Weld Club Trustees and Valuer General
[2007] WASAT 256
•10 OCTOBER 2007
WELD CLUB TRUSTEES and VALUER GENERAL [2007] WASAT 256
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2007] WASAT 256 | |
| VALUATION OF LAND ACT 1978 (WA) | |||
| Case No: | DR:311/2005 | 6, 7, 8, 9, 10 NOVEMBER 2006 AND 14 DECEMBER 2006 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) MR R J PRIEST (SENIOR SESSIONAL MEMBER) | 10/10/07 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Unimproved land valuations affirmed Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | WELD CLUB TRUSTEES VALUER GENERAL |
Catchwords: | Valuation of land Site in Perth central business district "Unimproved value" Comparable sales approach Challenge to methodology and assumptions of Valuer General Concept of "standard inside lot" |
Legislation: | City of Perth City Planning Scheme No 1, cl 48, cl 138 Valuation of Land Act 1978 (WA), s 4(1) |
Case References: | AMP Life Ltd and Valuer General [2007] WASAT 257 St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218 Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 |
Orders | 1. The unimproved land assessments issued by the Valuer General and effective as at 1 August 1998 and 1 August 1999, are affirmed.,2. The application is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : DEVELOPMENT & RESOURCES ACT : VALUATION OF LAND ACT 1978 (WA) CITATION : WELD CLUB TRUSTEES and VALUER GENERAL [2007] WASAT 256 MEMBER : JUSTICE M L BARKER (PRESIDENT)
- MR R J PRIEST (SENIOR SESSIONAL MEMBER)
- Applicant
AND
VALUER GENERAL
Respondent
Catchwords:
Valuation of land Site in Perth central business district "Unimproved value" Comparable sales approach Challenge to methodology and assumptions of Valuer General Concept of "standard inside lot"
Legislation:
City of Perth City Planning Scheme No 1, cl 48, cl 138
Valuation of Land Act 1978 (WA), s 4(1)
(Page 2)
Result:
Unimproved land valuations affirmed
Application dismissed
Category: B
Representation:
Counsel:
Applicant : Mr MN Solomon
Respondent : Mr BP King and Ms CA Ide
Solicitors:
Applicant : Phillips Fox
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
AMP Life Ltd and Valuer General [2007] WASAT 257
St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
(Page 3)
Summary of Tribunal's decision
1 The Valuer General assessed the unimproved land value of 1 Barrack Street, Perth, at $19,700,000 on 1 August 1998 and 1 August 1999. The applicant, the registered proprietor of the land, objected to the valuations.
2 The Tribunal considered the competing methodologies of the expert valuers called by the parties and examined the comparable sales put forward by both valuers.
3 The Tribunal preferred the approach of the Valuer General's valuer and affirmed the assessments.
Issues
4 The issue for determination is the unimproved land value of the applicant's land under the Valuation of Land Act 1978 (WA) (VL Act) as at:
• 1 August 1998; and
• 1 August 1999.
5 The Valuer General assessed the unimproved value of the subject land for the purposes of s 4(1) of the VL Act at the relevant dates as follows:
• 1 August 1998 - $19,700,000; and
• 1 August 1999 - $19,700,000.
Facts
6 The subject land: The applicant was at all material times the registered proprietor of Lot 500 on Diagram 74602 being the whole of the land comprised in Certificate of Title Volume 2105 Folio 150 (subject land).
7 The subject land, which has an area of 5,779 square metres, is located at the north-west corner of the intersection of Barrack Street and The Esplanade in the Perth Central Business District (CBD), with a third frontage to Sherwood Court.
(Page 4)
8 Planning controls: At all material times the subject land was zoned Office (Central Area) under the City of Perth City Planning Scheme No 1 (CPS 1).
9 The zoning under CPS 1 provides a plot ratio allowance of 5:1. Plot ratio under CPS 1 means the ratio of the gross floor area (GFA) to the area of land within the site boundaries.
10 Pursuant to cl 138 of CPS 1, the Council of the City of Perth could grant a plot ratio bonus of up to 20% if, in the opinion of the Council, the proposed development included a "community or other facility or amenity and that facility or amenity and the design, standard and nature of the proposed as a whole constituted a significant improvement to the amenities or environment of the Central Area".
11 Subject to certain exemptions that are not presently relevant, cl 48 of CPS 1 at material times gave the City absolute discretion to approve developments that did not comply with a standard or requirement prescribed by the Scheme if the City was satisfied of certain matters.
