DCP Land Valuation Methodology Review Amendment C177 ......Residential and Industrial Sub-divisional Land, Infill Development Sites Valuation and consultancy advice for Acquisition

MPEV-0866-003

18 November 2013

Mr Dane Logan Metropolitan Planning Authority Level 29, 35 Collins Street MELBOURNE VIC 3000

Email: [email protected]

Dear Dane,

DCP Land Valuation Methodology Review Amendment C177 – Wyndham North DCP

I have been instructed by the Metropolitan Planning Authority (MPA; formerly the Growth Areas Authority) to provide my opinion on the Land Valuation Methodology adopted by Charter Keck Cramer (CKC) in the Wyndham North and Wyndham West Development Contribution Plans (DCP). Subsequent to this I was instructed to provide my opinion on the indicative values of a sample of properties contained within the Wyndham North DCP.

1 Qualifications and experience

My expert evidence report has been prepared in accordance of the requirements of the Planning Panels Victoria ‘Guide to Expert Evidence’ and a statement of my qualifications and experience is attached as Appendix A to this letter.

A significant proportion of my valuation experience has been within the outer metropolitan ‘greenfield’ market of Melbourne. I have completed Development Contribution Plan Valuations on behalf of the MPA on several occasions. I have also had significant experience in undertaken compensation valuations in accordance with the Land Acquisition and Compensation Act 1986 and the Planning and Environment Act 1987.

2 Expert report

A copy of my DCP Land Valuation Methodology Review report is attached as Appendix B. In preparing this report I was assisted by Elliot Wasniewski, Assistant Valuer in gathering information, searching Certificates of Title and preparing parts of the report at my direction. The report was also peer reviewed by Brian Dudakov, Director. The opinions contained within the report are my own unless stated otherwise.

I received a brief from MPA on 4 September 2013, to address the following issues;

Part One

The first part will be a peer review of the methodology and assumptions used by CKC in the Wyndham North and Wyndham West DCPs.

mailto:[email protected]

MPEV-0866-003 PAGE 2

Part Two

The second part will be to evaluate three different valuation methodologies:

Broad hectare

Site specific , and

Combination of the two, or other as agreed.

The evaluation of each methodology will include:

A short summary of the methodology process.

The benefits of using the methodology in a DCP context.

The negatives of using the methodology in a DCP context.

Implications for the overall DCP rate.

Indexation and re-valuation methods.

The long-term implications of each method and related revaluations for the funding of land

acquisitions through the DCP.

The long-term flexibility of the DCP to accommodate adjustments to land use allocation within the

PSP.

I received additional instructions via email on 11 November 2013 from MPA to undertake additional research and provide my own opinion on the indicative land values for a sample of the properties contained within the Wyndham North Development Contributions area. The sample of properties was selected by me.

3 Questions outside expertise, inaccuracies and additional matters

To my knowledge, there are none contained within in my report.

4 Facts, matters and assumptions

These are stated within my report.

5 Reference documents

I have been provided with the following documents;

Full versions of the CKC Valuations of both the Wyndham North and Wyndham West DCPs.

Draft Copies of the Wyndham North and Wyndham West DCPs.

Preliminary land budgets for the Wyndham North and Wyndham West DCPs.

Draft Precinct Structure Plans (PSP) for the Truganina and Riverdale areas within the Wyndham North DCP.


Draft PSPs for the Black Forest South, Alfred Road and Ballan Road areas within the Wyndham

West DCP.

Selected submissions that refer to the DCP land valuations from land owners within the Wyndham

North DCP area.

6 Summary of my opinion

6.1 RECOMMENDATIONS

Based on the content of my report and with particular reference to the Standard Development Contributions Advisory Committee review objectives of;

Simplify and give certainty to the process of securing land for public purposes,

Ensure that there is an equitable approach toward the valuation of land for public purposes,

Ensure that the principles of the recommended DCP framework cannot be undermined.

I consider from a Valuers and the majority of landholder’s point of view, the Per Property Broad Hectare approach provides the most certainty, is the most equitable and is least likely to be undermined by owners seeking recourse to other compensation mechanisms. However, from a DCP manager’s point of view this is not likely to be the simplest to manage. I recommend that the Per Property Broad Hectare approach as the best land valuation methodology.

As mentioned in Section 4.4 Hybrid approach, it may not be possible to implement a Per Property Broad Hectare approach given that a number of the PSPs have not been completed. For those PSPs that are not advanced enough, I consider that the below could apply;

Wyndham North

Oakbank and Tarneit North: A Hybrid approach will be required at a minimum due to large number of smaller properties,

I consider that each PSP in Wyndham North should have its own valuation area.

Wyndham West

Mambourin and Quandong; Overall Broad Hectare approach for each PSP is likely to have limited inequity,

I consider that some of the PSPs in Wyndham West could have common valuation areas.

With regard to the valuation indexation I consider that annual or bi-annual valuations are required. I do not consider that quarterly indexation to CPI or other similar measure is warranted.


6.2 WYNDAM NORTH VALUATIONS

I consider that that the CKC assessments are within an acceptable range, although the larger land holdings are assessed to the low end of this range.

As my opinion of value as at 22 April 2013 is generally within approximately 10% of CKCs assessments I do not consider that this factor by itself warrants a revaluation. The residential market for both individual lots and broad hectare holdings has improved since this time, hence when this is taken into account together with my view that CKC assessments are to the low end of the range, I recommend that a revaluation be undertaken.

7 Planning Panel Victoria Statement

I have made all the inquiries that I believe are desirable and appropriate and no matters of significance which I regard as relevant to my knowledge been withheld from the Panel.

Yours sincerely,

Andrew Kinnaird Director


Appendix A – Qualifications & Experience

Andrew Kinnaird Director Professional Details and Qualifications

Full Name: Andrew Paul Kinnaird

Practice: Urbis Valuations Pty Ltd

Level 12/120 Collins Street

Melbourne Vic 3000

Home: 1/32 Albenca Street

Mentone Vic 3194

Occupation: Director Urbis Valuations Pty Limited

(trading as Urbis)

Qualifications: AAPI (Associate of the Australian Property Institute)

Certified Practising Valuer – Member No. 62804

Bachelor of Business (Property) with Distinction – RMIT

Association

Current Member – Australian Property Institute Membership Admissions Committee

Member 2009-2011, Property Council of Australia Residential Developers Committee

Western Australia Land Valuers Licensing Board No. LV44537

Experience Approximately 10 years of qualified experience in the valuation of Residential, Industrial and Commercial and other forms of Real Estate throughout Victoria;

Expert Evidence and Conferences

Provided Expert Evidence in Broadcast Australia Pty Ltd and Valuer General (2011) WASAT 58.

Involved in a numerous mediations and compulsory conferences for a range of purposes.

Development Contributions Plan Valuations

Prepared Development Contribution Plan Valuations on behalf of the Metropolitan Planning Authority (formerly the Growth Areas Authority) for the Lockerbie, Merrifields, Craigieburn R2 and Melton North Precinct Structure Plans, and

Currently preparing the Development Contributions Plan Valuations on behalf of the Whittlesea Council for the Quarry Hills Precinct Structure Plan, and

Advised land owners in a number of Development Contributions Plan areas of values.

Acquisition and Compensation

Valuations on behalf of both owners and Authorities for compulsory acquisition purposes e.g. road widening (VicRoads), educational sites (Department of Education) and retarding basins (Melbourne Water), and

Assessments of land contained within the Western Grassland Reserve which have significant native vegetation, and

Experience with expert evidence reports on valuation matters.

Professional Details and Qualifications

Page 2

Residential and Industrial Sub-divisional Land, Infill Development Sites

Valuation and consultancy advice for Acquisition and Disposal, Rating and Tax, Compensation and Mortgage Purposes, and

Feasibility analysis, completion of the Estate Master Certification Course, and

Margin Scheme Valuations, and

Market research

Industrial, Retail and Commercial

Valuation and consultancy advice for Acquisition and Disposal, Rating and Tax, Compensation and Mortgage Purposes, and

Experience in rental assessments, negotiations and Determinations.

Portfolio/Asset Valuations

Proficient in infrastructure asset valuations for accounting purposes.

