LAND COURT OF QUEENSLAND

CITATION: ING Office Custodian Pty Limited v Department of Natural Resources, Mines and Water [2007] QLC 39

PARTIES: ING Office Custodian Pty Limited (appellant) v. Chief Executive, Department of Natural Resources, Mines and Water (respondent)

FILE NO: AV2005/0806

DIVISION: Land Court of Queensland

PROCEEDING: An appeal against the unimproved value of an improved commercial property in the Central Business District of .

DELIVERED ON: 10 May 2007

DELIVERED AT: Brisbane

HEARD AT: Brisbane

MEMBER: Mr JJ Trickett, President

ORDER: The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of Lot 1 on Registered Plan 122127, Parish of North Brisbane (140 Creek Street), is determined at Fifteen Million Five Hundred Thousand Dollars ($15,500,000).

CATCHWORDS: Valuation - unimproved value - Central Business District improved commercial site - highest and best use - methods of valuation - direct comparison with sales - analyses of sales

Valuation – statutory construction - Valuation of Land Act 1944 – unimproved value of improved land – method of valuation – relevance of sales – analyses of improved sales – comparability of sales for different purposes – heritage restriction on development

APPEARANCES: Mr R Traves SC and Mr R Anderson, for the appellant Mr T Quinn and Mr S Fynes-Clinton, for the respondent

SOLICITORS: Gadens Lawyers for the appellant Legal Services, Department of Natural Resources, Mines and Water for the respondent.

[1] This is an appeal by ING Office Custodian Pty Limited (the appellant), against the unimproved value applied to its improved commercial land by the Chief Executive, Department of Natural Resources, Mines and Water (the respondent), as at 1 October 2003, under the provisions of the Valuation of Land Act 1944 (the Act). It is one of five appeals against such valuations by commercial landowners which were heard consecutively, with the evidence in each case being the evidence in the others. Decisions have previously been delivered in respect of three of those cases: Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water1, ING Management Limited v Department of Natural Resources, Mines and Water2 and Multiplex 324 Queen Street Landowner Pty Ltd & Anor v Department of Natural Resources, Mines and Water3. Many of the issues between the parties have been dealt with in those cases and the reasons for the decision in the present case should be read in conjunction with the reasons for decisions in those cases. Background [2] The appellants are the owners of land situated at the intersection of Adelaide, Creek and Ann Streets, bounded by Anzac Square on the south-west, with an area of 5,471 m². The site has a frontage to Adelaide Street of 66.788 metres, a frontage to Creek Street of 82.061 metres and a frontage to Ann Street of 66.522 metres. It is developed with three substantial commercial office buildings, linked by a common glass atrium:  Terrica Place (140 Creek Street) is located on the corner of Creek Street and Adelaide Street, comprising 25 levels of office accommodation, first floor foyer, ground floor retail and five basement levels. The building was built in 1995.  Ann Street Tower (295 Ann Street) is located on the corner of Ann Street and Creek Street, comprising 16 levels of commercial office accommodation, with ground floor retailing on Creek Street. The building was completed in 1974.  Anzac Building – Australian Government Offices (232 Adelaide Street) fronting Adelaide Street and Anzac Square, comprising a heritage listed seven level commercial office building, incorporating basement, ground level and six levels of office accommodation, with two rooftop residential units. The building was constructed in 1936/37.

1 [2007] QLC 10 (the 240 Queen Street case). 2 [2007] QLC 19 (the 239 George Street case). 3 [2007] QLC 36 (the 324 Queen Street case). 2 [3] As at 1 October 2003, the respondent assessed the unimproved value of the subject land at $16,500,000. After unsuccessfully objecting to the respondent against that valuation, the appellant appealed to the Land Court, contending for an unimproved value of $12,375,000. [4] The appellant's grounds of appeal read as follows: "The respondent's valuation is excessive having regard to the following: 1. Ground 1 The appellant's assessment of the unimproved value of Lot 1 on RP 122127 (the 'land') is lower than the respondent's assessment of the unimproved value of the land.

Particulars

1.1 The appellant's assessment of the unimproved value of the land is $12,375,000.

1.2 The respondent's assessment of the unimproved value of the land is $16,500,000.

2. Ground 2 The appellant's assessment of the unimproved value of the land is supported by sales evidence.

Particulars

2.1 The appellant's assessment of the unimproved value of the land relies on sales of properties in Brisbane including but not limited to: (a) 175 Eagle Street, Brisbane (Lot 10 on SP 151098); (b) 75 Eagle Street, Brisbane (Lot 3 on SP 140664); and (c) 120 Edward Street, Brisbane (Lot 5 on SP 135597).

3. Ground 3 The appellant's assessment of unimproved value of the land has been made in accordance with the Valuation of Land Act, 1944.

Particulars

3.1 The appellant has assessed the highest and best use of the land as being its existing use as a commercial property.

4. Ground 4 In assessing the unimproved value of the land the appellant has noted that the Anzac Building located at 232 Adelaide as constructed on the land is included on the Queensland Heritage Register and the Register for National Estate."

Those grounds were similar to the grounds in the other four appeals.

