The following cases were referred to in argument:
R A Vine (Engineering Ltd) v Havant Borough Council [1989]
2 EGLR 15
Contraband Discount Stores Ltd v Liverpool City Council (2007) LT Ref: ACQ/47/2005
(unreported)
DECISION
Introduction
1.
This is a claim for compensation resulting from the compulsory purchase
of a small area of land (the acquired land) in front of, and providing access
to, the main public entrance of the Merseyside Police Headquarters, Canning Place,
Liverpool (the retained land) under the Liverpool City Council (Paradise Street
Development Area, Liverpool) Compulsory Purchase Order 2003 (the CPO). The
CPO was made in connection with the £750 million major mixed use city centre
redevelopment scheme now known as Liverpool ONE. The claimant is the
Merseyside Police Authority which has agreed the value of the acquired land at
£20,000 (Land Compensation Act 1961 section 5, rule (2)) and items of
disturbance (rule (6)) amounting to £16,250 with the acquiring authority, Liverpool
City Council. Compensation is also sought in the sum of £2,000,000 (adjusted
to £1.9 million at the hearing) for injurious affection to the retained land
under the provisions of the Compulsory Purchase Act 1965, section 7.
2.
The acquiring authority say that, whilst the value of the acquired land
and disturbance issues are agreed in terms, as is the principle of compensation
for professional fees and expenses relating to the claim and statutory
interest, it is appropriate for the acquired land and the retained land to be
valued together on a “before and after” basis and must take into account
betterment under section 7 of the Land Compensation Act 1961. In its view
betterment amounted to some £5 million (adjusted to £5.8 million during the
hearing), and compensation should thus be nil. The advance payment of £90,000
already made under section 52 of the Land Compensation Act 1973 should therefore
be repaid.
3.
Mr Vincent Fraser QC of counsel appeared for the claimant and called Mr Edward
Nicholas Rice FRICS, Managing Director of CBRE’s Liverpool office (formerly
Irving Rice) who gave expert evidence relating to the local office and
investment market, including its perception of the scheme and its effects, and
Mr David Lyons FRICS who gave expert valuation evidence on a before (no-scheme
world) and after (scheme world) basis taking into account the effects of the
scheme together with the acquiring authority’s alternative access proposals, costings,
and related issues.
4.
Mr Robin Purchas QC appeared for the acquiring authority and called Mr
Michael John Burchnall MBA BA (Hons) MCD MRTPI who until September 2010 was the
council’s Assistant Executive Director responsible for planning and
transportation, who gave expert evidence relating to the planning aspects of
the scheme, Mr Peter James Hitchcock MA FRICS a partner in Hitchcock Wright
& Partners, Liverpool who gave evidence on the office market and its impact
upon the property in both the scheme and no-scheme worlds, and Mr Christopher
Charles Hubbard BSc FRICS who was Managing Director of Edmund Kirby in
Liverpool until it merged with Matthews & Goodman in March 2011. He is now
a consultant to the merged practice and gave expert valuation evidence again on
a before and after basis. Mr Guy Sutton Butler BSc (Hons) MRICS, a Projects
Director with Grosvenor Ltd (which was the council’s development partner in the
Liverpool ONE scheme) was also called and gave evidence relating to Grosvenor’s
involvement and in particular land assembly issues under the CPO.
5.
At the end of the hearing I sought closing submissions in writing, and
these were received from the parties by 15 November 2011.
Facts
6.
A very brief statement of agreed facts was produced by Mr Lyons and Mr
Hubbard on 15 August 2011. From this, together with the evidence, my
inspection of part of the MPA HQ on 5 October 2011 and the surrounding area
generally, I find the following facts.
7.
Merseyside Police Headquarters is a substantial 90’ high modern office
building with accommodation on ground, seven upper floors and a basement. It
was purpose built for the claimant in the late 1970s (occupation being taken
in 1982) of steel frame with concrete floors under flat roofs and has brown
facing brick cladding to the outer walls with coated metal frame windows.
There is also an attached amenity/office block with two floors of offices, a
canteen, gym, conference facilities and a basement. The site also includes a gatehouse
and a two-level car park for 340 vehicles (120 under cover) and an additional
secure compound for parking specialist vehicles and equipment. The total site
area, approximately rectangular in shape, was 1.21 ha (2.90 acres) and at the
valuation date that area also included a strip of soft-landscaped and partly
paved land to its front, northern, and eastern elevations. At the centre of
the northern section was a flight of 15 or 16 steps leading up to the main central
ground floor public entrance (which is approximately 2 metres above street
level) with projecting canopy. It led into the principal reception area (the main
staff entrance being on the south side, accessed from the private car park). There
was no DDA access to the northern entrance. This frontage land, which was
identified as plot 35 on the CPO map and was the area compulsorily acquired, was
bounded from Canning Place and Park Lane in part by a low brick wall, and had a
total area of .0126 ha (0.3 acre).
8.
In order to comply with Home Office security requirements, the principal
accommodation in the main tower was, and remains, configured as individual
cellular offices with brick partitions and served by two parallel corridors.
It was agreed that such an arrangement is inflexible (in terms of layout) and does
not conform to the open-plan configuration that a prospective office occupier
would require. Thus, such a prospective purchaser in the market would assess
the net internal areas on the basis of open plan design, and would allow, in
formulating his bid, for the costs of creating that configuration and would
build in a deferment whilst the works were completed. The valuation experts
agreed the areas on the two bases as:
Cellular Open
plan
Main building: 7,901
sq m (85,127 sq ft) 9,247 sq m (99,502 sq ft)
Amenity block 1,410
sq m (15,185 sq ft) 1,410 sq m (15,185 sq ft)
Gatehouse 40.8
sq m (439 sq ft) 40.8 sq m (439 sq ft)
Total 9,351 sq m (100,751 sq
ft) 10,697 sq m (115,126 sq ft)
The valuation experts agreed the values of the
amenity block at £64.59 per sq m (£6.00 psf), the gatehouse at £53.82 per sq m
(£5.00 psf) and the parking spaces at £1,100 pa net each in both the scheme and
no-scheme worlds, but the value of the principal office accommodation remained
in dispute.
9.
The MPA HQ is located immediately to the south of, but not directly
within, the main shopping and business districts of Liverpool City Centre. The
western boundary fronts the A5036 Strand Street, a busy 6-lane dual carriageway
running north/south and separating the city centre from Liverpool Quayside and
the Mersey. Further to the north, Strand Street becomes The Strand, and to the
south it is known as Wapping. Salthouse Dock and Albert Dock (now containing
the Liverpool Tate Gallery, Maritime Museum, shops, offices and restaurants) is
directly opposite. The World Heritage Site (designated 2004) comprising the
Cunard and Royal Liver buildings and the Castle Street Conservation Area lies
directly to the north. The northern elevation of the main office building
(which is on the northwest corner of the overall site) fronts Canning Place
(also part of the World Heritage Site) which now contains the new central bus
station, and also provides a pedestrian link into the south-west corner of
Liverpool ONE. The eastern boundary is onto a pedestrian link (Park Lane) between Canning Place and Liver Street with the John Lewis multi-storey car park
beyond. The southern boundary, inside which the gatehouse is located, and
past which vehicular access is obtained, is on to Liver Street. Prior to the
scheme, the MPA site was an island site with Canning Place, Park Lane and Liver Street forming a “U” configuration off Strand Street, with one-way traffic travelling
in a clockwise direction. Thus, all roads to which the property had a frontage
were vehicular highways.
10.
The PSDA (CPO) development area is broadly triangular and extends to
some 41.5 acres (18.15 ha). It is bounded to the north by shops fronting the
main historical shopping area of Church Street and Lord Street, and to the
south by part of Hanover Street and Canning Place. The development area
originally comprised a wide variety of building styles, ages, sizes and uses
and was principally in commercial use as offices and shops but also included
the original bus station, a fire station, car parks and Chavasse Park together
with part of the Ropewalks and the Grade 1 listed Bluecoat Triangle area. The
2.37 million sq ft development, which is now fully completed (spring 2009) and
has been operational since early 2008, comprises approximately 1,000,000 sq ft
retail, over one, two and three levels and anchored by John Lewis, together
with an outdoor market, bars, restaurants, two new hotels (the new Hilton being
directly opposite the MPA HQ on the opposite side of Canning Place), the new
Canning Place bus station, a cinema, offices, residential units, public open
spaces, a park and new car parks for over 3,000 vehicles.
11.
The history of the scheme, in a planning context, can be briefly
summarised thus: Under the provisions of the Local Government Act 1985, the
council approved the Deposit Draft of the City of Liverpool Unitary Development
Plan in April 1996 (LUDP) which sought to expand the retail core of the City
centre, recognising that it had been in steep decline over a number of years.
Parts of it were suffering dereliction and there was a shortage of adequate
shopping and other facilities within what was a major regional and historic
centre. In order to take forward its plans, and to facilitate the substantial
regeneration that was considered necessary (for which significant European
funding was to be made available), Healey and Baker were commissioned in June
1998 to:
“…undertake a City Centre Retail Study to
consider on a comprehensive basis the existing role and function of Liverpool
City Centre, the likely future trading profile and the potential to influence
this trading profile by seeking to build upon the City’ Centre’s strengths and
negate any perceived or actual difficulties.”
12.
The resulting “Liverpool City Centre Retail Strategy” was published in
February 1999, and was approved in March of that year. In parallel, the
council evolved the draft Paradise Street Development Area (PSDA) Planning
Framework which was approved on 30 May 1999. It also identified the Principal
Development Area (PDA) as summarised above.
13.
As part of the wider overall strategy which identified Liverpool as a
key regional investment and regeneration priority that included the proposed
new Arena and Conference Centre, the city council resolved in July 2000 to bid
to become the European City of Culture in 2007 (since re-named the European
Capital of Culture and referred to hereafter as C of C), and published in the
same month the “Liverpool Vision (The City Centre Regeneration Company)
Strategic Regeneration Framework” which was introduced thus:
“The Strategic Framework is not a master
plan for building projects, but a flexible framework to evaluate initiatives
and to set out criteria that bring about a boost to wealth creation and
investment and therefore sustainable job creation in the wider context of the
city. It will provide the vital context against which detailed action plans
can be created to deliver the interventions described. It is intended to
guide the changes that are already occurring in the City Centre to ensure the
maximum regeneration potential of all interventions and initiatives is achieved
in a co-ordinated way.”
14.
The C of C bid was made in March 2002 following the European Parliament
and Council of Ministers’ decision that a city from the UK be assigned to hold the title in 2008. The bid, which was made before the inquiries into the
revised UDP and the CPO relating to the PSDA scheme, was submitted to the
Department for Culture Media and Sport from which an Independent Advisory Panel
chaired by Sir Jeremy Isaacs considered the applications that had been made by
twelve UK cities. The panel then shortlisted 6 applications, and in June 2003
issued a report recommending that Liverpool should be successful city to be
nominated by the Government. The nomination was accepted, and the award was
made by the European Parliament shortly afterwards. Liverpool became European
Capital of Culture in 2008.
15.
Following an extensive competition, Grosvenor was appointed the
council’s development partner to take forward its emerging PSDA policy (in
accordance with PPG 6 guidance) in March 2000 and to deliver the required city
centre improvements. The first planning application was submitted in January
2001, and was subject to a number of revisions before eventually being
considered by the planning committee on 26 September 2002 and granted on 23
December 2002.
16.
Meanwhile, in November 2000 the council resolved to modify the LUDP and
to incorporate the PSDA proposals in the form of policies S1 and S2. The
second UDP inquiry commenced in November 2001, and the inspector’s report that
was published on 8 May 2002 recommended that the council proceed with the
modifications incorporating the PSDA, that policy S2 should be confirmed and
that any piecemeal proposals for development would prejudice the potential
success of a comprehensive development within that area. The revised LUDP was
subsequently adopted in November 2002, and its policies were those applicable
at the valuation date. Policies S1 and S2 read:
“S1 1. The
City Council will protect and enhance Liverpool City Centre’s role as a
regional shopping centre. First preference will be given to locating and
consolidating Class A1 retail development within the Main Retail Area (MRA) as
shown on the Proposals Map.
S2 1. A
comprehensive mixed-use regeneration scheme will be supported in principle on
the defined Paradise Street Development Area (PSDA) as shown on the Proposals
Map and on Figure 10.3.
2. Within
the PSDA, a Principal Development Area (PDA) has been identified. The Council
will support the provision of a substantial element of Class A1 comparison
retail floorspace, up to 100,000 sq m gross (75,000 sq m net), focused upon the
PDA subject to compliance with policy S1. The PDA will be regarded as an
extension to the MRA [Main Retail Area] once such development has taken place.
3. Within
the remainder of the PSDA, a combination of uses will be permitted including
leisure, hotel, offices, residential and retail uses, complimentary to the
retail provision within the MRA. Such redevelopment will only be permitted
where it:
·
supports and strengthens the MRA as extended by the development
of the PDA,
·
enhances links between the MRA, the PSDA, the Waterfront Area and
the Rope Walks Area and
·
does not prejudice the provision of Class A1 comparison retail
floorspace within he PSDA as proposed in S2(2).
4. Proposals
anywhere in the City which are likely to prejudice comprehensive development
within the PSDA as proposed in this policy, or to harm the vitality and
viability of the MRA as extended by the development of the PDA as proposed by
this policy, will not be permitted.
5. Proposals
for the comprehensive development of the PSDA will be required to make
provision for a substantial amount of new and improved public open space, to
include a significant urban park.
6.
Proposals for the comprehensive development of the PSDA will be required
to provide for design of the highest quality with the inspired use of quality
materials, a safe and attractive user environment, the retention and renewal of
buildings/structures/townscape which may be of architectural or historic
interest, together with the enhancement of the setting of existing buildings,
including the Bluecoat Chambers, having regard in particular to the
requirements of policies HD3, HD5, HD9, HD10, HD11, HD12, HD13, HD14, HD18,
HD19 and HD20.”
17.
Both in the deposit draft and approved Liverpool UDPs the subject
premises are shown in an area of mixed use covered by policy E6.
18.
The CPO was made on 28 March 2003 and, following an inquiry held
between September and November 2003, was confirmed without amendment by the
Secretary of State on 18 May 2004 (which was the date the parties agreed during
the hearing that the no-scheme world became the scheme world for valuation
purposes). The final, further revised planning consent was granted on 9 July
2004 and construction commenced in November 2004. A General Vesting
Declaration was made in respect of the acquired land and other areas on 22
November 2004, and the MPA land vested in the council on 5 January 2005, which
is the valuation date for the purposes of this reference.
19.
The acquired land was needed to facilitate the construction of the new
bus station, and particularly the parking stands and shelter canopies now
provided on the south side of Canning Place. A replacement public access was
subsequently provided to the MPA HQ and was installed by the council, this
comprising two, west and east facing narrow flights of steps, with enclosed
canopy over and a lift providing DDA access. The canopies over the southern
bank of new bus shelters finish within less than 2 metres of the top of the
steps. The steps and lift are located upon land that, at the date of the
hearing, remained vested in the council. Undertakings had been given by the
council (and were the reason that the claimant withdrew its objection to the
CPO) that continuity of access and egress to the building, and rights of access
to the highway would be granted. Since the hearing, the relevant land (which
had been leased to Grosvenor) has been transferred to the claimant together
with an easement allowing unfettered access between it and the public highway.
20.
In connection with ongoing negotiations in respect of the compensation
claim, the council commissioned a design study from K2 Architects (referred to
hereafter as the K2 proposals) in March 2011 to indicate how a prospective
purchaser might provide a satisfactory and suitable pedestrian access via the
eastern end of the MPA main tower from Hanover Street and the main Liverpool
ONE scheme, to supplement that which has been constructed behind the bus
shelters on the northern elevation and which the acquiring authority agreed was
unsatisfactory in perception terms as a principal public and/or staff
entrance. Budget costings were obtained from Messrs Todd & Ledson in the
sum of £430,000 inclusive of fees, but exclusive of VAT.