Contact

tel: 61 3 8663 4805 fax: 61 3 8663 4999 email: [email protected]

mailto:[email protected]


Appendix B – Valuation Report

Prepared for the Metropolitan Planning Authority

URBIS STAFF RESPONSIBLE FOR THIS REPORT WERE:

Director: Andrew Kinnaird

Job Code: MPEV-0866

© Urbis Valuations Pty Ltd

ABN 28 105 273 523

All Rights Reserved. No material may be reproduced without prior permission.

You must read the important disclaimer appearing within the body of this report.

URBIS Australia Asia Middle East urbis.com.au

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LAND VALUATION METHODOLOGY REVIEW

CONTENTS

1 Introduction ......................................................................................................................................................................................................................................................................................41.1 INSTRUCTIONS ...........................................................................................................................................................................................5

1.3 DEFINITIONS OF VALUE ............................................................................................................................................................................5

1.4 DATE OF VALUATION .................................................................................................................................................................................6

1.5 PECUNIARY INTEREST ..............................................................................................................................................................................6

1.6 MARKET MOVEMENT ................................................................................................................................................................................6

1.7 LIMITED LIABILITY SCHEME......................................................................................................................................................................6

1.8 SOURCES OF INFORMATION ...................................................................................................................................................................6

2 Location of DCPs and Properties ...................................................................................................................................................................................................................................7

3 CKC Review ............................................................................................................................................................................................................................................................................................93.1 WYNDHAM NORTH ASSESSMENTS ......................................................................................................................................................11

3.2 WYNDHAM WEST ASSESSMENTS .........................................................................................................................................................12

4 Valuation Methodologies ..................................................................................................................................................................................................................................................134.1 OVERALL BROAD HECTARE APPROACH ..............................................................................................................................................15

4.2 PER PROPERTY BROAD HECTARE APPROACH ...................................................................................................................................16

4.3 SITE SPECIFIC APPROACH .....................................................................................................................................................................17

4.4 HYBRID APPROACH ................................................................................................................................................................................18

4.5 WYNDHAM NORTH CASE STUDIES .......................................................................................................................................................18

4.5.1 PROPERTY 88-SE-33 ........................................................................................................................................................................19

4.5.2 PROPERTY 88-SE-34 ........................................................................................................................................................................20

4.5.3 PROPERTY 90-NW-10 .......................................................................................................................................................................21

4.5.4 PROPERTY 91-SO-19 ........................................................................................................................................................................22

4.6 WYNDHAM WEST CASE STUDIES ..........................................................................................................................................................23

4.6.1 BLACK FOREST ROAD NORTH – PROPERTY 8 ..............................................................................................................................24

4.6.2 ALFRED ROAD – PROPERTY 5 ........................................................................................................................................................25

4.6.3 BLACK FOREST ROAD SOUTH – PROPERTY 1 .............................................................................................................................26

4.6.4 BALLAN ROAD – PROPERTY 32 (28 IN CKC REPORT) ..................................................................................................................27

4.7 CASE STUDY SUMMARY .........................................................................................................................................................................28

4.8 INDEXATION AND REVALUATION ..........................................................................................................................................................29

4.9 LONG TERM IMPLICATIONS AND FLEXIBILITY .....................................................................................................................................30

5 Additional Considerations ...............................................................................................................................................................................................................................................315.1 EQUITY AND PUBLIC ACQUISITION OVERLAYS ...................................................................................................................................32

5.2 DCP EXAMPLES .......................................................................................................................................................................................32

5.3 OTHER GOVERNMENT AGENCIES ........................................................................................................................................................33

6 Standard Development Contributions Advisory Committee......................................................................................................................................................... 34

7 Recommendations ..................................................................................................................................................................................................................................................................... 36

8 Conclusion ....................................................................................................................................................................................................................................................................................... 38

Disclaimer ............................................................................................................................................................................................................................................................................................ 39

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1 INTRODUCTION

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1.1 INSTRUCTIONSInstructing Party: Metropolitan Planning Authority (MPA; formerly the Growth Areas Authority)

Contact: Ms Megan Taylor

Purpose of Instruction: Review the land valuation methodology adopted by Charter Keck Cramer (CKC) in the Wyndham North and Wyndham West Development Contribution Plans (DCPs). Our report is to assist the MPA in responding to land owners as part of the planning Panel process. We are to be cognisant of the limitations of valuation methodology available as a result of not all of Precinct Structure Plans (PSPs) having been drafted before the preparation of the DCP. This is a desktop review and no inspections of properties were completed.

1.2 SCOPE OF ASSIGNMENTThe scope is in two parts, as follows:

PART ONE

The first part will be a peer review of the methodology and assumptions used by CKC in the Wyndham North and Wyndham West DCPs.

PART TWO

The second part will be to evaluate three different valuation methodologies:

▶ Broad hectare

▶ Site specific , and

▶ Combination of the two, or other as agreed.

The evaluation of each methodology will include:

▶ A short summary of the methodology process.

▶ The benefits of using the methodology in a DCP context.

▶ The negatives of using the methodology in a DCP context.

▶ Implications for the overall DCP rate.

▶ Indexation and re-valuation methods.

▶ The long-term implications of each method and related revaluations for the funding of land acquisitions through the DCP.

▶ The long-term flexibility of the DCP to accommodate adjustments to land use allocation within the PSP.

1.3 DEFINITIONS OF VALUEThe assessments discussed within this report are on the basis of their unencumbered highest and best use. We have referred to the definition of market value, as approved by the Australian Property Institute, as follows;

“The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.”

We also refer to the principles for assessing compensation as defined in the Land Acquisition and Compensation Act 1986. In this regard, we have ignored other heads of claim such as severance or enhancement, disturbance, special value etc.

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1.4 DATE OF VALUATIONThis is a desktop review and no inspections of properties were completed. We refer to the Charter Keck Cramer relevant date of valuation of 22 April 2013. As a matter of consistency any reference to values within this report are as at this date.

1.5 PECUNIARY INTERESTWe confirm that neither Urbis nor the signatories to this Report has any pecuniary interest that could reasonably be regarded as being capable of affecting that person’s ability to give an unbiased opinion of value, or that would conflict with a proper valuation of the property. We advise that this position will be maintained until the purpose for which this valuation is being obtained is completed

1.6 MARKET MOVEMENTWe are required to advise that this valuation is current at the date of valuation only. The value assessed herein may change significantly and unexpectedly over a relatively short period of time (including as a result of general market movements or factors specific to the particular property). Liability for losses arising from such subsequent changes in value is excluded as is liability where the valuation is relied upon after the date of the valuation.

1.7 LIMITED LIABILITY SCHEMEUrbis Valuations Pty Ltd operates under the Australian Property Institute Limited Liability Scheme which is a scheme approved under Professional Standards Legislation.

1.8 SOURCES OF INFORMATIONOur report must be read in conjunction with the 2 CKC Reports, the 2 DCPs. We have not been provided with source documents or viewed individual Certificates of Title. We understand that there are 256 and 78 parcels assessed within the Wyndham North and Wyndham West properties respectively.

In referring to sales information as detailed within this report, we have relied on a range of external sources including publicly available information (newspapers, statements by public companies), subscription to information databases and information generally provided verbally by others such as estate agents, property managers, property valuers and consultants. In many instances, we have not had access to the original source material such as contracts of sale or signed leases. Although we have no reason to doubt the validity of the information provided to us, and we have relied on this information in good faith, we are unable to state with certainty that the information upon which we have relied is consistent with the contractual arrangements between the relevant parties.

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2 LOCATION OF DCPS AND PROPERTIES

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The Wyndham North DCP comprises some 256 properties over 4 Precinct Structure Plans (PSPs), with a total area of 4,052.93 hectares. The Wyndham West DCP relates to 7 PSPs with a further 2 PSPs required to partially fund infrastructure items within the defined area. There are some 78 parcels identified which have a total area of 2,217.70 hectares. A location plan is as follows;

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3 CKC REVIEW

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We have been provided with the full versions of both the Wyndham North and Wyndham West DCP Land Valuation Reports. We understand that owners have been provided with abridged versions, which do not include individual property assessments. The instructions and critical assumptions are almost identical and we make the following comments;

•INSTRUCTIONS

CKC identify that they have been instructed to adopt the following methodology;

“To assess the fair market value of the land within the Wyndham North/West Precinct Structure Plans (PSP’s) in order to provide a calculated average broad hectare rate attributable to the land within the precincts for application of the Wyndham North/West PSP’s Development Contributions Plan (DCP). The assessment provides that the land has appropriate approval for the highest and best use underlying use identified.”

