Cairns Resort Investments Pty Ltd and Anor v Chief Executive, Department of Lands [1994] QLC 268

[1994] QLC 268 Re: Determination of unimproved values - Cairns Local Government. Ref: AV93-210 and AV93-212. Cairns Resort Investments Pty Ltd and Pacific Growth Investments Pty Ltd v. Chief Executive, Department of Lands DECISION LAND COURT, BRISBANE 14 July, 1994 These appeals are against det~rrr:iinations of unimproved value made by the Chief Executive, Department of Lands, as at a relevant date of 31 March, 1992, of two five star hotel properties in the City of Cairns. Brief details are: Ref AV93-210 Part Portion 319 (Leases Band E) and Portion 478 and Part Portion 319 (Lease D) - Leased from Cairns Port Authority - Parish of Cairns - 9184m 2 - situation corner of the Esplanade and Marlin Parade, Cairns - Chief Executive's valuation $11,000,000 ($1200m 2 ) - Appellant's valuation $9,000,000 ($980m 2 ). Appellant Cairns Resort Investments Pty Ltd - Site development Hilton Hotel. Ref AV93-212 Lot 11 on RP 743265 - Parish of Cairns - 8139m 2 - situation 17-41 Abbott Street and 20-32 Lake Street, Cairns - Chief Executive's valuation $12,000,000 ($1500m 2 ) - Appellant's valuation $9,750,000 ($1200m 2) - Appellant Pacific Growth Investments Pty Ltd - Site development Cairns International Hotel. The Hilton Hotel site is zoned "Special Facilities (International Resort and Convention Hotel) including:- (a) Licensed premises, accommodation rooms, rooms, catering industry, commercial entertainment, restaurant; cabaret, caterers' premises, indoor (b) Shops (not exceeding 2500m 2 aggregate lettable area); (c) Car parking. -- 1 of 6 -- 2 This zoning was gazetted on 15 March, 1986, under the provisions of the City of Cairns Town Planning Scheme which was gazetted on 11 September, 1971. Under the provisions of the Development Control Plan 2 - "Height and Impact of Buildings" - which was gazetted on 19 October, 1989, the Hilton site was designated as Precinct 2. The main provisions of Precinct 2 in respect to the site are:- (i) Minimum allotment area for a tall building shall be 1500m 2 (ii) Plot ratio: the Base Plot Ratio for all buildings shall be 2:1 (iii) Total height shall not exceed 30 metres. The permitted gross floor area for the site is 18,368m 2 while the development achieved a gross floor area of 18,092m 2 • The Hilton Hotel comprises ground floor shopping and the main seven storey hotel. The Cairns International Hotel site is zoned "B1 Main Business and Shopping". Under Development Control Plan No 2 "Height and Impact of Buildings", the site is designated as Precinct 1. The main provisions of Precinct 1 in respect to the Cairns International Hotel site are:- (i) Minimum allotment area - no specific minimum allotment area for the development of buildings within this precinct (ii) Plot ratio - the Base Plot Ratio for all buildings shall be 4: 1 (iii) Total height: Subject to an exempted area within the precinct, the total height shall not exceed 48m. The permitted Gross Floor Area for the site is 32,556m 2 while the actual Gross Floor Area achieved in the development is 31 ,450m 2 • The Cairns International Hotel comprises ground level shops and the main 16 storey hotel. Valuation evidence in support of both appeals was called from Practising Registered Valuer Kevin Francis Malone who, I notice, filed both appeals as authorised agent. It is Mr Malone who values the Hilton Hotel site at $9,000,000 (8703m 2 @ $1000m 2 and 481m 2 @ $500m 2) and the Cairns International Hotel site at $9,750,000 ($1200m2). Mr Malone points out that there is a dedicated right of way over the Hilton Hotel site to the Cairns Port Authority providing access to its concrete jetty in -- 2 of 6 -- 3 Cairns Inlet which is just outside the south-east boundary of the Hilton site. This right of way reduced the useability area of the site by 481 m 2 and this is the area valued by Mr Malone at $500m 2 • He says the Hilton Hotel is well located for accommodation purposes although he points out that the retail component is just outside the known retail heart of Cairns City. Mr Malone considers that the Cairns International Hotel is better situated than is the Hilton Hotel in relation to the known retail heart of the City, being about 80m east of the Spence Street