Panori Pty Ltd atf Sleiman Property Trust v Valuer General

Legislative provisions

1. The Subject Land is to be valued in accordance with the requirements of s 6A of the Valuation Act which provides: 6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made. …

Relevant zoning

1. The Subject Land is currently zoned B6 Enterprise Corridor under the Inner West Local Environmental Plan 2022 (Inner West LEP).
2. During the Valuation Years, the Marrickville Local Environmental Plan 2011 (MLEP) (now repealed) applied to the Subject Land. MLEP zoned the Subject Land B6 Enterprise Corridor and had a maximum permissible Floor Space Ratio (FSR) of 0.95:1.
3. Between 1 July 2020 and 1 July 2021, the objectives and range of permissible uses in the B6 Enterprise Corridor under the MLEP were amended. The objectives and permissible uses for the Subject Land as it applied at 1 July 2020 were: Zone B6 Enterprise Corridor 1 Objectives of zone • To promote businesses along main roads and to encourage a mix of compatible uses. • To provide a range of employment uses (including business, office, retail and light industrial uses). • To maintain the economic strength of centres by limiting retailing activity. • To provide for residential uses, but only as part of a mixed development. • To enable a purpose built dwelling house to be used in certain circumstances as a dwelling house. 2 Permitted without consent Home occupations 3 Permitted with consent Business premises; Community facilities; Dwelling houses; Food and drink premises; Garden centres; Hardware and building supplies; Hotel or motel accommodation; Landscaping material supplies; Light industries; Markets; Neighbourhood shops; Office premises; Oyster aquaculture; Passenger transport facilities; Plant nurseries; Roads; Self-storage units; Serviced apartments; Tank-based aquaculture; Vehicle sales or hire premises; Warehouse or distribution centres; Any other development not specified in item 2 or 4 4 Prohibited Agriculture; Air transport facilities; Airstrips; Boat launching ramps; Boat sheds; Camping grounds; Caravan parks; Cemeteries; Centre-based child care facilities; Charter and tourism boating facilities; Commercial premises; Correctional centres; Eco-tourist facilities; Electricity generating works; Environmental facilities; Exhibition homes; Exhibition villages; Extractive industries; Farm buildings; Forestry; Freight transport facilities; Helipads; Highway service centres; Home occupations (sex services); Industries; Jetties; Marinas; Mooring pens; Moorings; Open cut mining; Pond-based aquaculture Port facilities; Recreation facilities (major); Residential accommodation; Respite day care centres; Restricted premises; Rural industries; Sewerage systems; Storage premises; Tourist and visitor accommodation; Waste or resource management facilities; Water recreation structures; Water supply systems
4. The MLEP as at 1 July 2021 contained the following changes: 1. Objectives to promote residential uses and dwelling houses were removed; 2. "Dwelling houses" were removed as a permissible use; 3. "Commercial premises" were removed as a prohibited use; and 4. "Retail premises" were included as a prohibited use.

Evidence

1. An inspection of the Subject Land and the locality was undertaken in the company of the representatives of the parties and their experts. In addition, an inspection of the exterior of the comparable sales was undertaken.
2. The parties each qualified an expert valuer to give evidence in the proceedings: Mr Jackson for the Applicant and Mr Hill for the Respondent.
3. The valuers prepared individual reports and participated in joint conferencing. In the joint conference the valuers agreed: 1. The direct comparison method of valuation is most appropriate and that it should be applied through the analysis of B6 - Enterprise Corridor zoned sales; 2. The B6 Enterprise Corridor zone provides for low rise development of the Subject Land to a maximum developable Gross Floor Area (GFA) of 1,092.5m2; 3. As at the valuing year of 1 July 2020, residential development was potentially possible on the Subject Land but was prohibited as of 1 July 2021; 4. An allowance for market movement is required to adjust the analysed land value of the sale at its contract date to the relevant valuing years of 1 July 2020 and 1 July 2021; 5. To reflect the slightly improved market conditions prevailing over the valuing years, that an adjustment up of 5% should be made from 1 July 2020 to 1 July 2021; 6. In adopting the direct comparison method of valuation, adjustments to the comparable sales were necessary for: 1. Location: this relates to the location compared to the Subject Land; 2. Size: whilst the valuers agreed as to the size of the Subject Land and comparable properties, the unit of measurement to be used to adjust for size was disputed. Both experts applied an adjustment for size on the basis of a rate per square metre of the GFA. The difference between the experts related to which GFA to adopt. Mr Jackson adopted a GFA for each sale determined as the highest GFA permitted by the planning controls. Where the permitted GFA exceeded the current GFA of the sale, Mr Hill, adopted the current approved GFA of each sale. This issue will need to be resolved in the consideration of each relevant sale to determine the appropriate adjustment to be made to render the sale comparable to the Subject Land; 3. Shape: the shape of the Subject Land was broadly square with similar depth to width. An adjustment to the comparable sales to reflect the different shapes of those sites was required; 4. Access/corner: relating to the position of any allotment either within a block or at the end of a block; access by way of secondary or rear access; and 5. Exposure: this relates to exposure of the sites to passing trade and was determined by reference to the lineal frontage to the main road.
4. Whilst the joint report of the valuers indicated that the valuers remained in dispute as to a number of topics, at the opening of the hearing the representatives for the parties agreed that the only issue for determination was the selection of appropriate comparable sales and the relevant adjustments to be made to such sales.

Comparable sales and adjustments

1. The location of each of the comparable sales, identified with a court sale number, is shown in Figure 1 below: Figure 1: Map of land value comparable sales supplied by the parties.
2. The valuers analysed the sales in both their reports in chief and in the joint report of the experts.
3. In his report in chief, Mr Jackson relied upon: 1. Sale 1: 38-40 Parramatta Road, Summer Hill; 2. Sale 2: 73 Parramatta Road, Haberfield; and 3. Sale 3: 3-15 Parramatta Road, Haberfield.
4. In his report in chief, Mr Hill relied upon: 1. Sale 4: 752 Parramatta Road, Lewisham; 2. Sale 5: 181 Parramatta Road, Haberfield; 3. Sale 6: 215-217 Parramatta Road, Haberfield; 4. Sale 7: 65-69 Parramatta Road, Concord; and 5. Sale 8: 156 Princes Highway, St Peters.
5. There were only two common sales relied upon by the expert valuers - Sales 4 and 5.
6. As to the sales that were not common the valuers elected not to engage in all of the sales relied upon by the other valuer. Mr Jackson did not analyse Sales 6 to 8. Mr Hill did not analyse Sale 2. The reason given by each valuer for failing to analyse each of the counterpart valuer's sales was that they did not consider such sales to be relatively comparable for various reasons.

Adjustments to be made to all sales

1. There were a number of adjustments that were required to be made to any sale selected as a comparable sale, these adjustments were for: 1. The analysed unimproved land value; and 2. Exposure.
2. As these two adjustment must be made to any sale determined to be comparable they will be dealt with separately from the individual sales and the adjustment determined applied to any relevantly comparable sale.

Unimproved Land value

1. The starting point to the determination of unimproved land value, as is required by s 6A(1) of the Valuation Act, is to determine a value for unimproved land. In this case, all of the comparable sales were of improved land. Accordingly, an adjustment to the comparable sales is required to be made to render them comparable to the assumption required by s 6A(1).
2. Where each of the valuers analysed a sale they undertook an adjustment to the improved comparable sales and determined what is referred to as the analysed land value, being the sale price less a dollar amount deducted from that price for the added value of the improvements on the land at the time of the sale, then adjusted for market movement to the valuation date. However, each valuer undertook this exercise by adopting a different analysis. It is therefore necessary to consider the differing approaches and determine which approach is to be applied in the circumstances of this case.
3. Mr Hill made his assessment based upon an application of industry accepted costings for improvements from Rawlinsons Australian Construction Handbook (Rawlinsons). Mr Hill made no deduction for depreciation of new improvements when determining his added value of existing improvements.
4. Mr Jackson's method relies on a hypothetical model of residual analysis somewhat like that undertaken to determine a residual land value for a proposed development based on the assumed highest and best use of land. He applies this method to capture all the costs associated with the development of the land and deducts this from the sale price to derive a value for the land. Mr Jackson applies a percentage deduction to construction cost to allow for the depreciation of improvements over time.
5. The methods of the valuers result in similar analysed land values for Sales 1 and 3 but result in a widely differing analysed land value for the recently constructed Sale 4, which is the sale nearest to the Subject Land.
6. I prefer the evidence of Mr Hill. The reliance by Mr Hill, on Rawlinsons, is a traditional method long accepted by valuers in undertaking such an exercise.
7. For the reasons that follow, I find that whilst in principle the approach of Mr Jackson may be appropriate in some circumstances, in this case the approach is not one that has been sufficiently justified such that it would displace the otherwise explicable reliance upon the costings provided for by Rawlinsons.
8. Firstly, Mr Jackson does not provide a clear explanation of how he arrived at the construction costs used in his mode, rather he provides a costs figure said to be derived from his experience. Absent some clear explanation of the process and foundations for the derivation of the base cost estimate I am unable to test its accuracy or appropriateness, particularly when sought to be relied upon to displace a cost derived from the industry accepted base costing provided in Rawlinsons.
9. Second, even if I was to accept Mr Jackson's costings there appears to be unexplained inconsistencies in the manner in which he derived such costing. In its submissions the Respondent identified a particular example of such inconsistency by reference to a comparison of the construction costs adopted by him for Sales 1 and 3 compared to Sale 4. In his report in chief, for Sale 1, Mr Jackson has adopted a construction cost for a part 1/part 2 level showroom/office with a Gross Building Area (GBA) of 855m2 of $1,282,500 showing $1,500/m2. The same cost per square metre was adopted for the construction cost of the improvements on Sale 3. In the joint report, for Sale 4, Mr Jackson adopted a construction cost for a part 1/part 2 level showroom/office with a GBA of 493m2 of $1,231,250 showing $2,497/m2 despite it being a cheaper style of construction. I accept the Respondent's submission that the cost to replicate the existing improvements was a primary input to Mr Jackson's model and the unexplained difference in per square metre costs for the two styles of building reduces the level of confidence I have in the comparative outcomes of that model.
10. Finally, as the other inputs into Mr Jackson's model and the model outcome depend upon the assumed construction costs those inputs are also considered to be unreliable.
11. Accordingly, I will adopt Mr Hill's costs for the analysed land value adjustment where available.

Adjustment for exposure (frontage)

1. The experts each considered that an appropriate adjustment for exposure should be made to comparable sales based upon a comparison of the length of the frontage to Parramatta Road.
2. The difference between them with respect to this adjustment is comprised by a difference in the lineal frontage of the Subject Land to Parramatta Road. Mr Jackson adopted a frontage for the site of 36.7m while Mr Hill adopted a frontage of 40.41m.
3. The Deposited Plan reveals that the Parramatta Road frontage, excluding the splayed corner to Carrington Street, was 36.7m. The frontage to Carrington Street, excluding the spayed corner was 25.33m. The difference between Mr Hill and Mr Jackson appears to relate to the length of the splay at the corner, Mr Hill ascribing it to Parramatta Road and Mr Jackson not ascribing the splay to either frontage. As both experts have ascribed 25.33m to the Carrington Street frontage, which excludes the splayed corner, I will accept the 40.41m adopted by Mr Hill, being the frontage to Parramatta Road including the length of the splayed corner, when considering adjustments made for exposure.

Choice of comparable sales

1. At the completion of the evidence and as identified in the closing submissions the parties each contended for different sales to be the most preferred sales for comparison purposes, which sales were: 1. Applicant: Sale 1, Sale 2 and Sale 3; and 2. Respondent: Sale 4, Sale 7 and Sale 8.
2. With the exception of Sale 4 and Sale 8, all sales are located outside the area subject to the Marrickville planning controls. No evidence was adduced identifying the relevant differences, other than permissible FSR and height limits, such that I could be confident that the planning controls were relevantly comparable to the Subject Land. For the known differences in FSR, all sales in the Ashfield planning area have permissible FSRs of between 1.5:1 and 2:1 while the two sales in the Marrickville planning area have a permissible FSR of 0.95:1, the same as the Subject Land. This adds an extra level of subjectivity to the adjustment of sales located in the Ashfield planning area when adjusting for size. The lack of additional evidence of the other development requirements under the Ashfield and Concord planning controls makes the use of these comparable sales less reliable.
3. Sale 1 is located proximate to the Subject Land and has an ongoing use consistent with that identified by both experts as a likely use of the Subject Land. While it is not subject to the provisions of the MLEP or Marrickville DCP 2011, being in the former Ashfield local government area, both valuers have provided an analysis and adjustments to the Subject Land. While I will have regard to the evidence of the valuers in relation to this sale, I still consider it less reliable for use as a comparable due to the reasons set out above.
4. I will deal with Sales 1, 4 and 8 below. However, for the reasons that follow, I accept that Sales 2 and 3, are the least comparable sales as compared to the Subject Land and should be discounted for the purposes of the valuation exercise. For the reasons below, I also consider Sales 5, 6 and 7 are of little use as comparable sales but do assist in considering the adjustment of attributes for those sales considered comparable. I also accept those sales have value as a reality check when considering the analysis and application of Sales 1, 4 and 8.
5. For the reasons that follow, I have determined that Sale 4 is the most comparable sale and that Sales 1 and 8 are appropriate as check sales, in that they represent a lower end of the scale of value. The balance of the Sales were of little or no utility in the determination of the appropriate value.

Sale 4: 752 Parramatta Road, Lewisham

1. Sale 4 is 35m east of the Subject Land on the same side of Parramatta Road. It is a small mid-block site of 423.7m2 with vehicle access from a rear lane. The use at the time of sale comprised a showroom at ground level with mezzanine office. The sale is subject to the same planning controls as the Subject Land. The experts agreed on adjustments for market movement, location, shape, access/corner and exposure but disagreed substantially on the analysed land value and adjustment for size.
2. The Respondent identified Sale 4 as its primary sale as it is close to the Subject Land. The difference in size was not seen as an issue as both valuers made adjustment for size.
3. Mr Hill considered a downward adjustment of -30% for size in comparison to the Subject Land, reflecting the economies of scale and risk associated with a larger development, in achieving the applicable common amount of FSR.
4. Mr Jackson's main concern in utilising this sale as a comparable sale was that it would require a significant adjustment for size in the order of -50% (on his adjusted GFA figures). It was his view that a small development, described as boutique, would be substantially discounted compared to a development over double the size with substantially more upper-level development. Adjustments of such quantum were, in his opinion, reflective of a lack of comparability.
5. Despite its size, I find this sale to be the most comparable to the Subject Land being the most proximate, subject to identical planning controls and having the same rear lane access. The fact that an adjustment of some quantum is required to be made to render this sale comparable must also be seen in the context that, apart from size and the corner location, each of the features that the Subject Land displays are reflected in Sale 4. The experts did not consider it to be a difficult task to adjust for size, albeit that they disagreed on the quantum of that adjustment. I consider this sale to be the most comparable sale of those relied upon by the parties subject to adjustments.
6. This Sale, being subject to the same planning controls, does not require a resolution of the dispute between the experts as to whether the appropriate GFA is reflective of current use or maximum permissible GFA. I consider the comparable planning controls to be an important feature in comparability between this sale and the Subject Land as it reflects a consistency with the relevant consent authority for any redevelopment and it also reflects a comparability in development potential.
7. The land area of Sale 4, however, is considerably smaller than the Subject Land. The area of the land of Sale 4 is 36.8% that of the Subject Land, as a consequence of the land size it has a smaller achievable GFA being 37.5% of the permissible GFA for the Subject Land. The adjustment for size is not a purely mathematical calculation but is required to take into account factors such as economies of scale. Each expert determined the adjustment they would make for size, however, neither expert gave an explanation of the manner in which they determined the adjustment they adopted for this sale. Having regard to the evidence adduced by each expert, I note that with respect to the other sales analysed Mr Hill had largely adopted a consistent adjustment for size for each sale. Apart from Sale 4, Mr Jackson had also applied a relatively consistent adjustment for size. By way of example, Mr Jackson in analysing Sale 3, made an adjustment of 10% where Sale 3 permitted three times the GFA compared to the permitted GFA of the Subject Land. He also made a 10% adjustment for size in his analysis of Sale 1, where that land had twice as much permissible GFA than the Subject Land. All things being equal, if the converse consideration was to be undertaken, that is, that the Subject Land had a larger permissible GFA than the comparable sale to the same extent the analysis would result in an adjustment of -20%. The determination by Mr Jackson of a 50% adjustment for size of Sale 4 appears inconsistent and unexplained in the context of his approach to adjustments for size of similarly divergent comparable sites. Accordingly, I prefer the evidence of Mr Hill who has consistently applied an adjustment for size over all of the analysed sales.
8. In order for Sale 4 to be rendered comparable to the Subject Land it is necessary that adjustments be made. As I have adopted Mr Hill's construction costs it is appropriate that his analysed land value be adopted. Thereafter, the experts have agreed the adjustment for market movement which I will also adopt. Mr Hill's analysis adopts the frontage calculation I have determined appropriate. As to the adjustment for access which is required as Sale 4 does not have corner access the experts have agreed as to that amount.
9. Based on the forgoing, I will adopt an adjusted sale rate of $5,115/m2 for 1 July 2020 and $5,385/m2 for 1 July 2021.

Sale 1: 38-40 Parramatta Road, Summer Hill

1. Sale 1 was relied upon by Mr Jackson but was also analysed by Mr Hill as part of joint conferencing. This sale was approximately 800m west of the Subject Land and was of a similar size with a frontage of approximately 20m, being just under half the frontage of the Subject Land.
2. The improvements at the date of sale comprised an existing part 2 level showroom/office. The relevant sale being considered was the purchase by the existing occupant for owner occupation.
3. Whilst the land was zoned B6 it was located in an area to which the Ashfield planning controls applied. No evidence was adduced to establish that the Ashfield B6 zone and complimentary planning controls were sufficiently similar to render the sites truly comparable from a planning perspective.
4. The experts agreed that the direct comparison of sales evidence should be based on the sales being analysed to a rate per square metre of GFA and applied to the site with adjustments. As observed above, the experts differed on the determination of the relevant GFA to be applied. The existing development of Sale 1 had a GFA of 1,210m2, this was the rate adopted by Mr Hill. Sale 1 had a permissible FSR of 2:1 which would translate to a GFA of 2,240m2 this was the rate adopted by Mr Jackson.
5. Mr Jackson considered this sale to be the most comparable due to its location and size. He was further of the opinion that the fact the sale was to a sitting tenant did not render it unreliable as such purchaser would be competing in the same market as investors looking to achieve the permissible increase in floor space to 2:1 as opposed to retaining the existing lesser floor space contained in the existing building.
6. Mr Jackson considered that the sale reflected a value reflecting the likelihood of development to the full permissible GFA. He accepted that there was a predominance of buildings in the locality that were developed to a lesser GFA but he was of the opinion that such was due to historic development patterns rather than current development potential. When considering notionally vacant land for the purposes of this valuation exercise it would be appropriate to consider that the market would seek to develop such land to its fullest extent. Therefore, the GFA applied by him should be adopted. Mr Jackson calculated a GFA of 2,240m2 for Sale 1 based on the permissible FSR of 2:1 and applied an adjustment for size of 10%.
7. Mr Hill did not consider Sale 1 to be a reliable comparable sale in that: 1. It was purchased by a sitting tenant for ongoing owner occupation and therefore was competing in a different market than unimproved land; 2. It was not purchased for redevelopment, which was further evidenced by no development applications having been lodged to demolish, rebuild or to increase the existing building area; 3. The permitted FSR was 2:1 being higher than the Subject Land but it would be unfeasible for the site to be developed to that quantum of floor space. Whilst physically possible it would not be economically feasible. However, Mr Hill had not undertaken a feasibility analysis to determine whether the redevelopment of the site would be economically feasible; 4. It was purchased by a sitting tenant who bought it because of the added value of improvements; and 5. Notwithstanding its unreliability Mr Hill analysed Sale 1 on the basis of a GFA of 1,210m2 based on an FSR of 1:1 and applied no adjustment for size.
8. The experts have agreed on the analysed land value at contract date and have largely agreed on the adjustment to 1 July 2020, the difference being a one-month adjustment for the contract month, April 2021 being either included or excluded.
9. I consider Sale 1 is broadly comparable in the context of the current use of the land and proximity to the Subject Land, but development potential must be resolved to allow a determination of the appropriate adjustments to render it comparable to the Subject Land.
10. The reference by Mr Hill to the redevelopment of Sale 1 to an FSR of 2:1 as being unfeasible was qualified by him to refer to economic unfeasibility. He was criticised by the Applicant as having failed to undertake a feasibility study to support his opinion. Whilst it is true that no feasibility study was undertaken by Mr Hill, he did rely upon his observations of the locality to support his opinion. He observed that of the recent sales in the locality only Sales 5 and 6 had development approval exceeding an FSR of 1:1 both having corner access and wider frontages but still requiring basement parking which would increase development costs. Despite two development consents, Sale 5 was yet to be developed. Further, Sales 1 and 3 were to sitting tenants who were content to remain in a building developed to a lesser FSR than permitted, indicating that the development potential of the land and the price paid was not in expectation of achieving a higher FSR in the foreseeable future. Mr Hill's view was that whilst the planning controls permitted a higher FSR the market in the area was not for land being purchased to develop to that extent and that development akin to what presently dominated the locality was the extent of development envisaged by the market.
11. Mr Jackson, who was of a contrary view, also did not provide a feasibility study that demonstrated that his level of development would be economically feasible, therefore the same criticism could be levelled at the Applicant's evidence. In circumstances such as those identified by Mr Hill as to the current development market in the locality being for buildings of a lesser FSR than the maximum permitted, some indication that the values being placed upon the relevant sales relate to an expectation of a higher FSR than exists predominantly in the locality must be established.
12. In this case, the Applicant can identify no relevant sale that indicates a market for development at a higher FSR. The current sales, particularly Sales 1 and 3 indicate that the present level of development is the extent of potential that the sales relate to and that the sales are not underpinning a value for redevelopment to the maximum permissible FSR.
13. For the above reasons, Sale 1 should be analysed at a GFA as identified by Mr Hill.
14. The experts disagreed on the adjustment for access/corner, Mr Jackson adjusting by 5% and Mr Hill by 10%. Both valuers adopted an adjustment of 5% for Sale 4, which has the benefit of a rear lane access. As Sale 1 has no rear lane access, I will accept the adjustment of 10% made by Mr Hill.
15. The question of adjustment for size has been dealt with in resolving the difference in applicable GFA. Therefore, I have adopted the 0% adjustment applied by Mr Hill for size.
16. Mr Jackson applied a 0% adjustment for exposure while Mr Hill adopted a 5% adjustment. Having viewed both properties I consider the Subject Land has superior exposure to Sale 1 through a wider frontage and better sight lines. Whilst I consider Mr Hill's adjustment conservative, I will adopt a 5% adjustment for exposure.
17. Based on the foregoing, I will adopt an adjusted sale rate of $3,759/m2 for 1 July 2020 and $3,947/m2 for 1 July 2021.