In our view this clearly sets out that the end result is to obtain a calculated overall broad hectare valuation. We consider that this is a blended approach of the 2 broad hectare approaches discussed in section 3. That is, all properties have been valued individually on a per property broad hectare approach, however all of the individual valuations have been totalled then averaged to arrive at the overall broad hectare valuation.

VALUATION DETAILS

This section summarises the valuation methodology and the critical assumptions made throughout the body of the report. The valuation summary is as follows;

“In arriving at our assessment of value, we have assessed the value of the individual parent holdings on the direct comparison approach, having regard to the sales of land released in the western and northern growth corridors, market considerations and associated positive and negative externalities. Accordingly, we have adopted value rates derived by the interpolation of determined rates to apply to the gross developable area of the parent holdings. In accordance with your specific instruction, we have expressed the value assessed as a value rate per hectare in accordance with the proposed uses. Subject to the assumptions and qualifications within this report, the average overall broad hectare value expressed as a rate per hectare [exclusive of Goods and Service Tax (GST)] for each proposed use is as follows;”

We agree with the entire aforementioned paragraph save for some reservation to applying a value only to the gross developable area. This area has been taken from the Land Use Budget and excludes encumbered land and as highlighted in section 4, some encumbered land could be argued to have some value.

We agree with all of the critical assumptions that are contained within this section.

TITLES

Due to the large volume of properties Certificates of Title have not been searched for the Wyndham North DCP and only some have been searched for the Wyndham West DCP. We consider that it is prudent to search all Certificates of Title to identify easements and encumbrances.

PLANNING• LOCALITY• SCOPE OF DEVELOPMENT AND MARKET COMMENTARY

We consider that these sections contain a good description of the location, its attributes, development potential, market commentary and sales evidence.

In the context of the Wyndham North PSP we consider that it is important to note that the distance the land is situated from the Melbourne CBD ranges from approximately 19 to 32 kilometres. We consider that this has an impact on value and is evidenced by the difference in lot prices being achieved for estates currently being marketed in the easternmost part of Truganina compared with the westernmost part of Tarneit.

We now review the valuation sections separately in the following sections.

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3.1 WYNDHAM NORTH ASSESSMENTSThe gross development areas for the various components of properties range in size from 0.02 to 180.68 hectares. The range in adopted rates per hectare is $25,000 (for Rural Conservation Zoned land) to $2,800,000. We have checked the overall calculations and are satisfied with the calculated overall broad hectare results.

We have not reviewed every single property assessment in detail; nevertheless we are generally satisfied with the adopted levels of value for the various sized properties. There is a difference in value per hectare of around $25,000 for larger properties situated in the eastern sector closer to the Melbourne CBD compared with those to the west. We consider that this difference in value could be greater; however this is a matter of opinion.

We are aware of a number of other sales situated within this DCP, which occurred a few years ago. These sales occurred in a better market than the current date of valuation. These sales in the Riverdale PSP reflect a higher rate per hectare than adopted in the DCP. Therefore, it is arguable that the value rate per hectare for properties in the 30-50 hectare gross developable hectare size range could be slightly higher. We consider that adopted values for this sized property are within the acceptable range but to the low end of that range.

In relation to the 4 hectare land holdings, CKC have adopted values typically ranging in the $700,000 to $850,000 per hectare range dependent upon the gross developable hectare size and locational attributes. We consider that these assessments are to the upper end of the acceptable range. The sales evidence quoted for this size property are generally in superior locations or do not have GAIC liabilities.

We consider that the values adopted for employment and Rural Conservation land area within acceptable ranges.

A summary of the valuations by PSP area is as follows;

Wyndham NorthCKC VALUATION SUMMARY

PSP 88 89 90 91AREA TOTAL 1,005.86 995.40 985.40 1,066.27AREA GROSS DEVELOPABLE 929.80 891.54 854.23 862.28MIN. AREA VALUED 0.43 0.37 0.02 0.09MAX. AREA VALUED 76.87 58.53 53.60 180.68NO. OF PROPERTIES 92 93 34 37AVERAGE AREA 10.11 9.29 25.80 28.74MEDIAN AREA 4.16 4.05 29.35 9.45MIN. RATE PER HA $40,000 $200,000 $175,000 $25,000MAX. RATE PER HECTARE $1,250,000 $1,375,000 $1,450,000 $2,800,000AVERAGE RATE PER HECTARE $496,000 $531,000 $440,000 $422,000MEDIAN RATE PER HECTARE $725,000 $775,000 $475,000 $625,000

S o urc e : Urbis

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3.2 WYNDHAM WEST ASSESSMENTSThe gross developable areas for the various components of properties range in size from 0.01 to 221.78 hectares. The adopted rates per hectare are $200,000 to $2,000,000. We have checked the overall calculations and are satisfied with the calculated overall broad hectare result.

As per Wyndham North, we have not reviewed every valuation in detail.

We consider that the values adopted in this area should be and are assessed at a lower rate than Wyndham North area. Lot prices currently being achieved in this area may be $50,000 less per 450m² lot compared with estates located in Truganina.

It is difficult to assess the current market value of broad hectare holdings in the area. We are aware of a recent confidential sale of a 40 hectare parcel in one of the PSPs that sold for significantly less than valued for DCP purposes. However, some of the critical of assumptions such as Council’s upfront development contributions and Native Vegetation would explain the majority of the discrepancy. Accordingly, we consider that some of the valuations in this area are at the high end of the acceptable range.

A summary of the valuations by PSP area is as follows;

Wyndham WestCKC VALUATION SUMMARY

PSP 40 42.1 42.2 43 92AREA TOTAL 528.69 494.65 507.54 89.35 597.47AREA GROSS DEVELOPABLE 339.41 445.01 408.47 80.61 465.93MIN. AREA VALUED 0.66 0.01 0.06 0.08 10.37MAX. AREA VALUED 42.07 83.69 81.38 11.98 221.78NO. OF PROPERTIES 30 13 11 10 14AVERAGE AREA 14.26 37.08 37.13 8.06 46.59MEDIAN AREA 12.03 33.34 35.36 9.67 16.05MIN. RATE PER HA $300,000 $300,000 $275,000 $650,000 $200,000MAX. RATE PER HECTARE $1,000,000 $1,725,000 $1,125,000 $2,000,000 $425,000AVERAGE RATE PER HECTARE $571,000 $370,000 $394,000 $679,000 $202,000MEDIAN RATE PER HECTARE $550,000 $425,000 $450,000 $675,000 $375,000

S o urc e : Urbis

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Valuation Case Study PROPERTY TOTAL AREA CKC NET DEV. HA CKC VALUE URBIS VALUE SUBMISSION?

PSP 1088

SW-08 60.77 60.77 $400,000 $425,000 No

NO-04 10.13 10.13 $600,000 $600,000 Yes

PSP 1089

NW-23 4.05 3.38 $800,000 $750,000 No

SE-22 42.42 39.41 $475,000 $500,000 No

PSP 1090

SW-01 54.24 49.81 $475,000 $500,000 Yes

NW-03 3.50 3.50 $800,000 $800,000 No

PSP 1091

NO-01 63.45 44.55 $450,000 $490,000 No

SO-10 20.51 12.75 $575,000 $575,000 Yes

3.3 WYNDHAM NORTH VALUATION CASE STUDIESWe were subsequently instructed to undertake further investigation as to our opinion of the indicative market value for a representative sample of residential properties within the Wyndham North PSP. These assessments are based on the same critical assumptions contained within the CKC report. This sample contains a mix of properties in which the owner or its representative has made a submission to the MPA in relation to the DCP land valuations and others that did not.

These investigations included a Title search and a detailed look at the properties locational attributes, to satisfy us of the properties indicative value as at 22 April 2013. We have also included some sales evidence overleaf; some of it is additional to that provided by CKC. We have not undertaken enough investigations that would be commensurate with a full market valuation and reserve the right to review our below assessments if more information becomes available.