21.
It was common ground that the areas occupied by the two level and ground
level car parks had the potential for, and could have been expected to have
received, planning permission for residential or mixed uses including offices,
hotel or A1 – A5 uses, and it was not contested that such a development would
be likely to be permitted to a height at least equivalent to the existing main
MPA tower.
Issues
22.
The principal issue between the parties is whether the retained
headquarters building and its site has been reduced in value, as the claimant
says, due mainly to the effect that the loss of the acquired land has had on
the main public entrance area, and the effects of other factors such as the
proximity of the new bus station/shelters or, on the contrary, whether it has,
as the council argue, increased in value as a result of the Liverpool ONE development
despite the acknowledged impact upon the north entrance.
23.
Mr Lyons’s original “claim” valuations (Appendix 11A in bundle 6 at p
2608 – pre-scheme and appendix 11C at p 2611 – post-scheme) were based upon the
floor areas of the main office tower as existing and partitioned. His
supplementary valuations (appendix 11B p 2610 pre-scheme and 11E p 2613 post
scheme) adopted the office areas agreed with Mr Hubbard upon the assumption the
de-partitioning had been effected, and included deductions for those works and
basic refurbishment of c. £4 million and revised access costs (post-scheme) of c.
£1 million. Mr Hubbard’s initial valuation, produced in response to Mr Lyons’s
first valuations were superseded by his valuation J (bundle 7 p 2955/6) and
incorporated allowances for the de-partitioning and refurbishment of £2.857
million and, in the post-scheme scenario, costs for provision of a revised
access (the K2 proposals) of £430,000. The valuation inputs in dispute can be
summarised thus:
Pre-scheme
Post scheme
Lyons (claimant) Principal offices
£10.50 psf £10.00 psf
Yield 8.00% 8.50%
No
allowance for development potential
Refurbishment/de-partitioning
costs (per Baqus) £4,041,582
Revised
access costs (per Owen Ellis Partnership) £1,045,123
Hubbard:
(Acquiring authority) Principal offices £9.50 psf £11.00
psf
Yield 10.00% (including 0.5%
reduction
for development potential)
7.50%
(including
0.75% reduction for
development potential)
Refurbishment/de-partitioning
costs
(per
Todd & Ledson) £2,857,000
Revised
access costs (per Todd & Ledson) £430,000
24.
In the light of the parties’ positions, I focus upon the facts and
evidence relating to the following points:
1. The MPA HQ as it was prior to the scheme in terms
of its location and surroundings relative to the city centre as then configured,
and how it would have been perceived in the marketplace.
2. The MPA HQ as it was at the valuation date, and any
positive and/or negative effects that the scheme has had upon it in terms of
market perception, location, surroundings and accessibility.
3. The local office market pre-scheme and post scheme
and whether upward movements in rental values and yields during the period up
to the valuation date were as a result of the scheme or other factors (or both).
4. The regeneration/modernisation/development that could
have been expected to have occurred in the area absent the scheme, and the
situation relating to the European Capital of Culture award (for 2008).
5. The potential for a new access in line with the K2 or Owen Ellis proposals.
6. The development potential of the car park area of
the site in both the scheme and no-scheme worlds.
7. Specific valuation
issues. In this regard, it is Mr Lyons’ valuations 11B and 11E and Mr Hubbard’s
valuation J that are relevant. They are set out in full at Appendices 1a &
b & 2 to this decision respectively.
1 & 2. The MPA HQ in the pre-scheme and post-scheme worlds
25.
The claimant’s case is that prior to the scheme, the building was in a
prominent, easily accessible location which, although slightly detached from
the main city core by dint of it being an island site, meaning that pedestrians
had to cross a busy road to get access, was nevertheless very close to
principal city centre services such as shops and stores (Church Street and Lord
Street – 750 yards), car parks, hotels, and the original bus station in
Paradise Street (500 yards). Mr Lyons described the area within the immediate
vicinity in some detail and said that whilst it was acknowledged that there
were a number of cleared sites immediately adjacent to the HQ used as surface
car parking, much of this clearance had been carried out in anticipation of the
scheme. He said that the building had significant presence with an imposing
and clearly visible public entrance and landscaped area to the northern
(Canning Place) frontage and it was a level and unhindered (apart from the road
crossing) walk into the city centre. It was accepted, and agreed between all
the experts, that both pre and post scheme, the HQ building was outside what
was defined as the central business district (CBD) which is where the city’s
principal offices are located, and that the general tendency over the years has
been for that area to be gravitating to the north, with new investments,
refurbishments and developments concentrated around the Old Hall Street area, away
from the Liverpool ONE development and the MPA HQ.
26.
Mr Lyons said that the effect of the scheme upon the property has been
substantial. Whilst, in connection with its existing use and occupation,
access for the staff via the car park and rear (south) entrance has not been
materially impinged upon, access for the public has been seriously affected.
Although the previous need to cross the road was “something of a modest
barrier”, the removal of the imposing landscaped entrance and the wide, fantail
steps that formerly served the north entrance, and its replacement with the
wholly inadequate new access hidden behind the bus shelters has had a major
impact upon the setting and thus the letting potential and capital value of the
premises. The access arrangements are now shabby, give the appearance of being
temporary and “look like an emergency exit.” Having once had an entrance that
was appropriate for a major headquarters building, the construction of the bus
station right in front, and the need for pedestrians to come through it to gain
access (with all the personal security issues that that raises particularly
after dark) has had, he said, a major deleterious effect. Although the impact
of Liverpool ONE as a whole has been beneficial generally, for these reasons,
the effect upon the HQ has been negative.
27.
Mr Rice said that the HQ occupied a secondary office location and was
formerly separated from the main CBD by Chavasse Park (which is where the new
“Q” car park has been constructed, with a new public park area over it), a
low-grade 1960s office building, the old fire station and some car parking
areas. The fact that the only pedestrian access was across the busy gyratory
system further exacerbated its isolation from the CBD. Post scheme, Mr Rice
said, the HQ now has only two direct road frontages – Strand Street and Liver Street, Park Lane having been pedestrianised and Canning Place now housing the new bus
station. Pedestrians approaching from the new city centre and the CBD to the
north are now required to cross the bus station either to the rear of John
Lewis or where it joins Strand Street, and whilst public access remains to the same,
north elevation, the whole entrance area has been significantly downgraded with
the loss of the previously landscaped area, and the provision of the new,
narrow entrance steps hidden behind, and overpowered by, the bus shelters. Access
is effectively now down an alleyway. Although the general area has been much
enhanced with the coming of the scheme, and access to the Ropewalks area is
also improved, as an office location it remains isolated from the CBD. It has
also lost much of its former prominence and with the configuration of the new Chavasse Park walking access to the CBD is now via a long and steep flight of steps that
lead to it and the western side of the retail development.
28.
As to the building’s condition and what it would offer to the market, both
prior to the valuation date, and after it, Mr Rice said that in his view no
prospective purchaser would contemplate occupying it as currently configured
and, as had been agreed between the experts, would thus build in an allowance
for de-partitioning, refurbishment and modernisation. He said that the floors
of the main building are deeper (in terms of depth between front and rear
walls) than is normally found in modern office blocks, and this has an impact
in respect of the need for additional artificial lighting to the inner areas,
lack of flexibility in space planning and increased energy costs. This
situation, which was exacerbated by the cellular layout, would be equally
difficult to resolve once the partitioning had been removed. According to the space
configuration section of the BCO Guide 2005, the minimum floor to ceiling
height requirement for comfortable occupation of buildings of this depth was
3.0m, but in two sample areas that he had measured, the heights were 2.35 m (2nd
floor) and 2.5 – 2.75 m (4th floor). As new occupiers would be
expecting comfort cooling and raised floors, this would make the problem worse.
The block was described as currently tired and dated and extensive
refurbishment would be required if the expectations of prospective occupiers
were to be satisfied. Apart from some specific areas there is no air
conditioning and raised floors have only been provided in certain parts. The
level of car parking provision is extremely generous by city centre standards,
and is more in line with requirements on out of town sites. Due to the
availability of public transport the need for spaces is very much less than
what exists – say 1 space per 1,000 sq ft. Although there would be an
opportunity to let spaces out to third parties, most occupiers, Mr Rice said,
would see this as a distraction to their core business in terms of management
and other issues such as security.
29.
Whilst the HQ was currently in, and suited to, single occupancy, there
would be very few potential purchasers who would require this much space, and
it was much more likely that a prospective purchaser would seek to split it
into a number of separate units. The local market reviews showed that there
was an average of only 4 transactions per year of units over 20,000 sq ft –
including the Hill Dickinson letting in St Paul’s Square (130,000 sq ft),
Unisys in Old Hall Street (140,000 sq ft) and a 71,000 sq ft letting to the
Ministry of Defence in 2007.
30.
In terms of market appeal, whilst the building itself remains to all
intents and purposes the same now that Liverpool ONE has been completed, the
downgrading of its access, the proximity of the new bus station and the overall
loss of its impact and image as a landmark building would all be factors which
would detract from its attractiveness, and thus demand in the marketplace. The
building has effectively “turned its back” on the city centre, and the presence
and proximity of the bus station will have had a detrimental affect upon rental
values and yield, thus diminishing the capital value. He accepted in
examination in chief that the scheme had served to improve the wider city
centre environment, but that could not be looked at in isolation. The scheme
had done nothing to improve the site’s correlation to or integration with the
CBD. The fact that shops and the bus station were now closer was recognised,
but this, he said, had no positive impact on values. There were negative
aspects of this closer proximity that also had to be taken into account – for
instance, disturbance from street music and other hubbub, litter and
loitering. The public toilets that had been constructed right in front of the
building were a particularly significant deterrent, although he accepted that
these were not proposed at the valuation date. In cross-examination, he
accepted that the area in front of the building was now safer and that there
were regular security patrols. Access to the Ropewalks area was also easier
but despite there being no main road to cross now, it needed to be remembered
that the main pedestrian thoroughfare into the Liverpool ONE development was
not through the bus station, but on the other side of the new Hilton Hotel.
31.
Mr Burchnall, for the acquiring authority, set out the planning policy
context of the MPA HQ site and surrounding area in the pre-scheme world, and
the background to the PSDA proposals in some considerable detail, the relevant
parts of which are summarised as facts above. He said that with no specific
allocations having been made in the LUDP other than its designation as being
within Policy E6, the approach was that the site would be suitable for a range
of alternative or complementary uses, as long as those did not conflict with
the provisions of other relevant plan policies. He said that, in the
pre-scheme world, the MPA HQ had been directly opposite, and faced onto what
was known as the Canning Place complex which had consisted of offices (mainly
occupied by departments of the city council), industrial/storage units, a
public house and fire station. All of these, apart from the fire station were
demolished in 1998/99 prior to the effective start date for the PSDA scheme,
and the vacant ground was used for car parking thereafter. To the north of
that area was the run down and unkempt Chavasse Park, a bus station and
lay-over and the old Moat House hotel. These areas were cleared in connection
with the scheme. Mr Burchnall said that Canning Place was a very busy gyratory
system having, in front of the HQ building, double yellow lines to ensure
free-flow of traffic. This road created a sense of isolation to the block. Strand
Street acted as a significant barrier for access to the Dockside area as there
were unsatisfactory at-grade pedestrian crossing arrangements, although he
acknowledged in cross examination that there were plans for that aspect to be
significantly improved, but wondered whether or not it would actually have
happened in the no-scheme world. There were areas of land to the east of the
HQ that had also been cleared and were used for open parking.
32.
It was Mr Burchnall’s view that the HQ was, prior to the scheme,
physically isolated from the city centre and CBD, being on an island site and
in an area which was run down with much dereliction and a number of cleared
sites The walk from the property to the CBD was convoluted and through run down
areas, whereas, post scheme, there had been a significant improvement and
although acknowledged to be less flat, the walk to the CBD was now altogether
more satisfactory. Although he accepted that the pedestrian access to the
front of the HQ was compromised to some extent by the new bus station, it would
allow for better and easier access by public transport, there would be lower
overall vehicle flows and less physical separation from the city centre than
had previously been the case. He said he disagreed strongly with the
claimants’ experts’ arguments that the bus station was hugely intrusive and
conceals the front of the building. There had been major highway and
infrastructure improvements around the MPA building, benefiting the current and
any future occupiers. Access from the city centre is now through newly
constructed paved avenues and Chavasse Park is much improved.
33.
Mr Hubbard described how, traditionally, the business and retail
districts of Liverpool city centre had been separate, with the main office core
immediately to the north and west of the principal shopping areas, focused on
the Town Hall and the axis of Castle Street and Old Hall Street, and bounded to
the west by The Strand and Pierhead. Although there were other offices within
and around the retail areas (including the subject premises), that is not where
the principal CBD was located or where ongoing pure office developments were
occurring. The MPA HQ prior to the scheme was thus, as had been described
elsewhere, away from the main core and on an island site in a far less
attractive area and where there were a significant number of derelict buildings
and cleared sites within the vicinity. It was acknowledged that the front
public entrance area and steps had been rendered less visible and prominent by
the development of the new bus station. However, in the overall scheme of
things, the considerable boost in market confidence that the scheme had
created, the close proximity of the new John Lewis department store (within 100
metres), the generally improving location, the improvements to pedestrian
access and the increased development potential would far outweigh those
acknowledged disadvantages.
34.
The description by Mr Lyons of the building as having an impressive and
imposing presence was, in Mr Hubbard’s view, an unreasonable one. He said he
would describe it as austere with a steep, unrelieved flight of steps leading
to an unattractive public entrance which had inadequate disabled access. The
building certainly could not be described as an impressive architectural
statement and Mr Lyons had failed to adequately draw attention to its degraded
setting and the disadvantages of the island site. Mr Hubbard said that, as to
concerns expressed by the claimant that the building has insufficient light to
the internal areas, away from windows, due to its built depth, the floor plates
do, in fact, comply with the published BCO range. In his view the
construction of the bus shelters to an innovative and exciting design (and to
which the MPA did not object) does not obscure the MPA HQ when observed from
most parts of the city.
3. The city office market, pre and post scheme
35. It was agreed during the
hearing that the MPA offices, if de-partitioned and basically refurbished
(redecorated, new carpets etc) would be classed as secondary, Grade B, in respect
of the rental value banding that was used in the Liverpool Commercial Office Market
Reviews (CMRs). Mr Rice accepted that the fact that the property was outside
the Central Business District (CBD) meant it would not attract demand from
companies that prefer to be located in a prime or near prime office location.
It followed that rental values and yields would be lower than those applying
within the main CBD.
36.
Mr Rice said that, in analysing the city office market in general terms,
he concentrated upon the years 2003 to 2007 which provided a spread of 2 years
either side of the valuation date. He said he was assisted by the CMRs that
were published in early 2006, 2007 and 2008 and spanned the period under
review. The CMRs were prepared jointly by Liverpool Vision (the city centre
regeneration company) and the Merseyside Property Forum, a membership
organisation representing the majority of Liverpool’s surveying practices.
The statistics in the reviews were compiled by the four major practices
operating in the office market: his own and Mr Hitchcock’s firms together with
Keppie Massie and Mason Owen & Partners. The reviews refer to the CBD,
the subject property being just outside and now separated from it by Liverpool
ONE.
37.
During the 5 year period under review, Mr Rice said that headline rents
(ignoring incentives) for Grade B offices increased by similar percentages to
those achieved for Grade A offices from £11.50 psf to £16.00 psf.
