Land and Environment Court New South Wales Medium Neutral Citation: AMP Macquarie Pty Ltd v Valuer‑General [2022] NSWLEC 114 Hearing dates: 30 March to 6 April and 20 April 2022 Date of orders: 21 September 2022 Decision date: 21 September 2022 Jurisdiction: Class 3 Before: Moore J Decision: See orders at [472] and [473] Catchwords: VALUATION OF LAND - appeals against statutory valuations for two valuation years - major regional shopping centre - "highest and best" use - choice between hypothetical development schemes - valuation issues arising concerning the adopted hypothetical development scheme - question of whether, on appeal, a statutory valuation can be increased - unnecessary to resolve jurisdictional question concerning increase in statutory valuation - appeal upheld concerning each statutory valuation - revised valuations substituted for issued statutory valuations - costs reserved Cases Cited: Botany Bay City Council v Premier Customs Services Pty Ltd (2009) 172 LGERA 338; [2009] NSWCA 226 Initial Action Pty Ltd v Woollahra Municipal Council (2018) 236 LGERA 256; [2018] NSWLEC 118 Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8 Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673; (2001) 114 LGERA 376; [2001] NSWCA 78 RebelMH Neutral Bay Pty Ltd v North Sydney Council [2019] NSWCA 130 Tetzner v Colonial Sugar Refining Company Ltd [1958] AC 50 Wehbe v Pittwater Council [2007] NSWLEC 827 Zhang v Canterbury City Council (2001) 51 NSWLR 589; [2001] NSWCA 167 Category: Principal judgment Parties: AMP Macquarie Pty Ltd (First Applicant) AMP Capital Funds Management Ltd (Second Applicant) Dexus Wholesale Property Ltd (Third Applicant) Valuer‑General of New South Wales (Respondent) Representation: Counsel: Mr A Galasso SC/Ms C Trahanas, barrister (Applicants) Dr S Pritchard SC/Mr R White, barrister (Respondent) Solicitors: King & Wood Mallesons (Applicants) Crown Solicitor's Office (Respondent) File Number(s): 270481 and 270482 of 2020 Publication restriction: No TABLE OF CONTENTS Introduction The site The hearing Representation Relevant provisions in the Valuation of Land Act The required assumptions concerning the site Relevant planning provisions Introduction The EPA Act The LEP The DCP and the 2010 study. The role of a development control plan The issues The competing hypothetical development schemes Introduction The Southwell and Shaw schemes are only concept schemes Jurisdictional issues - the Valuer‑General's proposed higher valuations The evidence The town planning evidence Introduction Strategic and Statutory Planning Considerations Relevance of the Herring Road Urban Activation Precinct Proposal Role of, and weight to be given to, Pt 4.5 of the DCP The Southwell scheme Consistency between instruments The "highest and best" use of the site based on the planning controls The scale and form of retail development needed for the site be the "retail core" of Macquarie Park or a "regional attractor" Whether planning controls required retail use across the entire site Pedestrian linkages Introduction Pedestrian connection compliance of the Shaw and Southwell schemes Active Frontage requirements and the Shaw and Southwell schemes Above‑ground parking requirements and the Shaw and Southwell schemes The approval strategy for a hypothetical development proposal The Southwell scheme's necessity for a cl 4.6 request The economic evidence Introduction Preliminary issue - instructions to experts The scale of retail development at the initial development stages Long‑term GLA requirements The optimum and maximum number of retail levels for the site What allowance would be made for future expansion? Allocation of part of the site for residential or other retail uses Build the hypothetical centre as a single stage or in multiple stages? The potential for a second department store to be attracted into an initial stage of retail development Demand for residential development on the site Should St Ives be included in the "main trade area"? Optimum car‑parking design for a regional shopping centre on the site Addressing the Southwell hypothetical development scheme Introduction The planning issue with the Southwell scheme The Southwell scheme and cl 4.6 of the LEP The position advanced for the Valuer‑General The position advanced for the Applicants Consideration The Shaw hypothetical development scheme Introduction The planning issues with the Shaw hypothetical development scheme Aboveground, on‑site parking for the Shaw hypothetical shopping centre Introduction The town planning evidence concerning parking Mr Shaw's evidence The terms of s 79C(3A) of the EPA Act The Applicants' submissions on the Shaw scheme's proposed parking The Valuer‑General's submissions on the Shaw scheme's proposed parking Consideration Pedestrian permeability Introduction Mr Shaw's evidence The submissions for the Applicants The submissions for the Valuer‑General Consideration Activation of the Waterloo Road frontage The profile of the hypothetical purchaser Introduction The evidence of Messrs Jackson, Miles and Preston The evidence Conclusion on the "hypothetical purchaser" evidence Conclusion on the preferred hypothetical development scheme Introduction The town planning evidence The economic evidence Conclusion The consideration of remaining evidence after the scheme choice The quantity surveying evidence The construction timing issue Static valuation versus discounted cashflow Consideration The detailed Shaw scheme valuation evidence Introduction Future costs The Shaw scheme towers Introduction The use of the Shaw scheme towers The rate‑per‑square‑metre GFA for residential space The deferral period for building the Shaw scheme towers Introduction Mr Jackson's oral evidence Mr Preston's oral evidence. The submissions for the Applicants The submissions for the Valuer‑General Consideration Build‑to‑sell v build‑to‑rent Consideration Valuing the build‑to‑rent option Conclusion Costs Orders Annexure A Annexure B Judgment Introduction 1. AMP Macquarie Pty Ltd, AMP Capital Funds Management Ltd and Dexus Wholesale Property Ltd (together, the Applicants) are the joint owners of the Macquarie Shopping Centre (the Centre) located in north-western Sydney. A description of the Centre is set out later. 2. Land in New South Wales is valued by the Valuer‑General pursuant to the Valuation of Land Act 1916 (the Valuation of Land Act), for local government rating and, potentially, for land tax levying. Rating and land tax calculations are undertaken on, at least in part, an ad valorem basis derived from the Valuer‑General's assessment of the land value, here, relevantly, of the site upon which the Centre is located. All such valuations take effect from 1 July in the relevant year. 3. Valuation for these purposes is undertaken by the Valuer‑General on an annual basis. An aggrieved owner, who wishes to dispute the assessed valuation for a property, is entitled to object to the Valuer‑General's assessment through processes established by the Valuation of Land Act. If the objection is not successfully resolved through that process, then the aggrieved owner has a right of appeal to this Court to have a judge or commissioner, acting as a judicial valuer, determine what is the appropriate valuation outcome for the relevant valuation date. 4. In these two proceedings, the Applicants, having exhausted the objection process, have commenced proceedings seeking to have judicial determinations made of the land value of the Centre as at 1 July 2016 and 1 July 2017. As a consequence, this decision deals with my determination of the land value to be applied to the Centre for each of those dates, being the determined value from the two proceedings being heard together. The site 1. The site is located in the Sydney suburb of Macquarie Park. Macquarie Park is a major mixed use precinct in Sydney's North Shore region. The Centre, a major regional retail centre, is currently located on the site. A bus interchange is adjacent to the site on Herring Road. Macquarie University is located to its immediate west. 2. The bulk of the site is, effectively, square in shape (although the Macquarie University Metro Station is inserted in its south‑west on the corner of Herring and Waterloo Roads at its western frontage. In broad terms, the site has a frontage of ~330 metres to Herring Road; ~360 metres to Talavera Road; and ~270 metres to Waterloo Road. 3. An additional rectangular element is located at its eastern end, with the long axis of the rectangle running from Talavera Road toward Waterloo Road for a little over half of the distance between those two thoroughfares. 4. As the length of the site's frontage to Talavera Road is longer than its frontage to Waterloo Road, this is a factor relevant to potential hypothetical development schemes. 5. The site is zoned B4 Mixed Use by the Ryde Local Environmental Plan 2014 (the LEP). It has an area of 110,700 square metres with a maximum floor space ratio (FSR) of 3:5:1. It therefore has a maximum gross floor area (GFA) of 387,350 square metres derived from these two metrics. The hearing 1. The hearing was held in person with all in the courtroom, other than the person speaking, being masked. The hearing was otherwise generally conducted in accordance with the Court's Covid‑19 policy as at the time of the hearing. Representation 1. The Applicants were represented by Mr A Galasso SC and Ms C Trahanas, barrister. The Valuer‑General was represented by Dr S Pritchard SC and Mr R White, barrister. Relevant provisions in the Valuation of Land Act 1. A number of provisions of the Valuation of Land Act are engaged for the purposes of these proceedings. 2. The first of the provisions is s 6A(1), the provision that establishes the basis upon which the determination of value is to be made. The provision establishes the hypothetical framework for this valuation exercise to be undertaken in each of the relevant years. It requires the hypothetical removal of all development from the land so that it can be valued as if the Centre had not been constructed. This provision is in the following terms: 6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. 1. As can be seen, the only alterations to the hypothetical natural landform on the site to be taken into account are any "land improvements" that have been made. "Land improvements" is a defined term with the definition appearing in s 4 of the Valuation of Land Act. The definition is in the following terms: Land improvements means— (a) …, (b) …, (c) …, (d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation, (d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land (otherwise than for the purpose of irrigation or conservation) that is associated with— (i) the erection of any building or structure, or (ii) the carrying out of any work, or (iii) …, (e) …, and (f) … 1. It is to be observed, as later discussed in more detail, that there is a significant excavation on the site below what would have been the original natural ground level. This excavation falls within the definition of "land Improvements" and requires to be taken into account in these two valuation exercises. 2. I have already noted that that the Valuation of Land Act provides for an objection process to be undertaken by an aggrieved landowner to a statutory valuation determination made by the Valuer‑General. For the two valuation dates here involved, the Applicants have undertaken, and exhausted, that process. It is not necessary to reproduce the statutory framework of these necessary precursor processes to the engagement of the Court's jurisdiction. It is sufficient to note that there is no dispute between the Applicants and the Valuer‑General as to the undertaking and exhaustion of those processes prior to the commencement of these two proceedings. 3. The final relevant provision of the Valuation of Land Act necessary to be reproduced is s 40. This provision sets out the powers of the Court that are able to be exercised in proceedings such as these. This provision is in the following terms: 40 Powers of Land and Environment Court on appeal (1) On an appeal, the Land and Environment Court may do any one or more of the following— (a) confirm or revoke the decision to which the appeal relates, (b) make a decision in place of the decision to which the appeal relates, (c) remit the matter to the Valuer‑General for determination in accordance with the Court's finding or decision. (2) On an appeal, the appellant has the onus of proving the appellant's case. 1. It is also to be observed that the onus of proof established by s 40(2) is the civil standard; that is, the Applicants must prove all relevant material factors to which I will need to have regard on the balance of probabilities. The required assumptions concerning the site 1. In Tetzner v Colonial Sugar Refining Company Ltd [1958] AC 50 (Tetzner), the Privy Council gave its decision in a valuation case concerning a sugar mill in Fiji. The valuation process there engaged required, as here, the assumption that the sugar mill did not exist and that the land upon which it was erected was vacant. 2. In the then applicable circumstances, the sugar mill was in a setting defined by the nature of the general development in the area surrounding the site. The Privy Council held that, for the purposes of the valuation there being undertaken, the setting in which the sugar mill was located was to be taken into account as defining the appropriate context within which the valuation of the hypothetically vacant site was to be undertaken. In the decision in Tetzner, Lord Keith of Avonholm said, relevantly, at 57: What … is required … is that the physical improvements, with any value which they attach to the land on which they are situated, be excluded from the valuer's computation. The land will then be valued as land void of buildings but situated in the community with the amenities and facilities which have grown up around it. Their Lordships see no objection in the process of valuation to regarding the land as land situated in a sugar town. The valuer need not shut his eyes to the fact that there is a sugar manufacturing industry in existence, though he is not entitled to value the sugar mill and its accessories situated on the subject land. 1. That decision is to be applied in the present circumstances (see Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at 121-122 [20]‑[21] and Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673; (2001) 114 LGERA 376; [2001] NSWCA 78 at [29]). 2. That means, for the present valuation exercise I am undertaking, although the Centre, as it exists, is to be treated for each of the base dates as if it did not exist (in the fashion mandated by s 6A of the Valuation of Land Act), for each of the 2016 and 2017 base dates, the then existing position concerning relevant factors such as: * the socio-economic demographics of the catchment currently providing the retail spend demand satisfied by the existing Centre; * the dimensions of the catchment that should be taken to generate that demand; * the extent of the existing commercial, residential and retail development which actually existed in the more immediate Macquarie Park Corridor precinct as at each of the relevant base dates; and * the anticipated demand for additional residential demand in the Macquarie Park precinct as at each of the relevant base dates are required to be taken into account in the analysis of any hypothetical development to be considered for the site. 1. In summary, although the existing development on the site (other than the land improvement excavation) are to be hypothetically removed, the reality, framing the site in both the immediate and broader context, is required to be considered for the purposes of my judicial valuation of the hypothetically vacant site. Relevant planning provisions Introduction 1. A limited range of planning documents require consideration for the purposes of the two valuation exercises here engaged. These are: 1. One provision of the Environmental Planning and Assessment Act 1979 (the EPA Act); 2. Several provisions of the LEP; 3. A number of elements of the Ryde Development Control Plan 2014 (the DCP); and 4. Portions of the Strategic Planning Document: The Ryde Local Planning Study 2010, which provided the strategic planning framework for the development of the LEP and, subsequently, the DCP. The EPA Act 1. Only one provision of the EPA Act arises for later discussion. That provision is s 79C (as the provision was numbered as at the valuation dates in 2016 and 2017). The relevant elements of the provision are in the following terms: 1 July 2016 (unchanged as at 1 July 2017) 79C Evaluation (1) Matters for consideration — general In determining a development application, a consent authority is to take into consideration such of the following matters as are of relevance to the development the subject of the development application: (a) the provisions of: (i) any environmental planning instrument, and (ii) …, and (iii) any development control plan, and (iiia) …, and (iv) …, and (v) …, that apply to the land to which the development application relates, (b) the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality, (c) the suitability of the site for the development, (d) …, (e) … (2) … … (3) … (3A) Development control plans If a development control plan contains provisions that relate to the development that is the subject of a development application, the consent authority: (a) if those provisions set standards with respect to an aspect of the development and the development application complies with those standards—is not to require more onerous standards with respect to that aspect of the development, and (b) if those provisions set standards with respect to an aspect of the development and the development application does not comply with those standards—is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development, and (c) may consider those provisions only in connection with the assessment of that development application. In this subsection, standards include performance criteria. (4) … (5) … (6) Definitions In this section: (a) …, and (b) non‑discretionary development standards means development standards that are identified in an environmental planning instrument or a regulation as non‑discretionary development standards. The LEP 1. Two provisions of the LEP will require consideration. The first of these is the element of the Land Use Table for the B4 Mixed Use Zone, this being the zone which applies to the site. The objectives for this zone and the use‑regulating element for the B4 Zone were (and remain): 1 July 2016 (unchanged as at 1 July 2017) Zone B4 Mixed Use 1 Objectives of zone • To provide a mixture of compatible land uses. • To integrate suitable business, office, residential, retail and other development in accessible locations so as to maximise public transport patronage and encourage walking and cycling. • To ensure employment and educational activities within the Macquarie University campus are integrated with other businesses and activities. • To promote strong links between Macquarie University and research institutions and businesses within the Macquarie Park corridor. 2 Permitted without consent Home occupations 3 Permitted with consent Boarding houses; Building identification signs; Business identification signs; Child care centres; Commercial premises; Community facilities; Educational establishments; Entertainment facilities; Function centres; Hotel or motel accommodation; Information and education facilities; Medical centres; Passenger transport facilities; Recreation facilities (indoor); Registered clubs; Respite day care centres; Restricted premises; Roads; Seniors housing; Shop top housing; Waste or resource transfer stations; Any other development not specified in item 2 or 4 4 Prohibited Agriculture; Air transport facilities; Animal boarding or training establishments; Biosolids treatment facilities; Camping grounds; Caravan parks; Depots; Eco-tourist facilities; Farm buildings; General industries; Heavy industrial storage establishments; Heavy industries; Home occupations (sex services); Industrial training facilities; Resource recovery facilities; Sewage treatment plants; Sex services premises; Signage; Vehicle body repair workshops; Vehicle repair stations; Waste disposal facilities; Water recycling facilities; Water supply systems 1. The second element of the LEP requiring noting is cl 4.6, a provision by which a development applicant can seek (subject to a number of tests set out in the clause) to be permitted to develop in breach of a development standard otherwise set by the LEP. In this instance, the relevant development standard is that which sets the maximum gross floor area (GFA) for the site. This requires consideration as one of the hypothetical development schemes, that advanced for the Valuer‑General exceeds the maximum permissible GFA for development set by the relevant control and LEP map demonstrating that control. The clause is in the following terms: 4.6 Exceptions to development standards (1) The objectives of this clause are as follows: (a) to provide an appropriate degree of flexibility in applying certain development standards to particular development, (b) to achieve better outcomes for and from development by allowing flexibility in particular circumstances. (2) Development consent may, subject to this clause, be granted for development even though the development would contravene a development standard imposed by this or any other environmental planning instrument. However, this clause does not apply to a development standard that is expressly excluded from the operation of this clause. (3) Development consent must not be granted for development that contravenes a development standard unless the consent authority has considered a written request from the applicant that seeks to justify the contravention of the development standard by demonstrating: (a) that compliance with the development standard is unreasonable or unnecessary in the circumstances of the case, and (b) that there are sufficient environmental planning grounds to justify contravening the development standard. (4) Development consent must not be granted for development that contravenes a development standard unless: (a) the consent authority is satisfied that: (i) the applicant's written request has adequately addressed the matters required to be demonstrated by subclause (3), and (ii) the proposed development will be in the public interest because it is consistent with the objectives of the particular standard and the objectives for development within the zone in which the development is proposed to be carried out, and (b) the concurrence of the Secretary has been obtained. (5) … (6) … (7) … (8) … The DCP and the 2010 study. 1. A range of elements of these two documents will later require consideration. Rather than producing the full suite of elements of each of them that will arise in the course of this decision, it is sufficient to note that the DCP, as is conventional for development control plans, addresses planning on a more fine‑grained basis than is possible for the LEP. The DCP also addresses such fine-grained planning on a precinct basis, including the Macquarie Park Corridor precinct within which the site is located. 2. The 2010 study, being a strategic planning document, has, as one of its thematic elements, consideration of the policy aspirations for the precinct within which the site is located. 3. Both these documents (but particularly, relevant elements of the DCP) are engaged at several points in the evidentiary evaluation process for these two proceedings. The role of a development control plan 1. In Zhang v Canterbury City Council (2001) 51 NSWLR 589; [2001] NSWCA 167 (Zhang), at [75], Spigelman CJ (Meagher and Beazley JJA agreeing) stated that the development control plan in question "had to be considered as a 'fundamental element' in or a 'focal point' of the decision‑making process [of the consent authority]". His Honour also stated that a provision of a development control plan that was directly pertinent to a development application "was entitled to significant weight in the decision‑making process but was not, of course, determinative". The issues The competing hypothetical development schemes Introduction 1. Although there are issues of detail requiring determination after a primary choice is made, that primary choice (what is the hypothetical development scheme that reflects the "highest and best" use of the site) defines the pathway along which the remainder of the decision‑making process must travel. This defining choice is a binary one in these circumstances. 2. The hypothetical development scheme advanced on behalf of the Applicants bears considerable similarity to (but is not identical with) the development, which actually presently exists on the site. Nonetheless, this model is derived from, and is to be assessed on the basis of, the assumption that, with the exception of the land improvement excavation on the site, the site is entirely notionally stripped of development. This hypothetical development scheme (subsequently referred to as the Shaw scheme, after the name of the architect who advances it on behalf of the Applicants) is founded on the assumption that the hypothetical development will be undertaken by an investment fund envisaging long‑term ownership in order to reap the benefit of a significant income stream to be derived from the development. 3. On the other hand, the hypothetical development advanced on behalf of the Valuer‑General (to be known as the Southwell scheme, after the architect who advances it on behalf of the Valuer‑General) is for a hypothetical development which contains a very large retail development component but not a component which is effectively the entirety of the site. This hypothetical development envisages, in the north‑eastern sector along the Talavera Road frontage, that a number of residential towers would be constructed and that the apartments in them would be sold. Similarly, the shopping centre itself would be constructed and on‑sold to a longer‑term investor who would seek to harvest the ongoing rental return. As will subsequently be revealed, each of these schemes has, as a feature in common, development elements in associated towers (although at differing locations) around the perimeter of the hypothetical shopping centre development. 4. The two hypothetical development schemes, despite some superficial apparent similarities, envisaged significantly divergent visions concerning the nature of the development scheme advice that would be put to, and adopted by, the prudent hypothetical purchaser as at the 2016 and 2017 base dates. 5. The choice between the Shaw and Southwell schemes, to be based on consideration of the town planning and economic evidence, tempered by additional consideration of the profile of the financial objectives of the hypothetical s 6A purchaser, does not resolve all of the issues requiring determination but does, necessarily, effectively define the range of further detailed matters of consideration requiring to be determined for deriving the hypothetical undeveloped transaction value of the site. 6. As a consequence, unlike many statutory valuation cases where choices concerning comparable sales and how they are to be adjusted to derive a valuation as at a relevant reference base date, in these proceedings the choice of which hypothetical development scheme should be preferred requires an early decision‑making, path‑determining choice in these proceedings. After making that choice, evidence given in the remaining expert disciplines concerning the discarded hypothetical development scheme is rendered irrelevant. 7. For the purposes of making the assessment of and determination as to which scheme is to be preferred, it is necessary not only to describe in some detail each of the Shaw and Southwell competing hypothetical development schemes to enable an understanding of the stark choice required in selecting between them, but also to address, for each of them, planning issues arising from both the strategic planning vision for the Macquarie Park Corridor precinct, as well as, for each scheme, compliance issues with either development standards set by the LEP or the more detailed planning controls set in the DCP. 8. It is, therefore, first, appropriate to turn to providing a general description of each of the hypothetical development schemes and describe the nature of the advice that each advances to the hypothetical purchaser. The Southwell and Shaw schemes are only concept schemes 1. The Southwell and Shaw schemes of hypothetical development scenarios postulated as advice for the prudent hypothetical purchaser are purely concept ones. They are ones that differ, significantly, in their visual presentation in these proceedings. Whichever of them might be appropriate to be adopted by the hypothetical purchaser, both of them would have needed further extensive work before being able to be submitted to a consent authority for approval, even as a concept development application. 2. Although the information concerning the Southwell scheme was presented in a more conceptually sophisticated fashion than was provided for the Shaw scheme, nonetheless, each of them provided sufficient detail to understand all the relevant elements envisaged for that hypothetical development. In particular, it is to be noted that each provided sufficient detail in order to identify what were obvious potential planning issues which would require to be considered by the hypothetical purchaser before adopting either scheme. Jurisdictional issues - the Valuer‑General's proposed higher valuations 1. The jurisdictional issue which potentially arises for determination will need to be considered if the valuation outcome I determine for either or both of the base years is greater than the original Valuer‑General's determination. That is because, in these proceedings, the Valuer‑General contends that, if the resulting valuation outcome is higher than that which had been originally determined, I should replace the earlier determined outcome with the higher valuation resulting from my judicial valuation conclusions. 2. Unsurprisingly, the position advanced on behalf of the Applicants is that there is no jurisdiction available to me which would permit me to give effect to such an outcome if it arose. 3. Exhibit 10 was a bundle of correspondence between the legal representatives of the parties concerning whether or not the Valuer‑General would seek to propose that I should increase the statutory valuations in the existing determinations for the 2016 and 2017 base dates. The upward determination proposed for the Valuer‑General, for each of the base dates, reflected the conclusions which Mr Preston had derived, as explained in his written evidence (although varying depending on whether or not the Southwell scheme or the Shaw scheme was adopted by me as the appropriate basis for statutory valuation determination). 4. Whichever scheme provided that valuation basis, it was Mr Preston's expert opinion that a significant uplift in the hypothetical valuation, on the basis mandated by s 6A of the Valuation of Land Act, would be appropriate. 5. Set out below is a table taken from the written submissions on behalf of the Valuer‑General showing the contended values on behalf of the Applicants for the two base dates; the Valuer‑General's statutory determinations for each of those base dates; and the values proposed, as at the date of those submissions, by the Valuer‑General as appropriate to be the outcome of these proceedings. Valuation Date Issued Land Value Applicants' contended Land Value Valuer‑General's contended Land Value 1 July 2016 $215,000,000 $184,000,000 $438,000,000 1 July 2017 $310,000,000 $209,000,000 $450,000,000 1. At the commencement of the proceedings, I had indicated to Dr Pritchard (Transcript 30 March 2022, page 25, lines 27 to 37) that I had doubts as to whether I would have jurisdiction to give effect to the increased statutory valuations sought by the Valuer‑General. 2. Perhaps fortunately, given the conclusions which I have reached as to the appropriate statutory valuation to be applied for each of the 2016 and 2017 base dates (being less than the current statutory determinations of the Valuer‑General but somewhat higher than those for which the Applicants contended), there is no need for me to address the question of whether or not I would have had jurisdiction to increase the statutory valuations above those originally determined by the Valuer‑General. Given that the jurisdiction point is rendered moot, it is inappropriate for me to comment further on it. The evidence 1. A large volume of documentary evidence was tendered, with this material being provided, almost entirely, electronically. After hearing and dealing with objections to the documentary evidence, the following documentary material was tendered electronically: 1. The Court Book became Exhibit A; 2. The Evidence Book became Exhibit B; 3. The Tender Bundle (of documents) became Exhibit C; 4. A chapter of the Ryde Local Planning Study 2010 (Chapter 7 - Employment) became Exhibit 1; and 5. A bundle of correspondence concerning possible higher valuation outcomes pressed by the Valuer‑General became Exhibit 10. 1. Two matters are to be noted. The first is that, although Exhibits A, B and C were tendered by the Applicants, for convenience, each of them included material that formed part of the Valuer‑General's case in each of the proceedings. Second, with respect to documents in Exhibit C, some material sought to be included in the exhibit relating to, or arising from, a concept development approval for development on the site and, separately, a second (and subsequent) development consent for works on the site of a more limited nature were rejected. The relevant folios in the electronic tender bundle did not, therefore, form part of the evidence in the proceedings. 2. Expert evidence was given on behalf of the Applicants and the Valuer‑General in seven disciplines. Each of the experts provided an individual report that was contained in Exhibit B and joint reports of the experts in their pairings/groupings were also contained in Exhibit B. The experts gave oral evidence, later discussed, in their groupings. The areas of expertise and the evidence of each of the parties are set out below: * town planning - Mr Tim Blythe for the Applicants and Mr Andrew Duggan for the Valuer‑General; * retail economics - Mr Tony Dimasi for the Applicants and Mr Sean Stephens for the Valuer‑General; * shopping centre concept designs - Mr Bruce Shaw for the Applicants and Mr Doug Southwell for the Valuer‑General; * quantity surveying - Mr Michael Gilligan for the Applicants and Mr Stephen Bolt for the Valuer‑General; * construction timing - Mr Neal Taylor for the Applicants and Mr Chris Peter for the Valuer‑General; * valuation - Mr Grant Jackson for the Applicants and Mr Gregory Preston for the Valuer‑General. 1. The valuers also gave evidence concerning what sort of entity might fit the profile of a purchaser of the hypothetically vacant site mandated for the valuation exercise to be conducted pursuant to s 6A of the Valuation of Land Act. With respect to evidence concerning the hypothetical purchaser profile, the Applicants also relied on additional evidence from Mr Greg Miles. Mr Miles had had extensive experience in shopping centre development and management on behalf of major investors owning such centres in Australia and New Zealand. Mr Miles did not have a counterpart expert on behalf of the Valuer‑General. Mr Miles provided an individual expert report, a report which was included in Exhibit B. Mr Miles gave his oral evidence concurrently with the valuers on this limited topic. The town planning evidence Introduction 1. Mr Blythe (for the Applicants) and Mr Duggan (for the Valuer‑General) gave concurrent evidence. They had each produced expert reports as well as a joint expert town planning report. These experts also subsequently produced two supplementary reports. Strategic and Statutory Planning Considerations 1. The experts agreed that the following instruments formed part of the planning control hierarchy under the EPA Act: * strategic plans under s 75AA of the EPA Act (as it was at the time) comprising A Plan for Growing Sydney (applicable at both the 2016 and 2017 valuation dates) and the draft Towards a Greater Sydney 2056 and draft North District Plan (applicable only at the 2017 valuation date); * the LEP, which was the principal environmental planning instrument for determining the permissible use, scale, and density of development on the site; and * the DCP, particularly Pt 4.5 relating to development in Macquarie Park. 1. Mr Blythe suggested that the City of Ryde Local Planning Study 2010 and the City of Ryde Community Strategic Plan 2025 were also relevant documents as part of the planning control hierarchy, although not formal matters of consideration under the EPA Act. Mr Duggan considered these documents as having "significantly lesser value in light of the more contemporary Regional and District Plans" (Exhibit A, Tab A2, page 62, paragraph 78). 2. The experts largely agreed about the contents of these instruments. They noted that (then) s 79C of the EPA Act required a consent authority to consider various instruments when determining a development application. The experts also noted the application of s 79C(3A)(b), specifically, a provision giving flexibility in applying provisions of development control plans to consent authorities. Mr Blythe opined that the DCP remained an important guiding document to any consent authority considering the site. Relevance of the Herring Road Urban Activation Precinct Proposal 1. In oral evidence, there was some discussion between the town planners as to whether the June 2014 Herring Road Urban Activation Precinct Proposal (HRUAPP) was relevant to the identification of the "highest and best" use of the site as at each of the valuation dates. 2. Mr Duggan opined that the HRUAPP was relevant since it was preliminary to statutory planning changes to zoning or other land use controls at the site (Transcript 1 April 2022, page 73, lines 27 to 29). He referred to a chronology in his expert report which set out the planning history of the Herring Road Priority Precinct from June 2012 to October 2015. This chronology included, amongst other events, the successful nomination of Herring Road area as an Urban Activation Precinct in November 2012; the preparation and public exhibition of the HRUAPP by the Department of Planning and Infrastructure (the Department) in June 2014; the Department's release of the Finalisation Report for the Herring Road Priority Precinct in May 2015; and the subsequent amendment of the LEP in October 2015 to bring it in line with final recommendations for the Herring Road Priority Precinct, pursuant to State Environmental Planning Policy (Major Development) Amendment (Ryde) 2015 (the October 2015 SEPP amendment). Mr Duggan noted that the HRUAPP was the document which provided the building height controls and the 3.5:1 FSR that were relevant to the site and that were subsequently implemented by amendment to the LEP in October 2015. 3. Mr Duggan described the HRUAPP as "an overarching and overriding strategic piece of planning work that deals with the Herring Road corridor, which includes the subject site". Mr Duggan suggested that "one of the main drivers" of the document was the provision of increased housing along the Herring Road corridor, which was strategically close to heavy rail (as it was proposed at the time), Macquarie University, and Macquarie Hospital. Mr Duggan noted that the HRUAPP had sought to add approximately 5,500 new homes (Transcript 1 April 2022, page 75, lines 20 to 31). He also noted that the HRUAPP and October 2015 SEPP amendment dealt with the rezoning of Macquarie University from SP2 Infrastructure to B4 Mixed Use to allow for commercial development throughout the university. In cross‑examination, Mr Duggan accepted, however, that the HRUAPP and the resulting October 2015 SEPP did not result in any change in the site's zoning. He accepted that the principal zoning change was to portions of Macquarie University, and the principal effect of the relevant SEPP amendments was to development standards for existing zones (Transcript 1 April 2022, page 79, line 25 to page 80, line 8). 4. Mr Blythe generally agreed with Mr Duggan's evidence on this issue, with some qualifications. Mr Blythe emphasised that the context of the HRUAPP was limited to the B4 Mixed Use Zone and the Macquarie University site, and that the document was not an holistic study of Macquarie Park or the Ryde LGA (Transcript 1 April 2022, page 74, lines 20 to 28). Mr Blythe agreed that the primary purpose of the HRUAPP was to drive housing supply close to the railway station and its precinct area. However, Mr Blythe opined that the HRUAPP's intent was not to revisit the planning controls in their totality. Mr Blythe pointed out that the HRUAPP and the subsequent October 2015 SEPP amendment only amended the LEP, and not the DCP provisions that went, in his opinion, to the intent of the planning controls (Transcript 1 April 2022, page 77, lines 7 to 20). He noted that any DCP amendments that had been proposed were withdrawn on the basis of objections by the Council of the City of Ryde (the Council). In this context, he also noted that the HRUAPP proposed increased FSR and building height controls for the site and surrounding precincts, but that the B4 Mixed Use zoning of the site had been in place prior to the HRUAPP and remained unchanged since (Transcript 1 April 2022, page 74, line 30 to page 75, line 16). 5. In cross‑examination, Dr Pritchard put to Mr Blythe that there had been no proposal to alter the intended land uses through the DCP, and that all changes to land uses were proposed to be dealt with exclusively through amendments to the LEP. In response, Mr Blythe reiterated that the relevant SEPP amendment did not change permitted land uses or the B4 Mixed Use zoning over the site (Transcript 1 April 2022, page 77, line 47 to page 78, line 22). 6. On this issue, Mr Duggan pointed to differences between the DCP Structure Plan and the SEPP amendment regarding the zoning of Macquarie University, and opined that the "nuance between a very broad level structure plan and the actual provision of land uses under the LEP" needed to be "treated carefully, … with primacy given to the LEP as to what is actually permitted on land" (Transcript 1 April 2022, page 78, lines 26 to 49). 7. As an additional point, both town planning experts were taken by Dr Pritchard to the HRUAPPR, which was also part of material that was placed on public exhibition in June 2014. The experts agreed that this report also reflected a focus towards housing (Transcript 1 April 2022, page 75, line 33 to page 76, line 29). However, Mr Galasso later sought to point out, and Mr Duggan acknowledged, that an "illustrative master plan" for the Herring Road precinct had been included in the HRUAPPR (Tender Bundle at page 257) which showed a dense series of towers along Talavera Road, Waterloo Road, and Herring Road, comprising a large, predominantly residential corridor adjacent to the site (Transcript 1 April 2022, page 80, lines 10 to 46). Role of, and weight to be given to, Pt 4.5 of the DCP 1. The next issue addressed by the town planners related to the role and weight of Pt 4.5 of the DCP, and whether at each of the valuation dates, the DCP fixed a core planning purpose of the subject land at all, let alone a "retail core". 2. In their Joint Expert Report, Mr Duggan and Mr Blythe agreed that the elements of the DCP (amongst others) that were relevant for the purposes of providing advice to a hypothetical purchaser on the "highest and best" use of the land were: - That the site is designated as retail core for Macquarie Park as per the Urban Structure Plan. - The role of the site as providing retail and services that could be described as a "regional attractor". - The requirement to 'activate' the Herring and Waterloo Road frontages. - The provision of a public plaza and community infrastructure as part of any development. - Other specific design criteria such as treatment of car‑parking structures and the like. 1. The experts also agreed that "the site's characteristics which include accessibility to a railway station (future Metro), bus interchange, adjacent road network and its adjacency to Macquarie University, made it suitable to fulfil the planning objectives as expressed in the DCP as the 'retail core' of Macquarie Park", and that "the characteristics of a regional attractor would include larger scale retail tenants together with uses such as cinemas and potentially other recreational offers". 2. The main point of disagreement between the experts was the "scale and form of retail development required to meet the consent authority's requirements of satisfying the role as the retail core of Macquarie Park" (Exhibit A, Tab A3, page 89, paragraph 14). 3. Mr Duggan proposed that the LEP and B4 Mixed Use zoning remained the primary land use controls for the site. He also expressed the view that (Exhibit A, Tab A3, page 89, paragraph 17): … a development which is consistent with the land use provisions and development standards set out in the RLEP 2014 and which can satisfy (amongst other relevant DCP provisions): a) being described as the retail core of Macquarie Park and b) provide retail and services that could be described as a "regional attractor" would be considered acceptable by the consent authority and would form part of my advice to a hypothetical purchaser. 1. With regards to the role and weight of the DCP, in oral evidence, Mr Duggan referred to s 74BA(1)(b) (as it was then) of the EPA Act, which provided that the principal purpose of a development control plan was to provide guidance on "facilitating development that is permissible under [any environmental planning instrument applying to the development]". Mr Duggan also made reference to s 79C(3A)(b) (as it was then) of the EPA Act, the terms of which are repeated below: (3A) If a development control plan contains provisions that relate to the development that is the subject of a development application, the consent authority: (a) … (b) if those provisions set standards with respect to an aspect of the development and the development application does not comply with those standards—is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development, … (c) … 1. Mr Duggan referred to cl 3.1 of Pt 4.5 of the DCP, a provision in the following terms: The Structure Plan sets out the broad framework for development within the Macquarie Park Corridor. It underpins the development controls within this Plan, and is supported by Ryde LEP 2014. 1. He also referred to cl 3.2 of Pt 4.5 of the DCP, which stated: The Urban Structure Plan reflects and builds on the existing land uses and functions within the Corridor to implement the vision for Macquarie Park as Australia's premier technology park and premier location for globally competitive business with strong links between Macquarie University and business. … 1. It is to be noted that Mr Duggan opined, with reference to zoning changes within Macquarie University, that what might be provided in a broad level structure plan may differ from the actual provision of land uses under the LEP and, as such, primacy ought to be given to the land use controls in the latter (Transcript 1 April 2022, page 78, lines 26 to 49 and page 83, lines 16 to 21). 2. On the issue of whether the DCP fixed a core planning purpose of the site as "retail core", Mr Duggan noted (Transcript 1 April 2022, page 83, lines 23 to 28): … I think both Mr Blyth and I still give credence to the term, "retail core", and it's certainly my evidence in my first report - and in the joint report - that the - the DCP can still be read to note the role of that site as the retail core. And - and I don't think I've ever said otherwise in evidence. But it's the strict interpretation of that applying across the site, almost like a - a de facto zoning plan, I think is where Mr Blyth and I differ. 1. In his expert report, Mr Duggan noted (Exhibit A, Tab A2, page 61, paragraph 75): Because the RLEP 2014 permits and promotes a mix of uses, and does not identify a primacy for just one use, this does not mean in my opinion that 'the primary role of the Site' should be inferred from the RDCP 2014. The uses that are permitted and may be pursued on the Site should be taken first and foremost from the RLEP 2014 which is an Environmental Planning Instrument. 1. Mr Blythe, acknowledged that the DCP was not to be given the same weight as the LEP; however, he opined it was still necessary to have regard to the DCP, saying (Exhibit A, Tab A3, page 89, paragraph 18): … in the context of a B4 Mixed Use Zone where a range of land uses are permitted with no specific floor space controls relating to individual land uses, it is appropriate and indeed necessary to look to the DCP for guidance as to the planning intent and direction. The DCP designates the entirety of the site as retail core and therefore from a policy perspective this is the primary driver for the use of the site and any mixed use development should have regard to this planning policy intent. 1. Mr Blythe observed that, in the absence of any guidance regarding core purpose in the LEP, it became more important to turn to the DCP to understand the planning authority's strategic intent. In his opinion, the DCP clearly expressed a core planning purpose of retail or retail core, though he recognised this was not at the exclusion of other uses such as residential or commercial (Transcript 1 April 2022, page 83, line 44 to page 84, line 7). Mr Blythe also took me to the following extract from the DCP (Tender Bundle at page 454): This DCP will seek to reinforce the role of the shopping centre as a regional attractor and hub for recreation facilities for families and youth - which currently include one of only two ice skating rinks in Sydney, cinemas and restaurants. 1. Mr Blythe noted that, whilst references in the DCP to the Macquarie Centre as it actually existed would need to be excluded, this did not change the clear sentiments in the DCP, which, in his opinion, a hypothetical potential purchaser of the site could not have ignored, saying (Transcript 1 April 2022, page 84, lines 34 to 45): So clearly what the - the mindset of the planning authorities is that, whilst it was obviously thinking about Macquarie Centre as it exists, clearly what the planning controls ultimately seek to do is to provide a regional or a significant shopping centre that has a regional attraction to it, and - and a hub for recreational facilities does - does bring forward concepts of that. It has a critical - it will attract a critical mass of people from a - a relatively wide catchment. Which means it needs to be of scale - it can't just be a - it's not a local centre. It's not something like Lachlan's Line or other - other centres of a smaller scale, including some like Marina Square that we visited yesterday. We're talking about a major attractor - and to get major attractors, you need major tenants that will draw from a wide catchment, even well outside of Ryde LGA. The Southwell scheme 1. The planners' oral evidence also addressed the relationship between the planning purpose of the DCP and the Southwell scheme. 2. Mr Blythe contended that the DCP "informed the need to provide retail services to be a regional attractor, to activate streets, deliver a park[,] plaza and community infrastructure" (Transcript 1 April 2022, page 85, lines 1 to 4). He expressed the view that this intent could not have been achieved by "shoehorning" those various uses into a smaller development footprint on the site in order to make available other parts of the site for residential or other development, as was the case in Mr Southwell's scheme (Transcript 1 April 2022, page 85, lines 4 to 13). He opined that "as a matter of practical application, the consent authority in determining any development application for the site would seek to be satisfied that the development would not derogate longer term planning objectives for the site, as expressed in the DCP as the 'retail core' and to act as a regional attractor" (Exhibit A, Tab A3, page 89, paragraph 20). 3. Furthermore, Mr Blythe's evidence was that, having regard to the surrounding development existing as at the base dates, there was no other precinct which could conceivably have fulfilled those functions. Whilst Mr Duggan did not concede this point, he agreed that the site was a "large site in single ownership that would fulfil that role" (Transcript 1 April 2022, page 85, lines 17 to 28). 