Commonwealth Banking Corporation Portfolio Management Services v The Valuer-General [1991] QLC 108

( .,...,,,....,."".,. ..,... ........... Re: Appeal against Annual Valuation of the Valuer-General - City of Toowoomba. AV91-702. LAND COURT, BRISBANE 26th September, 1991 Commonwealth Banking Corporation Portfolio Management Services V. The Valuer-General DECISION (Hearing at Toowoomba) The Commonwealth Banking Corporation Portfolio Management Services is the owner of Lot 1 on Registered Plan 186726, parish of Drayton, containing an area of 8.379 hectares. In the revaluation of the lands in the City of Toowoomba as at 31st March, 1990, the Valuer-General valued the land at $3,500,000. An objection to the valuation was disallowed. The matter now comes before the Court by way of appeal. The subject land is a rectangular shaped parcel upon which the Clifford Gardens Shoppingtown Centre has been constructed. 7.123 hectares is zoned Commercial B and 1.256 hectares Private Open Space under the relevant -- Town Plan. It has street frontage on all sides with frontage to the James Street- Warrego Highway and Anzac Avenue-Millmerran Road being four-lane highways, frontage to Vacy Street and Westray Street. Clifford Gardens Shoppingtown is a regional centre comprising a Woolworths Supermarket, Franklins Supermarket, Fosseys Department Store, Venture Department Store, Big W Discount Department Store and some 46 specialty stores comprising both national and local tenants. [1991] QLC 108 -- 1 of 14 -- 2 Evidence was given by valuer, Mr G.B. Jorgensen of Taylor Byrne, on behalf of the appellant and by Mr P.J. Klupfel on behalf of the Valuer-General. From the evidence it would appear that the valuation history of the subject land is that it was valued at $1,450,000 as at 31st March, 1983 (effective 30th June, 1984) revalued as at 31st March, 1988 (effective 30th june, 1989) at $3,200,000 and remained unchanged in the next annual valuation at 31st March, 1989 (effective 30th June, 1990). It was increased in this revaluation at 31st March, 1990 (effective 30th June, 1991) to $3,500,000. The appellants contend to a value of $1,950,000. In his evidence Mr Jorgensen says that even if he assumed that the 1989 valuation of $3,200,000 was correct which he does not accept, there is still no warrant for an increase to $3,500,000 on the evidence available between 31st March, 1989, to 31st March, 1990. He says that the boom in demand for shopping centres had finished by 1988 and certainly by early 1989. There was a period of stagnation and a great deal of uncertainty in the real estate market in south-east Queensland. This deterioration continued through 1989 and into 1990 to the point where he can now look back in hindsight and say that that was the start of the recession which still exists. During 1989 there were approximately 25 shopping centres on the market within south-east Queensland that he is aware of. Potential purchasers were fewer in number than previously existed during the boom time and with a lack of demand, there proved to be a decrease in values in some areas. Mr Jorgensen does not accept that the. unimproved value of the land as at 31st March, 1989, at $3,200,000 is correct, based on the sales evidence going back as far as 1987. He says that he is aware that until now the appellant was exempt from payment of Land Tax but that the position has now changed. He -- 2 of 14 -- 3 believes that this explains why the appellant had Jittl'e interest in objecting to earlier valuations. Mr Jorgensen lists in his written valuation particulars of nine sales dating back to April, 1987, which assist him in his valuation exercise in concluding that the 7.123 hectares of the subject land zoned Commercial B should attract a value of $27.16 per square metre - $1,935,000 and the 1.256 hectares of Private Open Space zoned land should attract a value of $1.19 per square metre - $15,000 to arrive at his total valuation of $1,950,000. The difficulty he sees in making a comparison between his sales and the subject land is the substantial difference in areas. He says that it is an accepted guide in valuation that the larger the parcel the lesser the rate per square metre should be applied. He says this is in keeping with the practice in sales in the marketplace. Mr Jorgensen commences with a sale in April, 1987, of a 2.221 hectare parcel zoned Rural at Ruthven Street, Kearneys Spring to McDonalds Properties for $345,000. 1.19 hectares was rezoned to Special Facilities. 