Golf course, clubhouse and accommodation units 4,500,000
Added value of balance of land 1,250,000
Added value of potential compensation 500,000
Total 6,250,000
198 This analysis of the transaction is based upon evidence from a number of sales including Paradise Springs, Gold Coast, Robina Wood on the Gold Coast, Lakelands on the Gold Coast, the Glades on the Gold Coast, North Lakes at Brisbane and the Links at Port Douglas.
199 The added value of the balance of the land has regard to the existing zonings and the fact that at the date of the sale, the Master Plan had not yet been prepared or approved in principle by the Council.
200 Mr Murphy believes, as does Mr Dempsey, that the price achieved for golf course sites did not change significantly between 1998 and 2001. Mr Murphy evidences this from a number of sales, including sales of properties on the Gold Coast and in the Hunter Valley.
201 I accept Mr Murphy. In my opinion it is unlikely that the price which could have been achieved in the market place for the subject property changed significantly between the date of sale in December 1998 and the date of acquisition. No doubt a purchaser may have paid a little more by reason of the fact that the Master Plan had been developed, although the uncertainties about the ultimate form of any development and the doubtful commercial viability of it would have confined the additional amount which may have been paid.
202 Mr Murphy is of the opinion that the Lakelands course, which sold for $9 million in July 1999, is significantly superior to the subject property. The Glades, which was sold for an effective price of approximately $10.5 million in October 2000, is also considered to be significantly superior to the subject property. He is of the view that both properties are superior due to their Gold Coast location and the quality of their features. Mr Murphy believes that the Robina Woods course, which was sold in June 2000 for $7.75 million, is closer in quality to Bonville, but its Gold Coast location also makes it a superior property.
203 Mr Murphy believes both the North Lakes and the Links courses are superior to the subject course in terms of their location. North Lakes is situated in a large residential community to the north of Brisbane, which is being developed in accordance with a master plan, and has the opportunity to attract golfers from the under-supplied Brisbane golf market. The Links, which is located near Port Douglas, is in a market which appeals to the upper end of the domestic tourist market as well as the international tourist market.
204 In Mr Murphy's view, the sale of the Paradise Springs course for $5.2 million, the sale of the golf course component of the Hunter Valley Golf and Country Club for $5 million, and the earlier sale of the subject property provides the best evidence of value of Bonville. Accordingly, Mr Murphy assessed the value of the golf course and associated facilities without the impact of the easement at $5 million.
Mr Murphy's after value
205 In assessing the after value of Bonville with impact from the transmission line, Mr Murphy concluded that the power lines do not have a significant impact on the amenity of the golf course because, with the knowledge that the power lines would exist, the course has been designed to minimise their impact. He acknowledges that golfers have to pass under the power lines between the second and third holes, ninth and tenth holes and seventeenth and eighteenth holes. However, because the course has been constructed in a flooded gum plantation, the lines are largely disguised by the trees although they do impact on the practice fairway and a hole used as a spare when the course is being repaired. The power lines are barely visible from the clubhouse and are only just visible from the existing accommodation units.
206 Mr Murphy had regard to two golf course sales where transmission lines affect a golf course. The first was a sale at Paradise Springs on the Gold Coast and the second Longyard at Tamworth.
207 The Paradise Springs course is impacted by a major overhead transmission line which is far larger and more obvious than the power lines passing through Bonville. Photographic evidence was tendered of the power lines.
208 The course was developed by a Japanese company which was apparently experienced in tourism development and the operation of resorts. The course was subsequently purchased by an experienced American operator, but is now owned by a consortium of local investors.
209 As with Bonville, the Paradise Springs course was designed under power lines which existed before the course was constructed. The developer and both purchasers advised Mr Murphy that the presence of the power lines did not have any discernible affect on the price achieved or paid for the golf course. Although the parties would have preferred if the lines were not present, the price paid was determined by the fundamentals of the property rather than any discount for the presence of the power lines.
210 With respect to the Longyard golf course at Tamworth, it was sold in 1997 for $1.67 million as a going concern. Apparently it is a high quality golf course designed by Greg Norman's design team, although the construction budget was not the same as for good quality resort courses. The course has a modest quality clubhouse and related facilities.
211 The course is affected by a 132kV power line and has been designed around it. However, the presence of the power line is obvious due to the open and relatively flat nature of the golf course site. Mr Murphy has made inquiries of the property's developer and has been advised that the presence of the power line did not have any impact on the price achieved for the golf course.
