Act 1944 –

Valuation Roll Nos: 3537; 3536; 3540; 3711 and 3722 Local Government: Gold Coast City

Silverfields Pty Ltd v.

Chief Executive, Department of Natural Resources

(AV98-820)

PP and BM Pty Ltd v.

Chief Executive, Department of Natural Resources

(AV98-821)

Awatea Holdings Pty Ltd v.

Chief Executive, Department of Natural Resources

(AV98-819 and AV98-824)

Daronada Investments Pty Ltd v.

Chief Executive, Department of Natural Resources

(AV98-822)

(Hearing at Coolangatta and Brisbane) D E C I S I O N

Background:

These five matters (referred to as "Group 2") are a significant part of the southern part of the Central Business District (CBD) of Southport, south of the Southport Mall, and were heard concurrently as much of the evidence submitted was common. The five matters were part of a total of 22 appeals in the Southport CBD which were contested as key to establishing true relativity throughout the CBD area. One matter (AV98-825) was subsequently found to lack jurisdiction, and forms no

part of this decision. The remaining 16 matters (Group 1) are the subject of a separate decision, and are located to the north of the Southport Mall.

All subject lands are located in the Short Street Office Precinct and are zoned as "Comprehensive Development" under the Town Plan of the Gold Coast City Council of 11 February 1994, and effective at the date of valuation of 1 October 1997. All normal services are available to all properties. The key issues are the method of valuation, the nature of improvements, comparison of sales and the application of sales.

On 2 March 1998 the Chief Executive issued the following valuations:

Property	Unimproved Value
17. (AV98-820)	$1,250,000
18. (AV98-821)	$3,250,000
19. (AV98-819)	$1,450,000
20. (AV98-824)	$530,000
22. (AV98-822)	$450,000

From the records of the Court the following objections were undertaken, subsequent to which the appellants have now appealed as follows:

Property	Decision on Objection		Date Issued	Value Appealed For
17.	Disallowed		14.09.98	$840,000
18.	Partly allowed	$2,800,000	14.09.98	$2,330,000
19.	Partly allowed	$1,125,000	14.09.98	$975,000
20.	Partly allowed	490,000	14.09.98	$337,000
22.	Partly allowed	$440,000	14.09.98	$400,000

Mr B Cronin of Counsel appeared for the appellants, calling evidence from Mr GJ Duthie, the registered valuer for the appellants. Mr R Paterson, Principal Legal Officer, appeared for the respondent, calling evidence from Mr D Treston, the departmental registered valuer responsible for determining the valuations.

The Evidence

(1)The Road Network –

All roads in the CBD are bitumen sealed with concrete kerbing and channelling.  Marine Parade is a major four-lane divided road.  Scarborough Street is a 30 metre wide road reserve with metered centre and kerbside parking, and is the main commercial road in Southport CBD. Short Street provides a link between Marine Parade and Scarborough Street, carries single lanes of two-way traffic, with roundabouts at each intersection, and with right-angle kerbside parking. There are parking bays off Marine Parade, which also has metered car parking. Seabank Lane is a short dead-end narrow 10 metre road reserve off Short Street, with limited access and metered parking on one side.

(2)     The Nature of the Lands –

(2.1)    The Description of the Lands –

Property	Address	Description	Area
17	18 Marine Parade	Lot 5 on RP 895966	1,198 m²
18	12 Marine Parade	Lot 1 on RP 192127	4,773 m²
19	26 Marine Parade	Lot 1 on RP 221034	2,043 m²
20	6 Short Street	Lot 3 on RP 86488	688 m²
22	4 Seabank Lane	Lot 10 on RP 86488 and Lot 1 on RP 90872	1,222 m²

(2.2)   The Physical Nature of the Properties –

·Property 17 (Southport Eye Centre). This is a regular shaped parcel at the corner of Marine Parade and Short Street, with frontages of 30.2 metres to Short Street, and 35.96 metres to Marine Parade, allowing for the corner truncation of the land. Land is generally level after the natural surface was cut and benched with an approximate 2.6 metre high retaining wall in the south-west corner, extending along the southern and western boundaries, which also provide benefit to the adjoining property 18. There are good views of the Broadwater.

Mr Duthie allows 100 metres of shared retaining walls ($220 per m²) and 390 m³ of cut. Mr Treston has valued the property as a generally level site and compared it to the sale of the subject land, so has made no allowance for walls or cutting of the site. Mr Duthie has allowed a higher rate for cut ($12 per m³) due to the more difficult nature of the rock material, and the smaller size of the excavation contract. He bases his assessment of the rock type from evidence obtained during the course of excavation of the

new building since erected on property 17. Mr Treston queries whether those deeper building foundations would be typical of the lesser depth needed to be cut for the benching of the site, or if the benching was in fact stepped. However, Mr Treston has no records to dispute Mr Duthie's conclusion, and agrees that if the rock existed then a higher rate for cut would be appropriate.

