AN BINSE LUACHÁLA
VALUATION TRIBUNAL
NA hACHTANNA LUACHÁLA, 1852-2001
VALUATION ACTS, 1852-2001

Nollaig Nominees Ltd. t/a Four Seasons APPELLANT
and
Commissioner of Valuation RESPONDENT

RE: Hotel at Lot No. 19C, Merrion Road, Pembroke East E, Pembroke East, County Borough of Dublin.

B E F O R E
Fred Devlin - FSCS.FRICS Deputy Chairperson
Michael F. Lyng - Valuer Member
Michael McWey - Valuer Member

JUDGMENT OF THE VALUATION TRIBUNAL
ISSUED ON THE 17TH DAY OF NOVEMBER, 2005

By Notice of Appeal dated 9th May 2002, the appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of €17,776.33 on the above described relevant property.

The Grounds of Appeal as set out in the Notice of Appeal are that:
"1. The valuation is excessive and inequitable.
2. The valuation is bad in law."

This appeal has been the subject of hearings dealing with the following two preliminary issues:
1. Issue: Admissibility in evidence in relation to this appeal of "Without Prejudice" comments made by the appellants' rating consultants Messrs. GVA Donal O Buachalla in an appeal involving the Westin Hotel. Another Division of the Tribunal heard evidence/submissions on this issue on 30th September 2003 and issued its written judgment on 15th December 2003.
2. Issue: Alleged failure of Appeal Officer to inspect the subject property as required by section 20 of the Valuation Act 1852. This Division of the Tribunal heard evidence/submissions on this issue on 24th November 2004 and issued its oral decision on the same day. With the consent of the parties it was decided that the oral decision sufficed and that no written judgment was required.

The hearing dealing solely with the matter of quantum was held on the 3rd and 15th December, 2004 at the Offices of the Valuation Tribunal, Ormond House, Ormond Quay Upper, Dublin 7. At the hearing the appellant was represented by Mr. Brendan Conway, B.L., instructed by Ms. Máire Conneely, Messrs. A&L Goodbody. Mr. James Devlin, B.L., instructed by the Chief State Solicitor appeared on behalf of the respondent, the Commissioner of Valuation. Expert valuation evidence was given by Ms. Sheelagh O Buachalla, B.A., A.S.C.S a director of GVA Donal O Buachalla and Mr. Terence Dineen, B.Agr. Sc., a Valuer in the Valuation Office on behalf of the appellant and the respondent respectively. Mr. Neil Gribben, the Director of Finance of the Four Seasons Group gave evidence in relation to the operation of the hotel and its position in the market. Mr. John Brennan, General Manager of the Four Seasons Hotel also attended.

The Property Concerned
The property concerned, which trades as the Four Seasons Hotel, is situated on a prominent corner site fronting onto the Simmonscourt Road and Merrion Road, Ballsbridge, Dublin 4. The hotel is located around 3-4 km from Dublin city centre and occupies a site area of some 3.3 acres which forms part of the RDS complex. The site is occupied under a building lease from the RDS for a term of 99 years from the 12th February, 2001 subject to an initial yearly rent of €507,895.23. The initial rent is subject to review at the end of the sixth year and thereafter at five yearly intervals.

Evidence was given that the hotel was developed by a limited partnership and is occupied and operated by the Four Seasons Group under an operational and management agreement. Details of this agreement were not made available to the Tribunal.

The hotel complex is a mainly 5-storey over basement block built to a high standard of construction, specification and finish. The ground floor is given over to the usual principal public rooms whilst the upper floors provide a total of 259 guestrooms and suites of various sizes and generous proportions. The leisure centre facilities, kitchens and service areas are at basement level where there are also 80 car-parking spaces. Additional surface car parking for 70 cars is also available.

A sophisticated air conditioning plant is installed, as is a comprehensive fire alarm and water sprinkler system. Three 21-person lifts and two service lifts serve all levels. High-speed internet access and other electronic facilities are supplied to all guestrooms.

Rating History
The subject property was first assessed in November 2001 at a rateable valuation of €17,776.33 (IR£14,000). No change was made to this assessment at first appeal stage and it is against this decision by the Commissioner of Valuation that the appeal to this Tribunal lies.

