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Appeal No. VA06/1/014 AN BINSE LUACHÁLA Debenhams Retail (Ireland) Limited APPELLANT RE: Shop, Store at Lot No. Unit B, Ballinure Road,
Mahon B, Mahon, County Borough of Cork B E F O R E JUDGMENT OF THE VALUATION TRIBUNAL By Notice of Appeal dated the 6th day of March, 2006 the appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of €2,930.00 on the above described relevant property. The Grounds of Appeal are set out in the Notice of Appeal and in a letter attached thereto, copies of which are in Appendix 1 attached to this judgment. 1. This appeal proceeded by way of an oral hearing in the offices of the Valuation Tribunal, Ormond House, Ormond Quay Upper, Dublin 7 on the 28th day of April, 2006. 2. At the hearing Mr. Nicholas Rose, Bsc (Hons), MRICS, of Gerald Eve gave expert valuation evidence on behalf of the appellant and his colleague Mr. Tom MacLynn acted as advocate. Mr. Frank Twomey, a valuer in the Valuation Office, appeared on behalf of the respondent, the Commissioner of Valuation The Property Concerned 4. The Mahon Point Shopping Centre forms part of an extensive mixed development scheme which also includes a retail warehouse park and business/office centre. The Shopping Centre is linear in configuration with the shopping mall at two levels with an anchor unit at either end, Tesco and Debenhams. In all there are 50 shop units and kiosks and at the Debenhams' end of the mall there is a multiplex cinema. 5. The Shopping Centre, which runs in an east to west direction, is built on a sloping site so that each mall has the benefit of direct access to an extensive car park at either end of the Centre. For reference purposes the malls are described as being at lower ground floor level and upper ground floor level. The two retail levels are linked internally by elevators, lifts and stairs. There is direct access to the shopping malls from the car park at each level and Debenhams also has the benefit of its own separate entrance at lower ground floor level. The Tesco unit at the upper ground floor level at the western end of the mall also has the benefit of its own separate entrance at car park level. 6. The Debenhams unit, which is at the east end of the centre, is arranged
over three storeys with retail and stock space at levels one and two with
ancillary office and staff accommodation overhead. Internally the subject
property has been fitted out to a quality typical of modern department
stores with tiled floors, suspended ceilings incorporating spot lighting
and air conditioning. Escalators, lifts and stairs are also provided within
the store. Lower ground floor level 8. The property is occupied by Debenhams subject to the terms and conditions of a 25 year lease from 1st February, 2005 subject to an initial yearly rent of €1,646,000 subject to rent reviews at five yearly intervals. At the start of the lease Debenhams had the benefit of a 12 month rent-free period and a capital contribution from the developer of €3,417,103. History Appellant's Evidence 11. In his evidence Mr. Rose contended for a rateable valuation of €2,225 calculated as set out below: Ground Floor 12. Mr. Rose said that, in his opinion, the valuation adopted by the
revision officer in relation to the subject property was fundamentally
flawed and as a result the property was considerably overvalued. Section
49(1) of the Valuation Act, 2001 requires that the property concerned
is to be valued Ground Floor 13. Mr. Rose said the Marks & Spencer comparison was highly relevant, not so much as to value, but as to the valuation methodology adopted by the Valuation Office which indicated a distinct differential in the square metre rate applied to retail space at ground floor and first floor levels. In his opinion, this valuation approach should be applied when valuing the property concerned and this was the essence of the dispute between him and the Valuation Office and the sole grounds of the appeal to the Tribunal. Whilst he was prepared to accept that the retail space at lower ground floor be assessed at the rate of €71.73 per sq. metre, as used by the Valuation Office, he contended that the accommodation at the upper level should be assessed in line with the Marks & Spencer valuation. In arriving at his opinion of net annual value Mr. Rose said he had applied the same differentials as applied in the Marks & Spencer premises in Merchants Quay and in so doing he was acting in a manner consistent with the requirements of section 49(1). 14. In further support of his argument that retail space at ground floor level should be valued at a considerably higher rate than retail space at first floor level, Mr. Rose referred to an earlier decision of this Tribunal, VA01/2/037 - Michael Guiney. 15. As a secondary argument Mr. Rose said that he had been advised that the net annual value of the retail units in the mall represented approx 27-30% of the passing rents in most cases. When due allowance was made for the rent free period Mr. Rose said his opinion of net annual value represented just under 27% of the adjusted annual rent of €1,316,800. 