Surfers Paradise Beach Resort Pty Ltd v Department of Natural Resources, Mines and Water
[2006] QLC 72
•10 November 2006
LAND COURT OF QUEENSLAND
CITATION: Surfers Paradise Beach Resort Pty Ltd v Department of Natural Resources, Mines and Water [2006] QLC 72 PARTIES: Surfers Paradise Beach Resort Pty Ltd
(applicant)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NOS.: AV2005/0187; AV2005/1572 DIVISION: Land Court of Queensland PROCEEDINGS: Appeals against annual valuations under the Valuation of Land Act 1944 DELIVERED ON: 10 November 2006 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mrs CAC MacDonald ORDER: 1. The appeals are allowed.
2. The unimproved value of Lot 1 on RP 173827, Lots 40-41, 45-49, 51-54, 59-60 on RP 41923 and Lots 1-4 on SP 132911 in the County of Ward, Parish of Gilston is determined at $38,800,000 as at 1 October 2003.
3. The unimproved value of Lot 100 on SP 144030 in the County of Ward, Parish of Gilston is determined at $38,800,000 as at 1 October 2004.
CATCHWORDS: Valuation – unimproved value – comparable sales – use of dated sales – unacceptable sales – valuation methodology APPEARANCES: Mr BG Cronin for the appellant
Mr W Isdale of Crown Law for the respondentSOLICITORS: McInnes Wilson for the appellant
Legal Counsel, Legal Services, Department of Natural Resources, Mines & Water for the respondent
Introduction
Surfers Paradise Beach Resort Pty Ltd has appealed against two determinations by the Chief Executive, Department of Natural Resources, Mines and Water of the unimproved value of land in Surfers Paradise owned by the appellant.
Pursuant to the Valuation of Land Act 1944, the Chief Executive determined the unimproved value of the land to be $44,000,000 as at 1 October 2003 and $48,675,000 as at 1 October 2004. At the hearing, Counsel for the respondent advised that the respondent now contended that the value of the subject land as at both dates was $44,000,000. The appellant submitted that the value as at both dates was $31,600,000.
Mr GA Jackson of m3 property strategists gave evidence on behalf of the appellant. Mr Jackson is a registered valuer in Queensland.
Mr PC Smith and Mr IL Hawley gave evidence on behalf of the respondent. Mr Smith, a registered valuer employed by the respondent, gave evidence in support of the 2003 valuation. He had not carried out that valuation but had inspected the sales and subject properties and agreed with the valuation. Mr Hawley is a registered valuer and director of P&P Valuers and Consultants Pty Ltd. He carried out the valuation as at 1 October 2004.
The valuers adopted the same general approach to the valuations, analysing and applying sales of comparable properties. Five sales were common to all valuers although differing weight was placed upon them. In addition, three sales in Surfers Paradise were relied on by Mr Jackson only and three in Broadbeach by Mr Smith and Mr Hawley.
The selection of different sales and the differing weight placed on the common sales resulted from differences between the valuers as to
· the identification and analysis of the relevant market particularly in relation to the dates and location of relevant sales; and
· analysis of the common sales and their application to the subject. Those differences arose because the valuers disagreed on the appropriate valuation methodology to be adopted – rate per square metre, rate per square metre of gross floor area or rate per bedroom – and whether an allowance should be made for the size of the subject property.
The major issues for decision are -
· whether three older, improved sales in Surfers Paradise could be used in the valuation of the subject;
· the market comparability of Surfers Paradise and Broadbeach and whether sales in Broadbeach could be used to value the subject;
· the appropriate valuation methodology; and
· the value of the subject land.
Background
The Land
The subject land is a large irregular shaped level site situated on the eastern side of Surfers Paradise Boulevard and occupying almost an entire block about 400 metres south of Cavill Avenue Mall and one block back from the beach. As at 1 October 2003 the property was made up of 18 lots with an area of 12,931 square metres. Those lots were amalgamated and a new title issued in July 2004 comprising 12,660 square metres.
Development of the site was in its early stages as at 1 October 2003 and completed in October 2005. An 80 level tower has been constructed comprising 972 bedrooms, two level basement car parking, a two level observation deck, retail shops on the ground floor, a health club and conference facilities. The property was described at the hearing as Q1 the World's Tallest Residential Tower.
Development approvals had been given on 23 November 2001 under the then current planning scheme and taking into account the draft (now current) Gold Coast Planning Scheme 2004. The approvals were in place at the valuation dates and allowed a plot ratio of 7.34:1, 94,931 square metres GFA (not including the observation deck) and a bedroom ratio of 13.3:1 as at 1 October 2003. Because of the change in land area the analysis becomes, as at 1 October 2004, a plot ratio of 7.5:1 and a bedroom ratio of 13.02:1.
All valuers agreed generally that the property is developed to its highest and best use, namely a high rise multi unit residential development with a mix of retail/commercial development at ground level.
Relevant Legislation
Section 13 of the Act requires the chief executive to decide the unimproved value of the land to be valued for the Acts under which local authorities are established. Section 3(1) provides that –
"(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;”
(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."
In accordance with s.3(1)(b) the valuers assumed, in their valuations, that the improvements in place as at both dates of valuation did not exist.
The valuations
The valuers agreed that the market in Surfers Paradise had flattened at the end of 2003 and remained stable throughout 2004 with the result that the value of the subject land as at 1 October 2004 was the same as that at 1 October 2003.
Mr Jackson's valuations of the subject were calculated as follows:
1 October 2003 and 1 October 2004
972 bedrooms @ $32,500/bedroom = $31,590,000
Rounded= $31,600,000
Analysis of Mr Jackson's valuations shows -
Rate per square metre - $2,444/m² (1 October 2003)
- $2,496/m² (1 October 2004)
Rate per bedroom - $32,510 (both dates)
Rate/m² GFA - $333/m² (both dates)
Mr Smith valued the property at $44,000,000 as at 1 October 2003 by adopting a rate of $3,403/m² of land area. He also carried out check valuations on a rate per square metre GFA and a rate per bedroom basis.
Mr Hawley adopted a value of $44,000,000 as at 1 October 2004 having compared the sales evidence on a rate per square metre (his preferred method), rate per square metre GFA and rate per bedroom basis.
The respondent's valuations of $44,000,000 may be analysed as follows -
Rate per square metre - $3,403/m² (1 October 2003)
- $3,476/m² (1 October 2004)
Rate per bedroom - $45,267 (both dates)
Rate/m² GFA - $463/m² (both dates)
Challenge to respondent's valuers' evidence
Counsel for the appellant submitted that the valuations prepared on behalf of the respondent were the result of collusion and that, at least, Mr Smith's and Mr Hawley's valuations should be regarded as one valuation made by one valuer. Counsel also submitted that the respondent's valuers had been partisan in their approach to their evidence.