Specifically, the CMRs showed typical Grade B rents to be: 2001 £10.50 psf,
2002 £11.00 psf, 2003 £11.50 psf, 2004 £12.00 psf, 2005 £12.50 psf, 2006 £14.50
and 2007 £16.00. He said this level of growth did not constitute a
sudden change in direction for Liverpool’s fortunes, there having been a steady
but more gradual increase in values over the previous period of 1996 to 2002.
Factors that would have contributed to the growth patterns that were achieved
included growth in the national and local economies, together with regeneration
projects including the Capital of Culture, St Paul’s Square, Princes Dock, the
Liverpool Arena and Conference Centre and improvements to the Old Hall Square
area generally together with the Liverpool ONE scheme. Regarding yields, he
said that they had hardened from 9.7% in 2002 to 5.7% in 2005, this being very
much in line with national city trends – as indicated in the schedule he
produced as an appendix to his rebuttal report [p2796].
38.
In his view there was no evidence that properties impacted by the scheme
(which itself only had a very small office content of only 35,000 sq ft) fared
any better than the general market within the CBD during the 5 year period 2003
to 2007. It was accepted that the new John Lewis store, constructed as one of
the key anchors to the scheme, was very much closer to the MPA HQ than the
original one and that the principal shopping and leisure area had been brought
closer to the property in general terms. Pedestrian access into the scheme and
to areas such as the Ropewalks was acknowledged to be better. However, differences
in proximity of the new shops to those that existed prior to the scheme would
have little or no effect upon rental values as those facilities were always
reasonably close by. Similarly, the proximity of the new Hilton Hotel would
have no material effect as, over the past few years there have been a number of
new branded and high quality hotels such as the Crowne Plaza, Malmaison and
Radisson, together with several boutique hotels, all of which are within easy
walking distance. The proximity of the new John Lewis car park, and the
others provided within the scheme would again have no material effect, as the
MPA building already contains more than adequate parking facilities, and
neither would the new bus station have any positive implications. The original
bus station was only a few minutes walk, and it was the new one that, as had
been said, had the most detrimental effect on occupier and public perception
due to what had been done to the public access to the building.
39.
In response to Mr Hitchcock’s comments relating to the changes in prime
office yields over the period under review, Mr Rice said that the sizeable
reduction that had occurred was generally consistent with other UK regions and
that, whilst the Liverpool ONE scheme was one of the factors that had
undoubtedly contributed to yield reduction, the figures in the CMR showed that
the yield shift was in line with the national trend. As to Mr Hubbard’s reference
to the Strand House comparable that was very close to the MPA HQ but just inside
the CBD (fronting onto The Strand), Mr Rice said that it had raised floors and
comfort cooling throughout and this needed to be taken into account. At the
2005 rent review, the rent increased to £13.00 psf from the £11.25 set in
2000. Over the 5 year review period, therefore, the increase in rental value
had been 15.5% which was less than the general increase over that period
suggested by the CMR figures, of 19%. Thus, there was no evidence from this rent
review (which was, of course, less reliable than an open market transaction in
any event), that the scheme had resulted in any boost to rental values on
buildings that were equally close to it.
40.
Mr Hubbard’s suggestion that the Horton House letting was “another
significant transaction reflecting the general beneficial effects of the
scheme…” would be more fairly described as having reflected the general
buoyancy in the Liverpool office market. Part of the letting was also to a
firm of solicitors who had been searching for suitable premises for a long
time. There was nothing in the evidence relating to this and other
transactions that could positively identify the scheme as having added any
extra to rental values.
41.
Various positive statements about the Liverpool office market from
within the “Liverpool Vision” Development Update of February 2005 and the 2005
CMR (Published early 2006) were put to Mr Rice in cross-examination including
the witnessing of “a steady increase in rental levels in refurbished and new
build offices” … “growth of up to 20% has been experienced over the course of
the last two years” … “a limited supply of Grade A office space”, that
Liverpool now has one of the largest city centre office markets in the UK and
that prime office investment yields have hardened dramatically to around 5.5%.
It was suggested that a statement referring to office take up in the 2005 CMR
confirmed the acquiring authority’s case that the scheme caused the rental
value of the MPA HQ to rise in the scheme world. It read:
“Economic growth in the city, the
changing requirements of occupiers, limited availability of good second-hand
space and the impact of Grosvenor’s retail development of the Paradise Street area – which has encouraged a number of office occupiers to find new
premises elsewhere – have all played a part in the record level of
transactions.”
42.
It was also put to Mr Rice that in a draft valuation report that he had
prepared for the MPA on 18 January 2006, he had made a number of positive and
objective statements relating to the area and the scheme and that that provided
a fair and telling description of the benefits that the scheme had brought upon
the area. Mr Rice said that there was no dispute that the scheme had been a
contributory factor in the overall rise in rental values and the fall in
yields, but it was by no means the only one and, as he had previously stressed,
there was not a shred of evidence to support the argument that rental values
within the city centre increased as a direct result of the scheme. As to his
advice to the MPA in 2006, he said that he had been appointed in a dual role –
to advise on a possible sale, and to advise in connection with the CPO. There
was no conflict, he said, in his opinions. He said, in cross-examination,
that in his initial appraisal of the building excluding residential development
value at £11 to £12 million, he had adopted a yield of 6.5%.
43.
As to potential bidders for the property, Mr Rice agreed with Mr
Hitchcock that, at the valuation date, there were some parties who were in the
market for a single occupation building of this size although the he did not fully
accept that the building would have been appropriate for, or of interest to,
all the potential bidders that Mr Hitchcock had mentioned. For instance, he
said, Merseytravel were looking for, and eventually settled upon (in 2009)
Grade A space. The MOD had confirmed to him that they were not actively in the
market at the valuation date (although they had previously been, and
subsequently re-entered the market, but in any event, they settled on a
refurbished unit within the CBD in December 2008). Atlantic Container Line
(ACL) had been seeking Grade A accommodation and whilst they might have
considered the reference premises, he thought it unlikely they would have taken
it further due to the amount of work required to bring it up to an acceptable
standard. In the event, they remained within Princes Dock. The Passport
Office (as it was then known – now the UK Passport Service) could have been
interested although the extent of works needed might again have discouraged
them as their occupational needs were quite urgent. They actually relocated to
refurbished premises at 101 Old Hall Street prior to the valuation date. There
was also a separate piecemeal requirement for space by the Immigration and
Nationality Directorate although at the relevant date they would have found the
MPA too large. They eventually agreed with a developer in 2009/2010 to consolidate
all their disparate locations into one 220,000 sq ft unit being refurbished to
a high standard in Old Hall Street, within the CBD. Mr Rice agreed that
there were also a number of potential occupiers (for parts rather than the
whole of the building) who were being displaced by the scheme. Although in the
overall office market locally numbers were relatively small, this was a welcome
injection of demand. There would also have been interest from developers and
investors if the building was offered to the market with vacant possession.
44.
It was submitted for the acquiring authority that it was clear from Mr
Rice’s evidence and from what he had said in cross-examination that, as with Mr
Lyons, his opinion was that Liverpool ONE had a positive impact upon confidence
within the city, but that there were also a number of other relevant factors
that came into play. They said “whilst we do not accept for a moment that the
effect of Liverpool ONE was not immediately and physically beneficial to the
reference property in terms of providing the connections and other facilities
and improvements…the fact that Liverpool ONE enhanced the market generally
within the city does not mean that that is not itself relevant in terms of the
valuation of the property in comparing what would have been the position in the
scheme and no-scheme worlds.”
45.
Mr Hitchcock also referred to the CMRs and said that these showed that
whilst there had been a gradual increase in the take up of office accommodation
in the late 1990s, this gathered momentum from 2000 onwards. As shown in the
2006 CMR, there were significant increases in rental levels from 2004 to 2006
which reflected demand around the valuation date, and there had been a
corresponding fall in investment yields, from 6.8% in 2004, through 5.7% in
2005 to 4.7% in 2006. The consequence was that capital values were seen to
increase substantially.
46.
Whilst it was accepted that the buoyant conditions that were generally
being experienced were in part as a result of national economic and trends, in
his view the specific confidence that was evident in the Liverpool office
market was due the regeneration and improvements that were taking place. Of
those improvements, the Grosvenor scheme was by far the largest and the
perceived benefits that it would bring to those properties and businesses
within proximity would have been clear by the valuation date. Indeed, the
benefits of the scheme were being widely trumpeted in advertising material and
individual property marketing promotions. The improvements that the scheme was
to bring to the reference property, including virtual integration within it,
would in his view far outweigh any perceived or actual disadvantages created by
the close proximity of the bus shelters and the effects that that had had upon
the main public entrance. Not all potential occupiers would be unduly
concerned about these factors, especially single occupiers, and they would have
attached significant weight to the improving quality of the surrounding area
and its facilities. In Mr Hitchcock’s view, the bus station was an attractive
and well managed facility, and the revised north entrance to the MPA HQ is
perfectly functional. They would have no reason not to accept the principal of
re-orientation of the main access to the south side, and would have readily
incorporated this into any proposed scheme of refurbishment. Indeed, he said,
a good example of where an entrance had been re-configured in similar
circumstances (i.e. where adjacent development was taking place) was the
building now known as The Plaza, Old Hall Street, which had been acquired for
refurbishment by Bruntwood, a well known Liverpool office developer, in 2003.
47.
In summary, in his main report, Mr Hitchcock said that market for the
property in the scheme world would, reflecting its development potential (as
discussed elsewhere in this decision), the substantially improved environmental
benefits, and all the other planned developments and public realm improvements
that were occurring have been significantly stronger than if the scheme had not
taken place. In his view the image of the building within the scheme setting
is superior to how it was previously on its isolated island site surrounded by
derelict buildings and open car parks, and it was inconceivable that the value
of the property would not be higher as a direct result of what the scheme was
bringing forward.
48.
The scheme meant the need for some city centre office occupiers to
relocate, and the examples he gave would, he said, all have been interested in
taking space in the MPA building if it had been available.
49.
Mr Hitchcock agreed with Mr Rice that the MPA building was outside the
CBD and that rental values would be proportionately less. He said that the
transaction at Strand House, which was within but just on the edge of the CBD
and close to the reference property, was a good indicator as to the market at
the valuation date. In his view, the rent review that was negotiated by him
at arms length with the occupier (Halifax) as at September 2005 reflected the
anticipated benefit of the scheme. The rental value equated to £13.00 psf
although the building was smaller and “a little more modern” than the MPA HQ.
50.
In cross-examination he accepted that, as Mr Rice had explained, the
pattern of rental value increases indicated within the CMRs from 2001 up to the
valuation date in 2005 was steady (at approximately 50p psf per annum) and that
whilst the annual office take-up statistics during that period were also pretty
stable, the Grade B take up in 2004 had been the lowest. These statistics, he
acknowledged, did not demonstrate any specific increase caused by the PSDA
scheme, and indeed indicated a fall in take up in the year immediately
preceding the valuation date. He accepted the references in the 2005 CMR document
that put the principal drivers for the increase in demand (over the 1990s) down
to the city’s indigenous professional and financial services sector. As to
yields, he acknowledged that the significant hardening between 2004 and 2006
that he had referred to (at 26.67% over the period) was only marginally above
the national city trend of around 25% and that there was nothing therefore to
indicate specifically that the scheme had had any particular impact. He
accepted that, in addition to the scheme, there were other substantial
developments and regeneration projects going on, although he insisted that with
the scheme representing almost 50% of the projected regeneration spend, it was
by far the largest contributor.
51.
Mr Hitchcock also accepted that his opinion that the benefits
associated with the scheme “far outweighed” any impact on the northern access
caused by the new bus station did not include any opinion as to the precise
implications on value, and that the evidence he had produced in respect of the
alleged benefits that changes made to the Plaza development had had was of no
assistance in this regard. Asked about the Strand House rent review, Mr
Hitchcock agreed that the figures did not support his arguments that the scheme
had directly influenced rental values of nearby properties. He said it was on
the southern fringe of the CBD which had not moved ahead as fast as the
northern end in terms of increased growth. Regarding potential interest in the
MPA HQ from office occupiers displaced by the scheme, he accepted that all of
those who had subsequently moved had found accommodation that was very
different from the subject property.
52.
In his rebuttal report, Mr Hitchcock also referred to rent reviews on
Victoria House, Pearl Assurance House, Graeme House and 10 Duke Street, which
were all close to the scheme. These showed rental growth over the 5 year
review periods (that occurred variously between 2001 and 2008) of 19%, 21%,
10.4% and 14.75% respectively and demonstrated the clear beneficial effect of
the scheme. He acknowledged that the various potential occupiers who were
being displaced by the scheme had all found accommodation that was, in reality,
very different from the subject property.
53.
The claimant submitted that Mr Rice and Mr Lyons had categorically
established that there was no evidence that the acknowledged improvements
created by the scheme had resulted in any improvement in office values in the
vicinity over and above the steady increases caused by the economic situation
generally and the other improvements and regeneration that were occurring in
the city centre. The focus of the CBD had moved, by the valuation date,
towards its northern perimeter and there was simply no evidence that supported
a growth in rental values in the area to the south that could be attributed
specifically to the scheme. No new office development was planned within the vicinity
of the subject property and it also needed to be borne in mind that the
valuation date was but a matter of months after work on the scheme had
commenced and any purchaser or prospective occupier would be acutely aware of
the disturbance and inconvenience that would occur for a considerable period of
time during the building works.
54.
The reliance of the acquiring authority on the figures relating to
Strand House, Mr Fraser said, was surprising as they clearly demonstrated (as
acknowledged by Mr Hitchcock in cross-examination) that even with it being
(just) within the CBD and immediately adjoining The Strand, it had
underperformed the rest of the city centre market in terms of rental growth.
That property was more modern than the subject, better equipped, and was not
encumbered by the new bus station and access difficulties that affected the
subject property. Whereas the rent review to £13 psf in September 2005 was a
15.5% increase over the £11.25 psf that had been set in September 2000, the
evidence elsewhere within the CBD showed an increase of 20% over this period.
The other properties within the vicinity (Victoria House, Pearl Assurance
House, Graeme House and 10 Duke Street) referred to in Mr Hitchcock’s rebuttal
report, when analysed, again failed to support his thesis that rental values
had increased significantly. There had been rental growth elsewhere during the
period of 38% and Mr Hitchcock had conceded in cross-examination that not only
was there no evidence that the rental values of these properties had advanced
any better than elsewhere, the analyses indicated a performance that was somewhat
worse.
4. Development prospects in the area absent the scheme.
55.
All the experts commented upon the likely pace of development in the area
within which the MPA HQ is located in the event that CPO powers had not been
available and the Grosvenor scheme had not gone ahead. Mr Rice and Mr
Hitchcock both said they shared the Tribunal’s view in Contraband Discount
Stores Ltd v Liverpool City Council (2007) LT Ref: ACQ/47/2005 (unreported)
where it said “in the absence of this or a similar scheme, the likelihood
is that some development within the PSDA may have occurred, but the
regeneration of the area would have been more gradual.”
56.
Mr Rice referred, in his report relating to rental value growth
generally, to regeneration projects that had contributed to rental value growth
outside of and in addition to the PSDA scheme: the St Paul’s Square
redevelopment, Princes Dock, the Arena and Conference Centre and the Old Hall Street area.
57.
Mr Hitchcock said the property would have remained in an isolated
position, outside the principal office core and surrounded by underused land
awaiting development. Gradual development of the area over a period of years,
coupled with the uncertain timing and nature of various schemes would not, he
thought, have materially altered the market for the MPA building although, if
the Arena and Conference Centre had not gone ahead, and the Capital of Culture
application had not been pursued, this would have had a damaging affect.
58.
