Village Fair Toowoomba Pty Ltd v Chief Executive, Department of Natural Resources
[2000] QLC 33
•26 May 2000
|
BRISBANE
26 MAY 2000
Re: Appeal Against Annual Valuation
Valuation of Land Act 1944
Valuation Roll No.: 31276
Local Government: Toowoomba
(AV99-1155)
Village Fair Toowoomba Pty Ltd
v.
Chief Executive, Department of Natural Resources
(Hearing at Toowoomba)
D E C I S I O N
Background:
This matter relates to land at 222 Margaret Street, Toowoomba, and described as Lot 100 on RP 802875, Parish of Drayton. The subject land is located in the Central Business District (CBD) of Toowoomba, approximately 100 metres west of the intersection of Margaret and Ruthven Streets. The subject land has an area of 1.61 ha, and fronts Margaret Street, Duggan Street and Victoria Street, all of which are bitumen sealed with concrete kerbing and channelling. Vehicular access is available from Duggan and Victoria Streets, and Victoria Street carries one-way traffic, and is part of a ring-road traffic system around the CBD. All normal utility services are available, and the subject land is encumbered by four easements, which are not seen as significant in the context of the current matter.
The subject land has a gentle fall from south-east to north-west towards West Creek, and is zoned "Commercial A" under the Town Planning Scheme of the Toowoomba City Council (the Council) of 10 June 1989, and effective at the date of valuation of 1 October 1998. The land is designated "Commercial Core Development Area" (Development Area C2), and is developed as a two-level shopping centre of some 60 shops involving 52 tenancies, with a multi-level (2) car park for in excess of 500 cars. The complex was constructed in 1989. Major tenants include Franklins Supermarket, Best & Less, Lincraft, KFC and Australia Post. Adjoining to the south of the subject land is a public car park owned by the Council.
About 100 metres to the west of the subject land is the newer Grand Central Shopping Complex, containing three major national anchor tenants and some 140 specialty shops, which has virtually now become the central focus of the CBD for Toowoomba. The impact of that complex is discussed later. The key issues in this matter are changes in the market, relativity, and comparison of sales.
On 29 March 1999 the Chief Executive issued a valuation of the subject land at $4,500,000. Following an objection the Chief Executive confirmed that figure on 13 July 1999. The appellant has now appealed, claiming that the unimproved value should more properly be $3,000,000.
Mr Stephen Davis, a consulting registered valuer, appeared and gave evidence for the appellant, also calling evidence from Alan John Tyler, manager of the Clive Berghofer Group, owners of the subject land. Mr R Vize, Counsel of Crown Law, represented the respondent, calling evidence from Brian Gerard Mahoney, the departmental registered valuer responsible for determining the valuation.
The Evidence:
(1) Changes in the Market -
Fundamental to the appellant's case in this matter is its claim that market forces in the Toowoomba CBD have now shifted over the last few years, due mainly to the establishment of several large drive-in shopping complexes into the market. The end result of those new competitors, as argued by the appellant, is that Village Fair Shopping Centre has lost several major national tenants, who tended to relocate in the newer Grand Central Complex. Because of the loss of those key tenants, Village Fair has experienced a downturn in business activity, which must, in its opinion, reflect in the unimproved value of the land, as well as the added value of the buildings upon the subject land.
Mr Mahoney agrees in principle that a decline in income level might indicate a fall in the unimproved value, but argues that it is the building, which is not performing, in the current matter. While not an expert in retailing movements, Mr Mahoney speculates that the current relocation to Grand Central may indicate a temporary state of the market, until the new attractiveness of that facility settles down. However, without evidence to support such a conclusion, I get little assistance from that assertion.
