site value of land, means the sum which the land, if it were held for an estate in fee simple unencumbered by any lease, mortgage or other charge, might in ordinary circumstances be expected to realise at the time of the valuation if offered for sale on such reasonable terms and conditions as a genuine seller might be expected to require, and assuming that the improvements (if any) had not been made;

improvements, for the purpose of ascertaining the site value of land, means all work actually done or material used on and for the benefit of the land, but in so far only as the effect of the work done or material used increases the value of the land and the benefit is unexhausted at the time of the valuation, but, except as provided in subsection (2AA), does not include-

a) work done or material used for the benefit of the land by the Crown or by any statutory public body; or

(i) the removal or destruction of vegetation or the removal of timber, rocks, stone or earth; or

(ii) the draining or filling of the land or any retaining walls or other works appurtenant to the draining or filling; or

(iii) the arresting or elimination of erosion or the changing or improving of any waterway on or through the land-

unless those improvements can be shown by the owner or occupier of the land to have been made by that person or at that person's expense within the fifteen years before the valuation.

1. Section 2 (2) of the VL Act sets out the basis for estimating the value of improvements for the purpose of ascertaining the Site Value as:

In estimating the value of improvements on any land for the purpose of ascertaining the site value of the land, the value of the improvements is the sum by which the improvements upon the land are estimated to increase its value if offered for sale on such reasonable terms and conditions as a genuine seller might in ordinary circumstances be expected to require.

1. Section 5A of the VL Act sets out the matters to be taken into account when determining the value of land:

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account-

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

1. Mr Jackson, representing the Applicant submitted the primary issue in the difference of the respective assessments of Site Value is the application of the sales evidence. Each Valuer holds a different view of the likely purchaser for large industrial sites as at the relevant date. Mr. Jackson's submitted the likely buyer for the property would be a developer.
2. Mr Sheales, on behalf of the Respondent submitted that based on the existing occupants of this north-western industrial precinct, the extensive road linkages and the amenity of the industrial precinct it was his view the property would appeal to two types of buyer - the prospective developer and the prospective 'distribution centre' owner-occupier.
3. Each party's view of the local industrial market as at the relevant date was therefore aligned to their expectation of the likely buyer for the vacant subject land parcel.
4. Set out below is a summary of each party's case as presented to the Tribunal.