[5] At the hearing, the appellant relied upon the evidence of registered valuer, Mr G Jackson, who produced valuation reports and gave oral evidence contending for a valuation of $11,950,000. [6] The respondent relied on the evidence of registered valuer, Mr M Denman. Originally the respondent was to rely on the evidence of registered valuer, Mr A Kirby. However, when Mr Kirby became seriously ill, Mr Denman, who had worked with Mr Kirby, took over Mr Kirby's responsibilities and gave evidence in this case. Mr Denman explained that he had reviewed Mr Kirby's valuation and his preparation for these cases and

3 accepted much of his work, but on occasions he had taken a somewhat different view. This led to differences in some of the sales analyses and other figures in the respondent's documentary evidence. Both Mr Denman and Mr Kirby had in turn taken over the responsibility for these cases from the original valuer, Mr Ian Smith, who also was ill. [7] Mr Denman produced valuation reports and gave oral evidence contending for valuations of either $31,500,000 or $20,000,000, depending upon how s.3 of the Act is to be interpreted. [8] The respondent had intended to lead evidence to an unimproved value made by what has been termed the "deduction approach" under s.3(2) of the Act. However, in my decision on preliminary issues in these cases, I held that evidence of valuations made under s.3(2) was inadmissible.4 [9] Mr Jackson had prepared a valuation made under s.3(2) of the Act before the evidence of valuations made by such method was ruled to be inadmissible. However, he would not have relied on that valuation, as it resulted in an unimproved value of $5,050,000, much lower than his contended unimproved value of $11,950,000.

The Subject Land [10] The land, the valuation of which is the subject of this appeal, is situated just outside the "Golden Triangle", an area bounded by Edward, Adelaide, Margaret and Wharf Streets, which is the long established prime commercial office location in the CBD. The land is regular in shape, but falls from the Ann Street frontage to the Adelaide Street frontage, which has necessitated excavation to accommodate the office towers on the land. It is surrounded by a mixture of high rise commercial development, with the open space Anzac Square on its south-western boundary and Central Railway Station, opposite the Ann Street frontage. [11] According to Mr Denman, the CBD is undergoing a demographic shift to accommodate more residential development, which he regarded as a broader wave of urban renewal, including large scale residential development within fringe CBD residential localities. At the date of valuation, the subject land was designated "Multi-Purpose Centre (MP1- City Centre) under the Brisbane City Plan 2000, which allows for a wide range of activities to be clustered together. [12] The preferred outcomes and strategies for the City Centre include the location of high intensity offices and higher order retail activities in a compact City Centre, linked by

4 Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water [2006] QLC 30. 4 public transport to Major Centres. However, the City Centre is also to contain high intensity residential uses that promote the vitality of the centre and make best use of existing infrastructure. [13] Before considering the evidence in this case, I will refer briefly to the legislation relevant to the determination of the valuation. Relevant Legislation [14] The valuation under appeal is the "unimproved value" of the land. That term is defined for both "unimproved land" and "improved land". Section 3 of the Act provides: "3 Meaning of unimproved value

(1) For the purposes of this Act –

unimproved value of land means –

(a) in relation to unimproved land – 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; and

(b) in relation to improved land – 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, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.

(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.

(3) …

(4) Notwithstanding anything contained in this section, in determining the unimproved 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 any improvements referred to in subsection (1) had not been made."

[15] The subject land in this case is improved land, so the provisions of s.3(1)(b) apply. In the 240 Queen Street case, I explained how the provisions of the Act had been judicially interpreted, including the line of authority to the effect that the best basis for arriving at the unimproved value is by comparison with sales of vacant or lightly improved land (site sales). However, where there are no such sales, it is necessary to have regard to improved sales and ascertain the unimproved value of improved land by comparison

5 with unimproved values deduced from the analyses of sales of comparable improved land. [16] In the 240 Queen Street case, I discussed what was referred to as "Mr Denman's theory". This theory is that for each successfully developed income producing property, such as the CBD appeal lands, the unimproved value of such land should be arrived at by deducting the value of improvements from the improved value of the property itself (the deduction method), or by comparison with unimproved values derived from sales of similar improved land. Only by such methods, according to the theory, could the true unimproved value of such a property be ascertained.5 [17] However, for the reasons explained in that decision, I found that I could have no confidence in the analyses of the improved sales by either Mr Jackson or Mr Denman, as the evidence in that regard was unreliable. Therefore, Mr Denman's theory was irrelevant to that case and I had to rely on the site sales. The Valuer's Methodology Mr Jackson's Approach [18] In Mr Jackson's opinion, the highest and best use of the components of the subject land comprising 140 Creek Street and 295 Ann Street, was for commercial office development, with lower ground floor retail use. However, because of the heritage listing of the component comprising 232 Adelaide Street, he was of the view that the highest and best use of that part of the subject land was restricted to the scale of the existing development, which meant that it had far less potential than the other components of the land. [19] Mr Jackson's approach was to value the unrestricted components of the land by direct comparison with sales of sites purchased for commercial development in the CBD. However, for the heritage listed component his approach was different. He reasoned that the heritage listing would prevent the site from being redeveloped as the existing heritage improvements had to be maintained. Therefore, he assessed its unimproved value on the assumption that its development could be no greater than the present heritage listed building. [20] In order to value the components not affected by heritage listing, Mr Jackson said he was able to identify only one sale of land purchased for commercial development in the calendar years 2001 to 2003 within the CBD. That sale was the site of the development at 6 Queen Street.