4. Mr Duggan accepted that the general proposition in the Southwell scheme that the site's south-eastern quadrant be comprised of retail/commercial components at ground level, with residential components above, was more consistent with a "mixed use/residential" description than a "retail core" description as designated in the DCP Urban Structure Plan (Tender Bundle, page 455; Transcript 1 April 2022, page 86, line 7 to page 87, line 31). 5. Mr Duggan said that his advice to a potential purchaser would still have been to purchase the vacant parcel of land and implement the Southwell scheme, it being permissible under the land's zoning, notwithstanding the inconsistency with the "broad structure" of the DCP. Mr Duggan explained that he would have advised a potential purchaser that there was flexibility afforded to consent authorities in applying DCP provisions under s 79C(3A)(b) (as it was then) of the EPA Act which could have applied, as long as the objective of the development control for the site, being the function of "retail core", was achieved (Transcript 1 April 2022, page 86, line 45 to page 89, line 17). He said (Transcript 1 April 2022, page 89, lines 19 to 23): WITNESS DUGGAN: As - as for - as I've said in my - my evidence in chief and in the joint report, as long as the role the subject site plays can be described as a retail core for Macquarie Park as per the Urban Structure Plan and is a regional attractor, then yes, residential could be achieved in - in that south-eastern corner. Consistency between instruments 1. The town planners' oral evidence also turned to whether there was an inconsistency or incompatibility between the DCP and the LEP. Mr Duggan considered there was no such inconsistency in terms of the provision of residential use together with retail use, the site being zoned B4 Mixed Use and afforded significant floorspace (387,000 square metres) and developable height. Mr Blythe also opined that there was no inconsistency between the DCP and the LEP in the sense that they were layered controls, with the LEP setting out a range of potential uses for the site, and the DCP providing further detailed guidance to the landowner as to what can be conceived for the land. 2. Mr Duggan however suggested that there was some inconsistency insofar as there is a reading that retail was to occur across the site, but there was a residential flat building with retail extending all the way to the ground (Transcript 1 April 2022, page 90, lines 33 to 37). 3. Mr Blythe responded that there was no conflict since the retail core mapping under the LEP did not prevent a residential tower being built on the site, nor did the DCP expressly prevent a residential building on the site. According to Mr Blythe, the planning intent of the DCP was for development conceived under it to be holistically retail, with a podium to accommodate other uses. Mr Blythe also referred to the fact that one of the B4 Mixed Use objectives under the LEP was to integrate compatible uses, though, on this point, Mr Duggan opined that this is not limited to vertical integration, but also included horizontal integration of retail and residential uses such as that which occurred at Wentworth Point. The "highest and best" use of the site based on the planning controls 1. In their Joint Expert Report, the town planners agreed that the "highest and best" use of the site, based on planning controls at the relevant dates, was as follows (Exhibit A, Tab A3, page 87, paragraph 1): (a) A mixed use development comprising retail premises, housing, commercial premises, community facilities, and possibly other uses such as tourist and visitor accommodation and student housing (although these uses are not listed in any particular order). (b) A maximum gross floor area of up to 387,450 sqm in accordance with maximum FSR of 3.5:1 and heights in accordance the maximum height controls which range from 120m to 65m in accordance with the RLEP 2014 development standards. (c) Built form including a retail shopping centre with good connections to the rail station (and future Metro station). A series of towers to take advantage of the significant height afforded. The distribution and massing of this built form is discussed below individually by the experts as this is an area of disagreement. (d) The detailed characteristics of the "highest and best" use development outcome would be informed by a master planning (or Concept DA) process. Key development outcomes required to meet controls would include: - the provision of a public plaza This plaza is required to have a minimum 0.67 ha in area with dimensions of a minimum 80m x 80 m; - the provision of a community space of not less than 3,000m2, which may include a branch library or other function in accordance with Council's Social and Cultural Infrastructure Framework. The community space must be directly accessible from the public domain and within a short walk of the station and bus interchange; - the community centre and the public plaza should be located in proximity to each other to maximise wayfinding and activation; - active retail frontages to Herring Road and Waterloo Road; - car‑parking to be provided below ground level and/or sleeved with other uses to create a suitable street interface at pedestrian level. 1. The experts primarily disagreed about the expected layout of development and quantum of retail floor space, especially whether retail land uses were likely to have been required to be provided across the entirety of the site and, consequently, how other land uses might have been provided. 2. Mr Blythe proposed that a retail centre of regional scale covering essentially the entire site with residential, commercial, and/or hotel uses located above a retail podium level would be the "highest and best" use of the land. He suggested that this approach reflected "the strategic planning intent in terms of the site's role as a major regional shopping destination as well as an attractor for other recreational activities" and that this approach acknowledged "the strategic importance of this site as a retail and community hub". Mr Blythe also opined that his approach would also have contributed to the overall success of the Macquarie Park Strategic Centre in terms of employment and services as envisaged under metropolitan and subregional strategies. Mr Blythe suggested that the "strongest indicator as to the core planning purpose of the site", from a policy perspective, was the designation of the entirety of the site as "retail core" in the DCP. He also noted the DCP's emphasis upon creating a vibrant street interface to the frontages of the site and the site's role in delivering housing and broader employment objectives for the precinct. Mr Blythe said that the designation of the site as a B4 Mixed Use Zone under the DCP meant that it could have supported a mixture of other integrated uses including residential, commercial, and hotel. However, he suggested that "the planning and layout for such uses should not act to constrain or compromise the planning intent expressed in the DCP". Mr Blythe proposed that zone objectives were most appropriately delivered by vertical integration of non‑retail uses, opining that "[a]ny proposal to develop the land that sought to limit the footprint of the retail centre and associated facilities in favour of the development of independent residential or commercial office towers should be approached with caution" as it would have compromised the potential to utilise the whole of the land as "retail core". 3. Mr Duggan opined that development should have taken the form of a retail shopping centre towards Herring Road and Waterloo Road with a series of towers located above them (to take advantage of the height afforded by the LEP). He suggested that the remainder of the site would have accommodated individual shop top housing towers and/or residential flat building towers located in a master‑planned manner. Mr Duggan suggested that the Urban Structure Plan in the DCP was a "broad framework for development" and was not to be read "as a form of zoning map which would require retail premises to be spread horizontally across the site from edge to edge", as long as the site satisfied its role and function as the "retail core" of Macquarie Park and its associated "regional attractor" functions. He also would have had regard to the flexibility afforded to decision‑makers under s 79C(3A)(b) of the EPA Act when providing any advice to a hypothetical purchaser in relation to the application of the DCP. The scale and form of retail development needed for the site be the "retail core" of Macquarie Park or a "regional attractor" 1. On the quantum of retail that would have been required by the consent authority, the experts agreed that the "planning controls set a maximum FSR or floor area limit across the entirety of the site but do not specify minimum or maximum FSR's relating to particular uses". The experts disagreed on "whether relevant strategic planning documents can be interpreted to establish a quantum of retail that would be required by the consent authority". 2. Mr Blythe contended that a shopping centre of regional scale was required to meet DCP planning objectives that the land function as "retail core of Macquarie Park" and provide retail and services such that it could be described as a "regional attractor". Mr Blythe's evidence was that planning controls would "give effect to planning policy and require the establishment of a major retail or super‑regional centre" on the site, thus "reflecting the strategic planning intent in terms of the site's role as a major shopping destination, as well as an attractor for other recreational activities". 3. In his expert report and in his oral evidence, Mr Blythe referred to the 2010 study in order to determine the scale of retail floor space required for a shopping centre at the site. This study contained an estimation of retail floor space capacity of 140,000 square metres gross leasable floor area (GLFA) at the site and suggested that a centre of 120,000 square metres GLFA would have met the retail sector definition of a "super regional" shopping centre (this second figure was calculated based on a shopping centre of 88,000 square metres GLFA, with consent for an additional 32,000 square metres GLFA). Based on this information, Mr Blythe estimated that "a centre accommodating in the order of 120,000‑140,000 [sqm] GLFA would meet the expectations of the planning policy framework for the site" (Exhibit A, Tab A1, page 25, paragraph 96). 4. It is noteworthy, however, that there was some disagreement as to the relevance of the 2010 study for identification of the "highest and best" use of subject land at each of the valuation dates. In oral evidence, Mr Blythe opined that it was relevant to the extent that it was a study that informed both the Ryde Local Environment Plan 2010 (the 2010 LEP), the 2014 LEP, and the DCP. Mr Blythe suggested that the Council had used the 2010 study to inform its strategic intent and, specifically, to "inform a position in terms of the long‑term supply of retail floor space provision that would be needed to support the Ryde community in the long‑term" and to inform a position that there was enough suitable land zoned to meet long‑term retail floor space requirements, on the assumption that existing centres or zoned precincts (such as the Macquarie Centre site) were capable of achieving or supporting a key component of that floor space requirement. In the Joint Expert Report, Mr Blythe noted that the 2010 study was produced to guide future growth in Ryde and to review and respond to the City of Cities: Sydney's Metropolitan Strategy 2005 and Draft Inner North Subregional Strategy, the latter of which set targets of 12,000 dwellings and 21,000 jobs for the City of Ryde. Despite the 2010 study being superseded by 2017, Mr Blythe considered that it remained relevant to "inform an understanding of the provision of retail services to meet current and future demand" because "fundamentally the employment and housing targets relevant to Macquarie Park remain broadly consistent". Mr Blythe also suggested that the 2010 study was necessary for ensuring planning controls aligned with higher order instruments or strategic studies. 5. Mr Duggan disagreed on the relevance of the 2010 study and opined that even though it did inform the 2010 and 2014 LEPs, it was outdated by the 2016 and 2017 valuation dates. In particular, Mr Duggan suggested (Exhibit A, Tab A2, page 68, paragraphs 116 to 117): 116. The 2010 Local Planning Study is drafted with reference to the draft 'Inner North Subregional Strategy' that seeks to implement the "City of Cities: Sydney's Metropolitan Strategy 2005". In effect, this 2010 Study therefore relies on an outdated 2005 Regional Strategy and a 2007 District Plan that was never finalised, and which were subsequently superseded by 'A Plan for Growing Sydney' and the associated north subregion chapter and later new draft Regional plan titled 'Towards our Greater Sydney 2056' and draft district plan titled 'North District Plan'. This is evidenced by the following quote taken from a summary of the 2010 Local Planning Study released by Ryde Councill: This Local Planning Study Overview is a summary of the various studies which have been prepared in response to the actions and directions within the State Government's Metropolitan Strategy and the Inner North Subregional Strategy. 117. Having regard to advice that would be given to a hypothetical purchaser in 2016 and 2017, the reliance that would be put on this 2010 study would in my opinion not be significant and certainly not be determinative of a quantum of retail that must be provided on the Site. 1. Mr Duggan explained that he would have advised a hypothetical purchaser to look to more contemporary documents, including the precinct‑specific Herring Road Urban Activation study, the new metropolitan plan, and, by 2017, the draft district plan. In addition to disagreeing as to the study's relevance, Mr Duggan also contested Mr Blythe's reliance upon page 46 of the 2010 study to inform his 120,000 square metres GLFA estimate for the required amount of retail use at the site. In his expert report and in oral evidence, Mr Duggan suggested that on his reading of the 2010 study, the 120,000 square metres GLFA figure was in fact a reference to the shopping centre that actually existed at the site, the figure simply being an aggregation of the existing and approved floorspace of Macquarie Shopping Centre at the time. For this reason, Mr Duggan suggested that this reference to the 2010 study was impermissible, given the assumption that the actual Macquarie Centre did not exist. Mr Duggan also noted that on the same page of the 2010 study, the reference to "Specialised Centre" did not require a shopping centre, making reference to the definition and characteristics in the Draft Inner North Subregional Strategy 2007. 2. Mr Duggan also suggested that Mr Blythe's reliance upon the 140,000 square metres GLFA figure in the 2010 study was incorrect for two reasons. First, Mr Duggan suggested that the 140,000 square metres GLFA figure reflected estimated retail floorspace for the entirety of Macquarie Park, rather than the site alone. It is to be noted that, in cross‑examination, Mr Galasso challenged this by suggesting that there was no material indicating that the strategic planning intent for the provision of retail in the Macquarie Park precinct could have been accommodated by retail "sprinkled" throughout the precinct (Transcript 1 April 2022, page 69, line 17 to page 70, line 24). To this contention, Mr Duggan responded by stating that retail premises were permissible in B4 Mixed Use and B3 Commercial Core zones and referred to examples of retail at the nearby Masters North Ryde (13,000 square metres of retail) and at Lachlan's Line (6,000 square metres of retail) (Transcript 1 April 2022, page 70, lines 26 to 33). He also referred to "Chapter 7 - Employment" from the 2010 study, which suggested, at page 7-26, that it would have been "reasonable to assume that further retail development activity will occur" in the "Macquarie Park Corridor in the Delhi Road area and within the 3 station precincts" (the three station precincts being those along the Epping to Chatswood rail link). Second, Mr Duggan suggested that reliance could not be placed upon the table from which the 140,000 square metres GLFA figure was taken as it also suffered from the impermissible assumption that Macquarie Centre actually existed in 2010. 3. Mr Duggan also challenged Mr Blythe's reliance upon the 2010 study's contention that the City of Ryde "requires 200,000sqm of retail floor space to meet current population demands, but with housing growth this is projected to grow to 250,000sqm by 2031". Mr Duggan suggested that this statistic was based on inadequate or otherwise outdated sources and that "no reasonable planning authority would seek to apply this document in place of the more contemporary Regional and District Plans". He also sought again to rely upon Chapter 7 of the 2010 study to suggest there were other areas within the City of Ryde where retail development could reasonably have been assumed to occur in future. 4. Overall, Mr Duggan disagreed with Mr Blythe's conclusion that the 2010 study quantified that the site would have been expected to accommodate between 120,000 and 140,000 square metres GLFA. Mr Duggan instead opined (Exhibit A, Tab A2, pages 62 to 63, paragraph 84): In advising a hypothetical purchaser I would advise that there are no specific retail targets that are set by the relevant planning controls or that can be meaningfully ascertained from background planning studies such as the Local Planning Study 2010. There is certainly no specific quantum of minimum retail that can be applied as a minimum floor space standard that a consent authority must uphold in the assessment of a development application. 1. As to the distribution of retail uses in the local area, Mr Duggan also suggested that (Exhibit A, Tab A2, page 71, paragraphs 126 to 127): 126. … I would advise that a more reasonable reading of the Local Planning Strategy is that retail demand will be addressed across the entire Local Government Area to 2031. The Strategy nominates several locations both existing and approved for further retail floor space within the LGA, other than the site of Macquarie Centre. There are also further locations for new retail floor space and expansion that occurred between the time the Strategy was drafted and the dates in question, with B4 Mixed Use areas in the LGA comprising Eastwood, West Ryde, Meadowbank, Ryde, and Gladesville. Other significant examples of growth in retail include, but are not limited to: - Bunnings Gladesville (LDA 2015/214, as modified) that provided some 16,000m2 of additional retail, - Masters North Ryde (LDA2015/144) that provided some 13,000m2 of retail, and - Lachlan's Line (LDA 2016/0395) that provided some 6,000m2 of retail. 127. I would not advise a hypothetical purchaser that a planning authority would assume or enforce on a future applicant the need to accommodate all demand for retail floor space in Ryde to 2031 on a single site, in a single development. 1. Both experts agreed that the specific quantum and type of retail to be provided at the site would also be informed by economic expert assessment. In this respect, Mr Blythe noted that Mr Dimasi's economic evidence advised a super‑regional shopping centre in the order of 125,000 square metres Gross Leasable Area (GLA) or more. 2. With regards to how the site would have satisfied the role of "regional attractor", Mr Blythe suggested that this would have been partially achieved through a concentration of retail uses. However, he noted that the planning intent went beyond the provision of retail services, and envisioned the co‑location of other uses, including community and recreational facilities, as further attractors for Macquarie Park. 3. Mr Blythe further noted that the DCP required community facilities to be provided on the site. Specifically, the DCP, at s 5.9, required that future development: Provide community space of not less than 3,000sqm within the Macquarie Park Shopping Centre (which may include a branch library or other function in accordance with the Social and Cultural Infrastructure Framework). The community space must be directly accessible from the public domain and within a short walk of the station and bus interchange. Community space must be discussed with City of Ryde prior to the lodgement of a Development Application. 1. Mr Blythe also noted the requirement for a public station plaza with a minimum size of 0.67 hectares and 80 metres by 80 metres in dimension under s 5.7 of the DCP. Mr Duggan concurred with these observations in his expert report. Mr Blythe noted that there was no specified timing for delivery of community facility infrastructure. He suggested that it would have been subject to negotiation at the time of a development application and clarified in any concept development application prepared for the site. Whether planning controls required retail use across the entire site 1. In oral evidence, Mr Blythe was asked by Dr Pritchard whether his evidence was, in effect, that there must be retail use over the entire site and that no other development could have proceeded unless it was over the retail podium. In response, Mr Blythe explained his view that the primary purpose set out by the DCP was to ensure that retail provision was achieved on the site, it being nominated in its entirety as "retail core". 2. He opined that any development proposal which would have irreversibly carved off parcels of land for non‑retail uses would have been "approached with abundant caution" to avoid erosion of retail core objectives. Mr Blythe did not exclude the possibility that such development might have occurred. However, he contended that a planning authority would have been "very cautious" before allowing it to proceed. He also noted, in his expert report, that "[w]hile a subdivision is permissible with development consent, the probability of obtaining development consent for a standalone subdivision of the land is considered to be low having regard to the objectives and requirements of the Ryde LEP and Ryde DCP". In particular, he suggested that (Exhibit A, Tab A1, pages 28 to 29, paragraph 116): • the preferred planning outcome under the LEP zone objectives was the integration of retail/commercial uses with residential uses above; • a site-specific DCP for the Macquarie Park Corridor had been adopted which nominated the entire site as "retail core"; • there were no other available sites in Macquarie Park in one title with equivalent characteristics to the site; • if subdivision was undertaken without a clear understanding of future development, there was a risk posed to the delivery of DCP objectives to "reinforce the role of the shopping centre as a regional attractor and hub for recreation facilities"; • subdivision would have imposed limitations upon site accessibility; and • a prospective land subdivision, such as excising the northern portion of the site fronting Talavera Road, would have had "the likely outcome of limiting loading and vehicle movements to Waterloo Road", which would haven likely been "unacceptable from a traffic management and urban design perspective" and potentially compromised the Waterloo Road frontage in terms of visual appearance, street‑level activation, and pedestrian-vehicle conflicts. 1. Consequently, Mr Blythe opined that the consent authority would have expected that the site contained: * a regional shopping centre in accordance with applicable planning policies and controls; * activated street edges in accordance with the DCP; * an integrated retail podium across the entire site; * mixed use tower developments integrated into the development above the retail podium; and * ideally, the form of the podium broken down to allow through-site and cross-site access in accordance with the DCP. 1. Mr Blythe suggested that, should a subdivision application nonetheless have been pursued, a consent authority would have been expected to "require demonstrable evidence regarding the likely future floor space capacity of the centre and how such floor space would be reasonably planned and delivered on a reduced land parcel" in order to be confident that the centre would continue fulfilling its role and the planning objectives for Macquarie Park. 2. Mr Duggan disagreed and proposed that a shopping centre as part of a mixed use development would have functioned satisfactorily as a "retail core" of Macquarie Park and as a "regional attractor". In his expert report, he noted, at paragraph 83: 83. There is no requirement to provide exclusively retail land uses from edge to edge on the Site if the overarching objective or function of the 'retail core' is achieved and development complies with the permitted land uses and development standards in the RLEP 2014. The urban structure plan in the RDCP 2014 is identified as a "broad framework for development" in Section 3 of Chapter 4.5 of the DCP, and it must be applied flexibly. 1. Mr Duggan also made reference to page 35 of the HRUAPPR to further suggest that the B4 Mixed Use Zone was to be used flexibly. 2. In his oral evidence, Mr Duggan additionally suggested that if the planning authority had intended a shopping centre to occupy the entire site, it could have zoned the site B3 Commercial Core, and permitted shop top housing via Sch 1 of the LEP. Mr Duggan's advice to a hypothetical purchaser would have been that the B4 Mixed Use zoning implied that the site could be used for non‑retail uses so long as its role as a "retail core" and "regional attractor" could be fulfilled. In his opinion, these designations did not exclude residential uses. 3. Mr Duggan opined that the development of surplus land on the site "could also include the subdivision of this land [to allow for a residential development on the site], noting that there is no minimum lot size applying to the site in the RLEP 2014". He suggested that a sound approach consistent with the DCP would have been for the initial development application to be a "concept approval" within the meaning of Div 2A of the EPA Act, and for development to be physically delivered in stages pursuant to that concept proposal, potentially by multiple developers. In his opinion, subdivision would have been "pursued as a product of the Concept Proposal rather than an initial standalone process for the subdivision of land". Mr Duggan suggested that the satisfaction of the LEP and DCP would have been considered at the time of concept plan development application assessment and determination, and that landowners would have been bound by s 83D(2) (as it was then) of the EPA Act to develop the site in a manner not inconsistent with the Concept Plan consent. In light of this suggested approach, Mr Duggan rejected Mr Blythe's proposition that subdivision without a clear understanding of future development would have put at risk the delivery of various DCP objectives. 4. As to the amount of residential development which would have been appropriate at the site, Mr Duggan opined, at paragraph 95 of his report: 95. The specific quantum and type of residential floor space provided on the Site would in my opinion be subject to architectural and urban design testing having regard to the consideration of RLEP 2014, RDCP 2014 and urban design assessment at the time a development application is lodged and assessed. This would include consideration of State Planning Policy No. 65 - Design Quality of Residential Apartment Development and the Apartment Design Guide. Pedestrian linkages Introduction 1. As an additional point, Mr Blythe opined that a fully integrated and publicly accessible retail development at ground level across the entirety of the site would have been desirable for satisfying pedestrian linkage and street‑level activation requirements. In this respect, Mr Blythe noted the "role of the site in enhancing pedestrian access and movement" under cl 4.1 of Pt 4.5 the DCP, and "the importance of strengthening access arrangements from the east along Talavera and Waterloo Roads connecting into the Macquarie Town Centre and the station precinct". He noted that the DCP also emphasised street‑level activation along Waterloo Road and Herring Road, where there were stricter controls (including a maximum width of 10 metres for individual shopfronts), as well as its encouragement of active ground‑level uses along the Talavera Road frontage (though without the same "active frontage" requirements). Mr Blythe also opined that it was important to elevate sensitive uses, such as residential uses, above the ground level, since they were not compatible with a highly activated ground plane, particularly in relation to aural and visual privacy. 2. By contrast, Mr Duggan's position was that retail development across the entire site was not necessary to satisfy pedestrian linkage and street‑level activation requirements. With regards to the permeability of the site for pedestrian access purposes, Mr Duggan opined this could have been achieved by developing the site as separate buildings which would have broken up the site's built form. He compared this to a large shopping centre development across the entire site, which he postulated would have restricted pedestrian movement during closing hours. 3. Mr Duggan also opined that the definition of "residential flat building" in the LEP enabled residential dwellings to be constructed at ground level, and that there was no requirement for dwellings to be located above a retail or business podium. He suggested that residential flat buildings were permissible with consent in the B4 Mixed Use Zone, it being an innominate land use in the Standard Instrument - Principal Local Environment Plan. Mr Duggan opined that standalone residential development would have been consistent with B4 Mixed Use zone objectives, which do not specify "vertical integration". He suggested that "consistency" with LEP objectives did not necessarily mean "achievement" of those objectives but, rather, being "compatible" or "capable of existing together in harmony", or "not being antithetic to" the objectives. 4. Mr Duggan also suggested that cl 7.3 of Pt 4.5 the DCP did not require active frontages on Talavera Road and, in the alternative, suggested that provision of active uses as part of residential flat or shop top building designs was not novel, pointing to examples such as Mascot and Dee Why Town Centres. He suggested that a hypothetical purchaser could have been advised to sleeve any above‑ground parking with other uses to promote active frontages. Pedestrian connection compliance of the Shaw and Southwell schemes 1. In oral evidence, the issue arose as to the extent to which the Shaw and Southwell schemes specifically complied with DCP objectives and controls relating to pedestrian connections. Mr Blythe and Mr Duggan agreed that Macquarie Park's very large street blocks were problematic for pedestrian permeability. This explained why the DCP's primary emphasis was to "clearly define a hierarchy of new streets" built coincident with new developments to create permeability through the "super blocks". 2. As a preliminary issue, there was disagreement between these experts as to the extent to which the Council would enforce such DCP pedestrian connection requirements. Mr Blythe explained that in his experience, the Council would have taken a more flexible approach, viewing the DCP pedestrian connection requirements more as aspirations than prescriptions. To reinforce this point, Mr Blythe referred to a note in the DCP providing that master plan controls could provide guidance on varying the locations of pedestrian connections. 3. Mr Duggan's opinion was that the general direction and intent for pedestrian links on the site would have been enforced by the Council. Mr Duggan pointed to the fact that the DCP specified a series of pedestrian links arranged in a spoke‑and‑hub fashion that culminated in the centre of the site. In his opinion, this demonstrated a "clear intention … to create permeability on a pedestrian level through the site" from all directions, and an expectation that any new development on the site would have to show "a high level of connection", particularly to main walking networks such as the upgraded Shrimptons Creek corridor. 4. With respect to the Shaw and Southwell schemes, Mr Blythe opined that they, being high-level sketch designs, both fell short of achieving DCP pedestrian connection "aspirations". He suggested that shortcomings of the Shaw scheme, such as issues with pedestrian connections from Talavera Road and Waterloo Road into the centre, were remediable through further refined design. Mr Blythe accepted that the Southwell scheme had considered pedestrian connection to a greater extent than the Shaw scheme. However, he also expressed reservations as to the Southwell scheme's approach, noting in particular the difficulty of providing effective single‑level, east-west pedestrian connection across the site's bowl-shaped terrain, as well as flooding constraints associated with ground‑level pedestrian access at Waterloo Road. 5. Mr Duggan opined that the Shaw scheme did not comply with DCP pedestrian connection requirements, as the provision of the large car‑park facing Talavera Road would have interrupted or compromised pedestrian connections heading towards Talavera Road. Mr Duggan also noted that the Shaw scheme favoured vehicular, rather than pedestrian, entry on Waterloo Road. With regards to the Southwell scheme, Mr Duggan opined that it allowed permeability through at least Talavera Road, and that at a high level, it did not prevent DCP objectives being achieved, subject to further design refinement. Active Frontage requirements and the Shaw and Southwell schemes 1. The town planning experts were also asked to address the Shaw and Southwell schemes' compliance with DCP objectives and controls relating to active frontage, which encouraged active ground‑level uses at the site. 2. Mr Duggan explained that the Waterloo Road frontage in the Shaw scheme was largely occupied by vehicular access and loading dock uses, in contravention of the DCP's designation of primary active frontage along that road. He explained that, by contrast, the Southwell scheme provided for active retail uses on Waterloo Road (subject to further detailed design considerations), consistent with the DCP. 3. Mr Blythe suggested that both designs required further work to ensure compliance. In his opinion, the Shaw scheme expressed a very strong retail brief and would have needed to be adapted to respond to some of the Council's controls, a process which he considered was feasible. On the other hand, Mr Blythe suggested that the Southwell scheme appeared better to address active frontage requirements than the Shaw scheme. However, he expressed reservations about whether all aspects of the Southwell scheme could realistically have been achieved to comply with such requirements. Above‑ground parking requirements and the Shaw and Southwell schemes 1. The experts' oral evidence also addressed contentions as to the DCP requirements for above‑ground parking, in particular, cl 8.7 in Pt 4.5 of the DCP, which contained the following requirement: l. Along all street frontages, above ground parking levels are to be laminated with another use for a minimum depth of 10 m, e.g. building entry lobbies, retail tenancies, commercial floor space. 1. Mr Blythe's opinion was that this DCP provision made clear an intent to avoid parking structures interfacing directly with the street, and that some form of sleeving was required, at least at ground level where pedestrians intersected with the building. However, Mr Blythe considered that the provision did not necessarily suggest that a multi‑storey car‑park would need to be sleeved across its full height and suggested there were existing methods for designing façades at upper levels to create an appropriate looking building. 2. Mr Duggan's view was that the DCP sought to ensure that there was no exposed car‑parking so as to create a suitable street interface at a pedestrian level. Mr Duggan suggested that a six- or seven‑storey car‑park exposed on Talavera Road would have been contrary to the DCP's intent for urban interfaces. However, Mr Duggan accepted that it was possible for above‑ground levels of the Shaw car‑park structure to be treated in a fashion similar to a commercial façade, such as by glazing, so as to prevent an open car‑park from being presented to the public domain. 3. As an additional point, Mr Blythe was also questioned about whether Mr Shaw's inclusion of sleeved car‑parking in his amended design was in order to ensure compliance with the DCP. Mr Blythe suggested that the design choice was made in order to provide a better urban interface with Talavera Road, and not necessarily for strict compliance with the DCP. Finally, regarding Mr Shaw's reference in his expert report to examples in Victoria of sleeved car‑parks similar to his amended design, Dr Pritchard put to Mr Duggan, who agreed, that the New South Wales Apartment Design Guide did not apply in Victoria. The approval strategy for a hypothetical development proposal 1. Mr Blythe expressed the view that there would have been an expectation and requirement from the consent authority that the site be master‑planned, and a concept development approval be required for the entirety of the site. He suggested that a separate development application for works could have been sought concurrently. This opinion was based on the DCP controls, notably the objectives applying to site planning and staging as set out in cl 8.1 of Pt 4.5 of the DCP, and the specific control in cl 8.1(b) requiring that: All sites 15,000m² or more in area should lodge a site-specific Master Plan and/or Stage 1 development application for approval. 1. Regarding the timeframe for obtaining a development approval for the initial development application for the land, Mr Blythe would have suggested to the hypothetical purchaser making allowance for at least 18 to 24 months from lodgement of the development application to obtain approval, on top of at least nine to 12 months to prepare the application. 2. Mr Duggan suggested that the timeframe for obtaining development approval for a mixed use development on the site, on the basis that a concept development application would have been submitted, was six to nine months to prepare the application and 12 to 18 months from development application lodgement to obtaining approval. After this process, Mr Duggan opined that further development applications seeking consent for the design of buildings and public domain elements in accordance with the approved Concept Plan would have been required. Assuming preparation for these subsequent applications began before the Concept Plan was approved, Mr Duggan would have allowed an additional four to six months for development application preparation and 12 to 14 months for the approval process. After this, further development applications could have been lodged and determined whilst construction was underway. The Southwell scheme's necessity for a cl 4.6 request 1. The town planning experts also provided evidence as to the necessity for, and prospects of success of, a request pursuant to cl 4.6 of the LEP for permission to breach the maximum FSR development standard under the Southwell scheme. This is discussed later. The economic evidence Introduction 1. At the relevant base dates, a prudent hypothetical purchaser would have typically requested an economic expert assessment to identify the level of market demand, and thus inform the potential scale and mix of uses at the site. The expert economic consultants who gave evidence in this respect were Mr Tony Dimasi (for the Applicants) and Mr Sean Stephens (for the Valuer‑General). Each prepared an individual expert report. Together they prepared a joint economics expert report. Preliminary issue - instructions to experts 1. The first topic during oral evidence of these experts concerned differences in the instructions given to each of them. The experts agreed that they had received different instructions. In particular, the questions put to Mr Stephens focused upon "the state of the residential market in Macquarie Park and its surrounds" and "the demand for residential apartments, including the demand for the various mix of apartments, in Macquarie Park in general and on the Land in particular", whereas the instructions to Mr Dimasi did not include such questions. 2. Mr Stephens was of the view that a prudent purchaser would have requested economic analysis of the markets most relevant to expectations of development on the site. It was put to Mr Dimasi that the exclusion of any such market from economic advice would have meant that the hypothetical purchaser would not have been fully informed about market opportunities on the site. Mr Dimasi disagreed, opining that an economic consultant of his experience and expertise would have made reference to competing factors affecting market opportunities, if they existed. With regard to his consideration of residential apartments, Mr Dimasi explained (Transcript 1 April 2022, page 114, lines 5 to 10): … I believe that I had outlined quite clearly in my report the reasons why retail use is the compelling use for the site, and - and the reasons why it would not have made any sense in my view to have hived off or - or sterilised part of the land for residential use, given the compelling evidence for the successful development of a super regional centre on this site. The scale of retail development at the initial development stages 1. The experts agreed that the trade area surrounding the site, at each of the base dates, could have supported a retail development at least consistent with the definition of a "Major Regional Shopping Centre" as defined by the Property Council of Australia.. However, they disagreed on the scale of retail development that was achievable on the site at the initial stage of development. 2. Mr Dimasi expressed the view that a super‑regional centre was the most financially attractive form of regional centre to be developed at the site, as it would have taken full advantage of the trading opportunity available at the site and attracted customers in the face of a surrounding competitive network of large regional centres (such as those at Chatswood and Hornsby). Mr Dimasi suggested that, as at 2016, the site would ideally have been planned to accommodate a shopping centre of 125,000 square metres of GLA or greater and that this could have been successfully delivered in one stage, with significant economies for doing so. Mr Dimasi based this figure upon the following facts from the years 2015 and 2016: * the 2016 Urbis Shopping Centre Benchmarks (the Urbis Benchmarks) showed that the average leasable floorspace amongst all regional shopping centres was 89,000 square metres, with Australia's top 10 regional centres averaging 134,528 square metres (the 2015 averages being similar); * there was a steady increase in size of Australian regional shopping centres over the past 25 years, and this was a well-known fact in the industry; * financial reports and statements from Scentre Group (which owned Australian Westfield-branded centres) indicated strong, above-forecast financial performance; * twenty-seven of 34 Australian Westfield centres were regional centres, which ranged in size from 61,900 square metres (Hurstville) to 178,100 square metres (Fountain Gate), of which 14 centres were larger than 100,000 square metres, and 22 centres were larger than 80,000 square metres; * Scentre Group Property Compendium data showed a general pattern of higher property values and lower capitalisation rates for larger shopping centres, with capitalisation rates decreasing in 2016 and into 2017. This, according to Mr Dimasi, indicated a pattern of increased centre values and strong demand relative to available supply. (However, it is to be noted that Mr Stephens contended that, in his experience, capitalisation rates were tightening not just for retail, but for most major property classes at this time due to a relatively low interest rate environment and stable economic conditions. He suggested that there was evidence that the decline in regional shopping centre capitalisation rates was in fact a relative under‑performance compared to other asset classes in terms of underlying market demand. He contended that Mr Dimasi did not make a capitalisation rate comparison with other asset classes, including the circumstance of a potential retail centre as part of a mixed use development outcome.); * Scentre Group Property Compendium and Urbis Benchmarks data showed a positive correlation between larger regional centres and increased specialty sales per square metre, which Mr Dimasi explained was linked to increased specialty store rental, the key driver of net income for regional shopping centres; * similar patterns of higher performance for larger regional centres were observed for other smaller Australian shopping centre operators, including Vicinity Centres Group and GPT Group. 1. As an associated issue, there was disagreement between the experts as to the appropriateness of Mr Dimasi's reliance on the Urbis Benchmarks in his expert report, including his reliance upon the 2016 Urbis Benchmarks to provide guidance as to the average mix of tenancies and average leasable floorspace of 134,528 square metres across Australia's top 10 regional shopping centres. Mr Dimasi justified his reliance upon these averages by arguing that they reasonably represented, as a guide, what a typical super‑regional shopping centre in Australia looked like in 2016 (of which there were fewer than 20). 2. By contrast, Mr Stephens expressed the view that Mr Dimasi's reliance on an average tenancy mix derived from the 10 largest regional centres only provided a representation of the largest and highest trading shopping centres in Australia. Mr Stephens's opinion was that an average derived from all regional shopping centres would have included super‑regional, major regional, and regional shopping centres. Mr Stephens suggested that these different categories of regional shopping centre and the Urbis Benchmarks would have been considered by a consent authority when deciding whether a regional shopping centre was a "regional attractor". Mr Dimasi did not speculate as to what a consent authority would or would not have regarded as a "regional attractor". 3. In coming to his conclusion as to the appropriate scale of retail development, Mr Dimasi also considered information about the market opportunity for the site, determined by reference to the trade area and target customer segments likely to be served and the competition faced in 2015 and 2016. In particular, Mr Dimasi highlighted: * the large spatial gap in the provision of regional shopping centres around the hypothetically vacant site, the adjacent regional centres being Westfield Chatswood and Chatswood Chase (these being the closest centres, but still nine kilometres away by road), as well as Westfield Hornsby, Castle Towers, and Westfield Parramatta; * the fact that each competing regional shopping centre location accommodated, or would soon have accommodated, a super‑regional shopping facility meant that Mr Dimasi would have advised any prospective purchaser that a regional centre at the site would have needed to be large and attractive enough to compete effectively. Notably, Westfield Chatswood and Chatswood Chase had a combined size of approximately 145,000 square metres, Westfield Parramatta was 137,700 square metres, and Castle Towers was in the process of seeking approval for a major expansion from approximately 113,000 to 193,000 square metres. In oral evidence, Mr Dimasi expressed the view that Mr Stephens' suggestion of building a centre of less than super‑regional status on the site, as at 1 July 2016, would have risked being uncompetitive; * at Map 2.1 of his expert report, Mr Dimasi indicated what he considered to be the "main trade area" for a regional shopping centre at the site, comprising a "primary trade area" (where the site is generally within five minutes' drive time), and three "seconday trade areas" (there was some disagreement between the experts about whether Mr Dimasi was correct to include the St Ives area within the "Secondary North" sector of the main trade area - this is later separately discussed). Mr Dimasi reached several conclusions using Australian Census data relevant to the main trade area (as he defined it), notably that: - the main trade area had a population of 245,000 in 2016 (with 75,600 residents in the primary trade area), this being a "very substantial population for a regional shopping centre"; - there was significant anticipated population growth in the main trade area in 2016, meaning demand for retail floorspace from population growth alone was expected to increase 35% to 40% over a reasonable planning horizon (for example, 20 years); - the population of the main trade area was of above-average affluence compared to metropolitan Sydney (15% above average on a per capita income basis) and Australia more broadly; and * his estimate that total available retail expenditure from the resident trade area population was $3.64 billion in 2016 and was projected to increase, in real terms, by some 75% to $6.36 billion by 2036. 1. In light of these analyses, Mr Dimasi concluded that "the opportunity for a regional centre development at the site was particularly strong" and the development of a super regional centre was "a compelling proposition". As an additional point, Mr Dimasi noted that the site was unique as it was situated "at the heart of a large employment area (Macquarie Park)", was "adjacent to one of Australia's largest universities (Macquarie University)" with a large student population, and was located immediately proximate to a railway station and bus interchange, providing additional customer segments that would contribute to retail turnover and floor space potential. 2. Mr Dimasi expressed the view that a shopping centre with a scale and composition typical of the best performing Australian super‑regional shopping centres at the time was appropriate. This would have included two department stores, two discount department stores, three supermarkets, an extensive series of mini‑majors (including global fast fashion operators), typical provisions of specialty retailers (totalling around 315 stores), and typical provisions of non‑retail shopfront facilities, as well as leisure, entertainment and lifestyle facilities. 3. In cross‑examination, Mr Dimasi accepted that no previous regional shopping centre had opened at close to 125,000 square metres GLA. Nonetheless, he considered that such a centre would have been supportable at Macquarie Park in 2016 or 2017 (Transcript 1 April 2022, page 117, line 45 to page 118, line 11): [T]he reason why such a centre would be supportable at Macquarie is a result of the assumptions that we are required to make, namely that at 2016 or 2017, everything else would have been in place, and the Macquarie Shopping Centre site would have been vacant. But everything else in terms of the catchment, in terms of the competitive framework, in terms of the infrastructure, the train station, the university, the workforce at Macquarie Park would have been in place. Now that's a very, very different situation to the situations that these various super regional centres have encountered as they have been progressively built, in line with the growth in their catchments, over a period of years. And at 2016 as well what would have been available to any prospective purchaser would have been the knowledge and the track record of these various super regional centres that had been successfully delivered in Australia over a very long period. So this would have been a vacant site at Macquarie at 2016 with everything else in place, would have been an outstanding opportunity for the development of a prised retail asset. 