12 Improvements: A number of other facts were agreed between the parties and the valuers.
13 At the relevant dates of valuation, the subject land was in fact improved with a commercial office building with a net lettable area (NLA) of approximately 34,007 square metres. The building comprised a 34 level office building with a five level car park completed in 1992.
14 The Weld Club is constructed on the north-western corner of the intersection of Barrack Street and The Esplanade and comprises a two level building constructed in 1892 with a gross building area of approximately 2,920 square metres.
15 Highest and best use: The parties and valuers also agree the highest and best use of the subject land is for development of commercial office premises in accordance with the provisions of CPS 1.
Comparable sales approach
16 The parties each called an experienced valuer to give expert evidence - Mr Grant Jackson for the applicant and Mr Lindsay Collins from the Valuer General's Office for the Valuer General. The valuers agreed a comparable sales approach to valuation of the subject land is appropriate though they differed in its application by reference to sales data.
(Page 5)
17 Mr Collins for the Valuer General applied the methodology used in the Valuer General's Office for yearly valuations and revaluations of CBD property. That methodology is to identify the value of a "standard inside lot" in the Perth CBD and then to apply the dollar rate per square metre to the land the subject of valuation having regard to the attributes of the subject land, for example, location, corner influence, shape and size.
18 By contrast, Mr Jackson for the applicant applied what he referred to as a holistic approach, which comprises of consideration of all of the sales evidence and the attributes of the subject land, to arrive by way of professional judgment at a value per square metre of GFA. He did not purport to assign percentage increases or decreases in value according to the particular identified attributes of the subject land.
19 In addition to the differences in the use of the comparable sales methodology, the valuers also differed on the use to be made of comparable sales, especially in relation to the development potential underlying some of the sales.
20 Another issue - or a related issue - between the parties was the proper difference, if any, between the value of the site the subject of AMP Life Ltd and Valuer General [2007] WASAT 257 on the relevant date in 1999 and the value of the subject site on the later relevant dates. The Valuer General contends there was a drop in value from 1999 to 2001, which only became apparent in late 2001, which was then applied to the values after 1999.
21 The applicant argues that there was no such drop in values and that the lower values adopted later by the Valuer General indicate that the value assessed for 1999 was excessive.
22 The methodological differences between the valuers, the drop in value point, and the proper analysis of a number of sales identified by the valuers as relevant sales, were issues common to this proceeding and that of AMP Life Ltd and Valuer General that was heard at the same time as this proceeding.
Competing valuation approaches
23 In assessing the unimproved value for the purposes of the two valuation dates in question, Mr Collins commenced with a "standard inside lot" gross floor area (GFA) value of $600 per square metre based on a 5:1 plot ratio for a lot in the Perth CBD, to which he added a 25% premium for location, to arrive at a value of $750 per square metre. He
(Page 6)
- supported the 25% premium by comparing the sales of 54 - 58 Mounts Bay Road and 12 - 14 The Esplanade, both properties in the broader Perth CBD.
24 Mr Collins then deducted 2% for each 1,000 square metres of GFA over 16,000 square metres, a figure which he deduced from an analysis of comparable sales, and then adjusted for corner influence and shape, to arrive at the rounded off value of $19,700,000.
25 Mr Collins also conducted a hypothetical development valuation using a discounted cash flow model in order to check the adjustments for corner influence and shape.
26 In addition, he provided unimproved valuations for nearby properties to indicate the coordination of the value of the subject land with those properties.
27 By contrast, Mr Jackson, the applicant's valuer, adopted a value per square metre of $500 by reference to the sales of 240 St Georges Terrace and 54 - 58 Mounts Bay Road, and then applied that figure to a GFA of 28,895 square metres available on the subject land to arrive at a valuation rounded off to $14,450,000.
Valuer General's approach to valuation
28 The Valuer General called Mr Collins, licensed land valuer employed by Valuation Services, Department of Land Information, Western Australia, to support the Valuer General's assessment of value.
29 The Valuer General contended that Mr Collins' valuation is transparent, logical and substantiated so far as practical by empirical evidence.
30 The Valuer General contended that the valuation of Mr Jackson, called by the applicant, is unreliable because he:
• wrongly analysed the 54 - 58 Mounts Bay Road sale at a plot ratio of 6:1 in order to arrive at a GFA building application value of $508 per square metre;
• derived and applied that rating inconsistently by deriving it on the basis of a 6:1 ratio and applying it to the subject site on the basis of the 5:1 plot ratio; and
(Page 7)
- • wrongly compared the sale of 54 - 58 Mounts Bay Road to the subject site without adjustment.