In relation to the sales evidence contained overleaf, we highlight that there have been a number of sales within the DCP area albeit some of these sales are a little dated having transacted in 2010. These older sales reflect a discount for a planning lead in period, although a number of which occurred before the market for broad hectare parcels stalled, with very few sales occurring throughout 2012 and into early 2013. This was a result of lot prices falling by 10%-20% in this area, together with a reduction in sales volumes.

A summary of the properties that we have reviewed are;

Consistent with our earlier comments we consider that the CKC assessments are within an acceptable range albeit to the lower end of it, with our assessments being within approximately 10% of their assessments. We generally consider that the assessments of the larger holdings should be higher. In particular, we consider that property SW-01 (PSP 1090) would be even higher had it not been impacted by the Regional Rail Link. This property is situated closer to the Melbourne CBD than most other parcels and is close to existing residential estates that are achieving higher prices than other parts of Tarneit. We also consider that due to the location of NW-23 and that the land is dissected by a drainage easement that its indicative value is a little lower than that adopted by CKC.

As our opinion of value as at 22 April 2013 is generally within approximately 10% of CKCs assessments, we do not consider that this factor by itself warrants a revaluation. The residential market for both individual lots and broad hectare holdings has improved since this time, hence when this is taken into account together with out view that the CKC assessments are to the low end of the range we recommend that a revaluation be undertaken.

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89$5

89,2

75$7

07,8

76$8

81,8

24$4

60,1

51$4

57,7

06$3

74,8

06$4

64,1

28$2

99,2

52Su

bjec

t to

GAIC

?No

t sub

ject

to G

AIC

Not s

ubje

ct to

GAI

CYe

s - $

80,0

00p/

ha b

ase

Yes

- $80

,000

p/ha

Not s

ubje

ct to

GAI

CYe

s - $

80,0

00p/

ha b

ase

Yes

- $95

,000

p/ha

Yes

- $95

,000

p/ha

Yes

- $95

,000

p/ha

$ Pe

r Pot

entia

l Lot

$42,

125

$35,

211

N/A

$58,

800

- $62

,550

$58,

025

$27,

817

N/A

$37,

821

$27,

429

Lot Y

ield

Per

Hec

tare

15.9

16.7

N/A

14.1

- 15

.07.

916

.5N/

A12

.310

.9

Com

men

tsTh

e sa

le p

rice

was

als

o fre

e fro

m S

tam

p D

uty.

The

adju

sted

sal

e pr

ice

per

hect

are

if co

mpa

red

to G

AIC

an

d S

tam

p D

utia

ble

hold

ings

wou

ld

appr

oxim

ate

$550

,000

per

he

ctar

e. T

he d

evel

oper

will

be

resp

onsi

ble

for t

he

cons

truct

ion

of a

n ac

oust

ic

wal

l to

the

Prin

ces

Free

way

bo

unda

ry a

nd w

ill b

e re

quire

d to

set

asi

de 3

.37

hect

ares

for t

he e

xtens

ion

of

Dun

ning

s R

oad

thro

ugh

the

land

. A n

ew in

terc

hang

e at

S

neyd

es R

oad

and

the

Prin

ces

Hig

hway

is p

lann

ed

with

land

alre

ady p

rovid

ed

outs

ide

of th

e co

ntra

ct.

Conf

iden

tial S

ale.

The

sal

e is

con

ditio

nal u

pon

obta

inin

g ac

cess

to

sew

erag

e an

d dr

aina

ge

from

the

adjo

inin

g pa

rcel

. Th

e pr

oper

ty so

ld w

ith a

pe

rmit

in p

lace

with

an

aver

age

lot s

ize o

f 386

m2 .

The

prop

erty

sold

at a

uctio

n w

ith 1

2 m

onth

term

s, w

hich

is

unu

sual

for a

pro

perty

of

this

nat

ure.

The

pro

perty

w

ent t

o au

ctio

n at

the

dire

ctio

n of

VC

AT in

rela

tion

to a

dis

pute

of t

he 2

ow

ners

w

ho in

herit

ed th

e pr

oper

ty.

The

land

incl

uded

6.2

7 he

ctar

es o

f net

resi

dent

ial

area

with

3.6

1 he

ctar

es a

nd

0.26

hec

tare

s re

quire

d fo

r ac

tive

open

spa

ce a

nd ro

ad

wid

enin

g re

spec

tivel

y. W

e un

ders

tand

that

thes

e 2

item

s ar

e co

mpe

nsab

le

unde

r the

Dev

elop

men

t C

ontri

butio

n P

lan

at

$900

,000

per

hec

tare

.

The

land

is fl

at a

nd va

cant

ap

art f

rom

a h

ouse

in th

e so

uth-

wes

t cor

ner o

f the

pr

oper

ty. S

urro

unde

d by

ex

istin

g re

side

ntia

l de

velo

pmen

t. B

elie

ved

to

have

sol

d fo

r $30

,000

,000

on

6 m

onth

term

s. C

ash

equi

vale

nt h

as b

een

anal

ysed

on

10%

dep

osit

with

bal

ance

pay

able

on

settl

emen

t. W

e un

ders

tand

th

at th

e la

nd re

quire

s fil

l at a

co

st o

f app

roxim

atel

y $2

0,00

0 pe

r hec

tare

.

Conf

iden

tial s

ale.

Joi

nt

vent

ure

betw

een

Cou

ncil

and

Aust

rala

nd.

Dev

elop

able

are

a ex

pect

ed

to b

e be

twee

n 37

-42

hect

ares

. Lan

d is

to b

e re

zone

d to

R1Z

. As

per t

he

coun

cil m

aste

rpla

n th

e pu

rcha

ser i

s to

bui

ld to

stri

ct

sust

aina

bilit

y gui

delin

es.

Incl

udes

reta

il sp

ace

of u

p to

5,0

00sq

m. T

erm

s ar

e 10

% d

epos

it w

ith th

e ba

lanc

e du

e on

ce th

e re

zoni

ng h

as o

ccur

red

(app

roxim

atel

y 12

mon

ths)

.

Four

indi

vidua

l titl

es s

old

toge

ther

, all

gene

rally

re

gula

r; th

ree

front

Cob

urns

R

oad

and

adjo

in th

e fo

urth

pa

rcel

at t

he re

ar w

hich

fro

nts

McM

inns

Roa

d. S

old

with

app

rova

l for

710

lots

an

d on

12

mon

th te

rms.

Du

e to

the

fall

in m

arke

t co

nditi

ons,

the

purc

hase

rs

of th

is p

rope

rty

ultim

atel

y di

d no

t set

tle th

is s

ale,

lo

sing

thei

r dep

osit.

The

impr

ovem

ents

con

sist

of

two

dwel

lings

, sta

bles

an

d sh

eddi

ng. C

urre

ntly

used

as

a ho

bby f

arm

. ESO

ru

ns th

roug

h th

e m

iddl

e po

rtion

of t

he p

rope

rty.

The

site

is c

urre

ntly

used

as

a ho

bby f

arm

. The

Dav

ies

Cre

ek ru

ns th

roug

h th

e pr

oper

ty, w

hich

is e

xpec

ted

to re

duce

the

deve

lopa

ble

area

by 1

6 he

ctar

es. T

erm

s ar

e be

lieve

d to

be

5 ye

ars,

w

ith a

$5m

dep

osit,

$3.

5m

in ye

ar 2

and

the

bala

nce

at

the

end.

Our

ana

lyse

d ra

te

per d

evel

opab

le h

ecta

re is

$4

83,0

00.

The

sale

term

s ar

e on

3.5

ye

ars.

The

pur

chas

er o

f the

la

nd is

ass

ocia

ted

with

the

Gol

den

Gro

up fr

om W

A. T

he

purc

hase

r is

to p

ay G

AIC

. P

rope

rty is

sub

ject

to a

H

erita

ge O

verla

y whi

ch

rela

tes

to th

e ho

use

as w

ell

as a

PAO

2. S

ome

8 he

ctar

es o

f the

site

is n

ot

cons

ider

ed d

evel

opab

le a

s a

resu

lt of

Dav

ies

Cre

ek

inte

rsec

ting

the

prop

erty.

O

ur a

naly

sed

rate

per

de

velo

pabl

e he

ctar

e is

$5

23,0

00.