·Property 18 (Seabank Centre). This is a "T" shaped parcel with frontage of 50.49 metres to Marine Parade, and a depth of 86.5 metres. The "T" piece fronting Short Street is 12.19 metres wide and a depth of 30.17 metres, joining the major part of the land, and providing a two-street access to the property. There are good views of the Broadwater. The land has an overall 3 metre fall towards the east, and has been cut and retained. There are some minor encroachments by eaves of adjoining garages along the western boundary, which do not appear to have any significant impact upon property 18.

Mr Duthie allows 380 m² of retaining wall ($220 per m²), which relate only to the subject land, and 6,600 m³ of cut for benching of the site. Mr Treston made no allowance for walls or cut, as he compared the site with comparable sloping sales. Mr Duthie used a lower rate for cut ($10 per m³) due to the large quantities involved on property 18. Mr Duthie argues that it is inappropriate to compare such a large sloping site as property 18 with sales which are basically level, and therefore site works must be allowed for.

However, Mr Duthie notes that he has allowed full costs for the wall, which normally should be valued as common walls on a shared basis. On reflection Mr Treston concedes that the benefit of the retaining walls on property 18 are restricted to that property, and give no benefit to the adjoining owner, except on property 17. On that basis Mr Treston agrees that the retaining walls on property 18 should relate only to that property. Mr Duthie also concedes that his estimate of 380 m² of retaining walls did not include the shared wall with property 17, or the shared wall with property 20.

·Property 19 (Connaught Centre). This is a rectangular shaped parcel of frontage 20.18 metres to Marine Parade and depth of 100.95 metres. The land rises gently from Marine Parade for about 4 metres to the rear boundary, and has been benched at the rear to provide car parking. There are views of the Broadwater from the front portion of the land. Mr Duthie allows for an easement along the northern boundary for services reducing the rate per m² by 20% (ie $95 per m²).  However, Mr Treston rejects such a reduction arguing that the easement is one of two reciprocal easements with the adjoining property (Easements A and B on RP 57226); thus the gains from the benefits of Easement B on the adjoining lot, balance the loss to property 19 from Easement A. Mr Treston therefore makes no allowance for the easements.

Mr Duthie allows 364 m² of retaining wall ($220 per m²), and 2,700 m³ of cut allowing for rock at $10 per m³. Mr Treston allows 140 m² of retaining

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wall ($200 per m²) and 2,000 m³ of cut ($7.50 per m³). Mr Duthie allowed full added value of the walls, and Mr Treston on a half-shared basis, although Mr Treston later concedes that full costs of walls should be allowed on property 19.

·Property 20 – This is a rectangular shaped parcel of 22.9 metres frontage to Short Street, and a depth of 30.2 metres, and adjoins property 18 on both the eastern and southern boundaries. There are restricted views to the Broadwater, and the land rises to the rear with a crossfall. Mr Duthie allows 38 m² of retaining wall ($220 per m²) and 340 m³ of cut ($6 per m³). Mr Treston allows no site works as he compares his sales on a comparable basis. Mr Duthie allows walls on the eastern boundary and a small retaining wall on the southern boundary, which is shared with property 18.

·Property 22 – This is a rectangular shaped level parcel of frontage 36.5 metres to Seabank Lane and a depth of 33.5 metres, backing onto property

18. Neither valuer makes any allowance for site works. The property is located immediately west of the 11-storey building (Seabank) on property 18, and has restricted exposure, views and access. There is an approximate 1 metre vertical wall at the rear boundary which inhibits direct pedestrian access from property 18 onto property 22.

(3)     The Use of the Lands –

It is agreed by both Mr Duthie and Mr Treston that the highest and best use of property 17 is for its present use as a medical centre, and for medical offices with some retail purposes. Properties 18, 19, 20 and 22 are agreed as best for office buildings. Mr Treston sees the existing high-rise residential building adjoining property 18 to the south as evidence of some potential high-rise residential use for properties 18 and 19, in view of the extensive views of the Broadwater. For that reason he has provided check valuations of those properties for residential purposes.

Property 22 is currently being used for temporary car parking prior to eventual long-term development.

(4)     Planning Matters –

All five properties are located in what is known as the Short Street Precinct, which falls within Precincts 1 and 3 of the Development Control Plan No. 1. The intent of Precincts 1 and 3 is to encourage office development which is well set back from the frontage in order to achieve visual amenity; and to also encourage residential development, particularly on sites with views to the Broadwater. Properties 17, 18, 20 and 22 are in Precinct 3, and property 19 is in Precinct 1.

Basic plot ratios are allowed in Precincts 1 and 3, which also provide for some exceeding of that plot ratio, subject to the inclusion of certain bonus elements into a

development, up to a specified maximum plot ratio, which cannot be exceeded.  The plot ratios are as follows:

Precinct	Basic Plot Ratio	Maximum Plot Ratio
1	2 to 1	4 to 1
3	1.5 to 1	2.5 to 1

However, in Precinct 1 for sites fronting the northern side of the Mall the maximum plot ratio is 3 to 1. Site coverage in Precinct 1 is not to exceed 80%; with the remaining 20% to be landscaped at ground level. A control height of 7 storeys applies in Precinct 3, with a maximum height of 15 storeys subject to conditions of Council and bonuses supplied by developers.

