“ESTIMATING FUTURE”

Dominion, Volume 29, Issue 303, 18 September 1936, Page 2

“ESTIMATING FUTURE”

♦ Judge’s Comment In Rental Case — THE SPECULATIVE ELEMENT In the first proceeding in New Zealand in which the Supreme Court has been asked to determine a ground rental, his Honour Mr. Justice Smith said yesterday that he was being asked to estimate the future. He was being asSed, as a court, to determine something speculators would give—the ■speculative dement was the basis of the whole matter before the court. The court was asked to fix the ground rental of a property at the cornet of Lambton Quay and Waring Taylor Street, the lessor being the Wellington Cilv Corporation (Mr. J. O’Shea and Mr. J. R. Marshall), and the lessee the Post and Telegraph Employees’ Association (Mr. O. A. L. Treadwell and Mr. H. J V. James).

Sydney George Nathan, valuer, an association witness, described rates on city buildings as scandalous. Property owners were frightened at the yearly increases. Willis Street rates were 20/4 per inch of frontage per annum. C. J. S. Harcourt, land agent and'auctioneer, cross-examined by Mr. O'Shea, said that the sale in 1930 of the leasehold of Featherston Street sections, bn which the Government Life Insurance now occupied a building, by the Post and Telegraph Employees’ Association to City Buildings, Ltd., for £4500, was an example of many transactions in boom times. The property was well let to the Government Life at £2400 annually, but he did not know what would happen when this department went into the hew Government btfilding. He thought Featherston Street property would take some letting. After some further cross-examination, Mr. O’Shea remarked he did not know what else besides the leaseholders' association was behind the present case. Mr. Treadwell said his clients were in court to get justice. It was correct that the association, on his figures, would lose £lOO a year if it continued to pay the present ground rent of £220 annually, said Harcourt. It might pay the association to walk out. It would not be the first to do so from that site. His Honour asked the reason for the qualification “might” The association might prefer to hang on for speculation, witness said. His Honour: If conditions continue in the future as to-day would it pay it to walk out?—“Personally, I would, but there are always future elements arising—rising letting values or someone who wants a prominent site and is prepared to take the site off its hands.” He believed Kirkcaldies’ paid £l6 a foot for their site in the ’seventies, said Harcourt, but thought Mr. O’Shea wrong if he said no land had been sold on Lambton Quay in the past 20 years at less than £3OO a foot. As to what was being paid in Courtenay Place the most recent sale was at approximately £2OO a foot—a purchase price of £9OOO with a Government valuation of £7225. Mr. Harcourt’s figures seemed almost incontestable, save what could be brought forward regarding building costs, and on them it would pay the lessee to give up the lease, said his Honour. But Mr. Harcourt said it “might” pay the lessee to do this. The real reason at the basis of the whole matter was the speculative element. ’ The court was required to fix a ground rental, the essential element of which was a s.peculative one. If the parties wished him to deal with this element he should be furnished with a record of sales and leases so he could determine what could be done. It all came down to asking him, even on the lessee’s case, to estimate the future. Re-examined, Harcourt eaid the Government Life had the whole of the building previously referred to as temporary premises, at £2400 annually. The ren * was fixed on this basis. His estimate Of the ground rent of the site concerned in the case was £ll9. His Honour: What would a prudent lessee give for the lease for the next 21 years, taking into account the building on it, the speculative aspect and any other factors? What do you say, as an expert?—“A prudent lessee before making up his mind to lease the site would require to have some object in view. In view of my past experience I would suggest 3 per cent of the Government valuation (£9400 in this case) as a maximum.” He was “unfortunately” interested in two buildings himself, said the next witness, Sydney George Nathan, valuer and estate agent. The outlook was bad toda/ for anyone building on leasehold unless compelled to. This was especially so in the past two years. Financial institutions such as banks and lending companies did not like city leaseholds. In the past the city corporation had not only got lessees once but twice —there were not only the ground rents but the scandalous rates. In Willie Street the rates were 20/4 per inch of frontage per annum, _ . To his Honour, Nathan said a prudent lessee would, in his opinion, give a maximum of 3 per cent, of the true value of the land, which he considered £l5O to £175 a foot—at the latter figure £7OOO. The Government valuation of £9400 was high. He thought the present lessee would be well advised to get out—if he were in its shoes he would get out tomorrow and drop the building project. Mr. O’Shea: If Mr. Treadwell is prepared to recommend that, I am prepared to offer it to the council to-night. Mr. Treadwell: What is the use of an observation like that? Dramatic! Property-owners were all frightened at the yearly increases in rates, said Nathan. As to Lambton Quay sales in the past 20 years at under £3OO a foot. S. S. Williams acquired premises with double frontage to The Terrace from the Wellington Piano Company at £2OO a foot, three brick shops just south of Tisdall's, buildings included, were sold at £2OO a foot, and 25 years ago the Wairarapa Farmers’ premises with 60 to 70 feet frontage and five-story building was sold at £lB,OOO or £3OO a foot with building and without it £lOO a foot. Trustees could not lend on leasehold and there were not many others who would. Regarding prices paid for city land, he thought persons had been living in a fool’s paradise for 20 years. Recalled. Joseph McC. Dawson, architect, said the Commercial Bank building cost £41,300 or 39/3 a square foot to erect, the A.P.A. building 30/7 —both office buildings—and Picot’s, a factory building flow being erected with ground floor shops, 15/4.

It was felt that when the Government buildings were completed and departments no longer required accommodation in private buildings, lower rente would have to be accepted, eaid Alexander Anderson Gellatly, land agent, Bethune and Co.

Evidence was also given by Donald Gordon Johnston, public accountant, and Horace Maitland Haycock, land ageut. Hie Honour reserved his valuation. He said that if he required further evidence regarding the future he would have it called.