Mr Lyons summarised the regeneration and improvement projects that have
taken place within the vicinity since the 1980s, including the reclamation of
hundreds of acres of derelict land between Albert Dock and Otterspool, the
rehabilitation of Albert Dock itself with 1 million sq ft
office/retail/residential/leisure and hotels, the major mixed use
residential/office development at Mann Island, the major conference area to the
south of Kings Dock, the redevelopment of Princes Dock and the adjacent
half-tide dock together with hotel projects including the Marriott Queens
Square, Radisson, Crowne Plaza and Malmaison hotels. These were just a
snapshot of the regeneration that has taken place within the area generally
and, Mr Lyons said, none of them were anything to do with the PSDA scheme.
One of the most significant drivers to growth was the European Capital of
Culture award. The application was made in 2002, and the announcement that Liverpool had been successful was made in 2003. This was coincident with the development
of the Grosvenor plans but was a year before CPO powers were obtained in mid
2004. He could not, therefore, understand the implications in Mr Burchnall’s
report that the scheme gave impetus to the grant of the award, or that an
application might not even have been made if the scheme did not exist.
59.
Both in his main report and his rebuttal report, Mr Burchnall set out in
detail his reasoning for concluding that in the absence of commitment to the
PSDA scheme, and it being highly unlikely that a remotely similar scheme would
have come forward, not only would the Arena and Conference Centre proposals not
have progressed “at least in the same timescale”, but also that Liverpool City
Council would not have bid for C of C status. Even if they had, it was likely
that they would have been unsuccessful. He said that without that award, Liverpool would not have been successful in the way that had been achieved in the scheme
world by the valuation date. He said that he felt sure that Mr Rice was right
when he said that Liverpool ONE, the Arena and Conference Centre and the C of C
have all contributed to growth, and similarly Mr Lyons was correct when he said
that the C of C was often understated as one of the reasons for the city’s
regeneration. Without these, Mr Burchnall said, the city would have been in a
very different economic position.
60.
During cross-examination which focussed in particular upon the
chronology relating to the City Council’s initial resolution to apply for C of
C status in 2000, the subsequent application (March 2002), the consideration
process and the judges’ favourable decision in Mid 2003, Mr Burchnall admitted
that he had no documentary evidence to support his contentions, and conceded
that the application for C of C would have proceeded in any event. However, he
said it was a fact that the PSDA scheme had been proposed before the submission
was made, Grosvenor “came on board in 2000”, and although it was accepted that
the development agreement had not been entered into and the CPO inquiry had not
yet taken place, the scheme in his opinion was a hugely important contributory
factor, and if it had not formed part of the city’s overall regeneration
policy, the case for the C of C would have been seriously weakened. Nevertheless,
as was acknowledged in closing submissions by the acquiring authority, Mr
Hubbard’s valuation was predicated upon the basis that the Arena and Conference
Centre and the C of C schemes would have proceeded absent the PSDA scheme
(B7-p2856 para 6.9). As both parties have proceeded on that basis, it is not
necessary to record in any further detail Mr Burchnall’s evidence and
cross-examination on that aspect.
61.
As to what developments were occurring in the vicinity of the MPA HQ
prior to and at the valuation date, as set out in the Liverpool Vision
Development Update 2005, Mr Burchnall referred to the Ropewalks area outside
the part of it that was included within the scheme and said that developments
were taking place at 1/3 Duke Street (the Casartelli building), 24/30 Hanover
Street, and sites in Campbell Square and Cleveland Square. There were also
developments to the south of the HQ in the area known as The Baltic Triangle. He
said these developments illustrated the overall policy approach whereby
individual schemes were encouraged and approved, whilst at the same time,
policy prevented the redevelopment of areas considered to be key to a larger
comprehensive redevelopment. In cross-examination he acknowledged that the
number of planning applications for major city centre developments was higher
in 2005 than in any previous year. In regard to the application that had been
made for a retail development on Chavasse Park and Canning Place (The Walton Retail
Scheme) which had been refused by the council in 2000 and again on appeal in
2002, he said the inspector had considered that a better site could be
identified (in accordance with the sequential test in PPG 6). Although
planning consent had earlier been obtained for a millennium project known as
the National Discovery Park, a mixed use scheme, in the same area close to the
MPA HQ, that proposed development had been abandoned as it could not be made
economically viable. In Mr Burchnall’s view, the dereliction around the
subject property would have remained absent the scheme, although he accepted
that interest had been expressed in some of the vacant sites. He acknowledged
that some development projects would have been turned down or delayed due to
the scheme from the point at which the revised UDP was adopted but, conversely,
there were many prospective development scenarios that had come forward
precisely because of the PSDA scheme.
62.
In cross-examination, Mr Burchnall further accepted that in the
no-scheme world, development within and around the city centre would have been
proceeding, and that the council and Liverpool Vision (The City Centre
Regeneration Company) would have been working hard to encourage new developments
to continue the regeneration that was already well underway.
63.
Although, as I have said, Mr Lyons and Mr Hubbard prepared their
valuations on the basis that the C of C and the Arena and Conference Centre
developments would have proceeded, the claimant submitted that the background
to the C of C bid was an important factor to be taken into consideration when
determining what would have happened if the scheme had not gone ahead. The
Liverpool Vision SRF document published on 26 July 2000 explained that the C of
C bid was part of a wider strategy that included provision of the Arena.
Liverpool was seen as a key regional investment priority, and one of the two
most important regeneration strategies in the North West. The bid itself
concentrated upon the cultural and public realm aspects, and only made passing
reference to the PSDA, although it was, of course, accepted that it was an
important part. However, with its principal focus and the timing of the
application and consideration of it by the panel being as it was, the PSDA
scheme whilst being in its early development stages, could not possibly have
been the key to its success that Mr Burchnall had originally said it was. Mr
Fraser pointed out that the C of C bid explained that the process of change and
transformation in the city had already begun, and outlined the steps that had
already been taken in advance of the scheme. The development agreement for the
scheme, which at the time of the bid was not completed and signed, was one of 7
further steps being taken. The C of C was described as being a critical
accelerator to the overall regeneration scenario that by 2002/2003 was already
well underway.
5. Revised access - the K2 and Owen Ellis proposals
64.
The acquiring authority, having acknowledged that the principal public
entrance to the MPA HQ is now unsatisfactory (in terms of appearance and public
perception) has, as part of its attempt to negotiate a settlement of this
matter, suggested how that entrance might be improved by obtaining, at the
behest of Grosvenor, a detailed proposal from K2 Architects, that set out potential
alternative arrangements. The cost of carrying out the K2 exercise, which the
acquiring authority considers to be an adequate solution, was roughly estimated
at £430,000 net of VAT by Todd and Ledson. That price included re-positioning
an external ventilation duct. It was accepted, in Mr Hubbard’s valuation,
that that cost should be deducted from the value of the main building.
65.
Mr Lyons said that K2’s initial attempt to design an access was to break
through into the east end of the building (closest to the entrance nearest to
Liverpool ONE) and have the main public entrance there. This was totally
unworkable principally because, apart from the fact that, as all parties
agreed, it is best to have the main entrance to a building like this in the
centre of its longest elevation, not only would the main plant rooms have to be
moved, but also the lift core was in the centre of the building. Minimum costs
of £2.5 million (according to the MPA’s technical advisers) would need to be
expended on internal re-organisation for a proposal that would, in any event,
have been impractical and inadequate. A revised proposal from K2 (and the one
which was before the Tribunal) was to provide from what was described as “The
Piazza” – the paved area on the corner of Canning Place and Park Place opposite
the multi-storey John Lewis car park - a broad, angled flight of steps leading
up to a terrace at the south-east corner of the building at raised ground floor
level, and a new walkway along the southern elevation linking in with the
existing access to the main southern entrance.
66.
This proposal, Mr Lyons said, had to be gauged against the access
arrangements that were previously in place prior to the compulsory acquisition
of the frontage land. The access that was there, and which has been described
in detail above, was quite satisfactory for its purposes, was of attractive
appearance and “gave the building some prestige in its’ slightly out of centre
location.” Not only was it now impossible to replicate such an entrance in
the scheme world, but this proposal takes people up a modest flight of steps at
the eastern end of the building to what is effectively the raised ground floor,
past louvered panels that discharge heat and air from the headquarters plenum
system and past the retaining wall to the upper level car park. There is then
an approximately 50 metre walk along the back of the building directing
pedestrians to what would be a re-configured southern, rear, entrance. No DDA
access is built into the proposal (although that has now been provided at newly
formed, existing north entrance which would remain), but that has the
appearance of being nothing more than a “back door” and the question of disability
discrimination could also arise.
67.
In Mr Lyons’s view, the proposals are wholly inadequate and
inappropriate for a building of this stature. As had previously been said, the
building was effectively turning its back upon the city centre, and with the
link in this proposal being into the current south entrance, that problem would
not be resolved. Such an entrance would be nothing more than an expensive
adornment to the building, and would do nothing to maintain or enhance its
existing value. Furthermore, pedestrians approaching the prospective new
flight of steps (assuming they were readily identifiable) would still need to
negotiate the bus station/shelters and pass the recently installed public
conveniences which are right outside. Then, he said, there are the legal
implications of re-acquiring the additional land that would be required in
front of the north-eastern corner (upon which to place the proposed new steps)
and obtaining the necessary rights and easements to allow unfettered public access.
This was a matter for legal submission but, he said, for a prospective
purchaser to have to treat with a third party, and to possibly suffer a ransom
demand, must have a detrimental affect on value.
68.
An alternative proposal and feasibility study has been obtained by the
claimant from the Owen Ellis Partnership, and has been considered by Mr
Lyons. This, he said, provides for a much more prestigious entrance better
suited to a 100,000 sq ft building, and would be unencumbered by the new bus
shelters. It incorporates a large ground floor glazed vestibule incorporating
two escalators together with appropriate DDA access which lead up to a further
raised vestibule at raised ground floor linking into the existing southern
staff access point. This new entrance is located at the south-western end of
the building and is accessed directly off The Strand. It has been
provisionally costed at £1,045,000 and would require the demolition of a small,
external, plant room but had no other effect in terms of the main building or
the car parking arrangements. Although it would be a more appropriate
resolution to the problem, it still did not alter the fact that the building
would have its main pedestrian and staff accesses on the opposite side to where
the original main public entrance had been. Mr Lyons pointed out that in
considering this alternative, Owen Ellis had said that it was clear, with the
new north access being a very narrow, dark, intimidating and inappropriate
entrance for a large commercial building, that no thought had been given by the
designers of Liverpool ONE to either the effect that it would have, or to try
and integrate the building into the scheme.
69.
Mr Lyons said that he understood that Owen Ellis considered this
proposal would need to be in addition to the K2 access so that there would
still be an access that was close to the entrance to Liverpool ONE, although in
his revised valuation, which included allowance for the cost of the Owen Ellis
proposal, he had not allowed for the K2 cost as well.
70.
It was submitted for the claimant that, regarding the fact that a small
area of the land that had just been compulsorily acquired would be needed to
facilitate the construction of, and access to, the K2 proposal, the acquiring
authority had been wholly wrong to suggest that a prospective purchaser at the
valuation date would have been told that the land and access rights would be
made available “at no charge.” The suggestion by the council, in its closing
submissions, that “the bidder would have concluded, in the absence of any
reason to the contrary, that the opportunity to provide the access would not
only have been immediately available as a matter of right and law” had
nowhere been explained and had not previously been raised. That suggestion was,
Mr Fraser said, incredible and quite improper, being wrong as a matter of law
and principle, and on the basis of the evidence. It had been acknowledged by
the acquiring authority that the land that would be required had a ransom
value. It was land that the council had considered it needed to acquire as
part of the scheme (to provide the new bus station), and it was ludicrous to
suggest that, on the very day it was acquired, they would have said that it
could either be re-transferred (or rights over it provided) at no charge. They
chose to acquire the land, and if part of that land is the key to providing a
new – and in the opinion of the acquiring authority – a satisfactory access,
the proper measure of compensation to the claimant must include that value.
Payment of compensation cannot be avoided on the wholly fictitious basis that
if asked on the valuation date, they would effectively pay the compensation by
returning the land.
71.
Surprisingly, it was submitted, the acquiring authority in re-examination
of Mr Hubbard on the final day of the hearing sought to introduce new evidence
in the form of the Public Realm and Common Parts Strategy, which showed
the land to be “Category C” land where rights would be given to third parties,
in support of their contentions that the required land would be freely
available. However, that expressly included the provision for Grosvenor to
extract contributions at commercial rates “if they considered it appropriate”.
That just confirmed that the land did, indeed, have a ransom value. The fact
that it was not until after the hearing of this case that the requisite rights
were secured was, it was submitted, proof that, at the valuation date, anybody
acquiring the property could not assume that it would be possible to secure the
land and/or rights either with or without having to pay a ransom. Further,
any prospective purchaser would need to adjust his bid for the property to
reflect concerns over just what Grosvenor or the council might construct on the
category C land right in front of the building. The fact that the public
toilets had not been proposed at the valuation date, but were subsequently
constructed is testament to that concern.
72.
Mr Burchnall commented briefly on the proposals. In his view, the K2 entrance would be likely to have achieved planning consent, and would be in the most
appropriate position for pedestrian access in respect of Liverpool ONE, the
John Lewis car park and the bus station. As to the Owen Ellis proposals, he
was concerned that with The Strand being such a busy highway, especially at
peak times, and with there being a number of junctions extremely close to the
proposed pedestrian entrance, there could be safety risks especially in
connection with drop-offs, and he had been advised that planning permission
would be likely to be refused.
73.
Mr Butler gave his views “as an experienced developer and as a potential
purchaser on behalf of a property company”, as to how he would enhance and
maximise the use of the site in the scheme world. He said initially that he
would look to enhancing the entrance from Liver Street (the south entrance) and
thought that there was an opportunity to create an imposing entrance accessed
through a newly landscaped and laid out car park area. Whilst the existence of
Liverpool ONE had increased the connectivity between Canning Place and the city
centre, Liver Street offered improved linkages to the new retail circuit and
also to the developments at Princes, Kings and Albert Docks. He said that he
would have considered this option also if the scheme did not exist. A
separate public entrance would not, in his view, have been necessary for normal
commercial use, although he accepted that is was a requirement for the MPA.
74.
Nevertheless, in the light of the claimant’s position regarding the
northern access, he said he had instructed K2 to come up with a suitable
alternative to the existing north entrance, and Todd and Ledson to cost those
proposals. Those relatively low cost works, he said, would have improved the
prominence of the building, its attraction to potential bidders and hence an
improved rental value. Any bid to purchase would reflect that cost, and the
time it would take to obtain planning consent and carry out the works (at the
same time as other refurbishments were effected).
75.
As to the claimant’s concerns regarding the question of ownership of the
additional land required to form the new access steps to the “K2 entrance”, Mr
Butler said that Ashurst, the acquiring authority’s solicitors, had produced a
note setting out the position regarding land ownership at the valuation date on
1 September 2011, and this was appended to Mr Burchnall’s report along with
other relevant documentation. He said it should be noted that the land now
forming the Piazza in front of the north eastern corner of the MPA HQ was
included in the same GVD as the subject land which, at the valuation date was
in the ownership of the council and was subject to the terms of the development
agreement between the City Council, LPL and Grosvenor. The overriding
objective of that agreement was to facilitate comprehensive delivery of the
scheme and it required the parties to work together to secure the land needed
and to work with landowners to resolve objections. The final boundary of the
PSDA was not fixed until the grant of the headlease in 2009, so there was ample
opportunity for certain non-essential parcels of land (as the relevant part of
the Piazza would have been) to be excluded from the headlease without adversely
impacting upon the Liverpool ONE development as a whole. Mr Butler said that,
just like the MPA, there were many adjacent occupiers who had access
arrangements that were affected, and various accommodation works and easements
were successfully agreed so as to provide such occupiers with adequate access
arrangements. It was also relevant to note that the K2 proposal was not the
only option, and indeed, Mr Lyons had investigated an alternative (the Owen
Ellis scheme) that would not have required any land to be taken back. In
cross-examination, Mr Butler insisted that, if the K2 proposal had come forward
at the valuation date, he did not believe that a ransom payment would have been
sought, and reiterated that it had purely been brought forward by the acquiring
authority in attempt to appease the MPA and to assist in facilitating
settlement of this claim. In his view, the K2 proposal would have been a fair
solution – the new steps would face directly onto one of the entrances to
Liverpool ONE, and would be a considerable improvement on what has been
provided on the north elevation which, he accepted, was not appropriate for a
main pedestrian entrance. He acknowledged in his main report that the MPA HQ
northern entrance had been compromised by the scheme, and in cross-examination
acknowledged that the close proximity of the new bus station will have reduced
the value of the building.