16. Under examination Mr. Rose agreed that the Marks & Spencer premises in Merchants Quay Shopping Centre was in a primary city centre retail location but stressed that he had introduced this property as a comparison solely to illustrate the valuation methodology used by the Valuation Office when valuing department stores. It was his argument that the Valuation Office should, as a matter of consistency, use the same methodology in valuing the property concerned. 17. When asked as to why he had valued the stock space at a lower rate per sq. metre than the retail space, Mr. Rose said that his reasons for so doing was to apply the same differentials as those used in the Marks & Spencer valuation. He agreed that the sq. metre rate of €71.73 applied to the Tesco premises at Mahon Point was fair and agreed also that the retail space accounted for only 61% of the overall accommodation of that store. The Respondent's Evidence 19. In his evidence Mr. Twomey valued the subject property as set out below and in support of his opinion of net annual value he provided 6 comparisons, details of which are contained in Appendix 2 to this judgment. Retail - lower ground floor 2,973 sq. metres @ €71.73 per sq. metre
€213,253 20. Mr. Twomey in his evidence said he was the revision officer appointed by the Commissioner of Valuation to value all units in the Mahon Point Shopping Centre. When first appointed he set about gathering and analysing all relevant information in relation to rents and other pertinent matters. His analysis, Mr. Twomey said, showed that there was no appreciable difference in rental levels for retail units in the two malls. Accordingly therefore he had valued all the units at a uniform rate per sq. metre except for the larger retail units where he had made an allowance for quantum. 21. However, when he came to value the anchor units (Debenhams and Tesco) Mr. Twomey said he had examined the valuations of a number of similar sized units in other suburban shopping centres in the Cork area and found that they were valued at a consistent level of €71.73 per sq. metre which he accepted as being the tone of the list for such units. In the circumstances he considered it fair and reasonable to value both stores in Mahon Point at this level. 22. Referring to the Marks & Spencer store in Merchants Quay Shopping Centre Mr. Twomey said that there was a distinct difference between it and the Debenhams store at Mahon Point. One was a prime city centre premises and the other was not. In city centre premises it was the accepted practise to value retail space on first floor level and above at a lower rate per sq. metre than the lower level retail space in order to reflect the ease of access, and more importantly market demand for ground floor retail space. The subject property however was different from a traditional city centre department store in that a feature of the design provided direct customer access to each floor level from the car parks. In the circumstances he could see no good reason to value one floor at a higher rate per sq. metre than the other and this was borne out by his analysis of the rents for the mall units. 23. Under cross examination Mr. Twomey said he did not look at the assessments of other department-type stores in Cork city because he did not consider them to be relevant comparables by virtue of their location. He agreed that the property concerned and the Marks & Spencer Department Store in Merchants Quay Shopping Centre were somewhat similar in size, fit out and configuration, but nonetheless Mr. Twomey contended they were not comparable for rating purposes as one was a city centre premises and the other was not. 24. When questioned about his comparison numbers 5 and 6 (units 1a and 1b) occupied by Next plc and Zara, Mr. Twomey said he had introduced these merely to show that in respect of the shops within the centre which were trading at both levels, the retail space on each mall was valued at the same rate per sq. metre. The only allowance he had made was for quantum and no allowance had been made to reflect the fact that the premises were trading at two levels. Findings 2. The difference between the valuers in this appeal is fundamental, in that Mr. Rose is of the view that the property concerned should be valued on the same basis as that considered appropriate when considering city centre department stores whereas Mr. Twomey is not 3. The property concerned in this appeal forms part of an "out of town" retail development and as such cannot be compared to similar type stores occupying city centre locations. In the circumstances the Tribunal prefers Mr. Twomey's valuation approach having regard to the fact that the store is easily accessible to customers at both levels. It is fair and reasonable therefore that the retail space at both principal levels be valued at a uniform rate per sq. metre in common with other larger retail units within the centre. 4. The Tribunal also accepts Mr. Twomey's uncontested evidence that there is an established tone for valuing anchor units in suburban shopping centre locations in the Cork city area and that the tone so established is €71.73 per sq. metre, as set out in his comparisons Nos. 2, 3 and 4. 5. The primary comparisons in this case are all single storey and are smaller than the property concerned. In the circumstances the Tribunal considers that there should be an allowance in recognition of the layout differentials and the degree of quantum. Determination Lower Ground Floor Level And so the Tribunal determines. |