Evidence was also called of a sale in the Bundall Central area which falls within the Development Control Plan 13 (Exhibit 5).  The height restrictions upon buildings in that locality are limited generally to 6 storeys, or not more than 3 storeys on smaller sites of less than 1,000 m². There is also power for Council to restrict a lesser building height, where a 6-storey building would adversely impact the amenity of residential development to the west. The maximum plot ratio is 2 to 1.

Mr Duthie argues that it is unwise to compare properties on the basis of the maximum plot ratios, where there is the potential for bonuses to raise the building density from the base plot ratio to a maximum plot ratio. He argues that maximum plot ratios are seldom achieved due to the onerous additional costs associated in making the bonus offer to Council.  For that reason Mr Duthie prefers to compare properties on a basic plot ratio basis. However, there is no stated basic plot ratio in Development Control Plan 13, which refers in its intent only to the application of a "maximum limit set on the plot ratio and site coverage".

The different approach to the use of  plot ratios in Precincts 1 and 3 of Development Control Plan 1 would appear to relate to allowing greater flexibility for developers in those precincts. To support his conclusion that maximum plot ratios are seldom achieved, Mr Duthie notes the existing plot ratios on property 18 (Seabank Centre) which is 1.76; property 19 (Connaught Centre) is 1.45; and property 17 (Eye Centre) is 1.72.

Mr Treston notes, however, that there is the potential to achieve higher development rates in Precincts 1 (4 to 1) and 3 (2.5 to 1) because of the higher maximum plot ratios in those areas compared to Bundall (2 to 1).   Mr Treston

concedes that Bundall is an emerging office location, but argues that the Short Street Precinct is older, and could be compared as an A-class location, while Bundall is more of a B-class location. Most of the core financial operators are located at Southport. In respect of the need to obtain consent approval of Council, and any possible consequential additional costs, many developers operate within their as-of- right land use zoning provisions, both at Bundall and Southport, although relaxations by Council are quite common in both areas.

Further evidence was called in respect of a sale (Sale 29) in Precinct 4 of Development Control Plan 1, where the former Southport Primary School site was identified for some Government core function such as major community facilities. The intent is to provide a landscaped town square adjacent to the corner of Scarborough and Lawson Streets, and incorporating available access for public car parking in the new developments.  There is also a special medical precinct (Precinct

5) which is located centred around the Gold Coast Hospital and the Allamanda Private Hospital near Queen and Nerang Streets. Sale 23 is part of that precinct. The plot ratio in the area of Precinct 5 bounded by Cougal, High, Queen and Nerang Streets is

2.5 to 1; and the remaining area of that precinct has a plot ratio of 1.2 to 1.

In applying the  intentions of  the  Development Control  Plans  Mr Treston concedes that he had tended to accept those plans as being more mandatory in nature, rather than as guiding principles, when he analysed the sale. He had also misinterpreted the proposals for car parking to refer more to providing a public car park, rather than just making parking available in the community interest for that purpose. The impact of those conclusions in the analysis of the sales is discussed later.

(5)     Methods of Valuation -

The methods of valuation adopted by Mr Duthie and Mr Treston are described in the decision on the Southport CBD Group 1 (AV98-758 & Ors), and I will not elaborate further.

In respect of any loading for corner influence in the Group 2 properties, Mr Treston has again applied a premium according to the area fronting the principal road. Mr Treston has applied a corner premium at property 17 (20%), while Mr Duthie has not addressed corner location as he saw that sale of the subject land (property 17) as out of line with the market, and therefore to be rejected. In any case Mr Duthie sees a premium for corner location as applicable to retail use; but of no consequence for

office buildings, where tower construction provides adequately for similar effects of views and exposure. The argument as to whether there is a separate market for purchasers who are owner/occupiers and for purely investors, also separates Mr Duthie and Mr Treston, as it did for the Group 1 properties. Mr Treston also makes no allowance for size for the reasons given in the Group 1 decision.

As key relativity benchmarks in the Short Street Precinct, Mr Treston advises that he has applied base rates for standard lots (10 m x 40 m) as follows:

Property	Standard Base Rate
17	$875 per m²
18	$775 per m²
19	$875 per m²
20	$650 per m²
22	$335 per m²

Mr Duthie has applied a slightly lower rate on property 18 because of its larger size and its "T" shape, which provides some impediment for development. That is supported in principle by Mr Treston, although not in quantum. Mr Duthie argued that there would appear to be some inconsistency in the difference in the base rates applied to property 20, compared to property 17 (34%), which appears to be in conflict with the 20% applied for corner location on property 17.