The Appellant's Evidence
Mr. Neil Gribben, the Director of Finance of the subject hotel, outlined the operational philosophy of the Four Seasons Group and the market segment in which it operates. As far as Dublin was concerned the Group views the Merrion, Westin, Westbury, Shelbourne and Conrad Hotels to be their natural competitors and in particular the Westin and Merrion. Like the Four Seasons, the Westin has a global presence and would be known to the major decision makers in the United States of America.

In common with other major hotels in Dublin the Four Seasons, Mr. Gribben said, subscribed to TravelCLICK, which produces monthly reports regarding occupancy rates, average room rates and RevPAR (revenue per available room) and included samples of these reports as part of the bundle of financial documents submitted to the Tribunal. Mr. Gribben said that this type of market information was important as it allowed operators to measure their performance against their peers in a number of critical operational areas.

Mr. Gribben said the hotel, which opened in February 2001, was not yet operating at its optimum and this was especially so in the corporate sector. Investigations carried out indicated that this sector of the market preferred hotels located closer to the city centre and the IFSC, such as the Westin, Merrion and Shelbourne. Mr. Gribben said that, in his opinion, the peripheral location of the Four Seasons was its main trading weakness. He also asked the Tribunal to look at the TravelCLICK documents and see for itself the relative performance of the Four Seasons against its competitors.

Mr. Gribben said that the hotel operated principally in the corporate market sector and that quoted room rates were discounted in an attempt to boost occupancy levels. Nonetheless the information available from TravelCLICK indicated that the occupancy rate at the Four Seasons was below the average attained by their competitors. The primary reason for this, he said, was the location.

Under cross-examination Mr. Gribben said he understood the construction costs of the hotel were about £90 million. He agreed that the Four Seasons brand was a byword for "Top of the Range". He agreed that the Dublin hotel was built and fitted out in accordance with the group's specifications and could be described as being a high quality product. Mr. Gribben also agreed that whilst trading was not yet at its optimum, it was improving on a year on year basis. Nonetheless, Mr. Gribben said the rate of business growth achieved and occupancy levels attained were disappointing due to the difficulties associated with the location of the hotel and the inadequacy of the existing transport facilities.

When questioned about other hotels such as Bewleys and the Arlington, Mr. Gribben said that these hotels operated in a different sector of the market and could not in any way be considered comparable. As far as he was concerned the hotels most comparable to the Four Seasons were the Westin, the Merrion and the Shelbourne, which in his opinion occupied the finest location in Dublin. If the Four Seasons had a choice, that is where they would like to be, but in 1999 when the decision to come to Dublin was taken, the Ballsbridge site was the only one considered suitable for a Four Seasons Hotel.

Ms. Sheelagh O Buachalla adopted her written précis and valuation which had previously been received by the Tribunal as her evidence-in-chief.

Ms. O Buachalla in her evidence said she was well experienced in valuing hotels for rating purposes. Among those in Dublin for which she had acted were the Westin, Radisson Stillorgan, Berkeley Court, Conrad and Fitzwilliam Hotels. In arriving at her opinion of net annual value Ms. O Buachalla said she had analysed the assessments of 8 hotels (listed in Appendix 1 to this judgment). Whilst all her comparisons were relevant, in her opinion the Westin and Merrion were the most comparable insofar as they were both 5 star hotels catering for the top end of the market. Having regard to her analysis Ms. O Buachalla put forward the following valuation:

Hotel 25,638 sq. metres @ €75.17 = €1,927,208
Basement: Leisure 1,014 sq. metres @ €75.17 = €76,222
Stores 3,526 sq. metres @ €24.66 = €86,950
Car spaces 150 cars @ €603.13 = €90,469
Total NAV = €2,180,638
@ 0.63% = RV €13,738

Ms. O Buachalla said that it was clear from her analysis that the established tone for valuing five star hotels was in the order of €82 per square metre. This was borne out by the analysis for the Westin, Conrad, Merrion and Berkeley Court. In her opinion the Westin and Merrion were very similar to the subject in standard and range of facilities offered but occupied better locations. This opinion, she said, was supported by Mr. Gribben's evidence. In the circumstances Ms. O Buachalla said she considered it appropriate to make an allowance of approximately 9% to reflect the differential in location and the larger area of the subject property.

When asked to comment on Mr. Dineen's comparisons, Ms. O Buachalla said she was of the view that most of them were not relevant. Indeed the only comparisons introduced by Mr. Dineen that were of assistance to the Tribunal, she said, were the Conrad, Jury's Ballsbridge and the Westin, all of which were common comparisons. The rest of Mr. Dineen's comparisons, she said, were so dissimilar to the Four Seasons in terms of size and quality of accommodation as to be of no assistance. The K-Club, she also said, was of no assistance whatsoever as it was not located in Dublin.

Under cross-examination, Ms. O Buachalla agreed that the subject property was a new purpose built hotel unlike the Westin and the Merrion. Whilst this to some degree was beneficial from an operational point of view, the Merrion and Westin retained many of the original period features in the public areas, which added a charm to the hotels lacking in the Four Seasons, she said. Ms. O Buachalla agreed that the guestrooms in the subject were generous in size and larger than those found in other five star hotels in Dublin.

Ms. O Buachalla agreed that Bewley's Hotel close by was valued at the same rate per square metre contended by her for the subject. Ms. O Buachalla said whilst this may be so, it had to be remembered that Bewley's was a three star establishment with limited facilities aimed at a different market segment. The fact was, she said, that the Four Seasons was a five star hotel and hence it should be valued on a par with other five star hotels in Dublin.

When asked to apportion the allowance of 9% for location and size, Ms. O Buachalla said that 5% could be attributed to the location factor and 4% to the larger area.

Respondent's Evidence
Mr. Terence Dineen having taken the oath adopted his written précis and valuation which had previously been received by the Tribunal as being his evidence-in-chief.

Mr. Dineen in evidence said that when he inspected the subject property he was most impressed by the exceptionally high quality of the construction specification and finish. It was, in his opinion, the best hotel in Dublin and occupied an excellent location.

Mr. Dineen said that in arriving at his opinion of net annual value as appeal valuer he had had regard to the fact that the hotel was in a start-up situation and that it could take up to five years to get the business up and running at optimum levels of trading. This opinion, he said, was confirmed by Mr. Gribben's evidence given to the Tribunal.

Mr. Dineen said that the Conrad was the first five star hotel in Dublin to be valued after the introduction of the Valuation Act, 1986 and this assessment had set the tone for valuing hotels of a similar nature. In his opinion the valuation of the Conrad was not soundly based but he accepted that it did establish the tone and that the €82 per square metre represented a cap which could not in normal circumstances be exceeded. When it came to valuing the subject, Mr. Dineen said, he came to the conclusion that the subject was of a much better quality and afforded a standard of accommodation and facilities in excess of any other five star hotel in Dublin. In the circumstances he was of the opinion that the valuation as determined at revision stage was if anything on the low side. Nonetheless, Mr. Dineen put forward the following assessments of net annual value:

NAV Hotel:
Entire (excl. all plant rooms) 29,281 sq. metres @ €93.00 = €2,723,133
150 car spaces @ €634.87 = €95,230
Total = €2,818,363
RV @ 0.63% = €17,755
OR

Ground to fourth floors, leisure centre 26,652 sq. metres @ €95.00 = €2,531,940
Bast. kit., stores, lockers, plant rooms 3,526 sq. metres @ €47.50 = €167,485
Attic & first floor plant rooms 3,364 sq. metres @ €13.66 = €45,952
150 car spaces @ €634.87 = €95,230
Total = €2,840,607
RV @ 0.63% = €17,895

OR

Ground to fourth floors 26,652 sq. metres @ €95.00 = €2,531,940
Bast. Kit., stores., lockers, plant rooms 3,526 sq. metres @ €47.50 = €167,485
150 Car Spaces @ €634.87 = €95,230
Total = €2,794,655
RV @ 0.63% = €17,606

In support of his opinion of net annual value Mr. Dineen introduced 9 Dublin hotel comparisons, details of which are set out in Appendix 2 to this judgment. Mr. Dineen said he was aware that a number of his comparisons were not five star hotels, but nonetheless he felt it appropriate to give an overview of hotel assessments in Dublin, if only to support his argument that the valuation of the subject was modest. The only hotel in his opinion which was of a quality similar to the Four Seasons was the K-Club which, although out of Dublin, was valued at €103 per square metre.

Under cross-examination, Mr. Dineen said he was well experienced in rating hotels in Dublin. He agreed that location was a factor to be taken into account but not necessarily the only one. In his experience location was certainly a factor in room rates and this was borne out by the room rates charged by Bewley's at their hotels in Merrion Road and Newlands Cross, which showed a 25% higher rate for Merrion Road. These hotels, Mr. Dineen said, were similar in all respects except location and this was the sole reason for the price differential. Accordingly, Mr. Dineen said, Ms. O Buachalla's decision to value the subject at the same rate per square metre as Bewley's on Merrion Road was inexplicable given the vast difference in room rates and range of facilities on offer to potential customers.