Mr Smith and Mr Hawley frankly admitted that they had used the same sales data. Both impressed me as honest and reliable witnesses who had exercised their judgment as independent professional valuers. Although some of the matters raised in their reports were irrelevant to the issues, I do not consider that there was any indication that the respondent's valuers had adopted a partisan approach.
The three older Surfers Paradise sales
Mr Jackson relied primarily on the sales of seven properties in Surfers Paradise to support his valuations. The respondent's valuers considered that three of those sales, Raptis Plaza (1 May 2002), Dolphin Arcade (1 June 2002) and Circle on Cavill (1 June 2001) should not be used because they took place some 17 to 28 months before the first date of valuation, and in the case of Raptis Plaza and Dolphin Arcade were heavily improved at the time of sale.
Mr Jackson said that the sales of Dolphin Arcade, Raptis Plaza, Circle on Cavill (prior to 1 October 2003) and Mercure (June 2004) indicated that there was a healthy demand for development sites in Surfers Paradise prior to 1 October 2003. He considered that the rise in the market had started with the sale of Circle on Cavill and other properties, around 1 June 2001. The rise in the market did not prevent use of the three sales, he said, because appropriate adjustments could be made. He did not allow a specific percentage for the increase but, in comparing the sales with the subject, one factor that he took into account was that an upwards adjustment was required to allow for the rise.
Mr Smith was critical of Mr Jackson's assessment of the market because, he said, Mr Jackson had failed to deal with the most important period between mid 2002 and late 2003. In Mr Smith's opinion the market for high-rise, multi-unit, mixed-use commercial developments on the Gold Coast, and specifically within the Surfers Paradise and Broadbeach areas, was slow prior to the middle of 2002. From late 2002 the property boom in Queensland took effect and as a result development sites along with all other property market sectors had risen in value. By December 2003 to February 2004 demand had settled resulting in levels of value being maintained and persisting to the present.
Mr Hawley said that there were few if any development sites openly marketed in Surfers Paradise between 1 October 2003 and 1 October 2004, probably because there were few suitable available sites and the quantum and scale of the developments in Surfers Paradise would limit the number of prospective buyers for sites. However Mr Hawley considered that the lack of obvious development site sales between 1 October 2003 and 1 October 2004 in central Surfers Paradise did not mean the market had softened nor did it mean that values remained at 2001/2002 levels.
The evidence indicates that there was a rise in the market for development sites in Surfers Paradise comparable with the subject between the dates of sale of Raptis Plaza, Dolphin Arcade and Circle on Cavill and the valuation dates. However there is no persuasive evidence as to the quantum of the increase. None of the valuers expressed an opinion as to that quantum and, although there were sales in Surfers Paradise at dates closer to the valuation dates, those properties are different in a number of respects from the three older sales such that it is difficult to establish the quantum of the increase by comparing the sales prices of the two groups.
There are also some potential difficulties in analysing the three older sales because they were heavily improved as at the dates of sale. However, the properties were purchased for redevelopment and Mr Jackson provided an analysis of each (detailed later) which allows for holding costs etc pending demolition. No real challenge was mounted to his analyses and I have, therefore, accepted them but with the caveat that there is a risk of error in them.
I consider that Raptis Plaza, Dolphin Arcade and Circle on Cavill are the most comparable properties with the subject in terms of location and planning attributes and therefore provide good evidence of market values of that type of property as at the dates of those sales. For that reason I do not consider that they should be excluded from the valuation process. However, because there is no evidence as to the quantum of the rise in the market in the relevant period and therefore no obvious way in which appropriate adjustments can be made, the weight that can be given to those sales is decreased. They do provide evidence of the bottom line for the value of the subject.
Market comparability of Surfers Paradise and Broadbeach
The respondent's valuers relied on sales of Broadbeach properties because they considered that there were insufficient sales of vacant or lightly improved land in Surfers Paradise. Mr Jackson said that the Broadbeach market was completely different from that in Surfers Paradise because there were different planning regimes and levels of development, different price structures, and the two areas were in different market phases. Sales in Broadbeach could therefore be used for a limited purpose only.
Planning attributes and levels of development
Mr Jackson said that the planning instruments and developments in Broadbeach were aimed towards the permanent resident, the older population. Although the planning regime for Broadbeach Precinct 2 did encourage some tourism related activity, Broadbeach was quieter than Surfers Paradise, with height limits throughout the area. There was an entirely different environment in Broadbeach appealing to a different, more elegant market. In contrast, there was a hub of activity in Surfers Paradise, particularly related to tourism and aimed at younger people, with entertainment bars, clubs and 24 hour activity. There was also a substantial retail, commercial and entertainment component in Surfers Paradise whereas in Broadbeach the only substantial commercial developments were the Oasis and its immediate surrounds, and Pacific Fair, a regional shopping centre. Further, there was a completely different level of development in Surfers Paradise which has many high rise buildings compared with Broadbeach where there were relatively few such developments.
Mr Smith considered that the Broadbeach sales of Oracle, Sierra Grand and Pegasus, which had similar or inferior planning attributes to the subject, should be used in the valuation.
Mr Hawley said that Broadbeach and Surfers Paradise form part of the high rise spine that characterises the city's linear form along the coastal strip between Surfers Paradise and Coolangatta. Unlike Broadbeach, Surfers Paradise has an unlimited building height and residential density in its core precinct. However, he considered that Broadbeach and Surfers Paradise were directly comparable and, in the absence of recent sales evidence within Surfers Paradise, Broadbeach was the next logical place to look to find evidence.
Conclusions re planning attributes and levels of development
Broadbeach and Surfers Paradise are adjoining areas with central Broadbeach lying about three kilometres south of central Surfers Paradise. Different planning regimes apply in the two areas.
Surfers Paradise
The subject property is situated within the Surfers Paradise Local Area Plan (LAP) under the Gold Coast Planning Scheme. The Desired Environmental Outcomes of the Surfers Paradise LAP are –
· The promotion and enhancement of Surfers Paradise as Australia's premier leisure tourist destination, including the consolidation of commercial, retail and entertainment activities within the core of Surfers Paradise.
· Encouragement of distinctive high rise residential and tourist development to enhance Surfers Paradise's famous skyline and townscape.
The Surfers Paradise LAP is divided into seven precincts. The subject is in Precinct 1, Entertainment, described in the town plan as the core or heart of Surfers Paradise, a vibrant, lively tourist centre which is divided into three character sub-precincts. The sales properties in Precinct 1 are Raptis Plaza, Dolphin Arcade, Circle on Cavill, Avalon and Solaire. Although some of these properties are in different sub-precincts from the subject, all have the same development parameters. There are no height or residential density restrictions.
Precinct 2 of the Surfers Paradise LAP, High Rise Accommodation, encourages the construction of high rise accommodation for permanent residents and tourists. The sales in Precinct 2 are Artique and Mercure. Developments in Precinct 2 are limited to a height of 30 storeys and a residential density of 1 bedroom/13m². The maximum plot ratio is 6.5:1.