212 Again, the price paid for the course was determined by the fundamentals of the property including its country location, course and clubhouse quality, profitability and limited market.
213 One of the reasons Mr Murphy believes the existence of power lines does not adversely impact on golf course sale prices is that in the prevailing market, golf courses are purchased for considerably less than their replacement cost. Accordingly, the price paid does not have a lot of scope to reflect discounts for extraneous matters when the whole property is being purchased for a heavily discounted price (compared to historical or replacement cost).
214 Although the market evidence does not disclose an identifiable discount for transmission lines, Mr Murphy believes that compensation is appropriate in the present case. He believes, based on generic evidence for discounts attributable to power lines, that discounts should be applied to the golf course, clubhouse and accommodation units component of the property of at least 5%, but no more than 7.5% of the unaffected value of the property. Accepting the higher figure, Mr Murphy's assessment of the after value of the golf course, clubhouse and accommodation units is $4.625 million. Based on this approach, the compensation which would be payable is $375,000. This assessment of compensation includes:
· the land acquired for the easement;
· the injurious affection to the golf course;
· the injurious affection to the clubhouse;
· the injurious affection to the existing accommodation units; and
· any loss of profit incurred by the golf course, clubhouse and (existing) accommodation.
Compensation for Further Development Potential
215 Mr Murphy believes that the value and reputation of Bonville is largely based on its heavily treed and rural environment. If the Master Plan was executed, he believes that the ambience of the pristine facilities may be lost due to the intrusion of a large number of tourist accommodation units into the property.
216 Mr Murphy identifies that the approved Master Plan is based on the use of the land for tourist accommodation purposes, which is a permitted use under the existing zoning. However, he believes that based on the performance of the existing supply of tourist accommodation in Coffs Harbour, and the impact that an additional 949 units would have on the competitive supply, this type of tourist development would not be commercially viable.
217 In addition to macro supply/demand considerations, Mr Murphy believes that the location of the proposed tourist accommodation is not conducive to a successful development. He believes that the main reason people visit Coffs Harbour is because of its attractive coastline and beaches. It is for that reason that all of the existing top quality accommodation is situated in the northern beach precinct of the city. However, notwithstanding the locational advantage of these accommodation facilities, they do not perform well and their investment performance has been very poor.
218 Accordingly, he does not believe that the Master Plan tourist development would be a commercial success and he does not believe that construction finance would be available for such a project which would incur significant upfront costs.
219 Mr Murphy accepts that there may be a potential for some further development on the site but believes, having regard to the existing tourist accommodation facilities in Coffs Harbour and the ability of the market to absorb additional room stock, the potential of the property for tourism accommodation units is more in the order of 150 rooms, including the 30 existing rooms. The potential for additional room stock is consequently, in his opinion, in the order of 120 rooms.
220 Mr Murphy believes that although there are examples of golf course based developments with a larger number of tourist accommodation units, these developments are located in better performing tourist destinations.
221 A good example of such a development is Cypress Lakes in the Hunter Valley, where the golf course based development is approximately 230 villas used predominantly for tourist accommodation. Cypress Lakes is located in a very good quality site in the heart of the Hunter Valley wine growing and tourism precinct. The development is a two hour drive from Sydney and it has been successful because of its site quality, the quality of the golf course and facilities, and its location in relation to the major markets of Sydney and Newcastle.
222 Mr Murphy does not believe that it is a reasonable proposition to suggest that this type of development could be emulated in the Bonville area, which is a six and a half hour drive from Sydney. Once visitors have decided to drive extended distances or fly to a destination, a lot of other options become available, including Port Stephens, the Gold Coast, the Sunshine Coast or other parts of Queensland.
223 Queensland destinations have the advantage of better flights, more choice of flights and access to low cost flights. As golfing destinations, they provide golfers with a range of top quality resort courses rather than only one such course. They also provide families and groups with a wide choice of activities apart from golf: theme parks, restaurants, night clubs and a range of activities in relation to northern Queensland the Great Barrier Reef.
224 Upon the assumption that there was a viable market for a further 120 units on the site, Mr Murphy believes it would be best developed with 20 in Site P (already contemplated on the Master Plan) and the remainder in the site adjacent to the tenth fairway (Site A), for which approval for 100 units has already once been given. If it was possible in the future to accommodate any further tourist accommodation, he believes it may be appropriate to then consider construction of units on Site B1, although this would increase the available accommodation beyond that which he accepts as being commercially viable.