When asked to comment on the valuation of the Conrad Hotel, Mr. Dineen reiterated his opinion that the assessment of this hotel at the 1989 first appeal stage was on the low side and not well founded. As a consequence, he said, all other hotels of a similar standard, including the subject valued after this assessment were similarly valued at a low level. In his opinion the subject was the best appointed hotel in Ireland and yet it was valued at a much lower level per square metre than the K-Club which was almost 20 miles from Dublin City centre. The only reason for this, he said, was the influence of the Conrad valuation which had the effect of suppressing the assessments of high quality five star hotels in Dublin. Mr. Dineen defended his choice of comparisons which included a number of three star establishments. The purpose in so doing, he said, was to show the valuation of the subject was very fair, and again if anything, on the low side.

Submissions
Mr. Conway in his closing submission said that the most appropriate method for valuing the subject property was the comparative method. Ms. O Buachalla's analysis of the assessments of a number of other five star hotels clearly indicated a "tone" which could not be lightly set aside. Section 5 (2) of the 1986 Act demanded that the valuation of the subject must be determined having regard to "the valuations of tenements and rateable hereditaments which are comparable and of a similar function and whose valuations have been made or revised within a recent period." In other words the valuation must be determined by reference to the tone of the list. The Valuation Tribunal had, he said, in a number of cases referred to the primacy of the tone of the list. It followed therefore that the valuation of the subject property must be determined in line with that of other five star hotels. The valuation of other hotels which were not of a similar classification could not be considered relevant in any shape or form.

Mr. Conway further submitted that considerable weight should be given to Ms. O Buachalla's evidence and valuation, which he said, had been carried out in a most professional manner. Mr. Dineen's evidence, he said, must be accorded lesser weight by virtue of the fact that he disputed the very basis of the Conrad Hotel valuation and of the subject, both of which he said were valued at too low a level, notwithstanding that he was the appeal valuer in the subject case.

Mr. Conway finally submitted that Mr. Gribben's evidence that the Four Seasons Hotel was disadvantaged by virtue of its location could not be ignored and must be taken into account when arriving at an assessment of its net annual value.

Mr. Devlin in his closing submission said Mr. Gribben's evidence regarding location was not compelling. The Four Seasons Hotel, he said, catered for the top end of the market and its operation was not in any way location-sensitive.

Mr. Devlin further submitted that the concept of the "tone of the list" must be treated with some degree of caution. Mr. Dineen, he said, was entitled to express the view that the valuation of the Conrad Hotel was unreliable and also to say that it had unduly influenced the subsequent valuation of other similar hotels in the Dublin area. In the circumstances Mr. Dineen was correct to introduce comparisons drawn from hotels of different grades to support his thesis that the valuation of the Conrad was at least suspect and possibly flawed as a basis for valuing other five star hotels. The Tribunal, he said, must look at all the comparisons and not limit itself to hotels having the same classification as the Four Seasons. In any event it was the property that had to be valued, not the classification which, he said, was purely a function of management style.

Findings
The Tribunal, having carefully considered all the arguments and evidence submitted both oral and written and including the comparative evidence, makes the following findings:

1. The relevant valuation date in this appeal is the 8th November, 2001 and hence the net annual value of the subject property is to be determined in accordance with now repealed enactments and more particularly Section 11 of Valuation (Ireland) Act, 1852 as amended by Section 5 of the Valuation Act, 1986.

2. The only issue in dispute is quantum, all other preliminary issues having been previously determined by the Tribunal.

3. It is common case that the subject property is a recently built hotel complex constructed to a very high standard of specification and finish consistent with the norm expected at a five star hotel.

4. The hotel which opened in February, 2001 is occupied by the appellant and trades as the Four Seasons Hotel under a form of franchise/management arrangement. The Four Seasons Hotel Group is a well-established company which operates a chain of hotels at the upper end of the market on a worldwide basis.

5. The Tribunal accepts, as do the parties, that at the valuation date the subject property was in start-up mode and had not then achieved anticipated levels of occupancy and/or profitability. In this regard, Baron J's comments in the High Court case Rosses Point Hotel Company Limited v Commissioner of Valuation 1986 (603 SS) are particularly apposite: "Profit earning ability is the basic element in determining the net annual value. It is based not on actual profits but on what the prospective tenant would anticipate would be his profits."