To support the decline in business activity Mr Tyler quotes changes in the turnover income for Village Fair since the last valuation of the subject land at 1 October 1996, demonstrating a fall of 60.8% in gross annual income, and a fall of 39% in net annual income, for the period October 1996 to October 1998. Those declines in income are also mirrored by a decline in internal pedestrian traffic flows within the complex, from 1995-96, reflecting 19.35% to 1996-97, and 33.4% to 1997-98. In further clarification of those pedestrian counts, Mr Tyler also provides changes in internal pedestrian statistics on a selected monthly basis as follows:Month 1996-1998
July fall 22%
August fall 23%
September fall 11%
Mr Vize notes that there had been an increase in pedestrians of 2% between September 1997 and September 1998, although there was no further explanation for that rise. As a matter of providing some indication of the changes in pedestrian flows between Ruthven Street and Margaret Street, Mr Mahoney provides some small sample counts of pedestrian movements. Those small samples monitored pedestrian movements at four places in Margaret Street, and five places in Ruthven Street, at varying times during the midday shopping period, during October and December 1998, and December 1993. The trends support a general fall of at least 50% in numbers at each location, and an overall total decline in pedestrian numbers of 62% between December 1993 and October 1998. The impact of the new shopping centres, particularly the Grand Central Complex, is clearly demonstrated. The decline in numbers at each of the selected surveyed locations varies between 56% and 81%, but the trend appears to be fairly consistent between both Ruthven Street and Margaret Street as follows:
| Margaret Street (East) | Margaret Street (West) | Ruthven Street (South) | Ruthven Street (North) |
| 56% fall | 63% fall | 58% fall | 72% fall |
| - | 57% fall | 81% fall | 68% fall |
| - | - | - | 57% fall |
While those small samples have a low level of statistical significance, the trends support Mr Mahoney's conclusion that there is a general shift in the CBD. However, the trend could also support Mr Davis' conclusion that the trend from both Ruthven Street and Margaret Street east is towards the Grand Central location west of the subject land. As Mr Davis notes, the pedestrian movements along Margaret Street west may reflect people just passing to the west towards Grand Central, but there were no conclusive pedestrian counts to either support or negate such a conclusion.
In clarifying the extent of the loss of major tenants, Mr Tyler advises those losses involved 13 who relocated to Grand Central, and two who relocated to another drive-in shopping complex at Wilsonton, which had one national anchor tenant and 13 specialty shops. In addition to those losses, one of their major tenants also established a second store in a further drive-in shopping complex at Clifford Gardens, which has 41 shops and offices. The result of that second outlet is that the turnover from the major tenant at Village Fair is about 50% of its former value, and a new lease has had to be renegotiated with the major tenant to reflect that reduced turnover.
However, Mr Tyler concedes that during the relevant period, Village Fair was able to attract one major new tenant from Ruthven Street, who relocated into Village Fair at a reduced lease rental of $230 per m². The former major tenant in that location was originally paying $375 per m². In addition to that reduced rental arrangement, an incentive of one year's rent free was also offered as an inducement to relocate to the subject land. Mr Tyler notes that the former major tenants relocated to Grand Central, in spite of rent-free concessions being offered to seek to retain them at Village Fair. It was also conceded that often national tenants have certain disincentives to consider, if they choose not to relocate to the new centres.
Mr Tyler also notes that rent-free enticements to tenants have occurred in the marketplace in Toowoomba CBD, only since the opening of Grand Central in 1996. Mr Tyler also concedes that rent-free enticements are now a general practice in the industry, in order to attract new tenants. Mr Tyler further estimates that Village Fair probably had about 25% vacancies at the relevant date in October 1998, and he notes that Grand Central, while a very new complex, also continues to have some vacancies, and is not fully tenanted.
Mr Tyler also advises that Village Fair is about 10 years' old and, in his opinion, continues to represent the best use of the subject land as a retail site. To the best of his knowledge there were no comparable problems with tenants relocating prior to the opening of Grand Central. Mr Tyler also confirms from his 20 years of experience in retail shopping centres, that if a new shopping centre was relocated away from the CBD in provincial cities, then there was always a resulting downturn in CBD activity. The Council in Toowoomba is conscious of those moves, and has sought to make parts of Margaret Street more attractive with beautification schemes. The area of Margaret Street, east of Ruthven Street, is now developed as a restaurant, hotel and entertainment precinct.