225 He concludes that the most generous allowance for development on site B1 would be for "say" 30 units at some time in the future, with a relatively low probability of successful and viable execution.
226 Mr Murphy further believes that, if there is only a market demand for a total of 150 tourist accommodation units on the developable land around the golf course, it may be difficult to create a viable development, having regard to the significant external costs which would be incurred, in particular the provision of water and sewerage.
227 However, although he has considerable doubt about the matter, Mr Murphy is prepared to accept the possibility that the B1 land may have accommodated up to 30 units. He believes that the proposed unit sites on the easement are inferior to the 20 units site (Site P) and the 100 units site (Site A), which he considers would exhaust most of the tourist accommodation potential on the golf course. However, having regard to the necessity to resolve doubts in favour of the land owner, Mr Murphy accepts that the 30 unit sites for which there may be some potential could be valued at $20,000 per unit site. On the assumption that that potential has been lost, he assesses compensation for the balance land at $600,000.
228 The assessed rate per site is based on the rate of $25,000 per site, which he assessed for Site A, and the discount he made for the risk associated with the viability of these sites and the fact that they would only be developed (if at all) after the more suitable sites are developed.
229 Mr Murphy also accepts that the transmission line injuriously affects the 100 unit site (Site A). Mr Murphy believes that the unaffected value of the 100 sites would be of the order of $25,000 per site or a total unaffected value of $2.5 million. He derives this value from the market evidence and the fact that considerable external costs would have to be incurred before the land is able to be developed.
230 Mr Murphy is not aware of any market evidence which accurately demonstrates the impact of transmission lines on land such as the subject property. In his experience, the market evidence derived from the sales to which I have earlier referred, indicates discounts for transmission lines for different types of properties of between 2% and 15%.
231 Mr Murphy believes that the market evidence indicates that good quality sites in superior Gold Coast resorts with services available to the boundary of the sites sold for prices which ranged from approximately $30,000 to $40,000 per unit sale.
232 Mr Murphy also had regard to the sale of the Hunter Valley Golf and Country Club for $10 million in May 1999. This sale includes the potential for a 150 room hotel and 175 apartments and includes a developed golf course. He believes that when analysed it reveals an average of $15,384 was paid for each hotel room and apartment site.
233 He also looked at the sale of the Vintage property in 1999 in the Hunter Valley for $8 million. The property includes a golf course site and balance land which is being developed with a total of 837 dwellings and 150 hotel room sites. He analyses that sale to show that the price represents an average of $7,600 per dwelling and hotel room site.
234 His analysis of development land in golf course and resort developments in Coffs Harbour and the Hunter Valley indicates rates per dwelling site ranging from $7,600 to $16,600 per dwelling site.
235 He considers that an appropriate discount for the proximity to the transmission line is 10 percent. Whilst the transmission lines are visible from the site they are separated from the site by a fairway and their impact is softened by the trees on the property. Accordingly, he assesses the injurious affection for the land known as Site A as amounting to $250,000.
236 He believes the development potential on the balance of the land is limited to one hectare lots. Based on previous proposals for such lots on the property, their likely positioning is not affected by the transmission lines, and accordingly, Mr Murhpy does not assess any additional compensation for these lots.
The claim of Ironhill Management
237 Mr Murphy says that no allowance should be made for any loss by Ironhill Management. Although he acknowledges an impact on the value of Sites P and A, he does not believe there would be any loss of development potential. Accordingly, even if compensable, Ironhill Management will not suffer any loss of potential revenue. Otherwise, he believes that the development potential of Site B1 is so uncertain and so unlikely to be developed in the foreseeable future that no amount should be allowed for the loss of potential management rights of that part of the site.
Conclusion
238 I have concluded that I am unable to have any confidence in the evidence of Mr Robertson. In my opinion he has an entirely unrealistic appreciation of the desirability of Coffs Harbour as a resort destination that includes a golf course. Although there is evidence of a number of successful golf course resort developments in other parts of Australia, they are generally associated with other facilities including beaches or other high quality golf courses which provide an attraction for dedicated golfers, other significant tourist attractions or are close to major population centres. Most of the successful developments have included facilities for permanent residential accommodation.