1. Ultimately, in light of the unique economic opportunity afforded by the site, Mr Dimasi suggested that a hypothetical purchaser would have taken the risk of constructing and opening a super‑regional shopping centre, even at a cost of over $1 billion (Transcript 1 April 2022, page 130, lines 15 to 38): … Bear in mind, in answering that, your Honour, that the - these corporations are in the business of making money. You can't make money unless you do something and so, that means taking calculated risk, so it means taking and - and - and mitigating and minimising those risks. And I've gone to great length to point out in my report, the set of circumstances facing this site, at 2016, would have been unique and unique in the properly used context of that word. There would have been no other similar situation in Australia available to any investor; in the middle of an affluent part of Sydney, the opportunity to develop a major retail centre, a major shopping centre, as I said earlier, adjacent to a university, adjacent to a train station, adjacent to a large workforce. I spent 30 years doing hundreds of cases where developers had sought to obtain approval to build more retail floor space for these centres. This would have been an opportunity to build, more or less, as much floor space as one wanted, in the middle of a - of a prime site in Sydney, as I said, a unique opportunity. 1. By contrast, Mr Stephens proposed that a smaller scale of retail development would have been appropriate on the site at the initial stage of development. He expressed the view that a centre of a scale and mix consistent with a major regional centre would have been realistically achievable and would have functioned as a strong regional attractor. Mr Stephens reached this opinion by taking into account "an appropriate balance between the significant retail opportunity offered by the Subject Land, as well as consideration of likely tenant demand, market risk and the potential for other uses (including residential) to also be developed on the Subject Land as part of a mixed use development outcome". 2. Mr Stephens would have advised a scheme incorporating a total floor space component of approximately 80,000 square metres, of which approximately 55,000 square metres would have been retail uses. 3. In coming to this conclusion, Mr Stephens took into account a number of considerations. He first considered the 11.07‑hectare site and its locational characteristics as a major mixed use precinct at the centre of Macquarie Park in the North Shore region of Sydney. Second, based upon his understanding of the planning context, and drawing upon Mr Duggan's town planning evidence, Mr Stephens formed the view that: 1. notwithstanding the existing presence of the Macquarie Centre as a super‑regional shopping centre, which for the purposes of this matter is assumed not to exist at the relevant dates and never to have existed, nothing at a metropolitan or local policy level implies that a super‑regional shopping centre is a specific requirement of policy for the site; 2. a centre can be a "retail core" and "regional attractor" without being a super‑regional shopping centre; 3. the policy context for the site encourages a mix of uses, including residential development; 4. the presence of the site immediately adjacent to the Macquarie University Station encourages an intensive built‑form, including the potential for housing; and 5. notwithstanding no specific requirement for a super‑regional shopping centre, a retail and commercial component at the site of an appropriate scale is required to meet wider policy objectives for a "regional attractor". 1. Mr Stephens considered the contemporary retail environment as part of his assessment of the potential for retail floor space at the site as at 1 July 2016. He noted that the economic backdrop was "largely stable" and that domestic conditions included "a solid housing and labour market, steady levels of consumer demand, balanced against subdued levels of investment activity in the mining sector" (the latter factor meaning New South Wales outperformed "mining states" such as Queensland and Western Australia). He also noted the low official interest rate of 1.75% and new international retail tenant demand drawn to Australia by the "relatively stable economy, solid growth prospects and strong relative retail margins", thus forcing domestic retailers to respond to the competition. Mr Stephens emphasised the following aspects of the retail landscape: * the sales growth in most categories of retail in the year to April 2016; * the growth of online sales in the year to June 2016; * the aggressive new store roll‑out strategy of international mini‑majors in Australia; * the substantial changes to the department store retail model occurring at the time, particularly Myer's closing of existing stores and abandonment of plans for future stores in response to subdued sales, and the acquisition of David Jones in 2014 and its subsequent period of adjustment; * the challenging conditions for discount department stores at the time, especially due to competition from rapidly expanding international mini‑majors, leading to trials with new store formats and product mix; and * the increased focus on customer experience in contemporary retail developments in response to the threat of on‑line retail and to accommodate international tenants, including the emergence of town centre‑style developments as an industry trend. 1. Mr Stephens also highlighted the substantial residential, mixed use, and commercial development in Macquarie Park at the time; the ongoing construction of the Sydney Metro giving rise to the prospect of improved access to Macquarie Park; and the fact that the nearby Top Ryde Shopping Centre had established itself as a key retail destination after a major redevelopment in 2010 (but noted that the Myer department store therein had closed in May 2015 due to relatively poor sales performance). 2. Additionally, Mr Stephens conducted a market assessment for the potential for retail floor space at the hypothetically vacant site as at 1 July 2016, having regard to the "local population, retail expenditure profile and competitive environment in which a proposed retail centre would reasonably expect to operate". To do so, Mr Stephens defined his own "main trade area", which was largely identical in geographical extent to Mr Dimasi's, but for the exclusion of the St Ives area from the "Secondary North sector". With respect to each factor, Mr Stephens said that: ● Local population: in a fashion similar to Mr Dimasi, Mr Stephens considered the Main Trade Area population as comprising "an affluent population with a higher-than-average proportion of families and young professionals as compared to Greater Sydney benchmarks" which would "generally associate strongly with modern retail facilities and generate demand for a range of retail uses including food, dining and entertainment operating for extended hours from the Subject Land". Mr Stephens estimated the resident population of the Main Trade Area to be 214,000 persons as of July 2016, approximately 30,000 residents less than Mr Dimasi's estimate, largely due to the exclusion of the St Ives area. His projected 2036 population of 307,000 persons is similarly lower than Mr Dimasi's estimate. Mr Stephens expressed the view that additional sales would "also likely be attracted from the substantial worker and student population within Macquarie Park", noting that some 50,000 workers and up to 40,000 students study and work within Macquarie Park, though some of these would also be residents. ● Retail expenditure profile: Mr Stephens used a 2016 MarketInfo micro-simulation model to estimate the value of retail spending by residents within the Main Trade Area to be around $3.05 billion in 2016, growing to $5.26 billion in 2036 (in 2016 dollars; noting for comparative purposes that Mr Dimasi's projections were made in real terms). An additional share of non‑resident student and worker spending would also be directed to any retail centre on the site, principally at cafés and food outlets. ● Competitive context: as at July 2016, Mr Stephens identified four competing super regional shipping centres within 12 km of the site, being Westfield Hornsby, Westfield Parramatta, Castle Towers, and the two centres at Chatswood (taken together). Mr Stephens also noted the existence of Top Ryde City as the nearest sub-regional shopping centre, and highlighted its discount department store, supermarket, and specialty store offerings (the Myer department store having closed in May 2015). Mr Stephens further noted that the Main Trade Area contained a range of supermarket-based centres serving smaller trade areas, including at Marsfield, Ryde, Pymble, and Epping, as well as localised convenience-based retail specialty and strip retailing facilities. He also suggested that several major retail projects in the Main Trade Area that were planned or under construction in 2016 would have pre-empted the new competition at the Macquarie Park site by facilitating or fast-tracking their own centre improvements, where justified. 1. In light of all of these factors, Mr Stephens proposed an indicative development scheme and tenant mix for a hypothetical development at the site at the valuation dates. In his opinion, a viable and appropriate initial stage of development would have comprised one David Jones department store of approximately 12,500 square metres, one discount department store of 7,500 square metres (with the potential for a second discount department store subject to the interest of potential operators), three supermarkets totalling 9,500 square metres from each of Coles, Woolworths, and ALDI, various mini‑majors totalling 8,000 square metres, and retail specialty shops totalling 17,500 square metres. 2. Mr Stephens also suggested 10,000 square metres of cinema and other entertainment functions and 12,000 square metres of other non‑retail uses (including non‑retail specialty shops totalling 3,000 square metres). He proposed that the approximately 3,000‑square‑metre balance of the site would have been used for a range of retail and/or commercial facilities which could provide amenity and ground‑level activation. 3. Mr Stephens estimated that, fully leased, this indicative development scheme would have generated approximately 2,200 ongoing full‑time, part‑time and casual jobs. He also estimated that such development could potentially have captured a market share of 11% of retail spending in the main trade area. 4. Overall, Mr Stephens said that his indicative development scheme reflected a "balance between prudent expectations of what retail development is supportable in market terms, with the expectations of policy for delivery of a regional attractor". It would have also accommodated the potentiality of non‑retail development (particularly residential development) on the site, which, in Mr Stephens's opinion, could have improved commercial returns. Long‑term GLA requirements 1. During their oral evidence, both experts were asked to provide estimates as to the total amount of GLA prudently required to accommodate a long‑term retail component extending to the year 2036. 2. Mr Dimasi postulated a requirement for approximately 180,000 square metres GLA, which he loosely estimated would translate to 250,000 square metres GFA. Mr Stephens estimated a lower long‑term requirement of 125,000 square metres GLA, and maintained that there was no professional rule‑of‑thumb for converting GLA to GFA. 3. As an ancillary point, Mr Stephens agreed, and Mr Dimasi was prepared to accept, that the base case designed by Mr Southwell was consistent with at least a "major regional shopping centre" under the Property Council of Australia classification. Both experts also agreed that, given Mr Southwell's base case scheme provided for 17,500 square metres GLA for specialty stores and assuming an average store size of 105 square metres, 165 specialty stores would have been accommodated, crossing the threshold of approximately 150 speciality shops contemplated by the definition of "major regional shopping centre". The optimum and maximum number of retail levels for the site 1. The experts agreed that up to four retail levels was appropriate for a regional shopping centre at the site. Mr Dimasi expressed the view that three retail levels was optimal, whilst four retail levels was the maximum. He noted the rarity of major Australian regional centres possessing more than three levels, the difficulty of attracting sufficient customers to levels beyond the third level, and limitations in the number of sufficiently strong anchor tenants that would have been required to draw customers to higher levels. 2. Mr Stephens largely agreed with this analysis, though he further suggested that a fourth level supporting entertainment and dining facilities would have been acceptable. In oral evidence, the experts generally agreed that, for Australian shopping centres, the first to third levels would have been most suitable for a strong retail component, and the fourth level suitable in more limited circumstances (usually for larger regional centres) and for uses such as entertainment. What allowance would be made for future expansion? 1. Mr Dimasi said that a regional shopping centre developer would make reasonable allowance for future expansion of the hypothetical shopping centre. He explained that a key feature of shopping centre management over the past three decades has been diligent, proactive, strategic planning to allow expansion of centres to offer increasingly broader attractions. He suggested that a master‑planned approach was typically undertaken to ensure future stages of expansion could be added with minimal disruption to existing assets, and that this would have been the advisable approach for developing a super‑regional centre at the site. Mr Dimasi suggested that if such an approach meant that the entirety of the site was to be built upon, he would have expected to see that result, and that in this case, if demand was so strong that further future expansion could have been supported, it would have been possible through an additional level of retail. 2. Mr Stephens prefaced his opinion by noting that whether allowance would be made for future expansion of the hypothetical shopping centre would depend, in part, upon the business model, objectives, and expertise of the potential developer. 3. Mr Stephens expressed the view that it was important for shopping centres that they adapt to best meet changing market conditions in the retail sector, as well as customer and tenant requirements. He explained that it was relatively common industry practice, in July 2016, for major shopping centres to undertake significant refurbishment or redevelopment every seven to 10 years (though this period could vary between centres). He also acknowledged the existence of master‑planned approaches. He noted that, for some centres, expansion potential would be limited by physical or other constraints (such as planning controls), in which case they would evolve by refurbishment and/or tenant remixing. 4. With respect to this site, Mr Stephens expressed the view that, at the valuation dates and assuming an indicative scheme was pursued for a shopping centre comprising an initial 77,000 square metres GLA, market demand for expansion would almost certainly have developed within a seven‑ to 10‑year timeframe. Mr Stephens expressed the view that a prudent purchaser would have been expected to make reasonable allowance for future shopping centre expansion. He generally estimated that a second phase of development might have involved an expansion of up to 20,000 square metres GLA, comprising an expansion of the department store and/or the attraction of a second discount department store, plus additional specialty shops and mini‑majors. Mr Stephens considered that further expansions beyond the second stage would have been possible, accounting for growth in resident, worker and student numbers identified to at least 2036. 5. However, Mr Stephens suggested that a prudent purchaser would have balanced any financial return from a potential future shopping centre expansion phase against returns from other potential non‑retail development outcomes (such as residential development), even if they may have compromised the physical potential for shopping centre expansion. He suggested that "even if the proposition for a Super Regional Shopping Centre of the scale and development timing identified by Mr Dimasi was accepted by a potential purchaser (which I consider extremely unlikely), it is not necessarily the case that it generates the highest commercial return from development of the Subject Land". Allocation of part of the site for residential or other retail uses 1. Mr Dimasi expressed the view that it would have certainly been inappropriate to advise a prudent hypothetical purchaser to adopt a course of action whereby part of the site was allocated to the construction of residential or other non‑shopping centre uses. He suggested that a prudent regional shopping centre developer would have been highly unlikely to take such a course of action as it would have risked compromising the trading performance of the centre (for example, by significantly constraining the provision and location of parking) or constraining the potential maximum size of the centre and reduced flexibility for cost‑effectively extending the centre in the future. For similar reasons, he said a prudent shopping centre owner would have been even less likely to seek to subdivide the site in order to sell part of it to another developer for separate non‑shopping centre development. In his knowledge, there had been very few, if any, instances of this occurring. 2. Mr Dimasi noted that super‑regional shopping centres were "highly prized real estate investments" and were "one of the best performed class of real estate investment over the previous two decades". He explained that centre managers and owners were well‑aware of the need for shopping centres to adapt over time and would have been "extremely reluctant to countenance" any development which could have potentially constrained the trading opportunity or the potential for cost‑effective improvements or expansions. Mr Dimasi explained that owners and managers of regional shopping centre assets took long‑term strategic views about their ownership, seeking to increase value of their assets through capital growth whilst generating safe and steadily increasing income, as opposed to carving off parcels of land for one‑off profits. Furthermore, in the event that it was to be carried out, Mr Dimasi suggested that any non‑shopping centre development would have been provided above the retail platform occupying the entire site. He noted that standalone developments unrelated to the shopping centre were, in his experience, rare in Australia. 3. In his oral evidence, Mr Stephens expressed the view that it was not necessarily the case that carving away a portion of the site for predominantly residential use would have curtailed the ability for the site to adapt to future demands. He suggested that the retail balance of the site may still have fulfilled any such future requirement, though he appeared to concede that there was also no guarantee that his postulation of about 124,000 square metres in 2036 was the ceiling of demand (Transcript 1 April 2022, page 138, lines 17 to 38). When asked about whether there was sufficient economic basis for a centre of 124,000 square metres GLA as of 1 July 2016 (assuming no sequential growth of the centre), Mr Stephens replied (Transcript 1 April 2022, page 138, line 40 to page 139, line 12): Well, there's - there's the spending there, and then there's the ability, as I said, to - to - to actually attract that to this site. So, it's - it's about market share as well. It's not about total spend. It is about the ability of this site to attract this sufficient market share to generate the sales to support that, and that's what I argue is - is - is unrealistic. 1. On whether residential development at the site would have been a standalone development or developed above a retail podium, Mr Stephens said that, from a market demand basis, either option was possible. He relied on a Colliers Market Research report which identified, as at 2014, 14 developers active in the North Shore market, with another 13 active developers more generally in the Sydney market, with the capability to deliver apartment towers of 300‑plus dwellings, as well as two potential joint venture partners. Mr Stephens suggested: …the potential purchaser interest in the Subject Land would include developers with the capability and desire to deliver both standalone and above retail platform residential development. Indeed, both development formats had been recently delivered in Macquarie Park (primarily standalone) and nearby Top Ryde City (above retail platform). Build the hypothetical centre as a single stage or in multiple stages? 1. Mr Dimasi proposed that a super‑regional centre could have been built as a single stage or over a number of stages over a relatively short period (four to five years), depending upon a variety of considerations including total construction costs, additional disruption costs, and the developer's appetite for risk. He suggested that a prudent purchaser would have sought to deliver a super‑regional centre in the most time‑ and cost‑efficient manner possible, and that the centre would have been master‑planned with the clear evidence and expectation that a super‑regional shopping centre was both desirable and supportable, and would have been likely to prove highly successful, given the rarity of comparable real estate assets in Australia. 2. Mr Dimasi acknowledged that existing Australian super‑regional centres at the base dates had been developed over multiple stages; however, he suggested that this was usually because they grew in line with population growth in their respective catchments. Mr Dimasi pointed out that in the present valuation exercise, although the site is assumed vacant, everything surrounding it, including the trade area population as it existed at the valuation dates, remains in place. In oral evidence, Mr Dimasi further expressed the view that it would have been "very viable" to build a super‑regional centre at the site in one stage in 2016, citing the avoidance of significant additional costs caused by interruptions to the centre's business during multi‑staged development. 3. Mr Stephens disagreed, opining that a prudent purchaser would have considered it unrealistic to build a super‑regional shopping centre in one stage or through an expedited development program and would have been extremely unlikely to accept the associated risk profile, regardless of the significant opportunity for retail development. Mr Stephens considered that the development of a super‑regional shopping centre in one stage would have been unprecedented in light of all other Australian super‑regional shopping centres at the valuation dates. Mr Stephens' expert report identified 21 super‑regional shopping centres with two department stores, all of which were built according to sequential development after a history of trading performance. 4. By way of example, Dr Pritchard put to the experts in oral evidence that the Castle Towers Shopping Centre was not a super‑regional shopping centre when it opened in 1979, and only evolved into a super‑regional centre after extensions in 1989, 1992, 1999, and 2000, which brought the centre's GLA up to 113,000 square metres (which, Dr Pritchard pointed out, was still only 89% of the size of the Shaw design proposed to be built in a single stage). 5. Mr Stephens supported the proposition that the Castle Towers Shopping Centre expanded in reaction to rising demand in the primary and secondary catchments. Mr Stephens expressed the view, however, that not every centre that expands in response to rising demand ultimately becomes a super‑regional shopping centre, and proposed that expansion depends upon a demonstrated ability to evolve and attract a larger market share of customers from a particular area over time, something which only a "small handful" of centres are able to achieve. 6. Mr Stephens also suggested that a super‑regional shopping centre of the size identified by Mr Dimasi would have typically relied on attracting two department stores, something which would have been difficult due to the operational issues faced by Myer at the valuation dates. Furthermore, Mr Stephens noted that any potential purchaser would not have had the benefit of observing the existing Macquarie Centre's operations to inform consideration of market demand for retail development, nor the benefit of customer awareness and loyalty generated over time (Transcript 1 April 2022, page 118, lines 15 to 24): The reality is that at present that a potential purchaser looking at the site at the time, vacant and unimproved and with retail never operating from the site, is that there is no track record, there is no demonstrated ability of the site to service a trade area and generate the market shares and attract the tenants required to support a super regional shopping centre. And I think it would be relevant to a prudent potential purchaser, given the contemporary and commonly applied practise of the development of regional shopping centres, to consider the development of a super regional shopping centre in one stage as unprecedented and therefore having an associated risk with it. 1. Mr Stephens' opinion was that a prudent potential purchaser, taking into account the market opportunities and risks associated with the site, would have developed a "major regional centre" in the initial phase of development, making allowance for further staged retail development, whilst also developing residential or other permissible non‑shopping centre uses. He said that any super‑regional shopping centre would have been a long‑term development, with a staging process reflecting stages of investment tied to developments in customer visitation patterns, established patterns of trade, and performance. Mr Stephens' advice to a hypothetical purchaser client would have been to finish building the base‑case centre; assess the trading performance for a number of years before considering the next stage; and repeat this process for all potential subsequent stages. 2. When Mr Galasso put to him that under his approach, a centre of 124,000 square metres GLA may never actually eventuate, Mr Stephens replied that, in his opinion, there would be sufficient market opportunity for a centre to reach that size, the timing of expansions being subject to prevailing market forces. 3. Mr Stephens also noted that a staged development pathway reflecting emerging demand was standard practice in the shopping centre industry. He expressed the view that there was no reason why this site should be any different. 4. Both experts agreed that the Scentre Group portfolio comprising Westfield shopping centres had historically been built in stages, and that younger Westfield shopping centres, such as Westfield Coomera and Westfield Plenty Valley, have had staged development programs. Neither expert was aware of any Australian shopping centre of the scale proposed that had been constructed in a single stage over the past 40 years. The potential for a second department store to be attracted into an initial stage of retail development 1. Both experts accepted in oral evidence that the only realistic options for department stores on the site, as at the valuation dates, were David Jones and Myer. 2. Mr Dimasi said that whilst marginal department stores, typically smaller stores located in undersized and/or underperforming regional centres, were facing rationalisation at the relevant base dates, flagship stores such as those in super‑regional centres and central business districts were the "way of the future" for department store operators, and in fact were expected to see improved trading performance as marginal stores were rationalised. Mr Dimasi suggested that both Myer and David Jones would have been interested in locating a department store at the site as at the 2016 valuation date. 3. By contrast, Mr Stephens expressed the view that, given the strategic location of Macquarie Park and the expectation of ongoing population growth in the "main trade area", the initial stage of development at the site would have attracted one department store, "almost certainly David Jones, of approximately 12,500m2 in size". He considered it "highly unlikely" that a second department store, namely, Myer, would have been attracted into the initial stage of retail development at the site. 4. In his expert report and in oral evidence, Mr Stephens explained that the department store sector, at the valuation dates, had been experiencing difficulty as a result of broader structural shifts in the retail sector. He pointed to ABS retail trade series data indicating a decline in department store spending as a percentage of total retail spending since the 1980s, and highlighted corporate issues involving Myer around late 2015 which gave rise to the closure of a number of stores (including at Top Ryde and Hurstville); the announcement of a "New Myer" strategy to reduce store footprints by up to 20%; and abandonment of plans for other new stores. This, in his opinion, would have been known to a prudent hypothetical purchaser, who could not have safely assumed Myer's tenancy in a super‑regional shopping centre on the site. 5. In his expert report, Mr Stephens also noted that eight department stores (four stores for each of Myer and David Jones) were already provided at super‑regional shopping centres within 12 kilometres of the site and that the "main trade area" of the hypothetical shopping centre at the site overlapped with those of Westfield Hornsby and Westfield Chatswood, limiting the potential for further department store operators at the site. In Mr Stephens' opinion, the lack of tenant demand for two department stores is an important reason why Mr Dimasi's sales and market share forecasts did not reflect a realistically achievable outcome. 6. Neither expert was aware of a shopping centre in the last 40 years which had opened with two department stores simultaneously. The experts estimated that there were between 15 to 20 regional shopping centres in Australia with two department stores (Mr Stephens estimating between 18 to 19). Mr Stephens stated that out of the 27 super‑regional shopping centres in Australia, 10 centres had only one department store, whilst one centre had no department stores. Demand for residential development on the site 1. In his expert report, Mr Stephens proposed that at the valuation dates, the residential property market in Sydney was generally characterised by strong levels of demand and investment activity. He suggested that a key factor in driving demand was the relatively high population growth rate since 2004, driven in large part by Commonwealth Government policies encouraging high levels of net migration to Australia. He explained that this population growth mostly occurred in major urban areas including metropolitan Sydney - in part due to the State Government's long‑term urban consolidation policies and a shift in housing preferences towards higher density housing formats. 2. Mr Stephens suggested that the record number of multi‑unit new dwelling approvals in Greater Sydney in 2015-2016 was indicative of strong developer interest in, and market demand for, multi‑unit residential development. He expressed the view that such demand was increasingly associated with mixed use development outcomes and that this was a well‑understood trend in the property industry before 2016. 3. Mr Stephens reviewed the characteristics and performance of the residential market in Macquarie Park and its surrounds by defining a "Local Housing Market" (LHM), which combined ABS Statistical Area Level 3 regions covering much of the Sydney North Shore region. According to Mr Stephens, demographic information available at the valuation dates suggested that: * the population of the LHM would have been reasonably expected to increase from 499,000 to 685,000 persons between 2016 to 2036, at a rate of 9,300 additional persons per annum, indicating a reasonable expectation of significant housing demand equivalent to 87,200 new dwellings; and * this increased demand was also reflected in rising annual new building approvals within the LHM in the five years leading up to 2016, the overwhelming majority of which were for what the ABS defined as "Other" dwellings, which included medium and high‑density dwellings. 1. Mr Stephens' review of market activity (including sales and rents) in the LHM from 2006 to 2016 also indicated that: * there had been growth in annual sales, median price, and annual median price growth rate for units and apartments; * two‑bedroom units and apartments accounted for approximately half of sales, with increasing demand for one-bedroom units as a proportion of all sales; * the median unit price in the LHM in 2016 was $125,000 above the Greater Sydney average; and * there had been strong rental price increases for one‑ and two‑bedroom units within the City of Ryde Local Government Area, which out‑performed average growth in Greater Sydney. 1. These factors all contributed to Mr Stephens' conclusion that there were relatively strong demand conditions existing in the unit and apartment market relevant to Macquarie Park at the valuation dates. 2. Mr Stephens further provided an analysis of the demographics of unit and apartment residents in Macquarie Park and the LHM. He provided a variety of statistics including median personal income, average age, proportion of Australian‑born residents, language spoken at home, household size, proportion of dwellings rented, and employment. From this information, he concluded that: This review of socio-economic data indicates to me that at the time of the 2016 ABS Census of Population and Housing the demand for apartments in Macquarie Park was characterised by a relatively young population with a high share of primarily foreign-born students. A high share of single person households and a relatively low average household size is combined with relatively low rates of car ownership. Of employed residents, an above average share are young professionals. Rents are above the Greater Sydney average and investors own a significant majority of housing stock. 1. Mr Stephens suggested that the following factors contributed to the demand for residential apartments in Macquarie Park in general: 1. an emerging market for higher‑density residential, with medium and high‑density development already planned and underway within Macquarie Park, with the reasonable expectation of significant future population growth and apartment development; 2. the high profile of Macquarie Park as the location of Macquarie University, Macquarie University Hospital, significant corporate office functions and other major community infrastructure; 3. the relative accessibility via private and public transport, including the proximity of the M2 Motorway; 4. the presence of the Macquarie University train station providing access to Hornsby, Chatswood and the CBD and, in the near future (as at July 2016 and July 2017), the growing north‑western suburbs of Sydney, noting the North-West Rail Link began construction in 2014 and was due for completion in 2019; and 5. strong residential market conditions generally on the North Shore of Sydney and across the residential property sector. 1. Mr Stephens also suggested that the following factors contributed to the attractiveness of the site for potential residential developers, unit purchasers and future residents: 1. the strategic, centralised location within Macquarie Park directly adjacent to the train station, university, hospital and other community infrastructure; 2. an expectation that any residential apartments would integrate into an intensive mixed use precinct, including a significant retail component consistent with the operation of a regional attractor; 3. a large site size with multiple street frontages providing numerous access points and built‑form development opportunities. 1. There was also some discussion about documents referred to in the Social Impact Statement annexed to the Statement of Environmental Effects submitted on behalf of AMP for the development application at the site dated 18 December 2015. These documents comprised the report entitled "AMP Project Green - Residential Market Assessment" dated 22 May 2012) and the report prepared by Colliers International for AMP entitled "Analysis of the Macquarie Park/North Ryde Residential Apartment Market" dated April 2014. 2. In oral evidence, Mr Dimasi accepted that the following extract from the executive summary of the 2012 MacroPlan Dimasi report reflected the sort of advice that would have been provided to a hypothetical purchaser of the site, though only to a purchaser with a particular interest in residential development: The objective of our analysis is to evaluate market conditions for potential apartment development at the Macquarie Centre. Recent projects marketed in close proximity to the Macquarie Centre have proven to be in great demand with the Macquarie Centre project on Herring Road recording very strong sales. 1. Mr Stephens understood that, prior to 1 July 2016, AMP Capital were "considering the potential for a significant residential component as part of a mixed use development outcome", as noted in the 2014 Colliers report, which stated that "AMP Capital is in the early stages of planning for a Stage 1 Masterplan for the redevelopment over part of their Macquarie Shopping Centre (for retail and residential purposes)" and was proposing "approximately 820 apartments within the Stage 1 Masterplan to be built across four buildings". 2. Mr Stephens suggested that even though this scheme was premised on the existence of the Macquarie Shopping Centre, it still reflected "in tangible terms the general market interest in residential development within Macquarie Park, and the Subject Land" that would have generally been known to the prudent purchaser at the valuation dates. In oral evidence, Mr Stephens additionally suggested that the commissioning of the 2014 Colliers report was a tangible demonstration of AMP Capital's interest in the Macquarie Park residential apartment market and indicated the steps it took to seek information about whether to build a residential development. 3. Mr Dimasi disagreed and suggested that the furthest the 2012 MacroPlan Dimasi and 2014 Colliers reports went was to merely demonstrate demand for residential apartments at Macquarie Park, noting: They're a long way from being a feasibility assessment of the development of apartments at the Macquarie Centre, and in particular, whether or not that should occur in lieu of retail development at the Macquarie Centre. 1. In his expert report, Mr Stephens noted the fact that a planning application had been lodged for the site in December 2015 (and approved in November 2016) which "included design parameters for building envelopes to accommodate four towers fronting Herring Road", which were proposed to "contain mixed use development including commercial premises, residential accommodation and/or tourist & visitor accommodation". He also made reference to four residential apartment approvals on land immediately proximate to the site from 2012 to 2017 (namely Macquarie Central, Macquarie Residences, Macquarie Park Village, and 101 Waterloo Macquarie Park). These included applications from large development groups such as Meriton and Toga Group, and, according to Mr Stephens, were indicative of the fact that the wider Macquarie Park precinct had been identified as an "opportunity for substantial investment in higher density residential formats". 2. According to Mr Stephens, commentary and analysis within the 2014 Colliers and 2012 MacroPlan Dimasi reports similarly supported the fact that strong investor interest reflected relatively strong demand conditions for the residential sector leading up to the valuation dates. 3. Mr Stephens further quoted from the 2014 Colliers report, which suggested that Macquarie Park and the site had "a strong outlook in terms of accommodating new housing development", and identified a lack of housing, a latent "pent up demand" for new apartment developments, and strong sales rates for recent Macquarie Park residential developments, which were indicators of strong buyer demand and would have been of interest to potential developers. 4. Mr Stephens also formed the opinion that, as of July 2016, the Top Ryde development of a new shopping centre and 635 apartments in five towers above that shopping centre reflected a "tangible demonstration of the ability to deliver a master‑planned mixed use development project of significant scale on the lower North Shore of Sydney, including residential development above a significant retail centre". 5. Dr Pritchard took Mr Dimasi to several extracts from the 2012 MacroPlan Dimasi report. These extracts highlighted, amongst other things, the under‑supply of housing and premium‑grade apartments in the Ryde Local Government Area in 2012; the predicted above-average price growth of residential property in the area; and the estimated demand for 4,000 additional dwellings by 2017 and 5,500 additional dwellings by 2020. Mr Dimasi did not contest the accuracy of the advice provided in the report at the time and accepted that it reflected the fact that there was demand for new residential apartments in the Macquarie Park region at that time (which would, in turn, have also fuelled demand for retail supply). 6. Dr Pritchard also took Mr Dimasi to a section of the report which noted the Macquarie Centre had a clear advantage over sites outside the Macquarie Park precinct by virtue of its proximity to retail and rail transport, allowing it to extract a value premium over competing developments in the Macquarie Park precinct. 7. Regarding the mix of apartment demand at Macquarie Park as at the valuation dates, Mr Stephens considered that it would have been reasonable to consider an apartment market which (Exhibit A, Tab B2, page 330, paragraph 67): a Included a high share of foreign-born students and young professionals b Was dominated by investors, although would include some limited owner-occupiers c Had recent projects with demonstrated demand for primarily one and two bedroom apartments. 1. In light of these considerations, Mr Stephens suggested an apartment mix was appropriate to be envisaged which: … focussed primarily on one and two bedroom apartments serving the student and young professionals market, and which is attractive to investors. That is generally consistent with the advice also provided at that time by Colliers (65% 1 bedroom, 30% 2 bedroom, page 117) and MacroPlan Dimasi (60% 1 bedroom, 35% 2 bedroom, page 25) to AMP in relation to the Macquarie Centre site. 1. He noted that a developer could have delivered a higher share of two‑bedroom apartments if it sought more owner‑occupiers as purchasers and/or young professionals and downsizers as residents, referencing the development at 101 Waterloo Road, which comprised 72% two‑bedroom apartments. Mr Stephens suggested that the final mix of apartments for any development would have been informed by market analysis, depended upon the developer's experience, expertise, and preferred business model, and could have responded over time to market conditions via a staged development program. 2. Overall, Mr Stephens summarised his position as being that as at the valuation dates, there was strong demand for housing, particularly apartments, including at the site. He suggested there had been an emerging industry trend in the previous 10 to 15 years of co‑locating residential and retail development, driven by both commercial realities and government policy. Given the flexibility of the zoning at the site, the site attributes, and its scale, Mr Stephens would have strongly advised a client to take into account a residential component in association with the retail component, in accordance with the planning policies for a regional attractor in the retail core of Macquarie Park. He expressed the view that: In terms of the relevant matters, I consider it reasonable to expect that any potential prudent purchaser of the Subject Land, as at July 2016 and July 2017, would consider residential uses as an intrinsic and important component of any future development outcome. This would be complemented by retail, commercial and other uses in a modern and integrated mixed use precinct which reflects planning policy requirements. 1. Mr Dimasi summarised that he would certainly not have advised a hypothetical purchaser to allocate any land at the ground level of the site for potential residential development in a way that would have compromised the development of potential retail, entertainment, leisure, and related facilities. He suggested that it might later be reasonable to develop residential uses above the retail component, subject to detailed feasibility studies. He said that the mere fact that there was demand for residential uses did not guarantee that residential development would have been profitable when built as part of a shopping centre development, given that it would have compromised the effective operation and long‑term planning of retail uses. Should St Ives be included in the "main trade area"? 1. One additional area of disagreement between the experts was whether the Secondary North sector of their defined "main trade area" for the hypothetical shopping centre included additional areas surrounding St Ives. 2. Mr Dimasi expressed the view that the St Ives area was included within the Secondary North trade area for several reasons. He first noted that the site was located 10 minutes' drive time from the middle of St Ives, along a straightforward section of Ryde Road which ran almost directly to the site. He also noted that the competing large regional shopping centre offer in Chatswood (Westfield Chatswood and Chatswood Chase) was a longer 15 minutes' drive time from the middle of St Ives, and was more fragmented, comprising two shopping centres at opposite ends of a relatively long street, as opposed to the more convenient, fully integrated centre at Macquarie Park. Further, although the competing large regional shopping centre offer at Westfield Hornsby was approximately 13 minutes' drive time from St Ives, it was located in an outbound direction from St Ives and was also in a lower sociodemographic area than St Ives. In these circumstances, Mr Dimasi said that the most attractive offer for residents of St Ives would have been that at the site, and that although St Ives residents may also have shopped in the Chatswood centres and at Westfield Hornsby, it would be as a secondary trade area for those residents. A secondary trade area is, by definition, one from which the residents are expected to direct some proportion of their expenditure to the centre in question but a noticeably lower proportion than that which is attracted from residents directed to the primary trade area. 3. Mr Dimasi also noted the circular relationship between a shopping centre's scale and mix and the extent of the trade area which it can serve. He expressed the view that the larger and more attractive a shopping centre is, the more extensive the trade area that it can serve, assuming that trade area is available to be served. As such, the recommendation to develop a super‑regional centre at the site, and the scale, mix and attributes of that centre would be informed by the site's ability to draw business from an area such as St Ives. 4. Mr Stephens suggested that, when defining the main trade area, it must be recognised that any regional shopping centre at the site would be considered as operating on a "first principles" basis without the benefit of pre-existing trading patterns. Mr Stephens disagreed that the St Ives area should have been included in the definition of the Secondary North sector of the site's main trade area. He pointed to the presence of super‑regional shopping centres at Chatswood and Hornsby which had well‑established trading patterns (as opposed to the site). He considered that "any realistic initial development scheme for a regional shopping centre at the Subject Land would offer a competitive, although not directly comparable, offer to the well-established super regional centres at Chatswood and Hornsby, and the different socio‑demographic profile of St Ives and Macquarie Park". Optimum car‑parking design for a regional shopping centre on the site 1. Mr Dimasi proposed that the ideal design for a car‑park would have been to provide car‑parking at the same grade as each retail level, with the balance of car‑parking in either basement and/or rooftop levels. The exact design would have been subject to factors such as cost, size and shape of the site, road frontages and required setbacks, and scale and mix of retail uses to be accommodated. He noted that a developer of a new site, like the one at Macquarie Park, would have sought to provide the best possible car‑parking in terms of layout, accessibility, and convenience in order to provide the highest level of amenity for potential customers. Doing so would obtain a marketing edge over competitors. Mr Stephens considered this to be a matter outside of his professional expertise. Addressing the Southwell hypothetical development scheme Introduction 1. In short compass, the Southwell hypothetical development scheme can be described as one incorporating: * a regional shopping centre built primarily addressing Herring Road but with elements along both the Waterloo and Talavera Road frontages of the site; * the proposed regional shopping centre, although initially proposed to be built in two stages, would, for reasons later explained, be constructed in a single stage. The initial shopping centre element would occupy 110,600 square metres of the 387,450 square metres GFA available to be developed on the site; * potential for expansion in the size of the regional shopping centre is provided in the centre of the site. The maximum GFA allowance in this scheme for the expansion of the shopping centre is 60,400 square metres; * residential tower developments are proposed along the Herring Road and Waterloo Road elements of the shopping centre as towers constructed atop the podium provided by the shopping centre; * in the north‑eastern corner of the site, fronting Talavera Road, the Southwell scheme envisages a precinct comprising five (mixed use, but overwhelmingly residential) towers ranging between 11 storeys and 19 storeys in height. This residential precinct would yield 1,474 apartments (Evidence Book, folio 530, total for Stages B1.1, B1.2, B2.1, B2.2, and B3) as its final yield (the yield having been revised during the evolution of Mr Southwell's design, as later described); * parking for the shopping centre and the residential towers, using the centre as a podium, would be provided in basement parking utilising the existing land improvement on the site, but also involving further extensive excavation to provide additional, lower parking levels. Additional, lateral excavation would also need to be undertaken in order to make provision for necessary parking for future expansion of the shopping centre to its maximum developable GFA capacity; * parking in the residential precinct on Talavera Road would be underneath each of those residential apartment towers; and * each of the residential apartment blocks in the Talavera Road residential precinct would have commercial elements constructed at ground level in order to comply with the development requirements for these buildings to be classified as being of a mixed use development typology as required by the B4 Mixed Use zoning of the site. 1. Two further observations are appropriate to be made at this time. First, the Southwell hypothetical development scheme envisages that all the residential apartments that would be developed (that is, those not only in the Talvera Road residential precinct but also in the residential towers above the shopping centre) would be constructed on a build‑to‑sell basis rather than embodying any build‑to‑rent residential development. 2. Second, the total GFA of the entirety of the Southwell hypothetical development scheme is 394,560 square metres GFA. This total hypothetical development yield is 7,110 square metres GFA (or 1.8%) greater than the maximum 387,450 square metres GFA development standard permitted for the site, derived from applying the 3.5:1 FSR as set by the LEP for the site to the area of the site. As a consequence, as later discussed, a request made pursuant to cl 4.6 of the LEP would need to be made (and succeed) at development application stage for the additional non‑compliant GFA to be permitted. 