Appeal No. VA94/3/025
AN BINSE LUACHÁLA Intel (Ireland) Limited APPELLANT RE: Factory, offices and grounds at Map Ref: Part 1
(part of), B E F O R E JUDGMENT OF THE VALUATION TRIBUNAL By Notice of Appeal dated the 28th day of October 1994 the appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of £28,260 on the above described hereditament. The grounds of appeal as set out in the Notice of Appeal are that:- The Property: The complex has been developed in two stages, the first stage referred to as the ESSM building and the second stage referred to as the Fab 10 complex. The work being carried out in the ESSM building mainly involves the assembly and insertion of printed circuits into personal computers, and also some warehousing/storage. The Fab 10 facility includes the main production building, the support building, the offices, warehouse, chemical store, water treatment or RODI buildings, energy centre, and waste neutralisation buildings. The process involves converting raw silicone which is imported from Germany and Japan, into microchips for the computer industry. The Clean Room or Fab Block is essentially a three level structure, comprising a basement called the Subfab, a stiff vibration resistant suspended slab called the waffle slab and an elevated steel framework with a grated platform which supports the PACE units. The waffle slab which supports the Clean Room floor is a unique development in that it is structurally independent of the steel frame of the building shell. This means that any movement or vibration in the shell of the building will not be transmitted to the production floor on which stands the very sensitive microchip producing machinery. The slab is 930 mm deep with about 400 support columns about 5 metres tall and this slab in turn is covered by a raised metal floor which facilitates air re-circulation. The Clean Room is laid out on the raised floor in alternate clean bays and service bays. The clean bays are rated Class 1 which is the highest standard achievable in the world, and a higher standard than any other factory in Ireland. The remainder of the Fab space between waffle slab and roof, which acts as a plenum for the re-circulating air and make-up air, is rated class 100. Temperature in the Clean Room space is maintained at 22oC +- 1.5o and relative humidity is similarly maintained at 37% +- 2.5%. The plant, because it is highly mechanised and automated, has significant demand for electrical power with an estimated peak demand of 18MVA and an average demand at full production of 12MVA. 25MW 110KV supply has been provided to the site by two overhead transmission lines from the ESB 110KJ network. This is one of only two industrial facilities in the country which has a supply at such a wattage. Site distribution is by 10KV underground cables. Location: Agreed areas - Fab 10: Ancillary Buildings: Boilers Generators: Chillers: Tanks: Acid Treatment: Diesel Tank: Tenure: Valuation History: The premises was listed for Revision in 1992 to value the extension and the valuation was increased to £28,260. The valuation was appealed. No change to the valuation was made at First Appeal. Written Submissions: In the respondent's submission Mr. Tom Cuddihy, B.Agr.Sc, a District Valuer with 27 years experience with the Valuation Office, on the figures then available to him took three approaches to valuation of the premises. The first such approach was to take the rent under the "sale and leaseback" arrangement, with additional rateable expenditure added in, at a 7% de-capitalisation rate with adjustments back to November 1988. This resulted in an estimated rateable valuation of £32,000. The second method was to take the sale price of the building and add improvements from the Fab 10 Building Cost Schedule. This gave a rounded rateable valuation on the same assumptions of £30,000. The third method was from the Assets Schedule supplied to the respondent by the appellant and this gave an estimated rateable valuation of £30,942. Mr. Raymond Ward, FRICS MIAVI ACI Arb, Chartered Surveyor of Lisney submitted
in his précis of evidence that: He set out a number of comparisons, the principle of which is Intel (Ireland) Limited 1991/4 appeal rateable valuation £3,260 (the ESSM building). Oral Hearing: The Tribunal adjourned for the purpose of inspecting the subject premises, and this inspection took place on the 11th day of April 1995. The hearing resumed on the 22nd day of May 1995 at which time the appellant was in a position to furnish to the Tribunal revised tables of costs showing items which had been agreed between the parties to be rateable, non rateable and other items which were disputed in relation to their rateability. Also the appellant was able to point out that Mr. Cuddihy in his estimation of the cost of construction for the capital cost method of valuation had in fact double counted in arriving at his figure to the extent of £18,644,523. Mr. Cuddihy also had carried out further exercises in relation