(6)     Analysis of Sales –

In support of his estimates of the valuations, Mr Duthie supplies the following

sales:

• Sale 13 (Mr Treston's Sale 6) – (4 Seabank Lane – Lot 10 on RP 864488 and Lot 1 on RP 90872). This is the sale of property 22 which is a level inside lot of area 1,222 m², adjoining property 18 to the rear.

The sale sold to an adjoining owner (property 18) for $485,000 in October 1997 which, after allowing for improvements and a discount of 15% for an adjoining owner purchase ($72,750), and a six months' delayed settlement (9%), was analysed by Mr Duthie at $400,000 ($327 per m²). Mr Treston analysed the sale at $483,450 ($396 per m²), and applied it at $440,000 ($360 per m²), adopting a base standard rate of $335 per m².

Mr Duthie supplied evidence of a letter from the owner of property 22 (Mr Peter Kurts – Exhibit 3), noting that in Mr Kurts' opinion he had paid a very high price and out of line with the market expectations. Mr Kurts purchased property 22 as a protective measure to safeguard views from his existing Seabank Centre building on property 18.

·Sale 14 (Treston's Sale 26) – (124 Bundall Road, Bundall – Lot 146 on RP 223585). This is an inside level lot which had previously had 2 metres of shored excavations, with piles from previous development work. It has since been developed as a 6-storey strata office block as the Gold Coast Financial Centre.

The sale has an area of 1,669 m² and sold in July 1996 for $850,000 which, after allowing for improvements of the shoring ($13,600) and excavation ($30,000) and for removing the piles ($20,000), plus a five month delayed settlement ($18,586), was analysed by Mr Duthie at $808,000 ($484 per m²).

·Sale 5 – (Cnr Windmill and Davenport Streets – Lot 11 on SP 108000). This is a corner site of area 808 m² and described in the decision on Group

1.     The sale was analysed by Mr Duthie at $335,000 ($415 per m²), and by Mr Treston at $348,000 ($430 per m²).

Mr Treston supports his valuation with his Sale 6 (Mr Duthie's Sale 13), his Sale 26 (Mr Duthie's Sale 14), and Sales 1, 2, 7, 30 and 32 (see Group 1); and the following additional sales:

·Sale 8 – (18 Marine Parade – Lots 5 and 6 on RP 96107). This is the sale of property 17 by Dr Gregor for the purpose of developing a 5-storey medical centre, which has subsequently been constructed. The new building contains 107 m² of restaurant area and takeaway food facilities on the ground floor.

The sale sold in May 1995 for $1,400,000 which, after allowing for improvements was analysed at $1,398,800 ($1,169 per m²), and applied at
$1,250,000 ($1,045 per m²). It is reported that the property was formerly passed in at auction in September 1993 for $1,050,000. Mr Treston assesses the standard base rate at that location at $875 per m².

·Sale 17 – (64 Davenport Street – Lot 2 on RP 55393). This is an inside lot of area 511 m² located about 440 metres north-west of the Southport Mall, within Precinct 2, and close by to Sales 1 and 2.

The sale sold in November 1997 for $240,000 ($470 per m²), and after allowing  for  improvements  (including  a  dwelling)  was  analysed  at

$198,978 ($389 per m²), and applied at $162,000 ($317 per m²).

·Sale 23 – (103 Nerang Road – Lots 1 to 6 on RP 44715, and Lot 5 on RP 45793 and Lots 2 and 3 on RP 81403). This property fronts both Nerang and Cougal Streets, has an area of 5,962 m², and is located in Precinct 5, opposite the Southport General Hospital, and close by to St Hilda's School. The sale was subject to rezoning of the land to "Special Facilities", which occurred in December 1995. It was planned to develop a 3-storey medical centre, but the site was resold in May 1998 for $2,530,000.  The highest

and best use is for a medical complex containing some retail uses, and multi-unit residential development in Cougal Street. Mr Treston has assessed a standard base rate on Nerang Road at $510 per m², and on Cougal Street at $325 per m².

The sale sold in November 1995 for $2,500,000 which, after allowing for improvements, was analysed at 42,494,000 ($418 per m²), and applied at

$2,400,000 ($402 per m²).

·Sale 29 – (56 Scarborough Street – Lot 4 on S 18298). This is a 1.813 ha site on the corner of Scarborough Street, Lawson Street and Garden Street, and about 100 metres from the Southport Mall, and adjoining Australia Fair Shopping Centre. The sale was formerly  the  Southport  Primary School site, is located in Precinct 4, and is currently used to provide car parking for Australia Fair. Any parking for that purpose could also be seen to satisfy Council's intent for access to public car parking in the area.

The sale sold in  March 1995 for $6,500,000 ($359 per m²), and after allowing for improvements was analysed at $6,292,000 ($347 per m²), and applied at $6,500,000 ($358 per m²).