3. As also later discussed, different considerations for such a cl 4.6 request arise for the hypothetical development for the 2016 base date compared to those which would arise for the 2017 base date. This was because the date of increase of the developable GFA yield arose from an increase from 2:1, as the FSR, to 3.5:1, as the FSR, with this change being effected on 1 October 2015, some nine months prior to the 2016 base date. 4. During the course of the hearing, a three‑dimensional diagrammatic presentation of the Southwell scheme was frequently referred to in evidence and submissions. This three‑dimensional schematic was contained in Mr Southwell's expert report, it appearing at folio 526 of the Evidence Book. It is appropriate to reproduce a copy of it below before explaining what is depicted in it. As the annotation to the image appearing below is necessarily impossible to read as a consequence of the image size able to be reproduced in portrait at this point, a full A4 copy of this image is reproduced in landscape format at Annexure A to this decision. 1. As earlier noted, Mr Southwell's development scheme originally envisaged that his shopping centre element would be constructed in two stages, those stages being shown as shaded green in the left‑hand and right‑hand elements of the upper line of the above image. However, during the joint conferencing of the expert valuers, they concluded that separation of construction of the shopping centre element into two stages would not provide the best hypothetical development value outcome and that developing the two stages as a single, merged project was the appropriate hypothetical path to be adopted. As a consequence, Mr Southwell adopted a revised hypothetical development staging model that would have the two stages noted above appearing on the top line of his schematic developed as a single project rather than in temporally separated, sequential stages. The planning issue with the Southwell scheme The Southwell scheme and cl 4.6 of the LEP 1. As earlier noted, the maximum GFA permitted to be developed on the site, whilst remaining compliant with the FSR of 3.5:1 set by cl 4.4(2) of the LEP and the associated Floor Space Ratio Map is 387,450 square metres. The Southwell hypothetical development scheme is based on a development yield of 394,560 square metres of GFA. This proposes an exceedance of the area permitted by the development standard of 7,110 square metres GFA or 1.8%. 2. For such an exceedance to be permitted, a development application for the Southwell scheme hypothetical development scheme would need to be supported, successfully, by a request made pursuant to cl 4.6 of the LEP seeking to be permitted to breach that development standard. 3. Clause 4.6 of the LEP is a beneficial and facultative provision that creates the possibility of the granting of an exemption from compliance with a development standard. The provision was earlier set out at [27]. Any such hypothetical request in support of such a hypothetical development must satisfy the consent authority that each of the tests set by the clause are satisfied before the request can be granted. Relevantly here, cl 4.6(3)(b) requires that the consent authority for the hypothetical development be satisfied that sufficient environmental planning grounds have been established to justify permitting the exceedances of the maximum GFA otherwise permitted to be developed on the site (see Initial Action Pty Ltd v Woollahra Municipal Council (2018) 236 LGERA 256; [2018] NSWLEC 118 and RebelMH Neutral Bay Pty Ltd v North Sydney Council [2019] NSWCA 130 - RebelMH v North Sydney). The position advanced for the Valuer‑General 1. In his expert report, Mr Duggan addressed the necessity for a successful cl 4.6 request in the following terms: 105. For the avoidance of doubt, the "highest and best" use scenario I put forward in this report does not require any changes to the development standards or other planning controls contained in the RLEP 2014 or RDCP 2014. 106. However, owing to the scale of the Site, from my experience a Planning Proposal may be prepared as the basis for a masterplan for the development of the Site which may vary the planning controls and development standards applying under the RLEP 2014 and RDCP 2014. 107. Further, Clause 4.6 of the RLEP 2014 enables a development to vary the development standards and may be pursued at the time of lodging a development application. The variation request would justify the contravention by demonstrating that compliance with the development standard is unreasonable or unnecessary in the circumstances of the case, and that there are sufficient environmental planning grounds to justify contravening the development standard. 108. Examples of variations under Clause 4.6 granted to the development in the area include, but are not limited to, development at: - 01-107 Waterloo Road, Macquarie Park (LDA2016/0567) to enable additional floor space (11%), - 82-84 Waterloo Road, Macquarie Park (LDA2016/0602) to enable additional height (1- 4.2%), - 25-27 Waterloo Road, Macquarie Park (LDA 2016/0395) to enable additional floor space (2.6%), - 80 Waterloo Road and 16 Byfield Street (LDA 2016/0524) to enable additional height (10.7%). I would advise a hypothetical purchaser that this is evidence of circumstances where the consent authority has applied the development standards in the LEP flexibility (if required) and where clause 4.6 can be demonstrated to be satisfied. 1. Mr Duggan further addressed the issue in a supplementary expert report. Mr Duggan expressed the opinion that the objectives of the FSR control development standard would have been achieved notwithstanding non‑compliance with the standard, and that this was one of the ways that compliance with the development standard could have been shown to be "unreasonable or unnecessary in the circumstances of the case" in satisfaction of cl 4.6(3)(a) (citing Wehbe v Pittwater Council [2007] NSWLEC 827) (Evidence Book, Tab A4, page 97, paragraph 20 to page 98, paragraph 24). In order to show this, Mr Duggan made reference to each of the three objectives of the FSR control as set out in cl 4.4(1) of the LEP: (1) The objectives of this clause are as follows: (a) to provide effective control over the bulk of future development, (b) to allow appropriate levels of development for specific areas, (c) in relation to land identified as a Centre on the Centres Map—to consolidate development and encourage sustainable development patterns around key public transport infrastructure. 1. With respect to each of the objectives, Mr Duggan expressed the view that: a. Objective (a) to provide effective control over the bulk of future development The location in which excess floor space would seek to be located sits generally within the 90 metre height of building height area and partially in the 65 metre height of building area. In both cases the expansion would be well below the maximum height development standard for that part of the Site. This area of the Site has been afforded significant height by the planning controls and the provision of the additional level of department store in this part of the site would not be inconsistent with the type and form of building envisaged for the Site and in particular the area around the corner of Herring and Talavera Road. b. Objective (b) to allow appropriate levels of development for specific areas The Site has been afforded significant development potential given its proximity to public transport and other key uses such Macquarie University and Macquarie Hospital. The provision of a modest (~2%) amount of additional GFA above the maximum permitted on the Site would not be inconsistent with the objective of providing an appropriate level of development on the Site. As part of any future development application, a traffic and parking assessment would be undertaken which would be important in considering the impacts of any additional traffic arising from the GFA above the development standard. c. Objective (c) to consolidate development and encourage sustainable development patterns around key public transport infrastructure The Site falls within the nominated Macquarie Park Corridor Centre and therefore this objective would be relevant. It would not be inconsistent to provide additional retail GFA within such close proximity to the public transport which exists around the station, including the future metro line. 1. With respect to cl 4.6(3)(b), Mr Duggan said that there were sufficient environmental planning grounds to justify contravening the FSR control. He suggested that a positive environmental planning ground would have been the additional provision of retail use: 27. There are sufficient environmental planning grounds to justify a flexible approach to the application of the FSR control as it applies to the site. The non‑compliance with the FSR control largely results from seeking to expand upon a department store which if approved on the Site would provide for subsequent increased Department Store floor space (if required). The Site would be the beneficiary of significant public and private investment that would make it suitable to expand a Department Store should the need arise. 1. With respect to cl 4.6(4)(a)(ii) of the LEP, Mr Duggan opined that the proposed excess floor space would have been in the public interest and been consistent with the objectives of the B4 Mixed Use Zone in the LEP. 2. As a result, Mr Duggan would have advised a purchaser that there would have been "strong prospects of obtaining a clause 4.6 for the FSR variation that is put forward by Mr Southwell as Option 3 in his expert report." (Evidence Book, Tab A4, page 99, paragraph 32). 3. As to the form and timing of the cl 4.6 request, Mr Duggan opined (Evidence Book, Tab A4, page 99, paragraph 33): 33. The clause 4.6 variation could be made at the time of the Concept DA or (if not contemplated at the time) as part of a later development application. A modification pursuant to Section 4.55 of the EP&A to the Concept development consent would need to be sought if the clause 4.6 application was to be made as part of a later development application. 1. During the course of his oral evidence, he was questioned on this point by Mr Galasso (Transcript 1 April 2022, page 107, line 7 to page 109, line 38): GALASSO: And according to the numbers, with that last piece of retail expansion, for the quantum of that last stage, there would be an exceedance of the floor space ratio control. WITNESS DUGGAN: It just tips over the edge, yes. GALASSO: Yes, well, but there is an exceedance. WITNESS DUGGAN: There's an exceedance. GALASSO: You want to say, "just tips over", but there's an exceedance, is there not? WITNESS DUGGAN: An exceedance. GALASSO: Right. Now, this is an environment in which, in October 2015, there was a - would you be happy with the description - "significant uplift" in floorspace ratio for the subject site? WITNESS DUGGAN: Yes. GALASSO: 2:1 to 3.5:1. WITNESS DUGGAN: Yes. GALASSO: And in order to deal with the exceedance of the floor space ratio control, you've recognised the need to prepare and have upheld a request pursuant to clause 4.6 of the LEP. WITNESS DUGGAN: Yes. GALASSO: And that's what this report deals with? WITNESS DUGGAN: It - it deals with advice that I'd give a hypothetical purchaser, and it's not meant to be a 4.6 in itself, but I try to engage with the subject matter as to the type of advice I would give. GALASSO: Yes. Your report is 111 pages long. The vast sum of it is taken up by someone else's clause 4.6 on a different site. WITNESS DUGGAN: Correct. GALASSO: But you deal with the integers of clause 4.6, do you not? WITNESS DUGGAN: Yes. GALASSO: Now I'm not going to take you through the first element of clause 4.6 - or one of the earlier elements of clause 4.6 about concerning unreasonable or unnecessary - but one thing I do want to ask you about is that aspect of clause 4.6 in sub clause 3(b), which is, "sufficient environmental planning grounds to justify contravening the development standard". Now, there are two things about that. The first is - and you deal with this in paragraph 27 on evidence book 99 - and I want to put it to you this way, irrespective of the quantum, the request is needed to be undertaken because, by the time of this last stage, floor space, a) has been built or approved - approved and/or built, and b) of that floor space, a not insignificant proportion of it is residential. WITNESS DUGGAN: Yes. GALASSO: So it's almost trite, isn't it, that if it wasn't already used up, you wouldn't need a clause 4.6 objection? WITNESS DUGGAN: Yes. GALASSO: Secondly, when it comes to the environmental planning ground, you say, may we take it - and this would form the basis for an environmental planning ground - you say in the second sentence of paragraph 27, "The non‑compliance with the control largely results from seeking to expand upon a department store, which, if approved on the site, would provide for subsequent increased department store floor space if required". WITNESS DUGGAN: Yes. GALASSO: Now, is that not consistent with the notion of a retail core? WITNESS DUGGAN: It - it - it certainly engages by - with, by that time, that there is a significant retail shopping centre there and a department store which could be expanded. And the sufficient environmental ground is the fact that for - that it is in the absence of other, certainly other environmental impacts, and that would be an appropriate place to expand upon a department store. GALASSO: Yes, but you're focussing upon the retail provision as an environmental planning ground. WITNESS DUGGAN: Yes. GALASSO: And may we take it, you would advance that as a positive environmental planning ground? WITNESS DUGGAN: Yes. GALASSO: Well, that that would be there upon recognition of the retail core designation in the DCP, wouldn't it? WITNESS DUGGAN: Yes, but I - I've - again, I've always said this role - the site has to play the role of a retail core. GALASSO: And if less of the site had already been given away to what I've described as a residential precinct, then this sentiment would not need to be the subject of a clause 4.6, would it? WITNESS DUGGAN: No. That's just one - that's just as one follows the other. GALASSO: Can I ask you this, what happens when there is more demand for retail space? There would need to be another clause 4.6, wouldn't there? WITNESS DUGGAN: If there was, yes. GALASSO: So is this the case, that on the scheme about which you give advice about a clause 4.6, it seeks to maximise floor space on a site without any capacity, except through either a, or a series of, clause 4.6 requests to accommodate any greater demand for retail on the subject site? WITNESS DUGGAN: Well, this clause 4.6 is only engaged on the - the third expansion in Southwell's design. GALASSO: I didn't ask you about that, Mr Duggan. I asked you about if, to the extent beyond - this is dealing with the third option, and I've started on that basis, but if there is future demand for retail space on this site, you accept, do you not, that that could only be accommodated by either another, or a series of, clause 4.6 objections that address that increased floor space? WITNESS DUGGAN: Yes. GALASSO: And in a sense, they would be required because, by that point in time - that is, by the saturation of floor space - there has been, amongst other things, a significant precinct of residential created in the south east corner of the subject site. WITNESS DUGGAN: Yes. 1. Mr Southwell was also questioned on this point during the course of his oral evidence. Although the relevant portion of the transcript is somewhat lengthy, for reasons later explained, I include it in full (Transcript 4 April 2022, page 176, line 50 to page 185, line 39): PRITCHARD: It might be an appropriate time, Mr Southwell. You heard what fell from his Honour in relation to clause 4.6 request. Would you like to explain the circumstances surrounding that for his Honour? WITNESS SOUTHWELL: Certainly. So the clause - so in - in option - or should option 3 be adopted, it does take the total GFA of about 7000 square metres over and above 3.5 to 1 in the planning controls. It represents about a 1.8% difference to the permissible GFA, of course, that does rely on a clause 4.6 and the support of the planning expert and that's not, to be frank, that's not uncommon on a lot of development developments where we do where the clause 4.6 often has support for minor variances. To put it into context, 7,000 square metres could be taken out of the residential, for example, to compensate that. 7,000 square metres represents about 6000 square metres of saleable area, or about 60 apartments out of 2,500. So, yes, it's a component of area, it's not significant, in my view and if it weren't supported by the planning authorities, there's a number of avenues to claw that back. By that, I mean, at the moment, the residential NSA is based on an 85% efficiency of the gross floor area, which is quite a conservative approach. To claw back that 6000 square metres of NSA, you'd need to take the residential development from 85% to 87% efficiency and give back the same NSA. That can be done in detailed design. The residential across the road in number 2/10 Cottonwood Crescent, that's a DA we had approved. Currently under construction with Meriton, is 88% efficiency. We have large projects in Bankstown of 500 apartment with 89% efficiency. So, my simple point of that, is that with detailed design, you can reconcile that shortfall and revert back to a compliance scheme if you need to. PRITCHARD: Does that answer your Honour's‑‑ HIS HONOUR: No, it leaves me floundering a little. if you are going to have prepared or to assist in the preparation of the clause 4.6 request, you have to detail not merely that the exceedances. 7,000, 6,000 square metres. You have to identify where the exceedance is going to occur and why that exceedance is justified. Now, you've told me about the area. You're instructed, hypothetically, to assist in the draughting of such a request. Which 6000 square metres is it that you are going to say is the exceedance for which you seek the indulgence potentially granted by that clause? WITNESS SOUTHWELL: I would suggest - if option 3‑‑ HIS HONOUR: No, I don't want you to suggest anything, I want you to tell me of your design that requires a clause 4.6 request to be made successfully, which bit are you going to make that request about and why? PRITCHARD: Perhaps, Mr Southwell, it would assist the Court if you directed the Court to particular plans. WITNESS SOUTHWELL: Thank you. So, yes, the additional - if I go to, bear with me, I believe it's - I'll just go to the relevant plan. If you go to page 506, which should be the ground floor of the development. The 7,000 square metres that relates to this clause 4.6, has come through option 3. Now, in the development of a concept master plan, my recommendation to the hypothetical client would be that there is an area of retail circa 5600 square metres that sits under site B, for example, that includes a number of non‑core retail components, including child care community spaces that would be ancillary to the primary retail component of the development. Often in these scenarios we work with the planners to identify what are the logical areas to argue - for the clause 4.6. Obviously, a lot of factors of clause 4.6 is also evidencing that it doesn't have any impact on the public domain in terms of the overall built form, the shadow and the like. Here, it is purely a floor space issue rather than any other controls, we're well under the height claim and very minor extra-over. I'm not sure if that answers it clearly. HIS HONOUR: I'm sure it doesn't. So you say one of the Bs, is that right? Or all of the Bs‑‑ WITNESS SOUTHWELL: So, under the Bs, there's currently 5,000 square metres of retail GLA that includes childcare, community spaces and some corner neighbour - what I call this service-related retail under the residential. HIS HONOUR: Yes. WITNESS SOUTHWELL: So, what we would assist the planner in writing the clause 4.6 is write about why there's value in having that below the residential in terms of the community offer, in terms of greater public benefit, so that the primary retail centre could achieve the 128,400 square metres of GLA that we had suggested. HIS HONOUR: To what extent does that 6,000 square metres comprise all or part of the space necessary to make the residential B buildings mixed use for the purposes of the‑‑ WITNESS SOUTHWELL: Well, all I could say is that, by way of example, across the road in Cottonwood Crescent, we had two developments approved under the B4 zoning. One of them has a single café on the ground floor of circa 100 square metres. And the other one, that I mentioned earlier that's been on being constructed by Meriton, all it has in the lower ground floor is a childcare centre. It's a very minimal component of non‑residential on the ground floor. HIS HONOUR: So, you are saying to me, if the 6,000 square metres is not permitted, and comes out of the pink, there will still be some commercial under each of those buildings, is that right? WITNESS SOUTHWELL: Yes, because we would reconcile the GFA by two methods. One - reducing the quantum of non‑residential on the ground floor there and two - at the end of the day, the residential portion is driven by the efficiency of the net sellable area of the apartments. So, minor tweaks in the efficiency of the planning for the residential apartments would reduce that shortfall. HIS HONOUR: Mr Galasso. GALASSO: Mr Southwell, isn't the answer to his Honour's question that the - that where on the site this additional floor space is located is in fact in the regional shopping centre? WITNESS SOUTHWELL: Through, yes, through the development of option 3, correct. GALASSO: So, if - one way for his Honour to see that diagrammatically is if you went to the evidence, book at page 526. This is your staging matrix. WITNESS SOUTHWELL: Mm-hmm. GALASSO: Or, staging sequence. The exceedance that warrants the clause 4.6 is an exceedance at the end of the project, so to speak, is it not? WITNESS SOUTHWELL: Correct, however‑‑ GALASSO: Just - is - were you able to answer that positively or negatively, or do you need to explain it? WITNESS SOUTHWELL: I'd like to explain it, please. GALASSO: All right. WITNESS SOUTHWELL: Obviously, the whole premise for this development is you would lodge a concept DA. So, it's at that point in time that you know whether the planning authorities are going to support a clause 4.6. If it's evident, through the pre-DA process, that they're not going to support it, the master plan, including those staging diagrams, would be tweaked accordingly. GALASSO: Well, you're advising - this case is about you advising a hypothetical, prudent purchaser of vacant land. WITNESS SOUTHWELL: Correct. GALASSO: And may I take it from your evidence, you're advising that hypothetical prudent purchaser even before that purchaser buys the land, not only that you will achieve the maximum floor space ratio, but that you're going to get a result that is more than the floor space ratio control under the local environmental plan. WITNESS SOUTHWELL: We're advising - I'm advising a prospective purchaser - a hypothetical purchaser, sorry, that there are series of options for how they could develop the site and a series of stages. I would also advise them that we have used a very conservative conversion rate from GFA to NSA. GALASSO: But Mr Southwell, by the time - if we look at these stages, I mean, bear in mind, in this case, we've got Mr Preston who's saying that he prefers your scheme because it's more specific than Mr Shaw's scheme to value, now there's a series of stages we've got here. Correct? WITNESS SOUTHWELL: Correct. GALASSO: You have identified the stages, and for the topic of an exceedance of floor space, it is in fact bottom right hand corner page 526 stage 4, that is that part of this sequence that would necessitate the clause 4.6 objection. Correct? WITNESS SOUTHWELL: In totality, yes. GALASSO: And it needs it, because by the time of that stage all of the other coloured boxes in the preceding five perspectives have utilised floor space and all that's left is this central reserve space in the middle of the site for the shopping centre. Correct? WITNESS SOUTHWELL: Correct. GALASSO: Why didn't you just pull back the floor space elsewhere for the sake of having a compliant development scheme in advising a hypothetical prudent purchaser? WITNESS SOUTHWELL: Typically on any development we have clients asking us where else can they explore opportunities on the site. It's pretty rare, Mr Galasso, to have a client not ask us could we pursue additional area, or look at various stages. As I mentioned before, in the hypothetical process of advising a client, we have to make educated guesses on efficiency rates and the like, that apply to a scheme. GALASSO: Yes, but the efficiency rates, Mr Southwell, have got nothing to do with the GFA element, do they? WITNESS SOUTHWELL: No, I beg to differ. GALASSO: The efficiency rates, can I suggest to you, are an exercise between you and the client to convert as much GFA as possible to either gross lettable area or net saleable area. WITNESS SOUTHWELL: Correct. GALASSO: And the matrix for the consent authority is concerned with GFA, gross floor area, correct? WITNESS SOUTHWELL: Correct. GALASSO: So is this the case that by the time this last stage, you maintained the floor space ratio for the shopping centre because it was consistent with Mr Steven's evidence for the expanded shopping centre? WITNESS SOUTHWELL: Sorry, can you repeat that question? GALASSO: His Honour's got the sixth perspective plate on page 526, and with that sixth plate, his Honour knows that that would produce an exceedance of the floor space, correct? WITNESS SOUTHWELL: Correct. GALASSO: The reason why you didn't just cut off, as it were, 6,000 or 7,000 square meters from that retail expansion was because you knew Mr Stevens would support it as the final stage of a shopping centre expansion. Correct? WITNESS SOUTHWELL: Yes, I believe I understood that Mr Stevens would see value in having a series of stages for the retail, should it need to expand. GALASSO: And one of the reasons why there is that exceedance can be put down to the fact that you have provided floor space on the overall site for - sorry, first of all, that square meterage is retail square meterage, correct? WITNESS SOUTHWELL: It's 7,000 in the total GFA. GALASSO: Yeah, but this stage is a retail stage, correct? WITNESS SOUTHWELL: Correct. GALASSO: And the reason why it exceeds the floor space ratio cap is because, by this point, you've already built the site out. WITNESS SOUTHWELL: No, may I correct that? This will be lodged as a concept of DA, so you know what the concept DA phase, whether the clause 4.6 will be supported or not. Nothing is built at that point. GALASSO: But Mr Preston is valuing your total floor space ratio, you haven't bought the site yet. WITNESS SOUTHWELL: Correct, he is valuing it, and the planner as I understand it has indicated it's likely to be supported. GALASSO: All right. So this is how we go. We've got a set in October 2015 that increase the floor space from 2:1 to 3.5:1, in July the next year, someone's about to buy the land and notwithstanding the uplift in the floor space, you and Mr Duggan are saying, "That's okay. Pay extra for floor space that is in exceedance of that." WITNESS SOUTHWELL: No, we wouldn't tell the client to pay extra. We would identify what the opportunities and risks are, we would also typically explain to them where that yield can be retained, that sellable or lettable yield can be retained, should the additional 1.8% not be supported by the planning authority. GALASSO: You used the phrase "approval risk" when you come to talking about Mr Shaw's car‑park, but can I suggest to you that as at 1 July 2016, the scenario I put to you about the state policies controls, there would be considerable approval risk in any advice to a purchaser about pursuing a scheme that has an exceedance of floor space. Would there not? WITNESS SOUTHWELL: There's always risk with exceedance of the floor space. It's a value judgement on the extent of risk. 1.8% is not significant. GALASSO: That would be even more the case when it's recognised that in that planning authority's collection of controls, it has identified the whole of the site as retail core, yet you have isolated a precinct of the site as predominantly residential. WITNESS SOUTHWELL: The site is identified as B4 mixed use. I wouldn't use the word "isolated" the residential, because there's also residential over the retail. GALASSO: You told his Honour about examples of clients that you have and about Meriton, how they deal with the mixed use topology by having only one cafe on the ground level of a 25‑storey building, or‑‑ HIS HONOUR: Meriton had a childcare. GALASSO: Yeah, you mentioned one client of yours with a single café and Meriton had one childcare. WITNESS SOUTHWELL: Correct. GALASSO: In that typology - sorry, how many levels are we talking about? We'll get Mr Shaw's levels. 30 levels. Is a precinct that's got one cafe on the ground or one childcare on the ground with up to 30 levels of residential above, is that what you as an architect would consider to be demonstrative of a retail core? WITNESS SOUTHWELL: You're ignoring the fact that there is 50% of the site‑‑ PRITCHARD: Please let him answer his question‑‑ GALASSO: No, no, no. Don't tell me what I'm ignoring, Mr Southwell. I put the question to you that if a building has one cafe in the bottom of it, or one childcare centre in it, with 30 levels of residential above, as an architect, do you regard that as demonstrative of a planning authority's designation of that site as retail core? WITNESS SOUTHWELL: On the entire site, yes, because more than 50% of that entire site is the primary retail centre. So the area that you're discussing, which is the residential towers B, with a range of uses on the ground floor, some retail, some community and childcare, whatever they might be, is only to a portion of the site. GALASSO: Well where does it in the DCP have that gradation across the site? WITNESS SOUTHWELL: It doesn't, it identifies it as a mixed use. There are then a number of other requirements in the LEP and DCP about the primary activation along both Herring Road and Waterloo. The primary public domain that sits at 40 x 40 metres around the metro station. There are a number of other characteristics of the planning controls that you use to guide a design outcome. GALASSO: We've been talking about the floor space ratio on your scheme, and I think I asked you this earlier in relation to instructions. But if it's the case that Mr Stevens is wrong about the capacity for retail at this site ultimately, it's the case, is it not, that there is no capacity for expansion of the retail on your scheme unless there is either a change in the planning controls to increase the permissible floor space ratio or there is another clause 4.6 objection? WITNESS SOUTHWELL: Sorry, if his advice was‑‑ GALASSO: Sorry, was that a question you couldn't answer either yes or no? WITNESS SOUTHWELL: Can you repeat the question? GALASSO: Yeah, absolutely. We've been talking about a clause 4.6 objection for an additional 7,000 square metres of floor space in your scheme. I want you to assume that someone is of the view that Mr Stevens may be incorrect about the capacity for the site to provide more retail floor space. Do you agree that on your scheme, there is no capacity for any additional retail floor space unless the controls are changed, to change the floor space ratio standard, or unless another clause 4.6 is brought along and approved? WITNESS SOUTHWELL: The alternative to that is the master plan would be redesigned in response to that advice. GALASSO: Yeah, but Mr Stevens' advice is at 1 July 2016, Mr Southwell, and you're telling his Honour about getting a master plan from day one that includes an additional 7,000 square metres for retail. Once these stages are built, you can't go back and unbuild them, can you? WITNESS SOUTHWELL: No. No. GALASSO: Once the portion on Talavera Road is given to residential, it's highly unlikely, if not absolutely improbable, that it will be converted to super‑regional shopping centre, correct? WITNESS SOUTHWELL: Well, super‑regional shopping centre is 85,000 square metres and above. GALASSO: I didn't ask you that. WITNESS SOUTHWELL: Well, my - my scheme is already in that category. GALASSO: The precinct on Talavera Road, once it's built - with a café in the bottom and a childcare centre and 30 levels of residential - and sold, is highly unlikely to ever be able to be made available for super‑regional shopping centre; correct or incorrect? WITNESS SOUTHWELL: Correct. HIS HONOUR: So, do I understand that your hypothetical purchaser coming to you for advice is going to be told that there's a maximum permitted GFA of the nominated square metreage from the controls and is then going to ask you, "How can we push out the envelope a bit further?" Is that correct? WITNESS SOUTHWELL: Correct. HIS HONOUR: And I want you now to tell me, in idiot‑proof language, what is your answer to that question and why? WITNESS SOUTHWELL: I would argue that, in totality, recognising that the client has come to us in the first instance, to show how we can maximise and utilise the permissible floor space. I've never had - in my 20 years I've never had a client to me and say, "Can you design a scheme and leave some on the table?" So, the idea of not‑‑ HIS HONOUR: But you're not answering the question. The question is, you've got a limit that is set by the controls - 350,000. Your client comes to you and says, "I want you to design a scheme that's going to utilise all of that, over a period of time, but how can we get some extra and why?" I want you to tell me the answer to that second element of the question‑‑ WITNESS SOUTHWELL: Yes. HIS HONOUR: ‑‑in simple terms, please? WITNESS SOUTHWELL: The why would be, the additional components, whether that be‑‑ HIS HONOUR: No, the first is where, and then why. WITNESS SOUTHWELL: Okay. So, where it is a product adopting - should the masterplan adopt option 3 for planning approval, then the additional 7,000 square metres is a product of that step, which is the first step. HIS HONOUR: So, the answer, put simply, is, somewhere on the site, is it? WITNESS SOUTHWELL: Correct. HIS HONOUR: And you're going to go to a planning authority and say, "We're going to put in a hypothetical clause 4.6 request and we want another 7,000 square metres and we want it on the site and we're not going to tell you where it is, or what it's for"? WITNESS SOUTHWELL: No, no - sorry. HIS HONOUR: Well, Mr Galasso has been taking you to the final diagram, the bottom, right‑hand corner of page 526. Are you saying to me that, on the sequence, if the 7,000 extra square metres is not granted to you, it has to come out of the aqua‑coloured box marked "A4"? Or are you saying to me, "Oh, well, if they don't like giving us 7,000 square metres, we can just knock it off the site somewhere else"? WITNESS SOUTHWELL: That is often what happens in a masterplan process, because we're seeking a DA approval for the entire concept. Yes, the 7,000 square metres is a product of that aqua component on the bottom‑right of the page there, which constitutes circa 34,000 square metres of GFA. HIS HONOUR: And you would say to you client, "You will need to talk to your planner about what the realistic prospects are, in that planner's assessment, of whether or not your clause 4.6 is going to be successful", is that correct? WITNESS SOUTHWELL: Correct. HIS HONOUR: And you would then expect the answer to that, plus your design, that is capable of being adjusted - plus or minus 7,000 square metres. They would then seek advice from their valuer, who would tell them what the combination of your design and their town planner's advice would be, as to the risk assessment they make about getting the extra 7,000 square metres. Is that correct? WITNESS SOUTHWELL: That is correct. 1. The final element of the Valuer‑General's evidence concerning a cl 4.6 request for the additional 7,000 square metres GFA was given by Mr Preston during the course of his oral evidence. Mr Preston observed (Transcript 5 April 2022, page 318, line 8 to page 319, line 7:] GALASSO: If that evidence is wrong or miscalculated or whatever, if there's more demand for retail, one of the consequences of the case that you valued is that there's no capacity for further expansion of the retail centre. Correct? WITNESS PRESTON: No. It accommodates some - the expansion contemplated by Mr Southwell in his design. GALASSO: You didn't listen to my question, Mr Preston. That's about the fourth time. In the scheme you've valued you've assumed that the expanse of retail offer is that which is in the base case and the expansion scenario and if the evidence that the respondent has been given is wrong and that the demand is greater than that, do you accept that there is no capacity for further expansion of the retail centre? WITNESS PRESTON: No. GALASSO: We've got a case before his Honour in which the Southwell scheme is not only at the maximum floor space ratio but requires a clause 4.6. Where does the extra centre come from? WITNESS PRESTON: Sorry, Mr Galasso, if you're suggesting that the centre should be greater in size, it would reduce any excess GFA available for any other use above that required for the retail centre. GALASSO: You're not listening to my question, Mr Preston. You valued a particular development scenario. WITNESS PRESTON: Yes, I did. GALASSO: That development scenario assumes the maximum scenario for retail; that is, the base and the option. WITNESS PRESTON: Correct. GALASSO: In my question earlier to you about the retail mindset, you said that it was subject to satisfaction of the retail demand. Remember that? WITNESS PRESTON: The requirement for the retail shopping centre, yes. GALASSO: I put to you that if the advice, that you've accepted, is an underprovision of retail space; that is, if there's greater demand for a shopping centre, a greater demand for shopping centre floor space, there's no capacity on the scheme that you valued for an expansion of the shopping centre? WITNESS PRESTON: Greater than Mr Southwell's scheme, that's correct. 1. Mr Preston later confirmed that he had not considered that the additional FSR would not be permitted (Transcript 6 April 2022, page 408, lines 5 to 19). 2. Finally, on this point, the closing written submissions on behalf of the Valuer‑General addressed the necessity for a successful cl 4.6 request in order to provide justification for the Southwell hypothetical development scheme saying, at paragraph 130: 130 The Respondent submits that the Court should accept the evidence of Mr Duggan and Mr Southwell that a clause 4.6 variation request could be lodged at the Concept DA stage, and that the minor variation would strong prospects of being approved. In the unlikely event that it was not approved, minor adjustments could be readily made to the Southwell scheme so that it met the LEP FSR control. Therefore, this really is a non‑issue. The evidence is that the hypothetical purchaser would either obtain approval for the minor variation to the planning controls, or make minor adjustments to the design. Whatever the path taken, the GFA required for retail expansion option 3 proposed by Mr Southwell can safely be assumed to be available. The position advanced for the Applicants 1. In his supplementary planning report, Mr Blythe addressed the necessity for a cl 4.6 request for the Southwell scheme in the following terms: 1.1. OVERVIEW 11. The Southwell Concept Scheme incorporating Expansion Option 3 has a total GFA of 394,560m2 which would exceed the maximum floor space permitted under the Ryde Local Environmental Plan 2014 (RLEP). This development standard is however capable of being varied by the provisions of Clause 4.6 of the RLEP, noting that the subject site and the provisions of Clause 4.4 are not excluded from the operation of this clause under Clause 4.6(8) of the RLEP. 12. I agree with the summary guidance outlined by Mr Duggan in his supplementary report (paragraphs 20-23 inclusive) as to the approach to the preparation and consideration of a request made under Clause 4.6 of the RLEP. I also agree that on face value, that a 2% variation to the development standard is minor. 13. I do not however agree with Mr Duggan in respect to the following paragraphs: 32. I would advise a purchaser that there would be strong prospects of obtaining a clause 4.6 for the FSR variation that is put forward by Mr Southwell as Option 3 in his expert report. 33. The clause 4.6 variation could be made at the time of the Concept DA or (if not contemplated at the time) as part of a later development application. A modification pursuant to Section 4.55 of the EP&A to the Concept development consent would need to be sought if the clause 4.6 application was to be made as part of a later development application. 14. My reasoning is set out below in terms of how and when such an application may be practically made and, in turn, what advice I would offer a hypothetical purchaser in terms of the potential to achieve additional floor space above the controls of the RLEP. 1.2. FORM AND TIMING OF A CLAUSE 4.6 REQUEST 15. A Concept Plan is typically prepared to establish key development parameters such as the building envelopes, intended uses and development staging that provide guidance and certainty towards the preparation of future detailed applications. 16. It is typical, in my experience, that most Concept DAs do not confirm the floor space until the detailed development application stage, as the final detailed design is likely to vary the proposed final quantum of floor space. This is most particularly the case in respect to Concept DAs that have multiple stages of development, which is the anticipated outcome of the development of the Subject Land. A Clause 4.6 request associated with a Concept DA may have greater potential to be considered in the context of a single stage Concept approval. 17. In the context of the proposal prepared by Southwell, even if Retail Expansion Option 3 was included as part of the Concept Plan (and represented as a development stage in the DA submission), it is difficult to envisage how an applicant would justify a contravention to the development standard and demonstrate (as required by Clause 4.6(3)) that: (a) compliance with the development standard is unreasonable or unnecessary in the circumstances of the case, and (b) there are sufficient environmental planning grounds to justify contravening the development standard. 18. My advice to a hypothetical purchaser as at the relevant base dates is that it would be unlikely that an application to vary the development standard at the Concept DA stage under the Retail Expansion 3 scenario would succeed. This is on the basis that: • The Concept DA for the planning of the entire site would be too conceptual to warrant a variation to the floorspace control. • The applicant would be unable to demonstrate why compliance is not unreasonable or unnecessary particularly at the early phase of the development process. This is highlighted by the fact that Southwell has proposed three different expansion options reflecting uncertainty around the future scale of retail required to meet future demands and the fact that options 1 and 2 would be compliant. • In my opinion, a prudent consent authority would likely defer such a decision until a later stage of development (when greater evidence would be available to assess the merits) rather than allow an applicant to "bank" the additional floorspace at the Concept DA stage. • Put simply, given the expected long‑term delivery of all the stages of development to maximise the floor space available under the RLEP, it would be too premature to vary the standard at this initial phase of the planning process, even if only a small variation in relative terms. 19. Mr Duggan in paragraph 26 of his supplementary evidence, provides an analysis of how a Clause 4.6 variation may be justified by undertaking an assessment of the "First Way" which is an assessment of the objectives of the development standard itself. In this analysis, reference has been made to the Department Store that is the element of the development that would cause the non‑compliance with the development standard. In my opinion, this analysis must presume that the Clause 4.6 request is not made at the Concept DA stage but rather at a later detailed DA stage. I say this because if the consent authority was assessing a Clause 4.6 variation to the Concept DA stage, it would not be an assessment of the final element of the staged master plan (level 3 department store), but rather a holistic assessment of the development in totality and the justification as to why compliance is unreasonable or unnecessary. 1.3. PROSPECTS OF OBTAINING A CLAUSE 4.6 VARIATION TO EXCEED THE FSR STANDARD 20. I agree in principle that a 2% variation from the development standard is a minor variance and that there are precedents, including the site to the east of the Subject Land at 101-107 Waterloo Road, where the applicants successfully achieved a variation to increase the FSR above the development standard under LDA2016/0567. 21. A distinguishing feature of LDA2016/0567 from the proposed development of the Subject Land is that it was approved as a single staged detailed development application, where the consent authority could fully assess the merits of the Clause 4.6 request and overall project benefits. 22. I would advise a hypothetical purchaser at the relevant base dates to ensure that a building envelope established under a Concept DA has sufficient capacity to accommodate the potential of further floor space above the development standard, to 'future proof' the Concept DA. That does not mean that an application would be lodged to lock in the floor space at this time for the reasons set out above. 23. I consider that a Clause 4.6 request of the scale contemplated in the Southwell Concept scheme would have the potential to be approved, and to this extent I agree with the general analysis provided by Mr Duggan in paragraphs 26-29 of his supplementary report. However, in my opinion such potential would only exist at the time of the DA consent for the relevant stage of development, where greater evidence could be obtained to satisfy the requirements of the Clause 4.6(3). 24. In other words, while a purchaser may desire the prospect of gaining additional floor space above the development standard, this would not be likely be confirmed at the Concept DA stage and this risk would therefore remain until such a time that a DA is made for the relevant stage of development that exceeds the FSR standard. I also agree with Mr Duggan that a concurrent modification to the Concept DA would need to be made to facilitate any detailed development application but only to the extent that the development plan is inconsistent with the Concept approval. 1. Finally, on this point, the closing written submissions on behalf of the Applicants addressed the necessity for a successful cl 4.6 request in order to provide justification for the Southwell hypothetical development scheme saying, at paragraphs 77 to 81: VIII. As at 1 July 2016 and 1 July 2017, what advice would be given to the hypothetical purchaser of the Site in relation to varying the planning controls for the Site? 77. Mr Duggan and Mr Blythe agree that the "highest and best" use of the Site includes a maximum GFA of is 387,350m2: Joint Planning [1(a)]/EB Tab A3 at 87. This is consistent with Mr Duggan's position in his first report, where he concluded that the "highest and best" use scenario that he puts forward does not require changes to development standards or other planning controls in the LEP and DCP: Duggan 1 [105]/EB Tab A2 at 66. 78. Unfortunately for the Valuer‑General, Mr Southwell's design exceeds the maximum GFA. Mr Southwell's design involves a GFA of 394,560m2, which is 7,110m2 above the maximum GFA. A written request under cl 4.6 of the LEP would need to me made for approval of this excess GFA. The cl 4.6 request is required because, as acknowledged by Mr Duggan, by the time of the retail expansion, which leads to the exceedance, floor space has been approved and/or built and a not insignificant portion of that floor space is residential: Tr 107:11-16, 109:33-38 (Duggan). Mr Southwell acknowledges that the cl 4.6 request represents an approval risk: Tr 182:6-13 (Southwell). 79. To patch this gap up, in a supplementary report, Mr Duggan states that he would advise a hypothetical purchaser that "there would be strong prospects of obtaining a clause 4.6 for the FSR variation" and such a variation could be made at the time of the Concept DA or as part of a later development application: Duggan 2 [32]-[33]/EB Tab A4 at 99. (Both experts agree that a Concept DA process would be required for the Site: Joint Planning [30]-[36]/EB Tab A3 at 90-91.) 80. The appellants submit that the better advice to give to a hypothetical purchaser is that it would be unlikely that an application to vary the development standard at the Concept DA stage would succeed. As stated by Mr Blythe, the reasons for this are that: (a) The Concept DA would be too conceptual to warrant a variation to the floorspace control: Blythe 2 at [16], [18]/EB Tab A5 at 208-209. (b) At the early stage of the development process, the applicant would be unable to demonstrate why compliance with the floorspace control is unreasonable or unnecessary: Blythe 2 [18]/EB Tab A5 at 208-209. This is particularly the case because the design proposed by Mr Southwell is high level. Mr Southwell acknowledges that he designed a "high level feasibility scheme that shows a range of options and stages for consideration" and that his design is not final: Southwell 3 at 9/Supp EB Tab C5 at 15. (c) In light of the above, a prudent consent authority would likely defer any decision regarding variation of the floor space standard: Blythe 2 at [18]/EB Tab A5 at 209. 81. The appellants accept that there is the potential for the GFA exceedance to be approved at the time of a development application for the specific stage of development requiring the exceedance, which in the Southwell design scheme is the third retail expansion of the shopping centre. However, that would be some time after the Concept DA stage: Blythe 2 [22]-[24]/EB Tab A5 at 209. 1. The Applicants' closing submissions also submitted, commencing at paragraph 121: 121. There are numerous problems with the Southwell scheme. 122. First, with retail expansion option 3, the Southwell scheme is 394,560m2, which is approximately 7,000m2 or 1.8% above the maximum permissible GFA, and requires a cl 4.6 application: Southwell 2 [25], App A/EB Tab C3 at 554-555; Tr 169:25-35, 177:4-10, 178:2-3, 179:9-13 (Southwell). Mr Southwell was unable to articulate clearly which part of retail expansion option 3 would be the subject of the cl 4.6 application: Tr 177:33-178:50, 184:47-185:11 (Southwell). 123. Although the exceedance arises from retail expansion option 3, Mr Southwell stated that it was equivalent to about 60 apartments, suggested that any exceedance could be taken out of the residential part of his development and conceded that there were a "number of avenues to claw that [the exceedance] back": Tr 177:12-28, 178:46-179:5 (Southwell). This begs the question as to why the exceedance is necessary in the first place and whether it can really be said that "there are sufficient environmental planning grounds to justify contravening the development standard", especially in circumstances where the FSR was substantially increased a few months prior to 1 June 2016. Mr Southwell did not offer a good explanation for this, or why he would advise a hypothetical prudent purchaser, before they buy the land, that they would need more than the permissible FSR to realise his scheme: Tr 179:43-180:50, 184:17-185:39 (Southwell). Consideration 1. I have earlier set out the process by which the maximum developable FSR for the site was increased from 2:1 to 3.5:1. As there noted, this increase was effected by State Government imposition, utilising the SEPP, effective on 1 October 2015. As can be seen, this is only nine months prior to 1 July 2016, the first valuation base date engaged for consideration in these proceedings. 2. The criticisms advanced on behalf of the Applicants of the lack of specific justification proposed for the Valuer‑General as supporting the necessary cl 4.6 request for the Southwell hypothetical development scheme clearly expose the deficiencies in the reasoning advanced for the Valuer‑General on this point. 