76.
Mr Hubbard said that in his opinion the K2 proposals would be a very
acceptable solution for a bidder re-orientating the building’s pedestrian
access in the scheme setting, as they would improve the building’s presence.
He allowed the sum of £430,000 as a reduction to his scheme (after) valuation
as an appropriate allowance to be made to reflect the potential to provide a
new access, rather than any particular scheme or proposal. Whilst he had made
that allowance, Mr Hubbard said that, as the building’s principal staff
entrance and access from its own car park was on the south side, he thought a
prospective purchaser in the market would have been less concerned in the loss
of the previously undistinguished and somewhat formidable space to the north
elevation than had been made out by the claimant. The new bus station has an
“exciting and innovative roof design”, which does not obscure the view of the
MPA HQ from most parts of the city, but nevertheless, he accepted that a
purchaser would probably wish to provide a revised entrance on the lines of K2, to reflect its position as giving access virtually directly into Liverpool ONE.
77.
Regarding Mr Lyons’s alternative Owen Ellis proposal for a principal
public entrance in the south-west corner of the building, Mr Hubbard said he
agreed with Mr Burchnall that, giving directly onto the “pedestrian unfriendly”
Strand, it would achieve little, and would not be an appropriate market
solution. The suggestion by Mr Lyons that such a proposal might be in
addition to K2 seems, he said, to conflict with his rejection of K2 as “wholly
inappropriate”.
78.
In cross-examination, Mr Hubbard accepted that K2 would not replicate
the former access at the centre of the northern elevation, as the existence of
the bus shelters would make this impossible. However, he insisted that the
proposal for a revised public entrance towards the north-east corner was
perfectly acceptable, especially as he was convinced a prospective purchaser
would deem the southern elevation the most appropriate entrance into the
building for the reasons he had given, and also because that was the sunny
side. He acknowledged that effective signage would probably need to be
installed to direct pedestrians to the new K2 steps, but he did not see this as
an insurmountable problem. He also thought that the public conveniences that
have since been installed, would not have been put in that location if the new
entrance had been constructed in this position. Although he was unable to
speak to the legal situation regarding land ownership and access rights to
facilitate K2, he said he felt sure the situation would have been resolved
amicably, and at no cost to the purchaser.
6. Prospects for development of car park areas.
79.
It was agreed that there was, in both the scheme and no-scheme worlds,
potential for development of the covered and open the car park areas on the
retained land to the south of the main MPA HQ building, but that a purely
commercial development (the provision of additional offices) would not have
been economically viable. The question was whether, if there was any
additional value to the potential for residential development (and that was
also in issue), that value was altered as a result of the scheme.
80.
In his initial report, Mr Lyons referred to the Liverpool Vision
Residential Development Update from 2007 which provided information about the
range, location of and demand for City Centre Living projects as at the end of
2006, and which also gave average unit prices for the period 2000 to 2006. It
was clear from this, he said, that from 2000 to 2002, residential values had been
rising steadily, showing unit prices in 2000 of £93,160, 2001: £98,499, and
2002: £105,615. They then accelerated in 2003:£130,098 and 2004: £152,467,
following the C of C announcement. There was then a more modest rise in 2005
to £161,655 followed by a slight fall in 2006 to £158,508. There was a very
large increase in completions between 2002 and 2003 (1,272), but these fell in
2003/4 to 754, increasing again in 2004/5 to 1,015. In the light of these
statistics, he said that there was compelling evidence to suggest that the
market was, and had been for some years, alert to residential development
prospects in the city centre, but there was also evidence of a number of failed
schemes in the vicinity.
81.
There was absolutely nothing, he said, that could lead to the conclusion
that Liverpool ONE, which was not confirmed until 2004, had any positive or
direct impact on values. Accordingly, he said he made no allowance in his scheme
world valuation to reflect any alleged uplift to the residential development
prospects of the MPA HQ attributable directly to Liverpool ONE. Indeed, he had
not reflected any development potential in either his “before” or “after”
valuations, and had purely valued the car park areas on the existing use basis.
In cross-examination, Mr Lyons explained that on the basis of the yield he had
adopted, the value of the car park on its existing use basis was in the region
of £4.5 million (340 spaces @ £1,100 pa x 8.5%), which was as much as, or more
than, the residential value assessed on a per acre basis. It would also be
necessary, if residential development were to take place, to consider what the
impact would be on the remaining commercial element. Between 100 and 150 car
park spaces would still have to be provided, there were the costs and
disturbance that would be caused by the demolition of the car park and
subsequent construction works to be taken into account.
82.
Whilst acknowledging that Mr Hubbard had indicated the possibility of
residential development on the car parks amounting to about 177,000 sq ft, or
approximately 250 units, Mr Lyons said that a detailed residual valuation or
analysis was not necessary as there was no evidence of any betterment to those
prospects attributable solely to the scheme. He said, in his initial report at
para 30.56:
“30.56 I
invite the Tribunal to reflect upon the assertions of Mr Hubbard which appear
to be based on the flawed assumption that in January 2005 the [Liverpool ONE]
scheme would be completed as planned, whereas the reality, for compensation
purposes, at that date there could be no certainty that the scheme would even
proceed or be completed in the form envisaged by the planning consent.
30.57 I have come to the view that
whilst the car park to the Police Headquarters offers potential development
value in both a scheme and no-scheme world the practical approach to both
valuations would render the development value as nil or negative.”
83.
Mr Lyons said in his report and rebuttal statement that he did not agree
with Mr Hubbard’s methodology of adjusting the yield to reflect his opinion
that potential development value increased in the scheme world due to the
positive effects of Liverpool ONE. It was an unusual and odd way to assess a
potential residential development value in that it needed to take into account
partial demolition and loss of rent on the car park, construction and marketing
periods and other such factors that were wholly different to the capitalisation
of office rental values upon which the original yield was based. It also resulted
in an overnight increase of many millions of pounds on 5 January 2005. However,
in cross-examination, he accepted that where there was the opportunity for
growth in asset value through redevelopment, adjustment in the yield was indeed
a valid approach in allowing for that increased value. The main point that he
was making, he said, was that whatever additional value there might be for the
potential residential development, it was no more on 6 January 2005 than it was
on 4 January.
84.
Mr Rice stated in the introduction to his expert witness report that he
had been the author of a draft report to the MPA in January 2006 (one year
after the valuation date) setting out some initial valuation advice in
connection with their consideration of possible relocation to an alternative
site outside the city centre. That advice followed a report to the MPA’s
Estate Strategy Working Group from the chief executive in July 2005
recommending that preliminary approaches be made to Grosvenor and the city
council in the light of a possible “once and for all opportunity” to dispose of
the property at maximum value due to buoyant market conditions and the initial
marketing success that was being enjoyed in respect of the Liverpool ONE
development. It was considered that Grosvenor might be a “special purchaser”
who could be prepared to pay in excess of market value. A copy of Mr Rice’s
draft report was provided within the documents bundle, but he made no further
reference to it in his report or rebuttal evidence. In cross-examination it
was put to Mr Rice that that the advice he had given indicated that the
potential for residential development on the presently underused part of the
site comprising the utility building, car park and gatehouse (with parking for
the tower being provided by converting the existing basement), added between £4
- £6 million of value and this was in direct conflict with Mr Lyons’s view that
there was no additional development value. Mr Rice had said that the existing
use value was in the region of £11 - £12 million, which reflected his opinion
that substantial refurbishment was required and that due to the northern
entrance having been severely downgraded, it would be necessary for some
remodelling to provide an acceptable public entrance. His redevelopment
value was estimated at £16-£17 million,
85.
Mr Rice responded by saying that he was not instructed in July 2005, and
knew nothing of the initial views that had been expressed by the chief
executive. He said that his first involvement was in January 2006 when,
following the appointment of Irving Rice after a competitive tender process, he
carried out an initial appraisal adopting a broad brush approach and without
undertaking any residual calculations or obtaining QS advice. The draft report
concluded that “…we think it is worth looking into the feasibility of building
over the existing car park”. He said that in his existing use valuation, he
had adopted a yield of 6.5%.
86.
For the acquiring authority, Mr Burchnall confirmed his view, from a
planning perspective, that in January 2005 whilst the city council did not
specifically allocate city centre sites for residential development, there
would have been no objection to a 7 or 8 storey proposal (or possibly 9 storeys
with A3 use to the ground floor) taking in all parts of the site except the
main tower block itself. This view was borne out by the opinions that had
been expressed by the council’s chief planning officer in early 2006, following
and approach that had been made on MPA’s behalf by Mike Fagan of Knowsley
Borough Council. In Mr Burchnall’s view, the position would have been no
different in 2005 to what had been expressed in 2006. There was a considerable
demand from developers for city centre residential sites, he said, evidenced by
the number of major planning applications submitted to the council in 2005.
87.
Mr Butler’s main and rebuttal reports were dated 29 July 2011 and 2
September 2011 respectively. In respect of the potential for residential development
on part of the site, he said that, as a prospective purchaser, he would have
considered this to be a real possibility due to the current over-provision of
parking facilities on the site. As no planning permission existed, any
additional value would be speculative and he would, therefore, have expected it
to be reflected in an adjustment to yield. He said the development
opportunities would have been there in both the scheme and no-scheme worlds,
but would have been significantly more attractive to a purchaser in the latter
due to the considerable benefits afforded by Liverpool ONE. Mr Butler
produced letters from three residential developers which, he said, confirmed
that view.
88.
Although it had not been referred to anywhere in either of his reports,
in examination in chief, Mr Butler was asked about discussions that had taken
place between himself and Knowsley Borough Council (acting for the MPA) regarding
the building in July 2005. He said that he had received a telephone call
whilst in his car from Andrew Phillips of Knowsley asking if Grosvenor would be
interested in purchasing the HQ, and saying that they needed a quick answer.
He said that they spent some time discussing the property, and that he
immediately gave a verbal “opening offer” of £12-£15 million, which included
the development value of the car park areas. Mr Phillips, he said, indicated
that MPA were looking for £20 million. He said that subsequently, knowing of
the MPA’s interest in selling, arrangements were made for Building Design
Partnership (BDP) to draw up very basic sketch schemes showing the footprint
for a potential 7 storey residential development – which gave a gross external
area of some 166,000 sq ft. In cross-examination, Mr Butler was asked where
relevant documents were, and why the information had not been produced for the
Tribunal. He said he thought they were in the bundles, but that he would
provide any relevant paperwork “overnight”.
89.
The offer that was made, he said, was not based upon any scientific
calculations although he had the benefit of an Ordnance Survey sheet and
“knowledge of comparables”. He did say that he worked out in his head, whilst
driving, a value for the offices (c. 100,000 sq ft) at £10 psf net of
refurbishment costs to give £10 million, and then “two to four million pounds
for up to two developable acres of land”. He said he had not told Mr Hubbard
about this offer, or the calculations that led to it, although he said later on
that he had told him about the offer. Asked why his assessment of value to
support his offer had been by treating the value of the land separately, rather
than by yield adjustment, he said that it could be done either way.
90.
Mr Butler was then referred to documents in the supplementary bundle
relating to residual valuations that had been undertaken by Cushman and Wakefield (for the council) in October 2005, and based in part upon the BDP sketches, all
of which showed a negative land value. It was put to him that they showed that
neither residential nor mixed use schemes were viable, and he agreed that to be
the case although, in mitigation, Mr Butler said that he felt sure no
prospective purchaser would have relied upon “three single page appraisals.”
91.
On being re-called at the hearing the following day, Mr Butler firstly
said that, upon checking his files, the conversation he had had in his car was
not with Andrew Phillips (with whom he had had previous dealings) but with Mike
Fagan, who was Head of Asset Management at Knowsley. Secondly, he said that
the footprint plans he said had been sought following the discussion were, in
fact, dated December 2004 and had been provided to Grosvenor’s then agents,
Healey and Baker, in connection with land compensation issues. Mr Butler then
produced a copy of an email he had sent to Rod Holmes of Grosvenor (his boss)
dated 8 July 2005, immediately following his discussion with Mr Fagan, advising
him of it. Asked why he did not disclose the figure that had been offered, he
said that as the matter was likely to be discussed at a future steering group
meeting, he might have excluded it so that the board could consider the matter
with no pre-conceived ideas. He went on to say, in answer to a question from
me, that he was responsible for a £150 million budget, and thus had authority
to make the offer that he did. In a report to Grosvenor’s Head of Fund
Management sent on 5 August 2005 after a steering group meeting, Mr Butler
again did not mention his “offer”, but referred to the £20 million the MPA were
seeking, and said he thought it was “unrealistic” (although no detailed
appraisal had been undertaken).
92.
Asked about the BDO drawings, Mr Butler said he did not know anything
about the background, but accepted that they could not have been used to prepare
the Cushman and Wakefield residual valuations as they related solely to
residential, whereas the appraisals were based upon mixed uses. Finally, Mr
Butler accepted that, as an employee of Grosvenor, his evidence could not be
taken as impartial.
93.
Mr Hubbard acknowledged that there was potential for residential
development on part of the site in both the scheme and no-scheme worlds. In
valuing that potential, he said that he had considered the basic plan provided
by BDO in late 2004 – their option 3. It indicated a 7 storey development
built over a site area of 0.58 acres. He said that from 2002/3 to 2007/8 there
had been a significant increase of developer interest in city centre sites, and
a corresponding increase in values with residential and mixed use sites making
some £2 million per acre in 2002/3. In his view, a bidder for the MPA HQ would
have been prepared to add a proportion of such potential value to his bid, discounted
to reflect planning, timing risks (up to 6 years) and other considerations.
Rather than making an explicit allowance, Mr Hubbard said that the bidder would
simply reflect the additional development potential through adjusting the
all-risks discount rate adopted in valuing the various income streams. He said
that an appropriate reduction in yield would be one half of one percent and in
an erratum to his report (para 6.14) he said this would add about £655,000 to
the bid price. However, on being taken through his valuation in
cross-examination, he agreed that the additional development value amounted to
£641,422 in the no-scheme world. Yield adjustment, he accepted, was
subjective, but in his view reflected the appropriate methodology given the
absence of planning permission. He said that in the scheme world, the land would
be worth in the region of £4 million per acre and that, reflecting likely
increased demand caused by the beneficial aspects of the scheme (which by the
valuation date was confirmed, had funding in place and was about to commence),
a yield compression of 0.75% would be appropriate. He also thought that the
timescale for such a development to come to fruition could be brought back from
six to three years and that there were likely to be more bidders in the market.
The resulting additional value of the prospective development area was £1,793,380
(per the adjusted figure in his para 10.10). This represented an increase of
some £1.15 million over the no-scheme development value. That £1.15 million
was effectively the increased development value contribution to the overall
betterment which he assessed at £5.8 million.
94.