Mr Davis further supports that there has been a general downturn in business in Ruthven Street, and other parts of the CBD, due to the increased competition. To support that conclusion Mr Davis provides examples of centre incomes for two other retail complexes. In Ruthven Street the Heritage Plaza has declined between October 1996 and October 1998 by 21.8%; while in Margaret Street, opposite the subject land, the Central Court Market Plaza has declined 40% in the same period. Those income changes refer only to the ground floor retail shopping areas of each centre. Mr Davis draws direct comparisons between the decline in income at Market Plaza, Heritage Plaza and Village Fair, with the corresponding decline in Ruthven Street. Mr Davis argues that the rental incomes are a major factor that should be considered in this matter. Mr Mahoney agrees that commercial investors look to capitalise net incomes as a measure of the value of an investment.
In seeking to understand changes that have occurred in respect of the capital value of the Village Fair complex, Mr Mahoney advises that the building was developed about 1989 at a cost of approximately $50 million. The appellant purchased the site in 1992 for $21 million, in a mortgagee-in-possession sale. Mr Mahoney concedes that part of any overall loss in value of that site might represent some diminution in the value of the land, as well as in the building. However, Mr Mahoney notes that in aggregating the former smaller parcels in order to build Village Fair in 1989, the former owners were likely to have had to pay the higher rates per m², then represented in the smaller size of those parcels, in order to amalgamate those parcels.
Mr Mahoney argues that in the period January 1997 to October 1998, there were a number of sales in Ruthven Street, which demonstrated the effect of reduced rents, and higher number of vacancies. Those sales formed the basis of a reduction (35%) in unimproved values in Ruthven Street. Mr Mahoney argues that the remainder of the unimproved values in the CBD remained unchanged, except for some properties in Margaret Street east which increased by between 10% and 25%. Mr Mahoney therefore concludes that the reduction in values has been constrained only to Ruthven Street. He concedes that much of the CBD was in decline at October 1998, but argues that the sales evidence supports maintenance of current unimproved values in many areas, including the subject land. However, it is agreed that the only sale in Margaret Street west was Mr Mahoney's Sale 1.
Mr Mahoney agrees with the large decline in Ruthven Street properties, but argues that the Margaret Street properties have in part benefited by the change in the market to that locality. In determining his estimate of the unimproved value of the subject land, Mr Davis has estimated a decline of 30% from the former value, which he argues is supported by the decline in incomes, the fall in patronage, and sales in the locality, although he concedes that there are no direct sales in Margaret Street east or west to demonstrate a 30% fall (transcript p.18). Mr Davis concedes that there are not many sales in the locality of Margaret Street west, immediately west of Ruthven Street and adjoining the subject land. Mr Mahoney argues that there are many vacancies of street-fronting premises in Ruthven Street, but few in Margaret Street west. The only sale in that locality is markedly different in character to Village Fair, and Mr Davis has sought to compare like with like in his comparisons.
In comparing that one sale in Margaret Street west, Mr Davis concludes an analysed land component of that sale at $210,000. He concludes that the former unimproved value of that property (239 Margaret Street) was $235,000, which demonstrates a fall in value of 11%. However, Mr Davis notes that such analyses rely heavily upon the respective estimates of added value in that improved sale, often a matter of conjecture. A detailed explanation of that sale is addressed later, however, Mr Davis argues that retail incomes are a very important matter for consideration, when determining unimproved value in a relatively unstable retail market scenario.(2) Relativity -
Mr Mahoney agrees that the market has shifted since the opening of the Grand Central Complex, and recent sales confirm a change in relativity in the CBD. In establishing the correct relativities, Mr Mahoney has adopted a lineal frontage rate per metre, which he argues is accepted by the Courts. To demonstrate the applied rates, Mr Mahoney provides examples of frontage rates along Margaret Street and Ruthven Street (Exhibit 7). The rates in Ruthven Street peak at $30,000 per lineal metre, at the corner of Margaret Street, declining north to Russell Street ($19,000 per lineal metre), and to the south to near Little Street (about $17,000 per lineal metre).
The frontage rates in Margaret Street west fall from $29,000 per lineal metre (cnr Ruthven Street), to $28,000 per lineal metre at the subject land and $22,500 per lineal metre at Victoria Street to the west of the subject land.