239 Notwithstanding the visual attractiveness of Bonville International Golf Course, it is located a significant distance from the coast and provides no other attractions for golfers and their families. Being a significant car journey from Sydney, it would have difficulty in competing with resorts closer to the metropolitan area. Although it can be accessed by aeroplane, once a person looking for golf course and associated resort facilities has made their way to the airport, the travel time to southern Queensland would be similar to the travel time to Coffs Harbour and only an hour longer to the more northern parts of Queensland. All of the Queensland destinations provide significantly greater attractions than are available to someone at Coffs Harbour. The history of commercial tourist accommodation in Coffs Harbour and its lack of financial success does not justify a conclusion that any significant tourist accommodation development of the subject site would be viable.
240 As I have indicated, during the course of proceedings various experts met to identify a common position in relation to a number of matters. One of the matters upon which agreement was reached was the likely construction costs, including the provision of water and sewerage upon the assumption that 138 units could be developed along the line of the easement. Those construction costs varied significantly and were higher than the costs which had originally been assumed by Mr Robertson. When those costs were assumed for the purpose of analysing a hypothetical resort, the result was a negative value for the land.
241 This outcome was consistent with the position which Mr Dempsey had taken. Furthermore, the loss would increase if the assumed realisation for each unit of a sale price of $495,000 was not achieved. It was the view of Mr Dempsey and Mr Murphy that this was a price well in excess of the value which the market evidence disclosed was appropriate. I accept their evidence.
242 Faced with the agreed costs and a consequent negative value for the land, Mr Robertson produced a revised analysis in which he suggested that by increasing the quality of the accommodation in the units, he would be able to achieve a higher realisation price. Surprisingly, he also believed that a lesser profit and risk was appropriate and, by this recalculation, suggested that he could demonstrate a value for the land.
243 In my opinion, this exercise by Mr Robertson is completely unrealistic and undermines the credibility of his entire evidence. The value which he ultimately assumes for each unit is significantly inflated above that which the evidence would suggest is appropriate. I am satisfied that the adjustments which he made after it was demonstrated that the land would have a negative value bear no relationship to a true assessment of the market position.
244 In my opinion, Mr Nicholson also has an entirely unrealistic appreciation of the value of the Bonville site. Having regard to the sale in 1998 and my conclusion that the value of the site at the date of acquisition had not significantly increased, Mr Nicholson's evidence cannot be accepted. Drawing as he does upon permanent residential accommodation for his analysis, he has, in my opinion, come to unrealistic conclusions.
245 I accept the evidence of Mr Murphy and believe he provides an appropriate and generous assessment of the applicants' claims. I am satisfied that there was limited, if any, potential for further tourist development on the Bonville site. To date, the site has functioned as a high quality golf course drawing upon a local residential market and some tourists. The limited and modest accommodation on the site has not been fully utilised and I do not believe it appropriate to assume that there was viable potential for development consistent with the Master Plan or indeed for any significant development at all. The site does not have the benefit of the major attractions available to almost every other golf resort within Australia. Notwithstanding its limited desirability, it would have to compete in that market to attract investors who would only invest if they were satisfied that the golf course would attract consistent usage justifying a return on their investment. Because the site cannot be used for permanent residential accommodation, its market would be confined, with the consequence that I am not satisfied that it would attract sufficient investors to provide a return on the capital necessary to carry out the development.
246 I accept Mr Murphy's evidence that if there is a potential for further development on the site it is modest and would be carried out on sites other than B1 and B2. If land within the corridor of the easement is contemplated for development, in my opinion this would be confined to select areas within B1 and any development would be significantly less intense than is shown on the Master Plan. This could be achieved without having to confront the issue of the impact upon the koala population and the making of appropriate provision to accommodate the bushfire risk.
247 In my opinion because of the topography, distance from the main facilities, and the poor relationship that the residential accommodation would have to the golf course, there is no prospect of development in the area shown as B2.
248 In accepting the evidence of Mr Murphy, I indicate that I also generally accept the analysis undertaken by Mr Dempsey. However, as Mr Murphy resolved the matter in a manner more favourable to Ironhill than Mr Dempsey, I believe it appropriate to accept his opinion when determining the appropriate compensation.
249 As a consequence, in my opinion the appropriate compensation payable to Ironhill includes the following elements: