COURT JUDGEMENTS

NSW VALUER GENERAL CONTRACT VALUERS FAVOUR JOHN SANIDAS VALUATION REPORT 2022 ($11,000,000) OVER SYDNEY METRO’S REVISED FINAL VALUATION REPORT ($8,450,000) IN STAGE 1 – NEGOTIATION OF ACQUISITION BY AGREEMENT BASED ON THE JUST TERMS ACT FOR AN INDUSTRIAL PROPERTY AT CLYDE

The subject property was an old industrial flood affected site comprising 5,500 square metres at 50-52 Wentworth Street Clyde corner Kay street also known as LOT 1 DP1180007 being  part of the Camellia Precinct. The area is identified as a Priority Revitalisation Precinct in A Plan for Growing Sydney’s Greater Parramatta to Olympic Peninsula Priority Growth Area, an area expected to grow significantly over the next 20 years and strengthen Parramatta’s status as Sydney’s second CBD.

Owner concerns

The owners were concerned with not being adequality compensated for the underlying development value for which they paid a premium to be inside the precinct at the time of purchase in 2017. They were also concerned broadly with the level of industrial land use lost in the area because of a number of government projects planned. In this respect, they believed they may be worse off, if they could not be relocated on industrial land, in the same area, after the acquisition.

The subject property

The subject property overall comprised a (circa 1950s) detached part one part two storey industrial warehouse distribution complex with high clearance storage and office accommodation which formed part of the industrial area of Clyde, just two kilometres east of Parramatta CBD.

Approximately 53% of the property was leased to Simotas Food Distributors. The property benefited from truck, yard, container, and customer access available from a central and secondary driveway, off the main street.

Approximately 47% of the property was leased to VO Group Australia, a steel manufacturing window business operator who occupied the front section of the complex under the same roof with revamped office accommodation to ground and first floor. The property benefited from truck and pedestrian access from two other driveways with high clearance loading bay access points and customer access from a central driveway to the front office.

Overall, the property had a street frontage of approximately one hundred and forty metres (140 metres). Eighty metres (80 metres) to Wentworth Street and sixty metres (60 metres) to Kay Street and benefited by 3 double width driveway access points, including the advantage of a quiet no through road. The site has good site visibility to and from the M4 Freeway overpass and entry point to Sydney Helicopters and Granville Sports Ground.

valuation methodologies

In this instance, the Capitalisation of Income Approach was carefully adopted as the primary valuation methodology. As a cross check method, the Direct Sales Comparison Approach was adopted with appropriate court preferred adjustments, for time (market movement), size and location.

case law referenced

The valuation exercise must assume that both parties (to the hypothetical transaction) are ‘perfectly acquainted with the land, and cognizant of all circumstances which might affect… [its] value’ (Spencer v the Commonwealth of Australia [(“Spencer”)] (1907) 5 CLR 418 at 441 per Isaacs J.
the valuer should analyse those comparable sales. This often involves converting the value of those sales into another measurement that can be easily compared: Marroun at [201] (Sheahan J and Parker AC). Examples of this process include converting those sales into unitary rates, such as a psm rate.

(Whilst the comparative sales methodology may be the conventional approach, other methodologies can be acceptable where appropriate. As noted by Wells J in Bronzel v State Planning Authority (1979) 21 SASR 513 (‘Bronzel’) at 516:

It has been accepted that a generally valid method of conducting a comparable sales approach is to undertake it in the four steps of accumulation, analysis, adjustment and application: Constantine v Blacktown City Council (No 2) [2016] NSWLEC

In Crompton v Commissioner of Highways (1973) 5 SASR 301, Wells J stated at 317: Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. 100% of the valuation fees were awarded by the VG as disturbance