3. Although, perhaps, the percentage exceedance of the maximum GFA permitted for the site might be regarded by a hypothetical developer proposing the Southwell scheme to the consent authority as being of comparative insignificance, nonetheless, the actual additional GFA proposed in raw numerical terms is not trifling. 4. In circumstances where the indulgence that would be sought by the hypothetical cl 4.6 request to be made by the hypothetical purchaser for the purpose of the 2016 base date, the environmental planning reasons to be advanced in support of the request would need to be cogently (indeed, given the short time period since the FSR had been significantly increased, compellingly) advanced to the consent authority. As can be seen from the evidence and submissions advanced on behalf of the Valuer‑General concerning this point, there is certainly no cogently articulated (let alone compellingly articulated) basis upon which a cl 4.6 compliance dispensation request could be founded. I am not satisfied that, for the 2016 base date, such a request would have had any possibility of success. 5. Mr Southwell's oral evidence on this topic was set out earlier. The position articulated by Mr Southwell was that, in some unspecified fashion and, at some unspecified location, the hypothetical development yield embodied in his scheme could be adjusted to reduce the GFA yield in order to render it compliant would not provide a proper basis for certainty in the advice given to the hypothetical purchaser in order to permit that purchaser to assume that the cl 4.6 request necessary to enable the full Southwell scheme yield to be achieved would be successful. 6. For my present purposes of consideration of the acceptability (or otherwise) of the hypothetical purchaser considering the Southwell scheme, it is sufficient to note that, the transcript reveals, in response to questions from Mr Galasso and, subsequently, from me, Mr Southwell was unable to provide any coherent explanation as to precisely where the additional 7,000 square metres of floor space in his scheme (being the relevant exceedances requiring a successful cl 4.6 request) would be located or how, in terms of the matters requiring to be addressed by such a cl 4.6 request, that additional floor space would be justified. 7. This element of uncertainty imposes, at least for the 2016 base date, significant risk as to whether the Southwell scheme would be sufficiently certain of being granted development consent as to provide a basis upon which to transact the hypothetical purchase. 8. Although the evidence and submissions on behalf of the parties set out above, concerning the cl 4.6 issue, did not distinguish between the 2016 and 2017 base dates, I am satisfied that the additional effluxion of the further year since the amendment to the planning controls effected by the SEPP had increased the maximum permissible FSR (and, hence, the maximum permissible GFA) would have rendered the possibility of a successful cl 4.6 request being more likely to be achieved for the 2017 base date. Nonetheless, all the tests mandated by cl 4.6 of the need to be demonstrated to the consent authority (see RebelMH v North Sydney at [51]). The evidence given on behalf of the Valuer‑General does not provide any coherent basis upon which I could conclude that all the matters required to be demonstrated would be able to be established. 9. The defects identified in my discussion of the 2016 base date analysis above remain valid for such a cl 4.6 request, if submitted in support of a Southwell hypothetical development scheme being contemplated by the hypothetical purchaser for a base date 1 July 2017 purchase of the site. 10. My criticism of Mr Preston's redistributive adjustment proposals remains equally valid for the advice that would be given to the hypothetical purchaser for a 2017 base date transaction. 11. As a consequence, the GFA exceedance for the Southwell hypothetical development scheme would act as a significant brake on the hypothetical purchaser seeking to rely on that scheme for making a purchase decision for either of the relevant base dates. The Shaw hypothetical development scheme Introduction 1. Mr Shaw's hypothetical development scheme was not presented in the same graphic format as has earlier been shown for Mr Southwell's hypothetical development scheme. Mr Shaw's scheme was depicted in a series of what planners would likely describe as butter-paper sketches, with each level having a separate sketch. This resulted in a total of 10 images in his individual expert report (the images being at folios 438 to 447 of the Evidence Book). The primary reason for the comparatively large number of images arose from the fact that Mr Shaw's scheme did not rely, exclusively (although it did so partially), on basement parking. 2. Mr Shaw proposed that, in lieu of a residential precinct in the north‑eastern corner of the site along the Talavera Road frontage, there would be a multi‑level, aboveground car‑park. Because of the lower slab‑to‑slab clearance necessary for car‑parking provision when compared to the retail levels, every second car‑parking level would be located as a mezzanine, effectively, to an adjacent retail level. This design pattern resulted in a total of seven car‑park levels (including the basement car-park level), compared to four retail levels adjacent. 3. Mr Shaw's explanation of the advantages he said arose from such a design are addressed, later, in my consideration of the parking provision in his scheme when assessed against the design outcomes envisaged in the DCP. 4. Mr Shaw's scheme hypothesised a super‑regional shopping centre of 182,000 square metres GFA being constructed as a single project to open for trading when completed. Mr Shaw made, as had Mr Southwell, allowance for future expansion of the shopping centre. Mr Shaw's allowance for future retail expansion was 35,800 square metres GFA. As a consequence, Mr Shaw's super‑regional shopping centre development allocated 217,800 square metres GFA for this purpose out of the available 387,450 square metres GFA derived from, and limited to, the total GFA permitted on the site as derived from application of the 3.5:1 FSR permitted by the development standards applicable to the site. Unlike Mr Southwell's hypothetical development scheme, Mr Shaw's hypothetical scheme did not postulate the necessity for a request pursuant to cl 4.6 of the LEP to be approved for the implementation of his proposal. 5. As a consequence of the significantly greater allocation of GFA for Mr Shaw's proposed super‑regional shopping centre and his provision for future expansion of this centre being significantly greater than that hypothesised in the Southwell scheme, some 169,650 square metres GFA remained available for hypothetical development of the five towers allowed for in Mr Shaw's scheme potentially to be developed along the Herring Road frontage, utilising Mr Shaw's shopping centre scheme as their podium. 6. During the course of his oral evidence, Mr Shaw confirmed that nothing in his hypothetical development scheme would necessitate making a dispensation request pursuant to cl 4.6 of the LEP. The planning issues with the Shaw hypothetical development scheme 1. Five planning issues arise for consideration by the hypothetical purchaser in an assessment of whether or not to seek to adopt the Shaw hypothetical development scheme as a basis upon which to transact the hypothetical purchase. Those planning issues were: 1. Whether the consent authority would accept a development which relied, primarily, upon multi‑level, aboveground car‑parking? 2. If multi‑level, aboveground car‑parking was acceptable, would its proposed interface with Talavera Road require design modification to render it acceptable? 3. As the proposed multi‑level, aboveground car‑parking did not have the setback from the east‑west extension of proposed Road No 24 at the southern boundary of the dog‑leg in the site, what adjustment to the Shaw design (if any) would be necessary? 4. Is the pedestrian permeability sufficiently compliant with the planning vision for the site and, if not, can it be modified to be rendered acceptable? and 5. Given that the Shaw design proposes ingress and egress for loading dock facilities along the Waterloo Road frontage of the site, would that be acceptable when the DCP envisages that there would be an activated street frontage along that boundary of the site? 1. Each of these issues would need to be accepted by the hypothetical purchaser as capable of reasonable resolution if the hypothetical purchaser was to be able to rely on the Shaw scheme as a basis for undertaking the hypothetical purchase. Aboveground, on‑site parking for the Shaw hypothetical shopping centre Introduction 1. The DCP addresses how provision of parking for retail premises should be supplied. This is contained in cl 8.7 in Pt 4.5 of the DCP. This DCP provision is supported by three diagrammatic representations. The provision (including the diagrams) is reproduced below: 1. It is clear that the Shaw hypothetical development scheme does not, in the form originally advanced, comply with the requirements of the DCP. It is necessary, in this context, to consider whether that which is proposed in the Shaw scheme is acceptable as initially advanced and, if it is not, whether advice could be given to the hypothetical purchaser as to how it could be rendered acceptable to a consent authority and still remain functional for supporting a hypothetical super‑regional shopping centre. The town planning evidence concerning parking 1. I have earlier set out a summary of the town planning evidence given by Mr Blythe and Mr Duggan. In that evidence, I have summarised their positions on the proposed parking provisions for the Shaw scheme. It is unnecessary to repeat what is there set out. It is sufficient to note that there was a disagreement between them as to the acceptability of the Shaw scheme's proposed parking arrangements and, if the design was not acceptable in its original form, whether and how it might be rendered acceptable whilst retaining functionality to support the proposed super‑regional shopping centre. Mr Shaw's evidence 1. Mr Shaw had addressed the question of parking in his expert report in a number of places. He did so in the following terms: 2.2.9.6 The total experience relies on convenience. That is, making the 'getting there' and then leaving experience as easy and painless as possible. This is why there is a great deal of effort undertaken with respect to ease of access to car‑parking, public transport and then proximity of these to the retail environments. In my experience, Customers will generally, be discouraged from visiting a specific mall if they face more than 2 levels of car‑parking separated from access to the retail experience and a distance of more than 100m from an entrance. I have noted that Tony Dimasi in his report, (2.57 & 2.58) supports this view around convenience and amenity of car‑parking. … 2.2.9.21 Whilst the relativity of car‑parking to discretionary retail is not as important as it is to convenience based, convenience is still paramount to 'needs' retail (so called as there is not necessarily a reliance on cross shopping). That is easy access to car‑parking, in sufficient quantity and direct, trolley friendly access between the parking and the retailers. It is for this reason that I propose a location at the lower level with a full layer of cars in the basement below. This also requires a high level of servicing with both deliveries and waste management which should ideally be located directly adjacent at grade. … 2.3.2 The excavated level of the land is at a depth below the lowest level of car‑parking. I have proposed that the void created at this lower level be retained for future car‑park expansion for future towers above the podium. This car‑park could be removed in the future, in part, to create an additional retail level. This could be achieved alternatively by building the basement car‑park at the base level, creating a loftier, customer friendly car‑park. The disadvantage to this proposal is the additional three metre rise in vertical connection to the lower ground level. Equally this could be achieved by construction of the basement car deck as a removable structure. Figure 17.0 - Proposed Macquarie Centre 2016 Scheme 2.3.2.1 The additional car‑parking required in this scheme could be provided by additional levels to the deck car‑parking to the east. I would assume that car‑parking demand will reduce in the future based on reduced car ownership, reliance on public transport and ride share. The increase in the 20-minute neighbourhood, with increased residential density will also contribute to the reduced reliance on car‑parking. 2.3.3 The other method of expansion could be to expand into the car‑parking deck at the upper levels. This would need to be achieved via the removal of the mid-level car‑park, which can be achieved with the provision made in the original construction. I have undertaken this approach in the past with projects such as Chatswood Chase. … Please explain where you would locate car‑parking in your design. 2.5.1 As discussed earlier, my experience is that the judgement by retailers in committing to lease a shop in the centre and in a specific location within the centre will depend on a range of factors. The most important of these is their assessment of passing foot traffic. One of the most significant determinants here is the direct access to car‑parking. That is, access to retailer's floor level provides the largest number of customers to access their tenancy directly, and without level change. This decision will directly impact on the maximisation of rental rate per square metre as it will be a judgement based on anticipated turnover. Therefore, the more car‑parking I can provide at each (or proximate to) level of retail will directly impact on the maximum revenue generation or productivity of the retail area. I note that Tony Dimasi's report provides an opinion that supports this position at 2.57 and 2.58 of his report. Figure 19.0 - Proposed Macquarie Centre 2016 Scheme 2.5.2 The provision of car‑parking in elevated decks is also more cost effective than basements. This is because the savings on excavation, shoring, retention and mechanical exhaust can be significant. 1. In addition, Mr Shaw provided a diagrammatic illustration of how a skin of apartments could be provided along the Talavera Road frontage and returning along the eastern face of the car‑park in order to remove the open presentation of the multi‑level car‑park when viewed from the north or north-east. These images were appended to the joint report of Mr Shaw and Mr Southwell. 2. The Shaw design is clearly significantly non‑compliant with the earlier set out objectives and controls of the DCP for on‑site parking. Although Zhang does permit departure from the terms of the DCP in the fashion outlined, nonetheless, serious consideration must be given to the terms of that document's objectives and controls. It is certainly not open to me to express a conclusion that the controls are, as a general proposition, inappropriate (Botany Bay City Council v Premier Customs Services Pty Ltd (2009) 172 LGERA 338; [2009] NSWCA 226). The terms of s 79C(3A) of the EPA Act 1. I have earlier set out the terms of s 79C(3A) of the EPA Act as it applied at each of the base dates. This statutory provision, in addition to the guidance given by the Court of Appeal in Zhang, is also potentially engaged for the purposes of consideration of whether the Shaw scheme is acceptable or not. It is appropriate to repeat the terms of this provision: 79C Evaluation … (3A) Development control plans If a development control plan contains provisions that relate to the development that is the subject of a development application, the consent authority: (a) if those provisions set standards with respect to an aspect of the development and the development application complies with those standards—is not to require more onerous standards with respect to that aspect of the development, and (b) if those provisions set standards with respect to an aspect of the development and the development application does not comply with those standards—is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development, and (c) may consider those provisions only in connection with the assessment of that development application. In this subsection, standards include performance criteria. … The Applicants' submissions on the Shaw scheme's proposed parking 1. The Applicants' closing submissions discussed the Shaw scheme's proposed parking as follows (at page 35, paragraphs 108 to 109; page 42, paragraphs 142 to 145): 108. There is an above ground car‑park accessible from Talavera and Waterloo Rd and basement parking: Shaw 1 [2.2.5], [2.2.7], Fig 13/EB Tab C1 at 422-423, 431; Joint Design [2.2(i)]/EB Tab C3 at 541. Mr Shaw has proposed car‑parking at every retail level because he considers that there should be easy access to all retail levels from car‑parking as this would make accessing the retail centre convenient and enhance its value: Joint Design [2.2(j)]/EB Tab C3 at 541; Shaw 1 [1.4], [2.2.9.6], [2.2.9.21], [2.5.1]/EB Tab C1 at 418, 424, 430, 436; Tr 175:30-43 (Shaw). Mr Shaw's car‑parking scheme responds to the way people shop - a discretionary shopping trip, where customers would likely park in the above ground car‑park; a needs shopping trip, where customers would likely park in the basement parking: Tr 234:27-39, 234:50-235:20 (Shaw). 109. At the hearing, Mr Shaw also explained that the basement car‑parking was across the Site and had three travelator points connecting the car‑park to the retail, which were equitably distributed throughout the car‑park with reasonable travel distances: Tr 234:13-21 (Shaw). Mr Southwell raised the peril of travelling uphill with a trolley: Tr 233:48-4 (Southwell). However, Mr Shaw sensibly pointed out that travelators had trolley locking mechanisms for safety reasons: Tr 234:23-27 (Shaw). … 142. To the extent that the Valuer‑General argues that above-ground parking should not be accepted because it is, in effect, contrary to design principles in the DCP, the appellants submit that the car‑parking can be designed to blend with the surrounding streetscape. 143. Most of the above ground car‑park designed by Mr Shaw abuts commercial core or a business park: cf DCP, Figure 3.2.1/TB Tab 9 at 455; Shaw 1, App 1, ground plan/EB Tab C 1 at 441. In a commercial typology, it is common for facades to be less articulated and modulated than, for example, in a residential circumstance: Tr 104:38-50 (Duggan). Mr Southwell accepted that the design of a car‑parking structure was easily adaptable and could be dressed up as a commercial building: Tr 243:14-244:8 (Southwell). 144. At the hearing, Mr Blythe added that the purpose of the planning provisions in the DCP (TB at 506) was to provide a better urban interface to the road and that, in addition to sleeving, there were more creative ways of designing above-ground car‑parking facades: Tr 103:21-28 (Blythe). Mr Duggan also gave evidence that there were alternatives to sleeving or laminating - for example, glazing the façade of the car‑park so that it appears commercial: Tr 104:44-105:39 (Duggan). 145. In addition, Mr Shaw has provided a revised design to screen the car‑park with apartments or commercial space: Joint Design at 3, App 1/EB Tab C3 at 538, 547-548; Tr 245:7-14 , 245:34-41(Shaw). 1. In oral closing submissions, Mr Galasso reiterated these points (Transcript 20 April 2022, page 463, lines 34 to 47): GALASSO: Then we deal with car‑parking, your Honour. The proposition is this, that there's no doubt that the car‑parking for the shopping centre is and would be sought in the mindset of the regional shopping centre builder to be as proximate as possible to the retail offer, and effectively at grade, and your Honour saw instances of that on the site view, and that, we would submit, is irrespective of the controls. As I said earlier today, the controls envisage car‑parking throughout the area covered by the DCP, but we would submit that in instances where the developer is seeking to provide for a successful regional super regional shopping centre, there would be no occasion for concern about the location of car‑parking and that to the extent that the controls talk about effectively screening it or hiding it, and they do say that, or "sleeving" it as they particularly say, that's a matter of design that is easily accommodated. The Valuer‑General's submissions on the Shaw scheme's proposed parking 1. The Respondent's closing submissions discussed the issue of proposed parking as follows (at paragraphs 217 to 223): Stacked car‑park on Talavera Road DCP - above ground car‑parks 217. The controls for rear and side setbacks in clause 7.6 of the RDCP 2014 relevantly provide that: Above ground portions of basement car-parking structures are discouraged…" (emphasis added) 218. The controls in section 8.7 of the DCP for on‑site parking provide that: Along all street frontages, above‑ground parking levels are to be laminated with another use for a minimum depth of 10m… 219. Mr Duggan refers to section 8.7 of the DCP in his report (at p 19): Section 8.7 also notes that if parking is provided above ground, it should be sleeved with other uses (building entry lobbies, retail tenancies, commercial floor space and the like) for a minimum depth of 10m. 220. Whilst Mr Shaw's original report apparently overlooked the requirement in section 8.7 of the DCP, his amended design in Annexure 1 to the joint report appears to have addressed it. However, this appears to have created an inconsistency in the evidence of the town panners, Mr Blythe and Mr Shaw: Mr Blythe's evidence is that the "retail core" requires residential apartments to be built over the podium of a shopping centre. Mr Shaw's amended design does not do this. 221. Nonetheless, despite the Applicants' belated recognition of section 8.7 of the DCP, the Respondent's submission is that the stacked car‑park on Talavera Road would be unlikely to obtain approval from the relevant consent authorities. Mr Southwell's evidence (at p 30 of his report) is that: It is my view, based on experience, that a development of this scale in a contemporary urban environment, would face a significant approval risk should an elevated parking structure be proposed of a scale required to support the development area. Development approvals of this scale will typically proceed through a series of urban design review panels where fundamental urban design principles will be assessed. 222. Mr Southwell's oral evidence was that: "there's not many contemporary examples in Sydney of aboveground car‑parks of this ilk in the last recent period". His evidence was: WITNESS SOUTHWELL: Yeah. We - we've done them where there are extenuating circumstances, so one in Mascot where it's a ridiculously high water table and contaminated ground. But it's very unusual to have an above ground car‑park in a contemporary Sydney market of that scale. Yes, there are other examples of one or two storeys that are either laminated or sleeved and, in fact, in Marina Square, as the site drops away, there is one level of the car‑park that pops up and is - and is screened as well. But the urban design review panel, from my experience, takes on board the fundamental urban design principles or the DCP quite seriously related to permeability and connection, and the - the Shaw scheme relies on a large, elevated car‑park that's significantly taller than what exists there at the moment that sits to the north of a residential apartment building at number 101 Talavera Road, is built closer and would, in my view, pose significant approval risk at the DA process. 223. The Court would accept the Respondent's evidence that the Shaw scheme would fail to comply with fundamental designs principles in the applicable planning controls. 1. In oral closing submissions, Dr Pritchard submitted (Transcript 20 April 2022, page 497, lines 10 to 32): Generally, in relation to the stacked car‑park on Talavera Road, addressed at paras 217 to 223 of the written submissions, your Honour will recall that the controls for rear and side setbacks in s 7.6 of the DCP provide that above ground portions of basement car‑parking structures are discouraged, and that the controls in s 8.7 for on site parking provide that along all street frontages, above‑ground parking levels are to be laminated with another use for a minimum depth of 10 metres. Mr Duggan's makes reference to s 8.7 of the DCP in his report at p 19, that's evidence of 55-- HIS HONOUR: Understand that, my recollection is that the diagrams in the DCP that set out within the body of the relevant clause is controls is to what the DCP anticipates will be the answer in addressing that sleeving and the like. PRITCHARD: Correct. Despite the applicants belated recognition of s 8.7 of the DCP, the respondents submission is that the stacked car‑park on Talavera Road would be unlikely to obtain approval for the reasons given by Mr Southwell in evidence, mainly it would face a significant approval risk based on his experience in a contemporary urban environment. Development approvals of this scale will typically proceed through a series of urban design review panels where fundamental urban design principles will be assessed, and your Honour will recall his oral evidence that there's not many contemporary examples in Sydney of above ground car‑parks of this or in the last recent period. Consideration 1. I have earlier set out the terms of s 79C(3A) of the EPA Act as a relevant statutory provision. I have also earlier noted, in my discussion of the role that a development control plan plays in the assessment of a development application, how this provision enables, in appropriate circumstances, the approval of a development proposal where the intent of what is sought by the relevant development control plan is achieved in a fashion which differs from what is specified by that plan. 2. In these circumstances, it is this provision advanced on behalf of the Applicants as one of two alternative bases by which the intent of the objectives in cl 8.7 of Pt 4.5 of the DCP can be achieved without compliance with the control that requires: l. Along all street frontages, above‑ground parking levels are to be laminated with another use for a minimum depth of 10 m, e.g. building entry lobbies, retail tenancies, commercial floor space. 1. The submission is that the treatment of the Talavera Road façade to the multi‑level, aboveground car‑parking in the Shaw hypothetical development scheme for the super‑regional shopping centre would be treated in a fashion that made its appearance consistent with, and indistinguishable from, a commercial office building. Such a development, it was submitted, could be advanced on behalf of the hypothetical purchaser, post purchase, in the expectation that the consent authority would find such a façade treatment acceptable to satisfy the requirements of the DCP. To the extent that such a façade treatment was necessary for such compliance purposes, I understood that it could also be applied to the two secondary road frontages of the parking levels - these being on the eastern edge of the site and along the extension of the proposed future Road 24 opposite the predominantly residential mixed use development at 101 Waterloo Road. 2. The second potential method of satisfying the parking requirements of the DCP was to sleeve the outer edges of the parking levels by deletion of portion of the parking spaces (being those along the Talavera Road frontage and wrapping around the corner of the eastern boundary of the site) and substituting a one‑apartment‑deep residential development presenting to Talavera Road and wrapping, at least to some extent, around to the eastern boundary of the site. 3. It was Mr Shaw's evidence, as I understood it, that such a modification was capable of being effected to his proposed design without rendering the level of parking provision unacceptable or in breach of any Council policy or controls. 4. It was submitted for the Applicants, as I understood it, that the advice which would be given to the prudent hypothetical purchaser was that the adoption of one or other of these design options would provide an acceptable approval basis for that purchaser to be satisfied that the Shaw hypothetical development scheme's proposed multi‑level car‑park was approvable. 5. I am satisfied that this approach is to be accepted without the necessity for expressing a preference for which of the two design options would need to be advanced to the consent authority for this purpose. It is sufficient, for the purposes of my valuation task, that I can be satisfied that the advice on this matter that would have been given to the prudent hypothetical purchaser would have been that the design of the car‑park did not give rise to an insurmountable barrier to the Shaw hypothetical development scheme and that two readily implementable solutions were available - each being a solution that did not compromise achievement of the Shaw hypothetical development scheme. This advice would be given on the basis that which of the options might need to be adopted for a hypothetical concept development application would be able to be negotiated with the consent authority as part of the process for evolving such an application. 6. I am satisfied that such advice would have been proffered and accepted and, thus, that the parking provision proposed for the Shaw hypothetical development scheme could be adopted by the prudent hypothetical purchaser without any concerns relating to the adequacy or acceptability of its proposed parking provision arrangements. Pedestrian permeability Introduction 1. The DCP sets out, diagrammatically, how it is envisaged that a series of through‑site pedestrian pathways will be created as part of the overall development envisaged to take place on the site. The schematic envisages multi‑pathway connectivity through and across the site, with the diagram showing radial pathways from a central intersecting focus in the middle of the site. A copy of the diagram from the DCP appears below: 1. The Shaw hypothetical development does not achieve compliance with this permeability aspiration as the multi‑level car‑park design in the north‑eastern corner and along the Talavera Road frontage act as a barrier to the creation of a connection along that diagonal pathway. In addition, although of much less complexity in resolution, Mr Shaw's proposed access arrangements for ingress and egress from the necessary loading dock facilities to service his hypothetical super‑regional shopping centre potentially impose a (not insurmountable) design challenge for implementation of the postulated pedestrian entrance connectivity element from approximately the midpoint of the Waterloo Road frontage of the site. Mr Shaw's evidence 1. Mr Shaw addressed this point, briefly, in the Joint Expert Report (Evidence Book, Tab C3, page 544): c) Both Mr. Southwell and I produced retail schemes that centred around Herring and Waterloo Road frontages which focus on the relationship with the rail station and the adjacency to the Macquarie University precinct. Both schemes effectively limit the site permeability from west to east, and south to north. This is not unusual for large retail mall developments. This is in contradiction of the DCP. However, I would argue that the DCP provision should be interpreted as a guidance rather than as literal circulation routes. Through the planning process and design development I could see the opportunity to 'crack open' the retail axis from west to east and potentially from south to north, to satisfy planners desired outcomes. 1. He was also questioned on this point. During the course of his oral evidence. He said (Transcript 4 April 2021, page 227, line 26 to page 228, line 36): PRITCHARD: Mr Duggan gave town planning evidence on 1 April when responding to questions as to the extent the Shaw and the Southwell designs complied with the DCP objectives relating to pedestrian connections that - and I read from it - unfortunately, we can't bring it up, so you'll have to listen to me. "Certainly, the Shaw design, from my review of it, does not" - this is in terms of compliance with the relevant provision: It does not through the provision of a large car‑park on Talavera Road means that these pedestrian connections heading towards Talavera Road would be interrupted or compromised or require connection through a car‑park on Waterloo Road and that large car‑park facing Talavera Road could be a barrier to providing those connections and dependent on how Waterloo Road is ultimately architecturally treated would seem like a barrier as well. Mr Blyth's evidence in relation to this issue was: I agree that the Shaw scheme hasn't given it adequate consideration. I think the Southwell scheme has probably thought a bit harder about the specific objective. I think the Southwell scheme has thought more about it. Would you like to respond, both of you, to the town planners' comments in relation to your respective considerations of pedestrian connection requirements as outlined in the DCP? WITNESS SHAW: Yes, we recognise the pedestrian connectivity in the DCP - expectations in the DCP. We believe we could modify our scheme to accommodate both east - west and north - south. GALASSO: But I didn't..(not transcribable).. WITNESS SHAW: We believe we could accommodate in modifications to our design to create pedestrian connections to both east - west and north - south through the site, if required. PRITCHARD: At what point in the process, Mr Shaw? WITNESS SHAW: As - as Mr Southwell has referred, we would have early consultation with - with planners and at that point we'd be able to gauge as to - to what the - these - a project of this scale, the negotiation process through planning is complex and comprehensive. So there would be a number of expectations around what we would need to do in terms of trading off with respect to certain elements of the design in order to - to gain approval. One of those things we - we did provide in the supplementary report was a - an approach in terms of sleeving the car‑park with residential and, similarly, we believe that we could - we could create pedestrian connectivity both - as I said at both east - west and north - south for the project if necessary. PRITCHARD: But, Mr Shaw, an indispensable element of your design is the retention - in fact, the increasing size of the elevated car‑park. Isn't that correct? WITNESS SHAW: Well, with respect, I'm not sure about the increasing size, but the - the elevated car deck is a fundamental principle of our design, yes. PRITCHARD: That's been identified by the town planners as a barrier and an obstruction barrier to providing those connections. WITNESS SHAW: It's problematic, but it's not a problem that can't be solved, in our view. 1. Mr Southwell similarly addressed this aspect of the Shaw design in his primary expert report at paragraphs 100 to 102, in the following terms: 100. Item 2.2.9.14 shows the primary circulation pattern and planning. Whilst this appropriately shows pedestrian connections off Herring Road and the Plaza, it does not address Section 4.1 of the DCP, part 4.5 which requires a series of pedestrian connections across the site. The large, elevated parking structure to the north of the site precludes site permeability and there is no connection off Waterloo Road. I consider that this would be problematic with approval authorities and results in effectively an introspective development that only engages with 1 of 3 street fronts. … 102. … My advice to a hypothetical purchaser would be that such a design solution is a poor outcome as: … • It fails to allow pedestrian permeability through what is a very large site … 1. Mr Southwell also gave oral evidence on this aspect of the Shaw hypothetical design, saying (Transcript 4 April 2022, page 226, line 11 to page 227, line 24): PRITCHARD: Tender bundle 495, and as you appreciate, it provides aboveground portions but basement car‑parking structures are discouraged. In your report, page 48, 484 of the evidence book, paragraph 85 of your report, you express the opinion, based on experience, that: A development of this scale in a contemporary urban environment would face a significant approval risk should an elevated parking structure be proposed to the scale required to support the development area. Development approvals of this scale will typically proceed through a series of urban design review panels where fundamental urban design principles will be assessed. Can I ask you to elaborate upon the opinion that you there express in relation to the significant approval risk faced by an elevated parking structure at this location? … WITNESS SOUTHWELL: … But the urban design review panel, from my experience, takes on board the fundamental urban design principles or the DCP quite seriously related to permeability and connection, and the - the Shaw scheme relies on a large, elevated car‑park that's significantly taller than what exists there at the moment that sits to the north of a residential apartment building at number 101 Talavera Road, is built closer and would, in my view, pose significant approval risk at the DA process. PRITCHARD: In relation to clause 7.3 of the DCP and the requirement in relation to pedestrian connections. WITNESS SOUTHWELL: Yes, again I think a scale of this size at the 11 hectares I - I do believe the urban design review panel will expect a level of permeability through the site. I recognise that both - both our schemes have connection through the retail component, in particular, diagonally from the - from the metro station. However, the main point of difference is that with the residential component of my site, you can then connect through the streets on the footpaths in a normal manner as opposed to if there's an elevated car‑park there you obviously butt heads with that pretty quickly. 1. Mr Southwell later made further comment on this issue (Transcript 4 April 2022, page 228, line 40 to page 229, line 9): WITNESS SOUTHWELL: Well, look, I think obviously an above ground car‑park there occupies quite a significant footprint. I haven't measured it, it's probably about a quarter of the site, 30% of the site which is quite - sorry, is probably about a quarter to 30% of the site of the 11 hectares is significant in footprint. Yes, you - you could create circulation through it in - in some manner, but I think taking the public through an internal street next to an elevated car‑park is not ideal and - and - and, you know, there's plenty of examples around places like Parramatta and so forth where they're trying to unstitch those issues from the past where elevated car‑parks and quality public circulation don't work well together. PRITCHARD: Can you elaborate upon any of those examples in Parramatta? WITNESS SOUTHWELL: So probably in Parramatta City Council is currently going through a whole raft of dealing with primary civic spaces connecting down to the river that go past a number of council car‑parks over multiple floors, and they're at great pains to try and unlock proper public domain. The connections are not just for people to walk from A to B, they're also about safety and passive surveillance and - and observation. So, you know, walking through an elevated car‑park late at night is - is far from ideal. The submissions for the Applicants 1. The written closing submissions for the Applicants briefly addressed this issue, at paragraph 110, in the following terms: 110. There is the potential for the above‑ground parking in the Shaw scheme to be converted to other uses as part of any future expansion: Joint Design [3.2(b)]/EB Tab C3 at 543; Shaw 1 [2.3.3]/EB Tab C1 at 434. In addition, the Shaw scheme can accommodate modifications to create more pedestrian connections if required: Tr 228:1-36 (Shaw). The submissions for the Valuer‑General 1. The written closing submissions for the Valuer‑General addressed this issue, at paragraphs 224 to 229, in the following terms: Pedestrian connections 224 Section 4 of the RDCP 2014 provides that: This DCP aims to create a permeable network of streets and pedestrian ways and to create new streets and laneways. The implementation of this DCP will improve vehicular, pedestrian and cycle permeability within the Corridor. 225 Figure 4.1.1 in DCP shows the "pedestrian connections" across the subject land in a red dashed line. Mr Southwell extracts this figure (at p 11 of his report, reproduced below). 226 Mr Southwell (at p 14 of his report) shows how his design complies with the planning controls in relation to pedestrian connections. 227 Plainly, Mr Shaw's design fails the pedestrian connectivity requirements in the DCP due to the stacked car‑park which Mr Southwell observes "occupies quite a significant footprint" of the area, being "probably about a quarter to 30% of the site". 228 Mr Duggan's evidence was that "certainly that large car‑park facing Talavera Road could be - could be a barrier to providing those connections and dependent on how [the access to] Waterloo Road is ultimately architecturally treated would seem like a barrier as well." The Applicants' planner Mr Blythe conceded that: the Shaw scheme hasn't given it adequate consideration, but it to my mind is remediable through refined design and I think that there would be a way that some connections - I think there would need to be improved connection from the top end of Talavera Road into - into the centre and not just be occupied by a car‑park and there needs to be some sense of ability to access a site as close as possible to the Eastern boundary of the site, so it's the opportunities to improve that design, and similarly from Waterloo Road as well. 229 Mr Shaw apparently agreed that his scheme would require modification, but gave oral evidence that "we could accommodate in modifications to our design to create pedestrian connections to both east - west and north - south through the site if required". He provided no detail beyond "we could", and the Court could not be satisfied on the evidence that this would be dealt with in a manner that would be acceptable to the consent authority. 1. During the course of her oral closing submissions, Dr Pritchard addressed this issue in the following terms (Transcript 20 April 2022, page 497, line 34 to page 498, line 16): In relation to pedestrian connections, your Honour will recall s 4 of the DCP which refers to the lands aim to create a permeable network of streets and pedestrian ways and to create new streets and laneways to the implementation of the DCP will improve the acute pedestrian cycle, permeability within the corridor and your Honour will recall the figure in the DCP showing pedestrian connections across a subject land as a red dash line, that's extracted in Mr Southwell's report, and indeed, in the respondents written submissions, and Mr Southwell demonstrates in his evidence and the Court will accept that Mr Southwell's design complies with the planning controls in relation to pedestrian connections. Mr Shaw's design, by contrast, fails the pedestrian connectivity requirements in the DCP due to the stacked car‑park which as Mr Southwell observed and council has earlier observed, occupies quite a significant foot print of the area, probably about a quarter to 30 percent of the site. Mr Duggan's evidence was that certainly that last car‑park facing Talavera Road could be a barrier to providing those connections and dependant on how access to Waterloo is ultimately architecturally treated would seem like a barrier as well, and even the applicants planner, Mr Blyth conceded that the Shaw scheme hadn't given it adequate consideration, and Mr Shaw currently agreed that his scheme would require modification. Your Honour will recall his evidence and it's extracted in the written submissions that we could accommodate but provides no detail beyond, "we could", and in light of that evidence, the Court wouldn't be satisfied that this would be dealt with in a matter that would be acceptable to the consent authority. Likewise, in terms of active frontages and requirements of s 7.3 of the DCP, here again, the Shaw scheme would require a substantial re-design in order to comply with the requirement in s 7.3 in relation to active frontages, that control encourages pedestrian access and movement within Macquarie Park generally, but more particularly in activity centres which include the subject land, at the extract in the written submissions of the active frontage and setback control drawing in figure 7.3.2 of the DCP. Consideration 1. Whilst the Shaw design undoubtedly discloses a failure to address adequately the overall aspirations in the DCP for pedestrian connectivity, I am satisfied that this is not an insurmountable design problem. Creating a pedestrian path through the ground‑level element of the multi‑level car‑park may require some rearrangement of the parking layout at that level in order to provide a clearly identified pathway sufficiently satisfying the DCP's aspirations. 2. However, it is to be observed that resolution of this should not impose any significant design difficulty and such design provision could identify a pathway, effectively, directly along the diagonal spoke shown in the DCP's diagram. Indeed, providing access along this diagonal by design changes to the Shaw scheme would more faithfully replicate the identified pathway in the DCP than would be the position in the Southwell scheme, where the proposed street/laneway arrangements in the pedestrian precinct fronting Talavera Road could not accommodate such a pedestrian pathway in the fashion envisaged by the DCP. 3. Although the pedestrian permeability envisaged for the Shaw scheme did not conform with that shown diagrammatically, it is to be observed that there were also inadequacies in this regard arising from the Southwell scheme as a consequence of the proposal for the residential precinct in its north‑eastern corner. 4. In the context of the Shaw scheme, there is sufficient similarity between what is in envisaged by it and what is shown in the DCP's vision for pedestrian permeability for me to be satisfied that any concerns of a consent authority in this regard would be able to be resolved during a concept development application process 5. I am satisfied that, an appropriate competently advised hypothetical purchaser would not regard this aspect of the Shaw hypothetical development scheme as an incurable defect standing as a barrier to transacting a hypothetical purchase of the site. 6. It follows, therefore, that this issue would not act to cause a hypothetical purchaser any concern about relying on the Shaw scheme as a basis for undertaking the hypothetical purchase transaction. Activation of the Waterloo Road frontage 1. One of the objectives of the planning controls for the site envisages that there would be activation along the Waterloo Road frontage. Such activation was provided for in the Southwell scheme but was largely absent in the Shaw scheme. This absence arises from the fact that Mr Shaw envisages that much of this frontage would be given over to access/egress arrangements for goods delivery and despatch. Resolution of this issue by design change to the Shaw scheme is more problematic, as his present access/egress location is integrated into, and apparently necessary for, operation of his super‑regional shopping centre as an entire, coherent scheme. It is possible to envisage how this might be resolved, at least to some extent. A copy of the ground level of Mr Shaw's scheme is reproduced below. 1. Although the presence of the department store and the mini‑major on the ground level facing Waterloo Road in the Shaw scheme might present some limited opportunity for activation along that frontage, this is not a significant matter weighing in favour of this scheme, in its planning context. I also note that the topography of the site, sloping as it does down from Herring Road toward Shrimptons Creek, will also act to limit the ability of providing activation along this façade of any development on the site. 2. In addition, this requirement is not one arising from a development standard in the LEP but from planning control provisions derived from the DCP. I have earlier set out the proper role which a development control plan serves in the assessment of any development proposal and the fact that, unlike seeking permission to breach a development standard utilising a request pursuant to cl 4.6 of the LEP, a consent authority does have a discretion to depart from development control plan prescriptions, provided that consideration of doing so follows proper analysis of why such a departure might be appropriate (as discussed in Zhang earlier noted). 3. In present circumstances, given that, for reasons later set out, I am satisfied that the Shaw scheme is the overwhelmingly preferable hypothetical development scheme to be considered for valuation purposes, the hypothetical purchaser, properly advised on this point, would accept that the lack of activation along the Waterloo Road frontage would not act as a barrier to a consent authority approving a development based on the Shaw hypothetical development scheme given its otherwise overall significantly greater consistency with the desired planning outcome for the site when compared to the Southwell scheme. The profile of the hypothetical purchaser Introduction 1. Having set out the nature of the Shaw and Southwell schemes, it is now appropriate to set out the competing positions advanced on behalf of the parties as to what would be the corporate profile of the likely hypothetical purchaser of the site. The evidence of Messrs Jackson, Miles and Preston The evidence 1. I have earlier noted that, in addition to Mr Jackson, the Applicants' valuer, the Applicants also relied on the evidence of Mr Miles whose shopping centre expertise was earlier set out. Mr Preston, the expert valuer for the Valuer‑General, joined Mr Jackson and Mr Miles in giving joint expert evidence on this comparatively limited topic. Mr Miles had produced an individual expert report on this topic. These three witnesses also produced a Joint Expert Report after conferencing. They gave tripartite concurrent oral evidence on 5 April 2022 on this topic. Mr Miles then withdrew to permit Mr Preston and Mr Jackson to continue giving oral evidence the following day on the broader range of valuation matters requiring consideration. 2. As can be seen from the earlier summaries of evidence, selection of which of the Shaw and Southwell schemes would be adopted by the hypothetical purchaser for the purposes of the hypothetical transaction in each of the relevant years, it is necessary to weigh an amalgam of the town planning, economic and hypothetical purchaser evidence. For the purposes of doing so, it would not be sufficient to reach a conclusion simply based on my assessment of the evidence of what might be the commercial nature of the hypothetical purchaser to the transaction mandated for theoretical consideration by s 6A of the Valuation of Land Act. This is because, as Mr Preston discussed in his evidence on this issue, the hypothetical purchaser, if contemplating development of the smaller‑scale regional shopping centre with more limited potential for future expansion, would inevitably be seeking to on‑sell that element of the Southwell scheme to an investing entity of the broad profile postulated by Mr Miles and Mr Jackson. 3. I have noted above that Mr Jackson, Mr Miles and Mr Preston produced a Joint Expert Report. This document, of three‑and‑a‑half pages, plus attachments, essentially summarises the positions adopted on this point in each of the individual expert reports. 4. At paragraph 4 of the document, Mr Jackson and Mr Miles summarised their jointly held conclusion that: … the primary use of the site as a super regional shopping centre is the focus of the likely prudent purchaser. Other potential uses such as office, hotel or residential apartments would be ancillary or subservient to the main retail development. 1. These witnesses also expressed the view that: … maximising the GFA is not the primary aim in developing the subject land. The key focus would be on maximising the retail opportunity with the development of a super‑regional shopping centre. 