Broadbeach
The Desired Environmental Outcomes for Broadbeach include -
. Consolidation of services and employment generating activities
. Improvement of transport linkages
. Achievement of a high standard of urban design, and
. Promotion of intensive tourism uses.The Broadbeach LAP contains nine precincts. Two sales, Pegasus and Sierra Grand, are located in Precinct 2, Highway Tourism which is intended to cater for large scale tourism developments incorporating accommodation, restaurants and entertainment facilities. A maximum building height of 30 storeys, residential density of 1 bedroom/13m² and GFA ratio of 4:1 apply, as of right, to these properties.
Precinct 3, Residential and Low Impact Tourist, caters for high density permanent residential land uses, low impact tourist residential uses and a minor range of commercial uses. Oracle, Ultra and Verve are located in this precinct which allows height levels of 30 storeys. Differing densities apply within this precinct. For Oracle, the residential density is 1 bedroom/13 m² of net site area and the maximum plot ratio is 6.5:1. The applicable densities for Ultra and Verve are 1 bedroom/25m² and a maximum plot ratio of 4:1.
Although the intents of the planning instruments for Surfers Paradise and Broadbeach differ, Surfers Paradise Precinct 1 and Broadbeach Precinct 2 have common features. Surfers Paradise Precinct 1 is described as a vibrant, lively tourist centre and developments within the Main Entertainment sub precinct are to include a range of retail, entertainment and tourist related activities with the area being a hub of activity on a 24 hour basis. Precinct 2 of the Broadbeach LAP is intended to cater for large scale tourism incorporating accommodation, restaurants and entertainment facilities.
Surfers Paradise Precinct 2 encourages the construction of high rise accommodation for permanent residents and tourists which compares with Broadbeach Precinct 3 which caters for high density permanent residential land uses and low impact tourist residential uses.
Similarly, although there are differences between the development parameters in the two areas, there are a number of similarities. Broadly speaking, the Main Entertainment Precinct in Surfers Paradise is unique in that developments of unlimited height and residential density are allowed. The capacity to construct developments of unrestricted height means that a developer has greater flexibility in the use of land and it allows development of sites such as the subject, with an 80 level tower. Such developments would not be possible in any of the other precincts in Surfers Paradise or Broadbeach. However development is not uncontrolled in Surfers Paradise Precinct 1 because the Surfers Paradise LAP Place Code provides, in Performance Criterion 31, that the maximum plot ratio permitted is 6.5:1. While this restriction may perhaps be waived, the evidence indicates that, leaving aside the subject, the maximum GFA ratios achieved in Surfers Paradise Precinct 1 were 6.6:1 (Circle on Cavill) and 6.7:1 (Avalon). The rates of 7.34:1 and 7.5:1 achieved at Q1 were explained on the basis that two sites were originally involved in the approval and the GFA ratio for both was 6.5:1. The evidence shows, therefore, that the permitted maximum GFA ratio of 6.5:1 operates to restrict the size and density of development permitted in this precinct. There is more variation in the bedroom ratios in Precinct 1 where the approved densities range from 1 bedroom/11.10 m² to 1 bedroom/14.35 m². Nevertheless there do appear to be controls on the bedroom densities approved in Surfers Paradise Precinct 1.
The development restrictions for land within Surfers Paradise Precinct 2 and that part of Broadbeach Precinct 3 where Oracle is situated are identical – a maximum plot ratio of 6.5:1, height limit of 30 storeys and residential density of 1 bedroom/13m². Broadbeach Precinct 2 has a lower 4:1 GFA density.
Market conditions and price structures in Surfers Paradise and Broadbeach
Mr Jackson considered that the markets in Surfers Paradise and Broadbeach were in different phases as at the valuation dates because most of the sales in Surfers Paradise occurred prior to 1 October 2003 whereas most of the Broadbeach sales settled in late 2004. Around the dates of valuation eleven developments of 100 or more units were planned or under construction in Surfers Paradise, totalling 2993 apartments. There were only six developments of a similar size in Broadbeach comprising 1067 apartments. It emerged from subsequent evidence, that, as at the dates of valuation, a substantial number (between 715 and 1027) of the units in Surfers Paradise had sold. By way of contrast there were comparatively few units in high rise developments for sale or sold in Broadbeach as at the relevant dates. Mr Jackson considered that purchasers had decided that an oversupply of apartments was looming in Surfers Paradise and had turned to Broadbeach where there was low supply.
Mr Jackson said that another difference was that units in new developments in Surfers Paradise sold for less than those in Broadbeach. In my opinion, that evidence was inconclusive.
Both Mr Smith and Mr Hawley said that there was more opportunity for new development in Broadbeach compared with Surfers Paradise where numerous projects had been announced. Mr Hawley said that there was nothing to suggest that the main areas of Broadbeach were more valuable than Surfers Paradise. The evidence indicated, he said, that the Surfers Paradise Main Entertainment Precinct would at least be the equivalent of Broadbeach if not more valuable. He considered that it would be incorrect to disregard a sale such as Pegasus because there was more sales activity in Broadbeach than in Surfers Paradise.
Conclusions re the market comparability of Surfers Paradise and Broadbeach
There are some similarities between Surfers Paradise and Broadbeach in relation to proximity to the beach and, as discussed above, some of their planning attributes.
However, the evidence also establishes some clear differences between Surfers Paradise and Broadbeach. There are more high rise buildings and a greater retail, commercial and entertainment component in Surfers Paradise than in Broadbeach. Further, the existence of the unrestricted height and residential densities in Precinct 1 of Surfers Paradise suggests that properties within that area have superior development potential as compared with those in other areas. Broadbeach is a quieter, residential locality, particularly compared with Surfers Paradise Precinct 1 where the subject is located.
The evidence also indicates that the markets for development sites in the two areas were in different phases in that there was limited activity in Surfers Paradise after 1 October 2003 and virtually all the sites in Broadbeach sold between 1 October 2003 and 1 October 2004.
Most of the Broadbeach sales took place, therefore, after the first date of valuation. Generally speaking after date sales should not be relied on for valuation purposes unless there is evidence that the market has not changed since the date of valuation. The valuers agreed that the market in Surfers Paradise had not altered between 1 October 2003 and 1 October 2004, and there was evidence that this was the case throughout the Gold Coast. I do not consider however that that was proven in Broadbeach. I accept the explanation that the increased activity in Broadbeach probably occurred because the supply of sites in Surfers Paradise had dried up, but the mere fact that developers then turned to Broadbeach does not necessarily mean that the prices paid in Broadbeach were the same as those that would have been paid in Surfers Paradise if similar sites were available there.
Although Mr Smith said that, historically, Broadbeach came from a lower base, the values shown in Broadbeach are, speaking broadly, higher than those shown in the Surfers Paradise 2003/2004 sales, on a rate per bedroom basis, and rate per/m² GFA. This difference is less discernible on a rate/m² basis. The evidence did not establish whether the higher rates in Broadbeach demonstrate the state of the market in Surfers Paradise from late 2003 through 2004 (as the respondent's valuers contend) or whether they are attributable to the differences in planning attributes between Surfers Paradise and Broadbeach and/or any differences attributable to the location and amenity of the two areas, and/or a rise in the market in Broadbeach.
In those circumstances, my conclusion is that there are sufficient differences between Surfers Paradise and Broadbeach to indicate that the Broadbeach sales should not be applied directly in valuing the subject. They can be used to show the upper limits of the subject's valuation.
Valuation Methodology
Discount for size
Mr Jackson said that the Surfers Paradise sales evidence demonstrated that a discount for bulk should be applied in valuing the subject property. Such a discount usually arises, he said, because larger developments involve a greater level of risk, a greater period of time is needed for development and costs are significantly higher. Further, the market for large sites is relatively limited because only those very large and experienced developers who have access to appropriate finance facilities could take on a project such as Q1. Such developers demand a significant profit margin for the risk they undertake. While Mr Smith agreed in principle with those observations, he said that the sales he had analysed showed a range of values with no obvious bulk allowance.
The following table has been drawn up from Exhibit 9 –
Sale Property Sale Date Land Area Bedrooms Analysed
$/m²Analysed $/brm Analysed $GFA Mercure Resort
Circle on Cavill
Q1 (Subject)
Raptis Plaza
Dolphin Arcade
Artique
Avalon
SolaireJun-04
Jun-01
-
May-02
Jun-02
Jan-02 to Jan-04
Oct-03
Jul-0324,879m²
14,130m²
12,660m²
8,478m²
7,240m²
3,901m²
2,673m²
1,947m²1913
985
972
741
652
299
231
151$2,211/m²
$1,677/m²
-
$2,716m²
$3,079m²
$3,397m²
$3,858m²
$2,337m²$28,753
$24,054
-
$31,074
$34,193
$44,320
$44,640
$30,132$340/m²
$254/m²
-
$418/m²
$474/m²
$677/m²
$576/m²
$409/m²
Mr Jackson also said that within the Broadbeach market the GFA analyses per square metre show a discount for size. A similar table for Broadbeach shows –
Sale Property Sale Date Land Area Bedrooms Analysed $/m² Analysed
$ bedroomAnalysed $/m² GFA Oracle July 02-Mar04 11,943m² 901 $3,728/m² $49,426 $574/m² Pegasus Aug 04 8,636 m² 664 $3,818/m² $49,676 $955/m² Sierra Grand Nov 04 6,916 m² 465 $3,248/m² $48,312 $800/m² Ultra Oct 04 4,644 m² 181 $3,865/m² $95,022 $980/m² Verve Feb 03-Dec 03 4,238 m² 98 $4,238/m² $106,534 $1,208/m²
In my opinion, it is difficult to treat the question of size separately from the other aspects of the sales properties because of the number of variations between the properties. Thus, within Surfers Paradise, the sales took place over a period of three years in the first two years of which the market was rising. Some of the sales are in different precincts and have different planning attributes and different locations. The areas of land vary significantly. Some limited comparisons may be made. The sales of Raptis Plaza, Dolphin Arcade and Circle on Cavill took place between June 2001 and June 2002 and were similar in terms of location and planning attributes. Raptis Plaza and Dolphin Arcade lie in a similar band on a rate per m²/land, rate per m²/ GFA, and rate per bedroom basis. The rates shown by Circle on Cavill are considerably lower. Although the market rose in that 12 month period, those sales provide some evidence that, at the time of those sales, a discount for size should be allowed at least where the difference in size is between 7000/8500 m² on the one hand as compared with 14,000 m² on the other. The rates obtained for Mercure, which was sold between the two valuation dates, also indicate that a discount should be allowed for a property of that size.
The Broadbeach evidence is less clear. Pegasus and Sierra Grand are similar to one another in dates of sale, location and planning parameters yet Pegasus, which is larger, shows higher rates than Sierra Grand. Oracle (11,943 m²) and Pegasus (8,636 m²) show very little difference in their rates.
My conclusion is that there is some limited evidence of a discount for size and that is a factor that should be taken into account in the application of the sales evidence.
Basis of comparison
Mr Jackson applied the sales evidence on the basis of the rates achieved per bedroom because the Surfers Paradise sales indicated that there was a comparatively narrow band of bedroom densities, from 11.1:1 to 14.35:1. That was the case in Broadbeach also, he said, with the exception of Verve and Ultra. He considered that a comparison of rates per square metre of land should be a secondary method only because that approach did not have regard to the variations in the development approvals and planning restrictions applicable to the subject and the sale properties.
Mr Smith said that the most appropriate valuation method was direct comparison on a rate per square metre basis because that method removed the variations between sale properties arising from individual development approvals which resulted in significant differences between residential, retail and commercial components and residential densities. There was a narrow band of value on a rate per square metre basis across all the sales indicating that it was better to use that approach. His secondary approaches, which he used as check methods, were to compare the properties on the basis of a rate per square metre/GFA, as of right and as approved, and rate per bedroom, as of right and as approved. He considered that those methods should only be used as a check where properties had exactly comparable residential and approved use mixes.
Mr Hawley analysed the sales on a rate per square metre/land, rate per square metre/GFA and rate per bedroom basis. His preferred method was comparison on a rate per square metre basis because it removed variations for density, height and gross floor area where none were nominated under the town plan.
Conclusions re basis of comparison
The value to be determined is the market value of the unimproved subject land at the relevant dates which is established by determining the amount that a prudent buyer would pay to a prudent seller for that land. In Spencer v The Commonwealth of Australia (1908) 5 CLR 418, Isaacs J (at 441) described the prudent vendor and purchaser as persons -
"… willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."
The prudent vendor and purchaser would know the development capability of the subject land as at the valuation dates because the development approvals were in place. For the type of development approved, that capability is primarily dependent on the size of the land, the approved GFA ratio (and therefore the GFA) and the approved residential density. Some commercial/retail use was also approved. I consider that the sales evidence should be analysed and applied by taking into account all of those factors.
In an ideal world, sales of properties with similar characteristics to the subject as to location, size and development potential should be selected. Those sales should, ideally, have occurred at dates close to the dates of valuation. The difficulty in this case is that none of the sales fulfils all these criteria.
I consider that the prudent purchaser of the subject in its unimproved state would compare the unimproved sales properties with the subject on the basis of the development allowable as of right on each sale property even though particular development approvals may allow higher or lower development densities. Comparison on the as of right footing enables properties to be compared on a like with like basis. It eliminates differences between the properties which are not essential characteristics but which arise from decisions by individual owners, who may not fulfil the description of 'reasonable purchasers', to develop their properties in ways which either exceed or do not maximise the development potential of the properties.
Where properties have the same development potential they may be compared with one another on a rate per square metre basis because the rate paid per square metre would take into account the development rights attaching to a property under the planning laws. Thus properties with the same development potential as the subject under the town plan (height restrictions, bedroom density and GFA ratio), may be compared directly with the subject on a rate per square metre basis, and the subject valued on that basis. It follows that sales with different planning attributes from the subject are less comparable and adjustments must be made for those differences.
Most of the sales have been analysed by the valuers on the basis of the development approvals granted, whether or not those approvals were in place at the date of sale. The analyses reflect, therefore, the individual developments approved in the analysed rates per bedroom and per square metre/GFA. However, the rate per square metre provides a consistent basis of comparison.
My conclusion is that the properties should be compared on a rate per square metre basis, but taking into account the differences, as of right, as to height restrictions, GFA ratio and bedroom density.
Valuation
The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels (Fischer v Valuer-General (1983) 9 QLCR 44 at 46). Both parties lead evidence of sales of vacant or lightly improved properties as well as properties which were heavily improved but where the improvements were to be demolished and the properties redeveloped. The sales will be considered individually in the light of my conclusions to date and an overall assessment made.
Surfers Paradise
The sales of Artique, Avalon, Solaire and Mercure occurred at or near the dates of valuation. Avalon and Solaire are in Precinct 1. Artique and Mercure are in Precinct 2.
Avalon (Precinct 1)
This property is located on the corner of Wahroonga and Ferny Avenues at Surfers Paradise, overlooking the Nerang River, on the western side of Ferny Avenue. There is no direct access to the beach which is about 550 metres to the east. The property has an area of 2,673 square metres and is situated within Sub Precinct 3 - Riverside Resort.
The property was purchased for $10,900,000 by contract dated 29 October 2003 which settled on 21 September 2004, after development approval had been obtained in July 2004 for construction of a 31 storey tower of 17,903 m² GFA (6.69:1) and 231 bedrooms (1 bedroom/11.57m²). I have accepted the respondent's valuers analysis of the sale to $3,858/m², $575.99/m² GFA and $44,640/bedroom.
In applying the sale to the subject, Mr Jackson adjusted the sale to allow for its smaller size and smaller development potential. The allowance amounts to a discount of about 37% per square metre, Mr Jackson saying that the smaller the size of a sales property the greater percentage should be allowed. He conceded that the sale was in an inferior location as compared with the subject because the subject is closer to the beach, but pointed out that the sale had the advantage of an uninterrupted aspect of the Nerang River.
Mr Smith said that the Avalon site sat neatly within the narrow band of rates per square metre that had been established. He and Mr Hawley considered the site to be, overall, inferior to the Q1 site, but their applied rate to the subject ($3,403/m²) was considerably less than the $3,858/m² shown in the Avalon sale.
The sale provides good evidence of the market value of a property of its type as at the dates of valuation. It is similar to the subject in planning attributes, but is considerably smaller than the subject and therefore has less development potential. It is also in an inferior location. As indicated previously, I consider that some discount should be allowed for the size of the subject as compared with this sale but I do not accept that a discount of 37% per square metre has been established by the evidence, particularly when the superior attributes of the subject are taken into account. Allowing for all those factors, I consider that the rate per square metre to be applied to the subject should be less than that shown in this sale.
Solaire (Precinct 1)
This sale was relied on by Mr Jackson and Mr Smith only. Mr Hawley considered the sale to be inferior to the subject and to be dated in relation to the valuation as at 1 October 2004.
The property is located in Sub Precinct 1 - Main Entertainment on the western side of Ferny Avenue, two blocks north of Cavill Avenue and approximately 500 metres west of the beach. It has an area of 1,947 square metres.
The property was purchased for $4,410,000 in July 2003 with settlement in August 2003. Approval was given in July 2004 for construction of a 19 storey tower of 11,167 m² GFA (5.7:1) and 151 bedrooms (12.89:1). I have accepted Mr Smith's analysis of the sale, after allowances for clearing and demolition costs, to $4,550,000 or $2,337/m², $409/m² GFA and $30,132/bedroom.
Mr Jackson noted that the sale was approximately 15% the size of the subject and said that the rate per bedroom should be consequentially discounted. An upward adjustment was required to account for the inferior beach exposure of the sale although the sale was reasonably located with river and beach views available. Although the subject is substantially larger than the sale, he adopted higher rates per bedroom and per square metre for the subject because of Solaire's inferior location.
Mr Smith considered that the sale represented "one of the worst development blocks" within the precinct and was considerably inferior to the subject in all respects. It was too small to develop to its full potential, irregularly shaped, situated on the north-western fringe of the LAP and was abutted by the Surfers Paradise Police Station and the busy Ferny Avenue access road.
Comparison of this sale with the other contemporaneous sales evidence in Surfers Paradise shows, in my opinion, that the price paid for this property and its analysed rates per square metre of land, per bedroom and per square metre/GFA are out of line with those sales. This may be, as Mr Smith said, because the property is a small, poorly located development block. I do not consider that the sale should be relied on to value the subject.
Artique (Precinct 2)
This property is located on the eastern side of the Gold Coast Highway, two blocks south of the subject, approximately 150 metres from the beach. The irregular shaped site resulted from an amalgamation of various lots which were purchased in 3 transactions in October 2002, October 2003 and January 2004, the final settlement date being April 2004. The resultant area is 3,901 square metres. The total purchase price was $13,430,000.
Development Approval for the site issued in November 2004 for a 30 storey building of 19,556 m² consisting of 1 bedroom/13m² or 299 bedrooms, with a GFA of 19,556 m² and a plot ratio of 5.013:1. The building has subsequently been constructed.
Mr Jackson allowed $70,711 for demolition costs and the respondent's valuers allowed $175,000. Mr Jackson was unable to say precisely where his figure had come from – he thought from inquiries of the purchaser or a local agent. Mr Smith had received responses to a considerable number of written enquiries he had made to purchasers of properties over the relevant period. The figure of $175,000 came from the purchaser. Mr Jackson did not consider that the difference was material and was content for the Court to accept either analysis. I have accepted Mr Smith's allowance. On that basis, the sale analyzes to $3,397/m², 677/m² GFA and $44,320 per bedroom.
Mr Jackson applied a rate per square metre to the subject of $2,444 (1 October 2003), a discount of approximately 28%, to allow for the greater size of the subject and its slightly superior location.
The sale provides good evidence of the market for high rise residential development of its type as at the dates of valuation but allowances must be made for the differences between the sale and the subject. The sale property is smaller, in an inferior location and has an inferior shape as compared with the subject. It is located in Surfers Paradise Precinct 2 and therefore has inferior planning attributes as compared with the subject. No development approval was in place at the time of sale.
Although the sale is inferior in a number of respects to the subject, I consider that some discount should be allowed for the size of the subject as compared with the sale and, therefore, that the rate per square metre applied to the subject should be lower than that shown by the sale.
Mercure (Precinct 2)
The Mercure Resort is situated in Ferny Avenue, on the western side of the highway, about 1 kilometre north of Cavill Mall and 250 metres west of the surf beach. It has an area of 27,860 m².
The property sold for $61,000,000 on 17 June 2004, with settlement on 30 June 2004. At the time of sale, the site was developed with the Mercure Resort (405 hotel rooms) and a car rental yard. The valuers agreed that the property had been purchased for demolition and redevelopment. That had not occurred as at the date of the hearing because, it was said, the purchasers were still involved in the planning process. Although there was some difference in the analysis between Mr Jackson on the one hand and Mr Smith and Mr Hawley on the other, particularly in the appropriate allowances to be made for demolition costs and the present value of the net operating profit for 3 years (from the continued operation of the resort, pending demolition), Mr Jackson said that he was satisfied for the Court to accept either valuer's analysis. Mr Smith had obtained his figures from the purchaser and I have therefore accepted the respondent's valuers analysis of the sale price to $54,975,000 or $2,211/m², $340/m² GFA and $28,753/bedroom (as of right).
Mr Jackson agreed that the sale was in an inferior location as compared with the subject and in an inferior planning precinct although, he said, it had the advantage of being an island site. He adjusted the sale up for its larger size and inferior location. As with the other sales, in applying the Mercure analysis to the subject, Mr Jackson had regard not only to that sale but all the sales involved in Surfers Paradise. He considered that the amount applied to the subject should be higher than the analysed rates of Mercure but lower than a number of those other properties and similar to Circle on Cavill.
Mr Smith pointed out that in addition to the differences in size between the sale and the subject sites, the sale has a frontage to an extremely busy four lane highway and had no planning approvals in place at the time of sale. Both he and Mr Hawley considered that because the sale property was heavily improved at the date of sale it was difficult to provide an accurate analysis of its unimproved value and, therefore, the sale should not be relied on as a primary tool for valuing the subject site.
Mr Hawley considered that Mr Jackson's adoption of $32,500/bedroom was weighted at the lower end of the range and that a greater difference was warranted between that figure and the $28,753 shown in the sale. Similarly, although Mr Jackson did not consider the rate per square metre of GFA, the GFA analysis for the sale ($340/m²) as compared with that adopted by Mr Jackson ($333/m²) indicated that Mr Jackson had made no allowance for bulk.
I consider that this sale also provides good evidence of the market in Surfers Paradise as at the dates of valuation although there are differences between the sale and the subject. The analysed sales figures should be adjusted up to allow for the greater size, inferior location, inferior planning attributes and lack of development approval of the sale. I do not consider that Mr Jackson's adjustments are sufficient to allow for the superiority of the subject as compared with the sale.
The three remaining sales in Surfers Paradise are the older sales discussed earlier.
RaptisPlaza (Precinct 1)
This property is situated in the heart of Surfers Paradise, with frontages to Cavill Avenue and the Esplanade, in Sub-Precinct 2 – Beach Front Resort. It has an area of 8,478 m². At the time of the sale the development comprised 6,930 m² of retail space, 2,399 m² of commercial space and a vacant site overlooking Surfers Paradise beach. There were no development approvals in place at the date of the sale.
Development approval for the site was granted in November 2004 for the construction of 741 bedroom, (1 bedroom/11.44 m²), and a GFA of 55,086 m² (GFA ratio of 6.51:1) which calculates to $418/m²/GFA.
The property sold in May 2002, with settlement in June 2002, for $33,000,000. Mr Jackson deducted 3 years gross income from the sale price to reflect the return received by the purchaser while finalising the development proposal and analysed the sale as follows –
Purchase Price $33,000,000
Annual Gross Income $4,000,000
Less present value of 3 years gross income $10,708,184
$22,291,816
Add present value of deferred
demolition costs $734,430
Analysed land value $23,026,246
Analysed rate per m² $2,716/m²
Analysed rate per bedroom
(based on 741 bedrooms) $31,074
Mr Jackson's adopted rate per bedroom for the subject ($32,510) is higher than that indicated by this sale ($31,074). He adjusted the sale price up to allow for the rise in the market between the date of sale and 1 October 2003. Against that he balanced the superior location, commercial potential and slightly smaller size of Raptis Plaza. Mr Jackson did not apply specific percentages in making those adjustments, but compared the subject with the sale and the overall market, and made a professional judgment that $32,500 was an appropriate rate per bedroom for the subject.
As compared with the subject, the sale is in a superior location with beach views that cannot be obstructed. It is also in a superior area for retail purposes and has a larger component of commercial/retail use (16%) compared with the subject (2%). There was no evidence as to whether the commercial/retail component was more or less valuable than the residential component.
As indicated previously, I consider that less weight should be placed on this sale because it took place some 17 months before the first date of valuation in a rising market. There is also some potential for error in analysis because of the substantial improvements included in the sale. The sales figures should be adjusted down to allow for the superior attributes of the sale, the larger size of the subject and the lack of development approval at the time of sale. The adjusted Surfers Paradise sales contemporaneous to the dates of valuation show that a much higher rate per square metre should be applied to the subject than indicated by this sale and adopted by Mr Jackson, to allow for the improvement in the market.
Dolphin Arcade (Precinct 1)
This property is located in Sub Precinct 1 – Main Entertainment with frontages to Orchid Avenue and the Gold Coast Highway which are both retail areas. It has an area of 7,240 square metres. The property sold in June 2002, with settlement in August 2002, for $32,783,700. At the time of sale there was a four level retail development on the site, but no development approvals were in place.
Development approval was given in July 2004 to construct two residential towers of 50 and 36 levels comprising a total of 398 apartments of 652 bedrooms and 3,500 square metres of retail space. No redevelopment had commenced at the time of the hearing.
Mr Jackson analysed the sale as follows –
Sale Price $32,783,700
Annual gross income $4,130,786
Less present value of 3 years gross income $11,058,304
$21,725,396
Add present value of deferred
demolition costs $569,634
Analysed land value $22,294,030
Analysed rate per m² $3,079/m²
Analysed rate per bedroom (based
on 652 bedrooms) $34,193
The property is superior to the subject for retail purposes but otherwise is in an inferior, internal, non-beachfront position. The sale shows a higher rate per square metre than Raptis Plaza which is surprising given the superior location of Raptis Plaza. As with the Raptis Plaza sale less weight can be placed on the sale because it took place some 16 months before the first date of valuation, and because it was heavily improved, there is potential for error in analysing it. The sale is in an inferior location to the subject for residential purposes, no development approval was in place at the time of sale and the market has improved since the date of sale. Those factors point to an upward adjustment of the sale rates. The larger size of the subject is to be balanced against that.
Circle on Cavill (Precinct 1)
This property is located in Sub Precinct 1 – Main Entertainment with frontages to the Gold Coast Highway, Cavill Avenue and Ferny Avenue. It has an area of 14,130 square metres.
The property was sold in June 2001 for $28,500,000 with settlement in December 2003. The sale was conditional upon development approval being obtained. The development approved comprises 11,000 m² of retail and commercial space, Tower A of 69 stories, Tower B of 49 stories (a total of 985 bedrooms), 11 home offices and a minimum of 1,020 car spaces.
Mr Jackson analysed the sale as follows –
First deposit on signing contract $50,000
Second deposit at the earlier of
180 days or DA approval $1,350,000
Final payment $27,100,000
Total$28,500,000
Cash equivalent value $23,466,943
Add present value of deferred
demolition costs $226,866
Analysed sale price $23,693,809
Analysed rate per square metre $1,677/m²
Analysed rate per bedroom
(on 985 bedrooms) $24,054
This sale is even more dated than Raptis Plaza and Dolphin Arcade. The location is superior to the subject for retail purposes but inferior for residential purposes because of its internal, non beachfront position on the highway. The development approval allows for 12% retail area compared with the subject's 2%. The sale and the subject are similar in terms of land size and development attributes.
I consider that Mr Jackson's adopted rate per square metre ($2,444) does not represent a sufficient increase to allow for the increase in the market and the superior location of the subject.
Broadbeach
Mr Jackson analysed two sales in Broadbeach – Pegasus and Sierra Grand – as secondary evidence. He did not directly apply the sales in valuing the subject, but used them to demonstrate that sales in Broadbeach were achieving a different level of value from those in Surfers Paradise.
Pegasus and Sierra Grand formed part of the primary evidence of the respondent's valuers. In addition, Mr Smith and Mr Hawley relied on the Niecon Amalgamation (Oracle) and the sales of Ultra and Verve.
I concluded earlier in this decision that the Broadbeach sales should not be applied directly in valuing the subject, but may be used to show the upper levels of the subject's valuation.
Pegasus
This property is situated on the eastern side of the Gold Coast Highway, 200 m south of the Broadbeach Mall and 350 m west of Kurrawa Beach. It has an area of 8,636 square metres, and is situated within the Broadbeach LAP, Precinct 2 - Highway Tourism.
As of right, a maximum building height of 30 storeys, residential density of 1 bedroom/13m² (665 bedrooms) and GFA ratio of 4:1 apply to the sale property. At the time of sale there was no development approval in place and none has issued since.
The property sold for $33,000,000 in August 2004 with settlement on 1 November 2004. The respondent's valuers estimated the costs of demolishing the improvements to be $300,000 which offset any holding income from the date of settlement to the date of demolition in April 2005. They deducted $15,000 for clearing and analysed the sale to $32,985,000 which equals $3,818/m², $955/m² GFA and $49,676/bedroom on an as of right basis. Mr Jackson accepted that analysis.
Mr Smith and Mr Hawley considered the sale property to be located in an inferior position as compared with the subject, because the sale is south of the Broadbeach Mall on the busy Gold Coast Highway and further away from the beach. Compared with the subject, the sale had a similar to inferior residential density ratio, an inferior height limit and an inferior plot ratio.
Mr Smith said that although the sale date was after the 1 October 2003 valuation date, the sale supported the general levelling of the market that occurred between October 2003 and October 2004. He considered that the analysed rates of the sale compared with those issued on the subject at $3,402/m², $463/m² GFA and $45,314/bedroom indicated a conservative application.
Mr Jackson said that in applying the sale to the subject, the rates shown by the sale should be discounted to account for the larger land size of the subject, the scale of development on the subject being 48% greater on a bedroom basis than the sale, and the fact that the sale property sold at a time when the Broadbeach market was experiencing strong growth.
I consider that the analysed sales figures should be adjusted downwards, in comparison with the subject, to allow for the sale's smaller size and lower GFA ratio and its location in Broadbeach where as I indicated previously, the values appear to be higher than those in Surfers Paradise. However, the location of the sale on the highway and away from the beach is inferior to the subject and there was no development approval in place at the time of sale. Those factors should be set off against the downward adjustment. Taking all those factors into account, I consider that the rate per square metre to be applied to the subject should be lower than that shown in the sale.
Sierra Grand
This property is situated at 22 Surf Parade, Broadbeach on the eastern side of the Gold Coast Highway about 350 m west of Kurrawa Beach, a block south of Pegasus. It has an area of 6,916 m².
The property is located in the Broadbeach LAP, Precinct 2, Highway Tourism. At the time of sale there was a development approval in place, given on 19 September 2003, which was subsequently amended in November 2005. The amended approval is for a development of 30 storeys, with a GFA of 28,072 m² (residential 26,507 m², non residential 1,565 m²), a plot ratio of 4.06.1 and 1 bedroom/14.9 m² or 465 bedrooms.
The property sold for $22,480,000 on 23 November 2004 with settlement on 30 May 2005. Although the sale date is after the 1 October 2003 date of valuation, Mr Smith considered that it supported the general levelling of the market that occurred between October 2003 and October 2004. Mr Smith and Mr Hawley allowed $15,000 for clearing the site and analysed the sale to $22,465,000, which equates to $3,248/m², $800/m² GFA, and $48,312 per bedroom, using the approved densities, GFA etc.
Those analysed figures should be adjusted down to allow for the smaller size of the sale, its location in the Broadbeach market and lack of development approval. The inferior location and GFA ratio of the sale are to be balanced against those factors.
Oracle
This property occupies a large part of a block about 200 m west of the beach and one block south of the Broadbeach Mall. It has an area of 11,943 square metres. The property is situated within the Broadbeach LAP, Precinct 3 - Residential/Low Impact Tourism, RD8.
The site was amalgamated between July 2002 and March 2004 with settlements between March and July 2004. The total sale price was $47,880,324 which Mr Smith and Mr Hawley analysed as follows:
Sale Price $47,880,324
Add demolition costs $416,565
Less income $1,582,562
Less PV Purchase Price
for extended settlement $2,166,389
Less clearing $15,000
$44,532,938
Development approval was given on 22 November 2005 for the construction of two towers of 50 and 40 levels (compared with the maximum as of right height of 30 storeys), with a plot ratio of 6.5:1, 77,568 m² GFA and 901 bedrooms. In addition, a ground floor retail/commercial area of 5.62% of GFA with a mezzanine option of another 1.4% retail commercial space was approved. Using that approval, Mr Smith and Mr Hawley analysed the sale to $3,728/m², $574/m² GFA and $49,426/bedroom.
Mr Smith and Mr Hawley considered this to be a prime sale for valuing the subject. The amalgamation had occurred between July 2002 and March 2004, the sale and the subject were similar in size, shape and proximity to the beach and had achieved very similar approvals in terms of plot ratio and residential density. Mr Smith said that the analysed rates per square metre, per square metre GFA and per bedroom were significantly higher than those issued on the subject indicating that the sale had been applied conservatively.
Mr Jackson thought that this transaction should not be relied on because of its location in Broadbeach and also because of the circumstances surrounding the sale. Some 80 contracts were involved in the amalgamation which took place over an extended period of time beginning in 2001. The contracts were conditional on the purchase of other specified properties and on the purchasers obtaining development approval. Settlement of some of the contracts was extended and prices were renegotiated. Settlements occurred between early to mid 2004 after the developer was satisfied that it had control of a large site. Mr Jackson was unable to say whether there had been compulsion and imprudence although he understood there were some cases where there was some disparity in the prices.
Although the earlier sales in the amalgamation occurred in 2002, I do not consider that the sale can be described as "old". The total price represents a range of sales between 2002 and early 2004. Nor do I consider that the multiple contracts involved in the amalgamation of the site mean that the sale is unreliable. Amalgamations are necessary to obtain a development site of this size in either Surfers Paradise or Broadbeach, and there was evidence that some of the other sales and the subject were the result of amalgamations, although the number of properties involved in the Oracle amalgamation is high.
Apart from its location in Broadbeach, this sale would be extremely useful in valuing the subject for the reasons advanced by the respondent's valuers. However because of its Broadbeach location, I do not consider that the sale can be applied directly, but rather, indicates the upper limit of the subject's value. This is supported by the evidence of other sales, considered above, which points to a rate per square metre well below $3,728.
Ultra and Verve
Ultra is located in Broadbeach about 3 kilometres south of Surfers Paradise. It is an inside parcel of 4,644 m² lying about 300 m west of the beach. The property is situated within the Broadbeach LAP, Precinct 3 - Residential/Low Impact Tourism, RD7.
The property sold on 29 October 2004 for $17,950,000 with settlement on 29 November 2004. Development approval was in place for a 30 storey building, 17,540 m² GFA and 1 bedroom/25.65 m² or 181 bedrooms. The 17,540 square metres GFA approved is well above the allowable GFA based on area and height restrictions. The respondent's valuers analysed the sale to $17,199,000, or $3,704/m², $980/m² and $95,022/bedroom.
Mr Smith pointed out that the analysed rates on the sale were significantly higher than those issued on the subject which, he said, indicated a conservative application of the sales analysis. Both he and Mr Hawley considered that, overall, the sale was inferior to the subject. The sale was a smaller development site situated in an inferior position at Broadbeach with significantly inferior development potential having an inferior residential density, inferior plot ratio potential and inferior maximum height.
Verve is located on Old Burleigh Road, Broadbeach about 3 kilometres south of Surfers Paradise and opposite Pratten Park and Kurrawa Beach, about 220 m south of Broadbeach Mall. It has an area of 2,463 square metres.
The property lies in the Broadbeach LAP, Precinct 3 - Residential/Low impact tourism, RD7.
The property results from an amalgamation of 3 sites, the sales occurring between February and December 2003 with settlement from March to May 2004. Development approval was given in December 2004 for a 30 storey building with 1 bedroom/25 m² (98 beds) and a plot ratio of 3.5:1 or 8,640 m² GFA. The total sale price was $10,450,400. Mr Smith and Mr Hawley said that demolition costs of $254,000 would have been offset by any holding income. After deducting clearing costs of $10,000, they analysed the sale to $10,440,400, which equates to $4,238/m², $106,543/bedroom and $1,208/m² GFA.
Mr Smith and Mr Hawley said that, in comparison with the subject, the sale was in a superior location being opposite the beach with uninterrupted views to the east. However, the sale had significantly inferior development potential as compared with the subject because of the sale's inferior maximum height level, residential density and plot ratio. The sale demonstrated that sites close to the beach commanded higher prices than those further away, Mr Smith saying that it provided an indication of the value of the front section of the subject which abuts Northcliffe Terrace. The analysed rates shown by the sale were significantly higher than those issued on the subject which, Mr Smith said, was to be expected given the nature of the sale site.
I consider that the analysed rates per bedroom for both the Verve and Ultra sites indicate that they are not comparable with any of the other sales or with the subject. The difference is possibly caused by a bedroom ratio of 1/25 m² as compared with the other sales in both Surfers Paradise and Broadbeach which range from 1/11.1m² to 1/14.87m² and in the case of Verve, its location opposite the beach. I do not consider that these sales should be relied on to value the subject.
Valuation conclusions
In summary, the subject site is unique amongst the properties under consideration because of its size and location on the southern fringes of Surfers Paradise Precinct 1 (which allows developments of unrestricted height and residential density and GFA ratio achieved). I consider that the Surfers Paradise sales contemporaneous with the dates of valuation provide the most reliable evidence of the value of the subject. Those sales are Artique, Avalon and Mercure. I have excluded Solaire and have decided that Raptis Plaza, Dolphin Arcade and Circle on Cavill should be used only to indicate values that are lower than the subject.
The Broadbeach sales of Oracle, and to a lesser extent Pegasus and Sierra Grand, show values which I consider are higher than the subject.
Artique and Avalon show rates per square metre of $3,397 and $3,858 respectively, Mercure shows $2,211. None of the properties is exactly comparable with the subject, but having made the adjustments discussed earlier I consider that a rate per square metre of $3,000 should be applied to the subject. This analyses to $39,917 per bedroom and $408/m² GFA which is consistent with the sales evidence as discussed.
$3,000/m² allows for the increase in the market between the sales of Circle on Cavill and Raptis Plaza. It is a slightly lower rate than that shown by Dolphin Arcade, but the subject's rates per bedroom and per square metre/GFA, are higher than those in Dolphin Arcade. Excluding Verve and Ultra, $3,000/m² is less than the rates shown in the Broadbeach sales, which range from $3,248/m² (Sierra Grand) to $3,818/m² (Pegasus).
As at 1 October 2003, the rate of $3,000 per square metre results in a total value of $38,793,200 for the subject which I will round to $38,800,000. The valuation as at 1 October 2004 is the same.
ORDERS
1.The appeals are allowed.
2.The unimproved value of Lot 1 on RP 173827, Lots 40-41, 45-49, 51-54, 59-60 on RP 41923 and Lots 1-4 on SP 132911 in the County of Ward, Parish of Gilston is determined at $38,800,000 as at 1 October 2003.
3.The unimproved value of Lot 100 on SP 144030 in the County of Ward, Parish of Gilston is determined at $38,800,000 as at 1 October 2004.
CAC MacDONALD
MEMBER OF THE LAND COURT
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