31 The Valuer General says Mr Jackson is wrong in ascribing the rate of $508 per square metre to 54 - 58 Mounts Bay Road because he assumed the sale was based on a guaranteed plot ratio of 6:1. While he suggested that he was not assuming any guarantee, the effect of his assumption amounted to a guarantee. That assumption was based on the existence of development approvals which were never realised and on development approvals that post-dated the sale (see Exhibit 29, page 15).
32 The Valuer General says Mr Collins' unchallenged evidence was that he spoke to a principal of the purchaser at the time of the sale and was advised that the applications for development which had been approved earlier with a 6:1 plot ratio, were not considered viable by the purchaser and that the purchase in question was a speculative land bank purchase with a 6:1 potential, but only a 5:1 guaranteed plot ratio (Exhibit 3, page 20). Further corroborative evidence to this effect was referred to in the form of an email communication from Mr John Percy to Mr Collins dated 24 October 2006 (Exhibit 27, pp 32 - 34).
33 The Valuer General says that the sale should, therefore, be analysed as one relating to a plot ratio of 5:1 with the potential to obtain 6:1.
34 The Valuer General also says that, if a GFA value is to be derived from the sale of 54 - 58 Mounts Bay Road based on a plot ratio of 6:1, consistency requires that the same plot ratio be applied to the subject land given its similar potential and bonus plot ratio. This is especially so considering that current development on the subject land uses a 6.39:1 plot ratio (calculated from figures provided at Exhibit 36, page 2).
35 The Valuer General says that if Mr Jackson had applied $500 per square metre to the GFA of the subject land calculated at 6:1 (5,779 x 6 = 34,674 square metres) not the 5:1 it actually has, but recognising its potential then even without further adjustment he would have arrived at a value of $17,337,000 in 1998 and 1999. If the adjustments identified by Mr Collins of 25% for location, less 26% for size, plus 23% for corner influence and shape were also made, then the result would be $19,725,171, which the Valuer General points out is almost identical to Mr Collins' valuation.
36 The Valuer General says it appears that in limiting the potential plot ratio of the subject land to a plot ratio of 5:1, Mr Jackson has relied, in part, on a principle purportedly taken from a decision of the former Land
(Page 8)
- Valuation Tribunal of Western Australia in St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218 at [87]. That principle is said to be that a bonus plot ratio of up to 20%, resulting in a plot ratio of 6:1, cannot be assumed, so the permissible plot ratio of the subject land is limited to 5:1. That is, while comparable sales can be analysed on the basis of their full potential, a development potential in excess of a guaranteed 5:1 plot ratio cannot be assumed or reflected in assessed unimproved values.
37 The Valuer General says that, for the reasons provided in the submissions in the related Tribunal proceedings of AMP Life Ltd and Valuer General, the St Martins' decision is wrong on this point and should not be followed.
38 Moreover, the Valuer General says Mr Jackson's analysis of the two sites that he treats as comparable, indicates that he assesses the GFA value of the subject land to be about the same as the GFA value of 54 - 58 Mounts Bay Road; that is, he saw no significant location differences between them. Thus, in comparing 54 - 58 Mounts Bay Road to the subject land, he makes no adjustment for location, despite the substantial differences identified by Mr Collins.
39 The Valuer General points to the differences identified by Mr Collins as follows:
54 - 58 Mounts Bay Road -
• currently developed as a car park next to Quayside on Mill at the back of the Hartley building;
• limited pedestrian access;
• directly across the road from the busport so that low rise use would always be restricted;
• on the fringe of the prime central core; and
• on Mounts Bay Road which is a "blatant raceway" exit from the freeway.
Subject site -
• a prominent corner in very close proximity to the prime central core;
(Page 9)
- • very pleasant outlook over parks and gardens;
• unrestricted views to the river;
• greater degree of amenity;
• connected through to St Georges Terrace; and
• through access and connection through undercover linkage via Allendale Square to Sherwood Court.
40 The Valuer General says Mr Jackson's failure to appreciate the locational differences between the two sites suggests a lack of familiarity with them when compared with Mr Collins' broader, yet detailed, knowledge of the Perth CBD.
41 The Valuer General says that Mr Collins' adjustment of 25% from the value of 54 - 58 Mounts Bay Road was supported by the sale of 12 14 The Esplanade.
Applicant's approach to valuation
42 The applicant refers to and relies on its submissions in AMP Life Ltd and Valuer General, which proceedings were heard at the same time as this proceeding and raise a number of common issues.