intersection. Mr Malone has valued each of the subject sites using the same method of valuation. His enquiries reveal that there have been 13 sales of properties in the Cairns Central Business District in the twelve month period running up to and just after the relevant date for valuation. Eleven of these properties are much smaller than are the subject sites and Mr Malone believes they are of little assistance as a basis for valuing the subject sites. He says the remaining two sales are a valid comparison and can be used. One is the sale of the Tuna Lodge Motel site which is situated at 114 Abbott Street, Cairns, between the Holiday Inn Hotel and the Trade Winds Hotel. It is described as Lot 1 on RP 730834 and Lot 1 on RP 735844 containing 4592m 2. This site sold on 7 April, 1992 Uust after the relevant date) from Tuna Lodge Motel Pty Ltd to N.Q. Resorts Pty Ltd for $3,750,000 ($817m 2 ). At sale date it was a vacant site and it was purchased by an adjoining owner company. Mr Malone sees the Tuna Lodge Motel site to be inferior to each of the subject sites. The Respondent Chief Executive has valued the Tuna Lodge Motel site as at 31st March, 1992, at $806m 2 ). The remaining sale relied upon by Mr Malone is that of the prime retail Woolworths site (Lot 407-411, 427 on Plan C 1981 and Lot 2 on RP 709874 containing an area of 4037m 2) which is situated at 103 Abbott Street. This property sold on 19 September, 1991, from AMP Society to Chorley Properties Pty Ltd for $6,400,000. Erected upon this site at sale date was an old single level 3938m 2 retail building which was the subject of a 40 year lease to Woolworths and which lease had 18 years to run at sale date. This sale has been analysed to show an unimproved value of $1313m 2 and Mr Malone points out that the Respondent Chief Executive's valuation of the Woolworths site as at -- 3 of 6 -- 4 31st March, 1992, is $2,180m 2 • Mr Malone considers the Woolworths site to be superior on a square metre basis to both the subject properties. As further support for his valuations, Mr Malone has investigated valuation relativity and relative increases and decreases since the City of Cairns Annual Valuation was made as at 31 March, 1991. He says that apart from the Cairns International site and the Raddison Plaza Hotel site, the unimproved values of properties have been reduced from between 15% and 32.5% since 1991. He also says that the last sale of a site acquired for an international hotel was the Holiday Inn site in May 1988 for $1541 m 2 . This sale was apparently used as a basis for the 1989 Annual Valuations of $16,000,000 for the Cairns International Hotel site compared with a valuation of $12,000,000 for the Holiday Inn site. Mr Malone believes that if this same relativity was maintained for the 31 March, 1992 relevant date valuations, the Hilton Hotel site would be valued at $8,325,000 and the Cairns International Hotel site would be valued at $7,200,000. Mr Malone commented during the course of his evidence that the Cairns commercial property market as at the relevant date for these valuations (31 March 1992) was "travelling on the bottom" after having peaked in 1988/89 and having receded after the pilots' strike in late 1989. During 1991 and 1992 his office (Baillieu Knight Frank as it then was) was marketing mortgagee properties and in 1993, eight or nine C.B.D. properties were sold by mortgagees in possession. He told us that there were a lot of forced sales until mid-1993 when the market started to recover. Mr Malone said that at the relevant date institutional buyers were withdrawing from regional centres such as Cairns. Mr Malone outlined the circumstances surrounding the sale of the Woolworths property. His evidence about the sale accords with that provided by Registered Valuer Terence Joseph Gould who, like Mr Malone, is a Director of Bailleau Knight Frank (as it then was). Mr Gould's evidence was given at the same sittings of the Court in Re: Determination of unimproved value - GE Cominos & Co Pty Ltd v. Chief Executive, Department of Lands (Ref AV93-213). I have dealt with the use of this sale as a basis of valuation at some length in that decision. For the reasons stated therein, I have come to the conclusion that the sale of the Woolworths property did not provide a satisfactory basis of valuation for the Cominos property (the Orchid Plaza) and for the same reasons I am similarly disposed not to be influenced by it in my decision in these cases. -- 4 of 6 -- 5 The Respondent Chief Executive's valuations of the sites were made by Departmental Registered Valuer Patrick Francis Goodman-Jones. Mr Goodman- Jones' valuation of the Hilton Hotel Site is apportioned as follows: 8703m2 @ $1250m2 and 481m2 @ $625m2 (easement and severed areas). Mr Goodman-Jones has also used as a basis of valuation for each of the subject sites the sale from Tuna Lodge Motel Pty Ltd to N.Q. Resorts Pty Ltd. This site is zoned "R2 Residential Multi Unit" and is categorised as being within Precinct 3 under the Development Control Plan 2 "Height and Impact of Buildings". Some of the provisions of Precinct 3 include: (i) Minimum allotment area for a tall building shall be 2000m 2 (ii) Plot ratio shall not exceed 1.75:1 (iii) Total height shall not exceed six storeys and 18 metres. The Maximum Gross Floor Area for a development on the site is 8036m 2 • By way of comparison with the Hilton Hotel site, Mr Goodman-Jones sees the Tuna Lodge Motel site as being inferior in location and stresses that it has an inferior plot ratio. He sees the sale site as also being inferior in location, size, zoning and plot ratio to the Cairns International Hotel site. Mr Goodman-Jones seeks to gain support from an unimproved value relativity schedule placed in evidence. He compares the valuations of both subject sites each to each but this is not satisfactory evidence since both properties are the subject of appeals (vide Section 13(7) of the Valuation of Land Act of 1944 - as it then was). But another comparison has merit. He relates each of the subject valuations with a valuation for the Radisson Hotel site of $12,000,000 (including an allowance of $720,000 for fill) - site rate $950m 2 - for Lots 782 and 862 on NR 7979 containing an area of 1.323ha. Mr Goodman- Jones sees the Raddison site as being slightly inferior in location to the Hilton Hotel site, and points out that it has a similar plot ratio and is within the same Precinct 2 of Development Plan 2 "Height and Impact of "Buildings". Mr Goodman-Jones says the Raddison site has an inferior plot ratio to the Cairns International Hotel site. Mr Goodman-Jones generally agrees with Mr Malone's comments about the state of the commercial market in Cairns at or about the relevant date. He -- 5 of 6 -- 6 suggests that the Hilton Hotel site is far superior to the Tuna Lodge Motel site since it is only about 150m from the core shopping area in Cairns. He also suggests that the Cairns International Hotel site is superior to the Hilton Hotel site because of its more advantageous zoning and superior plot ratio. Having discarded the Woolworths sale as a reliable basis of valuation, it remains to consider the subject valuations in the light of the sale of the Tuna Lodge Motel site. I am satisfied that the degree of superiority of both the Hilton Hotel and the Cairns International Hotel sites is much greater than Mr Malone suggests. The Tuna Lodge Motel site is really an esplanade site while the Hilton Hotel is on Trinity Inlet and close to the C.B.D. The Cairns International Hotel site is closer again to the C.B.D. and has a much superior zoning and plot ratio. Added to this, it is Mr Goodman-Jones' evidence that each of the subject valuations is not out of line with the valuation of the Raddison Hotel site at $12 million. The onus is on the appellants to demonstrate that the Chief Executive's valuations of the subject lands are excessive (vide Section 16J(3) of the Valuation of Land Act of 1944 as it then was) . In the circumstances of these cases, I cannot hold that the onus has been discharged. Accordingly, I make the following determinations - AV93-210 The appeal is dismissed and the unimproved value of Part Portion 319 (Leases B and E) and Portion 478 and part Portion 319 (Lease D), Parish of Cairns, as determined by the Chief Executive in the sum of $11,000,000 is affirmed. AV93-212 The appeal is dismissed and the unimproved value of Lot 11 on RP 743265, Parish of Cairns, as determined by the Chief Executive in the sum of $12,000,000 is affirmed. (C.H. Carter) Member of the Land Court -- 6 of 6 --