1. Mr Jackson provided examples (which were annexed to this joint report) of what he considered were super‑regional shopping centres which had not maximised their GFA. 2. On the other hand, Mr Preston indicated that he considered that the site was a mixed use one, with the likely prudent purchaser focusing on both retail and residential apartment development concurrently. 3. Although Mr Miles and Mr Jackson both expressed the view that they did not consider that residential development was an appropriate ancillary outcome of the super‑regional shopping centre development that each considered appropriate for the site, it is to be observed that both the Shaw and Southwell schemes both hypothesised tower development above the podium of the shopping centre element which each of them hypothesised for the site. As will later be required to be considered in addressing the detail of the valuation evidence for the Shaw scheme, the potential for "above retail podium" development is a matter of some significance (including choices as to the use to which such above‑podium development might be put). 4. In the Joint Valuers Report (to be distinguished from the joint report involving Mr Miles' participation), Mr Jackson and Mr Preston bilaterally addressed the question of the extent to which residential development would or would not complement large-scale retail development on the site. As I understood their evidence, it was Mr Jackson's position that such residential development could only be contemplated to the limited extent that it would not inhibit potential future retail expansion if future demand made such expansion economically desirable (also hypothesising that any such residential development would remain in single ownership of the site and not be on‑sold). 5. It was Mr Preston's position that, because the incorporation of a significant residential development element (as proposed in the Southwell scheme at the north‑eastern end of the Talavera Road frontage), the hybrid development proposed in the Southwell scheme would enable a greater economic potential to be realised and, as I understood him, in a shorter timeframe. 6. Several matters also warrant being noted as arising from the concurrent oral evidence given by these three witnesses. First, Mr Miles responded to Mr Preston's opinion that, if the Southwell scheme was adopted, the hypothetical purchaser/developer would, in addition to selling the proposed apartments into the residential market, also on‑sell the shopping centre element to a fund which would hold it for income stream purposes in the fashion that the super‑regional centre postulated by the Shaw scheme would be held. 7. It was Mr Miles' evidence that Mr Preston's proposition that a shopping centre development would likely be developed and then transferred or on‑sold to an investment fund was contrary to his 25 years of experience where centres were developed within a fund (or a joint venture of funds) and that they were all developed within the owning fund and the owning fund continued to own the development post‑completion. He also postulated that Mr Preston's transfer option within a group of funds would potentially create stamp duty questions that might act as disincentives to such transfers. 8. Mr Miles accepted that development of commercial office space and/or tourist and visitor accommodation was compatible with a super‑regional shopping centre where they remained owned by the owner of the shopping centre and contributed to what he described "as adding population density to the whole ecosystem of that shopping centre" (Transcript 5 April 2022, page 333, lines 4 to 12). 9. Mr Preston was asked to respond concerning residential development in conjunction with retail shopping centres as a general proposition. He said (Transcript 5 April 2022, page 334, lines 9 to 14): WITNESS PRESTON: …. In my opinion, retail is all about trade catchment, and it's about people, and a symbiotic relationship between people and retail shopping. To enhance the trade catchment of the - a - a shopping centre on the subject property through vertical - creating two and a half thousand apartments, all of which are occupied by people, which will only enhance the trade catchment rather than detract from it. 1. Mr Preston then gave a number of examples of shopping centres where residential development had been integrated with (or was proposed to be integrated with) the development of the shopping centre. 2. Mr Miles and Mr Jackson both accepted that the potential for disruption to any retail centre, if it was to act as a podium for future residential tower development above, could be at least significantly ameliorated if facilities for integrating access lobbies, lift shafts and the like took place at the time of construction of the shopping centre. This would be advantageous and assist in reducing (but not necessarily eliminating) future disruption to the shopping centre if such towers were later constructed. 3. In response to questions from Mr Galasso, Mr Preston accepted that, in addition to the super‑regional shopping centre and its provision for expansion in the Shaw scheme, that scheme also provided capacity to expand the development by the construction, in the future, of five towers along the Herring Road frontage and that that could be residential development in those towers (Transcript 5 April 2022, page 320, line 39 to page 321, line 26). 4. Mr Galasso also questioned Mr Preston on the point that, if the Shaw scheme car‑park in the north‑eastern corner along the Talavera Road frontage was given over to residential development, and those apartments were sold, that would create an inability to expand the shopping centre into that area and that this would also result in an inability to adapt to market change for the retail offering if that was to arise (Transcript 5 April 2022, page 322, lines 22 to 40). 5. Mr Miles was also questioned by Mr Galasso concerning car‑parking arrangements comparing the Shaw and Southwell schemes. He expressed the view, comparing the Southwell basement‑parking scheme with the Shaw adjacent, multi‑level parking scheme, saying (Transcript 5 April 2022, page 337, lines 48 to 50): WITNESS MILES: … a retail level that has adjacent on grade cars would always be worth more than a retail level that has no adjacent cars and fed by lifts from car‑parks below. 1. Mr Preston's response on this point was (Transcript 5 April 2022, page 338, lines 28 to 35): WITNESS PRESTON: …. But I think, to consider the design of Mr Southwell versus that of Mr Shaw, we also need to be very mindful of the fact that the distance and the points from the basement parking up into the centre, as opposed to, say, the distance from the corner of the site, your Honour, that we inspected, into the shops - it perhaps would be more approximate to the metro station on the diagonally opposite corner. I don't share Mr Miles' view that it significantly impacts rents. There are other reasons, in terms of levels within a centre, but the parking is not a significant contributor to that. 1. Mr Jackson was also asked to express an opinion on this point, saying (Transcript 5 April 2022, page 338, line 43 to 49): WITNESS JACKSON: In my experience, over a long time, there is no doubt - I'd say without exception - that the higher you go from ground level, retail rents fall, no matter what the car‑parking is. Ground level will always give you the best return, and the rents decline from there. But you can, to an extent, try and counter that by providing efficient car‑parking and access for customers to each of those upper levels. And that is, without exception, the design of all the good shopping centres in Australia. 1. Mr Jackson also made a more general observation that shopping centre parking arrangements were most successful when it was possible for a customer visiting the centre to be able to park in reasonable proximity to the particular retail destination within the centre that was the object of the customer's visit. 2. I put to the witnesses my understanding of the differences between the Shaw and Southwell schemes as being that the Southwell scheme effectively exhausted the GFA (indeed, needing acceptance of a cl 4.6 request for an exceedances of the permitted GFA), whereas the Shaw scheme did not exhaust the GFA but left a significant element available for future development with the unutilised element of the GFA having value - value which would be built into the price sought by the hypothetical vendor. 3. Mr Jackson's response to this proposition was in the following terms (Transcript 5 April 2022, page 325, lines 38 to 43): WITNESS JACKSON: That's correct, your Honour, and that's been my approach to value where I've add a component on top of the shopping centre value in my assessment of the land value for the property. So I'm saying by adding in the amount which I've termed either commercial or hotel, that amount of money which I think - I'd have to look at my report to get the exact figure but an additional $70 million is paid for this future blue sky. 1. Mr Preston disagreed with this approach, saying (Transcript 5 April 2022, page 326, lines 9 to 21): WITNESS PRESTON: I'm sorry. In my opinion, the purchaser in the market that seeks to utilise part of the GFA and defer part of the GFA would be beaten to the post in the hypothetical transaction by a hypothetical purchaser that seeks to use the GFA in a master planned and coordinated way. With Mr Jackson's comments, I would like to actually look at the zonings of the examples he suggests, because it may be that they are not mixed use type zonings and they're limited to business use which could be why the - a reason why the GFA is not fully utilised in those sites, but in our circumstances of a mixed use site capable of satisfaction of the retail shopping centre offering, I accept that that - the dispute about the size of that, your Honour, but in my opinion, the hypothetical purchaser would only ever meet with and treat with the hypothetical vendor at a price which reflects the usage of the GFA. 1. It is to be observed that, in addition to that which I set out above from the evidence involving these three witnesses, Mr Jackson and Mr Preston also dealt with the "hypothetical purchaser" issue separately in their joint valuation report (paragraphs 232 to 236) in a fashion consistent with the tripartite expert evidence dealt with above. It is, therefore, not necessary to repeat any of the material from that joint report. Conclusion on the "hypothetical purchaser" evidence 1. I have considered the evidence given by Messrs Miles, Jackson and Preston concerning what might be assumed as to the commercial profile of the hypothetical purchaser. My conclusion is that this evidence marginally favours the position advanced by Mr Miles and Mr Jackson. However, this is not determinative of, but merely gives support to, the proposition that the Shaw scheme for a super‑regional shopping centre should be that which would be considered for, and adopted by, the hypothetical purchaser of the site for each of the relevant valuation years. Conclusion on the preferred hypothetical development scheme Introduction 1. The next step in resolving the valuation of the site for each of the base dates is to select which hypothetical development should be adopted for that purpose. Having done so, as noted later, remaining technical construction issues (quantity surveying and construction sequencing) fall away, given the significant agreements between the relevant experts in these disciplines with respect to issues involved for each of the Shaw and Southwell schemes. 2. Identification of the preferred hypothetical development scheme requires consideration of, and synthesis from, the town planning, economic and hypothetical potential purchaser evidence. 3. Because the choice between the Shaw and Southwell schemes for hypothetical development of the site is critical to consideration of the way in which the valuation evidence requires to be considered and determined, I felt it appropriate to set out, in some detail, the summary of the evidence concerning town planning and economic issues. This is because, in my assessment, these two areas of expertise interact in a fashion which, when assessed together, effectively define the competing approaches to determining which of the Shaw and Southwell schemes of hypothetical development should be selected. 4. Although there was also a contest between the parties as to what might be the investor profile of the development proponent who would undertake the preferred hypothetical development, it seems to me that the choice between the long‑term, income-oriented investor and the shorter‑term, profit‑realisation purchaser is, in reality, self-defining by, rather than informing of, the hypothetical development scheme which would be pursued. This is because, although not dealt with at length in the joint evidence of Messrs Preston, Jackson, and Miles, the ultimate Shaw hypothetical development scheme incorporating the five towers above a super‑regional shopping centre podium) would permit an investor‑developer seeking to realise shorter‑term profit on capital investment. This would be achieved by constructing the Shaw development with the objective of on-selling the individual strata elements of the five towers and also on-selling, to a long‑term, income‑stream‑oriented investment fund, the super‑regional shopping centre element within the podium. 5. As a consequence, although it is necessary to consider the hypothetical purchaser profile, the final versions of the Shaw and Southwell schemes do not render this choice as stark a binary one as would have arisen had the evidence of Mr Preston and Mr Jackson not evolved - resulting in, as I understood it, acceptance of the appropriateness of considering and valuing the Shaw scheme on the basis of incorporation of the five above‑podium tower elements into that scheme. Whilst there remained a stark choice between the two hypothetical development schemes, that choice is, essentially, to be made on the basis of the town planning and economic evidence rather than the potential investor profile of the purchaser playing any determinative role in that choice. 6. The two fundamental matters requiring determination to enable a choice to be made between the Shaw and Southwell schemes are: 1. Which of the schemes better fits with the town planning vision for the site? and 2. Which of the schemes provides a better economic return model for the site? 1. These two questions are, obviously, interrelated. 2. At the outset, I should indicate that I am satisfied that the Shaw scheme provides the more appropriate answer to each of the above questions. 3. In this context, I observe that reaching these conclusions is also consistent with the conclusion I earlier expressed that, on the basis of the evidence of the purchaser profile experts that the likely profile of the hypothetical purchaser would be for an entity (or entities) seeking a long‑term income stream and associated capital growth. As a result, there is no inconsistency between these outcomes. 4. I now turn to explain why I have concluded that the Shaw scheme is the appropriate answer to the two questions I have posed above. The town planning evidence 1. I have earlier noted the agreement between the town planners that the DCP elements that were relevant for the purposes of providing advice to the hypothetical purchaser on the "highest and best" use of the land were those as set out earlier, being: - That the site is designated as retail core for Macquarie Park as per the Urban Structure Plan. - The role of the site as providing retail and services that could be described as a "regional attractor". - The requirement to 'activate' the Herring and Waterloo Road frontages. - The provision of a public plaza and community infrastructure as part of any development. - Other specific design criteria such as treatment of car‑parking structures and the like. 1. I also noted that they had agreed that "the site's characteristics which include accessibility to a railway station (future Metro), bus interchange, adjacent road network and its adjacency to Macquarie University, made it suitable to fulfil the planning objectives as expressed in the DCP as the 'retail core of Macquarie Park', and that 'the characteristics of a regional attractor would include larger scale retail tenants together with uses such as cinemas and potentially other recreational offers'". 2. However, the planners differed as to whether the designation of the site as "retail core", in the context of the zoning of the site being B4 Mixed Use, acts, effectively, as an aspirational control for the spread of retail development across the entirety of the site in the fashion envisaged by the Shaw scheme. 3. Their disagreement was not as to whether there could be a residential component on the site that was consistent with the "retail core" designation but, of significance, they disagreed as to how and where such residential component should be accommodated. In this regard, Mr Blythe had expressed the view that a consent authority considering hypothetical development on the site would not permit any residential component of such a development to act to inhibit future development possibilities in a fashion which impinged on its designation as "retail core" and the retail development to act as a regional attractor. With respect to this objective, it was Mr Blythe's evidence that there was no other site in the locality which could fulfil those functions. 4. I note that Mr Duggan accepted that the proposed residential development at the Talavera Road frontage of the site at its north‑eastern end was appropriate to be regarded as a traditional mixed use development rather than appropriate to have a "retail core" designation applied to it. However, it was Mr Duggan's view that the Southwell scheme provided a sufficient intensity of retail development to be accommodated on the site that would enable it to satisfy the DCP objectives as being "retail core". 5. In essence, the fundamental difference between the planners requiring my resolution is the extent to which the "retail core" designation of the site can be achieved by the smaller retail footprint, and more limited potential for future retail expansion, that would be the case if the Southwell scheme was adopted when compared to the super‑regional shopping centre and the more significant potential for future retail expansion that would be available if the Shaw scheme was to be preferred. 6. Although there were differences between the planners concerning the effect of the broader regional and metropolitan‑wide planning strategies that had evolved up to each of the valuation dates, the differences between them (in Mr Blythe's preference for the Shaw scheme extending retail development across the whole of the site, and Mr Duggan's proposition that this inference was not appropriate to be drawn and that residential development could and should be accommodated in conjunction with a sufficiently large retail development to be able to be understood as "core retail" and a regional attractor) is, in my assessment, a matter of nuance. This arises, particularly, in the context where, for the retail component of the Southwell scheme, in addition to the residential precinct on Talavera Road at the north‑eastern end of the site, Mr Southwell also postulated tower development (capable of being residential) above his hypothetical retail podium - a position mirrored by Mr Shaw's provision for towers of a similar nature (although not at the same locations as Mr Southwell) for similar potential uses. 7. Although it is a matter of comparatively fine balance, I am persuaded that the position adopted by Mr Blythe is preferable to that advanced by Mr Duggan. This is because, although the site is zoned B4 Mixed Use, the overall planning intention of the designation of "retail core" across the whole of the site (together with the aspiration that it act as a retail regional attractor) marginally tips the planning considerations in favour of the Shaw scheme over the Southwell scheme (although this, as with my conclusion as to the hypothetical potential purchaser, is not determinative). The economic evidence 1. Although I have earlier included a lengthy summary of the competing economic positions advanced by Mr Dimasi and by Mr Stephens, I am satisfied that the economic considerations in favour of the Shaw scheme over the Southwell scheme can be set out in comparatively brief compass. 2. The first step in the process of assessing the economic evidence, I am satisfied, is to address the difference between Mr Dimasi and Mr Stephens concerning whether St Ives would be assumed to be part of the total market area from which customers of the retail centre development on the site would be drawn. Having addressed that limited matter (albeit one of some importance), it is then appropriate to turn to addressing the broader planning and economic issues in context. 3. As earlier noted, the decision in Tetzner requires me to have regard to the actual nature of development existing as at the two base dates. This, self‑evidently, incorporates not merely the physical development but also the socio-economic profile of the relevant areas falling, or potentially falling, within the total target market of the retail development which a hypothetical purchaser would envisage for the site. It also encompasses the nature of the existing physical linkages in the regional road system as at those dates. 4. In his evidence, Mr Dimasi explained why residents of St Ives would prefer to travel to a shopping centre on the site in preference to travelling to either Chatswood or Hornsby. He did so by reference to both travel times from St Ives to each of those potential competitor centres, as well as what he considered were the less desirable design layout elements of those centres. In that context, I do not consider that Mr Stephens had any adequate answer to those reasons for regarding St Ives as an area appropriate to be considered as part of the total target market area for retail development on the site. 5. In addition, although perhaps a matter of minor importance, the Mona Vale Road/Ryde Road linkage from St Ives is part of a major regional road system likely to facilitate ease of making a trip to a substantial retail centre on the site when compared to the more complex travel paths (as opposed to travel time) to access shopping centres in either Chatswood or Hornsby. 6. As a consequence, I am satisfied that I should conclude that the shopping centre element on the site would provide retail services to, and attract customers from, the St Ives area. In this context, the present socio‑demographic nature of St Ives shows that its being encompassed within the total target market area would add a significant number of affluent consumers to that target market. 7. As a result of the Tetzner consideration that is mandated in the present circumstances of having regard to the extent of the mature physical development of the residential component within the target market, it is also appropriate to assume that these demographics provide a significant potentially accessible economic base which would already exist for any shopping centre to be hypothetically developed on the site. This also provides support for the Shaw scheme over the Southwell scheme. 8. There is provided, by the Shaw scheme, greater potential for future expansion of the GFA able to be dedicated to retail offerings than would be the case if the Southwell scheme was to be adopted. Because of the Tetzner factors requiring to be considered, I am satisfied that this limits such risks as might be implied from developing the retail offering in the very significant GFA fashion proposed by the Shaw model. 9. As earlier noted, it was Mr Dimasi's opinion that the larger and more attractive a shopping centre was, the more extensive a trade area from which it would be able to draw custom (on the assumption, as is here the case, that there was a potentially extensive area from which customers could be drawn to come to the retail offering of a super‑regional shopping centre on the site). 10. As a significant difference between Mr Stephens and Mr Dimasi concerning the potential for residential elements to be accommodated within the hypothetical development, Mr Dimasi expressed the view that allocation of GFA for this purpose should not be accommodated at ground level because that would have the effect of compromising space available for future retail expansion. 11. I have earlier explained why I am satisfied that that St Ives should be included in the likely target market catchment for a shopping centre on the site. This, in itself, is an indicator that a larger, rather than more modest, total retail offering would be appropriate. 12. As was explained in the lengthy summary of his economic evidence, Mr Dimasi explained why he would not have advised the hypothetical purchaser to develop the site in a fashion which compromised the potential for future retail expansion as long‑term options for the site. 13. In addition, Mr Dimasi also explained why he considered that there were economic advantages in the style of car‑parking proposed in the Shaw scheme, because of this providing ease of access to each of the retail levels by having levels of car‑parking, effectively, at or near grade. He expressed the view that, from an economic point of view, such a parking arrangement would maximise convenience of access for potential customers in a fashion that was not readily available from the Southwell scheme. This, Mr Dimasi considered, would provide a marketing and attraction positive for the total retail offering which would be constructed on the site by adopting the Shaw scheme. In this latter context, I note that Mr Stephens made no comment on these parking‑related matters as he considered it to be outside his professional expertise, thus making Mr Dimasi's economic opinions on this point uncontested. 14. Although Mr Dimasi accepted that residential development on the site above the retail offering providing a podium for such potential development, it is to be noted that this is a feature common to both the Shaw and Southwell schemes and does not weigh in favour of one over the other. 15. All of these economic factors, in my assessment, make the adoption of the Shaw hypothetical development scheme clearly more attractive on an economic basis to a hypothetical purchaser than that proposed by Mr Southwell. Conclusion 1. In essence, the difference between the parties as to what would be the commercial profile to be assumed for the hypothetical purchaser of the site was a contest as to whether that entity would be one which would purchase and develop the site as a super‑regional shopping centre (the Shaw scheme) - retaining the resulting asset as a long‑term investment in order to enjoy the significant income stream and anticipated capital‑gain increases arising from such long‑term asset‑holding. In that scenario, the hypothetical purchaser would be a property investment fund (or group of funds, as is the case with the present ownership of the site). 2. On the other hand, the hypothetical purchaser scheme advanced for the Valuer‑General was that the acquiring entity would be a property development one which would undertake a development based on the Southwell scheme with the varying elements (including individual apartments), being on‑sold after completion. Depending on staging (the Southwell scheme diagram earlier reproduced but modified for a single‑stage shopping centre construction), this scheme would permit much earlier recoupment of the purchase price and construction costs, together with the harvesting of the profit to be made. It is to be noted that the smaller (but still significantly sized) shopping centre in the Southwell scheme would be expected to be sold, after completion, to an investment fund of the nature proposed by the Applicants as their hypothetical purchaser. 3. For reasons earlier explained, the conclusions I have reached (about the nature of the prudent hypothetical purchaser and the balance in favour of the Shaw scheme to be derived from the town planning evidence) are not determinative for my conclusion that the Shaw scheme should be adopted for the purposes of undertaking the substantive valuation process. 4. However, when the conclusion I have drawn from the economic evidence is added to these two‑factor conclusions, I am satisfied of the inevitability of concluding that the hypothetical development scheme proposed by Mr Shaw should be preferred. I am also satisfied that there are no insurmountable difficulties with his scheme for reasons earlier explained. 5. In addition, as I have also earlier explained, the necessity for, and likely lack of success of, a cl 4.6 request (one being necessary to achieve the total GFA proposed by the Southwell scheme), together with the lack of any explanation as to how the Southwell scheme would be modified to accommodate rejection of such a request, reinforces my view that the Shaw scheme is to be preferred. The consideration of remaining evidence after the scheme choice 1. At the commencement of the final day, prior to the commencement of closing submissions, I discussed with the advocates my tentative view that, if, after considering and analysing the town planning and economic expert evidence, I was to reach a conclusion as to which of the Shaw or Southwell hypothetical development schemes provided the appropriate context within which the remainder of the expert evidence should be considered, that would render it unnecessary for me to reach any conclusions concerning areas in dispute arising from the remaining expert evidence which addressed the scheme I had determined was to be discarded. 2. Subject to Mr Galasso submitting that I would need, also, to have regard to, and resolve the differences arising from, the expert evidence of Mr Miles and Mr Jackson for the Applicants and Mr Preston for the Valuer‑General concerning the nature of the hypothetical purchaser in the context of the hypothetical development scheme which might be adopted by me as the preferred basis for further analysis, this proposition was agreed. 3. As can be seen from my earlier consideration of, and determination concerning, the preferred hypothetical scheme, I have considered the town planning, economic and potential purchaser evidence in reaching my conclusion that the Shaw scheme is that upon which the hypothetical purchaser would proceed to consider valuation issues for informing a hypothetical purchase‑price offer to the hypothetical vendor. 4. I therefore now turn to set out the matters arising from the remaining, less controversial areas of expertise requiring consideration before turning to address the highly contested valuation issues arising with respect to the Shaw scheme. The quantity surveying evidence 1. Subject to noting one specific detail concerning the quantity surveying evidence, it is unnecessary to address this topic in detail. As earlier noted, the quantity surveying evidence for the Applicants was given by Mr Michael Gilligan, whilst that given for the Valuer‑General was given by Mr Stephen Bolt. 2. In the areas where they had costed like-for-like with respect to the Southwell and Shaw hypothetical development schemes, whilst their costings were not identical, they were sufficiently close to be able to conclude that each was within the relevant margin of error with the other. As a consequence, the agreed position, as I understood it, was that the midpoint of the costings was appropriate to be accepted for my valuation purposes. 3. The significant difference between them was the costing by Mr Bolt of the Shaw scheme as being $900 million greater than the costing of the same scheme by Mr Gilligan. It transpired that this superficially significant difference arose because Mr Bolt had costed the construction of the five residential towers along the Herring Road frontage that were provided for as a future development option in the Shaw hypothetical scheme, whilst Mr Gilligan had not included them in his costings. 4. However, as I understand the evidence, Mr Gilligan's costings for the Shaw scheme incorporating the construction of the five towers increased his costings in a fashion bringing it to within the margin of error compared to that of Mr Bolt of the Shaw hypothetical scheme with residential towers included. 5. On this basis, I am satisfied that there was no matter arising from the quantity surveying evidence requiring adjudication by me. To the extent that the prudent hypothetical purchaser would need to have regard to these costings, that purchaser would adopt the midpoint between the values set out in the evidence of Mr Bolt and Mr Gilligan on a five‑tower‑included basis. The construction timing issue 1. As earlier noted, expert evidence was given concerning how much time would be necessary to construct the relevant hypothetical development. This evidence was given by Mr Neal Taylor for the Applicants and by Mr Chris Peter for the Valuer‑General. They reached differing conclusions as to how long it would take to construct the relevant first stage of the hypothetical development scheme to be adopted. 2. The differences arose from only a single dispute between them. The difference between the two positions resulted in a construction time differential of approximately six months for the proposed shopping centre. 3. This dispute was whether or not construction on a project of the nature of the hypothetical development would be undertaken on a five‑day working week or a six day working week (with the sixth day, Saturday, being of a lesser duration - effectively, as I understood it, being a half working day on Saturdays). 4. The proposed hypothetical development construction proceeding on a five‑day working week was explained by Mr Taylor as reflecting his experience of the development of such projects. It was also his evidence that, if a six‑day working week model of the nature proposed by Mr Peter was to be adopted, it was his experience that the additional working time on the Saturday would be used for catch‑up/rectification activities to address matters which had otherwise arisen but not been addressed during the course of the conventional five-day working week. He postulated, as I understood his evidence, that the need for such catch‑up/rectification works was likely to arise on a project of such magnitude, whichever of the Shaw or Southwell schemes I preferred. 5. The evidence given by Mr Peter for the Valuer‑General was that it would be conventional for such a construction site to work the five‑and‑a‑half‑day working week upon which he had based his calculations. It was his evidence that this was the conventional working week for a project in New South Wales of the nature that would arise from the hypothetical development. 6. I accept the evidence of Mr Peter on this point. The explanation given by Mr Taylor, that any Saturday working would be taken up with rectification works and therefore would not shorten the overall construction period, does not sit comfortably with his assessment that there would be the necessity for such rectification works on a regular basis. If such rectification works were necessary on a regular basis on a conventional five-day construction week, with no Saturday catch‑up opportunity, he provided no explanation as to how such rectification works would be accommodated during his postulated five-day working week without those catch‑up activities themselves, during the ordinary working week, extending the construction period necessary for the site. I am, on that basis, satisfied that the construction timing differences are to be resolved on the basis of a five‑and‑a‑half‑day working week and that, in reality, the differences between the two experts might well have been illusory given the evidence by Mr Taylor concerning the regular necessity for catch‑up/rectification time. 7. However, despite these differences, there was no suggestion that this issue would have any significant impact on valuation issues. Static valuation versus discounted cashflow 1. There was a significant methodological issue in dispute between Mr Jackson and Mr Preston. Mr Jackson adopted the position that the valuation should be undertaken on a static basis. That is, for each of the base dates, the relevant costs and other factors should be applied so that the valuation was an "as is valuation" as at each of the base dates. 2. On the other hand, Mr Preston proposed that the appropriate valuation methodology was one involving a discounted cashflow over a period following each of the base dates. In practice, what Mr Preston's model did was to assume an escalation in costs from each of the base dates and then, at a relevant period of time (say, 20 years, as I understood him), the resulting numbers were to be discounted back to the base date in order to provide the relevant current value to be applied. 3. Clearly, Mr Jackson's model is easier to understand but ease of understanding (and presumably application) does not mandate that it should be adopted. 4. It is appropriate, first, to set out Mr Jackson's evidence on why he proposes that his model should be adopted. This evidence falls into two categories. First, the positive evidence given by him in support of his model and, second, the criticism that he makes as to what he says is the inapplicability of Mr Preston's discounted cashflow model in these circumstances. 5. Mr Jackson summarises the positive evidence in support of his model and his criticism of Mr Preston's model in the Joint Expert Report as follows: 5.7 Static versus Escalating Feasibility Analysis 344. In my experience, the usual and without exception approach to a feasibility analysis is to use a static model of calculation. A static model is a model which at the date of valuation takes account of all anticipated realisations and costs involved with the development project. 345. A static model is the preferred approach to a feasibility analysis as it is based on known value levels and costs at the date of valuation. 346. The feasibility analysis has been undertaken by GP and me based on assuming 100% debt funding. Debt finance will be provided by a financier or group of financial institutions to assist in funding the project through the development phase. 347. In my experience, without exception, one if not all of Australia's major four banks would be involved in the provision of finance for a development such as that proposed for the subject property. Given the size and scale of the project, funding would likely be provided on a syndicated debt facility agreement whereby a syndicate of major financial institutions provide varying levels of debt in one coordinated facility. 348. The requirement of Australia's major banking institutions to valuers when undertaking a feasibility analysis for the purpose of providing finance is to undertake a feasibility analysis of the project on a static model basis. To support this requirement, I annex to this Joint Report the Australian requirement for valuers of the major four Australian banks. 349. For ease of reference; (a) Westpac - Page 17 (b) NAB - Page 34 (c) ANZ - Page 19 (d) CBA - Page 7 350. There is a very good reason why our major financiers ask valuers not to undertake an escalated feasibility analysis. There is enormous uncertainty over how future outcomes may turn out. The longer the projection into the future, the greater the uncertainty. 351. The development program of GP spans over a period of approximately 14 years. Long experience informs me that anything can happen over that period. As an example, in a period of 10 years either side of the base dates of valuation, the Australian economy has experienced the impact of a global financial crisis and a pandemic. 352. Australia's major financiers in my experience request a static feasibility approach to ensure a responsible approach to prudent lending. They will not advance mortgage finance based on speculative realisations in the distant future. 353. To illustrate my concerns with the escalating approach to value, at paragraph 332 GP adopts a total realisation escalated for both the retail and residential apartments in July 2016 of $4,423,636,024. When compared to the static approach, GP adopts $3,637,813,636. The escalated model is reliant on value growth of $785,822,388 over the development period. Should this projected growth not be achieved in whole or part, the value assessed for the land would be eroded substantially. 354. It is of no surprise that the GP escalated model derives an inflated value for the land. Any development may be successful if such a phenomenal level of growth was adopted. 1. On this topic, Mr Jackson gave oral evidence as follows (Transcript 6 April 2022, page 383, line 21 to page 385, line 28): WHITE: Have you got a copy of the supplementary evidence book, Mr Jackson? In particular page 104 of that where we find Mr Peter's updated Gantt charts. For your Honour's note, it's page 104 of the supplementary evidence book. … WHITE: Page 104, do you see in the chart on the left‑hand side B21 residential tower is start of development is 7 June 2023 and the finish date is July 24? WITNESS JACKSON: Yes. WHITE: Residential tower B2 is the next one down. That starts on 12 January 24 and 26 February 25. WITNESS JACKSON: Yes. WHITE: Then turning over the page, residential tower B3 starts on 22 January 26 and finishes on 5 April 2027. WITNESS JACKSON: Yes. WHITE: Under the static model, you are assuming that the apartments from those towers are sold for prices that they would have achieved in a market dated 1 July 2016. WITNESS JACKSON: Correct. WHITE: I'm going to suggest this to you, Mr Jackson, that the vendor is not going to accept a land valuation which assumes that all of those apartments are sold at 2016 prices. WITNESS JACKSON: No, I disagree with that. The vendor would have no say in how you might model it. HIS HONOUR: You'll have to speak up. I couldn't hear you. WITNESS JACKSON: I - I - I disagree with that. I mean, the vendor is not going to have any say in how a purchaser might model something, and the way these feasibilities are viewed is to - you have regard to the development program but reflect current day dollars and market value at the current day. So you're not immersing yourself in the world of the unknown. WHITE: You say the vendor isn't going to have an interest in this. Is the vendor is going to have his own or her own feasibility analysis? WITNESS JACKSON: Highly unlikely if they're selling it. WHITE: Well, in the 6A world, because we have to assume, don't we, that the vendor and the purchaser are both perfectly acquainted with the potential for the land? WITNESS JACKSON: If you're asking me to assume it, I'll assume it. Yes. WHITE: All right. So the vendor is going to be given advice, these apartments get built in the mid‑2020s and are going to be sold at those prices in the real world. WITNESS JACKSON: What prices is that? WHITE: The price which exists in the mid‑2020s when they are‑‑ WITNESS JACKSON: But you don't‑‑ WHITE: ‑‑built and sold. WITNESS JACKSON: But you don't know. You're standing at the front of the property on 1 July 2016, you have no idea - as in none, as to what these apartments might be worth in 2023. It is nothing but a guess. WHITE: It's more than. WITNESS JACKSON: No, it's not. You have no - I'm - I'm an experienced valuer and I can't tell you what something is going to be worth in seven years with any degree of certainty whatsoever, and I couldn't hold my name out to that because you don't know. WHITE: One thing that you do know is at that date, 1 July 2016, is what the demand is. WITNESS JACKSON: That's you - you - you know everything at that date, not just the demand, you know everything else at that date. What you don't know is what the future might bring, none of know that. We've got no idea. WHITE: But you have to make a judgment as to what the land is going to be realising in some future date . WITNESS JACKSON: Well, the reason - no, I disagree with that. You look at what it might realise on the date. So if you held all your assumptions constant that there - therefore you've got a logical and consistent basis of comparison. So it's not infected by futuristic projections that you really have no idea about and no control over. So you look at everything, the - the standard valuation approach is to look at everything on - at constant day dollars at the date you're doing your assessment and assess everything from there. That way you're consistent in relation to cost, in relation to realisation. So there's no - no infecting the outcome by any projection up or down that may never be materialised. 1. Mr Jackson's evidence continued (Transcript 6 April 2022, page 386, line 44 to page 387, line 38): WHITE: Going now to the costs in the static approach, again the costs of construction remain as at 1 July 2016 or whenever the start date is. WITNESS JACKSON: That's correct. WHITE: So what I'm going to suggest to you is that in a project of the time scale of Mr Southwell's project, a multiphase master plan project, the costs are going to inevitably escalate throughout the life of that project. WITNESS JACKSON: Probably will. WHITE: So the hypothetical prospective purchaser is not going to accept a land value which assumes that the cost of construction will remain the same throughout the life of the project because it's going to artificially increase the value of the project. WITNESS JACKSON: No, that's not how the market behaves. The market asks you to look out it on a date, "Tell me what the - the land would be worth on that date based on what's known on that date." I agree with the proposition that as you move forward into the future that costs and realisations might change, it might go up, they might go down, you don't know. The market behaves on the basis of what's known. WHITE: What we assumed in this case, because the construction experts have assumed it, they've assumed that the construction costs do factor in the escalation of costs as the Southwell scheme progresses and develops. WITNESS JACKSON: Yes, projected. WHITE: You say that they should not have done that. WITNESS JACKSON: Well, they - they - they can do whatever they want. I'm not there to tell them what they should or shouldn't do, but they have projected into the future in relation to costs. WHITE: But - I'm sorry, I don't want to interrupt you. WITNESS JACKSON: No, I was - as to whether that actually ultimately turns out to be in - in any way correct, well, that would depend on the market. WHITE: But on your case, on your analysis of the valuation model that should be used, the only costs that are relevant to his Honour are those costs which applied as at 1 July 2016 or 1 July 2017. WITNESS JACKSON: The ones you know, that's right. 1. In his supplementary expert report, Mr Jackson added: 98. I have also set out in some detail the concerns I have with the Escalating Feasibility Approach. For the purposes of this Reply, I have focussed on the Static Approach adopted by GP on the basis that the Escalating Approach is fundamentally unaccepted in the valuation profession. … 1. The element of the closing submissions on behalf of the Applicants, proposing that Mr Jackson's approach should be favoured, were in the following terms: 231. While Mr Jackson and Mr Preston agree that the hypothetical development method should be used to value the retail component of the Site, they disagree on whether the static approach or escalating approach should be used. 232. A static feasibility analysis is based on known value levels and costs at the date of valuation: Joint Valuation 1 (Jackson) [345]/EB Tab G3 at 1788. 233. An escalating feasibility analysis (also referred to as a discounted cash flow or DCF analysis) applies a percentage increase to income and costs: Joint Valuation 2 [35] (Preston)/Supp EB Tab G5 at 208. 234. An escalating feasibility analysis is just a guess: Tr 384:48-385:14, 389:30-34 (Jackson); Tr 393:48-395:8 (Preston). Mr Preston could see that it was "sporadic" and "lick your finger and put it in the air sort of stuff": Tr 415:41-416:41 (Preston). 235. A static feasibility analysis, as adopted by Mr Jackson, should be preferred because it is more reliable. In a static feasibility analysis, all assumptions are constant and so there is a logical and consistent basis of comparison that is not infected by futuristic projections: Tr 385:19-28 (Jackson). Future movements in costs and returns are still priced in as part of the risk analysis in a static feasibility analysis. They are represented by the profit risk rate: Tr 388:37-389:11 (Jackson). 236. Also, a static feasibility analysis be required by Australia's major banking institutions for debt financing: Joint Valuation 1 (Jackson) [344]-[354]/EB Tab G3 at 1788. 237. In addition, the Australian Property Institute recognises that a static analysis is suitable for preliminary feasibility studies and for calculating land value: Joint Valuation 2, App C at [1.4]/Supp EB Tab G5 at 242. These are the very tasks being undertaken by the Court. 1. On the other hand, Mr Preston's explanation as to why the discounted cashflow model should be adopted, from his written and oral evidence, as well as his criticism of Mr Jackson's static model, were set out in the following extract from his valuation report. Mr Preston wrote: In my opinion for multiple use large multiple staged projects an appropriate valuation methodology is the Discounted Cash Flow (DCF) approach wherein cash outflows and cash inflows are forecasted and discounted on a staged basis over the development and sell period (over time) which includes lead time to gain development consents and approvals, construction time and then sell down of the components and stages of the project. Whilst I have considered the comparable sales approach, I have placed more weight on the DCF methodology in the circumstances of the Subject Property as it considers the characteristics of development of the Subject Property over time. 1. In the further joint expert valuers' report, Mr Preston further provided extra commentary in support of his opinion on the issue, writing: 32. Mr Jackson then discusses his preferred static approach logic in the context of my capitalisation approach. I refer to reasons why, in my opinion, the static valuation approach is fundamentally flawed in its application to the valuation question in these proceedings as at 1 July 2016 and 1 July 2017 later herein. 33. Mr Jackson in his supplemental report then turns to his feasibility analysis based on Mr Southwell's design which he prepares on a static approach without growth in costs or growth in sales values. 34. Mr Jackson at paragraph 98 states "for the purposes of this reply I have focused on the static approach adopted by GP on the basis that the escalating approach is fundamentally unacceptable in the valuation profession". 35. I significantly and fundamentally disagree with Mr Jackson on this point which I note is a material issue in this matter. When the Court considers the facts as to the application of discounted cash flow (DCF) which is commonly known to include growth in costs and growth in income (sales), in my opinion it will be demonstrated that the "highest and best" use market value of the land is only obtainable from the use of the DCF analysis inclusive of growth in both costs and sales. 36. In my opinion the application of a static valuation approach does not result in the "highest and best" legally permissible use market value of the subject land. 37. Mr Jackson has repeatedly said in joint conferencing and in his evidence that a DCF with growth in costs and sales is unacceptable in the profession and points to several bank Credit Risk Valuation Policies which, on occasion, he has referred to as valuation standards. Bank Mortgage Credit Risk Valuation Policies are not valuation standards. 38. Furthermore when the development mortgage Credit Risk Valuation Policies of the banks are closely compared focusing on:- (a) Development mortgage valuation Credit Risk Valuation Policies; (b) The Discounted Cash Flow approach; (c) The use of static methodology or DCF including of growth; (d) The exclusion of DCF valuation including; 39. It becomes immediately apparent that they are different. In Mr Jackson's logic he would apply a different market valuation based on each bank's policy requirements when preparing bank mortgage valuations. 40. Valuation Standards adopted in Australia are the IVSC Valuation Standards (Adopted by the Australian Property Institute (API) and Royal Institution of Chartered Surveyors (RICS)) and the Australian Accounting Standards Board (AASB) standards and in particular AASB 13 Fair Value. 