43 The applicant says both Mr Jackson and Mr Collins accept that it is necessary to analyse sales to derive a rate per buildable square metre. From there, one assesses value by reference to the development potential of the land.
44 The applicant says the differences between the opinion of Mr Jackson and Mr Collins relate to the methodology by which one arrives at the rate per buildable square metre and then how it is applied to the development potential of the land.
45 The applicant emphasises that Mr Collins adopted a process that Mr Collins says is necessary in order to justify the continuous and contemporaneous value of each piece of land in the Perth CBD. Significantly, Mr Collins conceded that this is not the method that is adopted in the marketplace and by "private valuers". He defends his method by saying it is necessary for the broader and continuous - the coordinating - task the Valuer General must maintain.
(Page 10)
46 The applicant says the distinguishing hallmark of Mr Collins' approach is to attribute particular percentages to various factors of different parcels of land. Thus, in analysing a sale, Mr Collins adds or deducts percentages for factors that include corner, shape and throughlot.
47 In addition, in analysing a sale or ascribing value, Mr Collins subtracts or deducts a percentage for size.
48 Mr Collins then deduces the underlying rate per buildable square metre, after adding and subtracting these various factors.
49 In contrast, the applicant says Mr Jackson takes these factors into account in a more general way by considering them all together and making a professional judgment about how one sale compares to another in light of the various factors.
50 The applicant notes Mr Collins criticises Mr Jackson's methodology as being subjective and not open to review by reason of the unexplained subjectivity. Mr Collins says that his method permits precise application and review at any time because it applies precise formulae and calculations.
51 The applicant says, because the distinguishing feature of Mr Collins' methodology is the add-on factors for corner, shape and size, it is important to assess whether that process indeed provides any greater precision or accountability than the general professional judgment method of Mr Jackson.
52 The applicant contends that if the evidence of Mr Collins is closely analysed, his methodology in relation, for example, to the influence of shape is no less objective than the methodology adopted by Mr Jackson.
53 In the result, the applicant contends that the more "marketbased approach" of Mr Jackson to valuation should be preferred to the approach adopted by Mr Collins.
54 As to four properties agreed by the valuers as relevant for comparability purposes 54 - 58 Mounts Bay Road, 100 St Georges Terrace, 240 St Georges Terrace and 181 St Georges Terrace the applicant says the evidence shows there is not a lot of difference between Mr Collins and Mr Jackson at the end of the day in relation to the rate per buildable square metre. The only significant difference relates to the analysis of the sale of 54 58 Mounts Bay Road, and that difference is simply a product of analysing the sale at 5:1 plot ratio or 6:1 plot ratio.
(Page 11)
55 The applicant notes that Mr Collins refused to accept that the history of the grant of plot ratio bonuses meant that this particular purchase could be analysed on the basis of an expectation of receiving a bonus. In the applicant's submission, Mr Collins' approach is not realistic and Mr Jackson's position, whereby a purchaser would attribute value to a site's demonstrated ability to attract a plot ratio bonus, is more likely to reflect commercial reality and should be accepted.
56 The applicant says the Valuer General's position is inconsistent with Mr Collins' own submission in relation to the site in the AMP proceedings, to the effect that the AMP site can be analysed on the basis of a 90% expectation that a plot ratio bonus in excess of 20% would be granted to the purchaser. The applicant says Mr Collins therefore wishes to have it both ways. The applicant says that, on the one hand, Mr Collins attributes no value to a property that has consistently attracted a plot ratio bonus of 6:1 on past development scenarios, but wishes the Tribunal to accept his submission that the AMP site can be valued on the basis of a 90% certainty of the grant of a plot ratio bonus well in excess of 6:1.
57 The applicant says that the matter was considered comprehensively in the St Martins' decision where the former Land Valuation Tribunal preferred the approach adopted by Mr Jackson, namely, to proceed to valuation on the basis of plot ratio of 5:1 with a potential for 6:1, and that decision should be supported.
58 The applicant says there is little difference between Mr Collins and Mr Jackson on the sale of the land at 100 St Georges Terrace at a time fairly proximate to the valuation dates.
59 As to 12 - 14 The Esplanade and 181 St Georges Terrace, sales in respect of which Mr Jackson and Mr Collins disagree, most attention was given to 12 14 The Esplanade. The applicant notes that the dispute between Mr Jackson and Mr Collins in relation to 12 - 14 The Esplanade concerned whether a premium had been paid by reason of a sale to an adjoining owner. However, as the evidence unfolded, the more important issue became whether the site was purchased for the purpose of a complete redevelopment and ought to be analysed on that basis. The applicant says it should first be observed that the rate per buildable square metre derived by Mr Collins for this property stands in marked contrast to the rate per buildable square metre for the other properties analysed. That begs the question as to whether, indeed, there is something in Mr Collins' analysis that suggests his rate for this property is inappropriately inflated.
(Page 12)
60 The applicant says that if it can be demonstrated that the sale of the property was not for the purposes of a complete redevelopment, then it is inappropriate to undertake the analysis set out by Mr Collins in his report to derive the underlying land value.
61 The most significant question, therefore, is whether the sale was undertaken for the purposes of a complete redevelopment of the land.
62 The applicant points to evidence that suggests the purchase was not motivated by the prospect of redevelopment, even though it was recognised that the property had further development potential. The purchaser company's board paper contained an executive summary which makes no reference to any redevelopment whatsoever but refers to the value of the car parking on that site and its income yield.
63 As to the sale of 181 St Georges Terrace, the applicant says this also reflects a rate higher than the other properties and therefore needs to be considered with caution.
64 The final site in relation to which there was disagreement was 125 St Georges Terrace. The applicant notes that Mr Collins made the point that the sale does not reflect land value because the vendor insisted on an unconditional sale. The applicant says that objection has no merit because an unconditional sale is precisely what is contemplated by the usual valuation test.
65 The applicant says the reality is that the sale of 125 St Georges Terrace reflects one of only two sales of vacant land on St Georges Terrace. It was an unconditional sale by a vendor who had no reason to be anxious. The only adjustment required would be for the footings in the heritage buildings on that site.
66 The applicant also draws attention to the unimproved value assessments made by the Valuer General for years subsequent to the relevant dates and the fact that they were reduced. The value ascribed to the subject land on 1 August 2000, 1 August 2001, 1 August 2002 and 1 August 2003 was $15,800,000.
67 The applicant notes that at the hearing the Valuer General sought to uphold the subsequent reduced assessments as reflecting Perth market movements.
68 As to the drop in value after 1999 assessed by the Valuer General, the applicant submits the Tribunal should not accept the Valuer General's
(Page 13)
- position that there was a significant drop in the market from 1999. After considering all the evidence, the applicant says the Tribunal should conclude that the more probable explanation for disparity in value was that the earlier values were excessive.
69 The applicant also contends that the application of a premium is not appropriate.
70 As to the particular process of valuation undertaken by Mr Collins, the applicant contends that the 15% premium for corner location is inflated.
71 Finally, the applicant contends that the hypothetical analysis conducted by Mr Collins, when one has regard to the evidence of the two quantity surveyors called to give evidence, does not support the valuation made by the Valuer General.
The Tribunal's findings
72 The Tribunal refers to and relies upon its findings and reasons in AMP Life Ltd and Valuer General published simultaneously with these reasons, which deal with most of these same issues.
73 While there are various approaches available to a valuer in conducting a valuation of unimproved land, the valuers called to give evidence in these proceedings, Mr Collins for the Valuer General and Mr Jackson for the applicant, agree that the correct valuation approach in this case involves a comparison of vacant land sales or near vacant land sales in the Perth CBD on the basis of an analysis of permissible GFA. The Tribunal agrees that such an approach is called for in a case like this.
74 Both valuers relied on the following sales in order to arrive at the unimproved value of the subject land:
• 240 St Georges Terrace;
• 54 - 58 Mounts Bay Road; and
• 181 St Georges Terrace.
75 Mr Collins also relied on the sale of 12 - 14 The Esplanade.
76 Mr Jackson also relied on the sale of 100 St Georges Terrace.
(Page 14)
77 Mr Jackson says that in assessing the value of the subject land in comparison to the sales evidence, allowances have been made in each instance to recognise the individual elements pertaining to each sale.
78 In formulating a basis for comparison, factors such as date of sale, size, development potential of the land, and exposure of the site were all considered in drawing an appropriate view of the unimproved value, but not quantified by the valuers in most instances.
79 In summary, Mr Jackson believes the most comparable sales are the sites at 240 St Georges Terrace and 54 - 58 Mounts Bay Road, and a smaller site at 181 St Georges Terrace. He considers the subject land (Weld Club) has a value of $500 per square metre of GFA. From Mr Jackson's evidence, the following table emerges:
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80 Whilst Mr Jackson has had regard to the various factors of difference between the subject land and the comparable sales, there is little evidence before the Tribunal to demonstrate how such differences have in fact been quantified and applied. Mr Jackson relies on the "art of the valuer", an approach to valuation the applicant says is supported by observations of McLure J in Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 at [72]. That aside, the valuers agree that amongst the sales in the "basket" of relevant sales, the sale of 54 58 Mounts Bay Road may be considered to provide useful guidance to the valuation of the subject land in this case.