Sale 8: 156 Princes Highway, St Peters

1. The Respondent submitted that while in a different locality, Sale 8 was still subject to the MLEP, has the same FSR and is on a busy road. It was not just relied upon for value but also the common-sense approach.
2. There are features that relate to Sale 8 that renders its comparability less than that of Sale 4. First it is in a different locality some distance from the Subject Land being located 3.8km southeast of the Subject Land in a straight line. Sale 8 was also subject to a reservation for a classified road.
3. There were some features of Sale 8 that also indicated a degree of comparability. The sale was of a corner allotment with two street frontages, generally square in shape with a splay frontage to the Princes Highway. It was subject to the same Marrickville planning controls as the Subject Land with a permissible FSR of 0.95, the same as that of the Subject Land.
4. Mr Jackson did not engage with the sale, considering it to be a dated sale in a different locality some distance remote from the Subject Land, complicated with a reservation for classified road. His opinion was that given there was a volume of sales evidence on Parramatta Road in the immediate locality of the Subject Land it was difficult to reconcile why reliance was placed upon Sale 8.
5. Mr Jackson's criticism of Sale 8 may have had some force had the sales on Parramatta Road in the vicinity of the Subject Land been comparable. For the reasons outlined below, I consider Sale 4 to be the only comparable sale in that locality. Therefore, whilst located some distance from the Subject Land, which at first consideration may have affected its comparability I note that Mr Jackson accepted that notwithstanding the distance, the location was comparable. He stated (Tcpt, 29 May 2023, 90(31-32)): WITNESS JACKSON: For B6 use, it's a main road, it's probably not a lot in it, but probably not as good.
6. Notwithstanding, Mr Jackson's acceptance that the B6 zoning and location on a main road rendered it a comparable sale - albeit less desirable - I consider Sale 4 to be the most comparable sale. Sale 8 due to the distance from the Subject Land is less desirable. For this reason, this sale would express a value being one that would be the least value that could be ascribed to the Subject Land, any less value would not be reflective of the market for B6 zoned land on a main road such as the Subject Land. I therefore accept Sale 8 as what was described by the Respondent as a reality check.
7. It is necessary to adjust this sale to render it comparable. As indicated above, Mr Jackson did not engage with this sale and I therefore have no assistance from him as to the appropriateness of the adjustments made by Mr Hill.
8. Mr Hill estimated an added value of improvements for Sale 8 at $100,000. He relied on the intentions of the purchaser, evidenced by lodgement of a DA to demolish the existing improvements, and the subsequent DA for alterations and additions, rebuilding the building but retaining the façade to arrive at that number. Mr Jackson questioned this sale being considered as a development site opining that the sale includes existing improvements intended to be used, as demonstrated by a DA being proposed shortly after the sale to undertake additions and alterations to the existing improvements.
9. I prefer the opinion of Mr Hill. The initial DA seeking to demolish the building would reflect the intentions of the purchaser, if not at sale date, within a reasonable timeframe from the sale date. The subsequent DA would reflect a reconsideration, the reasons of which can only be confirmed through interviewing the purchaser, which neither expert has done.
10. Sale 8 occurred in November 2018 and therefore the experts considered whether a further adjustment for market movement during the period of COVID affectation was required in addition to the agreed adjustment otherwise applicable for market movement of 5%.
11. The experts had a dispute as to the appropriate adjustment to bring this sale in line with the relevant Valuation Date market due to the fact that the influence on the market of the COVID pandemic. Mr Hill adjusted his analysed sale by approximately 7.6% which is 0.3% lower than the 7.9% that would be achieved using the 5% per annum standard. Mr Jackson considered the sale would raise a red flag being a pre-pandemic sale.
12. Mr Hill also applied 5% per annum for adjustment of sales transacting prior to 1 July 2020. In oral evidence, when questioned about the 3 month period between March and July following the declaration of the pandemic and its impact on the market, Mr Hill stated (Tcpt, 29 May 2023, 69(11-17)): I believe that the increases between the July 2019 to the to March 2020 was an improving business market. There is little evidence to suggest that the market fell between March to July 1 June 1 July 2020. I have not seen any evidence, and I don't believe the lack of sales evidence is a reason why the market has fallen back. But in that three month period between March, the pandemic date, and 1 July, you could say that the market remained static.
13. Mr Jackson, in oral evidence, indicated his belief that the market continued to rise between 1 July 2018 to 13 March 2020 (Tcpt, 29 May 2023, 80(1-9)): WHITE: Would you agree with Mr Hill that it's reasonable to say that in the Sydney market between 1 July 2019 to the middle of March 2020 that the market continued to improve, and by 5%? WITNESS JACKSON: No, I don't agree with that. I think there was modest improvement. I would accept that, but I don't think it was too much. But then, of course, we to use the term, Mr White we went off a cliff.
14. Mr Jackson cited the uncertainty caused by the declaration of the pandemic (Tcpt, 29 May 2023, 80(23-27)): WITNESS JACKSON: I think things were still in a positive sense in that sort of eight to nine month period you're referring to. There was certainly some uncertainty building, but I think it's fair to say, in my experience, that prior to the formal announcement of the pandemic whilst there was a lot of talk going on when the prime minister came out and declared a pandemic, we found ourselves in a different world.
15. After 1 July 2020, the market recommenced the annual 5% escalation.
16. Neither expert could provide evidence to support their view of the market movement between 13 March and 1 July 2020. As was accepted by both experts, no evidence by way of sales (or otherwise) was available. On that basis, doing the best I can on the evidence available, I accept the opinion that in the relevant period the market remained static, as expressed by Mr Hill at [82] above, as more persuasive than that of Mr Jackson.
17. For reasons set out above, I reject Mr Jackson's contention of a market collapse between March and July 2020 wiping out gains made in the 18 months prior.
18. Mr Hill adopted a negative adjustment of 5% for location considering the locational attributes of this section of St Peters and the Subject Land are similar, although St Peters, at best, may be considered slightly superior. Mr Jackson, in oral evidence referred to above considered that the Princes Highway location may not be as desirable without expressing any reasons for that approach. I prefer the evidence of Mr Hill that appeared to have considered the comparison between the two locations in more depth and therefore has provided more rationale for his opinion. I accept the negative adjustment of 5% made by Mr Hill.
19. Mr Hill also made a negative adjustment of 5% for size based on the developable GFA for the Subject Land being slightly larger than that of Sale 8 which I accept in the absence of a contrary view.
20. Mr Hill adopted a positive adjustment of 10% for shape. He considered the sale inferior to the site due to the land acquisition reservation area impacting on the developable area of the site. Mr Jackson identified the land was complicated with a reservation that was classified road but provided no view on the actual impact. This would appear to support the adjustment made by Mr Hill and I accept that adjustment.
21. Mr Hill also adopted a 10% adjustment for access/corner due to the sale's side access being limited to a section of frontage which may be further affected by the land acquisition area while the Subject Land's access benefits from an additional rear third frontage. This attribute was not engaged by Mr Jackson, and I will accept the adjustment adopted by Mr Hill.
22. Mr Hill has made no adjustment for exposure based on both the Subject Land and the sale being located on heavily utilised arterial roads. There was no contest to this adjustment, so it is accepted.
23. Based on the forgoing, I will adopt an adjusted sale rate of $4,122/m2 for 1 July 2020 and $4,314/m2 for 1 July 2021.

