VALUATION REPORT

The Shay, Shaw Hill, Halifax HX1 2YT

Client: Metropolitan District Council Date: October 2013

CONTENTS

1! INSTRUCTIONS ...... 3! 2! LOCATION ...... 4! 3! SITE ...... 4! 4! DESCRIPTION ...... 5! 5! ENVIRONMENTAL CONSIDERATIONS ...... 5! 6! TOWN PLANNING ...... 6! 7! RATING ...... 6! 8! TENURE ...... 6! 9! TENANCIES ...... 7! 10! INCOME & EXPENDITURE ...... 7! 11! ALTERNATIVE USES ...... 8! 12! CONCLUSIONS ...... 8! 13! LIMITATION AND PUBLICATION ...... 10!

APPENDICES

APPENDIX I ...... Standard Definitions and General Valuation Principles

Calderdale Metropolitan District Council The Shay, Shaw Hill, Halifax HX1 2YT October 2013

1.6 This Valuation Report and the valuations and opinions contained herein have been prepared in accordance with the Practice Statements and Guidance Notes set out in the RICS Valuation Standards.

1.7 This Valuation Report has been prepared by Peter J Hague BSc (Hons) MRICS, Registered Valuer, who is qualified to carry out the valuation in accordance with the RICS Valuation Standards. In preparing this Valuation Report we have acted as Independent Valuers. We have no conflict of interest in accepting your instruction.

2 LOCATION

2.1 The property lies a short distance south of the town centre in a mixed-use area comprising a predominantly residential area to the west and industrial to the east.

2.2 The property is accessed via Shaw Hill which links the eastern area of the town centre with Road (A629); the one of the main arterial routes that connects the town with the motorway network via J24 M62.

3 SITE

3.1 We have been provided with a site plan (attached at Appendix X), which provides confirmation that the site area is 11.4 acres (4.62 ha). The site includes areas of woodland to the Skircoat Road and Shaw Hill/Shay Syke frontages, which shield the ground structures from the surrounding roads. The topography of the area is sloping west to east (a fall of some 25m) with the pitch level being considerably higher than Shaw Hill to the east.

3.2 This site boundary on the plan provided includes adjacent garages and car wash fronting Shay Syke, which we assume do not form part of this valuation. From data obtained from the Council’s planning portal it would appear that the area under consideration (the ground and external ancillary areas extends to 10.2 acres (4.14ha).

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4 DESCRIPTION

4.1 The property is a multi-use sports stadium that dates back to 1921. FC Halifax Town (football) and Halifax RLFC () both play their home games at the Shay, which has an official capacity of 10,561 (5,830 seats).

4.2 The ground comprises four stands, the North Stand, the East Stand (opened 27 March 2010), the South Stand and the Skircoat Stand. The North and South stands were built in the mid-1990s and the East Stand opened in 2010. The Skircoat Stand is the oldest remaining stand at the Shay.

4.3 There is a car park that wraps around the East and South stands and an outdoor 3G five-a-side pitch at the southeast corner of the ground. There is an additional car parking area on Huger Hill, to the north of the stadium.

4.4 The stadium provides the usual range of facilities for sports fans as well as a facility in the East Stand to accommodate events such as parties and conferences. There are 11 function rooms, ranging in size to accommodate every type of event, from one-to-one interviews to larger conferences, weddings and meetings for up to 350 guests.

4.5 At the southeast corner of the ground adjacent to the East Stand there is a part-constructed building. The original East Stand design incorporated a hospitality and media facility, which is the same height as the adjacent East Stand. Work on the building as well as the East Stand construction was halted in 2002 but it was omitted from the 2008 redesign and subsequent completion of the East Stand.

4.6 On the adjoining site to the north there is a large decked car park used by HBoS and a TA Centre.

5 ENVIRONMENTAL CONSIDERATIONS

5.1 We are assuming that the property is not affected by contamination.

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6 TOWN PLANNING

6.1 The Replacement Calderdale Unitary Development Plan (UDP) was adopted on 25th August 2006 (as amended August 2009). It was amended in 2009 by Direction of the Secretary of State, which extended the life of some policies within the Replacement Calderdale UDP for an indefinite period until deleted or replaced by policy within the Local Plan, but has deleted 46 policies.

6.2 The ground and surrounding areas (stated as having an area of 4.14ha) was designated in the UDP as Openspace Urban (OS3) but this was deleted by the 2009 Direction of the Secretary of State.

6.3 The text of the UDP that remains states:

‘Playing fields and sports grounds are a scarce resource and the loss of any part of a playing field may represent an irretrievable loss. The English Sports Council, operating as Sport , opposes the development of playing fields in all but exceptional cases (Planning Policy Statement: 'Policy on planning applications for development on playing fields' 1998). There is therefore a need to safeguard existing playing fields and sports grounds from unacceptable development in order to continue to provide for the needs of both current users and future generations as advocated in PPG17.’

6.4 The other areas of the larger site are designated as Primary Employment Areas (E1) and the surrounding land is a combination of Primary Employment, Primary Housing and Other Retail areas.

6.5 The south eastern corner of the site is marked as being Pipelines (EP6 - Hebden Bridge/Mulcture Hall). It is advised that any development is carefully controlled in the vicinity of this high-pressure gas pipeline.

6.6 The Council’s planning portal displays an extensive planning history for the site which includes the following noteworthy applications: ! Use of land for open air market (time limited permission); ! Outline application for covered training area with changing (permitted); ! Use of social club as restaurant (permitted); ! Ground improvements and re-roofing of stands (deemed permitted); ! Outline proposal for foodstore, non-food retail, fast-food unit, petrol filling station and associated parking and servicing (withdrawn); ! Various applications relating to the new East Stand development.

6.7 It was confirmed to us that he wooded area fronting Shaw Hill could possibly be cleared to allow development, although this would be controversial.

7 RATING

7.1 The property is entered into the 2010 Rating List as Stadium & Premises with a rateable value of £33,750 with effect from 27th April 2011.

8 TENURE

8.1 FREEHOLD

8.2 We assume that the Council is the freeholder of the site, although we have not seen any documentation to this effect.

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9 TENANCIES

9.1 We have not been provided with any lease or licence documentation but we have been advised that both the football club and the rugby club use the property under the terms of licence agreements. In copy correspondence it suggested that the income received from these are: ! Rugby Club: £39,000 per annum ! Football Club: £30,000 per annum

9.2 The correspondence also comments that the licence fee payable by the Rugby club is largely unpaid, although it is not clear what period of time this relates to. There would be questions over the financial standing of the payees and so the income would not be regarded as being particularly secure.

9.3

10 INCOME & EXPENDITURE

10.1 We have been provided with the following data:

Income 2010/11 2011/12 2012/13* Average Car parking charges £37,699.34 £36,960.88 £44,400.00 £39,686.74 Stadium hire £80,260.42 £59,957.21 £85,980.00 £75,399.21 Catering profit share £70,428.43 £47,886.13 £49,700.00 £56,004.85 Other rents & misc. £6,500.00 £1,427.67 £12,120.00 £6,682.56 5-a-side football £48,046.32 £44,873.08 £47,050.00 £46,656.47 Total £242,934.51 £191,104.97 £239,250.00 £224,429.83

Expenditure 2010/11 2011/12 2012/13* Average Employees £121,108.99 £144,062.95 £156,370.00 £140,513.98 Gas £17,445.76 £15,705.62 £17,280.00 £16,810.46 Electricity £104,707.55 £69,066.15 £75,970.00 £83,247.90 Carbon tax £0.00 £3,840.00 £3,840.00 £2,560.00 Water £21,914.42 £21,032.08 £23,140.00 £22,028.83 Rates £11,983.69 £17,094.76 £15,460.00 £14,846.15 Repairs & Maintenance £75,695.60 £99,440.30 £100,000.00 £91,711.97 Cleaning £5,703.38 £7,314.23 £7,310.00 £6,775.87 Insurance £8,724.35 £2,903.94 £2,900.00 £4,842.76 Administration Expenses £12,894.07 £10,493.88 £9,870.00 £11,085.98 Communications & IT £11,804.45 £1,135.93 £1,640.00 £4,860.13 Launch Events £15,505.80 £0.00 £0.00 £5,168.60 Total £407,488.06 £392,089.84 £413,780.00 £404,452.63

Surplus/(Loss) (£164,508.55) (£200,984.87) (£174,530.00) (£180,022.80)

* The 2012/13 figures are forecasts.

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10.2 We have seen copy correspondence that suggests that a new catering venture is being negotiated but we are unsure as to what impact this will have upon income. The catering income to the Council averages £56,000 per annum, which is stated to be a ‘share’. We have not been provided with any information on what proportion of the catering income this represents and it may be that a third party investor could increase this income stream in the event that the Council’s share ceased to be payable.

10.3 It is unclear whether the current licence fees paid by the clubs are included in the income figures.

10.4 The figures above represent the Council’s profit and loss account for the stadium and may not necessarily reflect what a third party could generate. We have not been able to discuss the business in detail with the Council and so it is difficult for us to estimate whether there would be any prospect of increasing income or reducing costs. For the purposes of this exercise we shall assume that any private sector investor would not be able to increase the profitability/decrease the losses of the business by a significant margin.

10.5 Therefore, in commercial terms and on the basis of the limited information that has been made available to us it is difficult to imagine that anyone would pay a meaningful sum of money to purchase the stadium business as a going concern.

11 ALTERNATIVE USES

11.1 We have spoken with Richard Seaman who confirmed that in the past there were proposals for a mixed-use scheme on the site, which was to be an ancillary function of the whole. This comprised ground floor retail units with residential on the upper parts. This was not registered on the Council’s planning portal presumably because no application was made.

11.2 There was an application made back in 1994 for a retail scheme on a site that included the subject property and the adjacent Skircoat Garage, which comprised a 65,000 sq ft foodstore, 24,000 sq ft non-food retail units, a drive-thru restaurant and a petrol filling station. Clearly this would have involved a comprehensive redevelopment of the site but we do not know whether the proposal included a relocation of the stadium facility.

11.3 The application was withdrawn and it is unclear as to whether it would have been successful at that time. It would appear that any proposal along these lines made now would meet with substantial resistance from the planning department and Sport England.

11.4 Market demand for the site for some form of retail development, more than likely a foodstore, would be reasonable and could justify a site price in the region of £7m - £10m, subject to determining abnormal costs. These costs would have to include the relocation of the sports clubs. Whilst carrying out our research we did discover that there was a suspicion that ground condition may be an issue.

11.5 The other potential alternative use would be residential development. Again, without knowing the details of abnormal costs associated with such a proposal it is difficult to provide a definitive assessment of value but we believe that a rate of around £500,000 per acre would be the best expectation of price (i.e. circa £5m capital receipt).

12 CONCLUSIONS

12.1 Any further development of the site would have to be complimentary to and could not have a detrimental impact on the existing use. This may be an opportunity to increase revenue although any increase would have to be assessed in the context of the development costs.

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12.2 A proposal for a change of use away from sports venue would be strongly resisted by the planners as well as Sport England. There would also be the issue of local resistance to a move or closure of the ground.

12.3 The stadium loses the Council in the region of £180,000 per annum at the moment and if it was offered for sale on the open market assuming a continuation of the existing use we cannot imagine that there would be any meaningful interest from parties that are unconnected to the clubs.

e must also bear in mind the cost saving to the Council in the event that it did dispose of its interest.

12.4 In acquiring the freehold interest the purchaser would be acquiring a facility that may cost in excess of £20m to replace. The valuation approach that we would take in assessing the bid from the proposed purchaser would involve determining the cost of an alternative facility and then adjusting this to reflect the fact that the Shay is not brand new (i.e. a DRC approach). Your colleagues carried out this exercise in 2010 and arrived at a figure of £19m. We have in the time allowed not been able to fully research the cost of new stadia but our initial thoughts are that a DRC of £19m is not wholly unrealistic, bearing in mind that the East Stand cost £4.6m to build (which represents more than one quarter of the stadium) and that to purchase a suitable alternative site could involve paying over £2.5m. On this basis the offer made does not satisfy s123.

12.5 However, recent attendance figures of around 1,500 for both clubs would indicate that neither club would at this point in time choose a stadium with the capacity of the Shay (10,000). No doubt both clubs will have ambitions to increase their respective fans bases and the football club’s recent promotion offers some encouragement in the regard. Nevertheless it is by no means certain that either club will require the full capacity of the ground in the foreseeable future. This has to be taken into account when assessing the ‘worth’ to the prospective purchaser.

12.6 A key issue is whether there is a realistic prospect of an alternative use of the site (in market and planning terms). Planning would seem to be clear in so far as any change would be strongly resisted. We cannot pass comment on whether an application for a change of use would ultimately be successful but if we assume it might then high value alternatives would include residential and supermarket. The site is approximately 10/11 acres and could generate receipts (in today's market) of around £7m - £10m for these alternative uses.

12.7 No one would pay that now for this site with its current planning status and political profile. In order to realise a higher value use then the clubs would either have to be dissolved or relocated. The former would obviously be extremely contentious the latter less contentious but possibly extremely costly. The clubs could ground share but we am not aware of any comparable facilities elsewhere in Halifax and so a move to or Huddersfield might be the only option; this would cause a lot of bad feeling but it has happened in the past with other clubs. The other option is to buy a site and construct a new facility; the sales receipts from the current ground would not cover this cost but would compensate in some measure.

12.8 We are of the view that the Council should protect itself from the risk of the site being bought now to facilitate a longer-term redevelopment proposal. If the freehold interest were to be sold the Council’s only remaining protective control would be via the planning process, which can never be a guarantee that the stadium is protected indefinitely.

12.9 We are sure that the Council would not wish to sell the ground and then see the clubs being wound up and the land sold at a profit.

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12.10 We cannot provide you with a figure at which it would be safe for you to sell the freehold but we can confirm that at £1.45m the Council is exposing itself to enormous risk. We are however cognisant of the need to capture any investment into the town and if the intentions of the proposed purchaser as he portrays then this should be encouraged. For this reason the Council should consider a way in which it can give the purchaser what he seeks without losing control of the ground. This could be achieved by: ! The granting of a long lease with a restrictive user clause, or ! A sale with a restrictive covenant, or ! A sale with the provision of an overage payment in the event of an onward sale or change of use. This may also include a restrictive covenant.

12.11 Given the high profile of a sale of the ground for an alternative use we would suggest that the Council grants a long lease at a peppercorn with a strict user restriction. This would mean that the Council retains control and if at some point the clubs did dissolve (through innocent processes) or were relocated then a share of any proceeds could be negotiated.

12.12 If the Council wanted to satisfy the provisions of s123 without there being any uncertainty then the it should consider openly market the proposition. We strongly suspect that this would result in very few serious bids being received.

12.13 We recommend that you open negotiations with the bidding party but on the basis of there being tight restrictions on the future use of the property. In order to comply with s123 the valuation of this asset/liability would have to disregard any restriction that the Council may choose to impose on a transfer but it can take into account the special purchaser status of the buyer which means that the 'worth' of the asset to the buyer can be taken into account. It would also take into account the mitigation of on-going losses to the Council.

13 LIMITATION AND PUBLICATION

13.1 This Report is prepared solely for the use of Calderdale Council. No responsibility is accepted to any other party for the whole or any part of its contents. It may be disclosed to other professional advisors assisting in respect of the purpose for which the valuation is prepared.

13.2 Neither the whole nor any part of this Report nor any reference thereto may be included in any published document, circular or statement nor published in any way without the Valuer’s written approval of the form and context in which it may appear.

We trust that this Report is satisfactory for your present purposes but should you require any further information or clarification please do not hesitate to contact us.