5 [2007] QLC 10 at [34] – [43]. 6 [21] The only other development site sale was the purchase of a 50% interest in the site at 70 Eagle Street in July 2002, acquired by the adjoining owner. However, Mr Jackson placed no reliance on that sale because, he said, it was an off market transaction between related ownership interests. He therefore had regard to some of the older site sales. [22] The commercial site sales upon which Mr Jackson relied were:  6 Queen Street, area 7,348 m², for $25,480,000, in June 2003, which he analysed to $3,467 per m², but later adjusted to $3,121 per m² because of agreements for lease to two major corporate entities and because the land had been sold with the development approval in place;  175 Eagle Street, area 3,459 m², for $21,500,000, in October 2000, which he analysed to $2,746 per m²;  75 Eagle Street (), area 3,663 m², for $15,000,000, in December 1998, which he analysed to $3,893 per m²; and  120 Edward Street, area 1,822 m², for $6,000,000, in May 1998, which he analysed to $2,841 per m². [23] Because there were so few commercial development site sales, Mr Jackson, mindful of the decision of the High Court in Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111, undertook analyses of a number of sales of improved commercial properties within the CBD, to determine whether the purchasers of any of those few commercial sites had paid a scarcity premium. The results of those analyses satisfied Mr Jackson that the commercial site sales did not contain any scarcity premium. [24] The improved commercial sales to which Mr Jackson had regard were the same three sales that he referred to in the 324 Queen Street case:  324 Queen Street, area 1,820 m², the sale of a half interest in the property for $38,630,000, in June 2001, which he analysed to an unimproved value of $3,650 per m²;  260 Queen Street, area 1,384 m², for $24,000,000, in December 2002, which he analysed to an unimproved value of $3,337 per m² ($3,863 per m² in the 324 Queen Street case);  145 Eagle Street, area 2,121 m², for $29,000,000, in March 2003, which he analysed to $2,387 per m². [25] Mr Jackson said that he was also aware of a small number of sites in the CBD which had been purchased for high rise residential development in 2003, with the level of development proposed varying significantly. However, although he did not rely upon

7 them, Mr Jackson referred to three such sales. Those sales reflected rates per m² ranging from $2,789 per m² up to $3,294 per m², the variance, he said, dependent upon the location of each site, but more importantly, the level of density and aspect which is able to be achieved. He went on to say that each of the sites will enjoy views and aspect from the developed apartments. In his opinion, it was difficult to apply the residential sales to the subject property because of the level of density able to be achieved on each of the sale sites, compared with the unknown level of residential density which could be achieved for the subject property. [26] The residential site sales to which Mr Jackson referred were:  , area 5,098 m², for $15,000,000, in August 2003, which he analysed to $2,789 per m²; the site of the proposed residential development called "The Georgian", which had been abandoned by the vendors, Divine Limited and Urban Properties, in early 2002;  333 Ann Street, area 1,563 m², for $5,272,727, in September 2002, which he analysed to $3,294 per m², which had development approval at the time of sale for a 41-level tower comprising 190 residential apartments; and  420 Queen Street (Aurora), area 3,099 m², for $12,000,000, in August 2001, which he analysed to $3,284 m², which had approval to develop a 69-level residential apartment tower comprising 478 units. [27] In his oral evidence, Mr Jackson gave a further reason for the rejection of the residential sales. He regarded the commercial and residential markets as separate and distinct and thought that the residential sales would be relevant only if the subject land had potential for residential development. However, he refused to consider that it had any such potential, because of his interpretation of the Land Appeal Court decision in Department of Natural Resources and Mines v QNI Metals Pty Ltd6. He understood that case to establish the proposition that for land to have a higher and better use than its present use, it must be demonstrated that the land would have an unimproved value higher than the value for its present use, plus the cost of demolishing the structures on that land. In the present case, he said, that could not be demonstrated. [28] However, in the 240 Queen Street case, I found that Mr Jackson's interpretation of the QNI Metals case was mistaken.7 Therefore, in my view, the decision in QNI Metals does not prevent regard being had to the residential sales and they should be considered as part of the overall sales pattern in the CBD.

