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Appeal No. DS08/0/007 Maurice Gillen and Declan Farrell APPELLANT RE: Derelict Site at AO Smith Premises, Boghall Road, Bray, County Wicklow B E F O R E Fred Devlin - FRICS.FSCS. Deputy Chairperson JUDGMENT OF THE VALUATION TRIBUNAL By Notice of Appeal dated the 7th day of March, 2008 the appellant appealed against the determination of Bray Town Council in fixing a market value of €18,000,000 on the above described property. The grounds of Appeal are set out in the Notice of Appeal, a copy of which is attached at the Appendix to this Judgment.This is an appeal under section 22(4) of the Derelict Sites Act, 1990 against the valuation of €18 million placed on the relevant urban land by Bray Town Council in accordance with section 22(1) of the Derelict Sites Act. The appeal proceeded by way of an oral hearing held in the offices of the Valuation Tribunal, Ormond House, Ormond Quay Upper, Dublin 7 on the 10th and the 27th June, 2008. At the hearing the appellants were represented by Mr. Jonathan Ross, A.S.C.S M.R.I.C.S, a Director of DTZ Sherry Fitzgerald. Mr. John Doyle F.I.A.V.I., F.R.I.C.S, the Managing Director and Chairman of H.J. Byrne, Auctioneers, Valuers & Surveyors appeared on behalf of Bray Town Council. The lands in question comprise the former AO Smith premises which occupy a prominent site at the junction of Boghall Road and Killarney Road about 1 kilometre south from Bray town centre convenient to the N11. The property adjoins a small IDA estate but the surrounding area is mainly residential in character. The area of the property concerned has been agreed at 2.99 hectares (7.4 acres). On the lands concerned there is a single storey manufacturing and warehouse facility with integral two storey office accommodation built in the early 1980’s. The gross area of the buildings is approximately 4,629 square metres. Both surveyors, for the purposes of this appeal, valued the property which is zoned Objective C - “to provide for economic development and employment” as a site ready for redevelopment. The Appellants’ Evidence Mr. Ross in his evidence contended that the market value of the lands in question in accordance with section 22(1) of the Act was €13,350,000 at the relevant valuation date, that is the 28th November 2007. In support of his opinion of market value Mr. Ross introduced details of two transactions in the Bray area. In his evidence Mr. Ross said the current property market was under pressure due to a combination of factors including tightened credit control, worsening economic outlook and inflationary concerns all leading to a decline in development activity and land values. This matter was, he said, graphically illustrated by the evidence of three sales of development sites within the Sandyford Industrial Estate. In May and November 2006, two sites were sold and obtained prices in the order of €53 to €58 million per hectare. In September 2007 a similar site in Sandyford was sold for a reported price of €31.2 million per hectare. This, Mr. Ross said, represented a decline in the market value of development land of 45%. The Appellants’ Comparisons (i) The Dell facility at Boghall Road, Bray. Comments (ii) Former E.S.B premises, Pinewood Close, Boghall Road, Bray. Comments Having regard to the above Mr. Ross analysed the sale as set out below: Purchase price €3,070,000 When questioned about this transaction Mr. Ross agreed that the sale had not yet closed but accepted that, for the purpose of comparison, it may be taken as indicating the value of the site in October, 2007 subject to a normal closing period of, say, 2 months. He further agreed that in value terms there should be an uplift of ten percent in the price per hectare obtained to reflect the better location and profile of the subject property. On the other hand he contended that there should be a reduction of 15% in the price per hectare to reflect the relevant sizes of the two properties. He agreed that the application of these allowances on the purchase price on a price per hectare basis for comparison purposes will give the following outcome: Purchase price per hectare = say €4,873,000 (In his valuation as originally set out Mr. Ross said his 5% allowance for quantum was a net figure made up of -15% for quantum and + 10% for locational differences). Under examination by Mr. Doyle, Mr. Ross said he was aware that a site of approximately 0.6 acres at Raven Drop Road, Sandyford was sold by tender at a price equivalent to €42 million per hectare in September 2007. He did not however accept that this undermined his proposition that development land values at Sandyford had declined between May 2006 and September 2007 by 45%. The Raven Drop Road site, Mr. Ross said, was a small corner infill site and hence one would expect it to attract a premium price. Mr. Ross also agreed with Mr. Doyle that in value terms Sandyford was markedly different from Bray and that apart from the three transactions from Sandyford he had produced no other evidence to support a decline in market value of 45% for development land. In his evidence Mr. Doyle said the Dell property was very similar to the subject property in terms of size, location and profile. However, the quality and extent of the buildings on the Dell site were much superior to those on the subject property and afforded an opportunity to avail of an income stream during the pre-development process. The benefit of this, Mr. Doyle said, represented a premium of 10% over and above pure site value. Mr. Doyle said that he was aware of the fact that the change in underlying economic conditions had led to an erosion of confidence which in turn had affected the value of development lands. In his opinion the decline in the market value of such lands between November 2006 (the Dell transaction) and November 2007 was in the order of 20% in the Bray area. In relation to the ESB property, Mr. Doyle said, it occupied a much inferior location than the subject property with no direct access or profile to a major road. The fact that it was bounded on two sides by residential development could give rise to future development difficulties. These factors would, he said, have had a bearing on the price obtained. An analysis of the Dell and ESB transactions based on his evidence is as follows: The Dell facility Site area: 3.85 hectares The ESB Site Site area: 0.63 hectares Under examination Mr. Doyle said that he had no actual market evidence to support his opinion that the values of development lands in Bray had deteriorated by 20% between November 2006 and November 2007. His opinion, he said, was based on his own