41. In my opinion, for the Judicial Valuer to rule on a static non‑growth valuation approach as opposed to a DCF valuation approach including growth in costs and sales, it should be aware of all the relevant standards and information as well as market practices rather than a selective limited amount of information on the matter as put by Mr Jackson. 42. In making such a broad statement about the use of DCF including growth, Mr Jackson chooses to ignore the API's guidance paper on feasibility studies referenced ANZPGP 205 Feasibility Studies a copy of which is annexed hereto at Appendix C. 43. This guidance paper discusses the use of both static and dynamic feasibility valuation methods as well as DCF. 44. The relevant Sections are scanned below:- 46. As can be seen the API guidance is that Static, Dynamic and DCF valuation methods can be used and are not precluded from use in the manner suggested by Mr Jackson. 47. I note the following from the above excerpt of the API feasibility guidance paper:- a) a feasibility study can be prepared using a static analysis, dynamic analysis or discounted cash flow method of analysis; b) a static approach considers costs generally estimated as at the date of completion of the project and the income is assessed at the same date with allowances for vacancies and letting up periods.; c) a static valuation analysis assumes no changes in prices or cost during the period of development; d) a dynamic valuation analysis allows for potential movements in prices and costs over the period of the development; e) in a discounted cash flow method both costs and income are assessed over an appropriate time period and then discounted back to the present value generally being the date of commencement of the project. The discounted cash flow approach is also a more complex financial analysis that should include interest-rate calculations on a 100% debt funded basis. I have adopted this approach. 48. Discounted Cash flow is further discussed at section 9.5 and 9.6 of the API guidance paper which are scanned below:- 49. I note particularly the reference at 9.5 - discounted cash flow methods that the approach is particularly appropriate for large phased schemes. It is for this reason that I have adopted this approach. 50. In my 35 years of experience undertaking valuations large, staged scheme development sites I have never applied Mr Jacksons static approach. To do so would not be accepted by the vendor or purchaser who always require this type of analysis. 51. Also banks such as Macquarie Bank require DCF analysis for staged projects. In fact, I have been required in the past to undertake DCF for comparable sales for Macquarie Bank on the Liberty Grove development a number of years ago. 52. I have always applied the DCF approach including both corroborated growth forecasts in costs and sales. I am also currently providing valuation advice in a number of major staged projects around Sydney using the DCF approach on this basis and will continue to do so into the future. 53. The static approach is also fundamentally flawed for large multi-staged projects as it ignores the realty that costs and values grow and can fluctuate. It however can have a place in short term single staged projects that do not have the same cash flow impacting considerations that a staged project does. 54. I also note that Mr Jackson does not consider Mr Gilligan's growth forecasts. The cost growth logic was also agreed between the cost experts. 55. Furthermore Mr Jackson, in his capitalisation approach between 1 July 2016 and 1 July 2017, accommodates significant growth in the shopping centre value itself by compressing the capitalisation rate from 5% to 4.75% in his assessment of Mr Shaw's scheme. 56. In Mr Jacksons supplemental report he also prepares a feasibility analysis. 57. Mr Jackson also values the residential component of the development without reference to any sales evidence. A matter he accuses me of with respect to the retail rental which was not correct. 58. He derives a static residual land value of $57.5m dollars as at 1 July 2016 and $68.6 as at 1 July 2017. I note that I do not have his Estate Master Files and cannot review his calculations in detail. 1. However, the following exchange between Mr Galasso and Mr Preston in cross‑examination is worth noting in relation to the above extract from the further Joint Expert Report (Transcript 6 April 2022, page 396, line 37 to page 398, line 24): GALASSO: You then say in 44, "The relevant sections are scanned below," and you set those out. Then at 46 you say, "As can be seen, the API guidance is that static dynamic and DCF valuation methods can be used and are not precluded from use in the manner suggested by Mr Jackson." That cuts both ways, doesn't it? WITNESS PRESTON: Yes, it does. GALASSO: It's not as if there's a preclusion of one or the other, you're just saying that it‑‑ WITNESS PRESTON: I accept that, yes. … GALASSO: Then 1.4, the static analysis which is what Mr Jackson did: With this approach costs are generally summated at the date of completion of the project and income is assessed as at the same date with allowances for vacancies and letting up periods. This is the less complex financial analysis which is suitable for preliminary feasibility studies and for calculating profit and risk or land value. WITNESS PRESTON: Yes. GALASSO: It says that. WITNESS PRESTON: Yes. GALASSO: Isn't that what we're doing in this case? WITNESS PRESTON: Yes. GALASSO: You don't include that reference to it being suitable for calculation of land value in your summary in paragraph 47 at all, do you? WITNESS PRESTON: No, I hadn't done that intentionally though, Mr Galasso. 1. Earlier, in oral evidence, Mr Preston made the following comments in response to Mr Jackson's contention that the discounted cashflow method was inappropriate, as it required uncertain projections into the future (Transcript 6 April 2022, page 385, line 41 to page 386, line 5): WITNESS PRESTON: I fundamentally disagree with Mr Jackson on this point. The - the fact is that we are being asked to consider valuations, for example, of 2016 and to make an assumption that the world will mark time in terms of cost and price in 2017, 2018, 2019, 2020 is - to my mind it's not how markets function, it's not how the economy functions. You know, we - we have a consumer price index at a raw level across all prices. The - Mr Jackson, I think, with respect says that he always values on a static approach. I never - sorry, the static approach is useful for doing very small developments that are completed within 12 to 18 months as a rule‑of‑thumb type approach. Any approach that is multi‑staged over a long period of time - and I've valued many, many properties in this same logic where they are staged, not always retail, I submit that, the - the - they include staged residential projects. I - I've never and would never and will never approach it by a static approach. 1. Mr Preston also said (Transcript 6 April 2022, page 387, line 40 to page 388, line 33): WHITE: Mr Preston, so your view, please, on whether in a valuation model one should look at escalating costs or not throughout the life of a project such as the Southwell project. Mask off, please. WITNESS PRESTON: In my opinion, Mr White, yes, they should be considered, the cost escalations. A couple of other relevant comments regarding static versus discounted cashflow, if I may, your Honour. Discounting is not a new thing. John Newton first thought of the concept of discounting in the 1600s. The first interest tables were developed in the 1700s. We are sitting here in 2022 opining on what values might be by way of value methodology as at 2016 and 2017. The concept of discounted cashflow, your Honour - I was an expert for the RTA in RTA and Austral Bricks and Colics(?) several years ago against - and my opponent valuer in that case was Wayne Lonergan from Lonergan Edwards, and that case was all about discounted cashflow, albeit to do with a different asset class. It was a clay shale extraction and a landfill with Austral Bricks and Colics. There was no debate in that matter about the use of discounted cashflow. It was about the discount rate and as a result of me analysing comparable sales versus Mr Lonergan in that matter, using a weighted average cost of capital logic to derive his discount rate, I lost. He won. I went and did a Master's degree in Applied Finance, your Honour, to be able to understand the application of methodology such as discounted cashflow to all asset classes. It is commonly and widely used as a methodology to value companies, to value stocks, derivatives, property. Mr Jackson would have the Court believe that it's limited to valuing passive investment properties or multi‑tenanted investment properties such as offices, retail and industrial, as if complete, and that it would not apply in the case of a development. I disagree. It is a methodology that if the costs in growth and the costs in sales are properly accounted for, and the discount rate reflects growth, it is an entirely appropriate methodology. In our circumstances, your Honour, we have the two cost planners, Mr Bolt and Mr Gilligan, I think - you must excuse me if I've got the name wrong. They've both agreed on annual growth for the growth in cost during a project between the dates of valuation of 1 July 16 and 1 July 17. I think Mr Jackson and I were in agreement that the capitalisation rates, for example, for the shopping centre, compressed by 25 basis points or a quarter of a percentage point, which in and of itself is an implication of growth from 2016 to 2017, your Honour, so in my opinion, given a staged long‑term development, which is also the approach recommended in the API's guidance on - Australian Property Institute, your Honour, representing the valuers professionally, is an appropriate approach for a multi‑stage long‑term project. 1. Mr Preston added (Transcript 6 April 2022, page 390, line 50 to page 391, line 40): WITNESS PRESTON: And the way that I identified my growth for the end value of the shopping centre is to look at the competitive set of valuations of - of other shopping centres and tracked the movement in price, which, can I just make another point to do with discounted cashflow, your Honour, and if I can just hark back to Rost and Collins and the Albany case as it's referred to in 1976, the world we're in today we have much more statistical data upon which growth can be more reliably forecast for both costs and sales than we did at the time of the Albany case in 1976. So, Mr Jackson would have the Court believe that these are radical assumptions as to future growth, I have done my level best to approximate the - the - the growth in the sale values noting that I'm adopting the growth of the cost planners, Mr Bolt, Mr Gilligan, for the costs by reference to available statistical data. Might I also add, your Honour, the market is - for this property, I think no one would doubt that it's an institutional, significant and very sophisticated investment market. The types of people that - the types of people in that market are well versed in - in the application of applied finance concepts, they will usually have a capital allocation committee within the Cbus or the Lendlease or the Mirvac. They will - will not allocate capital to any investment or developer unless they see a - the - the return from that exceeding their cost of capital, and they all discounted cashflow, it's just not to sit and say that that's not the way the market behaves for the sophistication that we're talking about here given the nature of the development is just not - not opinion, your Honour, it's not how I would advise a hypothetically prudent purchaser either. HIS HONOUR: Are those persons about whom you've just spoken people who are buying what I would call working assets or people who are buying development sites? WITNESS PRESTON: Both, your Honour, the - another matter I was involved with recently was the acquisition of 13 Martin Place for the new railway station. The methodology that we applied there was discounted cashflow, I was in very close contact with the capital markets team at Dexus who owned the site to consider the very question you put, what would the hypothetically prudent purchaser or vendor seek a return out of a project like, you know, office tower in the city, and just common place, they have capital markets teams and they have investment committees that review these opportunities to undertake these either passive investments, your Honour, which by that I mean an existing investment property and or developments. 1. The closing submissions (oral and written) on behalf of the Valuer‑General on this issue were in the following terms (footnotes omitted): Valuation of the Southwell scheme 318. Mr Preston uses a DCF for the valuation of the Southwell scheme which involves forecasting cash outflows (costs) and cash inflows (sales) over a staged development and sell period incorporating lead time to development consent, construction time and sale time. 319. Mr Jackson disagrees with the use of the DCF methodology, preferring to use the static model. The static model assumes no changes in prices or costs during the period of the development. 320. Mr Preston explains why the static model is inappropriate for valuing a master‑planned staged development, occurring over many years, in the SEB at pp 208-210 [33]-[58]. In his view, the static approach is useful for doing very small developments that are completed within 12‑18 months. The Australian Property Institute Guidance Paper 'Feasibility Studies', effective 1 July 2021, identifies the DCF approach as "particularly appropriate for large phased schemes", such as the Southwell scheme. Mr Preston is of the view that the market would view the static model as an inappropriate model for use when valuing a multi-staged project to be developed over many years, such as contemplated by the Shaw design. 321. Mr Preston particularly rejected the criticism by Mr Jackson that the DCF escalating method artificially increases growth in realisations. There is no artificial growth because the income is discounted at a discount rate back to the present day value, being in this case 1 July 2016 & 1 July 2017. 322. A further weakness in the static model for a multi-phased development is that it does not account for escalating costs over the life of the development. In their reports, each of the quantity surveyors opines that it is appropriate to account for the escalation of costs. A prospective prudent purchaser would not accept a valuation based on a feasibility model which does not account for growth in construction costs over the life of the development. 323. Mr Preston adopts a monthly DCF approach (as opposed to quarterly or annually cash flow frequencies) because this best reflects the manner in which cash flows occur and because it reflects properly the indirect costs such as financing which are tied to cash outflows of direct costs. Using the DCF method, both costs and income are assessed over the life of the development and then discounted back to present value. 324. The DCF model therefore accounts for development staging over time taking into account: • the components of the development; • the staging of construction and release of the components of the development to meet the market (retail and residential); • the additional interest expense or debt service cost of holding the man whilst the staged development is undertaken; • the additional holding charges through the life of the development and sell period of the project such as council rates and land tax; and • additional fees and expenses incurred through the longer duration of project. 325. Mr Preston's DCF approach takes into account each of these considerations. In circumstances where each of the development costs and end sale values, as well as staging and timing of the development, is properly accounted for in an economic sense in the residual land value DCF approach, the Court can safely conclude that the value of the land which results from this approach has been soundly rationalised. … Valuation of the Shaw scheme 331. Mr Preston disagrees with the valuation methodology adopted by Mr Jackson of the Shaw design. That approach appears to Mr Preston to be in two parts: • Part A - static residual land value analysis of the shopping centre using Argus - Estate Master software; and • Part B - deferred future commercial office land value on a GFA rate basis. 332. As set out above at [320]-[322], a basic flaw with the static valuation model adopted by Mr Jackson using Argus-Estate Master is that it does not make any allowance for growth in costs or sales over the lifetime of the development project. The model conflicts with the evidence of the quantity surveyors, each of whom escalates construction costs over the life of the development. For the reasons given above, it does not represent "highest and best" value because it somewhat simplistically assumes that costs and sales remain fixed as at the date of sale prices, namely 1 July 2016 (or 1 July 2017), notwithstanding that the hypothetical development is constructed (and sold) over many years after the purchase date. 333. Mr Preston also disagrees with the Part B valuation methodology adopted by Mr Jackson by which Mr Jackson considers the potential to undertake further commercial office development on the subject land within the "air rights" above the shopping centre at a future point in time. Mr Jackson uses a comparable sales analysis to apply a rate of $1,000/sq m of GFA for commercial office development (as at 1 July 2016). Mr Jackson discounts this rate when applying it to the subject land because, in his view, any future commercial development on the subject land "will be air rights development above the shopping centre and not freehold land." Mr Jackson's approach is contrary to s 6A of the VLA because he assumes that the 'fee simple' is a bundle of divisible rights of 'on surface land' rights and 'air rights', whereas the valuation of land under s 6A of the VLA is a valuation of rights comprising the one indivisible 'fee simple', being the most extensive estate in quantum: Commonwealth v New South Wales (1923) 33 CLR 1 per Isaacs J at 42. Consideration 1. As earlier discussed in this topic, Mr Preston advocated the adoption of regular incremental adjustments - of 6.5% growth in year one, 3% growth in years two to four, and 2.5% annual growth thereafter for retail sales, and negative 2.1% growth in year one, negative 5.5% growth in year two, 3% growth in years three and four, and 2.5% growth thereafter for residential sales, compared to the "here and now" approach adopted by Mr Jackson. 2. I am satisfied that, for a single, simple reason, Mr Preston's approach is to be rejected on the basis of the only available empirical evidence of the costing cycle over recent years. This evidence was contained in a table derived from Mr Preston's primary expert report (Evidence Book, Tab G2, page 1554) which showed the relevant cycle of residential price cost adjustments between 1999 and 2020. A copy of that table is reproduced below: 1. As can be seen, over the period covered by the above table, costs have cycled over a significant range. 2. Mr Galasso questioned Mr Preston as to how the above table fitted with his conclusion that it was appropriate to adopt a smoothed growth factor for the purposes of his discounted cashflow analysis when the information upon which he based his conclusions showed a significant variation, both as to quantum of variation and whether the variation was positive or negative, on a year-on-year basis. Mr Galasso cross‑examined Mr Preston, at length, on this point (Transcript 6 April 2022, page 415, line 41, to page 420, line 22). It is not necessary for present purposes to set out this lengthy evidence. 3. On the basis of this table - a table which is the best (and indeed only) evidence demonstrating the nature of relevant price movements over the period of 21 years covered by the table - I am satisfied that there is no rational basis upon which I could accept that it would be appropriate to rely on a model that adopted a smoothed rate of cost calculation (whether of a positive or negative nature being irrelevant) over a period of twenty years or so in the face of the relatively wild oscillations in the observational data. 4. It is sufficient for present purposes to observe that, during the evidence cited above, Mr Preston was not able to provide what I consider to be any rational and coherent explanation as to why his smoothing out of numbers was appropriate to be adopted in order to undertake a dynamic assessment in preference to the static one advocated by Mr Jackson. 5. For this single reason, I have concluded that the static model advanced by Mr Jackson is to be preferred. Indeed, in reaching this conclusion, I am fortified by the fact that the hypothetical purchaser will have a costing available based on what is the position at the time of the hypothetical purchase, thus enabling that purchaser, assumed to be appropriately and fully informed, to make a proper assessment of, and appropriate allowance for, what might be any allowances necessary to be made. Adopting this position, I am satisfied, is appropriate in light of the conclusion that I have reached, as earlier explained, that the hypothetical purchaser of the site is going to be a sophisticated large‑scale investor with significant experience in this portion of the market. The detailed Shaw scheme valuation evidence Introduction 1. I have earlier explained why I am satisfied, based on consideration of the oral and written town planning evidence given by Mr Blythe and the oral and written shopping centre economic evidence given by Mr Dimasi, that the appropriate hypothetical future development project upon which the hypothetical purchaser would approach the notionally vacant site as at each of the base dates would be the scheme proposed by Mr Shaw rather than that proposed by Mr Southwell. 2. At this point, it is appropriate to note that Mr Jackson and Mr Preston had not undertaken analysis of the scheme proposed by Mr Shaw in a context of having regard to Mr Shaw noting that his design provided for potential future development utilising the GFA surplus of over 160,000 square metres inherent in his scheme, after allowing for the immediate development of the super‑regional shopping centre proposed by Mr Dimasi and allowing for the proposed future expansion of Mr Dimasi's shopping centre. 3. Mr Preston had not undertaken any valuation analysis of Mr Shaw's hypothetical development design (Exhibit A, Tab G3, page 1798, paragraph 437): 437. Whilst GP agreed with GJ that we would each value each others scheme, GP has not been able to do this given the lack of detail relating to the entirety of the scheme such as:- (a) GBA for each stage; (b) GLAR of each stage; (c) Car parking for each stage; (d) Costs for the commercial stages. 1. On the morning of the fifth day, I raised with Mr Galasso and Dr Pritchard the fact that I considered that it was potentially desirable to have Mr Jackson and Mr Preston undertake further valuation work, based on an analysis by each of them of Mr Shaw's hypothetical development design, coupled with consideration of the scheme encompassing the hypothetical future development of the five‑tower development options postulated by Mr Shaw as being available along Herring Road to utilise the surplus post Dimasi GFA calculations. I provided the advocates with a copy of the topic that I proposed would be appropriate for Mr Jackson and Mr Preston to consider for these purposes. The terms of the reference question I provided were: 3. Yesterday, it was Mr Shaw's evidence that, although Mr Jackson had valued the towers in Mr Shaw's model on the basis that they would be commercial and Mr Shaw was of the view that they should be built-to-rent residential towers, is it not necessary for me to have the valuers address these tower elements of Mr Shaw's design on four separate bases, those being: • commercial; • built-to-rent residential; • built-to-sell residential; and • some blended combination of the above? 1. Mr Jackson and Mr Preston undertook further joint conferencing overnight after the conclusion of the concurrent evidence which they had given (together with Mr Miles) on what might be the identifying financial operational profile of the hypothetical purchaser of the site for the purposes of the s 6A transactions as at each base date. As a result of their joint conferencing, each of them produced a comprehensive Excel spreadsheet responding to the matters which I had set out in the question conveyed to the advocates. 2. On the morning of the sixth day (the day on which Mr Jackson and Mr Preston gave their concurrent oral valuation evidence), these spreadsheets were tendered (Mr Jackson's analysis becoming Exhibit D, whilst Mr Preston's analysis became Exhibit 8). 3. At this point, it is appropriate to note that, for the purposes of questioning Mr Jackson and Mr Preston, that role on behalf of the Valuer‑General was undertaken by Dr Pritchard's junior, Mr White, as had been the case during the questioning of these experts, together with Mr Miles, during the course of the oral evidence concerning the hypothetical purchaser for the hypothetical s 6A transactions. 4. A significant portion of the questioning of Mr Jackson and Mr Preston during the morning of 6 April 2022 concerned their respective responses to my question requiring their valuation analysis of the expanded version of the hypothetical development design proposed by Mr Shaw. 5. Given that I have concluded, for the reasons earlier explained, that the scheme upon which the hypothetical s 6A purchaser would approach consideration of the acquisition of the site would be that prepared by Mr Shaw (for reasons earlier explained), it is not necessary to consider, further, the valuation evidence, written or oral, that had the Southwell scheme as its starting design. Future costs 1. In my earlier summary of the evidence of the quantity surveyors, I set out the terms of an exchange I had had with them concerning the fact that the differences between them on the Shaw scheme were ones which could be described as being within an acceptable margin of error of each other if the costing of the five residential towers along the Herring Road frontage that were provided for as a future development option in the Shaw scheme had been included in Mr Gilligan's costings. 2. For the purposes of the valuation evidence, Mr Jackson accepted, and worked with, the outcome set out for the Shaw scheme in Mr Gilligan's report. 3. Mr Preston, on the other hand, did not accept the future cost projection escalation percentage nominated by Mr Bolt, the Valuer‑General's quantity surveyor, as appropriate to be applied. In this regard, in response to questioning on this point from Mr Galasso, Mr Preston's evidence was (Transcript 6 April 2022, page 423, line 32 to page 425, line 30): GALASSO: In fact at 196, this makes sense of my note; you even reject Mr Bolt's evidence, do you not? WITNESS PRESTON: As far as escalation, yes. GALASSO: You reject it, if his Honour reads 196, this is in the DCM, so this is related to the debate versus DCF, Mr Bolt comes up with a cost escalation which you reject and the consequence of Mr - Mr Bolt's the respondent's expert, correct? WITNESS PRESTON: Yes, that's correct. GALASSO: On Mr Bolt's cost escalation, it would result in a lower value than the value you came up with, correct? WITNESS PRESTON: May I answer this, your Honour‑‑ GALASSO: Well, I'll try and put it to you more simply. Mr Bolt estimated cost escalation, correct? WITNESS PRESTON: Yes. GALASSO: You didn't accept Mr Bolt's cost escalation, correct? WITNESS PRESTON: I accepted his annual rates, but not his escalation of the entire construction costs of each year. GALASSO: If Mr Bolt's cost escalation was to be accepted, then the result would be a reduction in the land value, correct? WITNESS PRESTON: The - am I able to answer a bit more fully, your Honour? GALASSO: Your Honour, I insist on an answer to that question. HIS HONOUR: I'm content to order the witness through answer yes or not, but the witness is then to be able to say, because. GALASSO: I'm happy with that. Mr Bolt is your team's own quantity surveyor, correct? WITNESS PRESTON: Yes. GALASSO: He had one job, to cost the project? WITNESS PRESTON: Yes. GALASSO: And as part of that job, he estimated cost escalation as a quantity surveyor? WITNESS PRESTON: Yes. GALASSO: If you accepted his cost escalation as a quantity surveyor, the necessary result would be your land value would be less than what you tell his Honour it should be, correct? WITNESS PRESTON: Yes, but could I please explain? GALASSO: Absolutely. WITNESS PRESTON: Mr Bolt has escalated the entire sum - sorry, I'll take a step back. Mr Bolt has calculated the construction costs as at 1 July 2016. In his escalation, Mr Bolt escalates the entire sum of each of the stages for the period of time suggested by Mr Chris Peter in the timing expert. That is not how my cashflow works. And nor is it how the cash is paid out during the construction costs. I have taken Mr Bolt's actual figures to the dollar in my 2016 and 2017 valuations, applied his annual escalation costs - rates, percentage terms, and then I have - my cashflow is done - is prepared month, Mr Galasso, and the cash outflows for the costs are paid out on a month by month basis on a drawdown S-curve for each of the stages that were given to me by Mr Bolt. Mr Bolt's - the difference, your Honour, is Mr Bolt's escalated figure is the total sum escalated each year. That is not how the money is paid out when the - my - when the building is built, and that's not how my cashflow works. So Mr Bolt is not privy to the way my cashflow works. What I have done is taken his percentages and applied them on a monthly drawdown basis subject to an S‑curve which is, your Honour, is the amount of money that's drawn down each month to fund the construction of each stage of the project. HIS HONOUR: Does it assume that that happens at an even rate throughout the year? WITNESS PRESTON: The escalation rate is - is - is compounding monthly, your Honour, at Mr Bolt's percentage per annum. HIS HONOUR: But the cash is paid out at then even rate. That is at 12 equal monthly tranches, is it? WITNESS PRESTON: No, sorry, your Honour. There's a - there's a concept called an S-curve. As construction costs on a project are paid, they are lower in the early months, and they build up to a higher amount towards the centre of the construction, and then they taper towards the end. It is very important to actually plot that into a discounted cashflow to properly calculate‑‑ HIS HONOUR: So it's an inverted bell curve, is it? WITNESS PRESTON: Yes it is, your Honour. It's exactly it. 1. As can be seen, Mr Preston provided no coherent explanation why he declined to accept the evidence of Mr Bolt on this point for the purposes of his valuation model, proposing instead that the appropriate method for cost adjustment was to adopt construction costs for the stage as at the date of valuation and apply Mr Bolt's annual growth percentages throughout the cashflow on a monthly compounding basis to the date that the costs are expensed, applying construction costs drawn down "S" curves for each stage. 2. As earlier noted, the cost adjustment rates proposed by Mr Bolt as being appropriate were the same as/generally consistent with the rate that was proposed by Mr Gilligan for these purposes. Absent such an understandable explanation, I am satisfied I should proceed on the basis of there being sufficient agreement between Mr Bolt and Mr Gilligan not to need to address this matter further. The Shaw scheme towers Introduction 1. As can be seen from the instructions given to the valuers as to the matters I had asked them to consider when valuing the Shaw scheme on the assumption that the five towers were to be included in its development potential and value ascribed to them, two of the hypothetical development options were for residential uses of the towers. Those residential uses were either for the towers to be constructed on a build‑to‑sell basis or for the towers to be constructed on a build‑to‑rent basis with a hypothetical developer retaining long‑term ownership of the residential towers. 2. For each of these hypothetical residential tower schemes, it was necessary for the valuers to ascribe a rate‑per‑square metre GFA for that hypothetical development. There were significant differences between the rates‑per‑square‑metre GFA adopted by Mr Preston and Mr Jackson for the hypothetical residential tower development options. In addition, each of them adopted a lower rate‑per‑square‑metre GFA for their build‑to‑rent valuation than they did for their build‑to‑sell one. It is necessary to consider these differences and which approach might be considered to be correct. 3. I turn, first, to consider the difference between the valuers in their derivations of the appropriate rate‑per‑square‑metre GFA to be attributed to the hypothetical residential towers on the basis that they would be constructed for build‑to‑sell purposes. 4. A range of matters require consideration for the purposes of deriving a valuation for the site for each of the base dates, on the assumption that the Shaw scheme with the five residential tower developments hypothesised can be applied. These various matters were addressed by Mr Jackson and Mr Preston in their spreadsheets which became Exhibits H and 8. The areas where they are not in agreement and about which I need to reach a determination to be fed into the relevant spreadsheet model are: * what is the rate‑per‑square‑metre GFA to be applied to any residential development which is to be hypothesised for one or more of the towers in the Shaw scheme? * what is the mix of hypothesised development types appropriate to be adopted for this version of the Shaw scheme? * what is the deferment rate appropriate to be applied to the relevant element of the Shaw scheme? * what are the appropriate development deferral time periods appropriate to be applied to the construction of the Shaw development typology for the development mix appropriate to be adopted for the Shaw scheme? The use of the Shaw scheme towers 1. In 2014, Colliers was commissioned to undertake an assessment of residential demand in the precinct where the site is located. As part of that, Colliers also assessed the potential for future demand for commercial space and whether there was future demand for the construction of a hotel with a significant short‑term residential component. The report concluded (Tender Bundle, folio 152): Non-Residential Land Use Considerations We have been asked to consider a range of uses on the site, being residential and alternative uses including Hotels, Aged Care Accommodation and Student Accommodation. We consider that the "highest and best" use of the land to be clearly residential apartments in the current marketplace and accordingly should be considered as the primary use on the subject site. We note that the majority of the UAP is under the control of Macquarie University, who have restricted land tenure (in comparison) and a charter which restricts residential development. We are of the opinion that these lower value alternative uses (in this case non‑residential alternatives) would be best suited to the university land, where potential exists for a lower average cost of land can be applied. In summary there is no apparent commercial sense in competing with Macquarie University on non‑residential uses, including student accommodation. In analysing alternative land uses we have spoken to experts in aged care, hotels and student accommodation to gauge the demand and respective feasibilities associated with these alternative land uses. In particular we examined the hotel and serviced apartment sector as one of the higher preference of 'non‑residential' categories. Whilst the general hotel market within Sydney is relatively strong with high on average occupancy rates and room rates currently being achieved (in the order of 90%). In nearby Chatswood demand mid-week can be high (up to 90% occupancy) and average room rates are in the order of $220 per night, however the weekends can have a very low occupancy i.e. 50% - 60% and a substantial room rate reduction (in the order of $150 per night). The other issue facing this sector is that the Macquarie Park area is not seen as an accommodation destination. The North Ryde/Macquarie Park area does not have the critical mass of accommodation supply to accommodate travellers from outside of the CBD. This issue will be amplified with the closing of the Stamford Hotel for residential development (Herring Road). Competition in the hotel/serviced accommodation is starting to be impacted by aggressive pricing by relatively new market entrants such as Meriton (producing mostly serviced apartments). In the Macquarie Park area is particularly strong with the opening of Meriton's serviced apartment development on Talavera Road. Industry sources indicate that there has been significant price cutting and room rates have been as low as $140 per night, but with special discounts in the setup period understood to be offered under $100 per room per night. The rate‑per‑square‑metre GFA for residential space 1. In Mr Preston's valuation of the Southwell hypothetical development scheme, he adopted a rate of $1,250 per square metre GFA allocated for residential development (Evidence Book, Tab G2, page 1531). He had not, in his initial expert reports nor in his contribution to the joint valuation expert report, valued the five‑tower element of the Shaw hypothetical development scheme. 2. I have earlier described the process by which I had directed Mr Jackson and Mr Preston to conduct further joint conferencing concerning the five‑tower element of the Shaw hypothetical development scheme. As earlier noted, this further joint conferencing resulted in further spreadsheet evidence for each of the 2016 and 2017 base dates. 3. Mr Preston's evidence, as earlier noted, concerning the various valuation options for this aspect of the Shaw hypothetical development scheme was set out in Exhibit 8. For the purposes of developing that evidence, Mr Preston adopted a rate of $2,650 per square metre GFA for the residential use valuation of the towers in the Shaw scheme. As can be seen, this residential rate‑per‑square‑metre of GFA is, in general terms, double that which Mr Preston had adopted for the purpose of his valuation analysis of the residential component of the Southwell hypothetical development scheme. 4. During the course of his oral evidence, Mr Preston was questioned as to why he had adopted such a significant increase in the rate‑per‑square‑metre GFA to be applied to the residential component of the Shaw hypothetical development scheme. The relevant portion of the transcript records this evidence at page 354, line 17 to page 355, line 29 and page 359, line 50 to page 362, line 43). 5. It is not necessary to reproduce the lengthy elements of the transcript that would be required to set out the entirety of the questioning by Mr Galasso, Mr White and me of Mr Preston on this point. It is sufficient to note that Mr Preston derived his residential rates for the Southwell scheme by analysing and adjusting the residential components of a number of mixed use developments in the vicinity. Undertaking those adjustments (which were of significant scale as elsewhere discussed) led to Mr Preston's derived valuation for the residential component of the Southwell scheme's various residential elements (they comprising between them a number of freestanding residential towers in the north‑eastern quadrant of the site and the various "above retail podium" towers). 6. I note that, toward the conclusion of Mr Preston's evidence on this point (this being on the fifth day of the hearing), I rejected any suggestion of providing Mr Preston with the opportunity of preparing any further expert report on this point. 7. In the course of his various responses to the overall questioning on this point, Mr Preston was unable to provide a satisfactory explanation as to why his valuation rates for the Southwell scheme residential components should not be applied to those in the Shaw scheme towers (if they were to be assumed to be residential) given that the areas of residential GFA in the Southwell and Shaw scheme instances were both of very substantial size - each being orders of magnitude greater than any of the comparator sites he referenced.. 8. For this reason, I am satisfied that it is appropriate to adopt the lower rate‑per‑square‑metre GFA proposed by Mr Jackson to be applied to the Shaw scheme residential components, being the rate applied by Mr Preston for the Southwell scheme residential components. 9. In his oral closing submissions, Mr Galasso also addressed this aspect of Mr Preston's evidence on several occasions. It is not necessary to set out the entirety of, or undertake a detailed analysis of, these submissions. It is sufficient to note that Mr Galasso addressed the fact that, even relying on the size differential between the total residential GFA over all elements of the Southwell scheme, this would not, Mr Preston had conceded, be sufficient to provide a proper foundation for the near doubling of the rate per square metre that he had applied for the Southwell scheme residential components to found the rate which he now sought to apply to the Shaw scheme residential components. Mr Galasso also pointed out that it was Mr Jackson's evidence that once you get to the development sizes of the residential components in the Shaw scheme when compared to that in the Southwell scheme, adjustment for size was not needed. 10. In his oral closing submissions on behalf of the Valuer‑General on this valuation aspect of the Shaw scheme, Mr White submitted that the difference in area between the Southwell residential component and the Shaw residential component was sufficient to justify the higher valuation applied by Mr Preston to the Shaw residential element. In this regard, Mr White proposed, as being uncontroversial in a valuation sense, that "when you bring forward a smaller site for residential or commercial, the value per square metre is higher than it is for a larger site". 11. Mr Jackson was also provided with the opportunity to comment on why he did not change the rate‑per‑square‑metre GFA between the Southwell and Shaw residential components. Mr Jackson's evidence on this point was (Transcript 6 April 2022, page 363, lines 1 to 34): GALASSO: Well I'll ask Mr Jackson; Mr Jackson, you assisted his Honour with your metrics in terms of rate, which I think you've got headed, date, rate, deferment rate and years. First of all in terms of build to sell, what do you say about Mr Preston's - sorry, first of all, your rate of $1,250 as I understand it is Mr Preston's $1,250 that he used for the Southwell scheme? WITNESS JACKSON: Correct. GALASSO: Do you recognise that it is a rate that Mr Preston derived by reference to the amount of floor space in the Southwell scheme relative to what he identified as five comparable sales? WITNESS JACKSON: Correct. GALASSO: Do you recognise that in the Shaw scheme, the quantum of floor space is less than that amount? WITNESS JACKSON: Yes. GALASSO: And presumably, by the fact you took $1,250, you made no adjustment to the rate per square metres? WITNESS JACKSON: That's right. GALASSO: Why not? WITNESS JACKSON: Because they're both in my opinion, still very significant undertakings. Almost 170,000 square metres of GFA in the Shaw scheme is a very significant amount of development to take place. It's factual that the Southwell design is larger, but on any view, they're both very significant undertakings to develop that amount of GFA. So I didn't distinguish between the two because I think they're both very significant, would both take a very long time, would be over many many stages, and I think the level of discount once - once you get to that scale and size, I think is it should be consistent. 1. In the written closing submissions for the Applicants, this aspect of Mr Preston's evidence was addressed in the following terms: 225. First, Mr Jackson adopted a residential GFA rate of $1,250/m2, which is based on the residential GFA rate adopted by Mr Preston in every valuation until the hearing: Tr 347:1-9 (Jackson); Tr 354:23-26 (Preston); Preston at 35-36/EB Tab G2 at 1530-1531. He explained that the same residential GFA rate could be applied to the Southwell scheme and the residential towers above the retail podium in the Shaw scheme because the residential development in both schemes are very significant undertakings (and hence no adjustment for size): Tr 363:4-34 (Jackson). 226. Mr Preston more than doubled the residential GFA rate for the residential built-to-sell towers, adopting a rate of $2,650/m2. Mr Preston agreed that the relationship between the residential GFA in the Shaw and Southwell schemes (169,650m2 compared to 216,560m2) is not sufficient to account for a more than doubling of the rate/m2 of residential GFA: Tr 355:25-29, 360:38-36 (Preston). His justifications for this leap - avoiding "double discounting" or undertaking "a completely different exercise" - does not make sense and demonstrates that the increase from $1,250/m2 to $2,650/m2 is arbitrary: Tr 350:25-45, 351:4-12, 352:31-353:13, 354:6-12, 361:4-19 (Preston). Mr Preston, in effect, conceded that the residential GFA rate for the Shaw scheme was arbitrary, stating: "It's just the way that I've done it to satisfy this exercise … So what results is a greater differential": Tr 361:18-19 (Preston). (The appellants note that Exhibit 8 as tendered on 6 April 2022 comprised the two pages (2016 and 2017) of valuation assessment, however that Exhibit as sent to the Court in electronic version contained a third page which was not tendered, and was not the basis of cross‑examination, and accordingly the appellants object to that third page.) 1. In his oral closing submissions, Mr Galasso also addressed this aspect of Mr Preston's evidence (Transcript 20 April 2022, page 467, line 38 to page 468, line 17; page 513, line 30 to page 513, line 27; page 534, line 29 to page 536, line 44): Page 467, line 38 to page 468, line 17: GALASSO: … but what Mr Preston has done, we would say impermissibly, is revalue the residential floor space. And these were the matters, your Honour, that we've dealt with in the written submission, your Honour has the benefit, and I'll deal with this now. Can I say, if it's relevant, this reflects what we say at para 226. Your Honour has exhibits D and 8, in excel, and your Honour had asked for them, so that your Honour could manipulate the deferment period and the deferment rate. HIS HONOUR: Yes. If I tendered to create a jurisdictional error that you will both complain about. GALASSO: Interestingly, if you played around with it, there's no amount of adjustment that you can do to Exhibit D, Mr Jackson's table, that gets you anywhere near Mr Preston's number, you end up, even if you reduce the deferment rate down to two percent or three percent, and the deferment period universally, to five years. This is in the combination, which is a five years, that commensurate with a rough bill time, you end up in the mid to three quarter two hundreds, in terms of a land value. That's just the way it works. And similarly, if you took Exhibit 8, Mr Preston's. The primary driver to the significant difference, and the large numbers, is Mr Preston having realigned or readjusted a residential rate per square metre from the twelve hundred and fifty dollars, that he himself had derived, for the precinct, and all of a sudden, more than doubling it to twenty six fifty. If you put twelve fifty into that column that's got twenty six fifty, wherever it is, it comes up with a number, instead of the three seven four, it comes up a number that's mid two hundreds. So, it's that artificiality, every time there's something asked, when we criticise Mr Preston of this, every time there's a criticism of what he's done, what comes back is the same thing, just with an adjustment, that gets you the same number. Page 513, line 30 to page 513, line 27: HIS HONOUR: No, I understand, you're explaining to me why I should have a because is to, whether it should be 1250 or 2650. GALASSO: It's certainly going to be hard on 1250. I mean, I think the question is, does it get as high as what Mr Preston says in exhibit H, namely, the 2650. And you do get some assistance. The Court does get some assistance from Mr Preston on that. And we tried to set that out in paras 341 and 342 of the written submissions. You'll recall that the comparable sales which were relied upon for the residential values, are set out by Mr Preston in the primary report at evidence book 1531. I don't know if it's convenient for your Honour to take that up. … GALASSO: --to read the table, but these are principally the residential sales that we saw on the site inspection, your Honour. If your Honour recalls, we went to 101 Waterloo Road, which was at the bottom of the shopping centre. It was the one where that, perhaps, wasn't very much retail on the ground floor. And then we looked over the road, over Waterloo Road, and there were those residential-- HIS HONOUR: There were two residentials. GALASSO: Yes. So, there was, I think, there was 82 - 84 and 80 Waterloo Road are the ones we saw. We didn't see the other ones, Halifax Street or 112 Talavera Road. And, as you can see, your Honour, the sizes were quite a lot smaller of those sites compared to the potential residential GFA that Mr Preston was considering at the time, that the sales range between 30,000 square metres and 87,000 square meters of GFA. And therefore the biggest adjustment that Mr Preston was making for comparative purposes was an adjustment for size, as your Honour can see in the yellow line at the bottom of the table. Now, of course, what we would submit that the - now that the scale of potential residential GFA is less in being the five towers, then the adjustment for size, we would submit, is less as well. And what Mr Preston has done, and he complained this in the oral evidence, is that he adjusted downwards from those comparable sales for size and time. And for the nature of the mixed use development. And he adopted a rate of, as we've seen, 2,650. And he said that that was a reasonable rate, given that before adjustments the rates per square metre of the sales in this table ranged from between $3,181 per square metre to $4,129 per square metre. So, Mr Preston hasn't just adopted no those-- … Page 534, line 29 to page 536, line 44: GALASSO: … Page 94 and 95 is the respondent's attempt to rescue Mr Preston from his own value. His $1,250 a square metre was a number that Mr Jackson adopted because he had used it for the purposes of residential in the Southwell scheme. It's quite apparent when he had to do the exercise asked of him in exhibit 8 that in order to get anywhere near his valuation number, Mr Preston had a problem. There's no adjustment that he could make to a deferment period or a deferment rate that gets him anywhere near the valuations that evolved in this case, and the only way that he could do that was to change for the first time in exhibit 8 the residential rate per square metre, and I note, your Honour, that he more than doubled it. 1,250 became 2,650, and there is simply no foundation for that. Firstly, in the first bullet point of 337 - this is the respondent trying to do it in submission rather than as a function of evidence - firstly, it's said that there's an aspect of time. We'd submit that there's no aspect of time that's materially different to the aspects of staging of time in the Southwell scheme that is demonstrated in exhibit 8 as being just a justification for a conversion of the rate to 2,650. After all, the original staging periods were in the order of 133 to 140 months. The second is this notion that the rate should be higher if less residential GFA was to be developed. It's important to recognise that that's got no foundation on the evidence. Mr Preston had blended the rate across the whole of the site for the Southwell scheme, and he conceded in cross examination that the difference between the 216,560 of the Southwell scheme and the 169,000 that's referable in exhibit 8 was not sufficient to undertake the extent of the adjustment that he undertook, and the transcript reference for that, your Honour - and it's important - it's day 5, p 355, line 17 through to line 29. That is it was specifically put to him that the area adjustment for that amount of size was not sufficient for a more than doubling. And he accepted that. Added to that is Mr Jackson's evidence that once you get to a certain size, and his evidence was that you are at that size in the exhibit D and exhibit 8 quanta, there is no adjustment needed for size. What the respondent now wants to do is throw all of that out and have, in a simplistic way, your Honour accept that because they are different quanta of size, that that necessarily means that there needs to be adjustment. And, in fact, there's no foundation to that whatsoever. … HIS HONOUR: I understand that you don't cavil with me applying 1,250, you object to me applying 265 up. GALASSO: Your Honour, I simply say if the 1,250 is for 200 and whatever it is thousand square metres, and your Honour is looking exhibits D and 8 at 170,000 square metres, both as a bare proposition also as conceded by Mr Preston but as was told to you by Mr Jackson, you don't go adjusting the 1,250, and if you do it's not a more than double adjustment. That increment between 170 and 213 is not a doubling or a halving, whichever way the mathematics goes. It's a nonsense, and it's a nonsense motivated by the fact that once he was asked to do this exercise, because as the respondent has conceded today deferment rate and deferment periods are less sensitive to it all, in order to get to the number again the only thing that he could do was up the rate for residential. Never did it before. Never segregated it all, blended it all before and is in a ballpark of similarity in terms of size sufficiently to derive a rate. But what does he do? 2,650. And that's the thing that's driving the number up. … 1. The written closing submissions for the Valuer‑General addressed this aspect of Mr Preston's evidence in the following terms (footnotes omitted): Market value of residential floorspace within the towers 337. Mr Jackson adopted the rate of $1,250 for the build to sell, reflecting the rate adopted by Mr Preston in his primary report. In Mr Preston's opinion, it would be inappropriate to adopt that rate however for residential development limited to the towers for two reasons: • Firstly, Mr Preston opined that to adopt that rate "would be double discounting". That is because Mr Preston's chosen residential rate of $1,250 is already discounted from market rates to reflect the fact that, in the Southwell scheme, 216,560 sqm of residential GFA is developed over a significant period of time. Mr Preston applies the rate of $1,250 to the entire 216,560 sqm because of deferral. The rate would and should be higher if less residential GFA were to be developed (and in a shorter time period) which would be the case in this scenario (where a max of 5 towers are developed for residential purposes, or perhaps less, in the 'Shaw Retail plus Combination' option). • Secondly, as set out above, the adopted rate of $1,250 was for the whole of the Southwell residential scheme, not just the towers fronting Herring Road and Waterloo Road. It is therefore an average rate applied equally across all Southwell residential. As his Honour sought to explore with Mr Preston, it is obviously wrong to adopt the same rate for the Southwell towers above the shopping centre which are delivered in the first part of the Southwell scheme compared to the towers B2.1, B2.2 & B3 which are delivered later in the scheme. The rates for the towers fronting Herring Road must necessarily be higher than the rates for the later, more speculative towers. 