5500 square metres was subsequently sold to TMK Pty Ltd (B.P.) in September, 1988, for $250,000 with Special Facilities - Service Station zoning of approximately 5,500 square metres and the balance zoned Rural. He analyses the service station land sale . to show $36 per square metre for 5,500m 2 square metres of the Special __ Facilities zone and $5 for the 9780m 2 of Rural zoned land. He analysed the balance site owned by McDonalds after including holding interest until rezoning, risk factor rates and rezoning fees to show a rate of $32.36 for 6,384 square metres. These s·ales are in southern Ruthven Street area flanked by other Commercial zoned properties. Mr Jorgensen also considered a sale in August, 1987, to Roosterland -- 3 of 14 -- 4 Pty Ltd in Ruthven Street, Kearneys Spring, of Rural zoned land with an area of 2.827 hectares for $240,000. He analysed this sale adding holding interest, etc., and arrives at $39 per square metre for the 7,200 square metres subsequently zoned Special Facilities to accommodate a Big Rooster chicken sale outlet. Some land was dedicted for park and the balance of Rural zoned land he valued at $4m 2• There is another sale in this area from Proprietors Stenner Plaza to Ampol Australia Ltd of an area of 2130 square metres in March, 1988, zoned Special Facilities - Service Station shows $187. 79 per square metre. It was part of a larger parcel developed by the vendor in a 5 lot Commercial subdivision. He details such sales in his written valuation. A small Commercial B site of 1990 square metres sold in August, 1990, from The Lutheran Church to Kerredan No 11 P/L for $52,000 ($26.13 per square metre). Another site of 6 lots totalling 5025m 2 which has been amalgamated by TMK Pty Ltd was purchased in December, 1987, August, 1988 and May 1989 and rezoned from Residential A to Special Facilities - Service Station for development of a small retail complex and service station. It is his opinion that while some land has been rezoned Special Facilities, this zoning has been for a specific commercial use to meet the wishes of._ the owner and in effect it is a use which could be undertaken under Commercial B zoning and he is comparing like with like in using the sales. He gains comfort from a sale which occurred just after the relevant date when a parcel at the corner of Ruthven and Spring Streets was amalgamated by Springtor Pty Ltd with purchases in May, June and October, 1990, for $705,000. The area is 5.1476 hectares reduced after conceding a 40 metre strip to 4.3356 hectares. The strip is for creek -- 4 of 14 -- 5 and park. It has obtained a rezoning approval in February, 1991, for Special Facilities - Tavern, Service Station, 63 Unit Motel. Fast Food, Cinema Complex, Convenience Store, TAB and Catering Shop. After allowing holding interest and a risk factor, rates and Land Tax and rezoning fees, he concludes that the total cost of the property was $932,294 or $21.50 per square metre. He says this sale is probably the best guide to an appropriate value for the subject land because of its size. He says site for site because of size the subject land should attract a value of less than $27 per hectare if they were side by side but the subject land has in his opinion a superior location and he has made allowance for that in adopting $27 for the subject. This makes an allowance for the superior location and also for the diminution in value per unit because of the difference in size. Mr Jorgensen was invited by Mr Ure, Counsel for the appellant, to comment upon the written valuation prepared by Mr Klupfel and particularly the schedule of sales in that valuation. The first sale was of an 8094 square metre parcel which sold in August, 1988, for $462,000 and is zoned Commercial Industry and Heavy Industry. Mr Klupfel had analysed that sale to show $55 per square metre for the land and he has applied a rate of $50 per square metre to that parcel in association with an adjoining parcel. Mr Jorgensen is not familiar with this sale __ but in his view, because of the zoning, it is not particularly relevant when there are sales of land for commercial use. His next sale is the sale from McDonalds to TMK Pty Ltd already referred to where Mr Klupfel has applied a rate of $30 per square metre. He notes that Mr Klupfel says that this was zoned Rural at the date of sale in September, 1988. Mr Jorgensen was informed by the Deputy Town Planner that at the date of -- 5 of 14 -- 6 sale it was zoned partly Special Facilities - Service Station with the balance zoned Rural. He has already exp-ressed his opinion on this sale. Mr Klupfel has listed the four sales in Hursley Road separately. Mr Jorgensen has dealt with them in his valuation as one transaction in an overall process of amalgamating a parcel. He says it is appropriate to look at the overall price for the whole 5,000 square metres and not to view each sale separately. Mr Klupfel has also included the after date sales to Springtor Pty Ltd showing the separate sale but Mr Jorgensen believes his approach in analysing the sales as a total package is the appropriate way of making a comparison . In his after date sales, Mr Klupfel includes a sale from Southern Cross to TMK Pty Ltd of a 1.029 hectare parcel of Commercial B land situated at West Hoey and Charnley Streets in January, 1991, for $1,815,000. Mr Klupfel had analysed this sale to show an unimproved land value of $800,108 but has applied $515,000 ($50 per square mere) to the parcel in the revaluation. Mr Jorgensen comments that this is an improved sale and such sales are always difficult to analyse, particularly when endeavouring to fix on an appropriate percentage for depreciation and obsolescence. Mr Jorgensen includes in his valuation particulars of the Valuer- __ General's valuations in respect of The Range Shopping Centre, K-Mart Plaza and K-Mart Plaza Carpark and the rate per square metre which has been applied to those parcels at $54, $30 and $23 respectively. He says that they are all much smaller in area and believes the Valuer-General has made insufficient allowance in his valuation of the subject land for the substantial variation in the areas concerned. In cross-examination by Mr Fisher, Counsel for the respondent, Mr Jorgensen was -- 6 of 14 -- 7 criticised on his analysis of various sales where he has included holding charges and costs of obtaining rezoning and making an allowance for risk instead of taking the sale price as it appears in the contract. He believes that it is appropriate to include these charges as a developer would take these into consideration when deciding whether to purchase a particular allotment or not. Mr Klupfel gave evidence concerning his valuation of the subject land applying $50 per square metre to the 7. 123 hectares of Commercial B zoned land and a rate of $2.5 per square metre for the 1.256 hectares zoned Private Open Space. He says there were no comparable sales in the city to assist him in the valuation of the subject land and in fact he does not believe there is any property that is comparable to it. He says it is unique in its size and its location as a regional shopping centre and because of its size it can create its own environment and as a result it attracts a premium value on that basis. Mr Klupfel says he looked for sales with any commercial flavour and his first sale at 665 Ruthven Street of the 8094 square metre parcel of Commercial Industry and Heavy Industry zoning already referred to and upon which he has applied a rate of $50 per square metre. He said the purchaser owned a small shopping centre and electrical store and acquired this land to expand the centre. __ He says he does not believe that it is comparable in any way but it does give him a guide as to a level of value that someone would be prepared to pay in that particular locality. His second sale is a sale to TMK Pty Ltd already referred to where he shows the zoning as Rural at the date of sale. He says this has been developed as a BP Service Station and was a resale from McDonald Properties of part of a larger parcel which they had acquired prior to this sale. He does not -- 7 of 14 -- 8 believe that this is any real guide to the value of the subject land because its zoning is Special Facilities and although the uses allowed under the Special Facilities zone would be similar to some of the uses allowed under Commercial B, he still believes there is a difference. He does not agree with the method adopted by Mr Jorgensen of including holding interest, an allowance for risk and rezoning fees as part of the overall cost of acquiring lands to form a package for some development. He makes the same comment concerning the Hursley Road lands but comments that he still does not feel the sale is a real guide for assessing a value for the subject land. On the after date sale to Springtor Pty Ltd, he says that the sale shows him an unimproved value of land of $13 per square metre for land zoned Rural that is proposed to be used at a later date for a commercial development. He includes an after date sale of a 1987 square metre parcel of Commercial B zoned land on the corner of Holberton and Harth Streets to Kerredan No 11 Pty Ltd for $52,000. This was purchased to build five shops and this has since been done. He does not think there is any reason why this sale should not be considered to be other than a sale at arms length. It is away from the centre of the city on the north- western corner of the city in a very marginal residential area. He has applied a rate of $25 per square metre to this parcel and says it gives him a minimum value for __ _ Commercial B land. His sale from Southern Cross to TMK Pty Ltd in January, 1991, already referred to was a sale not known to him until very recently and was not considered by him in his valuation exercise but he says that in his opinion it is a sale that shows that there has been no decrease in values of Commercial B land or of shopping centres in Toowoomba. Mr Klupfel says that he also looked at the rates applied to regional -- 8 of 14 -- ( 9 shopping centres in Maryborough, Ipswich and the Sunshine Coast and records in his valuation the rates applied to those centres. He says he did not -attempt to compare one with