The common sales are:

Mr Duthie  Mr Treston

Sale 13  Sale 6

Sale 14  Sale 26

(7)     Changes in the Market -

To support his conclusion  that there has been no appreciable change in the market over recent times, Mr Duthie supplies the following late sales:

·98A Marine Parade – Lots 16 and 17 on RP 107375. This was discussed in the Group 1 decision, and is a sale of a parcel of 1,156 m², in March 1999 for $800,000, which was analysed at $671,000 ($580 per m²), and applied at $750,000 ($649 per m²) for both the 1.10.97 and 1.10.98 valuations.

·Cnr 125 Nerang Street – Lot 5 on RP 47010. This was also discussed in the Group 1 decision, and is a sale of a parcel of 809 m² in April 1999 for

$400,000, which was analysed at $324,000 ($400 per m²), and applied at

$465,000 at both the 1.10.97 and 1.10.98 valuations.

·80 Queen Street – Lot 1 on RP 50000. This was also discussed in the Group 1 decision, and is a sale of a parcel of 604 m² in January 1999 for

$180,000, which was analysed at $178,000 ($295 per m²), and applied at

$248,000 ($411 per m²) at 1.10.97, and at $210,000 ($348 per m²) at 1.10.98.

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Mr Duthie argues that the applied rates for the above properties, which exceed the analysed sale prices, demonstrates that the Chief Executive has overvalued them.

(8)     Application of Sales –

A summary of the various applications of each property follows:

·Property 17 – Mr Duthie sees the sale of the subject land as out of line with the market and to be rejected. He sees his Sale 14 ($484 per m²) as inferior; and property 17 is about 100% to 115% more valuable than his Sale 13 ($327 per m²). Mr Duthie also sees the building and location of property 18 as superior to property 17, and he has adopted a rate of $679 per m² for property 17.

To support his conclusion that the sale of the subject land to Dr Gregor was out of line, Mr Duthie refers to the sale of other lands opposite the Southport General Hospital, which he claims are valued at around $500 per m²; and which have been developed for medical specialist purposes, and which return similar gross rentals to those achieved on property 17. Mr Duthie also provides a feasibility analysis of property 17 to support his contention that the sale price was excessive and out of line with normal market expectations. Even adopting post-project analysis figures, and not allowing for any contingencies, Mr Duthie concludes that standard commissions, interests and other costs suggest that a net loss of some
$382,849 would result from the initial purchase of the land at its purchase price of $1,400,000. On that basis he rejects the sale as out of line, and sees the sale as some additional premium to Dr Gregor as an owner occupier.

Mr Treston has mainly relied upon the sale of property 17 (Sale 8) as the top property in the locality; and seeks support also from his Sale 6 (property 22). Mr Treston agrees that his Sales 7 and 23 provide only limited assistance due to their inferior location. Mr Duthie rejects Sale 7 as comparable to the subject land because of the special conditions of that sale. Mr Duthie also notes the difference in plot ratios between his Sale 14 at Bundall, and the lesser ratios at Mr Treston's Sale 23 opposite the Southport General Hospital. Mr Duthie believes comparisons with Sale 6 (property 22) are not comparable due to the inferior exposure and views from property 22.

Mr Duthie believes his Sale 14 establishes an absolute upper range for the Short Street Precinct, while Mr Treston argues that Bundall Central Business District, although expanding, continues to be more of a lesser centre compared to his opinion of Southport CBD as a superior centre, and therefore superior on that basis. Mr Duthie concedes that rents at Bundall are generally higher than at Southport, but also that rents fluctuate considerably. To support his conclusion, Mr Treston points to the greater presence of Government and community administration buildings and major banking in the Southport CBD, compared to Bundall. The evidence supplied from the Australian Property Council would tend to support that conclusion.

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Mr Treston has applied a standard base rate of $875 per m² for the 1,198 m², to which he then adds a 20% premium for corner location, giving an adopted rate of $1,043 per m² for the subject land. Mr Duthie rejects the corner premium for use as a high-rise office building for medical specialist purposes.     The allowance for retaining walls and cut and fill were discussed earlier.

·Property 18 – Mr Duthie draws support from his Sale 14 ($484 per m²) at Bundall, which is smaller and with an inferior location to the subject land. Mr Duthie sees property 18 as having a value of about 10% less than property 15 (82 Marine Parade) discussed in the Group 1 decision, although he concedes that property 15 is an inferior office location, and is also a smaller size than the subject land. Mr Duthie adopts a rate for property 18 of $439 per m².

Mr Treston relies mainly on the sale of property 17 (Sale 8) and the sale of property 22 (Sale 6), getting lesser support from his Sales 23 and 29, which are both of inferior views and location. Mr Treston sees Sale 14 (Bundall) as a support sale. He also provides a check on the value by analysing the subject land on the basis of possible future residential "high rise" development, similar to the site adjoining to the south, and comparing his Sale 30 ($633 per m²) and Sale 32 ($475 per m²). Mr Duthie queries the relevance of those comparisons.

