AN BINSE LUACHÁLA
VALUATION TRIBUNAL
AN tACHT LUACHÁLA, 1988
VALUATION ACT, 1988

Hayfield Manor Hotel APPELLANT
and
Commissioner of Valuation RESPONDENT

RE: Licensed Hotel, House and Grounds at Lot No. 55b; College Road,
Ward: Mardyke Gillabbey B, County Borough of Cork
Quantum - Restrictions on use of leisure facilities

B E F O R E
Liam McKechnie - Senior Counsel Chairman
Barry Smyth - FRICS.FSCS Member
George McDonnell - F.C.A. Member

JUDGMENT OF THE VALUATION TRIBUNAL
ISSUED ON THE 9TH DAY OF MARCH, 1998

By Notice of Appeal dated the 12th day of August 1997 the appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of £1,800 (buildings) on the above described hereditament.

The ground of appeal as set set out in the Notice of Appeal was that "the valuation is excessive".

1. The appeal proceeded by way of an oral hearing which took place in City Hall, Cork on 29th January 1998. Mr. Edward Hanafin Bsc (Surv), ARICS ASCS, MIAVI, from
Lisney Chartered Surveyors appeared on behalf of Mr. Joseph Scally who was himself in attendance. Mr. Liam Cahill, an Appeal Valuer in the Valuation Office appeared on behalf of the Commissioner of Valuation. In accordance with practice and as required by the rules of this Tribunal the parties had prior to commencement of the hearing exchanged précis of evidence and submitted same to us. Having taken the oath each valuer adopted as his evidence in chief his precis. From the evidence so tendered the following facts either agreed or so found have emerged. The property is located approximately one mile south-west of Cork city centre adjacent to University College Cork. The property comprises a 53 bedroom luxury hotel with leisure centre and conference facilities in a purpose built three storey detached building together with the original Hayfield House, a detached two storey house utilised as staff residence. The entire stands on a site of approximately 0.8
hectares (2 acres) laid out in formal gardens with car parking areas to the front and side.

The agreed accommodation and floor areas are as follows:-

Basement
Stores/Loading - 2,039 Sq.ft. = 636.9 Sq.m.

Ground Floor
Hotel Entrance hall, lounge bar, dining room, boardroom, library, resident's lounge, administration office, kitchen staff canteen, laundry and ancillary stores and service accommodation, two bedrooms, ladies and gents cloak-rooms. - 14,648 Sq.ft. = 1,360.9 Sq.m.

Leisure Centre Reception area, swimming pool, gymnasium, plant room, and ladies and gent's cloakrooms - 4,922 Sq.ft. = 457.3 Sq.m.

First Floor
Hotel Upper foyer, nineteen bedrooms,
three suites, linen store - 14,126 Sq.ft. = 1,312.4 Sq.m.

Conference Centre Foyer, two intercommunicating conference halls, three meeting rooms, stores and ladies and gents cloakrooms - 5,615 Sq.ft. = 521.6 Sq.m.

Second Floor
Hotel Upper foyer, twenty-nine bedrooms, linen store - 15,600 Sq.ft. = 1,449.4 Sq.m.
Total Floor Area - 56,485 Sq.ft. = 5,248.1 Sq.m.
* All bedrooms en-suite
Hayfield House Staff Accommodation - Valuation not in dispute.

2. Following completion the property was listed for valuation and on the 1996/4 revision a rateable valuation of £1,800 was placed thereon. This was issued on the 8th November 1996. This was appealed and the result issued on the 11th July 1997 showing no change. Hence the present appeal to the Tribunal is against the R.V. £1,800.

3. Mr. Hanafin on behalf of the occupier and appellant proposed three methods of valuation namely the comparative basis, the cost basis and the turnover basis each of which produced a different N.A.V. and thus R.V. and he proposed a median figure from these of £1,044 R.V. On the comparative basis Mr. Hanafin proposed £0.50 p.s.f. on the basement stores, £3.50 p.s.f. on the hotel accommodation, £3.00 p.s.f. on the leisure centre and the conference centre leading to an N.A.V. of £187,707 and applied a fraction of 0.63% giving a rateable valuation of £1,182. To this he added the agreed R.V. on Hayfield House at £38 giving a total rateable valuation of £1,220. On the costs basis he provided total site and construction costs of £2,039,660 which he decapitalised at 7% for N.A.V. giving rise to an N.A.V. of £142,776 and this applying the 0.63% yielded a rateable valuation of £899 to which was added again Hayfield House at £38 giving a total rateable valuation of £937. On the turnover basis he provided an estimated turnover for the year ended the 1st April 1998 of £2 million which he reduced by 25.5% i.e. the consumer price index to bring the figure back to 1988 and applying a rate of 10% to that gave an N.A.V. of £149,000 and thus an R.V. of £938 plus the £38 for Hayfield House giving rise to a total rateable valuation of £976.

In cross examination Mr. Hanafin agreed that the most appropriate method was the comparative method.