The

prop

erty

was

pu

rcha

sed

off m

arke

t on

5 ye

ar te

rms

with

inte

rest

pa

yabl

e. A

t the

dat

e of

sal

e th

e la

nd w

as e

xpec

ted

to b

e in

clud

e ap

prox

imat

ely 2

5 he

ctar

es fo

r a d

rain

age

rese

rve

and

publ

ic o

pen

spac

e ne

ar th

e W

errib

ee

Rive

r. T

he D

SE

repo

rts d

o no

t sho

w a

Net

Gai

n of

fset

re

quire

men

t. O

ur a

naly

sed

rate

per

dev

elop

able

he

ctar

e is

$34

8,00

0.

Sour

ce: U

rbis

, PR

ISM

PG 14


4 VALUATION METHODOLOGIES

PG 15


The properties are to be valued on the assumption that their highest and best use value is based on a zoned and approved PSP for either residential or commercial development we consider that the appropriate valuation approach is by direct comparison with sales of other broad hectare holdings.

The method involves the analysis of comparable sales evidence with adjustments made to take into account the specific characteristics of each property such as size, location, topography, encumbrances and date of sale. The result of this analysis is then used in establishing the value of the various properties within the DCP.

Sales of large residential and employment properties don’t often occur after a PSP has been approved. This is because developers and land bankers generally purchaser properties many years before hand. These purchases are often either at a discount (compared to a PSP approved property) or are purchased with settlement terms over many years. Valuers discount these terms to reflect a cash value, reflecting that any DCP compensation will be paid on a cash basis.

Due to the assumption that these properties are to be valued at their highest and best use, we also consider that delays and abnormal servicing costs should be ignored. Other potential impacts on value such as contamination, Aboriginal Heritage, Native Vegetation and Wyndham Councils proposed up-front infrastructure contributions are also ignored. The existing street frontages and linkages should be taken into account. Locational attributes such as potential lot prices and rates of sale should also be taken into account.

The area of the property being valued is the Gross Developable Area. This area is the Total Developable area less encumbered land but inclusive of areas to be set aside for the DCP i.e. arterial roads, community sites, active open space, school sites etc. If the latter parcels were not required for these items in the PSP/DCP then it is likely to be developable. This is consistent with compensation precedent that requires the scheme of acquisition be ignored when assessing the highest and best use of the land.

For those properties with significant areas of encumbered land, such as a natural water course, steep topography or transmission lines, it is a difficult conceptual valuation argument as to whether this land has any value. Some of this encumbered land may satisfy part of a public open space contribution. Therefore, this theatrically frees up other unencumbered land for development. For an owner arguably this land has a notional value.

A detailed discussion of the valuation methodologies now follows;

PG 16


4.1 OVERALL BROAD HECTARE APPROACH

We consider that the overall Broad Hectare approach refers to an overall value per hectare applicable for all properties contained within a PSP. The average size of the properties contained within a PSP would be adopted for the basis of the assessment.

In practice this means that if the average area of a DCP is 40 hectares and the applicable valuation for a property of that size is $500,000 per hectare than all properties regardless of whether they are 2, 40 or 150 hectares are assessed at $500,000 per hectare.

We consider that this approach to valuation is best suited to PSPs that have similar property sizes which results in an equitable outcome for all owners, i.e. in limited circumstances.

▶ The benefits of using the methodology in a DCP context, include;

w Lower cost of administering the DCP,

w In theory should give the greatest opportunity to keep the DCP budget balanced,

w Owners have a high level of certainty of what they will receive for land compensation and what they will pay for the DCP Levy,

w Can be implemented when a PSP has not been prepared, the specific location or size of property that the respective infrastructure is on is not the driver land value compensation.


w Can lead to inequity, with owners of larger than average and lower than average sized properties being over and under compensated respectively.

▶ Implications for the overall DCP rate;

w The overall DCP rate should be the same as the property specific broad hectare approach and significantly lower than the site specific approach.

PG 17


4.2 PER PROPERTY BROAD HECTARE APPROACH

The per property broad hectare approach can also be referred to as the ‘Before’ and ‘After’ approach. This requires the valuation of every property contained within the PSP. The ‘Before’ assessment is based on the properties total area, it ignores the items to be set aside for the infrastructure identified within the PSP. The ‘After’ assessment takes into account the infrastructure items required within the PSP.

This approach is akin to the definitions contained within the Land Acquisition and Compensation Act 1986. Severance or enhancement, disturbance, special value etc. and other heads of claim are ignored for the purpose of DCP assessments. This is in part due to arterial roads, community facilities and active open space being expected to be provided as part of development of in greenfield areas. Although these infrastructure items may have some positive or negative impacts on surrounding uses they do not have severe impacts on amenity or cost to development that say a freeway with the requirement to construct noise walls does.

Based on our experience this approach is effectively a broad hectare valuation on a property by property basis. Conceivably, this approach could take into consideration situations after the infrastructure items have been provided where the after parcel is irregular in shape and may be less desirable to develop than before they were provided.

In practice this means a 2, 40 or 150 hectare property will be assessed at a rate per hectare attributable to that size property, for instance $800,000, $500,000 or $300,000 respectively. This approach will result in a very similar DCP Levy to the broad hectare approach assuming that the land being set aside for

infrastructure is evenly distributed across the various property sizes. It could end up in a higher or lower DCP Levy if the land set aside for infrastructure was skewed to smaller or larger than average sized properties respectively.

We consider that this method is applicable for all DCPs that don’t have properties with a generic size, with the potential for some exceptions if there is an unequitable outcome for a very limited number of circumstances.

▶ The benefits of using the methodology in a DCP context.

w Provides the most equitable outcome for land owners with compensation paid in line with the value of the land.


w The cost of administering the DCP is higher than the overall broad hectare approach,

w Has a slightly higher risk to Council than the overall broad hectare approach for the DCP budget to not be balanced,

w This approach will be difficult or not possible to implement when a PSP has not been prepared as the location of DCP items is not known.


w The overall DCP rate should be the same as the overall broad hectare approach and significantly lower than the site specific approach.

PG 18


4.3 SITE SPECIFIC APPROACH

The Site Specific approach is the assessment of the land required for each separate infrastructure item. That is, if a property was required to provide for road widening, public open space and a community facility, each infrastructure item would be valued separately.

For example, it has been common practice for DCPs to value community facilities on a Site Specific basis. These sites are often 1 hectare in size and are regular in shape with 2 or 3 road frontages. The value for a property of this size with existing street frontages is significantly higher than say a 40 hectare parcel. This is because a site of this size can be subdivided say for residential purposes at relatively little expense.

In practice this means that every piece of infrastructure which may have a size of 0.25, 2 or 5 hectares would be valued as at that size. For example, the values per hectare could be $2,000,000, $1,000,000 and $750,000 respectively (in the Wyndham North DCP area). We highlight these values could be argued to be significantly higher than comparable sized property assessed in Section 3.2, because it takes into account that additional street frontages have been constructed and hence lower development costs.

We consider that this approach has very limited application for DCPs. In our experience this has been commonly used for Council Community sites. These sites are not common with 1 or 2 generally required within a PSP, whereas roads and public open space can be expected to be provided for by all land owners.

▶ The benefits of using the methodology in a DCP context;

w Can be used for limited items such as Community Facilities that are not commonly provided items by all developers.

w In special circumstances can compensate an owner who has been adversely impacted by the DCP, by over provision or land locking. Nevertheless, this could equally be accommodated by the application of a Public Acquisition Overlay.

▶ The negatives of using the methodology in a DCP context;

w Can lead to inequitable benefits to owners who are required to provide infrastructure items,

w The cost of administering the DCP is higher than the overall broad hectare approach,

w Provides the highest risk to the DCP budget out of the three approaches,

w This approach will be difficult or not possible to implement when a PSP has not been prepared as the location of DCP items is not known.


w Leads to a significantly higher DCP Rate with net payers of DCP Levies paying significantly higher amounts than the broad hectare approaches.

PG 19


4.4 HYBRID APPROACHAs it may not be possible to implement Per Property Broad Hectare or Site Specific approaches for the Wyndham West and North DCPs we have been asked to comment on whether a Hybrid approach could be adopted. A Hybrid approach may consist of grouping properties into size ranges; for example less than 0.5 hectares, 0.51-1 hectares, 1.01-5 hectares, 5.01-10 hectares, 10.01-20 hectares and so on.