Mr Treston applies a standard base rate of $775 per m² for Marine Parade, and $650 per m² for Short Street frontages. He then makes allowance for the extra depth fronting Marine Parade (0.75), and the shallower depth fronting Short Street (1.1),  giving an overall rate of $587 per m² for property 18. The allowances for retaining walls and cut and fill were discussed previously.

·Property 19 – Mr Duthie relies mainly on his Sale 14 ($484 per m²), which he argues is superior in spite of its inferior Bundall location. He has valued the front part of property 19 at $600 per m², and the rear part at

$350 per m², giving an overall rate of $417 per m². Mr Duthie argues that the views from the front part of property 19 are not as good as those of the Nerang River at Sale 14.

Mr Treston relies mainly on his Sale 8 (property 17) and Sale 6 (property 22), with some support from his Sale 7. He applies 807 m² for the front part of property 19 at a base standard rate of $875 per m², to which he then adds the rear part of the site (1,236 m² @ $350 per m²) which, after allowing for site works, provides an overall rate of $538 per m². His check method for residential high-rise purposes, comparing his Sales 30, 32 and 33 provide a check rate of $515 per m². The difference in site works was discussed earlier. Mr Treston's Sale 33 is some 8 km from property 19, and is not near the Broadwater, and is seen as not very comparable.

·Property 20 – Mr Duthie sees his Sale 5 ($415 per m²) as an inferior location, but a superior corner site.  He also sees his Sale 13 ($327 per m²)

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as an inferior location, although larger than the subject land. Mr Duthie adopts an overall rate of $475 per m².

Mr Treston relies on the same sales as for property 18, with Sale 8 (property 17) as superior, and Sale 6 (property 22) as inferior. Mr Treston applied a base standard rate of $650 per m² to which he added an allowance for shallow depth (1.1), giving an overall rate of $712 per m². Site works were discussed earlier.

·Property 22 – Mr Duthie relies on the sale of the subject property 22 (Sale 13), but allows for a discount in the analysed rate of 15% for adjoining owner influence. That was supported by a letter from the owner of adjoining property 18 (Mr Kurts) advising that property 22 was acquired to protect views of tenants in property 18, and it was felt by Mr Kurts to be above normal market expectations. Mr Duthie also seeks support from his Sale 5 ($415 per m²) which is seen as larger, but an inferior location. Mr Duthie adopts an overall rate of $327 per m².

Mr Treston also mainly relied on his Sale 6 (property 22), but also seeks support from his Sales 1, 2 and 17. His Sale 2 is the same as Mr Duthie's Sale 5, and the comparisons by both valuers are similar. Mr Treston applies a base standard rate of $335 per m², to which he adds a shallow depth factor of 1.075, giving an overall rate of $360 per m². Neither valuer allowed anything for site works.

Decision:

(1)The Nature of the Land –

There is agreement on the impact of the road network and exposure and access to all sites, with the exception of the impact of corner location for office building purposes. Mr Treston seeks to allow a premium for corner location at property 17 (20%). Mr Duthie argues that for office building purposes the construction of the building negates any need for additional premium for corner location.

The evidence supplied indicates that costs of retaining walls were estimated by Mr Duthie from industry costs publications; while Mr Treston sought cost quotations from local contractors. Mr Duthie bases his costs of $220 per m² for solid concrete block walls, and Mr Treston's figure of $200 per m² is based upon his estimate of upgrading the costs of concrete crib retaining walls. However, if I adjust the rate of the quotation to allow for an area of 235 m² instead of 254 m², then the rate for the crib wall would be $211 per m², and Mr Treston's allowance for solid block walls would be near Mr Duthie's estimate of $220 per m². The walls on the subject lands are of solid concrete blocks. For the purpose of these matters, I will adopt a rate for the retaining walls of $220 per m².

In the matter of any site works upon the sites, where comparisons are on a level site basis, I will allow the following added values:

Property	Walls	Cut
17	50 m² (shared) @ $220 per m² = $11,000	390  m³  @  $7  per  m³  = $2,730
18	380 m² + 88 m² (shared) = 468 m² @ $220 per m² = $102,960	6,600 m³ @ $7 per m³ = $46,200
19	364   m²   @   $220   per   m²   (not shared) = $80,080	2,400 m³ @ $7 per m³ = $16,800
20	38 m² @ $220 per m² = $8,360	340  m³  @  $7  per  m³  = $2,380

There was no allowance for site works on property 22.

Retaining Walls	=	$220 per m²
Fill	=	$12 per m³
Cut	=	$7 per m³ .

 

While the rates may vary slightly between the Nind Street and Short Street Precincts, for the general reasons outlined in Group 1 decisions, I will maintain the following consistent rates:

While there may have been some evidence of rock in the deeper foundations for the new buildings constructed, I do not feel that it is conclusive evidence of similar rock on the shallower benching needed on the subject sites in order to get a level building platform, or step platforms on the longer sites.

Where Mr Treston has sought comparisons on a lightly improved like-with- like basis, he has followed the approach preferred in Grahn v. The Valuer-General (1992-93) 14 QLCR 327, at 328.