Mr. Hanafin provided a copy of the relevant planning permission and drew the Tribunal's attention to two points in particular, namely condition No. 5 which
provides that no permission is granted for any amplified music activities within the hotel complex and that the proposed conference room should be used solely for
conference purposes thus in his opinion prohibiting the use of the hotel for weddings and parties and condition No. 7 which provides that the swimming pool and leisure facilities should be used solely for residents of the hotel. He also argued that the hotel was small by today's standards with only 53 bedrooms and that it is generally accepted that 100 bedrooms are required to achieve economies of scale. He also drew attention to difficulties of access to the property, the restricted size of the site and difficulty with refuse collection. Although on all points he conceded that the proprietor and developer is an experienced hotelier who was aware of these factors when he proceeded with the development.

4. Mr. Hanafin provided four comparisons namely:

(i) The Silver Springs Hotel - which analyses that £4.00 p.s.f. on the hotel accommodation, £2.80 p.s.f. on Fort William House, £3.25 p.s.f. on the leisure centre
and £2.50 p.s.f. on the tennis courts and £4.00 on the conference centre
(ii) Jurys Western Road, Cork - which analyses at £3.96 p.s.f. and which rateable valuation predates the N.A.V. system
(ii) Blarney Park Hotel, Blarney Co. Cork - which analyses at £3.50 p.s.f. on the hotel, and £4.00 p.s.f. on the leisure centre and here Mr. Cahill claims that this property was in poor condition and required considerable expenditure
(iv) Castletroy Park Hotel, Limerick - which analyses £3.48 p.s.f. but it was agreed that this was an interim valuation and therefore should not be utilised in this case.

5. Mr. Cahill stated that in the absence of information concerning the total development cost and the trading performance he had adopted a comparative method in the calculation of net annual value and rateable value. This method has been utilised and agreed in both the Jurys Inn and Morrisons Island, recently constructed three-star hotels in Cork. Mr. Cahill calculated the rateable valuation as follows:

Hotel 54,911 sq.ft. @ £5.00 sq.ft. = £274,555
Basement/Loading 2,040 sq.ft. @ £2.00 sq.ft. = £ 4,080
£278,635
Net annual value £278,635 @ 0.63% = £ 1,755
Add for old house (staff quarters) 38

Rateable value £ 1,793
Say £ 1,800 R.V.

Mr. Cahill provided five comparisons:

(i) Morrisons Island Hotel, 15.16 Morrisons Quay - analyses at £5.00 p.s.f. on 27,453 sq.ft. plus £500 each for car parking spaces (21 spaces).

(ii) Jurys Inn, 3-8 Andersons Quay, Cork - analyses at £5.00 p.s.f. for 55,769 sq.ft. including the car parking spaces.

(iii) Silver Springs Hotel, Conference and Leisure Centre, Tivoli, Cork - with a similar analysis as in Mr. Hanafin's case above.

(iv) Jurys Hotel, Lancaster Quay, Cork - valued on the old sq.m. basis.

(v) Blarney Park Hotel, Blarney, Co. Cork - a similar analysis to Mr. Hanafin's
analysis.

6. It was confirmed that the propriotor is seeking a five star rating for the hotel but that it is not graded to date and that a four star grading had been offered but was not accepted.

Determination
It is the view of the Tribunal in this instance, that the only method on which to proceed is the comparative method. The date of valuation is too close to the date of commencement of trading in the hotel for any meaningful accounts to be available. The capital cost basis is really a contractors method and is not appropriate where comparative evidence is available. The two valuers were largely agreed on the comparisons but differed in their application and their adjustment to the subject property. Mr. Cahill arguing that this was an establishment seeking five-star rating and that at the upper end of the market one should have a rate per square foot applied, at least equal to that of Jurys Inn and Morrisons Island, recently constructed three-star hotels. Mr. Hanafin argued for a lower rate per square foot with a further downward adjustment for the leisure centre and conference centre, firstly because of the limited size of the hotel and its lack of economies of scale and secondly because of the planning restrictions on the use of both the conference centre and the leisure facilities.

The Tribunal in assessing the rateable valuation must estimate the net annual value as defined in the legislation. It is apparent to the Tribunal from the evidence adduced that the cost of operating and maintaining this undertaking to its desired five-star status would be proportionally greater than other undertakings providing a similar function but at a lower level. We have also taken cognisance of the fact that there are limitations on the use of the conference facilities and that the leisure facilities can only be utilised by residents of the hotel thus depriving it of a significant earning potential as in the Silver Springs Hotel. It would in fact appear that the leisure facilities are in the nature of a loss leader. We thus find that it is appropriate to adjust the rates per square foot derived by the comparisons downwards somewhat, to estimate a fair N.A.V. in this case.

Having regard to the foregoing and the evidence adduced by the parties the Tribunal determines the rateable valuation at £1,470 calculated as follows:

Basement/stores & loading canopy 2,039 sq.ft. @ £2.00 p.s.f. = £ 4,078

Hotel, Ground Floor, First & Second Floor 44,374 sq.ft. @ £4.25 p.s.f. = £188,589.50

Leisure Centre 4,922 sq.ft. @ £3.00 p.s.f. = £ 14,766

Conference Centre 5,615 sq.ft. @ £3.50 p.s.f. = £ 19,652.50

Total = £227,086
x 0.63% = £ 1,430.64
plus Hayfield House agreed £38 £ 38.00
Total £ 1,468.64
Say £ 1,470