the other but was looking at a general level of values. He makes reference to the evidence from Mr Jorgensen dealing with relativities with the rates applied to other shopping centres and he says The Range Shopping Centre is on the eastern extremity of the city, it is smaller in area and its situation is much inferior. In valuing it at a little over $50 a square metre he believes he has taken into account the location factor, the accessibility and the size of that parcel. The K- Mart Plaza had sizeable levelling works in the development and he has valued this at $30 per square metre in the unimproved state which does not include the levelling works. He is uncertain of the position with the K-Mart Carpark but he believes he applied a commercial rate only to part of that land as it was only partly used for carparking. He believes the subject is in a superior location to all of these properties. In cross-examination Mr Klupfel says that the task he set himself was to see whether or not there had been any movement in the marketplace up or down since the 31st March, 1989, which was the date of the previous revaluation. Having perceived an increase, he applied that increase to the valuation of__ $3,200,000 which was applied in the 1989 valuation. He was cross-examined at some length to explain the process by which he arrived at a rate of $50 per square metre for the Commercial B content of the subject land. I have difficulty in following the approach but it would appear from the answers given that Mr Klupfel first looked at the 1989 valuation and general levels of valuations. He decided there was nothing directly comparable with the subject land which he considered -- 9 of 14 -- 10 extremely unique in its position, size and visual appeal. As a regional shopping centre it creates an environment where it can be developed with considerable shops which can attract a large number of people. Smaller areas are not able to attract that volume of clientele. Therefore in the marketplace he believes the subject would be an attractive property and it would be - valued at a premium because of its unique qualities. He does not take issue with the proposition that the per unit rate for this large area should be less than the per unit rate of commercially zoned land of smaller size. He was cross-examined on the question whether it was appropriate to make a comparison between Commercial B zoned land and Special Facilities zoned but it would appear from the evidence that in general terms he does not see any great difference unless some parcel has been zoned Special Facilities and for some restricted purpose. Mr Klupfel agrees that the first sale that he has used of the land at 665 Ruthven Street - an area of 8094 square metres zoned Commercial Industry and Heavy Industry - was purchased by an adjoining owner and he agrees that under normal circumstances such sales are viewed with caution. He was asked to assume that the rate of $50 per square metre which he has applied to the 1.029 hectare shopping centre at West Street is correct and how he could justify the __ same rate of $50 per square metre for the subject which is seven times the area. He can see no difficulty in applying the same rate to the two parcels irrespective of the difference in area. Mr Fisher submits that neither valuer has a sale which could be classed as directly comparable but that Mr Klupfel has demonstrated that he has based his opinion on the value of the subject property on a comprehensive basis, -- 10 of 14 -- 11 painting a picture from the material he has gathered. He submits that the after date sale of the shopping centre shows that there is no trend downwards and that at least that the market is stable. He submits that the subject land has been fairly and conservatively valued in relation to smaller suburban shopping centres in Toowoomba and more than reasonable in relation to other shopping centres in south-east Queensland. Mr Ure submits that Mr Klupfel is in error in directing his mind to the movement in the marketplace between the date of the previous valuation of 31st March, 1989, and the date of this valuation of 31st March, 1990. He decided there was a small upward trend and has increased the previous valuation by a little over 9 percent. Mr Klupfel has accepted that because there has been no previous appeal that the 1989 valuation is correct. The sales used by Mr Jorgensen are of assistance and he has properly added to the purchase price of the sales where relevant such costs and holding charges until the suitable and desirable zoning was obtained. This shows the true cost to the purchaser of the land for his project. He submits that the evidence shows that the sales zoned Special Facilities are no less valuable than the land zoned Commercial B. He directs my attention to a decision of the learned Member of this Court, Mr Wenck, in Keltrol Building Co Ltd and __ Others v. The Valuer-General handed down 23rd March, 1990, dealing with Commercial B zoned land in the City of Toowoomba where he said: I do not agree with Mr Klupfel, as a general pr;nciple, that Special Facilities zoned land, all other things being equal, must be of lesser value than Commercial B. It must depend on the particular use permitted on the Special Facility zoned land. It seems reasonable that all other things being equal, a particular permitted use could be seen as either inferior, equal or even superior to the highest and best use which might be achieved under the Commercial B zoning.• Mr Ure submits that Mr Klupfel has erred in applying the same rate to -- 11 of 14 -- 12 the subject land as he has applied to the land of another shopping centre despite the fact that the subject is seven times larger. Both valuers are agreed that in general the larger the parcel of commercial land the lower the price per square metre. He submits that the purchase by Springtor of land to amalgamate to a Special Facilities - Tavern, Motel, etc., although it occurred during 1990 after the relevant date of valuation, has an attractive mix of uses, it is located in an area which is developing as a commercial node in Toowoomba and in a developing residential area. While it is not perfect it is of assistance to establish that the methodology of the Valuer-General has been wrong. I have considered the evidence in this matter and find that Mr Klupfel has accepted as his starting point the valuation of the Valuer~General for the subject land as determined at 31st March, 1989. This was a continuation of the same valuation of $3,200,000 as at 31st March, 1988. In the absence of any appeal against those valuations, it would be a reasonable assumption that the owner had no complaint about the valuation. This would be true in so many cases but the position here is unusual. The appellant was not liable to pay Land Tax upon this land (Section 13(1) Land Tax Act 1915-1990). I accept the submission that no land owner would incur expense in objecting and appealing against a __ valuation which brings no meaningful disadvantage to him and I accept the approach adopted by Mr Jorgensen of putting aside any consideration of that figure in the peculiar circumstances of this case. The evidence of earlier sales supports his conclusion that the previous valuation was open to challenge as being too high. It then is a matter to decide whether there is sales evidence to -- 12 of 14 -- ( 13 support a rate of $50 per square metre as the appropriate value for the Commercial B zoned land in the subject. I do not find the first sale at 665 Ruthven Street used by Mr Klupfel of any assistance. It is a mere 8094 square metres of differently zoned land acquired by an adjoining owner and amalgamated in a 1.45 hectare parcel. His other sales are of small areas and I find it impossible to transpose the values applied there to an appropriate value for the subject land. The after date sale of the shopping centre at West Street has been valued by Mr Klupfel at $50 per square metre for its 1.029 hectares. I cannot accept his reasoning that the same rate should be applied to the subject land when it is seven times larger. He, on the evidence, sees the subject as being unique and as an impressive shopping complex. I fail to see how the improvements upon the land can be said to be inherent in the unimproved value of the land. While it is common ground that the site is an ideal one for a shopping centre with excellent exposure · and four street frontage the matter of how the block is developed rests in the hands of the owner. I find the sale to Springtor Pty Ltd a useful guide in the subject case. It is a large site of over 4 hectares. Mr Jorgensen has included au the costs up to the rezoning of the land from Rural to Special Facilities by allowing for holding interest, risk factor, rates, Land Tax and rezoning fees. It has an approval for a multiplicity of __ uses and all things being equal, the subject land should attract a lower rate per square metre than this parcel. However, Mr Jorgensen has explained the factors which have influenced him in applying a higher rate per square metre to the subject land despite the disparity in area. He acknowledges the advantages inherent in the subject land and on a review of all of the evidence, I prefer the valuation approach made by Mr Jorgensen and I adopt it. No evidence has been directedto challenge -- 13 of 14 -- ( 14 the nominal amount which he has applied to the Private Open Space area. There is little between the two valuers on this point and I propose to adopt Mr Jorgensen's valuation in full. Accordingly, the appeal is allowed, the valuation of the Valuer-General is set aside and the unimproved value of the subject land is determined at One million, nine hundred and fifty thousand dollars ($1,950,000). (D.J. Barry) President of the Land Court -- 14 of 14 --