(2)     Methods of Valuation -

This was discussed fully in the decision on the Group 1 properties, and I will not repeat myself. However, it is agreed that the Short Street Precinct is the premier office location in the Southport/Bundall area, and the Marine Parade frontage of that precinct is perhaps the premium rate for the locality. However, the quantum of that key rate is a major matter of dispute.

(3)   Changes in the Market –

I note here  that  as  discussed  in  the Group 1 properties, the Short Street Precinct represents a different market segment to the Group 1 properties, which is basically why they were heard separately. The presence of the new building for medical purposes on property 17, together with Sale 23, would appear to demonstrate that a small market for medical oriented properties has developed in the "medical precinct". However, Mr Treston sees no difference between a medical person such as Dr Gregor and other owner/occupier purchasers in the area.

Both would appear to have some additional reasons for acquiring the properties, which are associated with the ongoing use of the sites. For this reason, in the current economic climate, owner/occupiers would appear to be dominating the market, and are paying higher prices in the area. How that might change as a consequence of any market upturn, where conventional investor developers with their greater development capacities might again lead the market, was not demonstrated. However, I see no reason for rejecting Sale 13 (property 17) as out of line for that reason. Whether Dr Gregor actually paid too much is another matter.

(4)   Comparison of Sales –

The wisdom of adopting sales of vacant or lightly improved properties, when determining unimproved values, is demonstrated by precedents.  (R & MM Barnwell

1. The Valuer-General (1990-91) 13 QLCR 13, at 17). The assistance of any comparisons of rental agreements, or any feasibility analyses, with their inherent risks, was also noted in the Group 1 decisions. (See Thirty-fourth Philgram Pty Ltd v. The Crown (1992-93 14 QLCR 13 at 28). In applying a premium for corner location I also note that, while Mr Duthie argues that it is not appropriate to apply a premium where the use is for office building purposes, he does not provide evidence of sales to support that conclusion.

   Likewise his across-the-board application of a reduction of 15% for adjoining owner influence is not supported here by sales evidence, although Mr Duthie has relied on his experience of other sales in the area. (See Santos Limited v. The Valuer- General (1988-89) 12 QLCR 231, at 235).

   Mr Treston, however, would appear to have placed great weight upon Sale 8 (property 17) which, if not representing a high price for the land, would appear to have now tended to raise the applied unimproved values on some properties in the area, and in some cases, above the sale prices paid for the land, and certainly above values analysed by each  valuer.  (56 Scarborough Street, 98A Marine Parade, 125

Nerang Street and 80 Queen Street). That signal could represent either that the market has changed, or perhaps that Sale 8 was in fact an imprudent sale and should be rejected.

As a means of checking the valuations, I note Mr Treston sought comparison for a potential use for residential high density purposes at properties 18 and 19, similar to the adjoining property south of property 18. Both residential checks indicate an overall rate of $515 per m² for that purpose, below the estimated highest and best use for office buildings at $587 per m² (property 18), and $538 per m² (property 19), but well above Mr Duthie's overall rates of $439 per m² (property 18) and $417 per m² (property 19).

I note also that in adopting a rate of $18,000 per bedroom for a predicted development of 144 bedrooms, the rate determined was seen as inferior to Sale 30 ($633 per m²) and superior to Sale 32 ($475 per m) and superior to Sale 32 ($475 per m²). The residential density in the Short Street Precinct is the same as that for the "Resort Residential 1" zoning of Sales 30 and 32. If the highest and best use of property 18 was for residential purposes similar to Sales 30 and 32, then the overall price for that property should lie between $633 per m² and $475 per m², a figure inconsistent with the sale price of the adjoining property 17 (Sale 8) at $1,169 per m², or the applied rate of $1,045 per m². On that basis I feel the check method for residential purposes does not assist me in the current matter.

If I consider then that Sale 8 (property 17) was out of line with market expectations, I note that it would be imprudent to seek to adjust the sale price in order to analyse the sale. In fact, precedent dictates that if the sale is out of line with the market, that sale must be rejected. That was found in Collins & Ors v. The Minister (1923) 6 LGR 84, where the Judge said:

"      You have either got to take the sale as representing the fair market value, or reject it. You cannot take a sale at a price and say:  'that was the sale price, but in my opinion it is not the correct price; I am going to alter the price paid by this particular purchaser'.  If that is done in the analysis of sales, one might as well reject the whole of those sales, and simply say what is the witness's opinion of the land to be valued."

The risk of seeking to make too much adjustment to a sale was identified in Brewarrana Pty Ltd v. Commissioner of Highways, SA (1973) 32 LGRA 170, where Wells J said at p.180"

"      There is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the

sales that are comparable from those that are not, … Some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. … The assessment of the risks of adjustment is peculiarly within his (the expert valuer's) sphere of skill."