6 [2002] QLAC 71. 7 [2007] QLC 10 at [51] - [59]. 8 [29] The sale upon which he placed most reliance was the commercial site sale of 6 Queen Street, which he described as comprising a similar large development site in a superior location, with an uninterrupted aspect of the , an island site with four street frontages, directly opposite the low rise heritage building and adjacent to the Queen Street Pedestrian Mall. His adjusted analysis of that sale was $3,121 per m². [30] From that sales evidence, Mr Jackson applied a rate of $2,800 per m² to the non-heritage components of the subject land, the area of which he calculated at 4,059 m², for an unimproved value for those two components of $11,365,200. [31] However, unlike the sales which are relatively level, the subject property slopes from its Ann Street frontage to the Adelaide Street frontage, a fall which Mr Jackson calculated at between 7.5 metres and 8 metres. With the assistance of Rawlinsons Construction Cost Guide 2003, Mr Jackson deducted the cost of the excavation of that area from the site value of $11,365,200, to arrive at an unimproved value of those two components of $10,915,000. [32] To value the heritage component comprising the land at 232 Adelaide Street, Mr Jackson commenced with what he claimed to be the market value of the existing heritage building and deducted the various components of value to derive the underlying heritage unimproved value of $1,030,000. [33] When that unimproved value for the 232 Adelaide Street component was added to the unimproved value of the other two components, Mr Jackson arrived at a total unimproved value for the subject land of $11,950,000 (rounded). [34] What appears to be a check method derived from Mr Jackson's analyses of the improved sales, headed "Commercial Improved Sales Approach", is set out below: "I have adopted a rate of $2,750 per square metre, which would derive the following Unimproved Value: 4,059 m² @ $2,750 per m² $11,162,250 Less Site work allowance including interest and holding costs $450,200 Plus heritage Unimproved Value $1,030,000 Total $11,945,225 Rounded to $11,950,000"8

[35] As in the other cases, Mr Jackson also relied on the settlements of valuations of nine other properties in the CBD. In the 240 Queen Street case, I dismissed the respondent's objection to the admissibility of relativity evidence.9 However, in my view, the circumstances of those settlements are such that they are of no assistance in determining the unimproved values in these cases.

8 Ex 70, p 26. 9 [2007] QLC 10 at [51] - [59]. 9 Mr Denman's Approach [36] Unlike the three appeals already decided, Mr Denman did not assess the unimproved value of the subject land by means of the deduction approach. His method of valuation was by direct comparison with sales of properties in the CBD. However, Mr Denman's opinion as to the highest and best use of the land and, indeed, his whole approach to the valuation depended upon how s.3(1)(b) of the Act was to be interpreted. If the interpretation was that the valuation must be made on the assumption that the improvements did not exist at the time as at which the valuation was made, but the impact of the prior existence of those improvements was not to be ignored then, as I understand Mr Denman's reasoning, he would agree that the highest and best use of the land was for commercial office development with ground floor retailing. He would therefore value the land by direct comparison with the unimproved values derived from the analyses of improved sales. [37] On the other hand, if it was to be assumed that the words "did not exist" meant "have never been made", then he was of the opinion that the site was equally well suited to either commercial office development with ground floor retailing, or residential tower development with ground floor retailing. In those circumstances, he said, the unimproved value could be ascertained by direct comparison with sales of vacant or lightly improved land (site sales), including sales for residential development. However, after he adjusted the sale of 6 Queen Street, which he regarded as his most relevant sale, he changed his opinion, contending that the highest and best use was for residential purposes. [38] Mr Denman pointed out that those methods of valuation related only to the components of the land which were not restricted by the heritage listing, as he had made a separate assessment of the unimproved value of the heritage listed 232 Adelaide Street. [39] Mr Denman's preferred method, in accordance with his theory, was by direct comparison with the analyses of sales of improved commercial properties. By such method, he contended, the impact of the prior existence of the improvements on the sales was not ignored, but was taken into account in the unimproved values derived from those improved sales. When the subject land was valued by comparison with those unimproved values so derived, the impact of the prior existence of the improvements on the subject land was reflected in the unimproved value of that land. [40] Mr Denman had analysed the sales of four improved commercial properties:  240 Queen Street, area 2,127 m², in October 2003, for $116,439,300, which he analysed to $15,539 per m²; this was the sale of a 26 level commercial office tower

10 situated on the prime commercial site at the corner of Queen and Edward Streets opposite the . The valuation of that site was determined in the 240 Queen Street case;  324 Queen Street, area 1,820 m², in October 2003, for $80,000,000, which he analysed to $9,396 per m²; this was the sale of a half interest in a 23 level commercial office tower for $40,000,000 on the corner of Queen and Creek Streets. The valuation of this site was determined in the 324 Queen Street case;  157A Ann Street, area 917 m², in September 2003, for $16,550,000, which he analysed to $3,875 per m²; this was the sale of a 13 level commercial office tower on the fringe of the CBD;  175 Eagle Street, area 3,377 m², in August 2002, for $95,950,000, which he analysed to $6,605 per m²; this was the sale of a 19 level commercial office tower situated on the Brisbane River, the valuation of which was also one of the appeals in this series, which has yet to be determined. [41] Mr Denman reasoned that if the sale of 175A Ann Street (which he thought to be low) was excluded, the analyses of the other sales ranged from $6,605 per m² to $15,539 per m². For the two components of the subject land not affected by heritage restrictions, he applied a rate of $7,000 per m² to arrive at a figure of $28,889,000, to which he added the unimproved value of the heritage component, which he calculated at $1,750 per m² (25% of the non-heritage rate) to arrive at a figure of $2,353,750 for the heritage restricted component. His total unimproved value was $31,242,750, which he rounded to $31,500,000. [42] For his unimproved value by direct comparison with site sales, Mr Denman reasoned that the designation of the subject land under the Brisbane City Plan allowed it to be developed for retail, commercial, residential or a mixture of those uses. In his view, therefore, "In assessing the value of the land unimproved regard must be had to what a prudent purchaser would pay for these uses given that competition amongst these purchasers exists."10 Mr Denman derived his unimproved value by that method, from nine site sales:  175 Albert Street (corner Elizabeth Street), which he regarded as a dominant use retail site in the 240 Queen Street and the 239 George Street cases; he conceded in cross-examination that he did not place much reliance on that sale;