1. Mr. O'Sullivan, a Certified Practising Valuer gave evidence on behalf of the Applicant. He described the property as being fully serviced with three encumbrances (E-5, E-7 & E-8) located on the boundaries and set aside for drainage and easement purposes. He also referred to a Section 173 Agreement V724538Q under the Planning and Environment Act 1987 dated 2 November 1998.
2. Mr O'Sullivan based his valuation on there being no environmental concerns, but allows for his valuation to be re-visited in the event that any environmental matters are discovered.
3. Mr O'Sullivan describes the surrounding development use in the area (including that within neighbouring Truganina and Laverton North) as generally large scale industrial uses; and land uses within the Gilbertson's Industrial Estate as including industrial warehouses and vacant industrial land. Mention is made of the grasslands reserve located directly to the south-west boundary and the large grasslands area on the eastern side of Mount Derrimut Road.
4. Mr. O'Sullivan paid considerable attention to the Economic Market and Melbourne Industrial Market Overview. He described Melbourne as having six identifiable industrial regions of which the south-east and the west are the largest. He also focused on the impact that the Global Financial Crisis (GFC) had on the industrial market.
5. Mr O'Sullivan compared the square metre unit values of land in the western and south-eastern regions and within the western region itself. He relied on tables produced by three commercial and industrial real estate organizations[1].
6. In summary, the CBRE table for the western region showed around a 20% fall in value for the two groups of land size in Quarter 4 of 2009, followed by no more than a 3% fall in Quarter 2 of 2011 while in the south-eastern region falls of 24% and 31% and increases of 32% and 38% were shown for the same land groups and the same quarters, respectively.
7. Knight Frank's statistics for the small land parcels in the west showed much less of a change - falls of 11% and 17% in August 2009 followed by re-bounds of 6% and 17% for the same groups in March 2011. For the south-east the falls in August 2009 of 28% and 25% were mirrored by re-bounds to a similar extent in March 2011.
8. The Savilles Table showed unit values for each region in three land groups - 0.5 Hectares, 1.0-5.0 Hectares and Englobo parcels, but for the north-west region (rather than the west) and the south-east region and for February 2009, March 2010 and November 2010. In the north-west the unit values given for the smallest sites showed a fall of 10% at the low end of the range; for the 1.0-5.0 Hectare parcels, show an 8% fall at the low end of the range. For the Englobo parcels in the north-west, the unit value ranges given are $50 to $70, $30 to $70 (a 40% change at the lower end) and $30 to $70 (no change).
9. In the south-east they show a fall of 12% at the low end and a rise at the low end of 39%; for the 1.0-5.0 Hectare sites the unit value ranges given are show a fall of 8% at the low end and $150 to $250 (a rise of 25% at the low end and a fall at the upper end of 17%); and for the Englobo sites the unit value ranges given are $80 to $100, $50 to $90 (a fall of 17% at the low end and a fall of 10 at the upper end) and $50 to $80 (no change at the low end but a fall of 11% at the upper end).
10. Mr. O'Sullivan referred to price changes for lots between 6,000 and 7,000 square metres (rounded) in size and lots varying between 2,500 and 2900 square metres (rounded) in size, within the West Park Industrial Estate (to the east of the subject property). For the larger parcels, the price change between August 2008 and October 2009 showed that for the smaller parcels there was no price change from December 2007 through to May 2009 but a 15% fall between May 2009 and April 2010.
11. He referred to the sales of six lots also in the West Park Industrial Estate, that ranged in size from 1,223 square metres to 1,600 square metres (rounded) that occurred from September 2007 through to June 2010. The changes within this group were more incremental than what has been so far provided being a fall of from September 2007 to March 2008 (2.89% $198 to $192); a further fall of between March 2008 and April 2009 (6.4% $192 to $180), a gain between April 2009 and February 2010 (4.1% $180 to $188) (one month past the relevant date), a fall between February and May 2010 of 3.2% and no change in the following three months to 2010.
12. Four sales that occurred between August 2008 ($155 per square metre) and October 2009 ($90 per square metre) of lots varying in size from 60,000 square metres to 70,000 square metres were also referred to. The only change in value shown is a fall of 22.6% from $118 per square metre between September 2008 and July 2009, despite the range given as $155 (August 2008), $118 (September 2008), $92 (July 2009) and $90 (October 2009).
13. Mr. O'Sullivan's report devoted several pages to the Market Movement in Industrial Englobo Land Values and three examples of "pairs of sales" as support for the severe impact of the GFC on the value of Englobo land parcels.
14. The first pair of sales was that of the same property at 469-491 and 499-523 Frankston Dandenong Road, Lyndhurst. It has a combined area of 31.9 Hectares of land and was zoned "Farming" when it sold for $25,800,000 in June 2006. It was subject to Planning Scheme Amendment C87 for a re-zoning to Industrial "1". This sale equates to $81 per square metre over the land area. In October 2010, the property was sold for $17,000,000 or $53 per square metre. The second sale is discussed further as one of the sale properties in Mr O'Sullivan's primary evidence. On this information the reduction in sale price equates to 35% between June 2006 and October 2010. Mr. O'Sullivan states that the earlier sale was prior to the 2007 peak and the re-sale occurred after the market had stabilized. He considered this to be prime evidence of the change in market for industrial Englobo sites.
15. The second pair of sales forming part of Mr O'Sullivan's primary sales was that of 165-211 Robinsons Road, Ravenhall and 20 Palmers Road, Truganina. The Robinsons Road property comprises 34.41 Hectares of land located one kilometre the north of the Deer Park By-pass. When it sold for $22,000,000 ($74 per square metre) in February 2008 it was zoned "Farming" but was to be re-zoned to Business "3". The land was purchased on the basis the re-zoning would occur and with the intention of constructing a Business Park ("Orbis Business Park").
16. Robinsons Road is the northern "extension" of Palmers Road, so 20 Palmers Road (north-east corner of Sayers Road) lies within the adjoining suburb of Truganina, two kilometres from the Princes Freeway and nine kilometres to the south of 165-211 Robinsons Road. It is a smaller site than Robinsons Road being 12.16 Hectares in size and sold I October 2010 for $5,771,000 ($64 per square metre). When it sold it was within the Urban Growth Zone "2" with an underlying Business "3" zoning. While the difference in price equates to a 14% reduction on the Robinsons Road sale, Mr. O'Sullivan was of the view that if the size and road exposure of each was more equitable he would expect the 14% reduction to become 30%.
17. The third pair of sales is that of 720 Kororoit Creek Road, Altona and 361-399 Kororoit Creek Road, Altona. No. 720 is a 51.93 Hectare site that was zoned Special Use Zone "4" and sold in July 2007 for $37,250,000 ($72 per square metre) - a price which Mr. O'Sullivan believes was above the market levels at that time; he also believes that this zoning is inferior to the Industrial "1" zoning of No. 361-399 Kororoit Creek Road. 361-399 Kororoit Creek Road comprises 56.46 Hectares that sold for $29,500,000 ($52 per square metre) in May 2010. Initially, Mr. O'Sullivan states that this represents a reduction of 28% on the sale of No. 720 Kororoit Creek Road, however, a subdivision of the land was substantially completed to the extent that roads, kerbs and paving were constructed and the services had been laid and when Mr. O'Sullivan applies his estimates of the cost of these works his analysis shows an adjusted price of $21 per square metre, a reduction in value that he equates to 69%.