It is our view that the more detailed the hybrid approach is the more unlikely its application is possible where the location of infrastructure is not known at the date of preparing a DCP.

Alternatively, valuation areas could be adopted with higher or lower average properties sizes being adopted. For example the valuation areas could be defined as PSP boundaries or other smaller sectors such as the various pockets of typically 4 hectare sized properties in the Oakbank and Tarneit North PSPs. This could reduce the inequity caused by the Broad Hectare but it would not eliminate it.

4.5 WYNDHAM NORTH CASE STUDIESFurther to our discussion of the different valuation methodology approaches we now provide examples of the implications of adopting different methodologies for various properties contained within the Wyndham North DCP.

For the Per Property Broad Hectare approach we have assumed that the distribution of required DCP infrastructure will be even across the property sizes and hence the DCP Levy will remain unchanged compared to the Average Broad Hectare approach. The Per Property Broad Hectare approach has the potential to result in a higher or lower DCP Levy compared to the Overall Broad Hectare approach. If the infrastructure items were to be more so situated on smaller land holdings then the DCP levy will be comparatively higher and conversely if the infrastructure items were to be situated on a larger landholdings, then the DCP Levy will be comparatively lower. We have not included these variances within our Case Studies as it is outside our scope of works.

In relation to the Site Specific Approach the infrastructure items compensable are 6 and 4 lane roads, community facilities and active open space. The expected total number of properties affected is 185 including both residential and commercial, with an estimated area of 340.83 hectares required. This is an average of 1.84 hectares per acquisition type; however each acquisition type is spilt into a number of sections or parts on various properties. In the absence of more accurate information provided to us we have assumed that each acquisition type has an average of 1.25 acquisitions per property. Therefore, the number of acquisitions increases to 231 with the resulting average size being 1.47 hectares.

The total component of land acquisition (including commercial) is $57,000 per net developable hectare out of the total DCP rate of $256,150, this is based on a rate per hectare of $500,000 over the 2,990 net developable hectares. We have applied a rate of $1,000,000 per hectare to the aforementioned assumption of a 1.47 hectare average acquisition area. The $1,000,000 over the 340.83 hectares equates to a doubling of the land rate to $114,000 per hectare. Therefore, the adjusted rate would be $313,000 per net developable hectare.

These calculations are indicative only and we reserve the right to review our case studies if more information is made available to us from the MPA in order to make more precise assessments of this approach.

PG 20


4.5.1 PROPERTY 88-SE-33This property is a 4.145 hectare parcel situated in the Oakbank PSP. The entire area of this property is required for Active Open Space. Based on the current DCP and adopted land valuation approach this property has the following position;

DCP Levy0 ND/HA @ $256,150 per ND/HA

$0

Land Acquisition4.145 HA @ $500,000 per HA

$2,072,500

Net position $2,072,500

If the CKC individual land valuation rate per hectare of $775,000 were to be adopted, the net position changes to;

DCP Levy0 ND/HA @ $256,150 per ND/HA

$0


$3,212,375


In this circumstance if the Site Specific Valuation approach were to be adopted the aforementioned assessment would not change.

DCP Levy 0 ND/HA @ $313,000 per ND/HA $0

Land Acquisition 4.145 HA @ $775,000 per HA $3,212,375


PG 21


4.5.2 PROPERTY 88-SE-34This property adjoins 88 SE 33 and is a 4.142 hectare parcel situated in the Oakbank PSP. The entire area of this property is available for residential development. Based on the current DCP and adopted land valuation approach this property has the following position;

DCP Levy4.142 ND/HA @ $256,150 per ND/HA

($1,060,973)

Land Acquisition0 HA @ $500,000 per HA

$0

Net position ($1,060,973)

If the CKC individual land valuation rate per hectare of $775,000 were to be adopted, the net position does not change;


($1,060,973)

Land Acquisition0 HA @ $775,000 per HA

$0


In this circumstance if the Site Specific Valuation approach were to be adopted the aforementioned assessment would change, as follows;

DCP Levy 4.142 ND/HA @ $313,000 per ND/HA ($1,296,446)

Land Acquisition 0 HA @ $775,000 per HA $0


PG 22


4.5.3 PROPERTY 90-NW-10This property is 41.66 hectares in size and based on the CKC assessment has 34.62 gross developable hectares. This equates to 7.04 hectares of waterway, however we highlight that the version of the Land Budget provided to us shows that this waterway area is 9.82 hectares and 1 hectare of passive open space. Some 2.249 hectares is required to be set aside for infrastructure leaving 28.593 net developable hectares. Based on the current DCP and adopted land valuation approach this property has the following position;


($7,324,097)


$1,124,500




($7,324,097)


$1,068,275




4 Lane Road 1.37 HA @ $1,000,000 per HA $1,370,000

6 Lane Road 0.879 HA @ $1,100,000 per HA $966,900


This property does not demonstrate significant of change in the net position regardless of what methodology is adopted.

PG 23


4.5.4 PROPERTY 91-SO-19This property is 91.019 hectares in size and based on the CKC assessment has a gross developable area of 56.5132 hectares. There is a slight difference between the waterway and conservation areas identified the version of the Land Budget supplied to us. The property also has a 1.4021 hectare area located within a Rural Conservation Zone and 1.4936 hectares of passive open space. Some 12.6827 hectares is required for public land with 43.73 net developable hectares. Based on the current DCP and adopted land valuation approach this property has the following position;


($11,201,440)


$6,341,350








4 Lane Road 2.5925 HA @ $1,000,000 per HA $2,592,500

Community Facility 0.2108 HA @ $2,000,000 per HA $421,600

Regional Open Space 1.3954 HA @ $1,000,000 per HA $1,395,400

Active Open Space 8.8484 HA @ $650,000 per HA $5,751,460


This property demonstrates a high degree of change in the net position dependent upon what methodology is adopted.

PG 24


4.6 WYNDHAM WEST CASE STUDIESFor the Per Property Broad Hectare approach we have assumed that the distribution of required DCP infrastructure will be even across the property sizes and hence the DCP Levy will remain unchanged compared to the Average Broad Hectare approach.

In relation to the Site Specific Approach the infrastructure items compensable are 6 and 4 lane roads, community facilities and active open space. The total number of properties affected and the total areas are; 55 for 168.86 hectares over all charge areas. This is an average of 3.07 hectares per acquisition type; however each acquisition type is spilt into a number of sections or parts on various properties. In the absence of more accurate information provided to us we have assumed that each acquisition type has an average of 1.25 acquisitions per property. Therefore, the number of acquisitions increases to 69 with the resulting average size being 2.45 hectares.

The Charge Area 1 component of land is $46,630 per net developable hectare (out of the total DCP rate of $221,832) for 1,333 hectares or a total of $62,157,790 divided by the rate per hectare of $390,000 equates to 159.38 hectares. We have applied a rate of $900,000 per hectare to the aforementioned assumption of a 2.45 hectare average acquisition area. The $900,000 over the 159.38 hectares equates to $143,442,000 or $107,608 per hectare over the 1,333 hectares. Therefore, the adjusted rate would be $283,000 per net developable hectare for Charge Area 1. We have assumed that the Ballan Road area would attract the same premium to that contained within the draft DCP and would have an adjusted DCP rate of $295,000 per net developable hectare.

These calculations are indicative only and we reserve the right to review our case studies if more information is made available to us from the MPA in order to make more precise assessments of this approach.

Some examples for the Wyndham West DCP now follow;

PG 25


4.6.1 BLACK FOREST ROAD NORTH – PROPERTY 8Property 8 is a 50.73 hectare parcel of land which comprises 3.26 hectares of encumbered waterway, resulting in a gross developable area of 47.47 hectares. The property will be required to set aside 6.9 hectares for a 6 lane road and 11.33 hectares for Active Open Space which will be compensated by the DCP at the nominated rate per hectare. The Net Developable area of the property is 29.24 hectares.

Based on the current DCP and adopted land valuation approach this property has the following position;


($6,486,368)


$7,109,700

Net position $623,332

If the land valuation rate were to be changed to the per property basis, the DCP Levy rate per hectare would remain unchanged

although the Land Acquisition rate per hectare would change to $375,000 per hectare, the net position would then change to;




If the Site Specific Approach were to be adopted our assessment of this property’s net position is;


Road Acquisition 6.9 HA @ $650,000 per HA $4,485,000

Active Open Space Acquisition 11.33 HA @ $550,000 per HA $6,231,500


This property is a Net receiver of funds from the DCP, with the higher the land value rate equating to higher compensation.