knowledge of, and experience in, dealing with property in the Bray area for over 40 years. In respect of the Dell and ESB properties Mr. Doyle said the Dell transaction was the most relevant comparison because it was similar to the subject property in several respects. There was, Mr. Doyle said, a limited availability of sites of the size of the Dell facility and the subject property in the Bray area and despite the lack of confidence in the present market there was nonetheless a strong demand for industrial units of all sizes in the Bray area. When asked by the Tribunal to comment on the difference in the prices on the per hectare basis between the Dell property and the ESB site, Mr. Doyle said there were two major factors – location and size. In relation to location, Mr. Doyle said, an uplift of about 25% on a price per hectare basis was warranted for the Dell property and the subject property. On the other hand there would be a reduction of 12.5% for quantum. [An analysis of this response would give the following outcome: Findings A derelict site is defined in section 3 of the Derelict Sites Acts, 1990 as “Any land (in this section referred to as “the land in question”) which detracts, or is likely to detract, to a material degree from the amenity, character or appearance of land in the neighbourhood of the land in question because of - Under section 8 of the Derelict Sites Act, 1990 every local authority is required to maintain a register known as “the derelict sites register” on which is entered the particulars of any land in their functional area which they consider to be a derelict site together with the name and address of each owner and occupier. Under section 8(e) of the Act the local authority is required to enter on to the register “particulars of the market value of urban land as determined by the local authority, or by the Tribunal on appeal, in accordance with the provisions of section 22.” Section 22(1) provides that “a local authority shall determine, as soon as may be after it is entered on the register, and at least once every five years thereafter, the market value of urban land by estimating or causing to be estimated the price which the unencumbered fee simple of such land would fetch if it was sold on the open market on the valuation date in such manner and in such conditions as might reasonably be calculated to obtain for the vendor the best market price for the land.” Under the provisions of the Act Bray Town Council determined the market value of “the land in question” at €18 million in accordance with section 22(1) of the Act. It is common case that the relevant valuation date for valuation purposes is the 28th November, 2007. At the oral hearing the parties to this appeal were represented by two highly experienced chartered surveyors who put forward their opinions of market value in a highly professional manner. Both surveyors put forward the details of two open market transactions in the Bray area in support of their respective opinions of value. Nonetheless each analysed the details of these transactions somewhat differently and hence arrived at opinions of value which were diverse by a significant degree. Both surveyors considered the Dell property and the “land in question” to be similar in many respects in terms of size, location and zoning characteristics. Both acknowledged that market conditions had deteriorated between the date of the Dell transaction and the relevant date for valuation purposes in accordance with section 22 of the Act. Mr. Ross was of the opinion that the market conditions had deteriorated to an extent such as to warrant a reduction of 45% on a price per hectare basis and his opinion in this regard was formed by an analysis of three sales in the Sandyford Industrial Estate as set out in the summary of his evidence. Mr. Doyle was of the opinion that a 20% adjustment was more appropriate based on his own extensive experience and knowledge of property values in the Bray area. Mr. Doyle in his analysis of the Dell transaction concluded that the price realised to some extent reflected the size and quality of the buildings on the property. In his judgement the added value of the building was in the order of 10% over and above the inherent site value of the property. It is common case that the former ESB premises occupy a location inferior to the Dell premises and the land in question. Mr. Doyle was of the opinion that the differential in value terms would be in the order of 25% while Mr. Ross considered 10% to be more appropriate. It is common case that on a price per hectare basis the smaller the site area the higher will be the price obtained. In analysing the ESB transaction Mr. Doyle was of the opinion that the “quantum factor” would give rise to a reduction of 12.5% while Mr. Ross considered 15% to be an appropriate figure. Having considered the evidence the Tribunal accepts that the starting point in arriving at the market value of the land in question is the Dell transaction. The Tribunal accepts Mr. Doyle’s evidence that the price obtained for the Dell property reflects the presence of the buildings on the site to the extent of 10% over the inherent site value. In relation to the deterioration in market conditions between November 2006 and November 2007 the Tribunal is of the view that the Sandyford evidence needs to be treated with some caution. Whilst it is evidence of what may have been happening in Sandyford it would be unsafe to use it as an indicator of general market trends. Mr. Doyle’s evidence in this regard is based on his opinion of market trends in the Bray area. Extensive though his experience is, it is nonetheless unsupported by actual market evidence. Accordingly, the Tribunal has come to the conclusion that the appropriate reduction to reflect the deterioration in market value between November 2006 and 2007 is 30%. In relation to quantum there is very little difference between the two parties. Mr. Doyle was of the opinion that it should be 12.5% whilst Mr. Ross was of the opinion that it should be 15%. On balance the Tribunal prefers Mr. Doyle’s opinion in this regard. The locational differences between the Dell property, “the land in question” and the ESB site are significant and on balance the Tribunal prefers Mr. Doyle’s evidence in this regard based as it is on his long and extensive experience of property values in the Bray area. Having regard to the above findings the Tribunal analyses the Dell and ESB transactions as follows: The Dell Facility The ESB Facility Determination Site Area 2.99 hectares And the Tribunal so determines.
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