Alma Investments Pty Ltd v Chief Executive, Department of Natural Resources and Mines [2001] QLC 56

LAND COURT BRISBANE 22 June 2001 Re: Appeal against valuations Valuation of Land Act 1944 Property ID Nos: 40037556; 40055323; 40104517; 40131714 Local Government: Pine Rivers (V00- 372, V00-681, V00-682, V01-91) Alma Investments Pty Limited v. Chief Executive, Department of Natural Resources and Mines D E C I S I O N Background: (1) These matters relate to lands at Alma Heights Estate, Dakabin, and were heard in conjunction with three other matters (V99-313; V00-371; and V99-312). The current matters deal with progressive valuations of the remaining unsold lands under Section 29 of the Valuation of Land Act 1944 (“the Act”), all relevant at the date of valuation of 1 October 1998. The key issues were the unimproved values of the included shopping centre (Lot 502), the child care centre (Lot 504), and the bulk discount allowed for multiple lots. Details of the separate appeals are as follows:  V00-372 – Lot 502 and four residential lots  V00-681 – Lots 502, 504 and twenty-three residential lots plus englobo lands Lots 944-945  V00-682 – Lots 502, 504 and twenty residential lots plus englobo lands Lots 944-945  V01-91 – Lots 502, 504 and two residential lots (2) In respect of the separate appeals the following valuations were issued and appealed for: Appeal Applied unimproved value Value appealed for V00-372 $495,000 $300,000 V00-681 $2,500,000 $2,000,000 V00-682 $2,400,000 $1,945,000 V01-91 $510,000 $240,000 [2001] QLC 56 -- 1 of 5 -- 2 Eric Gordon Oxenford, Director, appeared and gave evidence for the appellant. Mr D Grealy, counsel of Crown Law, appeared for the respondent, calling evidence from Gavin John Dunn, the departmental registered valuer responsible for determining the valuations. The Evidence: (3) In respect of V00-372, Mr Oxenford and Mr Dunn are in agreement with the applied values for the four residential lots at $145,000, and differ only in respect of the appropriate value for the shopping centre (Lot 502). (4) In respect of V00-681 and V00-682, once the unimproved values of the shopping centre (Lot 502) and the child care centre (Lot 504) have been determined, the only difference between the parties lies in respect of any bulk allowance to be applied to the separate unsold residential parcel lots. (5) In respect of V01-91, both parties agree in respect of the applied value of the two residential lots ($72,500), and differ only in respect of the shopping centre (Lot 502) and the child care centre (Lot 504). A Bulk Allowance - Mr Oxenford argues that sales of vacant new lots have been very slow as follows: Stage Period Total lots sold Average per month 4 6/98 to 6/2000 (25 months) 18 0.72 lots 4 7/00 to 12/00 (7 months) Nil Nil 5 3/99 to 6/00 (16 months) 21 1.31 lots 5 7/00 to 2/01 (8 months) 5 0.625 lots On that basis Mr Oxenford argues that the slow sale of lots supports a bulk discount of 30 percent for the 23 lots (V00-681) and 25 percent for the 20 lots (V00- 682). (6) Mr Dunn advises that he has applied an allowance of 1 percent per unsold lot up to a maximum of 20 percent discount for bulk sales. Mr Dunn argues that the allowance has been provided as a departmental policy in recognition that sales in bulk can attract a discount to reflect money saved on marketing and advertising etc. That maximum is adopted unless there is evidence to support a different application. The discount is applied to unsold lots in hand by a developer, similar to the value that could occur if the developer himself had purchased the lots in bulk. In the matters V00-681 and V00-682, a maximum of 20 percent had been applied in either matter. -- 2 of 5 -- 3 (7) Mr Dunn further advises that the 1 percent per lot up to a maximum of 20 percent was applied in spite of evidence of bulk sales on other estates in the area showing a different pattern. Mr Dunn draws reference to an estate at Deception Bay where a bulk sale of 50 lots showed only a discount of 0.125 percent per lot; while another estate at Bray Park had a bulk sale of 9 lots showing no reduction in price compared to the average price for 41 individual sales. In fact the average sale price for the bulk sale of 9 lots ($52,778 per lot) exceeded the average sale price of the 41 individually sold lots ($48,890). (8) To support his estimates, Mr Oxenford also seeks comfort from the agreed bulk discount allowed in other parts of Brisbane. He notes that bulk discounts can vary between 1.5 percent to 2 percent depending upon the element of risk in obtaining final sales of lots. He concedes that if the selling rate was healthy, the bulk risk allowance would be smaller, and argues that there is no standard policy in the marketplace in respect of what rate to