Adjustment 1 - time: what allowances (if any) should be made for movements in real estate prices between the sale date (18 March 2010) and the relevant date provided by the Rates Act (1 January 2013)? As discussed above, the Tribunal has found that there was no significant movement in the relevant segment of real estate market in this period. The Tribunal therefore makes no adjustment to the sale price on account of time.

Adjustment 2 - site area: what allowance should be made to adjust for the difference in the area of the subject site (607 sqm) and the area of the adjoining site (673 sqm)? The area of the subject site is 90.193% of the area of the adjoining site. The Tribunal therefore adjusts the hypothetical capital value of the subject property down from $4,000,000 to $3,607,727.

Adjustment 3 - depreciated cost of main improvements: what rate should be used to calculate the value of improvements so as to arrive at an unimproved capital value for the subject site? As noted previously, the valuers applied a wide range of costs for improvements from $800 to $2500 per sqm. Mr McInerney had a rate of $2000 per sqm for Sale 1 but used a figure of $2500 per sqm for improvements at the inferior property on City Walk (Sale 5). As previously noted by the Tribunal, both the subject property and the adjoining property are of sound construction with ceiling heights in the order of 4 metres. The Tribunal has therefore allowed a rate of $2500 per sqm for improvements to the subject site (estimated built GFA of 497 sqm) which equates to $1,242,500 which it deducts from the hypothetical capital value of the subject property of $3,607,727 to arrive at an unimproved capital value for the subject site of $2,365,227 which it rounds down to $2,365,000.

In the opinion of the Tribunal, there are no other factors which should be considered and the Tribunal therefore confirms that the unimproved capital value for the subject site is determined as $2,365,000.

1. Mr Green told the Tribunal that the capitalisation of rents is a "measure of investment returns" from leased properties and can be used to arrive at a capital value for a property.[77] In support of this capitalisation of rents approach, Mr Green provided sales evidence for seven leased properties in various parts of Canberra. These included local shopping centres in Campbell and Torrens, both of which he said were "inferior" properties; two large hardware stores in Woden and Gungahlin which he conceded were "not directly comparable" with the subject property; and three strata titled retail/commercial properties in the central areas of Canberra and on one or more levels. Mr Green stated that these properties showed a "yield range of about 7% to 8.8%". In his opinion, the subject property was superior to all of these properties and he therefore applied a yield "which is tighter or lower".[78]
2. Mr Green concluded that "in all my experience, the subject property could not be capitalised at a yield tighter than 6.5% and no greater than 7% reflecting the property's location, tenant profile, age, condition, the term and quality of the lease covenants. I have adopted a yield of 6.75% to the subject property". Mr Green reported that the income from the tenants of the subject property when capitalised at 6.75% gave a capital value to the subject property of $2,955,000.[79] After subtracting the value of improvements, Mr Green concluded that the unimproved capital value of the site using the capitalisation approach was $1,815.000.[80]
3. The respondent argued that the analysed yields upon which the Mr Green relied were not of directly comparable sale properties with characteristics of value similar to the subject property.[81] Mr McInerney disagreed with these figures provided by Mr Green and said there was evidence of comparable properties in Griffith with yields of 5.5% (Sale 9) and 5% (Sale 6).[82] The Tribunal notes that if a yield of (say) 5.5% was to be applied to the income figures from the tenants of the subject property provided by Mr Green, the capital value of the site would be $3,626,945 and, after subtracting the improvements as valued by Mr Green, the unimproved capital value of the subject site would be $2,486,945.
4. The Tribunal notes the suggestion by Callinan J that in its consideration of alternative valuations, the Tribunal should consider the particular features of each valuation "that are capable of yielding to adverse criticism".[83] The Tribunal was not persuaded by Mr Green's evidence regarding the financial yield. In the absence of plausible evidence as to a realistic financial yield, the Tribunal considers that the capitalisation of rent approach to be unreliable in the present proceedings. The Tribunal has accordingly given no further consideration to the capitalisation of rent approach proposed by Mr Green.

1. In his valuation report dated 18 September 2014, Mr Green referred also to a hypothetical development approach to valuation. This was described to the Tribunal by counsel acting for the applicant, Mr Arthur, as "a method designed to ascertain what somebody would pay for the site if they were to develop it from scratch in order to produce a building that represented the highest and best value".[84] Mr Green gave evidence that he had "calculated that maximum development".[85] Mr Green described his hypothetical building as having ground floor retail, upper floor residential and two levels of basement parking but there were no plans, sections or elevations and no planning analysis or architectural or structural feasibility studies. The Tribunal considers Mr Green's assumptions in arriving at that maximum development to be unrealistic and impracticable. Mr Green gave evidence that, "out of all approaches", the hypothetical development approach is "the least reliable"[86] and in its final submissions, the applicant did not press this approach.[87] The Tribunal accepts this concession and has accordingly not given further consideration to this approach.

1. The value of the subject land should be calculated by comparing the value of Sale 1 with adjustments for the area of the subject site and the depreciated cost of the improvements. The Tribunal accordingly finds that the unimproved value of the subject land at 1 January 2013 was $2,365,000.

[8] [2015] ACTSC 40

[9] [2015] ACTSC 40 at [70], [72]

[10] [2007] VCAT 652

[11] [2007] VCAT 652 at [50]- [52]

[12] Applicant's Submissions dated 11 March 2051 at [13]

[13] Respondent's Submissions dated 7 April 2015 at page 5.

[15] [1907] HCA 82; (1907) 5 CLR 418

[16] [1907] HCA 82; (1907) 5 CLR 418 at 441

[17] Joint Experts Report dated 28 November 2014, Exhibit A3

[18] Framework and Requirements of the International Valuation Standards Council, (2013) available at http://www.valuersinstitute.com.au/docs/professional\_practice/International%20Valuation%20Standards%202013.pdf. An earlier version of the Standards was provided in evidence - see Witness Statement of Phil Green 6/11/14 Annexure B - Ex A6 - members File Tab 9

[22] Challenger Property Asset Management Pty Ltd v Stonnington City Council [2011] VSC 184 at [17] per Croft J

[24] Applicant's Submissions dated 11 March 2015 at [80]

[25] Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391

[26] Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [85] per Heydon JA

[27] P Green, Valuation Report dated 18 September 2014, Applicant's Tender Bundle, Ex A5, Tab 2, page 5

[28] R44 at Part C - Additional controls for group centres, Commercial Zones Development Code, Territory Plan

[29] Transcript of Proceedings 4 December 2014 pages 23-24

[30] Transcript of Proceedings 5 December 2014 page 71