to figures produced by Mr. David Cunningham, Site Group Cost Manager, Intel and the final day of the hearing concentrated on the rateability issues and on the correct rate of return for use in the capital cost depreciation method of valuation. Considerable debate ensued in relation to the use of the ESSM building and valuation for the purpose of deducing an appropriate rate of return on capital. Mr. Ward's estimation of 4.2% return on capital was challenged by an exercise carried out by Mr. Cuddihy which resulted in reduction of some of the costs of construction of the ESSM project causing the rate of return to increase to 7%. Mr. McGowan also highlighted the de-mountable nature of the clean room and other process spaces, in addition to the fact that he did not regard the roof over the clean room under the interstitial space and holding the pace units, as floor area properly so called as it was so thoroughly adjustable by removable components. The concluding submissions of Mr. O'Neill may be summarised as follows: (1) The ESSM building did constitute a valid comparison as it was a building
in which humidity and other parameters were closely controlled, perhaps
not to the same Mr. O'Caoimh in his submissions replied that the ESSM building was not an adequate comparison, that in the circumstances the only basis for valuation was the capital cost method and that 7% was the appropriate rate of return. He cited 'Armour on Valuation for Rating' fifth edition and 'Ryde on Rating and the Council Tax' current edition. He referred to Cement Limited v. Commissioner of Valuation [1960] IR 283 and Cork Grain Discharging Company Limited v. Commissioner of Valuation [1978] IR 35, regarding rateability of Clean Room type structures. In relation to the submissions made on the allegedly non-rateable items by the appellant, Mr. O'Caoimh submitted that the raised metal floor was part of the building and essential to it. In relation to chillers and other items controlling the air quality, he submitted that these are just the same as chillers in a cold store attached to a meat factory. He cited the decision VA88/0/056 & VA88/0/057 - Pfizer Chemical Corporation v. Commissioner of Valuation in relation to the rateability of the cooling tower. Mr. O'Neill replied that the cost of the subject was cheap and that it was effectively an air processing plant and that the treatment of air should be treated as a part of the manufacturing process and the equipment to do it should not be treated as rateable for that reason. He also asked the Tribunal to consider the valuation of Analog Devices Limited, Raheen Industrial Estate, Limerick which was a building perhaps closest (although inferior) to the subject. Findings: The reasons for the Tribunal's finding on this aspect are as follows:- In regard to the other items which more or less go to service the Clean Room, the Tribunal is likewise of the opinion that they are parts of the building and are rateable except for the agreed item "process vacuum" which was for the purpose of lifting small items of material by way of vacuum capture. The cooling towers of which 30% are included are certainly rateable on the basis of VA88/0/057 - Pfizer Chemical Corporation v. Commissioner of Valuation. (b) Quantum: The value of such a comparison is not so much as to give comparable square
footage rates but to indicate a likely rate of return for capital in the
immediate vicinity of the subject premises. Finally, the Tribunal has taken cognisance of Mr. Cuddihy's last calculation on construction costs based on David Cunningham's figures given on behalf of the appellant, but has taken out a figure in respect of "scrubbed exhausts" which Mr. Cuddihy inadvertently added to his calculation. While not accepting Mr. Cuddihy's 7% deduced from the adjusted construction costs of the ESSM building, the Tribunal is disposed (by reason of the fast moving nature of the computer industry, and the need for a reasonably high rate of return on capital on all assets), to consider that a figure approaching that suggested by Mr. Cuddihy would be appropriate. The fact that the ESSM building was of a more conventional nature should mean that a longer period for repayment should be allowed to take into account better chances of renting the building for alternative uses. The Tribunal has considered the difficult issue of "distributables" and has accepted Mr. Cuddihy's figures for distributables being added onto the figures with an adjustment back to 1988 of 8%. The forgoing exercise produces in view of all the circumstances, an NAV of almost £4m. On a rounded up basis and on the application of the ratio of 0.5% this results in a rateable valuation of £20,000 for the Fab 10 building. In addition, the existing valuation for the ESSM building of £3,260 should be added to give a total valuation for the subject of £23,260 and the Tribunal determines this latter figure to be the rateable valuation.
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