Sale 2: 73 Parramatta Road, Haberfield

1. Sale 2 related to the sale of a federation style single dwelling on B6 zoned land within the Ashfield local government area. The site was located within a group of such dwellings. The site was also located within the signalised T-intersection of Parramatta Road and Hume Highway - both roads having high traffic volumes.
2. Whilst Mr Jackson placed some weight on Sale 2 the Applicant conceded in closing submissions that Sale 2 was not as comparable as some other sales and was very challenging in terms of access and site area.
3. Mr Hill did not consider Sale 2 was a comparable sale as it was marketed and purchased for residential use with the price paid being for a residential house use, not commercial. He referred to its location between the traffic lights of a major T-intersection with Parramatta Road and the Hume Highway and access to the land being very problematic, due to the location of the traffic light and electricity infrastructure poles generally affording just the current residential houses narrow driveway access. Overall, Mr Hill did not find this land remotely comparable to the Subject Land, primarily as it was transacted by the vendor and purchaser on the basis as a freestanding residential house use.
4. I do not consider Sale 2 is appropriately comparable to the Subject Land due to its location and sale being based upon the ongoing use as a single dwelling house. I am unconvinced that the purchaser was competing with persons seeking to develop the land for uses permitted in the B6 zone. The capacity to develop the land as a single lot for uses permitted by the B6 zone are severely restricted due to the limited frontage and access. The ability to exploit the land for a B6 zone use notwithstanding these clear and apparent constraints was not demonstrated by the Applicant.
5. I accept Mr Hill's analysis of this sale. The location within the T-intersection, its size and location within an existing group of single dwellings makes redevelopment for a B6 zone use at the date of sale challenging at best. Further, the land is located within the Ashfield local government area being governed by different planning instruments regulating redevelopment. For those reasons, I consider this sale is not comparable to that of the Subject Land.

Sale 3: 3-15 Parramatta Road, Haberfield

1. Sale 3 related to land also located in the B6 zone of the Ashfield LEP.
2. The sale was an "off market" sale to an existing tenant, being exchanged and settled on the same day.
3. Mr Jackson relied upon this sale and did not consider that the off-market sale rendered it unreliable as a comparable sale as, from his enquiries, the sale had been made at "arm's length" in that it was not sold to the same or related legal entity. Mr Jackson had not considered the contract of sale, nor had he made enquiries as to the nature of the negotiations or the terms of the sale.
4. Mr Hill was concerned about the off-market nature of the sale to a sitting tenant. He was of the opinion that where transactional activity diverts from the normal process of conveyance, such as this transaction, valuers will question the veracity of the sale and may place more weight on other sales evidence and/or will be required to gather a full understanding of the sale transaction to fully rely upon it.
5. I consider Sale 3 is similar to the Subject Land in its existing use, but I consider the context of the sale to render it unreliable as a comparable sale. Sale 3 was an off-market sale, purchased by one of the existing occupants for ongoing owner occupation. No evidence was adduced for the terms and conditions applicable to the transaction or to explain the contract and transfer dates being the same day. The ongoing use of the site would appear consistent with the B6 zone but the off-market nature of the sale, to a sitting tenant of part of the property, would require more investigation to ensure it is a fair market indicator.
6. I accept the evidence of Mr Hill with respect to this sale. Where the sale is off-market some further enquiry needs to be undertaken to ensure the sale is comparable to what is assumed to be a market sale of the Subject Land. In this case, the Applicant has made no enquiries to enable an assessment that the off-market sale should be treated as equivalent to a marketed sale, that is one that is sold on the open market. Absent such evidence of equivalence, there remain real uncertainties as to the sale price being representative of the relevant market to which it is being compared. For those reasons, and the fact that it is located within a different local government area with different planning controls, renders this sale not a sale comparable to the Subject Land and I disregard it for those reasons.

Sale 5: 181 Parramatta Road, Haberfield

1. Sale 5 was described as being some way distant from the Subject Land and adjacent to the WestConnex portal. The Applicant submitted that while it was one of Mr Hill's sales, Mr Hill had adjusted it by 65% compared to Mr Jacksons' minor adjustment of -5%.
2. The Respondent submitted that Sale 5, due to its large number of adjustments, is primarily relied upon as a reality check, and identifies why Mr Jackson's valuation of the Subject Land is too low.
3. I do not consider Sale 5 to be comparable to the Subject Land. The land has a frontage slightly wider than the site but has a depth of only 17.18m. The analysis of the sale price on a GFA basis shows a 60% discount to that achieved for Sale 6, which is a nearby property with superior dimensions and exposure that is currently being developed for accommodation with basement parking. I consider the total adjustment made by Mr Jackson of -5% to be inadequate and the adjustment made by Mr Hill of 65% would render it not comparable.
4. Sale 5 does provide a reality check supporting the contention that for some sites, the ability to achieve the full permitted GFA may be unrealistic. Prior to purchase, the land was subject to a development approval for 30 serviced apartments, which has since lapsed. The building was sold with a subsequent approval for a development including ground floor showroom, 21 serviced apartments on levels above and basement car parking which has not, in the almost five years since the contract date, been acted upon. The land has continued to be unoccupied since sale date with the exception of its use as a COVID testing site. The lack of action on development approvals may also indicate dimensions, location and reduced exposure due to the WestConnex portal have made development to the permissible GFA unattractive. No evidence was adduced of investigation with the owner to determine why the site remains idle.