6. The Tribunal accepts Mr. Gribben's evidence that the market sector in which the Four Seasons Hotel trades is shared with the Merrion, Westin, Westbury and Shelbourne Hotels and that the Merrion and the Westin in particular be viewed as the main competitors from a business point of view. The Tribunal also accepts Mr. Gribben's opinion that by comparison with the Merrion and Westin Hotels, the location of the Four Seasons would be viewed as a disadvantage by large corporate business clients who would wish to be convenient to the city centre and the IFSC. The Tribunal has examined the extract from the TravelCLICK analysis and notes the relative positioning of the Four Seasons Hotel in relation to occupancy rate, room rate and RevPAR.

7. It is common case that the comparative method of valuation is the one most appropriate for use in this appeal and that the use of such a method is consistent with Section 5 of the Valuation Act, 1986. The appellant contends that regard should be had only to those hotels having the same classification as the subject i.e. five star establishments. The respondent on the other hand contended that it was proper to have comparisons drawn from a wider range and that this was particularly so given Mr. Dineen's reservations regarding the basis of the Conrad Hotel assessment and its influence on the assessments of other hotels. Obviously it is up to the valuer to introduce such comparisons as he or she considers appropriate in the circumstances of the appeal under inquiry. In this instance, whilst the Tribunal accepts all the comparisons introduced by the parties to be representative of the tone of the list, most weight is attached to those which share a similar five star classification.

8. The Tribunal notes Mr. Dineen's reservations regarding the correctness or otherwise of the Conrad Hotel assessments although he did not elaborate on why or to what extent he considered the valuation of the Conrad Hotel to be flawed. The fact of the matter is, however, that the valuation of the Conrad Hotel was determined at the 1989 first appeal stage and has remained unchallenged in the Valuation List since that time. Similarly the valuations of certain other hotels also having a five star classification have gone through the valuation system e.g. the Westin, Merrion, Jury's, Berkeley Court and others. In the circumstances the Tribunal cannot lightly set aside such evidence nor indeed is it appropriate for the Commissioner of Valuation to contend that such valuations do not form the tone of the list.

9. The Tribunal has carefully examined all the comparable evidence and has concluded that the most relevant comparisons are other five star hotels in Dublin and in particular the Westin and Merrion which, by common consent, are high quality hotels operating in the same market segment as the subject. The Tribunal accepts the respondent's argument that the awarding of five star status has as much to do with management style as with physical attributes, but from the evidence it is clear that the subject property affords a range of facilities and accommodation to a standard not hitherto available in Dublin.

10. Generally speaking, hotels by their very nature are not homogenous. They may have many common features and characteristics but they all differ in many respects.

11. From the evidence tendered the Tribunal accepts that the Westin and Merrion occupy better business locations than the subject. On the other hand they are not purpose built establishments and whilst the Merrion and the Four Seasons have fully equipped leisure centres including a swimming pool, the Westin has a fitness centre only. The Westin has no car parking facilities which the other two hotels have. The area of the Four Seasons is approximately twice the area of both the Merrion and the Westin and it has 115 and 100 more guestrooms respectively. It is also true to say that on average the size, range and quality of the guestrooms in the Four Seasons is superior to that found in other hotels having similar five star classification.

12. When using the comparative method of valuation the valuer has to look at all the evidence available to him or her and make such allowances as are considered necessary or appropriate to reflect the many intrinsic and extrinsic attributes of the property concerned. This is not an easy task and requires great skill and judgement on the part of the valuers. In this instance the Tribunal is quite satisfied that both valuers have the requisite knowledge and experience.

Determination
Having regard to all of the evidence, the Tribunal has come to the conclusion that the locational disadvantages of the Four Seasons Hotel in comparison with the Westin and Merrion are more than offset by the superior range and qualities of its facilities.

Accordingly therefore the Tribunal determines the rateable valuation of the subject property to be €15,857 calculated as set out below:

Hotel ground to fourth floor 26,652 sq. metres @ €85 per sq. metre = €2,265,420
Basement kitchen stores
& plant rooms etc. 3,526 sq metres @ €45 per sq. metre = €158,670
Car parking 150 spaces @ €620 = €93,000
Net annual value Say = €2,517,000
Rateable valuation @ 0.63% = €15,857

And the Tribunal so determines.