81 However, that sale has been analysed by Mr Jackson on the basis of a 6:1 plot ratio or $500 per square metre GFA and then, in his valuation,
(Page 15)
- applied to the subject land on the basis of a 5:1 plot ratio without any further adjustments for the various factors of difference for which Mr Jackson says he has had regard.
82 It is noted by the Valuer General that had Mr Jackson applied the $500 per square metre to the subject land on the basis of a 6:1 plot ratio (the site having been developed, in fact, to a 6.39:1 plot ratio), then a figure of $17,337,000 would have been forthcoming. Further, if adjustments of 25% for location, less 26% for size, plus 23% for corner inference and shape were made, as Mr Collins suggested they should be, the resultant figure would be much the same as that put forward by the Valuer General, that is, $19,700,000.
83 Mr Collins generally relies on the same sales as comparable evidence as does Mr Jackson. However, Mr Collins starts by relying on a "standard inside lot" value of $600 per square metre based on a 5:1 plot ratio for a lot in the Perth CBD, which he supports from other sales including the Mounts Bay Road sale, and to which he adds a premium for location based partly on comparisons of the sales of 12 14 The Esplanade and 54 58 Mounts Bay Road, as well as to an extent the historic recognition by the Valuer General until late 2001 of a premium for central city properties between William Street and Barrack Street compared with properties further to the west.
84 To this base figure of $600 per square metre for a lot with a plot ratio of 6:1, Mr Collins then applies a premium of 25% for location, supported partly at least by the sale of 12 - 14 The Esplanade. In other words, Mr Collins has not relied in totality on the sale of 54 58 Mounts Bay Road, nor the premium for location demonstrated by comparison with that sale and 12 - 14 The Esplanade; or some historic formula.
85 The Tribunal finds that the adoption of the comparable sales method of valuation is most apposite to this case and finds limited usefulness in the hypothetical development analysis of 68 St Georges Terrace by Mr Collins to justify the 'loading' for corner influence, shape and throughlot attributes of the subject land. These adjustments are best made by reference to the comparable sales in question.
86 The Tribunal has little hesitation in concluding that the subject land is superior to 54 - 58 Mounts Bay Road as to location, corner position, shape and through-lot features, and also by comparison with any hypothetical standard inside CBD lot which the Valuer General apparently
(Page 16)
- uses for comparison when assessing the unimproved value of Perth CBD sites.
87 The applicant provides a "full frontal assault" on the methodology of the Valuer General, adopted, at least in part, by Mr Collins here, in the valuation of central city properties such as the subject land and the AMP site. It says, in substance, that the Valuer General is too formulae bound in its approach, drawing rigid distinctions between parts of the CBD (for example, premium assessment) and devising base rates for "standard inside lots" which only exist in theory. The concern is that by taking this approach the comparable sales approach is not truly applied.
88 As explained at some length in the reasons for decision in AMP Life Ltd and Valuer General, the Tribunal shares this concern. While the Tribunal appreciates the need for coordination of unimproved values of other nearby properties with the subject land that the Valuer General habitually undertakes, especially for the purpose of "bulk valuations" in helping to set rates annually in the metropolitan area and beyond, it is obvious that if the exercise in coordination is not correctly carried out, it may perpetuate an error in the method of determining market value from one property to another, while still demonstrating a properly coordinated outcome. In other words, the $600 per square metre base rate for a standard inside lot utilised by Mr Collins may be useful in the CBD valuation context, but only if the sales evidence that underpins it is disclosed and supports that rate.
89 What is ultimately required, as both valuers accept, is that the application of the comparable sales method actually involve the comparison of identified actual comparable sales.
90 On the other hand, while Mr Jackson is at pains to demonstrate that he has considered all of the factors of difference between the subject land and comparable sales that Mr Collins has relied on, the Tribunal considers his approach is weakened by its failure to demonstrate the manner in which he has applied those differential factors. For example, Mr Jackson explicitly fails to say to what extent the factor of location is important. As McLure J in fact noted in Arcus, a valuer should reveal the process by which they arrive at a conclusion. The approach of Mr Collins offers greater analysis in that regard than Mr Jackson's professional judgment call and it is of greater assistance to the Tribunal, as explained in more detail in the reasons for decision in AMP Life Ltd and Valuer General.