Yours faithfully

Peter J Hague BSc (Hons) MRICS, Registered Valuer Director For and on behalf of Hague Nicholls

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APPENDIX I

Standard Definitions and General Valuation Principles

Standard'Definitions'and'General'Valuation'Principles'

These Standard Definitions and General Valuation Principles will apply to all valuations and should be read in conjunction with and general terms and conditions of business except insofar as this may be in conflict with other contractual arrangements.

RICS Valuation – Professional Standards (‘Red Book’) All work is carried out in accordance with the Practice Statements contained in the ‘RICS Valuation – Professional Standards’ by valuers who conform to the requirements thereof. Our valuations may be subject to monitoring by the RICS.

Valuation Basis Our reports state the purpose of the valuation and, unless otherwise noted, the basis of valuation is as defined in the Red Book. The full definitions of the bases are as follows: ! Existing Use Value - The estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion – assuming that the buyer is granted vacant possession of all parts of the asset required by the business, and disregarding potential alternative uses and any other characteristics of the asset that would cause its market value to differ from that needed to replace the remaining service potential at least cost. ! Market Value - The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. ! Market Rent - The estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. ! Depreciated Replacement Cost - is a form of cost approach that is defined as the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

Valuations Financial Statements Valuations for inclusion in financial statements prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP) shall be on the basis of either: ! Existing Use Value or property, other than specialised property, that is owner-occupied for the purposes of the entity’s business; or Market Value for property that is either surplus to an entity’s requirements or held as an investment; or ! Depreciated Replacement Cost for specialised property.

Disposal Costs Taxation and Other Liabilities No allowances are made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. All property is considered as if free and clear of all mortgages or other charges, which may be secured thereon. No allowance is made for the possible impact of potential legislation, which is

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under consideration. Valuations are prepared and expressed exclusive of VAT payments, unless otherwise stated.

We do not normally read leases or documents of title. We assume, unless informed to the contrary, that each property has a good and marketable title, that all documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other outgoings of an onerous nature, which would have a material effect on the value of the interest under consideration, nor material litigation pending. Where we have been provided with documentation we recommend that reliance should not be placed on our interpretation, without verification by your lawyers.

Tenants Although we reflect our general understanding of a tenant’s status in our valuations, enquiries as to the financial standing of actual or prospective tenants are not normally made unless specifically requested. Where properties are valued with the benefit of lettings, it is therefore assumed, unless we are informed otherwise, that the tenants are capable of meeting their financial obligations under the lease and that there are no arrears of rent or undisclosed breaches of covenant.

Measurements All measurement is carried out in accordance with the Code of Measuring Practice (6th Edition) issued by the Royal Institution of Chartered Surveyors, except where we specifically state that we have relied on another source. The areas adopted are purely for the purpose of assisting us in forming an opinion of capital value. They should not be relied upon for other purposes nor used by other parties without our written authorisation.

Estimated Rental Value Our opinion of rental value is formed purely for the purposes of assisting in the formation of an opinion of capital value. It does not necessarily represent the amount that might be agreed by negotiation, or determined by an Expert, Arbitrator or Court, at rent review or lease renewal.

Town Planning and Other Statutory Regulations Information on town planning is, wherever possible, obtained either verbally from local planning authority officers or publicly available electronic or other sources. It is obtained purely to assist us in forming an opinion of capital value and should not be relied upon for other purposes. If reliance is required we recommend that verification be obtained from lawyers that: 1. the position is correctly stated in our report; 2. the property is not adversely affected by any other decisions made, or conditions prescribed, by public authorities; 3. that there are no outstanding statutory notices.

General Principles Our valuations are prepared on the basis that the premises (and any works thereto) comply with all relevant statutory and EC regulations, including fire regulations, access and use by disabled persons and control and remedial measures for asbestos in the workplace.

Structural Surveys Unless expressly instructed, we do not carry out a structural survey, nor do we test the services and we therefore do not give any assurance that any property is free from defect. We seek to reflect in our valuations any readily apparent defects or items of disrepair, which we note during our inspection, or

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costs of repair which are brought to our attention. Unless stated otherwise in our reports we assume any tenants are fully responsible for the repair of their demise either directly or through a service charge.