10 Ex 73, p 16. 11  6 Queen Street, (his most important sale) the sale of a large site for commercial development, with a ground floor retail component and large open space plaza area, which was discussed in detail in the 240 Queen Street case;  70 Eagle Street, the sale of a half interest in the site for the proposed Central Plaza Three commercial office development to the adjoining owner, a sale which I discussed and rejected in the 240 Queen Street case;  89 Charlotte Street, area 2,711 m², for $13,250,000, in January 2003, which he analysed to $4,990 per m², the site of the Festival Towers residential development;  420 Queen Street, area 3,099 m², for $12,000,000, in August 2001, which he analysed to $3,872 per m², the site of the Aurora residential tower, on the corner of Queen and Wharf Streets;  120 Charlotte Street, area 2,273 m², for $11,500,000 in December 2001, which he analysed to $5,059 per m²; the site of the Charlotte Towers 44 level residential development;  131 Mary Street, area 5,478 m², for $24,000,000, in March 2004, which he analysed to $4,382 per m²; the site of the Vision Tower mixed commercial and residential development with a retail component; that sale was six months after the date of valuation, but should not be disregarded as it confirms a trend;  64 Mary Street, area 1,523 m², for $6,488,000 in January and November 2003, which he analysed to $4,260 per m²; the site of the 44-level M on Mary residential development;  21 Mary Street, area 908 m², for $4,000,000, in April 2001, which he analysed to $4,626 per m²; an older sale of a small site. [43] From those sales, Mr Denman derived unimproved values ranging from $4,062 per m² to $8,253 per m². He recognised that there was a discrepancy between the unimproved values derived from the analyses of the improved commercial sales and from the vacant or lightly improved sales, which he attributed (according to his theory), to the land value component of a successfully developed improved property reflecting its proven ability to attract tenants and that the component for the risks and profits from the development is embedded in the land value. By contrast, he reasoned, the unimproved value based on sales of vacant or lightly improved land "… includes only a conservative allowance for the likely costs incurred in gaining and implementing development approval … and does not contain profit and risk allowances, as the risks are yet to be

12 encountered."11 Therefore, in his view, vacant land sales have never before been put to their intended uses and their sale prices reflect the unfulfilled potential of the properties and their associated development risks. [44] From those site sales, on the assumption that the improvements "have never been made" and that their impact on the subject land is not taken into account, Mr Denman's alternative unimproved value was: unrestricted components 4,126 m² @ $4,500 per m² $18,567,000 plus the heritage component of 1,345 m² @ $1,125 per m² (25% of the unrestricted components) $1,313,125 Total $20,080,125 Rounded to $20,000,000 [45] Mr Denman also referred to the same three sales that he called "minimum use sales evidence" in the 324 Queen Street case. He placed little reliance on those sales and I do not regard them as of any assistance. [46] Mr Denman stated that if s.3(1)(b) of the Act was to be interpreted to mean that it must be assumed that the improvements on the subject land had never made and that their prior existence could not be taken into account, then his assessment would be based on the site sales only, as explained above, at $20,000,000. However, after he adjusted the sale of 6 Queen Street, Mr Denman revised his opinion of the highest and best use of the land and contended for an unimproved value of $19,000,000. At no stage in his evidence did he attempt to support the respondent's valuation under appeal of $16,500,000. Indeed, he was of the opinion that the issued valuation was incorrect.12 The Valuation Evidence Considered [47] This case differs from the other four cases in this series, because the evidence is that a component of it is heritage listed and the development on it must be preserved and maintained. That component is 232 Adelaide Street, upon which is situated the seven level Anzac Building constructed in 1936/37. Both valuers agreed the heritage component must be valued taking that restriction into account. Although s.3(1)(b) of the Act requires that the improvements are to be assumed not to exist, the valuers seem to have assumed that the heritage restrictions run with the land and affect its unimproved value. I will return later to how that component is to be valued. [48] The other components at 140 Creek Street and 295 Ann Street, are not heritage affected and each must be valued at its highest and best use, which Mr Jackson contended was