(Page 17)
91 Both valuers agree there was no market movement between 1 August 1998 and 1 August 1999, at which dates the Valuer General assessed the unimproved value of the subject land at $19,700,000 and at which dates the applicant holds that the unimproved value for the land was $14,450,000. The applicant further holds that there was no drop in Perth's CBD unimproved values between 1 August 1999 and 1 August 2000, at which latter date the Valuer General assessed the unimproved value at $15,800,000. It seems to follow that the applicant's view is that the market was improving, that the Valuer General's valuations at $19,700,000 were excessive, and that the applicant's unimproved valuations at $14,450,000 should be preferred.
92 The statistical facts put forward in the evidence by the applicant and the lengthy market commentary provided in evidence by Mr Collins, principally by reference to media stories, do little other than to develop a perception as to what the Perth CBD values may have been at that time. However, they cannot usefully be relied upon for present purposes. It is to the actual sales evidence that we must primarily have regard.
93 The Valuer General states it was not until an option to purchase the AXA site at 100 St Georges Terrace came to notice in December 2001, that there was substantial actual market evidence for the fall in the value of land in central St Georges Terrace since the 1990s. To some extent, this could indicate that the view of the applicant may be correct in that values did not fall after August 1999, but rather the assessed unimproved values in August 1998 and August 1999 were excessive.
94 However, the Tribunal does not need to find whether this was the case. Rather, in light particularly of the sales evidence of 54 58 Mounts Bay Road and other relevant sales in the basket of sales adopted by both parties as evidence of the unimproved value of the subject land, the primary question is whether the evidence from that sale has been applied appropriately on behalf of the respective parties.
95 Apart from methodological issues discussed elsewhere here and in AMP Life Ltd and Valuer General, the Tribunal has some particular difficulties with the valuation of Mr Collins. On the one hand, in the valuation of the subject land he adopts a uniform approach in analysing the relevant sale of 54 58 Mounts Bay Road, for example, at a 5:1 plot ratio, to support his base value of $600 per square metre for a standard inside lot; he then seeks to support the valuation of the subject land on the basis it has in effect a 6:1 plot ratio having regard to its potential.
(Page 18)
- Mr Collins accordingly applies a factor of 5/6 to the base rate for the purpose of valuing the subject land on a 6:1 plot ratio.
96 Accordingly, Mr Collins effectively argues that a 6:1 plot ratio should be applied for the subject land. It is stated by the Valuer General that the actual plot ratio of the subject land as developed is in fact 6.39:1 and this supports Mr Collins' approach. The Valuer General also says there is potential for all developments in the relevant area to gain a bonus plot ratio of up to 6:1.
97 In the Tribunal's view it would seem to follow that the Valuer General's comparable sales evidence as to the subject land valuation is based, at best, on a 6:1 plot ratio. We do not think this is the correct approach and comment further below on the appropriateness of this approach.
98 The Tribunal also notes a marked difference in the discount for size adopted by Mr Collins in the valuation he has made for the site in the AMP proceedings and that of the subject land here, where the GFAs are almost the same, as the following table suggests:
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99 In his valuation of the AMP site, Mr Collins says the discount for size provided for there is based on sales analysis which demonstrates a 2% discount for every 1,000 square metres over 16,000 metres square (1.16% for every 1,000 square metres over 19,200 metres square) where the plot ratio is 5:1 (or 1.67% where the plot ratio is 6:1) with a maximum discount of 50%. There is no reference to such analysis in the case of his Weld Club valuation. In the AMP proceedings the calculated discount on this formula is 15.75%. Here Mr Collins, on a very similar area, calculates 26%, albeit he assumes a plot ratio here of 6:1. The discount provided for here in Weld Club therefore is generous (to the applicant) compared with the allowance made in AMP.
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100 As to the 54 - 58 Mounts Bay Road sale the Tribunal finds, as did the valuers, that it is a particularly helpful comparable sale amongst those in the "basket" of relevant sales. However, it should be accepted as a sale of land with a 5:1 plot ratio entitlement with a potential for 6:1, for the reasons given in AMP Life Ltd and Valuer General. The Tribunal accepts the evidence put forward by Mr Collins in so finding. There is no sufficiently firm evidence that a 6:1 plot ratio was effectively approved and relied upon at sale.
101 By the same token, the Tribunal considers the same plot ratio entitlement should be accepted for the subject land. There is no evidence to show a 6:1 plot ratio was effectively guaranteed on the subject land at the relevant dates. The most that can be said on Mr Collins' evidence is, like 54 58 Mounts Bay Road, that the subject site had a 5:1 plot ratio with potential for 6:1 plot ratio at the relevant dates.
102 As to the 12 14 The Esplanade sale, the Tribunal considers its usefulness to be limited. The evidence, such as it is, suggests the property was not acquired simply as a redevelopment site, but with an eye on the guaranteed income stream from parking that justified the price paid. The Tribunal largely accepts Mr Jackson's assessment of this sale. Accordingly, we are disinclined to place much reliance on the sale as indicating an underlying value per square metre of GFA, although it remains a sale that may be referred to.
103 As to the sale of 125 St Georges Terrace, the Tribunal has regard to it but cautiously, as the insistence on unconditional sale by the vendor may have kept potential buyers out of the market and affected its true value.
104 By comparison, the Tribunal considers the subject land generally to be superior to 54 58 Mounts Bay Road in terms of location, corner influence and shape, as do both valuers.
105 In the event, the Tribunal considers the underlying value of 54 58 Mounts Bay Road to be particularly instructive in the valuation of the subject land, as we find both sites have similar plot ratio potential, namely, 5:1 with potential for 6:1. No adjustment is therefore necessary save as to factors concerning location, size, corner influence and shape, and through-lot access.
106 As explained in the AMP Life Ltd and Valuer General reasons, the Tribunal does not share Mr Jackson's opinion that his professional judgment approach to the accommodation of the discriminating factors is
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- the preferred way for the Tribunal to value a property for the purposes of the VL Act. We consider that the valuer, for these purposes, should undertake a process of valuation which reveals as much of the valuation reasoning process as possible. Certainly, some real attempt to lay out the degree of influence the attributes and detrimental aspects of the subject land have played in the valuation should be attempted. Perhaps in some cases this will prove a difficult task, but here we think it is not impossible.
107 Broadly speaking we think Mr Collins' opinion that 25% should be added for location, less 26% for size, with 23% added for corner influence and shape including through-lot advantage, is not unreasonable. The 25% allowance for location finds support in a comparison with the Mounts Bay Road sale.
108 While we have expressed some concern with Mr Collins' calculation for a discount for size when compared with the 15.75% allowed on the AMP site, both valuers agree that a discount for size is required. The fact is that the 26% Mr Collins allows is to the applicant's advantage. We can ourselves, on the evidence, not see a more correct and preferable way to calculate it. Accordingly, we accept Mr Collins' professional judgment as to what it should be in this case. In other cases, a more considered approach may be called for.
109 Similarly, we accept Mr Collins' opinion that a 23% allowance for corner influence and shape including through-lot is appropriate, having regard to his experience in the Perth CBD. Corner influence is important, as is through-lot access, and this site is particularly advantaged by these factors.
110 Consequently, we find that the unimproved value of the subject site should be assessed at $19,700,000 as at 1 August 1998 and 1999 as follows:
Unimproved Value as at 1 August 1998 and 1 August 1999
| $21,671,250 |
| $ 5,634,525 |
$16,036,725 | |
| |
| $ 3,688,447 |
$19,725,172 |
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| $19,700,000 |
Note concerning valuation from 2001 onwards
111 The Tribunal notes that from 2001 onwards the valuation of the subject site was reduced by the Valuer General, following objection, to $15,800,000. This took account of the dealing on the AXA site at 100 St Georges Terrace in December 2001 that lead the Valuer General to accept that the premium previously added to the base rate of $600 per square metre was no longer applicable. The only change to the valuation of $19,700,000 then made was the removal of the 25% adjustment for location. In fact no location adjustment seems to have been made by the Valuer General then or in the subsequent years. Using the Valuer General's assumed rates, this is demonstrated as follows:
(i.e. less 25% for location, assuming a plot ratio of 6:1) | $17,337,000 |
| $ 4,507,620 |
$12,829,380 | |
| $ 2,950,757 |
$15,780,137 | |
| $15,800,000 |
112 However, we are not concerned with the 2001 assessment and the question whether a premium for location is relevant post-2001 does not arise for determination in these proceedings.
Order
113 Having regard to the Tribunal’s findings and assessment of value for 1998 and 1999, the Tribunal would order as follows:
1. The unimproved land assessments issued by the Valuer General and effective as at 1 August 1998 and 1 August 1999, are affirmed.
2. The application is dismissed.
114 The Tribunal will hear from the parties as to the terms of the final orders to be made in light of these reasons.
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- I certify that this and the preceding [114] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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