18. It was evident from his presentation that Mr O'Sullivan's subdued view of the Industrial Market was based on the low activity levels of developers, being a reflection of the industrial land market and economic outlook thereby setting the underlying levels of value for industrial land as at the relevant date.
19. Mr O'Sullivan submitted that due to the changing market conditions, he has had primary regard for sales that occurred from mid 2009 and into 2010 (past the relevant date), to avoid having to make adjustments to the price to reflect the changing market.
20. In relation to the first sale Mr O'Sullivan relied upon, 1 - 1-20 Palmers Road Truganina this property sold in October 2010 for $5,771,000. The land is a wedge shaped parcel of 12.16 Hectares zoned Urban Growth (Truganina Employment Precinct Development Plan) - it has an implied Business "3" zone. Land within this Precinct must contribute to the provisions of works and services to the extent of $100,005 per net developable hectare.
21. Mr O'Sullivan calculated that 8.28 Hectares of the land is developable; this equates to a contribution of $828,041. Since there is a residential estate opposite, Mr O'Sullivan has allowed an additional $10 per square metre for servicing costs.
22. Mr O'Sullivan submitted the Business "3" zoning is superior to the subject Industrial "2"; that Palmers Road is to be extended south to provide another entrance to the Princes Freeway and that within 1.5 kilometres of this property are the Kmart and Woolworths Distribution centres on Leakes Road. Mr. O'Sullivan equates the sale price to $47 per square metre over the whole of the land area and analyses the sale to $64 per square metre over the net developable area of the land.
23. The second sale referred to by Mr O'Sullivan was 469-491 & 499-525 Frankston-Dandenong Road, Lyndhurst which sold on 7 October 2010 for $17,000,000. He described the land as an industrial development site that sold at public auction with a planning permit in place that allowed for an industrial subdivision and the purchaser is developing it accordingly.
24. In addition to the purchase price, there was a cost to fill it of $1,160,000 and a cost to create a retarding basin of $232,000, equating to a total additional cost to the purchase price of $1,390,000.The property is also subject to a Development Contributions Plan Overlay - Dandenong South Industrial Area Development Contributions Plan - Lyndhurst of $17.11 per square metre of developable area, which Mr. O'Sullivan calculates to be 286,950 square metres. Applying the $17.11 per square metre to this area equates to a contribution requirement of $4,909,714.
25. Mr. O'Sullivan arrives at $53 per square metre based on the $17,000,000 sale price divided by the total area of the site. He then adds all of the above costs to the $17,000,000 to arrive at $23,299,714 and divides this by the total site area to arrive at an analysed rate of $72 per square metre.
26. Mr. O'Sullivan submitted this parcel has a superior Industrial "1" zoning to that of Industrial "2", it is comparable in area to the subject property, it is approximately 1.5 kilometres from Aldi's other Melbourne Distribution Centre, it is located within two kilometres from EastLink, it is located within the superior south-east industrial region and that it sold 10 months after the relevant date when the market had further stabilised.
27. Mr. O'Sullivan compared this sale with its earlier sale in 2006 that he considered being "prime evidence of the change in the market for industrial Englobo sites. He claims that the difference in the two selling prices represents a 35% reduction in value between June 2006 and October 2010; that the 2006 sale was prior to the peak of the market in late 2007/early 2008 and that the resale was 10 months after the date of valuation when the market had further stabilised". He also mentioned that the property has sold twice since 2006, but does not describe a third sale.
28. The third sale referred to related to 361-399 Kororoit Creek Road, Altona which sold in May 2010 for $29,500,000. This was a sale of a 56.46 Hectare site that was partially developed. It is zoned Industrial "1" and comprised a near completed subdivision (Access Altona Industrial Estate) to the extent that internal roads and kerbing were constructed, the lots were subdivided and the services connected. It was purchased after a public Expressions of Interest Campaign.
29. Mr. O'Sullivan deducts his estimate of the costs that were required to complete the subdivision in order to deduce an Englobo value based on the gross area. He calculates a total cost of a little over $15,000,000 and a 10% Profit and Risk Margin that equates to a little under $2,700,000 to arrive at an Englobo rate of $11,767,316 or $21 per square metre against the $52 per square metre derived from the sale price divided by the gross land area.
30. In relation to this sale Mr O'Sullivan submitted the land had a superior zoning to Industrial "2", the land area is larger, it is located closer to Melbourne's CBD but is a similar distance to road networks. He noted the marketing campaign ended in December 2009 but it was five months before the sale was concluded from the close of the marketing campaign. In his view the land within this estate achieves a slight premium over the land within the estates that neighbour the subject property; and this sale was a reflection of the lack of purchaser interest for large scale industrial land parcels in Melbourne's west.
31. Sale No. 4 referred to is 165-211 Robinsons Road, Ravenhall which sold in February 2008 for $22,000,000. It is a near rectangular shaped site of 34.41 hectares that abuts the Footscray to Bacchus Marsh Railway Line and the Deer Park By-pass. It was not serviced at the time of sale. It lies 3.5 kilometres to the north of the subject property and is slightly larger in size. To the north is industrial zoned land and to the east and opposite the property is residential development. Mr. O'Sullivan says it has a superior zoning of Business "3" and he factors in a $10 per square metre cost to bring the services to the site in order to adjust the unit value as per the sale from $64 per square metre to $74 per square metre. His also makes note of the downward change in values he previously established of 14% to 69% and so believes that when applying this sale to the subject property a 40% downward adjustment (or $44 per square metre) would be appropriate.
32. Sale No. 5 referred to is 210-238 Maidstone Street, Altona (also fronts Jordan Close) which was sold in May 2007 for $15,300,000. This is an irregular shaped parcel of land best described as having a near rectangular northern section that extends east from Maidstone Road along Jordan Close. Approximately two-thirds along the southern boundary of this section it is joined by a triangulated section, widest where it joins the northern piece, tapering to the south. Its overall area is 21.84 Hectares and it is zoned Special Use No. "4". It is located approximately one kilometre from 361-399 Kororoit Creek Road, Altona (sale No. 3) and three kilometres approximately from each of the Princes Freeway and the Western Ring Road. Mr. O'Sullivan analyses the purchase price to show a value of $70 per square metre.
33. The purchaser proposed to subdivide the land and on-sell the developed lots. Mr. O'Sullivan noted it is smaller in size than the subject property, it has an inferior zoning to the subject property, it sold close to the market peak and so based on his downward market trend, a discount of 35% on this sale price would need to be applied for time equating to a unit rate of $45 per square metre; and that its attributes of being easily subdividable and in closer proximity to the city support a value range of $40 to $45 per square for the subject land.
34. Based on the sales referred to Mr. O'Sullivan applies a unit rate of $45 per square metre to the subject land area of 301,400 square metres to arrive at $13,563,000 which he rounds to $13,600,000.