In forming his opinion of potential additional development value, Mr
Hubbard relied upon a number of development land transactions, details of which
were set out in Appendix CCH-D to his report. Three city centre sites with
potential for mixed use were each sold without planning consent for almost
exactly £2 million per acre, two in March 2002 (one of which was a 4.25 acre
site on Mann Island) and one in March 2003. The only evidence of value around
the valuation date was a settlement within the scheme (Site 9, Hanover Street) which was for a very small corner site for mixed retail/office use. The
agreed price represented £4.51 million per acre, but he accepted that not only
could less weight be attached to settlements but also it was not a residential
plot. He then referred to an arbitration award in August 2007 in connection
with an overage dispute on the same Mann Island site referred to above where
planning consent had been obtained. The award equated to £3.67 million which
was, he accepted in cross examination, an uplift of 68% and was nowhere near
the doubling that he had suggested would have occurred in the scheme world. He
then referred to the sale of a 2 acre cleared site with planning consent for
135 residential units and a health club in Sefton Street in September 2007 for
£4.3 million. In cross-examination, Mr Hubbard he that that also was not
comparable, not just because it was almost 3 years after the valuation date,
but it was also for a 22 storey development. It was eventually conceded by
Mr Hubbard that none of his comparables demonstrated any uplift in value of
residential or mixed use sites that could be said to be attributable to the
scheme.
95.
In closing submissions, Mr Fraser set out to prove why Mr Hubbard’s
methodology of applying an adjustment to yield could produce a “nonsensical”
result, and was wholly inappropriate. That approach, he said, just amounted
to plucking a figure out of the air and was fundamentally flawed. He compared
Mr Hubbard’s calculations in his valuation CCH-H, which had been based upon Mr
Lyons’s original areas and had not included adjustments for the stripping out
of internal partitions in the main block, and costs of so doing and refurbishment
that had been subsequently agreed to be the correct approach, with his
valuation CCH-J which was predicated on that basis and was the one now being
relied upon by the acquiring authority. The figure he had attributed to the
development value in CCH-J was £126,671, or 12.4%, higher than in CCH-H. None
of the changes made to the valuations was anything to do with the development
potential, but by adjusting the yield, it had the effect of increasing the
development value and thus the alleged betterment.
7. Specific valuation issues (not covered in 1 – 6 above)
96.
The evidence, provided by Mr Rice and Mr Hitchcock relating to the
Liverpool office market generally, has been covered above, and their references
to prevailing rental values and yields I do not repeat here. A considerable
amount of time was taken up in cross-examination of Mr Lyons in respect of the
fact that, in presenting his revised valuations 11B and 11E on the basis of
open plan floor areas, he had not shown any increase in rental value or yield (from
his original claim valuations) to reflect the demolition of partitions and
general refurbishments for which he had allowed costs of some £4 million. He
said that the increased floor areas provided the increased return and “the
building is what it is – it would be worth no more [per sq ft] whether
refurbished or not”, although, when pressed, he did admit that a higher
specification (which he had allowed for) could be expected to increase rental
value. However, I note that Mr Hubbard has done precisely the same in his
valuation CCH J and therefore I proceed on the basis that the rental values
alluded to in the revised valuations are those that, in the opinion of each of
the valuers, would be those applicable to the increased floor areas, and reflect
the refurbishment for which quotations had been received.
97.
In respect of that refurbishment, it appeared to be the case from what
Mr Lyons and Mr Hubbard said in cross-examination, that the considerable
difference between the Baqus and Todd & Ledson quotes reflected the extent
of the works to be undertaken. For instance, Mr Lyons said he had taken a
cautious approach, and had allowed for complete renewals of various items
rather than basic upgrades. The acquiring authority’s quote had not allowed
for raised floors. When it comes to my determination, therefore, I consider
the most appropriate way forward to be to “split the difference” and take as a
suitable allowance, £3,450,000. It was also pointed out that Mr Lyons, in
his revised valuations, had allowed a 2 year deferment whilst the renovation
works were undertaken, but in the final statement of agreed facts and in
cross-examination, he had agreed with Mr Hubbard that 9 months would be
sufficient. My valuation, to which I shall turn, will therefore reflect the
agreed deferment.
98.
As to the evidence upon which he based his opinion of rental values for
the main tower as at 5 January 2005, Mr Lyons’s assessment of £10.50 psf in the
no-scheme world was drawn from three transaction schedules that he summarised in
his report [p 2417] and set out in detail in his Appendix 15. One of the
problems in drawing comparisons, he said, was that there was only one building
that was as large as, or larger than, the subject property. That was St Paul’s Square – the letting to Hill Dickinson Solicitors in October 2005. That was at
£18.00 psf but was for Grade A space within the CBD that had been refurbished
to a very high standard and where substantial inducements had been offered to
the tenants. Most of the other comparables were significantly smaller, and
allowance would need to be made for that, together with adjustments for
specification and precise location. Regarding more general locations outside
the CBD, Mr Lyons referred to a letting of 81,000 sq ft in Albert Dock in April
2003 at £11.19 psf, and another of 19,132 sq ft in Temple Square in February
2006 at £12.00 psf. Regarding properties that may have been impacted by the
scheme, he referred to the lettings of the 3rd to 6th
floors of Graeme House (45,000 sq ft) to HMRC in 2001 at £9.60 psf and Victoria
House, James Street, (12,223 sq ft) to the MOD at £8.90 psf in 2001. These
buildings were not as good as the MPA HQ, and bearing in mind the steady
increase in rental values that had occurred over the period up to the valuation
date, as evidenced by the rent reviews that took place on both those units to
£10.60 and £10.50 psf respectively in September 2006, that showed just how
unrealistic Mr Hubbard’s no-scheme world figure of £9.50 psf was in January
2005.
99.
Mr Lyons also referred to several transactions in Cavern Court and
Merchants Court, and to a new letting of 26,500 sq ft at Regatta Place in
January 2005 at £13.00 psf together with a large number of others (including
very small units) and said that in the light of all this information, which he
had obtained from local agents, and had written confirmation of the details, he
had “taken a view” that £10.50 psf was an appropriate figure for the MPA HQ in
the no-scheme world.
100. In respect the Strand
House rent review to £13.00 psf, referred to by the market experts, and relied
upon by Mr Hubbard in respect of his scheme world valuation, Mr Lyons said that
was a smaller and more modern building in a better location on the edge of the
CBD and that figure would need to be adjusted downwards by £1 - £2 psf to
reflect those differences. That, therefore, supported his conclusions.
101. Regarding the
yield that he had applied in the no-scheme world (8.0%), Mr Lyons said that
there was little if any evidence of investment sales of comparable properties
and it was necessary therefore to take a view drawn from what information was
available. He said he started with St Paul’s House, the 131,000 sq ft pre-let
of Grade A space in the CBD to Hill Dickinson. In February 2006 that sold for
£42.8 million which reflected a net initial yield of 5.25% - in line with the
city trend as reported in the 2005 CMR of 5.7%. This was indicative of the
very best yield that could be achieved at the time, and it was necessary to work
outwards from this to reflect the nature of the subject property by
comparison. It was outside the CBD and, in terms of principal office
locations, “on the wrong side of town”. The investment market would therefore
be much more limited, and the yield had to reflect that. He also considered
the settlement that Mr Hubbard had negotiated on Merseyside House that
reflected a yield of 7%. That was a similar property although smaller and with
a lower rent and was within the CBD (but not its core).
102. As to Mr Lyons’s
assessment of the rental value post scheme at £10.00 psf, this figure was
increased in his valuation 11E from £9.50 psf, not to reflect refurbishment,
but in acknowledgement of the improvements to the public entrance per the Owen
Ellis proposals. The reduction from no-scheme to scheme world due to the
negative impacts on the original access and loss of prestige was thus £0.50p
psf. The same reasoning applied for his half of one percent outwards
adjustment to the yield.
103. Mr Hubbard
assessed the rental value of the tower at £9.50 psf in the no-scheme world and
said that that figure reflected the fact that without Liverpool ONE market
confidence would have been less than it was in the scheme world – the
appropriate figure reflecting the benefits of the scheme being £11.00 psf. He
said in his report that he was of the view that rental values for office
accommodation in central Liverpool had remained relatively flat during the
early 2000s but then increased significantly when the scheme came on-stream in
2004, however, he accepted in cross-examination that there was no evidence to
support that contention (except perhaps in respect of the best Grade A
properties), and that rental values had shown, according to the CMR, steady
growth from 2001 to the valuation date of about £0.50 psf per annum. He
admitted that he had difficulty in pinpointing precise evidence that would
support his view that value in the absence of the scheme would have been worse.
104. Mr Hubbard
firstly referred to India Building (also Grade B and within the CBD), where
rent reviews had been carried out in December 2003 (£10.82 psf) and January
2005 (£11.15 psf), which he accepted indicated only a modest movement in rental
values between the scheme and no-scheme worlds, although he thought that
property had been relatively unaffected by Liverpool ONE. He adjusted the
2005 figure downwards by £1.65 psf to reflect the MPA HQ’s poorer quality and
location to give his stated no-scheme world figure of £9.50 psf, although he accepted
that the £11.15 review in January 2005 was a scheme world settlement which
equated to Mr Lyons’s originally proposed scheme world figure (since adjusted
to £10.00 psf to reflect the value of the Owen Ellis entrance proposals).
105. He then referred
to Merseyside House, South John Street, which is just within the CBD and on the
edge of the original central shopping area. This was a settlement within the
scheme. It was a slightly better location for city centre office lettings and,
being close to the courts, was popular with tenants who used them. However
the accommodation was not as good as the subject property as it was all
un-refurbished, and was certainly less flexible. He said he had agreed the
rental value of those offices at £8.50 psf and had added £1.00 to reflect the
better and more flexible accommodation at the MPA HQ. Mr Hubbard also set out
the historical rents at other properties including Raglan House, James Street, and Minster House, Paradise Street, making adjustments that, he said,
supported his £9.50 psf. Those adjustments were mainly based upon the
relatively isolated location of the MPA HQ in comparison with the properties he
had referred to, and for the size of the accommodation.
106. Asked in
examination-in-chief about Mr Lyons’s comparables (set out in his revised
Appendix 15) Mr Hubbard said that the two lettings at Merchants Court in May
2001 at £9.38 and £8.50 psf respectively and reviewed to £13.06 and £12.35 psf
in May 2006, when adjusted back to the valuation date, supported his opinion of
£9.50 psf for the subject premises. He said that Victoria House, Graeme
House, Pearl Assurance house and 10 Duke Street all led him to the same
conclusion.
107. In the scheme
world, Mr Hubbard said that his increase in rental value to £11.00 psf
reflected his opinion that, due to the Liverpool ONE development, the setting
was radically stronger, more confident and more buoyant that it would have been
if it had not occurred, and development in the area generally had been more constrained.
He said he did not agree with Mr Lyons’s opinions as to the effects of the bus
station, and in his view the general aspect of the building from all directions
would seem to be virtually unaffected. However, he did accept that the new
northern access, apart from the fact it now had DDA facilities, was not as good
as it was. The only detriment to value was the cost of providing an
alternative (per the K2 proposals) which he had allowed for this in his capital
valuation. There was, he said, no downward affect on rental value. In
support of his assessment, Mr Hubbard referred to the Strand House rent review
which did, of course, reflect scheme world conditions. He said that the rent
review in September 2005 to £13.00 psf needed to be adjusted downwards by £2.00
psf to reflect the MPA HQ’s poorer location further from the office core, its
significantly larger scale, and more old fashioned accommodation. He said
that, also, the May 2006 rent reviews on Merchants Court sat well with his
assessment of £11 psf in the scheme world, as did other arms length rent
reviews within the CBD
108. On the question
of yields, it was agreed that the basis of assessment should be that the
building would have been vacant, with the main tower converted to open plan and
basically refurbished. Mr Hubbard relied principally upon the investment sale
of the Cunard Building (upon which he acted for the purchaser) in July 2001 in
determining an appropriate no-scheme world yield of 10.5% - reduced to 10% in
his valuation J to take account of the potential for growth in asset value
generated by the prospects for residential development on part of the car park.
He said that although that was quite a historic transaction, it gave a good
flavour of yields for major city centre investments that were unaffected by the
scheme. It was the former headquarters of the Cunard Line and one of the three
iconic and world renowned waterfront buildings off The Strand. Having 244,000
sq ft of accommodation it was significantly larger than the subject premises,
was multi-let and 87.4% occupied. Although an ERV for the best, refurbished,
space was £10.50 psf, many of the suites were un-refurbished and the average
rent overall was £6.69 psf. On a net initial yield of 7.98%, the equivalent yield
(which was the best measure for comparison) was 9.45% which, he said, was in
line with the reported market yield for that year of between 9.5 and 10.0%.
Mr Hubbard said that there would need to be a 2.05% uplift (to 11.5%) to
reflect the MPA HQ’s poorer accommodation and location and the fact that it
would be assumed vacant. From that he deducted 0.5% to reflect the development
potential and a further 1.0% to allow for the improvement in the investment
market between 2001 and the valuation date.
109. It was put to Mr
Hubbard in cross-examination that although there was no reported yield figure
for 2001, the CMR for 2002 showed 9.7% which reduced steadily to 6.8% in 2004, i.e.
a 3.0% fall. If such a reduction was applied, this would bring his no-scheme
world yield down to precisely the same as Mr Lyons’s view (8.0%). He accepted
that to be the case but said the CMR figures related to Grade A units in the
CBD, and in his view the Cunard Building could not be compared directly with
the information upon which the statistics were based. However, he did say that
the CMR figure for 2002 was “possibly being driven by the Cunard deal.”
110. Mr Hubbard also
referred to the acquisition by the council, by agreement in advance of the
scheme, of Chavasse Court and the open-market investment purchase of RSA House,
but accepted in cross-examination that, realistically, neither of them would be
of assistance to the Tribunal. He said that the transaction closest to the
valuation date was the negotiated settlement on Merseyside House. This
property comprised retail on the ground floor and offices above which
contributed 37.5% of the income. He said he agreed (in the negotiations that
were carried out on the statutory basis) that the settlement equated to 7.0%
for the office accommodation. Whilst that settlement assumed the no-scheme
world, Mr Hubbard said the transaction “reflected the setting of the CPO.” As
the valuation date was virtually the same as that relating to the subject
premises (February 2005), no adjustment was required for time. However, he
made an adjustment of 1.5% to reflect the much larger area of the subject
premises, and 2.0% for its more isolated location. He then deducted 0.5% for
the development value to give the 10% he thought appropriate.
111. In
cross-examination, Mr Hubbard accepted that the 6.8% reported yield for city
centre offices for 2004 reflected the scheme world and said that he had agreed
with the valuer acting on Merseyside House that that yields were effectively
the same in the scheme and no-scheme worlds. As to why he had made a 3.5%
adjustment for this property when comparing it to the MPA HQ, and only 2.0% for
Cunard House, Mr Hubbard said they were very different properties, and his
adjustments reflected his professional opinion. As to the location of
Merseyside House in comparison, Mr Hubbard acknowledged that there was really
not a large amount of difference, and he also accepted that the majority of
Merseyside house was un-refurbished whereas the assumption on the MPA HQ was
that the offices would be re-furbished.
112. Mr Hubbard also
referred to the CPO settlement on Minster House for which the valuation date
was 1 May 2006. This was again agreed at a 7% yield on a no-scheme world
basis, and the adjustments he made for the MPA HQ again, he said, supported his
10.0% yield on that building.