PG 26


4.6.2 ALFRED ROAD – PROPERTY 5Property 5 has an area of 8.94 hectares, which is entirely developable.

Based on the current DCP and adopted land valuation approach this property has the following position;


($1,983,178)

Land Acquisition 0 HA $0


If the Land Acquisition rate per hectare would change to $700,000 per hectare, the net position would not change;


($1,983,178)







This property is a Net payer of funds from the DCP, with the higher the DCP Rate the higher the payment.

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4.6.3 BLACK FOREST ROAD SOUTH – PROPERTY 1Property 1 has a total area of 86.72 hectares with 2.21 hectares of 6 lane road and 12.14 hectares of active open space. The property also has non-compensable items including 0.27 hectares of existing road reserves, 6.59 hectares of waterway, 1.97 hectares of passive open space and 4 hectares of additional open space relating to a quarry buffer. The net developable hectare area is 59.54 hectares. CKC have adopted a gross developable area of 80.13 hectares with a value rate of $325,000 per hectare. Based on the current DCP and adopted land valuation approach this property has the following position;


($13,207,877)

Land Acquisition14.35 HA @ $390,000 per ND/HA

$5,596,500


If the Land Acquisition rate per hectare would change to $325,000 per hectare, the net position would change as follows;


Land Acquisition 14.35 HA @ $325,000 per ND/HA $4,663,750




Road Acquisition 2.21 HA @ $900,000 per HA $1,989,000

Active Open Space 12.14HA @ $600,000 per HA $7,284,000


This property’s position varies dependent upon the approach but not by a great percentage.

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4.6.4 BALLAN ROAD – PROPERTY 32 (28 IN CKC REPORT)This property is within Charge Area 3 and has a total area of 12.14 hectares and a gross area of 11.51 hectares. Some 4.06 hectares is required to be set aside for active open space, with a net developable area of 7.45 hectares. Based on the current DCP and adopted land valuation approach this property has the following position;


($1,758,692)


$1,583,400

Net position ($175,292)

If the Land Acquisition rate per hectare would change to $550,000 per hectare, the net position would change as follows;


($1,758,692)


$2,233,000




Land Acquisition 4.06 HA @ $800,000 per ND/HA $3,248,000


This property’s net position as a net receiver or payer of DCPs is significantly impacted by the adopted land valuation methodology.

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4.7 CASE STUDY SUMMARYA table summarising the various net positions of the case studies contained in sections 4.5 and 4.6 now follows;

Case Study SummaryWYNDHAM NORTH PROPERTIES AVERAGE HA PER PROPERTY HA SITE SPECIFIC

88-SE-33TOTAL AREA 4.145NET DEV. HA 0.000AREA ACQUIRED 4.145NET POSITION $2,072,500 $3,212,375 $3,212,375% CHANGE FROM AVERAGE HA 55% 55%

88-SE-34TOTAL AREA 4.412NET DEV. HA 4.142AREA ACQUIRED 0.000NET POSITION -$1,060,973 -$1,060,973 -$1,296,446% CHANGE FROM AVERAGE HA 0% 22%

90-NW-10TOTAL AREA 41.660NET DEV. HA 28.593AREA ACQUIRED 2.249NET POSITION -$6,199,597 -$6,255,822 -$6,612,709% CHANGE FROM AVERAGE HA 1% 7%

91-SO-19TOTAL AREA 91.019NET DEV. HA 43.730AREA ACQUIRED 12.683NET POSITION -$4,860,090 -$5,811,292 -$3,526,530% CHANGE FROM AVERAGE HA 20% -27%

WYNDHAM WEST PROPERTIES AVERAGE HA PER PROPERTY HA SITE SPECIFIC

BLACK FOREST ROAD NORTH PROPRTY 8TOTAL AREA 50.730NET DEV. HA 29.240AREA ACQUIRED 18.230NET POSITION $623,332 $349,882 $2,441,580% CHANGE FROM AVERAGE HA -44% 292%

ALFRED ROAD PROPERTY 5TOTAL AREA 8.940NET DEV. HA 8.940AREA ACQUIRED 0.000NET POSITION -$1,983,178 -$1,983,178 -$2,530,020% CHANGE FROM AVERAGE HA 0% 28%

BLACK FOREST ROAD SOUTH PROPETY 1TOTAL AREA 86.720NET DEV. HA 59.540AREA ACQUIRED 14.350NET POSITION -$7,611,377 -$8,544,127 -$7,576,820% CHANGE FROM AVERAGE HA 12% -0.5%

BALLAN ROAD PROPERTY 32TOTAL AREA 12.140NET DEV. HA 7.450AREA ACQUIRED 4.060NET POSITION -$175,292 $474,308 $1,050,250% CHANGE FROM AVERAGE HA 371% 699%

S o urc e : Urbis

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4.8 INDEXATION AND REVALUATIONWe have been requested to discuss what Indexation and re-valuation methods are available to the DCP once it is approved. We are instructed that quarterly valuation adjustments to CPI or other property based index is proposed, together with yearly revaluations. Based on our knowledge yearly revaluations are common and often undertaken by Councils or independently appointed Valuers.

The subject DCPs have an expected development horizon of 30 years, which is longer than usual as a result of size. The administrative cost of revaluing so many properties at once is high. There is an opportunity for an alternative approach to be taken, with longer review period of 2 years or potentially more to be suitable for such a large area.

The quarterly index is less common. It is our view that indexing broad hectare land valuations on a quarterly basis is not warranted. This is because the value of this type of land seldom fluctuates that regularly, furthermore there are no known relevant indices in which to base such an index on. For example both employment and residential broad hectare properties values have remained flat or reduced over the past 2 years as against CPI or other indices that have increased over this period of time.

An alternative idea could be to operate like Melbourne Water and to fix the date of valuation as at the date the first planning permit is obtained for a Certificate of Title. A detailed register would need to be maintained nevertheless values would be fixed to a year. This could even be taken a step further with all values being fixed at the date of the approved DCP.

So far we have discussed the review indexation period. Another way of revaluing the properties within the DCP is to adopt different valuation areas or cells. This is a method adopted in other DCPs and is in part adopted for the Wyndham West DCP which has 4 Charge areas.

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4.9 LONG TERM IMPLICATIONS AND FLEXIBILITYFor the purpose of the long term implications analysis we consider that there is limited impact on whether revaluations are made on the basis of 1 or 2 year reviews, or on a fixed at the start of the Planning Approval basis;

OVERALL BROAD HECTARE BASIS

We consider that the overall broad hectare approach provides the most flexibility and easiest way to revalue public land for infrastructure items as a single rate is adopted. Any adjustments to land use could also be accommodated easily although noting that any significant changes after a high proportion of the land has been developed could end up in DCP being under funded.

This valuation approach can lead to inequity for some owners as it places a single value rate over all properties regardless of size, with some properties being valued and compensated under the DCP at amounts less than the actual value of the land. Where a demonstrable difference between the actual value and compensable value under the DCP occurs, it is more likely that these owners would explore other options to trigger compensation. If this were to occur then the DCP may be under funded.

PER PROPERTY BROAD HECTARE BASIS

We consider that this approach also provides flexibility to revalue public land and accommodate changes. If public land were to change from one property to another and hence be valued at a different property rate then there would be a slightly greater risk than the overall broad hectare approach for DCPs to be under funded.

We consider that this approach would minimise legal challenges for higher compensation claims.

SITE SPECIFIC BASIS

We consider that this approach is not equitable to be adopted for the valuation of all public land requirements. Furthermore, we consider that it is unlikely that there would be legal merit (noting we are not Lawyers) to challenge DCP land valuations made on the aforementioned 2 basis to actually be paid on a site specific basis.

The cost of undertaking valuations on this basis could be significantly higher as some land owners may prepare hypothetical plans and costs to substantiate claims; this is what currently occurs for negotiated sales of land for school sites to the DEECD.

Finally we note that this approach would give rise to the greatest risk to the DCP being under funded. This is due to the starting point of higher land values and the exponential effect of indexation.