11 Ex 73, p 20. 12 T 1554. 13 for commercial office development with ground floor retailing, consistent with the existing use. On the other hand, Mr Denman asserted that those components were equally well suited to either commercial office development, or for residential development. After adjusting the sale of 6 Queen Street, he changed his opinion, contending that the highest and best use was for residential purposes. The Unrestricted Components [49] Both valuers compared those components with unimproved values derived from the analyses of improved commercial sales. Mr Denman did so as his preferred method of valuation, in accordance with his theory. Mr Jackson, on the other hand, did so only because there were few commercial site sales and, in accordance with the direction of the High Court in Maurici, in order to ascertain if any scarcity premium had been paid by the purchasers of the site sales. He said that from that exercise he was satisfied that no such premium had been paid. [50] However, in this case, he acknowledged that the improved sales analyses provided a check on his primary method.13 He formed the view from his improved sales that a rate of $2,750 per m² should be applied to those components of the subject land. When he deducted an allowance for siteworks (which included interest and holding costs), the result supported his unimproved value derived from the site sales.14 [51] The improved sales relied on by Mr Jackson were the same sales that he referred to in the 324 Queen Street case. Although in the present case the improved sales supported the unimproved value arrived at from his site sales, it is clear from his oral evidence that he had no real confidence in the results of his analyses of such highly improved sales. He had analysed them, he said, only to ascertain whether the site sales included a scarcity premium.15 [52] Mr Denman also relied on the same improved sales that he had relied on in the 324 Queen Street case. That was his preferred method of valuation and the resulting unimproved value for the relevant components of the subject land far exceeded the unimproved value from direct comparison with his site sales. [53] In the three cases so far decided in this series of appeals,16 I have rejected the valuers' analyses of sales of highly improved commercial properties. For the same reasons explained in those cases, I also reject them in the present case. As in those cases, I must rely on the site sales.

13 T 1475. 14 Ex 70 p 26. 15 T 286; T 297; T 1183; T 1124. 16 [2007] QLC 10; [2007] QLC 17; [2007] QLC 36. 14 [54] The site sales relied on by the valuers in the present case are sales upon which they relied in the three cases in this series so far determined. Of those sales, I have found only the sale of 6 Queen Street and the more recent residential sales to be of any significant assistance. Mr Jackson contended that the residential sales were not relevant because the market for commercial and residential development sites were, in his opinion, separate and distinct. As in the 324 Queen Street case, Mr Denman did not differentiate between retail, commercial and residential sales for the reasons previously explained. [55] The residential development site sales referred to by Mr Jackson and those relied on by Mr Denman, do not, in Mr Jackson's view, provide a like with like comparison, as the residential sales were purchased for a different use by a different class of purchaser. He was of the opinion that residential development is more suited to the less preferred commercial locations along Mary, Charlotte, Margaret and Alice Streets and in the northern sector of Queen Street, within what he described as "the designated residential precinct".17 [56] Furthermore, he had no doubt that properties of a residential character are likely to attract a different class of buyer and are unlikely to provide a reliable indication of value of the land, the highest and best use of which is commercial.18 [57] With due respect to Mr Jackson, I do not accept that view. In the 240 Queen Street case, I found that regard should be had to the residential sales. That was consistent with the findings of the Land Court in the Perpetual Trustee Company case.19 Although I accept that purchasers of commercial and purchasers of residential sites were competing in the same market at the date of valuation, the type of development would depend on the particular attributes of each site. As was said in the Perpetual Trustee Company case: "…that does not necessarily mean that the same sites will be of equal interest to each …".20

[58] I found in the 240 Queen Street case that the distinction between the commercial and residential markets was no longer so apparent, given the encouragement of the planning scheme for residential development and the trend for mixed residential and commercial development in the same complex.21 In the Perpetual Trustee Company case, the Land Court referred to the significant residential component in the Riparian development, as

17 Ex 71 p 11. 18 Ex 71, p 12. 19 [2007] QLC 10 at [166]. 20 [2006] QLC 17 at [39]. 21 [2007] QLC 10 at [171]. 15 well as the Felix residential development which was inside the Golden Triangle, opposite the Waterfront Place prime commercial site.22 [59] In the present cases, there was evidence of the mixed development in Vision Tower, as well as evidence that part of the site at 400 Queen Street, which was originally intended for "The Georgian" mainly residential apartments, later sold for commercial development.23 [60] Despite his reservations, Mr Jackson at least acknowledged that residential and commercial developers do and will compete for available sites, but he thought that it would be an extraordinary coincidence if they perfectly aligned, because of the different attributes which motivate purchasers.24 [61] Mr Denman maintained that there had been a merging of the markets. He relied on both commercial and residential site sales. [62] In my view, the evidence demonstrates that a merging trend was evident before the date of valuation in these cases and continued after that date. Although I find that the highest and best use of the subject land is for commercial development with ground floor retailing, the residential sales cannot be ignored. The Most Relevant Sales [63] Both valuers regarded the sale of 6 Queen Street as the most important sale.25 Mr Jackson placed most reliance on that sale, which he regarded as having a fair degree of comparability, but he considered it to be superior in commercial and retail potential. He referred to its superior aspect and uninterrupted views over the Brisbane River, its four street frontages, its superior location opposite the Queen Street Mall, while the subject land is on the fringe of the CBD, outside of the "Golden Triangle", with no river aspect.26 [64] As mentioned previously, Mr Denman regarded the sale as so significant that after making adjustments to it for GST, he reconsidered his opinion of the highest and best use of the subject land and altered his contended unimproved value from $20,000,000 to $19,000,000.27 While Mr Denman agreed that the sale had superior attributes, such as aspect and views, he was of the opinion that the location of the subject land was superior for commercial purposes.