Sale 6: 215-217 Parramatta Road, Haberfield

1. Sale 6 was also identified as a reality check sale. Sale 6 benefited from a development approval for a hotel development that provided a greater level of development than the existing FSR permitted. Enquiries with the selling agent indicated the presence of the approval for a hotel was a significant factor in the selling price.
2. Sale 6 was sold with development approval in place for a 78-room hotel and has had a significant number of amendments lodged since. The most current amendment was for a 67-room hotel with basement parking slightly exceeding the statutory FSR. It is located distant from the site and comes under different planning controls which are not in evidence. Prior to development, the land contained a 1980's part 1/part 2 level showroom/office building which aerial photographs show covered most of the site. The land is being developed with basement parking which would have been required to permit the full GFA to be achieved. The scale of development is significantly beyond that considered by the experts for the Subject Land, both in GFA and cost.
3. I do not consider this sale to be a reliable comparable. The presence of the approved development consent, which was under construction, added a significant factual difference when seeking to compare with notionally vacant land. The analysis of the impact on value of the development consent on value would require a significant adjustment. The effect of the development consent, the distant location and the differing planning controls render the site such that significant adjustment would be required to attempt to render it comparable. For these reasons, I do not consider Sale 6 to be a comparable sale to the Subject Land.

Sale 7: 65-69 Parramatta Road, Concord

1. The Respondent submitted that Sale 7 was an indicator of value. While in a different local government area, it had the same B6 zoning, similar GFA and depth to the Subject Land, and was lightly improved, removing a subjective adjustment for the added value of improvements. The Respondent further submitted that the land would not be attractive to residential purchasers due to its low density FSR of 1:1, height limitation of 12 metres and the limitations of its location on a busy road (Tcpt, 30 May 2023, 120(34-40)): …secondly, a height limitation was restricted to 12 metres, and just as Mr Jackson said at p 52 of his primary report, exhibit D, where he says that residential would not be contemplated on the subject land because of its low density, low GFA nature, and its location on a busy road, we say, equally, that those limitations would apply to this, and I hear what your Honour said about the other side of the road I don't know what the density is on the other side of the road.
2. Sale 7 is a considerable distance from the site in a different area with different potential. Mr Jackson identified that planning controls allowed residential apartment development which is a use prohibited for the Subject Land at 1 July 2021 and not a likely use as at 1 July 2020. Additionally, the selling agent reported that the sale price was a record for the area and reflective of the purchaser (Reece) seeking a presence in the area.
3. Sale 7 is located in a different local government area and is a significant distance from the site. The land is just over 20% larger than the site and has a similar FSR of 1:1. The sale however has a height limitation, which is not present on the Subject Land. Whilst the sale site was not purchased for apartment use, but for the purposes of a commercial use, the sale price may reflect the market competing based on a number of permissible uses for the land. Absent some interrogation of the sale and the nature of the market participating in the sale it is an unreliable indicator of a B6 zone sale with residential apartments prohibited.
4. Whilst the sale is not comparable for the purposes of determining value it does have some worth from an evidentiary standpoint. I note that the evidence disclosed that land was being developed for a single storey, including mezzanine, store selling plumbing supplies, achieving a 0.44:1 FSR with 10 open car spaces. Such supports the evidence of Mr Hill that in this particular general locality development is not likely to reflect the maximum FSR in all cases.

Determination of value for the relevant valuation years

1. For the reasons outlined above, I consider the relevant comparable sales for the purposes of determining the unimproved land value of the Subject Land in accordance with the required s 6A of the Valuation Act is Sale 4. Sales 1 and 8 were not sales that were sufficiently comparable but did, however, provide what the Respondent referred to as a "reality check" on the value derived from Sale 4 providing an indication of the lower range of value above which the Subject Land must be valued.
2. Applying the adjustments that I have found are necessary to Sale 4 the following analysed values indicate an appropriate value of the Subject Land which I determined for each valuation year as: 1. 2020 Valuation Year - $5,115/m2 of the GFA resulting in a value of $5,588,000; and 2. 2021 Valuation Year - $5,385/m2 of the GFA resulting in a value of $5,882,000.
3. The Applicant bears the onus of proving its contention that the values determined by the Valuer General were too high: s 40(2) of the Valuation Act. In this case, as I have determined the values indicated above, the Applicant has failed to discharge the relevant onus, as the values determined by the Valuer General are less than the determined values. Accordingly, the Appeal must be dismissed.

Orders

1. The Court Orders: 1. In proceedings 198561 of 2022: 1. The Appeal is dismissed; and 2. The exhibits are returned. 1. In proceedings 198590 of 2022: 1. The Appeal is dismissed; and 2. The exhibits are returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 November 2023