1. Mr. Sheales notes the Applicant purchased a substantial vacant land parcel in Colemans Road, Dandenong in December 2007 for its own occupation of a similar facility to that now constructed on the subject land. He also noted that considerable works were involved in improving the land for occupation in 2009. He is of the view that "this is an important consideration since many of the sales put forward by both parties comprise holdings that are ultimately used for subdivision purposes. The difference between the purchasers for such land parcels is the developer's ability to "on-sell" the subdivided parcels at a profit and therefore must specifically be included in the land pricing consideration. That is, profit is a specific cost component of the land acquisition".
2. He goes on to say "in the circumstance where a property is purchased by an owner-occupier for operational requirements, the derivation of profit "from the land" is not the primary consideration. Whilst the location attributes of accessibility, ease of construction, expansion potential and exposure are generally consistent, the returns are derived by virtue of an increased operational efficiency". That is profit from the land is generated over a longer period and from a variety of areas. Thus the ability for the land to provide different forms of return (operational versus development) is a consideration reflected in the purchase prices paid for the various parcels. Generally speaking the owner-occupier is able to justify a higher price than the land developer / speculator - particularly if a long-term lead-time is required prior to development".
3. Mr. Sheales cites eight such distribution centres within the Gilbertson's and Angliss Industrial Estates and another three major industries that are housed within the Park West Industrial Estate - all in this western region. He provided a photograph depicting new comparable warehousing accommodation in Leakes Road that Kmart and Woolworths intend to occupy. He contended that if the subject Swann Drive property were for sale at the time these Companies were seeking land, it may well have been considered for the same purpose.
4. From operational, truck management and access/egress perspectives, Mr. Sheales points to the extensive Swann Drive frontage that is a key feature of the land.
5. In his analysis of land sales, Mr. Sheales noted that during the period from early 2006 to late 2008, a substantial volume of rural land was sold within the western part of Laverton north and Derrimut, mostly for future industrial development purposes, without much of the infrastructure that now exists. These sales included a number of parcels along Robinsons / Palmers Road, Dohertys Road, and Leakes Road, many of which are now being developed into industrial estates, while several others remain undeveloped. He advises that that the prices paid for these parcels reflected a much longer holding period than those sites that could be immediately developed for occupation. Added to the holding costs, would be the costs of re-zoning and then appropriate development approvals.
6. Though he contended the land is ideally suited to owner-occupation, Mr. Sheales does not ignore the ability of the land to be further subdivided into parcels of say 2 to 3 Hectares and so he believes that this flexibility of use is an important consideration in assessing its value as at the relevant date. As for land within the Urban Growth or Farm zoning that are exposed to further planning issues, Mr. Sheales contends that their lower values are a reflection of their planning status.
7. In the evidence Mr. Sheales presented, where the GST status has not been verified, he has treated the information as being exclusive of GST but reserves the right to re-consider his valuation if the GST status of his evidence was different to his application of it. Likewise his assessment of the Site Value is on the basis that GST is excluded.
8. In his valuation rationale, Mr Sheales states that he has sourced his evidence from a wide range of databases, newspapers and property professionals and so has relied on the information in good faith but cannot say for certain that the information obtained is consistent with the contractual obligations undertaken by each party since this component of the various transactions has not been sighted.
9. In relation to valuation methodology Mr Sheales considers the direct comparison on a unit per square metre rate is the best indicator of value of the land. He stated he had identified seven sales that provide a clear indication of the appropriate value range for the subject property as at the relevant date. In summary these are 440 Dohertys Road, Truganina at $45 per square metre, a parcel on the corner of Boundary and Foundation Roads at $81 per square metre, Lot A Dunmore Drive at $102 per square metre, 361-399 Kororoit Creek Road, Altona cautiously analysed at $62 per square metre, 469-491 and 499 to 523 Frankston-Dandenong Road, Lyndhurst at $53 per square metre, 165-211 Robinsons Road, Ravenhall at $64 per square metre and 678 Boundary Road, Truganina at $65 per square metre. These sales and others are set out in his appendix four which includes three other sales - 20 Palmers Road, Truganina, 40 Leakes Road, Truganina and 128 Swann Drive, Derrimut.
10. The first sale referred to by Mr Sheales was at 20 Palmers Road, Truganina which sold in November 2010 for $5,771,000 or $47.42 per square metre.
11. Mr. Sheales comments that the 12.17 Hectare land parcel was in the Urban Growth Zone, the only improvement was a dwelling and that it was a well-located parcel on the corner of Sayers and Palmers Roads with an area earmarked for commercial development. It is proposed to be within a Business "3" zone although at the time of sale he understood that the time frame for the zoning change was uncertain; additionally, he understands that part of the land is to be acquired for the re-alignment of Palmers Road, which is likely to delay development and that the land is within an area that has a strong presence of the Golden Sun Moth which considerably increases its risk profile. In his view he considered this land to be a southern out post and at the relevant date there was no shortage of land that could be developed before this one.
12. His second sale was 440 Dohertys Road, Truganina which sold in June 2010 for $30,000,000 or $46.33 per square metre. The site is given as being 64.75 Hectares within an Urban Growth Zone "2", it is restricted by a creek/ reserve (the area of which is not given) that will give rise to watercourse considerations. Mr. Sheales describes the land as being a rectangular shaped site on the north side of Dohertys Road within an area of ongoing industrial development wherein most adjoining parcels are zoned either Industrial "2" or Industrial "3" and that it is well positioned within a medium term development scenario. He considered this land to be somewhat isolated.