By that guidance, bearing in mind Mr Treston's wide experience in valuations for unimproved value, it could be appropriate for him to adopt Sale 8, which he notes is the premium property in that locality. However, in so doing, the level of adjustment to be applied to the analysis of that sale, should recognise the very high premium placed upon that land. In making any adjustment Mr Treston should give consideration to other guidance to be found in any comparison of rentals obtained in the area, and other sales, although of a lesser premium nature. In the light of the evidence provided by Mr Duthie, I have some sympathy for his conclusion that the sale was out of line with the market. As Sale 8 is fundamental to many of Mr Treston's determinations, I believe it would be wise to disregard that sale as a prime evidence of value.

However, in rejecting Sale 8 as a basic key sale for the precinct, I do not automatically accept Mr Duthie's comparisons. If I reject the additional adjustment for adjoining owner influence on Sale 13 (property 22), I arrive at an amended rate for Sale 13 at $485,000, less improvements, giving an analysed value of $483,450 ($396 per m²). If I then adopt Mr Treston's conservative applied rate (91%) I arrive at an applied value of $360 per m² for property 22.

The following amended analysed sales then become key to any comparisons:

Sale	Rate per m²
13	$396
14	$484
5	$430
23	$418
29	$347

I then compare each overall analysed rate as follows:

Property	Sale	Comparison
17	14 ($484 per m²)	Inferior (D & T)
17	13 ($396 per m²)	Inferior (D & T)
18	5 ($430 per m²)	Superior (D)

18	23 ($418 per m²)	Inferior (T)
18	29 ($347 per m²)	Inferior (T)
19	13 ($396 per m²0	Inferior (T)
19	14 ($484 per m²)	Superior (D)
20	13 ($396 per m²)	Inferior (D & T)
20	5 ($430 per m²)	Inferior (D)
22	13 ($396 per m²)	Subject Land (D & T)

The key to this analysis lies in a reassessment of a possible rate per m² for property 17, accepting that the price paid was very high. In their assessments of property 17 Mr Duthie has analysed a rate of $670 per m²; and Mr Treston a standard rate of $875 per m², before he added a further 20% for corner influence. If I accept Mr Duthie's conclusion that corner influence has less significance for high-rise office buildings, then Mr Treston's standard rate of $875 per m² could be compared with Sales 13 and 14, both of which are seen as inferior by both valuers.

However, Mr Treston's standard rate of $875 per m² relies upon his analysis of Sale 8. I also note that generally for prime commercial properties in the Southport CBD Mr Treston has made no allowance for size, yet he has adopted a standard rate of $775 per m² for the adjoining property 18. I would agree with Mr Treston that the evidence supports Southport CBD as a superior commercial centre compared  to Bundall CBD, and I believe that the rate for property 17 would be well in excess of the rate for Sale 14 ($484 per m²).

In view of Mr Treston's application of $775 per m² for property 18, I will adopt that basic rate for property 17, and adjust property 18 ($592 per m²) accordingly to allow for its larger size and dual street frontage. However, I have difficulty accepting Mr Duthie's comparison of property 18 as 10% less on a relativity basis to property 15 ($528 per m²). I believe the superior location of the Short Street Precinct, and the common Marine Parade exposure, would tend to support that property 18 is in fact superior to property 15, which is supported by the adopted rates. I have no evidence to support Mr Treston's standard base rate in Short Street at $650, but I will accept that figure. If I accept Mr Duthie's upper limit comparison (115%) with Sale 13, I arrive at a figure in excess of $700 per m² for property 17.

I then reassess the properties as follows:

·  Property 17 – 1,198 m² @ $775/m²  $928,450

Less site works	$13,730
$914,720
Adopt	$915,000	($764/m²)
·    Property 18 – 4,773 m² @ $592/m²	$2,825,616
Less site works	$149,160
$2,676,456
Adopt	$2,650,000	($555/m²)
·  Property 19 – 807 m² @ $775/m²	$625,425
Plus 1,236 m² @ $350/m²	$432,600
Total	$1,058,025
Less site works	$96,880
$961,145
Adopt	$960,000	($470/m²)
·    Property 20 – 688 m² @ $650/m²	$447,200
Allow shallow depth (1.1)	$491,920
Less site works	$11,740
$480,180
Adopt	$480,000	($698/m²)
·     Property 22 – 1,222 m² @ $396/m²	$483,912
Adopt (91%)	$440,000	($360/m²)

Conclusion:

Having considered the whole of the evidence, I am persuaded that some of the appellants have proved their case. The determinations of the Chief Executive are set aside and the unimproved values are determined as follows:

AV98-820  -  $915,000

AV98-821  -  $2,650,000

AV98-819  -  $960,000

AV98-824  -  $480,000

In respect of Property 22, I find that the appellant has not proved his case, and the unimproved value of Lot 10 on RP 86488 and Lot 1 on RP 90872 (AV98-822) as determined by the Chief Executive in the sum of $440,000 is affirmed.

NG DIVETT MEMBER OF THE LAND COURT