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5 ADDITIONAL CONSIDERATIONS

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5.1 EQUITY AND PUBLIC ACQUISITION OVERLAYSWhen land is required to be set aside for a public purpose one of the goals of the DCP is to compensate owners equitably for their contribution. An issue that can be missed is where the requirement for the provision of infrastructure can result in a land owner being frustrated from development i.e. land locked. In these circumstances or when land external to a DCP is required a Public Acquisition Overlay may be employed so that such an owner has recourse to obtain timely payment.

A good example of this is Property 88 SE 33 which is entirely required for Active Open Space. As many larger developments obtain development levy offsets in the early stages, there is often not much in the budget to pay out owners such as this in a timely manner.

5.2 DCP EXAMPLESWe consider that it is important to understand what valuation methodologies have been adopted for comparable or other recent PSPs. This is by no means an exhaustive list; nevertheless some examples now follow;

TOOLERN

Total Area: 2,400 HA

DCP Charge Areas: 4 (2 residential, 1 mixed use and 1 employment)

Land Valuation Approach: Compensation – broad hectare

Date: August 2010

CARDINIA


DCP Charge Areas: 6 (1 with part employment)

Land Valuation Approach: Broad hectare per property - compensation

Date: September 2008

LOCKERBIE


DCP Charge Areas: 1

Land Valuation Approach: Broad hectare per property – compensation (site specific valuations for community facilities)

Date: May 2012

MERNDA OVERALL DEVELOPMENT PLAN (NON MPA)


DCP Charge Areas: 6

Land Valuation Approach: Overall broad hectare

Date: October 2004 and Amended January 2008

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TRUGANINA EMPLOYMENT

Total Area: 772 HA

DCP Charge Areas: 1

Land Valuation Approach: Overall broad hectare

Date: December 2009

5.3 OTHER GOVERNMENT AGENCIESOther Government Agencies that actively acquire land, generally approach land acquisition as follows;

VicRoads: ‘Before’ and ‘After’ assessments for partial acquisitions

DEECD: Site Specific assessment

Melbourne Water: Broad Hectare assessment based on the original title area i.e. if 2 hectares of a 40 hectare site is required, the 2 hectares will be valued on the 40 hectare area. The valuation date is often fixed at the date of agreement, normally being the start of subdivision.

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6 STANDARD DEVELOPMENT CONTRIBUTIONS ADVISORY COMMITTEE

PG 36


In accordance with the terms of reference dated 21 September 2012 the Standard Development Contributions Advisory Committee was appointed to inform the Minister for Planning’s decision on the final framework for a new development contributions system and for the establishment of standard levies. In relation to Public Land some of the relevant outcomes are expected to include;

▶ A simple methodology for valuing public land infrastructure component.

▶ An appropriate method for annual indexation of the standard levies and charges, construction costs and land valuations (for example, by reference to an appropriate industry index), and for periodic review to ensure that the levies reflect contemporary infrastructure requirements.

We note that Urbis staff members have participated in Small Group Meetings with the Committee and have attended industry seminars in relation to the release of documents. Documents released to date include (but not limit to);

▶ A new Victorian Local Development Contribution System

This report raises questions about public land in Section 5.3 but does not include anything that will assist in this matter.

▶ Indicative standard levies for local development contributions

Table 16 of this report includes a detailed summary of the land component cost of the selected DCPs. The average equates to $50,350 per net developable hectare out of and average full DCP rate of $187,818 per net developable hectare, representing 27% of the cost.

▶ Report 1 – Setting the Framework

This is the key report released to date with section 11 relating to the valuation of Public Land. The findings of this discussion are;

▶ A detailed review of the issues relating to the land valuation and transfer should be conducted as part of Stage 2 report.

▶ The review of land valuation in Stage 2 should seek to identify available options to;

w Simplify and give certainty to the process of securing land for public purposes,

w Ensure that there is an equitable approach toward the valuation of land for public purposes,

w Ensure that the principles of the recommended DCP framework cannot be undermined.

The Stage 2 Report has been completed and has been sitting with the Minister for Planning. We are unable to obtain information about what the likely recommendations are to be. Considering that this report has been with the Minister for some time it is unknown as to whether any such changes will be adopted. We reserve the right to review our advice contained within this report if this the Committee advice becomes available.

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7 RECOMMENDATIONS

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Based on the foregoing and with particular reference to the Standard Development Contributions Advisory Committee review objectives of;

w Simplify and give certainty to the process of securing land for public purposes,

w Ensure that there is an equitable approach toward the valuation of land for public purposes,

w Ensure that the principles of the recommended DCP framework cannot be undermined.

We consider from a Valuers and the majority of landholder’s point of view, the Per Property Broad Hectare approach provides the most certainty, is the most equitable and is least likely to be undermined by owners seeking recourse to other compensation mechanisms. However, from a DCP manager’s point of view this is not likely to be the simplest to manage. We recommend that the Per Property Broad Hectare approach as the best land valuation methodology.

As mentioned in Section 4.4 Hybrid approach, it may not be possible to implement a Per Property Broad Hectare approach given that a number of the PSPs have not been completed. For those PSPs that are not advanced enough, we consider that the below could apply;

WYNDHAM NORTH

Oakbank and Tarneit North: A Hybrid approach will be required at a minimum due to large number of smaller properties,

We consider that each PSP in Wyndham North should have its own valuation area.

WYNDHAM WEST

Mambourin and Quandong; Overall Broad Hectare approach for each PSP is likely to have limited inequity,

We consider that some of the PSPs in Wyndham West could have common valuation areas.

With regard to the valuation indexation we consider that annual or bi-annual valuations are required. We do not consider that quarterly indexation to CPI or other similar measure is warranted.

CKC VALUATIONS (SECTION 3.3)

As our opinion of value as at 22 April 2013 is generally within approximately 10% of CKCs assessments, we do not consider that this factor by itself warrants a revaluation. The residential market for both individual lots and broad hectare holdings has improved since this time, hence when this is taken into account together with out view that the CKC assessments are to the low end of the range we recommend that a revaluation be undertaken.

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8 CONCLUSION

We advise that this Report is only for the use of the party to whom it is addressed, and no responsibility or liability is accepted to any third party for the whole or any part of its contents.

Urbis Valuations Pty Ltd

Andrew Kinnaird, AAPI

Director Certified Practising Valuer Australian Property Institute Member No. 62804

Brian Dudakov

Director

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DISCLAIMER

This report is dated 18 November 2013 and incorporates information and events up to that date only and excludes any information arising, or event occurring, after that date which may affect the validity of Urbis Valuations Pty Ltd’s (Urbis) opinion in this report. Urbis prepared this report on the instructions, and for the benefit only, of Metropolitan Planning Authority (Instructing Party) for the purpose of Desktop Review (Purpose) and not for any other purpose or use. Urbis expressly disclaims any liability to the Instructing Party who relies or purports to rely on this report for any purpose other than the Purpose and to any party other than the Instructing Party who relies or purports to rely on this report for any purpose whatsoever (including the Purpose).

In preparing this report, Urbis was required to make judgements which may be affected by unforeseen future events including wars, civil unrest, economic disruption, financial market disruption, business cycles, industrial disputes, labour difficulties, political action and changes of government or law, the likelihood and effects of which are not capable of precise assessment.

All surveys, forecasts, projections and recommendations contained in or made in relation to or associated with this report are made in good faith and on the basis of information supplied to Urbis at the date of this report. Achievement of the projections and budgets set out in this report will depend, among other things, on the actions of others over which Urbis has no control.

Urbis has made all reasonable inquiries that it believes is necessary in preparing this report but it cannot be certain that all information material to the preparation of this report has been provided to it as there may be information that is not publicly available at the time of its inquiry.

This report has been prepared with due care and diligence by Urbis and the statements and opinions given by Urbis in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading bearing in mind the necessary limitations noted in the previous paragraphs. Further, no responsibility is accepted by Urbis or any of its officers or employees for any errors, including errors in data which is either supplied by the Instructing Party, supplied by a third party to Urbis, or which Urbis is required to estimate, or omissions howsoever arising in the preparation of this report, provided that this will not absolve Urbis from liability arising from an opinion expressed recklessly or in bad faith.

Liability limited by a scheme approved under Professional Standards Legislation.

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