338. It is necessary therefore to 'unaverage' the rate applied across the whole of the subject land to find the rate that would apply to the towers above the retail development. That is not an exercise performed by either Mr Preston337 or by Mr Jackson, but is one that will need to be carried out by the Court, acting as judicial valuer. 339. The best evidence of the appropriate market rates of the residential floorspace in the Shaw towers is by way of comparison with the sales of development sites for mixed use development, predominantly residential units. Only Mr Preston has undertaken this analysis. 340. Those sales are found in Mr Preston's primary report, in particular the table at EB 1523. Three of the sales were viewed on the site inspection, 101 Waterloo Road (sale date June 2017), 82-84 Waterloo Road (sale date May 2017) & 80 Waterloo Road (sale date May 2016). At the time of writing his primary report, Mr Preston opined that these sales were "for significantly smaller land areas, different floor space ratios and smaller developable GFA" and therefore require greater adjustments when comparing these sales to the whole of the residential development in the Southwell scheme. Necessarily the adjustments are less if, as in this exercise, only 5 towers are being contemplated along Herring Road. The sales become much more comparable. 341. The adjustments to the comparable sales were shown by Mr Preston in his primary report at EB 1531. At the time, Mr Preston was comparing potential residential GFA of 216,500 sqm to the sales ranging between 30,556 sq and 87,885 sqm of GFA. Therefore, the biggest adjustment made by Mr Preston to each of the sales was for size. Under the current exercise, the scale of potential residential GFA is much less, being 169,650 sqm, and the adjustment for size is correspondingly less. 342. For the purposes of the GFA within the 5 towers only, Mr Preston in this exercise adjusts downwards from the comparable sales for size and time and for the nature of the mixed use development338 and adopts a rate of $2,650, which appears reasonable given that, before adjustments, the rates per square metre of the sales ranged from $3,181 per sqm to $4,129 per sqm. It is the residual land value per sqm of GFA that implicitly includes all of the risks inherent with development. 343. Certainly, based on the comparable sales and, for the reasons given above, the adopted rate for the purposes of valuing the residential GFA within the towers alone must be materially higher than $1,250 per sqm. 344. That, of course, is even more apparent if the 'Shaw Retail Plus Combination' is adopted as the most likely development scenario. In that scenario, less of the potential available GFA is taken up by residential floorspace which gets the valuer closer to the GFAs of the comparable sales. In this scenario, even less of an adjustment size is warranted. 1. In his oral closing submissions on behalf of the Valuer‑General on the valuation aspects of the proceedings, Mr White said, with respect to this aspect of Mr Preston's evidence (Transcript 20 April 2022, page 511, line 34 to page 513, line 12): WHITE: …. Can I just deal then, firstly, with the market value, because we know what Mr Jackson's done. He's taken the 1,250, which was the rate adopted by Mr Preston in the original evaluation, for the whole of the Southwell residential scheme. That was some 216,560 square metres. Therefore, not just the towers fronting Herring Road and Waterloo Road. … HIS HONOUR: That's what I'm saying, is that the three towers along the Herring Road front that happen together, plus those two round the corner facing Waterloo Road - between them, in rough terms, a residential component equivalent to Shaw Plus Towers, and at that stage, isn't Mr Preston saying that's $1,250 per meter squared? WHITE: No. What he's saying, if it's only those, it's got to be more than 1,250, because the 1,250 was for the entirety of the residential scheme, including what I think has been described as the Talavera Road residential precinct. So in effect, what's coming forward now is less development, and it follows - I don't think it's controversial in a valuation sense - that when you bring forward a smaller site for residential or commercial, the value per square metre is higher than it is for a larger site. HIS HONOUR: Yes, I understand that. It's the flag fall component, as it were. WHITE: Exactly. What your Honour was trying to explore with Mr Preston in the oral evidence was, if the 1,250 encompassed Talavera plus Herring Road, plus the bit of Waterloo, that surely is an average rate spread across, and Mr Preston - if you recall - ultimately agreed with that proposition. Now, what he hasn't done, and I tried to re examine him on it, and quite rightly I was told that we don't want another set of valuations, but regrettably, that's a task which is going to fall to your Honour. HIS HONOUR: I understand that, but doesn't that inevitably lead to the position, it seems to me, that - again, this is all hypothesising that I get to Shaw Plus - that the answer is going to be grey? It's not going to be black or white. WHITE: I think that must be right. In our written submissions, your Honour, right at the beginning of the section on valuation, we pointed to some authorities which your Honour is probably very well aware of in paras 316 and 317, where we've suggested a high authority, your Honour, in a case of Gold Coast Selection Trust, a Privy Council case from some time ago, "Valuation is an art, not an exact science. Mathematical certainty is not demanded, nor indeed is it possible." In this, I think, important authority, for the purposes of this case, Commonwealth v Milledge, what the High Court said the valuation is highly factual, and is arrived, "Not by a…in the land", "The problem was…the material date," and this is quite a good example of that, your Honour. You had Mr Preston valuing the residential over a much bigger scheme. Now we come back to a smaller scheme. Common sense would dictate that the valuation is going to be higher. Mr Preston hadn't done the calculation, but as I say regrettably for your Honour, it now falls to your Honour to try and assess that by reason of common sense, not mathematical precision. The deferral period for building the Shaw scheme towers Introduction 1. Mr Jackson and Mr Preston also differed about the time periods after the completion of the hypothetical development of the Shaw super‑regional shopping centre that would be appropriate to elapse before the five towers for that scheme were constructed. Each of them postulated that there would be an initial deferral period before the first of the towers was appropriate to be constructed, with each of the subsequent towers following sequentially at equally spaced intervals. Although they agreed on this approach, they disagreed on the initial deferral period and also on the subsequent intervals between the construction of each of the towers. 2. Mr Jackson's hypothetical model had the first tower being constructed five years after the completion of the shopping centre which was to act as its podium. His model then postulated further intervals of five years, as appropriate, to elapse between each of the further hypothetical tower constructions. On this basis, the fifth tower would be constructed 25 years after completion of the super‑regional shopping centre. 3. Mr Preston adopted the same structure for his hypothetical construction timing but proposed that the initial interval, after the construction of the Shaw scheme shopping centre, before construction of the first tower above it would be four years, with subsequent intervals of a further three years between each of the tower constructions. Mr Preston's model, therefore, postulated completion of all five towers within 16 years of completion of the shopping centre podium. 4. As this evidence (set out in Exhibits D and 8) only arose as a consequence of my directing that further joint conferencing take place between them to address the tower element of the Shaw scheme. This topic, as with other elements of the Shaw tower valuation material, was not addressed in any of the written expert reports. It was, however, the subject of some exploration during the course of the oral evidence of the valuers. Mr Jackson's oral evidence 1. Mr Jackson gave the following oral evidence explaining why he had adopted his sequential timing for the Shaw scheme towers (Transcript 6 April 2022, page 364, line 49 to page 365, line 35): GALASSO: Why do you have your 25 years and what do you say about Mr Preston's 16 years? WITNESS JACKSON: The Shaw scheme was designed around maximising the retail opportunity initially. The primary focus was - was developing a super‑regional shopping centre on the land and making that that was the key focus to be undertaken, so everything else was subservient to that, and within the design, there was provision for future development of towers if - if there was a desire to do such a development, so that's an important starting point in terms of deferral. The focus is on getting a super‑regional shopping centre developed on the land. That doesn't mean that you can't contemplate other forms of development during that process, but one must keep in the front of their mind that the focus of the Shaw scheme is the valuable retail asset. From there, the period of time in which you - you embark on future development is - will - will be - will be dependent on a range of factors. It's not just how - the last thing is how quick you can construct it, but that would not be a consideration. It'll be market driven in each instance, and it will be very much around the level of risk and appetite that that particular owner and developer has in terms of the development of these future stages. And importantly, within that and to minimise that risk, in my experience, having multiple tower constructions at once moves you way up the risk curve in terms of risk, much higher risk, which is something that is to be avoided. And the - the prudent way, in my experience, that development normally proceeds, and it doesn't matter whether it's - in this case, whether it's a residential or a commercial tower, is that you build - you build your first tower. You - you set about, obviously, completion of the construction program and - and the realisation of that asset to test the market demand and meet your expectations and it is - it is - once you've - you've either reached that - that end goal of completion or substantially towards completion, would you even contemplate your next stage. That's - that's mitigating your risk, and that's - that, in my experience, is sensible development, so that's been the - the - the path that I've adopted. I think it's prudent and certainly, in my experience, that's how multiple stages of development proceed. 1. Mr Jackson also gave the following pertinent evidence on this point (Transcript 6 April 2022, page 367, line 17 to page 371, line 1): HIS HONOUR: Then with respect to that, Mr Preston explained why he felt that some elements of Shaw retail plus combination could be developed simultaneously, but you have all of them running a regularised sequence. WITNESS JACKSON: Yes. HIS HONOUR: So it's my assumption that given the rests between towers 1, 2 and 3 in Mr Preston, and the time that it's likely to take to construct what I'll call a six‑year tower, some of the construction would overlap with the two floors, would it not? WITNESS JACKSON: Yes. HIS HONOUR: So you would be building three towers at least for some of the time simultaneously. WITNESS JACKSON: Yes. HIS HONOUR: You say to me, do you, that that would end up with an inappropriate disruption, having three construction sites operating at the same time‑‑ WITNESS JACKSON: I‑‑ HIS HONOUR: ‑‑for the purposes of operating the retail? WITNESS JACKSON: I do. I think that would be - that's a very significant undertaking, three major towers at once. HIS HONOUR: Is there any reason why there couldn't be some overlap of some of the towers? WITNESS JACKSON: It - it's‑‑ HIS HONOUR: Given the different uses. WITNESS JACKSON: It's possible, your Honour. Again it gets back to risk and capital required. I mean, to develop three major towers would be an enormous capital required to do it. But assuming all that can be accommodated and there was a - and a stronger appetite for risk that - that would be possible, and again it would be a matter of what would be - the approach that I - I've adopted, and it's - it's not the only way that it might be done, but the approach I've adopted is that prudently, I believe, you would want to minimise your risk, undertake to develop a particular tower. Let that - let that formulate within the overall development and then move to the next. HIS HONOUR: Your deferment rate accommodates a higher degree of risk, doesn't it? WITNESS JACKSON: That the - the number of years you mean in the deferment rate or the‑‑ HIS HONOUR: Well, both. WITNESS JACKSON: Or the percentage. HIS HONOUR: The rate compared to Mr Preston's three and a half‑‑ WITNESS JACKSON: Yes. Yeah, well‑‑ HIS HONOUR: ‑‑it reflect - prices in combined with the period of deferment, a greater degree of risk, doesn't it? WITNESS JACKSON: Yes, it's a - yes, it's a high rate, yes, correct. Yes. HIS HONOUR: But then Mr Shaw's towers are spread round the perimeter to considerable extent, are they not? WITNESS JACKSON: Yes. HIS HONOUR: Why wouldn't a developer, assuming availability of capital, build - let's just call it a residential tower in the Herring Road, Talavera Road corner of the site and build the hotel in the tower that is postulated to have a frontage to Waterloo Road in the Shaw plan? Pick the locations‑‑ WITNESS JACKSON: Yes. HIS HONOUR: ‑‑but well apart. WITNESS JACKSON: Yes. HIS HONOUR: Why wouldn't they happen - either couldn't they happen coincidentally, rather than 20 years apart? WITNESS JACKSON: Yeah, I think on the proviso of capital and subject to market demand, of course, that that is a possibility, and again it would just be a - a careful issue of not disturbing the - as best you could, the - the trading capacity of the - the retail shopping centre. HIS HONOUR: Do you want to recast the deferment period in years in the lowest element of the table to reflect the possibility that there might be some either simultaneous or overlapping development? WITNESS JACKSON: I - I could - there's - there's many combinations, your Honour. I could - I could do that. HIS HONOUR: What would you advise the hypothetical purchaser if they were going to adopt Shaw retail plus combination? WITNESS JACKSON: Well, my - my advice would be, as I've set out, that you would - you would minimise your risk and undertake each development - particularly of a different asset class - simultaneously, not - not as one and in a way - and the reason for doing them individually and not multiple towers at once would be to ensure you are not impacting the retail centre. But I accept, your Honour, you might say, "Well, but there's a possibility that" - depending on market conditions, which is - which is the critical factor - that you might expedite one particular stage of the development. I accept that. I mean, it is a - it is a bit of a - a - a bit of an unknown, you can't be definitive about it and I'm not suggesting to your Honour that I am being definitive about it. But the view I took was that when - when these sorts - and these are large towers, 33,930 square metres of development, they - they would take some time to develop and have them either rented or in the case of the residential apartments sold. HIS HONOUR: Yes, I understand all of that. But assume I'm going to get the spreadsheets electronically. They are base identical apart from the data inputs in the various cells. So assume I have a sudden rush of blood to the head and decide to play round with some of the factors that you've applied. You are fortunately making it entirely possible for me to do so without the need for me to construct a spreadsheet. I might not be able to construct a spreadsheet, but I don't need to. So if I wanted to play with the deferment period of years in the Shaw retail plus combination as if you were advising me as a prudent hypothetical purchaser of the vacant site contemplating developing over a period of time Shaw retail plus combination, what would you say would be a prudent mix of development times if it is not going to be a linear sequence of five plus five plus five plus five plus five? WITNESS JACKSON: Yes. Understand your question, your Honour. Look, I think there would be an opportunity if you wanted to expedite the program to bring potentially the commercial and/or the hotel forward. I don't think you would be trying to do competing residential in the - in the process forward. But I think there's - there's a - there's a prudent prospect that you might say that there's demand for office, let's try and bring the office tower forward, say, or alternatively you might say, you know, a major hotel operator has shown some interest in locating from Macquarie Park, and we might be able to sign them up and - and look at something like that. So they - they would be the - the ones that would immediately spring to mind where you might expedite that process if you were minded to, and you might be able to then bring that development period forward. As - as to that timeframe partly - partly, your Honour, it's going to be dependent on construction timeframes and everything else, but giving you my best guess to try and assist, you might bring each of those forward, you know, up to - I mean, you could bring the - the commercial to - to ten years and maybe the hotel to 15 years, say, as a 0 as a guide in that process. But again it's - you know, I'm just trying to work with the best I can with your scenario, but once again depending on the - the appetite. But if it's a - if you're a hypothetical developer that says, "Mr Jackson, I - I want to get on with this pretty quick and I've got - I've got an appetite - higher appetite for risk," then that's perhaps the advice I'd give you. … WITNESS JACKSON: Well, it may not, and consistent with my first report under "highest and best" use, I did refer to the fact that I think you would - you'd be more likely to build a commercial hotel, and then in my report - I can go to the exact part of it - I - I did say, and if you had some GFA left at all, you might then consider residential as the last alternative because in - in my opinion, it's paramount for the shopping centre to retain ownership to make sure that they can capture the retail opportunity as it evolves into the future. Mr Preston's oral evidence. 1. During the course of his oral evidence, Mr Preston also addressed this issue, as set out in the passages in the following paragraphs. 2. Mr Preston's explanation of his deferment periods under the Shaw build-to-sell scenario was (Transcript 6 April 2022, page 352, lines 10 to 23): WHITE: Thank you, Mr Preston. Sorry, just to go back to the first item if we may; residential build to sell. If you could just explain, perhaps you've already done it, but just for my benefit, please, and the Court's benefit. Why it is that your deferment period years, that's the right hand pink shaded column, differs from Mr Jackson's. WITNESS PRESTON: What I did, Mr White, was went firstly to my discounted cashflow with the time that each of the Southwell towers were being constructed, and then looked at the quantum of GFA in the five Mr Shaw towers, which is much greater than allocated to the ten separate towers in Mr Southwell's design. I've - I've extended the time compared to my discounted cashflow timing to reflect the larger towers. Put simply, there'll be more apartments in each of the Shaw towers than there would in the separate Southwell towers, your Honour. 1. Mr Preston again explained his deferment periods under the Shaw build-to-sell scenario (Transcript 6 April 2022, page 357, lines 4 to 12): GALASSO: The deferment period in years, I mean, you've got four, seven, ten, 13 and 16 for the bill to sell. Is there any market basis for the election of those years, or is it just a pick a date? WITNESS PRESTON: No. I - I think I mentioned earlier, Mr Galasso, I went back to my discounted cashflow analysis of the Southwell scheme and looked to the size of each of the towers in that relative to the size of these and have increased the time for this because each of the towers would take longer to build and sell. 1. Mr Preston also explained his concurrent/staggered deferment periods under the Shaw retail‑plus combination scenario as follows (Transcript 6 April 2022, page 351, line 41 to page 352, line 8): Turning to the combination scenario, your Honour, I've applied the same rates per square metre for each of the relative uses that we've contemplated in the five towers. I've applied the same deferment rates relative to that use, which again is tied to the underlying capitalisation rate. With my deferment period in the case of the combination scenario, in each of the earlier scenarios, each of the five towers would be - the second one would be competing with the first one, and the third with the first two, and the fourth with the first three. But in the combination scenario, they're exclusive - mutually exclusive uses, your Honour. That could be developed concurrently. Mr Jackson last night made the point that that would be - require a lot of capital, which I agree with. So I've - what I've done is chosen to do the build to sell apartments in the commercial because they don't compete with each other at one point in time, in terms of deferment, and then moved on beyond that, but not to overlap, just because of the capital that would be required in terms of developing the entirety of it at once. But the point with my differential deferment rates, your Honour, is that the towers wouldn't be competing with each other. different uses, different markets for sale on completion et cetera. 1. Mr Preston also explained the residential deferment periods under the Shaw retail‑plus combination scenario (Transcript 6 April 2022, page 358, line 20 to page 359, line 44): GALASSO: His Honour can see the result of that. The next column is the commercial, which you defer at different periods to the deferment of the residential in either build to sell or build to rent. WITNESS PRESTON: That is correct, yes. GALASSO: Why have you picked different periods? WITNESS PRESTON: I think the commercial offices will take a lot longer to take up in the market in Macquarie Park. GALASSO: Then the last column you have adopted for the residential - this is in the Shaw retail plus combination - you've roll out the residential towers at the same rate as you did for the purely residential scenario. WITNESS PRESTON: Yes, I do. GALASSO: You include a commercial tower at year 4 and a build to rent, that is, you actually bring three - you bring an additional residential component earlier than what would happen if it was either exclusively build to sell or build to rent. WITNESS PRESTON: Sorry, which one are you referring to? GALASSO: The last column, Shaw retail plus combination. WITNESS PRESTON: Yes. Sorry. I'm looking at that. GALASSO: Sorry, I don't mean this critically. You followed the order of tower 1, 2, 3, 4 and 5, but if we did it in sequence its towers 1 and 3 are built four years after the retain. WITNESS PRESTON: Yes. GALASSO: Then tower 2, then tower 5, then tower 4. WITNESS PRESTON: Correct, yes. GALASSO: You've actually delivered three residential towers earlier than you would have done if they were build to sell or build to rent. WITNESS PRESTON: That is correct because they're not competing with each other. GALASSO: They residential, aren't they? They're all residential. WITNESS PRESTON: We're building one to see it and the other is to - to rent it. GALASSO: Building two to sell and one to rent. WITNESS PRESTON: Yes, but the - the second build to sell I've deferred for seven years. GALASSO: Yes. But you've actually included between the first one and the second build to sell, you've put in a build to rent. WITNESS PRESTON: Yes, I have. Yes. GALASSO: You didn't distinguish the build to rent in the purely build to rent scenario. Build to rent you still went four, seven, ten, 13, 16. WITNESS PRESTON: Well, you're building the same product and building them so that they don't compete with each other once complete. GALASSO: Do you say that there's a different call for property depending upon if someone is renting or someone is buying? WITNESS PRESTON: It's a completely different market, Mr Galasso. GALASSO: Someone might be buying to rent it, rent it out, would they not? WITNESS PRESTON: An investor could do that, but it - it - it's a completely different proposition. They don't - they're exclusive of each other and don't compete with each other. The submissions for the Applicants 1. The deferral intervals for the Shaw scheme towers were addressed in the closing submissions for the Applicants. First, in the written closing submissions at paragraphs 218 and 223 to 224 and 227, this topic was addressed in the following terms: 218. There are four points of general agreement between the valuations of Mr Jackson and Mr Preston. … 223. Fourthly, in the combination scenario, Mr Preston provides for the concurrent development of certain of the towers: Tr 351:41-49 (Preston). At the hearing, Mr Jackson scheduled tower development in the combination scenario sequentially so as to minimise disruption and because building three towers at once is a significant undertaking: Tr 367:23-368:11, 369:13-30 (Jackson). However, he accepted that it was possible that the development of non‑competing towers in the combination scenario could overlap, if that could be accommodated and there was a stronger appetite for risk: Tr 367:46-369:11, 369:40-370:20 (Jackson). 224. The differences between Mr Jackson and Mr Preston in the valuation of the towers of the Shaw scheme on a built-to-sell basis, built-to-rent basis and combination basis are significantly different. The source of this difference is that Mr Jackson and Mr Preston adopt different residential GFA rates, deferment rates and deferment periods: Tr 349:45-47 (Jackson). Mr Jackson's approach should be preferred because Mr Preston's approach to valuation is unreliable. This is revealed by the problems with his prehearing valuations (see above at [202]-[211] and by the problems with the valuation he undertook of the Shaw scheme. … 227. Secondly, according to Mr Preston's valuation, the value of the Site is driven by residential development, not retail development: cf Tr 357:25-358:6 (Preston). This is clear from the following features of Mr Preston's valuation: … (c) Mr Preston's deferment periods prioritise maximising residential opportunity rather that prioritising retail opportunity or engaging in prudent development: Tr 364:48-365:35. The submissions for the Valuer‑General 1. The deferral intervals for the Shaw scheme towers were also addressed in the closing submissions for the Valuer‑General. First, in the written closing submissions at paragraphs 348 to 352, this topic was addressed in the following terms: Deferment period 348. The deferment period is the period of time in which the developer might action the particular component of development. It is also market driven and reflects level of risk and appetite in the market for the asset class. Mr Jackson's deferment periods are the same for commercial, residential and the combination option. Mr Preston's deferment periods vary and, in particular, are less for residential than they are for commercial. In other words, Mr Preston's deferment periods assume that the market evidence demonstrates that a developer would build residential GFA in the towers before building commercial GFA. This reflects Mr Preston's opinion that it would take a lot longer to absorb commercial space into the market than residential. 349. Mr Preston's evidence on the appropriate deferment rates and deferment periods should be preferred. Given that both elements are market based and reflect future opportunity for development, the objective market evidence available to the parties demonstrates a significant demand for residential development and no particular demand for commercial. The evidence includes the following: • the Herring Road Planning Precinct Proposal identified Herring Road as an area with strong market demand for additional housing; • the evidence of Sean Stephens concerning residential demand (EB 320-332); • AMP Residential Market Assessment (TB 1-32, in particular pp 6-7); and • the 2014 Colliers report 'Analysis of the Macquarie Park/North Ryde Residential Apartment Market' (TB 33-157 (the Colliers report)). 350. All of this is evidence of a strong demand for residential development at Macquarie Park and Herring Road, in particular. The Colliers report provides a particularly useful analysis for the hypothetical parties because it identifies not only why the subject land is a superior location for new residential development to meet the demand, but it also analysed the market for other uses, such as hotels. The analysis demonstrates that the market "did not see" the Macquarie Park area as an accommodation destination, that lower value non‑residential uses would be best suited to the University land, that the "highest and best" use of the subject land "to be clearly residential apartments in the current market place" and accordingly "should be considered as the primary use on the subject site". 351. Mr Jackson criticised the Colliers report, dated 2014, as not representing market evidence as at the valuation dates. However, it, along with the other evidence set out above, is the best and only evidence tendered at the hearing on this issue. Mr Jackson was unable to provide any reasons why the analysis in the Colliers report was no longer apposite at the valuation dates. Mr Jackson in his reports provides no evidence of market demand for 169,000 sqm of GFA for commercial uses. 352. The evidence set out above is the most convincing market evidence that demonstrates that the bulk, if not all, of the balance of 169,450 sqm of GFA would be taken up by residential GFA and not by commercial GFA. 1. During the course of his oral closing submissions, Mr White touched on this topic, submitting (Transcript 20 April 2021, page 518, line 9 to page 519, line 1): WHITE: I believe these are my instructions because I haven't done the exercise myself, but you will find that the deferment period is-- … … more sensitive than the deferment rate. Coming then to the deferment period, that is as we know from - and I've set out in 348 - we know from the evidence that the deferment period is the period of time which the developer might action the particular component of development. It's also market driven and reflects the level of risk and appetite in the market for the asset class. Again, looking at Mr Jackson's analysis for the moment, his analysis taking Shaw retail plus or commercial, in the first instance, his deferment period is exactly the same, five, ten, 15, 20 and 25, as it is in the Shaw retail plus all residential, which is the first grouping. We say, your Honour, that that just simply doesn't reflect the evidence in this case which shows (a) no demand for commercial, the analysis showing this is not an appropriate site for commercial and, yet, very high demand for residential, and the planning controls all suggesting that residential should take place on the site. Again, the precise numbers may not be the right ones but, certainly, your Honour is going to find a difference in the deferment period between commercial and residential, and that your Honour would prefer the evidence of Mr Preston set out in exhibit 8 compared to Mr Jackson. If goes back to our inputs in 354 for 1 July 2016, I accept your Honour's recognition that this is not the base case, but what we've sought to do there is to just identify that the deferment periods are likely for the residential towers to be very much less than was suggested by Mr Jackson. There is simply no rational support, your Honour, for the evidence of Mr Jackson that the retail would get built and then no residential towers would be provided for at least the first five years, but then only one would be provided at a time, and they would only be provided in every five years. That's just not the way on this evidence that a rational hypothetical purchaser is going to be looking at the site. HIS HONOUR: I understand that but, equally, Mr Preston says four, then three, plus three, plus three, plus three, does he not? That gives me the-- WHITE: Yes. HIS HONOUR: That's the spread in a marketing sense of the valuation evidence on deferment periods, isn't it? WHITE: Yes. … 1. In its closing written submissions at pages 98 to 99, paragraph 354, the Valuer‑General set out new, adjusted land valuation assessment spreadsheets for the "Shaw Retail Plus Combination" scenario, which it suggested was the most likely combination of development in the event that the Court preferred the Shaw scheme as representing the most likely town planning outcome. Adjusted spreadsheets were set out for both the 1 July 2016 and 1 July 2017 valuation dates, copied below: 1 July 2016 1 July 2017 1. These spreadsheets converted Tower 2 from build-to-rent to build-to-sell residential and introduced new deferment intervals for the five towers under the "Shaw Retail Plus Combination" scenario. This was explained at paragraph 355 as follows: 355. In this scenario, 2 residential towers are delivered when the shopping centre opens, reflecting the market demand for new housing, tower 4 is constructed and opened at the same time as those first two towers, and a third residential tower and office tower are delivered 4 years subsequently. 1. The Applicants' written closing submissions in reply addressed the Valuer‑General's adjustments at paragraph 29 onwards, advancing that they were made in submissions rather than by Mr Preston himself and were an attempt by the Valuer‑General to increase the value of the scheme without justification. With respect to the Valuer‑General's newly contended deferment periods, the Applicants submitted, at paragraph 31(b): 31 … (b) The Valuer‑General changes the deferment period for all residential developments and the hotel. He considers that two of the residential towers and the hotel would be constructed as part of the base development - that is, at the same time that the initial shopping centre is constructed. On this timing, the Valuer- would have competing residential towers being constructed simultaneously because of "the market demand for new housing". Mr Preston was well aware of the market demand for new housing, yet he structured his deferment periods to avoid such competition: Tr 351:41-8 (Preston). In addition, such a development - constructing three towers simultaneously at the same time as the base shopping centre - would require a developer to have a stronger appetite for risk than constructing just the base shopping centre and then deferring the tower development, or even constructing the base shopping centre and one tower: 370:11-20 (Jackson). 1. Mr Galasso also addressed this change in his oral closing submissions in reply as follows (Transcript 20 April 2022, page 537, lines 4 to 33): There's then the matter of deferment period, and in combination with the 2,650 this is now what gets the Valuer‑General's yet again bigger number. At p 98 of the written submissions your Honour sees the Excel spreadsheet with some numbers. Can I note the following - and I'll just deal with 2016 because the 2017 just follows on over the next page. The first is that in this combination Mr Preston in exhibit 8 had build to sell, build to rent, commercial, hotel, build to sell. The Valuer‑General converts tower 2 from build to rent to build to sell, so there's nothing rented, and that ends up increasing the rate to 2,650 because there was an agreement by Mr Preston that at build to rent 2,650 becomes 2,054, so again this artificial inflation. But have a look at the deferment period in years. For three of the five towers, no deferment period. Not even Mr Preston did that in exhibit 8. And for the last of the two towers, notwithstanding that the expansion retail is ten years deferred, in this table let's only defer it for four years, notwithstanding that Mr Preston in exhibit 8 had the first of the towers deferred for four years. The Valuer‑General now just fudges the table and comes up with a number, and what pops out? As we saw in para 356, a bigger number, 442 and 465, and as we've observed in the written submission that I handed up at para 29 - and, your Honour, we on pp 12 and 13 - I think the numbering restarted because we inserted a table, but in red we identify the difference between Mr Preston's - so we called it Preston versus Valuer‑General, because it's really the Valuer‑General having an issue with his own witness. In red we've identified the difference between the two, and as we say at the end of para 29, magically in submission and in spite of the evidence - they're my words; they're not in 29 - but magically we now have a valuation that's between a 17 and 18% of increase in value that Mr Preston, the Valuer‑General's witness, presented in exhibit 8. Your Honour, they would be our submissions. Consideration 1. The evidence of both Mr Jackson and Mr Preston on this point is potentially credible. However, I have earlier explained why I am unable to accept Mr Preston's evidence on either of the other valuation components for the tower elements of the Shaw hypothetical development scheme, as his reasoning was, as earlier explained, flawed on each count. As a consequence, I am satisfied that this unreliability provides a sufficient basis as to why Mr Jackson's timing interval evidence should be preferred. 2. I should also address the basis for Mr Preston's derivation and application of his rate‑per‑square‑metre GFA for residential elements derived from his Southwell scheme analysis, but differentially applied to the residential components of the Shaw scheme. 3. In this regard, I was taken to the spreadsheet in Mr Preston's expert valuation report (Evidence Book, folio 1531) where he reproduced the spreadsheet which he had used to derive his rate‑per‑square‑metre GFA for residential elements of the Southwell hypothetical development scheme. That spreadsheet was based on a comparable sales analysis involving five properties in the immediate vicinity of the site that were either mixed use (but significantly dominantly residential) or purely residential. Those five properties were at: 1. 101‑107 Waterloo Road, Macquarie Park; 2. 112 Talavera Road, Macquarie Park; 3. 13‑15 Halifax Street, Macquarie Park; 4. 82‑84 Waterloo Road, Macquarie Park; and 5. 80 Waterloo Road, Macquarie Park. 1. It was accepted by the parties that we had viewed all three of the Waterloo Road properties during the course of the site inspection, but that we had not travelled to or viewed the Talavera Road and Halifax Street properties (even though they had originally been on the proposed site inspection itinerary but were not actually included in the site inspection). 2. As a consequence, I indicated to the advocates that, in my consideration of Mr Preston's evidence on the question of what was the appropriate rate‑per‑square‑metre GFA to be applied to the residential tower component of the Shaw hypothetical development scheme, I did not consider it appropriate to have regard to the two properties which had not been inspected (and about which I had no significant descriptive evidence), as they appeared to have what I described as "outlier" valuations (being significantly above the values of the Waterloo Road properties) as analysed by Mr Preston. Having offered that observation to the advocates, this proposition was accepted by them as appropriate (Transcript 20 April 2022, page 514, lines 39 to 48 (Mr Galasso); page 514, line 50 to page 515, line 31 (Mr White)). Mr Preston's spreadsheet, from which he derived his $1,250 per‑square‑metre GFA for "Southwell residential", as described above, is reproduced as Annexure B to this decision. 3. As can be seen from the final stage of his analysis shown in Annexure B, Mr Preston made substantial adjustments for each of these sales upon which he relied for comparison purposes to take account of the difference in site areas. These adjustments for the three Waterloo Road properties inspected (in the order that they are set out earlier) were -60%, -75% and -75%. 4. Although I expressed some concern to the advocates about the extent of the adjustments which Mr Preston had made for this factor (it being my experience that adjustment factors of much greater than 30% were, in conventional valuation practice, regarded as being of considerable uncertainty and/or unreliability), these adjustment factors applied by Mr Preston are the only evidence that I have available to me on this point. Neither Mr Preston nor Mr Jackson was questioned on this point during the course of their oral evidence. 5. Although I have reservations about the extent to which Mr Preston adjusted the comparable sales in his rate‑per‑square‑metre GFA residential calculation and the necessity for me to set aside, for present purposes, the two of his comparable sales sites which were not inspected during the course of the site inspection, nonetheless, his comparison evidence and his resulting rate of $1,250 per‑square‑metre GFA for residential is the best (indeed, only) evidence which I have on this point. 6. Given that Mr Jackson was content to adopt this rate as appropriate and Mr Preston's inadequate explanation as to why he more than doubled the rate‑per‑square‑metre GFA residential for the purposes of the his analysis of the residential tower element of the Shaw scheme (given that the agreed residential GFA for this scheme was a very large area in total square metres - although not as large as that for the Southwell scheme), I am satisfied that I should accept it as the appropriate rate to be adopted for the purposes of my consideration of the valuation outcome as to be derived from the process that led to the development of Exhibits D and 8. Build‑to‑sell v build‑to‑rent 1. As can be seen from the above section discussing the derivation of the appropriate rate‑per‑square‑metre GFA for each of the build‑to‑sell and build‑to‑rent hypothetical residential tower options for the Shaw scheme, a build‑to‑rent model is a less valuable one and would result, on Mr Jackson's calculations in Exhibit D, in a lowering of his overall valuation of the Shaw scheme with five residential towers by a total of approximately $19 million. 2. However, as Mr Jackson explained in his oral evidence, the monetary value difference between these two options would not be the determining factor for a hypothetical purchaser automatically preferring a build‑to‑sell model. He explained why, in his opinion, adopting a build‑to‑rent model over a build-to sell model, if the hypothetical towers were to be residential, would be appropriate. This was because the retail centre owner would retain ownership and control over the towers and not need to deal with several hundred owners of individual apartment owners over future development or management issues. 3. It is also to be noted that Mr Shaw provided the following opinion with regards to build-to-rent compared to build-to-sell (Evidence Book, Tab C1, page 435, paragraph 2.4.3): 2.4.3 The nature of the towers can impact on the ability to modify podium conditions. For example, if the towers are 'build to sell' apartments, you may potentially need approval from several hundred owners to undertake any significant renovations to the podium. This can be managed better if they are 'build to rent' apartments and therefore controlled by a single entity. Build to rent was an emerging asset class in Australia, in 2016, but would certainly be a strong consideration for this location by 2021, in particular, for the reasons noted above.] 1. There was nothing in the written or oral closing submissions for the Valuer‑General specifically addressing the relative merits of build-to-sell compared to build-to-rent in any detail. Consideration 1. Although, as earlier discussed, when addressing the timing differences between Mr Jackson and Mr Preston as to how long after completion of the Shaw hypothetical development scheme's super‑regional shopping centre had been constructed would construction of each of the hypothetical towers have been undertaken, using that centre as the podium upon which the towers were to be erected, it was accepted that the necessary facilities to service those towers at the retail outlet levels and in the basement parking levels could be provided as part of the build of the shopping centre. Thus, incorporation of entrance lobbies, lift shaft elements through the retail levels and provision for residential parking in the basement levels could be constructed as part of the build for the super‑regional shopping centre in the Shaw hypothetical development scheme. Those spaces in the retail levels would be set aside until the expiry of the relevant deferral period for the construction for each of the hypothetical towers, whilst the basement‑parking provision for the future residents would be able to be utilised, on an interim basis, for additional retail patron‑parking. 2. However, for the reasons advanced by Mr Jackson, I accept that the forgoing of the retention of ownership and control of the hypothetical towers, if constructed for residential purposes, outweighs, in the long run, the immediate value premium which would accrue to the hypothetical purchaser, if such hypothetical residential tower development was constructed on a build‑to‑sell basis. 3. As a consequence, I am satisfied that the prudent hypothetical purchaser would be given, and accept, advice that the preferable hypothetical development scheme for residential towers should be on a build‑to‑rent basis. Valuing the build‑to‑rent option 1. Mr Preston and Mr Jackson each adopted a lower rate‑per‑square‑metre GFA for the build‑to‑rent option compared to the rate which each had adopted for the purposes of the hypothetical build‑to‑sell development. Mr Preston's rate‑per‑square‑metre GFA was $2,054 per square metre (a discount of 22.5% on the rate that he had adopted for the build‑to‑sell model). Mr Jackson adopted a rate of $969 (this being the 1 July 2016 rate) per square metre GFA (a discount of 22.5% on the rate which he had adopted for the build‑to‑sell model). Mr Jackson and Mr Preston agreed that residential built-to-rent would be 22.5% less than residential built-to-sell. For the reasons I have explained in my consideration of the rate to be accepted for valuing the build‑to‑sell residential tower model, I am satisfied it is also appropriate to adopt Mr Jackson's rate‑per‑square‑metre GFA for the purposes of a valuation for the hypothetical purchaser of the Shaw scheme on the assumption that the five towers were to be developed for a residential purpose and that that residential purpose was build‑to‑rent. Conclusion 1. I have concluded that: 1. The Shaw hypothetical development scheme is that which would have been accepted by the prudent hypothetical purchaser as the basis upon which the hypothetical purchase would have been undertaken; 2. The hypothetical purchase would have been based on the valuation model incorporating the five tower elements provided for along the Herring Road frontage of the site; 3. The five hypothetical towers would all have been constructed for residential purposes on a build-to-rent basis; 4. The deferral rates and deferral intervals for these hypothetical towers would have been those proposed by Mr Jackson in Exhibit D; 5. As a consequence, on these bases, the appropriate valuations (rounded to the nearest hundred thousand dollars) for each of the base dates are: 1. for 1 July 2016, $188,600,000; and 2. for 1 July 2017, $209,000,000. Costs 1. As these are proceedings where, by virtue of r 3.7(1)(c)(ii) of the Land and Environment Court Rules 2007, a special presumption is created for the purposes of considering whether to make a costs order, the appropriate costs outcome in each of these proceedings is that costs should be reserved. Orders 1. The orders of the Court in Matter No 270482 of 2020 are: 1. The appeal is upheld; 2. Pursuant to s 40(1)(a) of the Valuation of Land Act 1916, the valuation of Lot 100 in Deposited Plan 1190494, known as 197‑223 Herring Road, Macquarie Park NSW 2113 as at 1 July 2016 is determined to be $188,600,000; 3. Costs are reserved; and 4. The exhibits are returned. 1. The orders of the Court in Matter No 270481 of 2020 are: 1. The appeal is upheld; 2. Pursuant to s 40(1)(a) of the Valuation of Land Act 1916, the valuation of Lot 100 in Deposited Plan 1190494, known as 197‑223 Herring Road, Macquarie Park NSW 2113 as at 1 July 2017 is determined to be $209,000,000; 3. Costs are reserved; and 4. The exhibits are returned. ********** Annexure A Annexure B Amendments 23 September 2022 - Formatting case name in 'Case Cited', the first initial of 'Tetzner' appeared on the line previous. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 September 2022