The proceeding concerned a site valuation of the land on the corner of Elizabeth and Bourke Streets, where the old General Post Office (GPO) building is located. Site value is the value of land in its undeveloped state, and is used amongst other things to assess land tax. As the GPO building and land are heritage-listed, the GPO’s site value was required to be determined in accordance with the particular provisions of s 2(8) of the Valuation of Land Act 1960 (Vic) (“the Act”), which modify, for heritage sites, the normal approach to determining site value.
The relevant valuer, the Melbourne City Council, had assessed the GPO’s heritage-affected site value as $14,800,850. The Valuer-General was joined to the proceeding, running it in place of the Council, and contended for the increased figure of $26,375,000. ISPT, the owner of the GPO, at all times contended for a figure of $1. Resolution of the proceeding turned both on issues as to the proper interpretation and operation of the complex provisions of s 2(8) and on disputed matters of valuation methodology and opinion.
The Valuer-General argued that the valuation should take into account the commercial trading at the GPO and contended for a novel ‘rental differential’ methodology. Under it, heritage-affected site value would be derived by determining the site value of the land if free of heritage restrictions and reducing that amount by the ratio of the rental income actually being achieved to the rental income which might be achieved if the land were developed to its maximum potential free of heritage restrictions. ISPT relied upon a traditional hypothetical development method, which assessed the cost of developing the land to notionally construct the improvements actually in place compared to the returns which could be derived from doing so. Those costs were so high that the net returns were negative, resulting in ISPT’s valuation of $1.