Allowing for the differences in size of parcels, their location in Ruthven Street and Margaret Street, and adopting the lineal frontage gradations, Mr Mahoney determines the relative rates per m² for parcels in that location. The rates adopted for the subject land (1.612 ha - $275 per m²), the Council public car park (6,053 m² - $272 per m²), Market Plaza (1,153 m² - $427 per m²), and Heritage Plaza (about 4,000 m² - $275 per m²), demonstrate the level of difficulty in comparing like with like in the CBD.
Mr Mahoney also confirms that the Heritage Plaza in Ruthven Street had its unimproved value reduced to $275 per m² due to the decline in rents, the huge number of vacancies, and the sales evidence in Ruthven Street. Mr Mahoney concedes that there is some similarity between Heritage Plaza and Village Fair, as Heritage Plaza is a seven-storey office building with a plaza through it. Mr Mahoney sees the ground floor retail areas there as inferior to Village Fair.
In respect of any impact of rental returns, Mr Mahoney concedes that Ruthven Street businesses had demonstrated falls up to 50%, comparable to Village Fair. However, he sees rental returns as only supporting evidence, and relies mainly on sales as his primary evidence.
Because of its relatively large size, and its three-street frontage and good exposure, there are few properties in the CBD, beyond the Market Plaza and the Heritage Plaza, which provide any direct comparison. The Grand Central Plaza (3.7 ha), has a rate of $136 per m², but that land had some particularly difficult drainage and foundation problems to be overcome during construction. Those difficulties, encountered during construction of the initial Myer Centre in 1962, were noted in a building report (Exhibit 8).
In considering the history of the public car park immediately to the south of the subject land (Lot 1 on RP 850888), Mr Vize sought assistance in the sale of that parcel of 6,053 m² in about 1995, at a rate of $383 per m². While Mr Davis could offer no comment on the reliability of those figures, he notes that sale would provide no assistance to him, as it was not a free market transaction. Mr Davis notes that the Council had negotiated that sale from the appellant, after previously declining to purchase the site, prior to the appellant acquiring it for then planned extensions to Village Fair complex. The appellant apparently reluctantly agreed to sell to the Council, and in Mr Davis' opinion, the circumstances of that sale suggest that the appellant felt obliged to sell. For those reasons, Mr Davis rejects any reliance upon that former sale. Mr Vize further notes that the Council car park was the site of a former power station, and a likely contaminated site, although there was no confirmation of those assertions, and they provide little assistance to me.(3) Comparison of Sales -
Mr Davis argues that, due to the paucity of sales of comparable size properties in the CBD, his sales merely demonstrate that there has been a downturn in the market. Mr Davis gets no direct comparisons with any of his Sales 1, 2 or 4, and seeks only some comfort with his Sale 3. Mr Davis' sales are as follows:·Sale 1 - (330 Ruthven Street - Lot 1 on RP 205964). This is a 3,985 m² improved parcel that sold for $230,000, and was analysed at $80,000. The current unimproved capital value (UCV) is $81,000.
·Sale 2 - (513-515 Ruthven Street - Lot 2 on RP 93163). This is a 395 m² improved parcel that sold for $350,000, and was analysed at $110,000. The current UCV is $176,000.
·Sale 3 - (28 Bell Street - Lot 1 on RP 185978). This is a 2,020 m² parcel that is improved with a 2,000 m² building, and which is developed as a plaza with small retail shops. That sale was a mortgagee-in-possession sale, and in spite of extensive marketing prior to the sale, the property only sold for $375,000. The property had formerly sold as a viable plaza development in 1988 for $1,700,000, after major refurbishment at that time, and with all tenancies in place. When the recent sale occurred (subsequent to the opening of the Grand Central Complex), there were a lot of vacancies, and little interest in the property. Mr Mahoney rejects any comparisons with this sale due to its mortgagee-in-possession nature, and it is not comparable in any way to the subject land.
·Sale 4 - (239 Margaret Street - Lot 3 on RP 72967). This is a 311 m² improved property that sold for $450,000, and was analysed at $210,000. The current UCV is $235,000.