22 [2006] QLC 17 at [126]. 23 Ex 74, p 25. 24 T 1454. 25 Mr Denman T 1582; Mr Jackson Ex 71 annex 2 and T 1456. 26 Ex 71, Annex 2. 27 T 1764. 16 [65] As in the other cases, I find that the other commercial site sales are either to be rejected, or are of little significance. [66] Considered as sites for commercial development, I accept that the unrestricted components of the subject land have a reasonable comparability with the sale of 6 Queen Street at $3,467 per m² (or $3,536 per m², if the demolition of the old Trittons Building is to be added, about which there remains some doubt). [67] In the present case, Mr Jackson included the sale of 333 Ann Street, which he analysed to $3,294 per m², after adjustment for deferred settlement. That property had development approval for 41 levels of residential apartments. That sale was referred to by Mr Denman in the 239 George Street case. He analysed it to $3,373 per m², with no adjustment for deferred settlement. However, he had not referred to it in any of the other cases. In the 239 George Street case, Mr Jackson simply rejected all the residential sales. [68] Mr Denman did not know much about the sale,28 but he did not challenge its relevance as a sale in proximity to the subject land. However, it is situated on the heavily trafficked Ann Street and has other negative attributes which were mentioned by Mr Denman, which would detract from its residential amenity. [69] Mr Jackson also referred to the sale of 400 Queen Street, which was discussed in the 239 George Street case. He analysed that sale to $2,789 per m² (or $2,942 per m² if there was no adjustment for deferred settlement). He regarded it as having general comparability with the subject land. [70] Mr Denman challenged that sale on the basis that there was doubt as to whether the sale had ever settled. However, Mr Jackson was aware of the circumstances of the transaction and the subsequent subdivision and sale of that land. There is also uncontradicted evidence that after the date of valuation, part of that land was being developed for commercial purposes. [71] However, there seemed to be general agreement that the site at 400 Queen Street was inferior to the subject land, largely because of its situation. [72] The third residential sale referred to by Mr Jackson was the sale of 420 Queen Street in August 2001, the site of the Aurora development. That sale was part of the basis in the Perpetual Trustee Company case to establish the unimproved value for previous years of the site at 175 Eagle Street. The Court there adopted the rate of $3,800 per m² for the sale for comparison purposes. I accepted that figure for the unimproved value derived

28 T 1576 – 1577. 17 from the Aurora sale in 2001 for the purposes of comparison in the 324 Queen Street case.29 [73] Mr Jackson regarded Aurora as superior to the subject land for residential development, because of the precinct in which it is situated, its proximity to the river, its views and the other residential attributes, not enjoyed by the unrestricted components of 140 Creek Street.30 [74] In the three cases so far decided in this series of appeals, I have found that the residential sales close to the date of valuation were also relevant, reflecting unimproved values ranging from $4,300 per m² to $5,000 per m². Those sales included 64 Mary Street (M on Mary) in 2003 at $4,260 per m², 89 Charlotte Street (Festival Towers) in January 2003 at $4,990 per m² and 131 Mary Street (Vision Tower) in March 2004 at $4,382 per m². Based on those residential sales and the sale of 6 Queen Street, I have found that the prime commercial site at 240 Queen Street had an unimproved value of $6,300 per m² as at 1 October 2003. [75] The site at 239 George Street is not in such a prime commercial location. It is opposite the site for the Brisbane Square development, which was the sale of 6 Queen Street, which both valuers regarded as the most important sale in that case. It was the only sale of a commercial development site in 2003. Both valuers agreed that the market for such sites was subdued at the date of valuation, with few sales in the three year period to that date. However, Mr Denman considered that there had been growth in the market on the fringes of the CBD for residential development. The residential sales referred to above tend to confirm his view. However, those sales are located in an area of superior residential amenity, removed from the heavily trafficked city centre, but conveniently close to it, in a quieter locality, close to the river and the botanical gardens. [76] The subject land does not enjoy those residential attributes to the same extent. On the other hand, it has other advantages, including its commercial highest and best use and it is, as Mr Denman termed it, "closer to the action". It also has an outlook over Anzac Square and is handily situated to Central Railway Station. [77] It seems to me that despite its proximity to the river and its four street frontages, on a commercial basis the sale of 6 Queen Street has some general comparability with the unrestricted part of the subject land, which is in closer proximity to the "Golden Triangle" commercial precinct. However, although the later residential sales referred to by Mr Denman indicate that there has been an increase in the residential market since