apply. (9) To support his argument that the rate of sales has been very slow, Mr Oxenford provides a copy of his original budget for the estate. That indicates an overall projected selling of 277 lots over a period of 66 months (June 1996 to December 2001), an average of 4.2 lots per month. Mr Dunn agrees with Mr Oxenford that the current rate of almost one lot per month is slow and generally being experienced across other estates in the area. Decision: (i) V00-372 - (10) In the matter of V00-372, in a separate decision the shopping centre (Lot 502) has been determined at $250,000 (V99-313 and V00-371). As the four residential lots are agreed at $145,000, then the unimproved value for V00-372 is $395,000. (ii) V01-91 - (11) As the unimproved value of the shopping centre (Lot 502) is determined at $250,000, the child care centre (Lot 504) at $72,500, and the two residential lots at $72,500, then the unimproved value of V01-91 is $400,000. (iii) A Bulk Allowance - (12) The only issue for resolution is the matter of what should be the appropriate allowance, if any, for the unsold twenty-three lots and twenty lots of V00-681 and V00-682 respectively. I note that Mr Dunn believes that he has been more than generous in allowing a discount of 1 percent per lot up to a maximum of 20 percent, in spite of market evidence to the contrary. -- 3 of 5 -- 4 (13) The matter of bulk allowance was discussed by this Court in Buluarte Pty Ltd v Chief Executive, Department of Natural Resources (AV99-281), 20 June 2000 unreported. That matter had similar features to the current matter, and in fact was also represented by Mr Oxenford. In the special circumstances of that matter the Court allowed a discount of 1.5 percent for bulk single ownership of fourteen lots. (14) However that matter revealed market evidence that the area of that estate at Bellbowrie was experiencing sale rates at about half the rate compared to where the respondent had relied upon market support for a rate of 1 percent per lot in other urban areas of western Brisbane. In the current matter there is evidence that the Bray Park estate sold 50 lots in 43 months (1.16 lots per month) between October 1996 to April 2000; while the Deception Bay estate sold 50 lots in 13 months (average 16.7 lots per month). Those two estates have very different sales histories. (15) The Buluarte matter also disclosed a discerning pattern of complex house/land package arrangements of major builders, where some uncertainty could apply to the actual price paid for the land. In that matter a figure of $8,000 per lot appeared to exist between the actual land price reported for the sale, and the possible actual amount paid for the land, at average lot prices similar to the Alma Estate lands. (16) While those figures are of no concern in this matter, they indicate that house developers in fact use their negotiating powers to obtain discounts, not dissimilar to the bulk allowance currently being allowed for multiple ownership of lots. I note that the actual purchaser of the bulk lands at both Bray Park and Deception Bay are large project builders, similar to that noted in the Buluarte matter. On that basis I would view with some caution Mr Dunn’s evidence that bulk sales indicate negligible discounts. (17) However there is no direct market evidence to support Mr Oxenford’s opinion that the 1 percent per lot allowed by Mr Dunn is not adequate to provide some discount for bulk ownership. I note that policy is consistently applied by the respondent, although discretion is to be used in the special circumstances of each matter. See Burns Philip & Co Ltd v Valuer-General (1974) 1 QLCR 161 at 166. That matter also supports the principle of applying a maximum limit to any bulk allowance discount. (18) I am reminded that the onus to prove his grounds of appeal rests with the appellant in this matter under Section 56(2) of the Act. In the absence of market evidence that sales of bulk ownership reflect a discount greater than 1 percent per lot, I will accept Mr Dunn’s figures. -- 4 of 5 -- 5 I then recalculate the matters of V00-681 and V00-682 as follows: Parcel V00-681 V00-682 Shopping centre (Lot 502) $250,000 $250,000 Child care centre (Lot 504) $72,500 $72,500 Englobo lands (Lot 944 and $1,235,000 $1,235,000 945) $1,055,000 $920,500 Unsold residential lots $211,000 $184,100 Less bulk discount $2,401,500 $2,293,900 Total $2,400,000 $2,295,000 Say Conclusion: (19) In the four matters I am persuaded that the appellant has partly proved his case. The values as determined by the Chief Executive are set aside, and the unimproved values are determined in the sums of $395,000 (V00-372), $400,000 (V01-91), $2,400,000 (V00-681) and $2,295,000 (V00-682). NG DIVETT MEMBER OF THE LAND COURT -- 5 of 5 --