Mr Mahoney also confirms that there are no directly comparable sales in the CBD in respect of the size of those sales, but provides the following sales to support his conclusions
·Sale 1 - (239 Margaret Street - Lot 3 on RP 72978). This is the same as Mr Davis' Sale 4, and contains a two-storey building with mezzanine floor. The building was purchased with vacant possession, and has since been leased to a tenant who relocated from Ruthven Street. Mr Mahoney sees the sale only as comparable in location in Margaret Street west, which he sees as largely immune from the shift away from Ruthven Street, a matter Mr Davis rejects.
The sale sold in June 1998 for $450,000 which, after allowing for improvements, was analysed at $252,650 ($27,415 per lineal metre and $812 per m²), and applied at $235,000 ($25,500 per lineal metre and $755 per m²).
·Sale 2 - (26 Neil Street - Lots 1 and 2 on RP 5145; Lots 23 and 24 on RP 5131; and Lots 1 to 3 on RP 101913). This is a 2,226 m² improved sale, with a brick and iron building used as a restaurant, and a large car-parking area. The sale is seen as inferior to the subject land in a location further removed from the main retail activity, and in a lower pedestrian traffic area, about 350 metres east of the subject land. The sale supports that unimproved values in that area have remained static since October 1996. The sale formerly sold in 1993 for $566,500.
The sale then sold in September 1997 for $680,000 which, after allowing for improvements, was analysed at $498,000 ($10,356 per lineal metre and $224 per m²), and applied at $440,000 ($9,150 per lineal metre or $198 per m²).
·Sale 3 - (11 Bowen Street - Lot 5 on RP 144938). This is a 463 m² improved parcel with office premises. The sale has frontages to both Bowen Street and Woodward lane to its rear. The sale is vastly inferior to the subject land in both location and value, but was used to demonstrate that sales in the CBD, outside Ruthven Street, support a static level of value. The sale was sold in November 1997 for $250,000, which was analysed at $93,444, and applied at $83,000 ($7,600 per lineal metre or $180 per m²).
In seeking to understand the possible impact of the common sale at 239 Margaret Street, I note that the valuers diverge in their analyses of that sale. Mr Mahoney sees that property as having some relevance as it represents a development with small retail shops in close proximity to the subject land. While much smaller than the subject land, Mr Mahoney has estimated the applied unimproved value of the parcel at $235,000, which he argues supports the static nature of values in that part of Margaret Street west. Mr Davis has estimated the unimproved value of that sale at $210,000, which he argues shows a decline in value.
In arriving at his analysed unimproved value for 239 Margaret Street, Mr Davis has adopted added values of the improvements for the ground floor building at $650 per m², and the mezzanine floor at $135 per m², based upon his wide experience of the CBD of Toowoomba. Mr Davis further advises that those added value rates reflect approximately a 40% depreciation on the new replacement cost of between $1,000 and $1,200 per m². He further argues that his applied rate of $650 per m² is a resultant rate after allowing for any development interest costs.
Mr Mahoney analyses that sale, adopting replacement costs of $700 per m² for the ground and first floor levels, and $600 per m² for the mezzanine floor, using standard building code figures (Cordells). Mr Mahoney then allows normal fees and interest charges, an overall depreciation and obsolescent factor of 62%, and loss of interest on the land, giving a residual unimproved value for the land of $252,772. The difference in the land value between Mr Davis ($210,000) and Mr Mahoney ($252,772) demonstrates the difficulty of analysing improved values, and the small variations of opinion which can lead to varying outcomes.
Mr Davis rejects any relevance of Mr Mahoney's Sale 2, as it is not a retail site, and it is a fringe commercial site and is only 14% of the size of the subject land. Mr Davis also rejects Mr Mahoney's Sale 3 as not relevant, mainly because it is an office property, and not directly impacted by the change in retail patterns.
In further clarification of Mr Davis' opinion that the pulling power of Grand Central has no direct spin-off to Village Fair, I note that he believes the intervening open space (200 metres), and the railway line, provide discontinuities for people to seek to walk to Village Fair from Central Plaza. For those reasons he sees Village Fair as being sort of cut off from Grand Central influences.