113. As to his
opinion that an appropriate yield in the scheme world would be 7.5%, Mr Hubbard
said he relied principally upon the April 2006 investment sale of the newly
constructed 1 St Paul’s Square (the 131,000 sq ft office block let to Hill
Dickinson) at an equivalent yield of 6.0%. He said he would allow a 2.25%
uplift to reflect timing, location and covenant before then deducting 0.75% for
the improved potential development value. However, he accepted in
cross-examination that that adjustment was wholly inadequate when considering
that St Paul’s House was a brand new, fully let (to a first class covenant)
office block in prime CBD. Accepting that there had been a hardening in yields
of at least 1.1% during the period in question, meant that there was (after
deducting for development potential) less than 1.0% of adjustment left for
location, condition (grading) and covenant (MPA HQ being vacant). When
reminded of the percentages for location and type that had been applied on
Merseyside House and Cunard Buildings, Mr Hubbard conceded that that brought
the yield for the subject premises, as Mr Fraser put it “comfortably over
10.0%”.
114. Mr Hubbard also
analysed the sale in August 2006 of 101 Old Hall Street which was a 104,000 sq
ft office building pre-let to gold-plated covenants (the Home Office and
Unisys) that equated to a 5.1% equivalent yield. He allowed a 2.4% net
adjustment for time, location and covenants. Another sale of a new building, City Square, Moorfields let to HM Government achieved 5.0% in January 2007 and he adjusted
that by a net 2.5%. In the light of the detailed cross examination that had
been undertaken on 1 St Paul’s Square, where the circumstances and reasoning
behind the adjustments was virtually identical, I advised Mr Fraser that I
considered extensive further questioning of the expert on these two comparables
was not necessary.
115. It was submitted
for the claimant that there was not a shred of evidence that could support the
council’s contention that the value of the subject premises had increased by a
massive £5.7 million as a direct result of the scheme (and nothing else).
Indeed, it had been agreed that there had been a deleterious impact upon the
northern access to the property, and that the impact of the bus shelters would
cause a loss. It was telling, Mr Fraser said, that an advance payment of
compensation in the sum of £90,000 had been paid to the claimant, at a time
when they the council was being advised by Mr Hubbard and Mr Hitchcock, but it
was not being argued that that should be refunded due to the alleged betterment
that had occurred. All the valuation and market evidence suggested that
increases in rental values and reductions in yields were the result of the
regeneration in the area generally, and were following national city trends.
116. For the
acquiring authority, it was submitted that Mr Hubbard’s adjustment of an extra
0.25% to the yield in his scheme world valuation reflected the increased development
value that a prospective purchaser would attribute solely to the benefits that
the scheme had brought to the property. Mr Hubbard’s evidence, it was
suggested, should be preferred as it was based upon detailed analyses of
relevant comparable transactions whereas Mr Lyons’s evidence was much more
general in approach and his conclusions were unsustainable.
Conclusions
117. I find the
claimant’s experts’ description of how the premises stood prior to the
construction of Liverpool ONE in relation to the rest of the city centre and
the office districts as compared with the situation that now prevails (issues 1
& 2) altogether more persuasive. Mr Lyons’s comments were particularly
apposite where he said that the northern entrance arrangements now appear
shabby and look like an emergency exit rather than what had previously been a
normal and acceptable public entrance. The impact of the new bus shelters
butting virtually up to the north elevation and the existence of the new bus
station generally has had, in my view, a seriously detrimental affect upon the
building. The fact that the canopies to the shelters on the south side of bus
station all but touch the front of the building suggests to me that the
designers of this part of the scheme had no regard whatsoever to the effect
that the works would have, and had done nothing to try to integrate the
building into this part of the scheme. It is a fact that, when pressed, all
of the council’s experts acknowledged that the northern entrance had been compromised,
but it is the extent of that compromise that is in question.
118. Whilst the MPA
HQ was, prior to the scheme, clearly somewhat isolated, and occupied an island
site surrounded by busy roads whereas now, pedestrian links into the city are
somewhat improved and certainly safer, I am not persuaded that the fact it is
now “closer” to the city centre constitutes the benefits alluded to by the
council’s experts. The building was constructed for a specific purpose and
use by a single occupier, and its previous slightly isolated position would, I
think, have been seen as a benefit to the MPA. Public access was a
requirement, but clearly of secondary concern. In that respect, it could be
argued that the rather less attractive and somewhat intimidating present
pedestrian access arrangements are of minor importance and might be a reason
why the MPA did not object to the proposals.
119. However, on the
basis of how the building is to be valued under the statutory provisions, the
valuation experts agreed that, if offered to the market, the property would be
unlikely to be of interest to a single occupier, and would be seen as a
prospect for letting as individual floors (with the further development
opportunities to which I shall turn), and would also need significant internal
alterations from its current old fashioned but specialised configuration. The
claimant argued that the northern access (and aspect) would be of considerable
importance to a potential purchaser, and Mr Lyons sought to establish through
his evidence that the scheme has had a seriously detrimental effect both on
rental values and upon yield on this particular building (an opinion with which
Mr Rice agreed, saying that the building had effectively turned its back on the
city centre). I give my conclusions on the valuation evidence later, but it is
appropriate to say here that I have sympathy with the claimant’s views. It
was argued for the acquiring authority that the building’s proximity to the extended
city centre, and the benefits of the improved shopping, leisure and parking
facilities together with the overall beneficial effects brought about by
Liverpool ONE far outweighed any perceived disadvantages over access, and Mr
Hubbard said that his evidence demonstrated that rental values and yields had
improved as a direct result of the scheme. It was common ground that the
scheme has brought about considerable benefits to the area in general, and,
bearing in mind the scale of the development that has taken place, it would be
surprising if that were not the case. However, the question I have to answer is
whether and if those benefits alone have translated into increased rental
values and improved yields on office buildings within the vicinity, and this
one in particular.
120. In considering the
office market and rental values in the area generally, it is the evidence of Mr
Rice and Mr Hitchcock that I turn to now (issue 3). Both valuers went to
considerable lengths in terms of providing background information and
statistics relating to the office market generally in Liverpool both within and
without the CBD, specifically in respect of rental value levels and yields,
availability, take ups and the like during the period 2001 to the valuation
date and beyond. I am satisfied that the evidence from the CMRs has
established beyond doubt that rental values for grade B offices increased from
2002 to the valuation date in a linear fashion, and that, as convincingly
argued by Mr Rice, there was no evidence of any exponential increase in
2004/2005 that could be attributed directly to the effects of the scheme. I
accept Mr Rice’s view that the factors contributing to both increases in rental
values, and decreases in yields were attributable to general economic growth
and the benefits created by the whole of Liverpool’s regeneration efforts
including the coming of Capital of Culture status, the Arena and conference
centre project, the transformation of the docks area and, of course, Liverpool
ONE and these reasons were set out in the Liverpool Vision extracts to which he
referred.
121. The acquiring
authority made much in submissions about the fact that the claimants experts
acknowledged the benefits that the scheme brought, but that is not in
dispute. The question is that I have to decide, as I have said, is whether
any increase in value to the subject premises can be related directly to the
scheme in isolation. Mr Hitchcock said that of all the improvements taking
place in Liverpool, the Grosvenor scheme was by far the largest project taking
up some 50% of the regeneration budget. That was factually correct, but he
also went on to say that it was inconceivable that the value of the subject
property would not be higher as a direct result of what the scheme brought
forward. Indeed, in his view, the Strand House rent review indicated that to
be the case within the area. However he conceded in cross-examination when it
was put to him that the increase in rental value in that property from 2001 to
2006 was less than the general pattern locally, that the evidence did not
support his conclusions. As to his suggestion that a number of displaced
local occupiers would have been potentially interested in the subject property,
Mr Hitchcock had to accept that all of those that did relocate, did so to
premises that were entirely dissimilar. I think Mr Hitchcock’s most telling
concession in cross examination was that, with the statistics showing that
Grade B office take up was less in 2004 than at any other time during the
period under review, did not demonstrate any increase resulting directly from
the PSDA scheme.
122. In the light of
the evidence, I agree entirely with the submissions made by Mr Fraser (as set
out in paragraphs 53 and 54 above) and conclude that, despite the undoubted
benefits brought to Liverpool generally by the scheme, there is no evidence
from which I could determine that increases in rental values, or falls in
yields, could possibly be attributable solely to the scheme.
123. As to the
development prospects in the area absent the scheme (issue 4), the issue here
was around whether development in the PDA and surrounding area would have
virtually stagnated if it had not been for the Liverpool ONE scheme. In this
regard, I found Mr Lyons’s summary of the developments that had occurred within
the Liverpool central and waterside areas (paragraph 58 above) most helpful. Much
was made of the impact that there would have been on the city’s application for
the C of C, particularly by Mr Burchnall. Whilst he said in his initial
report and again, even more strongly, in his rebuttal report, that the
application would not have been made, he conceded in cross-examination that it
would, but remained unsure as to whether or not it would have been successful.
He was of the view that the city’s position in the competition would have been
seriously weakened without the commitment to the sort of improvements that a
major city centre retail, leisure and public realm redevelopment like the
Grosvenor scheme would bring. Mr Burchnall also accepted that that small scale
developments could have been expected to occur on the vacant sites around the
MPA HQ, and he also listed a number of developments that had been permitted.
He confirmed that the policy approach in the revised UDP was to permit relevant
small scale developments except in the areas (which would have included the
PSDA) where comprehensive redevelopment was sought. Although it was part of
the council’s case that the Arena and conference centre might not have
proceeded, it was accepted that those developments would have gone ahead and Mr
Hubbard’s valuation assumed that to be the case.
124. In my view it is
clear that the PSDA scheme came about on the back of a generally improving
scenario in Liverpool city centre, and was part of a significant regeneration
exercise and the overall confidence that had been engendered by it. I am
satisfied that a number of the vacant sites around the MPA HQ would have come
forward for development as part of the overall regeneration process even in the
absence of the scheme, and that, as the claimants argued, it was the scheme
itself that has created difficulties in bringing forward such developments. I
think that with the substantial improvements that have been made to the docks
area and the proposed improvements to The Strand, it was only to be expected
that proposals would have come forward for the vacant sites between these areas
and the city centre and the area in general could, therefore, have been
expected to improve.
125. I conclude therefore
that whilst the subject property would have remained somewhat more isolated
(from the city centre) than it is now, and would have remained on an island
site, the area in general would have continued to improve – as was admitted by
Mr Burchnall in cross-examination (paragraph 62 above). Also, for the sake of
completeness, I agree with the claimant’s argument that the C of C would have
proceeded absent the scheme, and the evidence relating to the history and
timing of the application and judging process confirms this to be the case.
126. Regarding the
revised access proposals in the scheme world (issue 5), firstly I agree with Mr
Butler when he said that a prospective purchaser of the building would not
attach significant weight to the need to replicate (as far as it was possible
to do so) the former separate public access from the north side. I think it
would be accepted that the principal entrance had to be on the south elevation
which, as was pointed out in evidence, is “the sunny side of the street.”
Nevertheless, I am of the view that pedestrian access from the north-east
corner, linking into a revised and upgraded southern entrance midway along that
elevation would be deemed essential to give convenient and easily visible
access from Liverpool ONE. Whilst I am satisfied that K2 could have provided
a workable solution I agree with the claimants that it lacked imagination and
impact, but feel sure that with a little more architectural and design flair,
there would be an opportunity to create an attractive and acceptable entrance
at that point, linking in with the main southern entrance via a suitably wide
and landscaped walkway.
127. Although the
very impressive ground and first floor glazed vestibule with internal
escalators and a lift proposed by Owen Ellis Partnership make for a more
impressive entrance, it does seem to me to be a little “over the top” and, in
any event, there still needs to be a link along the opposite side of the
southern elevation to the main entrance area – something that Mr Lyons said was
unacceptable in the K2 scheme. An entrance at western end of the building,
facing onto The Strand would also be, as Mr Burchnall pointed out, in the wrong
place.
128. I see no
architectural or logistical reason why escalators could not be provided in the
location of the K2 proposals, linking up to a nicely paved and landscaped
“platform” leading around to the southern side. There is also no reason why
adequate signage directing visitors to this entrance could not be provided. In
the light of all the arguments, I consider £430,000 to be insufficient to
create an adequate access, but £1,045,000 for the Owen Ellis scheme is
overstated. In my view a prospective purchaser, considering what might be an
acceptable solution to the northern access problem would budget £650,000 to
cover this.
129. However, where I
have considerably more difficulty, is coming up with an allowance that a
prospective purchaser would make to reflect the need to negotiate the
acquisition of a small additional piece of land in front of the building together
the requisite rights of access. Despite the fact that immediately after the
hearing, it was confirmed that the requisite rights of access had been put in
place, that was not the situation at the valuation date. I agree with Mr
Lyons (and this view is reinforced by the length of time it has taken to get
the matter finalised) that a prospective purchaser of the building in January
2005 would have had precisely the concerns that he alluded to. Whilst I
accept that there is no reason why Grosvenor or the council should be
difficult, a purchaser would be advised that (as admitted by Mr Butler) an
“appropriate charge” could be levied. Doing the best that I can on this
issue, I conclude that a purchaser would allow an additional £100,000 for this risk.
130. Turning to the
development prospects for the car park area (issue 6), Mr Lyons concluded that
whilst it existed, that value was no more than the value of the car parking
spaces that would be lost and he made no allowance for it either in his scheme
or no-scheme world valuations. I am satisfied that his research into the city
centre residential market, the various schemes that had taken place and the
other statistics he produced, demonstrated that there is no clear link between
the coming of the scheme and increased values or demand, and this view was
confirmed by Mr Hubbard in cross-examination. Neither of the valuers carried
out a residual valuation. If they had done so, they would have had to account
for the loss of value from the lost car parking spaces. Mr Hubbard instead
chose to make adjustments to the yield, in both scenarios, attributing an extra
quarter of one percent to reflect his opinion of increased site value in the
scheme world. Whilst Mr Lyons criticised Mr Hubbard’s approach, he did
acknowledge in cross-examination that where development potential exists, such
methodology is not necessarily inappropriate.
131. In the light of
my findings (and it now being agreed) that there was no evidence to support the
conclusion that there was any difference in residential development values
between scheme and no-scheme worlds due entirely to the scheme, and in the
absence of detailed calculations, I accept that some form of yield adjustment
to reflect it would be appropriate. I accept Mr Hubbard’s attribution of 0.5%
from whatever the appropriate yield rate would be if there was no such
potential and that should, of course, be the same in each valuation. In my
judgment, the fact that the evidence points to there being no impact upon
residential values attributable directly to the scheme, mean that conclusions
upon Mr Butler’s late evidence, and Mr Fraser’s submissions (paragraph 95
above) are not necessary.
The Valuations
132. Looking firstly
at rental value in the no-scheme world, I agree with Mr Lyons that from the
evidence he produced, Mr Hubbard’s opinion of rental value for the main tower
at £9.50 psf appears too low. Whilst it was acknowledged by both valuers that
it was difficult to find transactions that were directly comparable to what is,
in reality, a very large and fairly unique building on the edge of Liverpool
city centre, and adjustments have to be made, I am satisfied that the
comparables set out by Mr Lyons (paragraphs 98 & 99 above) and the CBD
rental levels for Grade 2 offices as explained by Mr Rice indicate that the
figure of £10.50 psf is much more likely to be a fair reflection at January
2005. I also find myself unable to accord as much weight to Mr Hubbard’s
evidence as I think his adjustments generally were somewhat wide of the mark.
He had also said that his view was that rental levels had remained fairly flat
from 2001 to the valuation date, but this is clearly not the case as evidenced
by the CMRs – a point he accepted in cross-examination. In my view, the
Strand House rent set in 2001 at £11.00 psf for a building that was closest to
the subject property but was acknowledged to be slightly better located, more
modern and better fitted out suggests to me that the rental value for the
subject premises would at that time have been about £9.50 psf (taking Mr
Hubbard’s suggested adjustment of £1 - £2 psf on that property), so that figure
in 2005 would clearly not be appropriate. I also fail to see how, in the light
of the evidence, Mr Hubbard could justify a £1.50 psf difference in rental
value between scheme and no scheme worlds purely on the (false) assumption that
that increase had been caused solely by the perceived benefits of the scheme.