Deleterious Materials We do not normally carry out investigations on site to ascertain whether any building was constructed or altered using deleterious materials or techniques (including, by way of example high alumina cement concrete, woodwool as permanent shuttering, calcium chloride or asbestos). Unless we are otherwise informed, our valuations are on the basis that no such materials or techniques have been used.

Site Conditions We do not normally carry out investigations on site in order to determine the suitability of ground conditions and services for the purposes for which they are, or they are intended to be put, nor do we undertake archaeological, ecological or environmental surveys. Unless we are otherwise informed, our valuations are on the basis that these aspects are satisfactory and that, where development is contemplated, no extraordinary expenses, delays or restrictions will be incurred during the construction period due to these matters.

Environmental Contamination Unless expressly instructed, we do not carry out site surveys or environmental assessments, or investigate historical records, to establish whether any land or premises are, or have been, contaminated. Therefore, unless advised to the contrary, our valuations are carried out on the basis that properties are not affected by environmental contamination. However, should our site inspection and further reasonable enquiries during the preparation of the valuation lead us to believe that the land is likely to be contaminated we will discuss our concerns with you.

Insurance Unless expressly advised to the contrary we assume that appropriate cover is and will continue to be available on commercially acceptable terms, for example in regard to the following:

! Composite Panels - Insurance cover, for buildings incorporating certain types of composite panel may only be available subject to limitation, for additional premium, or unavailable. Information as to the type of panel used is not normally available. Accordingly, our opinions of value make no allowance for the risk that insurance cover for any property may not be available, or may only be available on onerous terms.

! Terrorism - Our valuations have been made on the basis that the properties are insured against risks of loss or damage including damage caused by acts of Terrorism as defined by the 2000 Terrorism Act. We have assumed that the insurer, with whom cover has been placed, is reinsured by the Government backed insurer, Pool Reinsurance Company Limited.

! Flood and Rising Water Table - Our valuations have been made on the assumption that the properties are insured against damage by flood and rising water table. Unless stated to the contrary our opinions of value make no allowance for the risk that insurance cover for any property may not be available, or may only be available on onerous terms.

Outstanding Debts In the case of property where construction works are in hand, or have recently been completed, we do not normally make allowance for any liability already incurred, but not yet discharged, in respect of

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completed works, or obligations in favour of contractors, subcontractors or any members of the professional or design team.

Confidentiality and Third Party Liability Our Valuations and Reports are confidential to the party to whom they are addressed and for the specific purpose to which they refer, and no responsibility whatsoever is accepted to any third parties. Neither the whole, nor any part, nor reference thereto, may be published in any document, statement or circular, nor in any communication with third parties, without our prior written approval of the form and context in which it will appear.

Statement of Valuation Approach We are required to make a statement of our valuation approach. In the absence of any particular statements in our report the following provides a generic summary of our approach.

The majority of institutional portfolios comprise income-producing properties. We usually value such properties adopting the investment approach where we apply a capitalisation rate, as a multiplier, against the current and, if any, reversionary income streams. Following market practice we construct our valuations adopting hardcore methodology where the reversions are generated from regular short term uplifts of market rent. We would normally apply a term and reversion approach where the next event is one, which fundamentally changes the nature of the income or characteristics of the investment. Where there is an actual exposure or a risk thereto of irrecoverable costs, including those of achieving a letting, an allowance is reflected in the valuation.

Vacant buildings, in addition to the above methodology, may also be valued and analysed on a comparison method with other capital value transactions where applicable.

Where land is held for development we adopt the comparison method when there is good evidence, and/or the residual method, particularly on more complex and bespoke proposals.

There are situations in valuations for accounts where we include in our valuation properties, which are owner-occupied. These are valued on the basis of existing use value, thereby assuming the premises are vacant and will be required for the continuance of the existing business. Such valuations ignore any higher value that might exist from an alternative use.

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