Decision:(i) Comparison of Sales -
In seeking to understand the changes that are occurring in the CBD area, I turn first to the sales evidence provided. It is agreed by both valuers that none of the sales supplied provide any direct comparison with the subject land. Mr Davis' Sale 2 (395 m²), and Sale 4 (311 m²), are vastly smaller, as are Mr Mahoney's Sale 1 (common sale) and his Sale 3 (463 m²). The only purpose of those sales was to seek to demonstrate either that the market in Ruthven Street had declined by 30%, or that it appeared to have remained static in Margaret Street west.
The use of sales in what is predominantly office premises bears no direct relationship to properties in the retail market sector, which is clearly being impacted by major changes in customer satisfaction. On balance, I gain little assistance from any other sales, except perhaps the common sale at 239 Margaret Street, and then only as an indicator of market sensitivity. However, the different approach to determining the added value of improvements on that sale, tends to confirm the likely residual decline in value, if any, in the Margaret Street west locality. There is no argument that values have declined in Ruthven Street by about 30%, and the use of Mr Davis' Sales 1 and 2, provide no further assistance.
In respect of the 239 Margaret Street sale, it is agreed by both valuers that the analyses provided represent their professional opinions, and there will always be some element of conjecture in respect of the final analysed land values adopted. The matter of added value of improvements has always been seen by the Courts as a difficult matter, and always influenced by the use that the improvements bring to the land. (Russellan Pty Ltd v. Roads and Traffic Authority of New South Wales (1992) 75 LGRA 263, per Pearlman J). Any added value must also be assessed not at its actual costs, but at the reasonable costs of effecting the particular improvements on the actual land at the relevant date. That was identified in the High Court in McDonald v. Deputy Commissioner of Land Tax (1915) 20 CLR 231, per Isaacs J at p.235.
In seeking to determine the added value of improvements, the Land Appeal Court noted in O'Brien Nominee Pty Ltd v. The Valuer-General (1979) 6 QLCR 280, at p.285:"It seems to us that the concept of 'added value' of improvements involves at least two methods of valuation, the appropriateness of which depends to a substantial degree on the economic conditions prevailing at the relevant time."
The Land Appeal Court went on to say about the method of assessing added value in times of economic conditions at p.286:
"In short it is the value the market is prepared to pay for the specific improvements on the property."
In the current matter the depressed economic retail market in the CBD would tend to support more the methods adopted by Mr Davis, where he relies upon his assessment of the added value of the building, based upon his understanding of the market at that time. While not varying greatly in outcome, Mr Mahoney has tended to apply the "normal approach" identified in Lewis Kiddle & Anor v. The Deputy Federal Commissioner of Land Tax (1919) 27 CLR 316, where Knox CJ, in referring to the method of determining added value, said at p.320:
"This amount would be found by ascertaining the amount which it would cost to make the improvements in question at the relevant date, including a proper allowance for loss of interest on all outlay during the period which must elapse before such outlay became fully productive, and by deducting from the sum so ascertained a proper allowance for depreciation or partial exhaustion of the improvements."
Bearing in mind the Land Appeal Court's direction in respect of an added value determined by market forces, I would tend to accept Mr Davis' conclusion of a land component of some $210,000 on 239 Margaret Street. If I then seek guidance upon whether that land value reflects a value that is partly immune from the market decline of 30% in Ruthven Street, I note that such a value represents only an 11% decline from the former applied value of $235,000. However, I note that Mr Mahoney has himself applied a conservative 93% to his analysed figure of $252,650. If I then compare the $210,000 to the $252,650 by Mr Mahoney, I find that could represent a reduction of 17% in the value of the land.
(ii) Relativity -
I would agree with Mr Mahoney that a simple comparison of rate per m² provides little assistance in comparing relativities in that location, due mainly to the differences in size and shape of the parcel. If I then look to Mr Mahoney's use of the lineal metre frontage rates, I note that there would appear to be a clearer trend in the unimproved values. The method of adopting comparisons on a frontage rate was considered in the matter of 108 Flinders Street Building Units v. The Valuer-General (V83-618/9), 10 July 1985, unreported. In that matter the Land Appeal Court noted that it is appropriate to consider comparisons on either a unit area basis or a lineal frontage basis, but adopted the latter method in order to retain consistency with the comparisons adopted by Mr McDonald, the valuer for the respondent (p.4).