He accepted in cross examination that there was nothing that lent support to
that view, and his £11 psf was very much closer to Mr Lyons’s figure that was
arrived at on the basis that there were no scheme benefits that filtered
through to rental value. On the basis of the evidence that I have considered
in detail, I prefer Mr Lyons’s figure of £10.50 psf and adopt it.
133. The important
consideration now, of course, is what the rental value was in the scheme
world. Mr Lyons said that the rental value was reduced by £0.50 psf purely to
reflect the impact of the new bus station on accessibility and the overall
impression as described in his evidence. There was, as both he and Mr Rice
said, absolutely no evidence to support the contention that rental values on offices
had increased as a direct result of the scheme. Although the evidence has
clearly not established the council’s case that there was an uplift, I do not
accept Mr Lyons’s view that the rental value be reduced by the impact of the
scheme IF the revised access was provided along the lines I have suggested.
I am satisfied that, as Mr Hubbard argued, an allowance for the cost and
inconvenience of providing that access, including a reduction for the access
rights issue, will be sufficient. I conclude, therefore, that the rental
value, in the scheme world, at the valuation date, remained at £10.50 psf.
134. As to yields, it
was submitted by Mr Fraser that, in applying his yield of 10% in the no scheme
world, Mr Hubbard had admitted in cross-examination that two of the three
transactions he relied upon were not appropriate, and in respect of the third,
Cunard Buildings, although he had adjusted for differences in building and
location etc, he had admitted that if he had also made (as he should have done)
adjustments to reflect the movement in yields between 2001 and the valuation
date, they would have been 3% which would support Mr Lyons’s figure of 8% for
the subject premises. That was Mr Hubbard’s principal investment yield
comparable and I am satisfied from the evidence and what he said in
cross-examination that his adjustment of 1.0% to reflect the difference in time
between July 2001 and January 2005 was wholly inadequate. The CMR figures
suggest that yields for Grade A space fell by 3.0% and there was no evidence
produced that could support an argument that hardening of rates would not have
been similar for Grade B properties. I therefore accept the claimant’s
submission that, if anything, the Cunard sale supports Mr Lyons’s view. I
adopt Mr Lyons’s figure of 8%, but deduct a further 0.5% as I have concluded
above that that is an appropriate allowance for the residential development
potential not accounted for by him. In adopting the figure of 7.5%, I am not
forgetting that the valuation is conducted on the assumption that the building
has been converted to open plan, and generally refurbished.
135. Turning to the
settlement on Merseyside House, whilst one never applies the same weight to
such evidence as to unfettered open market transactions, the fact was that Mr Hubbard
accepted and agreed in those discussions that there was no difference between
scheme and no-scheme yields. I consider this to be important, and it supports
my conclusion that there is nothing in the evidence that supports an argument
that the scheme itself could have possibly made a 2.5% difference to yields, as
argued by him. Indeed, Mr Hubbard admitted that he came to such an agreement in
two settlement negotiations of office buildings in connection with the scheme.
136. In their closing
submissions, the council made much of the fact that the experts could well have
been confusing net initial yields with equivalent yields. Nevertheless, it
does seem to me that the CMR figures produce a reliable indication of levels
for good quality CBD investments and, more importantly, provide a useful
analysis of the improvement in the market between 2001 and 2005. Whatever
those figures reveal, it is the percentage adjustments that put the experts so
far apart. I am satisfied that, as with rental values, there was no evidence
from which it could be established that yields had improved as a result of the
scheme alone. It was, as with rental values, a contributory factor alongside
all the other regeneration and improvements locally in the hardening of yields,
along with the movements in the commercial investment market generally.
137. I do not think
that, realistically, the detrimental effect on rental value attributable to the
bus station and access issues would have an impact upon the yield, and agree
with Mr Hubbard that it is sufficient, in calculating the before and after
values, just to take account of the costs of providing the access (together
with the allowance that I have made for the rights and easement issue as I have
done in respect of rental values).
Summary
138. It will be seen
from the above, that in terms of the issues in dispute, I have concluded that
the rental value of the offices was £10.50 psf in the both no-scheme and scheme
worlds and that the yield should be 7.5% reflecting equal value for development
potential in both scenarios. Assuming £3,540,000 de-partitioning and
refurbishment costs in both valuations, but only allowing for the access and
rights costs amounting to £750,000 in the scheme world valuation produces a
diminution in value, allowing for 9 months deferment, of £710,350 (Appendix
3). This conclusion means, of course, that I find the acquiring authority’s
argument that a substantial amount of betterment exists, has not been
established on the evidence.
139. In addition to
the above, the agreed rule (2) compensation for the land acquired at £20,000
and rule (6) compensation for physical disturbance at £14,800 and for the
provision of security blinds at £1,460 are to be added to give a total of £746,610,
and I determine compensation in that sum.
140. A letter concerning
costs accompanies this decision, which will become final when the question of
costs is determined.
Dated
29 March 2012
P
R Francis FRICS
ADDENDUM
141. Submissions have
been received from the claimant, seeking the whole of its costs in the
reference, together with pre-reference costs (the principal of which has been
accepted by the acquiring authority), all of which should be subject to a
detailed assessment if not agreed.
142. Two sealed
offers were made. On 15 July 2011, the acquiring authority offered £510,000
plus reasonable fees and interest. On 8 September 2011, the claimant offered
to settle for the sum of £600,001 plus reasonable expenses and interest
together with, for the sum of £1.00, the transfer of the land upon which the
access steps on the north elevation had been provided and an easement for
access. Neither party accepted the other’s offer, although the transfer
relating to the land and easement has now been effected (see para 129 above). The
compensation determined exceeded both of these offers.
143. It was submitted
that, in accordance with the provisions of section 4 of the Land Compensation
Act 1961, the guidance provided in paras 59-82 of the President’s decision in Colneway
Limited v Environment Agency [204] RVR 37, and section 12 of the Tribunal’s
Practice Directions, as the claimant had been entirely successful in receiving
compensation that exceeded both of those offers, it should receive its costs in
full.
144. No submissions
were received from the acquiring authority. In my judgment, there are no
grounds justifying any discretion in favour of the acquiring authority, and I
therefore determine that the claimant should have all of its costs in the
reference, together with its reasonable pre-reference costs, such costs to be
the subject of a detailed assessment by the Registrar if not agreed.
Dated
30 April 2012
P
R Francis FRICS
ACQ/603/2010
Appendix
1(a)
Merseyside
Police Authority Headquarters
VALUATION
OF DAVID B LYONS FRICS
Ref:
11B
VALUATION ON BASIS OF RICS
(NIA) AREAS
(Pre-scheme world)
|
Building
|
Area
|
Rent
£ psf
|
RV
|
£
|
|
Gatehouse
|
439
|
5.00
|
£2,195
|
|
|
Amenity Building
|
|
|
|
|
|
Ground
& first floor
|
10,014
|
6.00
|
£60,084
|
|
|
Basement
|
5,170
|
3.00
|
£15,516
|
|
|
Main Building
|
|
Ground
– 7th floor offices
|
88,371
|
10.50
|
£927,895
|
|
|
Basement
|
11,133
|
5.00
|
£55,665
|
|
|
|
115,129
|
|
£1,007,156
|
|
|
Car
parking (spaces)
|
340
|
1,100
|
£374,000
|
|
|
Rental
value
|
|
|
£1,435,355
|
|
|
YP
perp @ 8%
|
|
|
12.50
|
|
|
|
|
|
£17,941,737
|
|
|
Deduct
costs of demolition/refurbishment of partitions (per Baqus)
|
|
|
£4,041,582
|
|
|
|
|
|
£13,900,355
|
|
|
Defer 2 years @ 8%
|
|
0.873
|
£1,202,573
|
|
|
|
|
|
£12,697,782
|
|
|
|
|
|
Say
|
£12,700,000
|
ACQ/603/2010
Appendix
1(b)
Merseyside
Police Authority Headquarters
VALUATION
OF DAVID B LYONS FRICS
Ref:
11E
VALUATION ON BASIS OF OWEN
ELLIS PROPOSALS POST SCHEME AND ON NIA
|
Building
|
Area
|
Rent
£ psf
|
RV
|
£
|
|
Gatehouse
|
439
|
5.00
|
£2,195
|
|
|
Amenity Building
|
|
|
|
|
|
Ground
& first floors
|
10,014
|
6.00
|
£60,084
|
|
|
Basement
|
5,170
|
3.00
|
£15,516
|
|
|
Main Building
|
|
Ground
– 7th floor offices
|
88,371
|
10.00
|
£883,710
|
|
|
Basement
|
11,133
|
5.00
|
£55,665
|
|
|
|
115,129
|
|
£1,007,156
|
|
|
Car
parking 340 spaces
|
|
1100
|
£374,000
|
|
|
|
|
|
£1,391,170
|
|
|
YP
perp @ 8.5%
|
|
|
11.76
|
|
|
|
|
|
£16,360.159
|
|
|
Deduct
costs of revised access
|
|
|
£1,045,123
|
|
|
Deduct
cost of partitions/refurbishment (per Baqus)
|
|
|
£4,041,532
|
|
|
|
|
|
£11,273,504
|
|
|
Defer 2 years @ 8.5%
|
|
(0.849)
|
£9,571,205
|
|
|
|
|
|
say
|
£9,570,000
|
ACQ/603/2010
Appendix
2
MERSEYSIDE POLICE HQ, CANNING PLACE, LIVERPOOL
VALUATION OF CC HUBBARD BSC FRICS, MATTHEWS & GOODMAN
Ref:
CCH “J”
Claim for Compensation as at 5
January 2005
ALTERNATIVE
ACQUIRING AUTHORITY’S REPLY TO THE CLAIMANTS STATEMENT OF CASE
Alternative “No Scheme
Valuation” Assuming A Purchaser Would Remove Internal Partitions – Revised
Valuation
|
|
|
|
Rental Value
|
|
|
|
Main Building
|
Area
(sq m)
|
Area
(sq ft)
|
Rate
(psm)
|
Rate
(psf)
|
Rental
Value
|
|
|
Ground-Seventh
Floor Offices
|
8.212.00
|
[88,369]
|
£102.26
|
[£9.50]
|
£839,505
|
|
|
Basement
– Storage/Ancillary
|
1,034.70
|
[11,137]
|
£
53.82
|
[£5.00]
|
£
55,685
|
|
|
Amenity Building
|
|
|
|
|
|
|
|
Ground
& First Floors
|
930.3
|
[10,014]
|
£
64.59
|
[£6.00]
|
£
60,084
|
|
|
Basement
– Storage/Ancillary
|
480.5
|
[5,172]
|
£
32.29
|
[£3.00]
|
£
15,516
|
|
|
Building
|
|
|
|
|
|
|
|
Gatehouse
|
40.78
|
[439]
|
£
53,83
|
[£5.00]
|
£
2,195
|
|
|
|
10,698.28
|
[115,131]
|
|
|
£972,985
|
|
|
Car parking spaces/Upper and Lower Levels
|
|
340
|
|
£1,100
|
£374,000
|
|
|
£1,346,985
|
|
YP
perp @
|
|
10.00%
|
|
=
|
10
|
|
|
Deferred
|
0.75
|
Years @ 10%
|
|
=
|
0.931 9.31
|
|
|
|
|
|
|
SUB
TOTAL = £12,540,598
|
|
Less costs of removing partitions and floor by floor
open plan strip out and refurbishment = £ 2,857,000
Including fees and costs contingency per Todd &
Ledson
|
|
|
|
|
|
|
TOTAL
|
£
9,683.598
|
|
|
|
|
|
|
Say
|
£9,700,000
|
“Scheme Valuation”
|
|
|
|
Rental Value
|
|
|
|
Main Building
|
Area
(sq m)
|
Area
(sq ft)
|
Rate
(psm)
|
Rate
(psf)
|
Rental
Value
|
|
|
Ground-Seventh
Floor Offices
|
8.212.00
|
[88,369]
|
£118.40
|
[£11.00]
|
£972,059
|
|
|
Basement
– Storage/Ancillary
|
1,034.70
|
[11,137]
|
£
53.02
|
[£5.00]
|
£
55,685
|
|
|
Amenity Building
|
|
|
|
|
|
|
|
Ground
& First Floors
|
930.3
|
[10,014]
|
£
64.59
|
[£6.00]
|
£
60,084
|
|
|
Basement
– Storage/Ancillary
|
480.5
|
[5,172]
|
£
32.29
|
[£3.00]
|
£
15,516
|
|
|
Building
|
|
|
|
|
|
|
|
Gatehouse
|
40.78
|
[439]
|
£
53,83
|
[£5.00]
|
£
2,195
|
|
|
|
10,698.28
|
[115,131]
|
|
|
£1,105,539
|
|
|
Car parking spaces/Upper and Lower Levels
|
|
340
|
|
£1,100
|
£374,000
|
|
|
£1,479,539
|
|
YP
perp @
|
|
7.50%
|
|
=
|
13.33
|
|
|
Deferred
|
0.75
|
Years @ 7.5%
|
|
=
|
0.947 12.63
|
|
|
|
|
|
|
SUB
TOTAL = £18,685,676
|
|
Less costs of providing revised pedestrian access to
the main entrance and reception = £ 430,000
Including fees but excluding VAT at say:
|
|
|
|
|
|
|
SUB
TOTAL
|
£18,255,676
|
|
Less costs of removing partitions and floor by floor
open plan strip out and refurbishment
Including fees, costs and contingency per Todd and
Ledson = £
2,857,000
|
|
|
|
|
|
|
TOTAL
|
£15,398,676
|
|
|
|
|
|
|
Say
|
£15,400,000
|
|
Betterment
arising at 5 January 2005 as a result of the scheme
|
|
|
|
|
SchemeValue
after land taken: £15.400,000
|
|
|
|
|
No
Scheme Value including land taken
|
£
9,700,000
|
|
|
|
|
|
|
Betterment
|
£
5,700,000
|
|
|
ACQ/603/2010
APPENDIX 3
UPPER
TRIBUNAL (LANDS CHAMBER) VALUATION
Merseyside
Police Authority Headquarters, Canning Place, Liverpool
Pre-scheme world valuation
Building Area
(sq ft) Rent psf Rental Value £
Gatehouse 439 £5.00 £
2,195
Amenity building:
Ground & 1st 10,014 £6.00 £
60,084
Basement
5,171 £3.00 £ 15,513
15,185
Main building:
Ground – 7th
floors 88,369 £10.50 £ 927,874
Basement 11,133 £5.00 £
55,665
99,502
£1,061,331
Parking
spaces 340 £1,100 £ 374,000
Rental
value £1,435,331
YP in perpetuity @ 7.5% 13.33
£19,132,962
Less costs of
de-partitioning and refurbishment £ 3,450,000
£15,682,962
Deferred 9
months @ 7.5% 0.947
£14,851,765
Say £14,851,765
Scheme world
valuation
Building Area
(sq ft) Rent psf Rental Value £
Gatehouse 439 £5.00 £
2,195
Amenity building:
Ground & 1st 10,014 £6.00 £
60,084
Basement
5,171 £3.00 £ 15,513
15,185
Main building:
Ground – 7th
floors 88,369 £10.50 £ 927,874
Basement 11,133 £5.00 £
55,665
99,502
£1,061,331
Parking
spaces 340 £1,100 £
374,000
Rental
value £1,435,331
YP in perpetuity @ 7.5% 13.33
£19,132,962
Less costs of
de-partitioning and refurbishment £ 3,450,000
£15,682,962
Less costs of
providing access £650,000
Allowance for
rights/easement issues £100,000
£
750,000
£14,932,962
Deferred 9
months @ 7.5% 0.947
£14,141,515
Say £14,141,415
Reduction in value £
710,350