29 [2007] QLC 36 at [55]. 30 T 1462. 18 the Aurora sale in 2001, the subject land does not have the same residential attributes of the later sales, or of Aurora. However, the subject land is better situated than the sale at 400 George Street. Furthermore, although the evidence concerning the sale was not entirely satisfactory, there was the evidence of the residential sale at 333 Ann Street for $3,294 per m², situated in the next city block. [78] Having regard to all the sales evidence, particularly the sales to which I have referred, I am of the view that the unrestricted components of the subject land should be valued as at 1 October 2003, at $3,500 per m². The Heritage Component – 232 Adelaide Street [79] Both valuers agreed that the seven level Anzac Building is "heritage listed" and that its highest and best use was "as presently used", without potential for further development. However, apart from Mr Jackson stating that he had regard to s.14(5)(d) of the Act (requiring that the unimproved value be made having regard to and making allowance for any restriction or limitation of use of land subject to a heritage agreement under the Queensland Heritage Act 1992), there was no evidence of the "heritage listing" or the heritage agreement. [80] Nevertheless, it is common ground that the heritage component should be valued at a significantly lower value per m² than the other components. Mr Denman, without further explanation, simply applied a rate of $1,125 per m², or 25% of the $4,500 per m² he applied to the unrestricted components. On the other hand, Mr Jackson purported to value the heritage component by a deduction method, first arriving at the market value by an unexplained process, then deducting an investment component and the value of existing improvements, which were also arrived at by a process which remained unexplained. [81] His exercise is reproduced below: "Market value $8,800,000 Less allowance for investment component $1,732,498 Less allowance for value of existing improvements $6,037,502 Heritage unimproved value $1,030,000"31

[82] Counsel for the respondent, Mr Fynes-Clinton, objected to the admissibility of that part of Mr Jackson's evidence, as it appeared to be based on the valuation made by a different valuer, for a different purpose, by a different methodology. Therefore, he submitted, in accordance with my previous ruling on the inadmissibility of the s.3(2) evidence in these cases, this evidence should be inadmissible.32

31 Ex 70 p 25. 32 [2006] QLC 30. 19 [83] From the disclosed material, the respondent inferred that the figures had been taken from a valuation dated 1 June 2003 prepared by the valuation firm, Urbis. If that is so, the material produced by Mr Jackson is hearsay and as the Urbis valuer was not called, it would be of no weight. [84] That left the evidence concerning the heritage component in a most unsatisfactory state. I had no explanation of how either valuer had arrived at their assessments. When it was pointed out by Mr Traves SC, senior counsel for the appellant, that there was little difference between the valuers in the value to be attributed to the heritage component, no matter how arrived at, I ordered that the valuers confer and try to reach agreement on the unimproved value that should be applied to that component. [85] Following the valuers' conference, Mr Jackson was prepared to agree that the heritage component should be valued at 25% of the value of the unrestricted components. [86] Therefore, I find that the value of the heritage component in this case should be valued at $875 per m². [87] The valuers disagreed about the area of the heritage component. Mr Jackson calculated the area at 1,412 m². Mr Denman contended the area was 1,345 m². While Mr Jackson explained that his calculated area was consistent with the area adopted by the respondent in the original assessment, Mr Denman gave no explanation for his calculation of the heritage affected area. However, the respondent did not challenge Mr Jackson's explanation. [88] In the circumstances, I will adopt 1,412 m² as the area affected by the heritage restriction. The unimproved value of that component is therefore $1,235,500. [89] On several occasions and in written submissions, counsel for the respondent requested that I rule upon the respondent's objection to the admissibility of the deduction valuation exercise of the heritage area carried out by Mr Jackson. However, as the valuers reached agreement as to the percentage of the unrestricted rate per m² that should be applied to the heritage area, in my view, the respondent's objection was no longer relevant.33 Site Improvements [90] Mr Jackson made allowance for the excavation of the sloping site so that it could be compared with the more level sales. However, Mr Denman disagreed, contending that most large developments require excavation siteworks for basement car parking. For example, Brisbane Square has three levels of basement excavation, Queens Plaza has six levels, Vision Tower seven levels proposed, MacArthur Building five levels. Mr

33 T 1500. 20 Denman pointed out that the Aurora site was a sloping site, with car parking above ground, eliminating the need to excavate a basement car park. The subject land has three street frontages and, in Mr Denman's view, its slope would provide developers with a great deal of flexibility. He did not think that the slope would result in any abnormal cost.34 [91] I accept that in a large scale development there may well be the need to excavate for basement car parking and in the absence of any evidence to the contrary, I do not think that a prudent purchaser would pay any less for the subject land because of its slope. Therefore, I will not make a deduction for the siteworks on the subject land. [92] In accordance with my findings, the unimproved value of the subject land will be determined as follows: Unrestricted Components 140 Creek Street and 295 Ann Street – 4,059 m² @ $3,500 per m² $14,206,500 Heritage Component 232 Adelaide Street - 1,412 m² @ $875 per m² $1,235,500 $15,442,000 Rounded to $15,500,000

The Statutory Presumption of Correctness [93] In the 240 Queen Street case, I considered the effect of s.33 of the Act. In this case, under those provisions, the valuation made by the respondent of $16,500,000 is deemed to be correct until proved otherwise. For reasons similar to those in the 240 Queen Street case, I find that the evidence has proved the respondent's valuation not to be correct. The statutory presumption has therefore been rebutted. Order: The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of Lot 1 on Registered Plan 122127, Parish of North Brisbane (140 Creek Street), is determined at Fifteen Million Five Hundred Thousand Dollars ($15,500,000).

JJ TRICKETT PRESIDENT OF THE LAND COURT

34 T 1534. 21