However, the use of lineal frontages may not always be appropriate, as noted in Thistlethwayte v. The Minister (No. 2) (1953-55) 19 LGR 167, where Sugerman J said at p.168:" Price per frontage-foot is a useful unit of comparison and valuation in appropriate circumstances, often sufficient in itself to lead to correct conclusions, but not always so, and accordingly requiring, in its application, that consideration be given to other factors which may be relevant to what a purchaser would be prepared to pay for the land."
It is also noted that modern methods of volume retailing by chain stores, department stores, supermarkets and regional shopping centres, rely more upon the area of selling space available (per m²), than upon the actual selling frontage for the display of goods. Within specialised office sections of cities and large towns, the emphasis is more upon the use of usable floor space, rather than street frontage. (Land Valuation and Compensation in Australia by Rost & Collins, 3rd Edition (1996) P.133). Whilst such texts do not preclude the use of a lineal frontage per metre comparison in the current matter, they do emphasise the need to take an overall approach to the valuations determined.
The above opinions by Rost & Collins were discussed in Selbourne Chambers Pty Ltd v. The Valuer-General (1984-85) 10 QLCR 1, at p.9. The President in that matter distinguished such an approach, as the subject land was not used for any of the retailing purposes mentioned by Rost & Collins. The President went on to note at p.9:"It seems to me the consensus of the text book writers is that in valuing a commercial property, the valuer must consider each property having regard to its individual characteristics and with due consideration to the many factors which Dr Murray has conveniently listed at p.149. These factors include, it should be noted, frontage, depth, corner influence, side or rear access, shape, street width, maximum building coverage etc."
The President also considered the matter of comparisons based upon the capitalisation of rents, and the per m² method, and rejected those in favour of a lineal frontage basis, in the circumstances of that matter. In the circumstances of the current matter, I believe that the use of the subject land, as virtually a supermarket or a regional shopping centre, lends some support to a comparison upon a per m² basis. However, the very extensive nature of the frontages of the subject land to three streets (about 324 metres), must lend some weight to the use of a lineal frontage approach, at least as a check approach. Margaret Street is the major road, and the lineal frontage of that roadway represents 86.8 metres. Because of their different uses as other than a large supermarket, the sales supplied have little direct relevance for use of lineal frontage as a direct comparison approach.
If I accept Mr Davis' analysed rate of $210,000 for 239 Margaret Street, I note that represents a rate of $22,826 per lineal metre, which is 11% less than Mr Mahoney's adopted rate for that parcel at $25,5000 per lineal metre. If I then extrapolate that decline in the lineal frontage rate from the $29,000 per lineal metre at the corner of Ruthven Street, I could conclude a rate of $22,000 per lineal metre on the northern side of Margaret Street, opposite the north-eastern corner of the subject land. If I then apply the same relationship across Margaret Street at that point as applied formerly by Mr Mahoney, (ie $28,000 to $24,500 or 114%), then I could estimate a revised rate for the subject land at $25,000 per lineal metre.
However, some caution must be taken in adopting such an approach, in view of the already noted subjective nature of the analyses of 239 Margaret Street. I believe that the most that can be readily gained from the 239 Margaret Street sale is that the values in Margaret Street west are not immune from falls in Ruthven Street. The impact of such declines in value may be better identified from other factors.
If I then seek relativity with the Council car park adjoining to the south, I note that considerably smaller parcel has a unit area rate of $272 per m², compared to the rate of $275 per m² for the much larger subject land. Adopting the normal principle that all else being equal, a larger site tends to reflect a lower rate per m² than a smaller site, I could conclude that the subject land rate could be less. However, I am aware that the car-park land was apparently a contaminated site, and presumably, there has been some adjustment to the unit area rate for that purpose.