13. The third sale referred to by Mr Sheales was 678 Boundary Road, Truganina which sold in July 2008 for $16,322,000 or $65 per square metre. This is a 25.11 Hectare land parcel that was zoned Farm at the time of sale and was developed with a dwelling and farm buildings, the land has a watercourse through it. It sold with a settlement period of ten months.
14. Mr Sheales further describes it as a substantial parcel being immediately west of Robinsons Road in an area designated for future industrial development. It was re-zoned Industrial "1" following the sale, but remains undeveloped, it has no main road frontage, an unmade roadway and has long term development prospects; additionally 2.3 Hectares are to be set aside for a Melbourne Water Reserve. Mr Sheales considered this to be of strong support to his assessment of value for the subject site.
15. Mr. Jackson questioned Mr Sheales in relation to the validity of this sale since it was purchased in 2006 for $8,000 000 and sold privately in July 2008 and was one of two property purchases by the same buyer. Mr. Sheales declined to comment on whether or not he considered the sale price to be high, he did say that he believed that the parties had an obligation to report the correct purchase price.
16. The fourth sale referred to by Mr Sheales was 165-211 Robinsons Road, Ravenhall, sold in February 2008 for $22,000,000 or $63.94 per square metre. This land has an area of 34.41 Hectares and was within a Farm Zone and outside the Urban Growth Boundary at the time of sale. There were no restrictions on the land at the time of sale, the only improvements were a dwelling and sundry improvements. It fronts the western side of Robinsons Road, a railway line runs along the north boundary and the Deer Park By-pass site skirts the south-western part of the site - (the By-pass was constructed after the sale). Subsequent to the sale the land was re-zoned to Business "3" and it is now being developed as the Orbis Business Park. Mr Sheales says it has an excellent street frontage, though it is a fringe location and particularly so at the time of its sale. Mr Sheales also considers this to be of strong support to is assessment of value for the subject site
17. The fifth sale was 373 Boundary Road, Truganina which sold June 2010 for $7,545,500 or $81.33 per square metre. This is a 9.27 Hectare parcel zoned Industrial "2" (inside the Urban Growth Boundary), having a second small frontage to Foundation Road and is opposite Mount Derrimut Road. It has a 458 metre frontage, the adjoining land parcels are zoned either Industrial "2" or Industrial "3"; Mr. Sheales is of the view that this site is well positioned for short to medium term development and that it has minor access limitations.
18. The sixth sale referred to was 361-399 Kororoit Creek Road, Altona which was sold in June 2010 for $29,750,000 or $85 per square metre for 35 Hectares and for $20,150,000 or $62.38 per square metre when adjusted to 32.3 Hectares to account for the 2.7 Hectares of floodway land.
19. Mr Sheales described this site as being 32.3 Hectares zoned primarily Industrial "1" and the balance of 2.7 Hectares is zoned Urban Floodway; it is also inside the Urban Growth Boundary. Roadway infrastructure was in place and almost all subdivisional works for a 64-lot subdivision were near completion (98%). It has a 442-metre frontage, although Mr Sheales considers this to be a secondary location, he applied a development cost of $150,000 per lot as being the added value of the subdivision works. This development is known as the Australand Access Industrial Park wherein the lots were selling at around $150 per square metre.
20. Mr Sheales submitted that he didn't have the full details of his analysis of this site with him, however, he would not rely on this sale; instead he considered that it was merely a statement of who was in the market for this sum of money. He also said that at the time of considering it, he tried a number of different analyses given the various site features and passed it by other valuer colleagues in his organisation that came to different conclusions. These verbal comments reflect the written comments wherein he states "that there is a considerable degree of subjectivity in relation to how the part completed development works should be treated.
21. The seventh sale he referred to was 469-491 & 499-525 Frankston-Dandenong Road, Lyndhurst which sold in October 2010 for $17,000,000 or $53.28 per square metre. A 32 Hectare site of two adjoining parcels having a 501 metre road frontage and zoned Industrial "1", that is located on the southern fringe of the Dandenong Industrial estate. At the time of sale the only improvements were a house and sundry others. Mr Sheales considered this to be an inferior site that was suitable for either owner-occupation or subdivision.
22. The eight sale referred to was Lot A Dunmore Drive, Truganina which sold in July 2011 for $9,236,700 or $101.83 per square metre. This is a 9.17 Hectare parcel of Industrial "3" zoned land with an extensive frontage to an inside street and considered by Mr Sheales as being a peripheral industrial parcel, positioned to the west of Palmers Road and north of Dohertys Road. Settlement of the sale was subject to final title approval.
23. Mr Sheales did not place a lot of reliance on this sale, however, at $53 per square metre for this land he considered this a comfortable level of support for his assessment of the subject land at $68.68 per square metre, but he did not wish to rely upon this sale owing to its distance in time from the relevant date.
24. The ninth sale referred to was at 128 Swann Drive, Derrimut which sold in October 2010 for $2,200,000 or $119.57 per square metre. The land is described as a slightly elevated 1.84 Hectare site located on the north side of Swann Drive, abutting the Deer Park By-pass and directly opposite the subject property. It is positioned within the Urban Growth Boundary. The purchaser proposes to develop it with a 10,000 square metre building.
25. The tenth sale referred to was at 40 Leakes Road, Truganina (corner Marquands Road) which sold in June 2009 for $56,500,000 or $45.42 per square metre on terms. This land was described as a 124.4 Hectare land parcel zoned Urban Growth inside the Urban Growth Boundary; it has watercourse and dam restrictions and the only improvements were a house and sundry improvements.
26. The land is relatively flat having good access from both roads; the watercourse and dam are located in the southeast corner that reduces its area. The land was purchased with settlement conditional upon the Precinct Structure Plan on a 10% deposit with the balance being payable after the Precinct Structure Plan approval, which was expected to be imminent. The sale was analysed at $409,500 per Hectare on the gross land area. The purchaser advised that the developable area is 76.65 Hectares excluding open space and a 7 Hectare area to be set aside for the Golden Sun Moth. The net sale price was $51,000,000 and it equates to $664,788 per Hectare over the net developable area of 76.65 Hectares.
27. Mr Sheales' Report sets out his Residual Value Assessment, wherein he arrives at an Englobo amount of $20,000,000.

1. The Tribunal inspected the subject property and the various sale properties. It observed that this western region is presently undergoing considerable industrial and residential development and that it has already seen considerable expansion. It also observed that the network of major roads provides for convenient access and movement of goods and services to and from this region to many other parts of Melbourne, Victoria and beyond.
2. The Tribunal notes Mr Sheales' comments that the two preferred estates within this region are the subject Gilbertson's Industrial Estate and the William Angliss Estate to the immediate south. Both of these estates are developed with parklands.
3. The grasslands reserve on the southern boundary of the land and a grasslands area on the eastern side of Mount Derrimut Road form part of linear parkland that extends from the eastern side of Mount Derrimut Road, crossing that road and skirting the property; then continuing directly south to join with the Federation Trail. The tract of land that skirts the subject property contains the three easements (E-5, E-7 & E-8).
4. There are a number of similar parkland reserves throughout this broader industrial western region of Melbourne and those close to the subject property include a retarding basin that is located to the north-east between the eastern end of Bliss Court and Fitzgerald Road and the Derrimut Grasslands and Andersons Swamp that occupies much of the estate bounded by Boundary and Fitzgerald Roads and the Western Ring Road.
5. Comparisons were made by the two Valuers, between this western industrial region and the south-eastern industrial region. The Tribunal observed there is a larger extent of natural watercourses and depressions in the topography that have resulted in a much larger network of parklands and nature reserves in the western region, compared to the south-eastern region.
6. Emerging from each of the Valuer's evidence was a different view of the market conditions, Mr O'Sullivan and Mr Jackson believing that the GFC had a far more severe impact on the industrial sector of the real estate market than Mr Sheales..
7. Mr O'Sullivan has put the downturn as showing between a 14% and 69% reduction over a four-year period from 2006 to 2010; while Mr. Sheales indicated that it was much less than this. Based on a broad range of sales that Mr Sheales has analysed he put the change generally in the order of 7.7%, but he did concede that there were examples of a change in the order of 10-15%. Even so, he was not as fixated on the GFC as the Applicant. His reason for this is that he had identified more than one type of buyer for the subject property.
8. Of interest to the Tribunal was the presentation of information in each of the Valuation Reports; the Applicant presented a considerable amount of statistical information regarding the market, while the Respondent provided a comprehensive overview of the background to the industrial market which helped form the view of the likely buyer profiles. In essence, Mr O'Sullivan was more convinced that the buyer for the subject land would be a developer while Mr Sheales was of the view that an owner-occupier Company such as Aldi and the various other distribution organisations located nearby or looking to purchase for the same use, would apply a much longer term strategic approach to a land purchase than a developer who relied heavily on market opportunity from which to generate a more immediate profit.
9. In the case of the subject, property, the owner has positioned itself to keep an expansion opportunity "up its sleeve" or to create some additional profit out of a subdivision of its remnant land, by purchasing a well proportioned parcel of land with an extensive road frontage that is not matched by any of the sales considered as evidence.
10. A considerable part of Mr O'Sullivan's valuation report is devoted to an overview of the Melbourne Industrial Market and in summary his comments reflect a smaller adjustment to the market than what he is campaigning for. The language used in his description is not the kind one would use if the market experienced such a severe downturn.
11. Mr O'Sullivan refers to the positive impact that the dredging of the Port of Melbourne will have over the next thirty years. He describes this project as having opened a "Sea Highway" to Melbourne and that the Port of Melbourne is currently Australia's busiest container and general cargo port and its handling capacity is expected to increase significantly over the projected period.
12. Mr. O'Sullivan notes that the western region accounts for around half of all construction activity during the second half of 2009, citing the two major pre-commitments of Kmart and Salmat.
13. Mr. O'Sullivan indicates that rental rates across the western and south eastern industrial markets held steady over the second half of 2009 with some minor softening in the City Fringe and northern markets. He goes on to say that Melbourne's West, the city's largest industrial precinct still remains the lowest cost option of all the major industrial precincts.
14. In respect to rentals, Mr. O'Sullivan advises of a varied performance depending on the nature of improvements, but prime grade properties have experienced limited value decline. He stated "with the slowdown in economic activity and the industrial sector's close affiliation during 2009, land values have fallen across most industrial regions. The trend now is for a stabilisation rather than further falls with a current dearth of new construction and limited business investment".
15. Also the statistics included in his report indicate that the biggest change in the Englobo land values within north-west region was at the lower end, where it fell from $50 per square metre to $30 per square metre between February 2009 to March of 2010. No explanation for the area included in the north-west region is provided nor is there an indication as to what a purchaser could expect to obtain for $30 and $70 per square metre. The Tribunal is of the view the subject land would not be at the low end of this range, particularly given the readily accessible network of sea, road and rail linkages and the general level of amenity of the development.
16. Mr O'Sullivan submitted the statistical tables demonstrated an inferiority in the land values of the western region when compared to land values in the south-eastern region; that the land values showed a significant fall between early 2008 and late 2009/early 2010 followed by a partial recovering in 2011, with all three agents reporting falls up to the relevant date.
17. In the same statistical data provided, the Tribunal not only notes these observations, but it was also clear to the Tribunal that while the land values in the south-east were above those of the west, they were also subject to greater fluctuations in price than the western region.
18. The Savilles table was the only one that showed any data for Englobo sites but it was for the north-west (rather than the western region) as well as the south west, so if the data extends to the more distant locations of the north-west, then in respect to the western region alone it could be skewed or at least showing a greater range in value than might actually have occurred. What the Tribunal found interesting about this table were that the statistics for the north-west region showed a fall in March 2010 for all land sizes, the largest at 40% was for the Englobo land in the north-west, however, it was only the land at the low end of each range that altered; the upper end of each range remained consistent across all time frames and there was no change to any of the sectors in November 2010.
19. By comparison, the land in the south-east showed greater change. In March 2010 the lower end of the range of the two smaller sectors fell to a similar extent as the western region; the upper end of the range showing no change at all but by November 2010 that lower range showed significant growth while the upper end of the smallest sized lots did not change and the upper end of middle sized lots fell by 17%. As for the Englobo parcels in the south-west there was a fall across the range in March 2010 (the greatest at the low end) and in November there was no change in the low end of the Englobo parcels but a second similar fall as that in March for the upper end.
20. The similarity between the two was the change in the Englobo land figures. In the north-west the range of $50 to $70 per square metre in February 2009 became $30 to $70 per square metre for March 2010 and November 2010. In other words the range increased from $20 to $40 per square metre. In the south-east, the range in 2009 changed from $80 to $100 per square metre to $50 to $90 per square metre in the same subsequent periods, a similar change in the range as the north-west.
21. The Tribunal is of the view that such statistical evidence serves as market indicators only and there is quite some variation across the three agents' figures, but none of which re-enforced a significant downturn in the market ranging between 14% and 69% over a four-year period as contended by Mr O'Sullivan. There was only one change of 40% at the low end of the Englobo range for March 2010 in the statistics presented by Savilles for the north-western region, but in that same period there was no change in the upper end and so while it indicates stability at the upper end of this industrial region, more information is required for it to be more reflective of the western region alone.
22. Annexed to Mr. O'Sullivan's valuation report were several pages taken directly from the three estate agents' industrial reports. The Tribunal considers it is important to mention that while each agent made slightly different points in their summary and each reported downward trends in the industrial market, none of the reports expressed the dramatic downturn as the Applicant might have us believe.
23. The Tribunal considered the information provided with each of the Valuer's sales evidence. It doesn't consider it necessary to comment in detail on every sale put forward, however there were some sales that the Tribunal considers deserve particular attention, while for others, more general observations are made. The following are the Tribunal's observations and comments:
24. In relation to 1 - 1-20 Palmers Road Truganina the difference between Mr O'Sullivan's $47 per square metre and his analysed $64 per square metre is due to his addition of $2,044,041 to the purchase price being for the development contribution of $828,041 and $10 per square metre ($1,216,000) for services.
25. Mr Sheales does not mention these additional components, but he does say that some of the land would be acquired for a road re-alignment while Mr O'Sullivan has calculated the net developable area of the land to be 8.28 Hectares without indicating how the balance of the land would be developed.
26. The Tribunal considers both Valuers are of the view that not all of the land can be developed and that the purchase price would have been influenced by the net developable area, the additional development costs and the lead time required for the land to be developed.
27. Rather than support a unit value of $45 per square metre as Mr O'Sullivan contends, the Tribunal is of the view that it is more supportive of the value adopted by Mr Sheales for the subject land that is already serviced so no significant lead time was required for a potential subdivision.
28. In relation to 469-491 & 499-525 Frankston-Dandenong Road, Lyndhurst both Valuers submitted the latter sale of this property; Mr O'Sullivan also submitted the two sales of it in 2006 and 2010 as one of his three "pairs of sales" to demonstrate a 35% downward change in the market over this four-year period.
29. In respect to Mr O'Sullivan's comparison of the two sales of this property, the Tribunal made the following observations in its comparison of them:
    • This property is contained in two separate parcels; not disclosed was whether or not these two parcels were separately owned and sold.
    • The combined two parcels make up this site, would form a rectangular shape if not for the much smaller rectangular shaped parcel (No. 493) positioned in the south-west corner of No. 469-491 Frankston-Dandenong Road, thus the road frontage of 501 square metres (according to Mr Sheales) was broken and some design considerations may be needed to be made in respect to its development around the small rectangular site that sits between them.
    • At the time of the sale in 2006, the zoning of the land was pending Industrial "1" however; it was also subject to a Planning Scheme Amendment so while it was being purchased ahead of this zoning change there was some level of certainty in respect to a planning change.
    • The circumstances, terms and conditions of each of the sales were not provided, so the Tribunal cannot be certain that the analysis of each sale is on the same basis of circumstance, terms and conditions as the other. As it is commonplace for sales of Englobo sites to be sold with a lengthy settlement, it is important that this component of each sale be established for the analysis of each and their comparison to be reliable.
30. Mr O'Sullivan calculated the net developable area to be 286,950 square metres and the gross site area is given as 319,100 square metres.
31. What is also not known about the first sale is the purchaser's expectation in respect to the pending change in zoning when the consideration of $25,800,000 was paid in October 2010. It may be that the Purchaser did not anticipate the accompanying adoption of the Development Contributions Plan into the Planning Scheme when the zoning change occurred and so took a risk in his purchase, despite there being some level of certainty about the zoning change. If that was so, the risk taken at that time was to some extent revealed in his subsequent sale price. Without the facts pertaining to the first sale being disclosed its reliability as market evidence and a market reference point are in question.
32. Following the second sale, Mr O'Sullivan makes allowance for the cost of a retarding basin and fill ($1,390,000) and Development Contributions as required under the Planning Scheme ($4,909,714). The Tribunal calculates the total land cost to be $23,299,714 or $73 per square metre over the site area; Mr O'Sullivan calculates this figure at $72 per square metre.
33. The Tribunal carried out an analysis of the 2006 sale price based on the total land area and the net developable area of the land as follows:

divided by 319,100 square metres = $80.85 per square metre

divided by 286,950 square metres = $89.91 per square metre

divided by 319,100 square metres = $53.27 per square metre

divided by 286,950 square metres = $59.24 per square metre

And on the basis of the total cost of the land plus works and contributions as follows:

divided by 319,100 square metres = $73.00 per square metre divided by 286,950 square metres = $81.20 per square metre.

1. When the works and development contribution are taken into account, the resulting total purchase cost shows a very small difference in the purchase price between that of October 2010 and that of June 2006 - $2,500,286 based on the figures provided; this equates to a reduction of 9.7% over the four years. If the requirement for fill and a retarding basin were common elements of the two sales and in its undeveloped state this could well be so, then in removing this component from the additional costs, the sum of the purchase price in October 2010 and the development contributions becomes $21,909,714 or $68.66 per square metre over the gross land area and $76.35 per square metre over the net developable area. This then represents a percentage change of 15% between the first sale price and this adjusted price, but in this example and the example above the circumstances, terms and conditions of each sale are not known and so not accounted for; and the costs of the fill and retarding basin requirements are not known for June 2006 so that the difference, if any cannot be accounted for either.
2. Effectively, the analysis of this sale based on the known data, tells the Tribunal that the purchase price on each occasion might well have been more similar than Mr O'Sullivan claims it was different. The real difference between the two sales relies on knowing to what extent the first purchaser was informed about the property; and the various other circumstances, terms and conditions of each sale.
3. The Tribunal therefore finds this comparison exercise, conducted by Mr O'Sullivan as a measure of market change, to be unreliable.
4. In relation to 361-399 Kororoit Creek Road, Altona with respect to this sale the Tribunal noted that the costings adopted were given as the Valuer's estimates and that the accuracy of such a calculation relies heavily on the accuracy of all of the input data. There was no evidence that this was based on actual data. Additionally, the Tribunal doesn't consider it unusual for the sale of a property of this size and consideration to take five months after a marketing campaign to be completed, given that there would have been a major holiday period within this time frame, and so it does not share the view that this sale is a reflection of a lack of purchaser interest for large scale parcels in Melbourne's west.
5. Mr Sheales also uses this sale but has a smaller land area (35 Hectares) of which he advises that 2.7 Hectares is located within an Urban Floodway Zone. He allows a development cost of $150,000 per block in a 64-lot subdivision and analyses the net sale price of the net area to be $62.38 per square metre compared with gross sale price over the total land area to be $85 per square metre, Mr Sheales considers this to be a secondary location.
6. The Tribunal notes the comments of Mr Sheales in so far as he feels that there is a great deal of subjectivity in relation to how the partly completed development works should be completed; and shares his view.
7. Mr O'Sullivan uses the sale of 720 Kororoit Creek Road at $72 per square metre, July 2007, to derive a plunge in the market between July 2007 and May 2010 of 69%; and although he believes that this sale is above the market levels, he refers to it later in his comments on this property and in respect to the Robinsons Road and Maidstone Road sales.
8. Mr O'Sullivan does not provide a reason for the owner selling off a very near complete 64-lot subdivision as a whole instead of selling the lots individually, nor does he find a reason for its "pair" supposedly selling above the market. None of the other data provided by Mr O'Sullivan shows anywhere near such a dramatic change in the industrial market in either the south-eastern or the western region, so the Tribunal views as cavalier, his construction of such a market change (14% to 69%) and subsequent reference to it on two more occasions by him as having been established for the industrial Englobo market.
9. What the Tribunal can take from this sale is that the purchaser, was in the market with $30 million to spend and so it serves as evidence of the likely buyer for the subject property - another point that Mr Sheales made in respect to this sale.
10. Both parties submitted the sale of 165-211 Robinsons Road, Ravenhall and their analysis was similar, however, Mr O'Sullivan's adjusted rate of $74 per square metre took account of the amount he estimated for service costs (an amount that wasn't proven). He considered it to be superior to the subject property in part because of its zoning and in part because of its exposure to the Deer Park By-pass. Mr Sheales acknowledged its excellent street frontage but described its position as a backwater, particularly at the time that it sold.
11. The Tribunal's impression of this site was that it was removed from the greater industrial precinct and though it had an extensive exposure to the Deer Park By-pass that in itself is an advantage and not a feature of the subject property, it is within reasonably close proximity of the subject property; however, the unique extensive frontage possessed by the subject property provides a significant benefit in its development, whether such development be in one stage or more than one stage, that could not be overlooked.
12. 210-238 Maidstone Road, Altona a smaller and irregular shaped site that sold in May 2007 for the equivalent of $70 per square metre was referred to. It is an irregular shaped site that abuts a secondary road in Maidstone Road, a railway line and residential development to the east. Maidstone Road is a secondary road. Noting the market movement over this period, the Tribunal is of the view that it does support the assessment of Site Value adopted by Brimbank City Council, since it was the after this sale that most of the growth and then a correction occurred.
13. In his comments about this sale, Mr O'Sullivan indicated that the zoning was inferior to the subject land's Industrial "2"zoning, it is smaller in size than the subject land (although the Tribunal notes its difference is not to the extent of that between the properties at Robinsons and Palmers Roads), that when it sold in May 2007 it sold at near the market peak. The next point Mr O'Sullivan makes is that the market peak was late 2007 to early 2008; May 2007 is therefore some distance from the market peak and it was from this period to 2010 that he established a fall of 14% to 69%.
14. The Tribunal is of the view that if May 2007 was at least seven months before the peak, then it follows that there could have been a further increase in the purchase price over the remainder of 2007 and prior to the market correction, so if this sale price required adjustment it would not be as significant as the 35% that Mr O'Sullivan contends. No helpful statistical evidence in respect to the market dating back to May 2007 and earlier was found in Mr O'Sullivan's report
15. The remaining evidence comprises a collection of sales of various sized properties that Mr Sheales presented, four of which were some time away from being developed (440 Dohertys Road, Truganina, 373 and 678 Boundary Road, Truganina and 40 Leakes Road, Truganina) and all lend support for the adopted rate of $68.68 per square metre by the Brimbank City Council in its site value, although the Tribunal suspects that 40 Leakes Road might be a potential residential site rather than an industrial site.
16. The two sales that remain comprise the property opposite at 128 Swann Drive (an example of the value levels for smaller lots in the same street) and Lot A Dunmore Drive, which Mr Sheales concedes could be ignored owing to the timing of its sale.
17. In summarising, The Tribunal found that the interpretation of the statistical evidence contained in Mr O'Sullivan's valuation report was not considered in sufficient detail and while the Tribunal accepts that there has been a downward change in the industrial market of the western region, around the relevant date, its own interpretation of the statistical evidence did not support the wide and dramatic downward change in the western region, between 14% and 69%, that Mr O'Sullivan contended. From the evidence submitted in written form and at the hearing the Tribunal considers that a downward change more like between 10% and 15% was experienced in Englobo parcels.
18. The Applicant's Valuer used three "pairs of sales" to show this wide and dramatic downward change in the market. The Tribunal considers that while in principle this exercise could have been useful, the lack of accurate information provided meant that the reliability of the results extrapolated from it were far from convincing and flew in the face of other statistics relied upon.
19. Mr O'Sullivan first endeavored to demonstrate a 35% change in the market by comparing two sales of the Lyndhurst property, but when he made the comparison as one of his "pairs of sales" he omitted much of the information about its second sale that he included when citing it as part of his primary sales evidence. Piecing all of the information together, the Tribunal finds that by not including all of the information when making an analytical comparison amounts to "constructing a smokescreen" in an endeavor to hide the true reality; even the Tribunal's analysis of this sale is subject to further information about this sale being disclosed. Nevertheless the Tribunal does not accept a downward change in the market of the 35% contended based on Mr O'Sullivan's calculations and the information that was not included, but should have been.
20. The second pair of sales, those of 165-211 Robinsons Road, Ravenhall and 20 Palmers Road, Truganina, differed in size by over 20 Hectares in their total site area and over 26 Hectares when the net developable area of the Palmers Road property is considered. Mr O'Sullivan shows a 14% reduction in value between these two sales and states that because of timing he expects that it should be more like 30%.
21. The extreme end of the dramatic downward change in the market relied heavily on a sale of a near completed 64-lot subdivision site in Kororoit Creek Road, Altona being compared to another fronting the same road but further west and on the north side. The data used to adjust its sale price to an Englobo value was given as "estimated" and neither quantified nor supported and the circumstances of the sale were not disclosed. To say that this sale showed a 69% change in the market, in part due to its partner sale having been "sold above the market", when there were too many other variables to be applied to its sale price, is misleading and in this regard, the Tribunal prefers Mr Sheales cautious reflection of it.
22. If any or all of these sales were omitted from the evidence put forward by both Valuers, Mr Sheales could fall back on an assortment of other sales of Englobo parcels that required more lead time in coming onto the market as completed developments that showed support for his Site Value.
23. In contending that the prospective purchaser for the subject property was a developer who would subdivide the land, Mr O'Sullivan, appeared to ignore the immediate development capabilities of the subject site , its extensive through street frontage and it being in a desirable estate.
24. The difference between the two Valuers' approaches was that Mr O'Sullivan relied heavily on statistical data that was not well interpreted and comparisons of "pairs of sales" that were disparate, to produce a most unbelievable downward trending outcome that not even the statistics in his report supported, while Mr Sheales provided a more objective view of the market and discussed a wider range of local sales that when compared to the subject site and its attributes produced a more logical and so a more convincing case for the Site Value that he is defending.
25. The Tribunal therefore leaves the Site Value as at 1 January 2010 unchanged and confirms it at $20,700,000.