If I then compare the Heritage Plaza site in Ruthven Street, I note that smaller parcel (about 4,000 m²), also has a unit area rate of $275 per m². While the lineal metre rate in Ruthven Street at the Heritage Plaza is not dissimilar to that concluded for the subject land, the difference in area of those two parcels would also suggest that the unit rate for the subject land should be lower than $275 per m².(iii) Changes in the Market -
I turn then to what is likely to be the most significant evidence supplied in this matter. While analyses of sales of non-comparable parcels elsewhere in the CBD may provide insight into conclusions in those areas, the best evidence in respect of the subject land, is likely to be, in my opinion, more directly related to that parcel. It is agreed that Village Fair is relatively different because of its larger size. The much larger Grand Central Complex is also agreed to have had a major impact upon retail activities in the CBD. What impact that has also extended to the subject land may be measured in hindsight, by resulting outcomes of patronage for Village Fair.
Mr Davis has not sought to analyse the unimproved value of the subject land by any use of the capitalisation of rents method, relying only upon a simple comparison on a percentage reduction of activities. He has accepted the former valuation at 1 October 1996, and has sought to adjust that figure to allow for the following declines:·Gross annual income 60.8%
·Net annual income 39%
·Pedestrian patronage 33.4%
In my opinion, the loss of the drawing power of some major national tenants was not balanced by any gain from new ones during the relevant period. Clearly the income figures attest to that conclusion. While there may, or may not, have been some element of impact due to the market attractiveness of the actual development of Village Fair, the difference in the decline of the gross income compared to the net income, reveals the extent to which Village Fair management went to seek to minimise the impacts of its competitors. Despite the management's best efforts to market the subject land, the net annual income declined by 39%. The comparisons of a decline in incomes for the Central Court Market Plaza (40%), and the Heritage Plaza (21.8%) are further evidence of the shift in retail activity.
In seeking to understand the impact of the pedestrian counts supplied for the subject land, I note that represents only the adult population passing through the doors of Village Fair. While there is a difference between pedestrian patronage and actual customer patronage, the nexus between those is well established in retail trading. The prime target is to get people through the door and into the complex. However, the small samples sizes of pedestrian counts supplied by Mr Mahoney, represent apparently only pedestrian movements along the footpath, and not those entering Village Fair. It would therefore be reasonable to conclude that, some of those people in Margaret Street west, may pass on to Grand Central to the west of the subject land. Overall, however, I believe all of the pedestrian counts support some impact in Margaret Street west.
Mr Vize reminds me that it is the responsibility of the appellant to demonstrate its case under s.45(4) of the Act, and that, unless that has been demonstrated, then s.33 dictates that the valuation shall stand. However, on the weight of evidence, I believe that responsibility has been exercised effectively. The evidence, in my opinion, supports that the overall value of the Village Fair complex has declined in the marketplace by between 11% and about 30% since October 1996. However, the question to be answered is, what percentages of that fall relate to the use of the building, and what part to a fall in the value of the land?
In seeking guidance on that question I note the words of the Land Appeal Court in O'Brien Nominees Pty Ltd v. The Valuer-General (supra), when speaking of the impact upon in value in times of declining market forces, said at p.284:" In such circumstances it is unrealistic to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing unimproved sales in these circumstances is what value is fairly to be attributed to the improvements?"
In the current matter I have no estimate of the added value of the improvements upon the subject land, and I must do the best I can with the evidence supplied. Balancing the various factors so far considered, I believe a decline in the value of the land by 20% would represent a fair and reasonable estimate of those impacts. If I then estimate the unimproved value of the subject land, I conclude a figure of $3,600,000 ($224 per m²). That reduced rate per m² would not be inconsistent with either of the smaller areas of the Heritage Plaza ($275 per m²), and Market Plaza ($427 per m²).
Conclusion
Having considered the whole of the evidence, I am persuaded that the appellant has partly proved its case. The unimproved value as determined by the Chief Executive is set aside, and the unimproved value of Lot 100 on RP 802875 is determined at Three Million Six Hundred Thousand Dollars ($3,600,000).
NG DIVETT
MEMBER OF THE LAND COURT
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