Expert Report on Valuation and Land Acquisition for Metropolis Airport
Colin David Smith, FRICS, an experienced professional in property valuation and land acquisition, has prepared an expert report for Metropolis Airport. The report involves the acquisition of land for a new runway and airport expansion. The land in question, part of a larger holding owned by Logipol SA, is currently used for arable crops. Key valuation issues and agreed facts regarding the land's ownership and potential development value are outlined in the report.
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Summary of Expert Report Colin David Smith FRICS
Valuation Office Agency from 1972 to 1989 Cadet Valuer to First Class valuer. Specialised in compulsory purchase + compensation on motorway and trunk road projects Equity Partner at Bruton Knowles (Gloucester) 1989 2006. Lead land acquisition consultant on Channel Tunnel Rail Link (High Speed 1) Senior Director CBRE (London) 2006 to date. Lead land acquisition consultant on 2012 London Olympic Games (850 acres of run down and derelict land) and Heathrow Airport (Third Runway) Expansion 2018 2020 (project currently shelved due initially to legal challenge and now post Covid). Extensive appearances as expert witness in Lands Tribunal, UK and East Caribbean High Court, Public Inquiries and Development Consent Order examinations. Many of which are Leading cases. Member of the IRWA International Relations Committee Frequent contributor at International Conferences in USA and Canada Former Chairman, Hon Secretary (and in 2013) awarded Honorary Member of Compulsory Purchase Association Colin Smith Career Summary
I have been asked to prepare an expert report on behalf of my clients Metropolis Airport in respect of the acquisition of various areas of land for a new runway and extension of the existing Airport A plan showing the land to be acquired which forms part of the agreed facts is on the following slide The land to be acquired includes part of a larger land holding, the freehold of which is owned by Logipol SA The land is currently used for growing arable crops and farmed by Logipol s tenant Farmer Giles; his claim for compensation is a separate matter that is not the subject of this dispute Valuation Issue in Dispute
Agreed facts The total area of land owned by the claimant is 100 hectares The entire property was acquired in 2009 from a real estate developer for 1m The area of land being acquired for the expansion of the existing airport is 20 hectares The land owned by the claimant has no current zoning or other planning designation for any form of development but a rail served logistics depot has been promoted The value of the subject land for its existing use is 1.2 million The value of the subject land with planning permission for the proposed development is 60 million
Agreed Facts (continued) There is no evidence of market value for the intended use of the subject land for airport purposes Highway access to the airport is subject to traffic flow constraints at the junction of the highway and airport access road; these constraints are being remedied as part of the new runway proposal The area around the airport has been identified as having impaired air quality both nitrogen oxide and particulate levels already being in excess of recommended maximum levels The valuation date is 1 June 2022; that is the date when the airport authority took entry onto the subject land
The basis and approach to compensation The legal foundation for the assessment of compensation in the present case is based on an International Treaty The legal framework provides that compensation for this type of acquisition is based upon the market value of the relevant interest in land Market Value is defined by the European Valuation Standards I have prepared my valuation of the subject land on this basis as shown in detail in Appendix XX In summary, my valuation of the land being acquired, on the required legal basis, i.e. market value as at the relevant valuation date, is 2.4 million (2x agricultural value)
The European Valuation Standards (EVS) (9thEdition 2020) define market value in the following terms (EVS1): The estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller acting independently of each other after proper marketing wherein the parties had each acted knowledgeably, prudently and without being under compulsion. This definition of market value necessarily incorporates the concept of highest and best use albeit in this instance ignoring the value to the acquiring authority Market Value
The European Valuation Standards set out the following (at para 4.3.4): The concept of 'highest and best use' (HABU) is integral to Market Value and is the use of a property that is physically possible, reasonably probable, legal or likely to become so, and that results in the highest value of the property at the date of valuation. I have provided more detailed consideration of these four key principles in Appendix XX of my report In summary, my opinion of value is based on the application of HABU to the particular circumstances of this case regard being had to the no scheme world assumptions Highest and best use (in a no scheme world)
The European Valuation Standards sets out three main approaches to value: approaches to assessment of (a) the market approach (b) the income approach (c) the cost approach value In the case of the subject land, in my opinion, neither the income approach or the cost approach can produce a reliable estimate of the market value of the land
The EVS sets out the following: In the Market Approach, the valuation is produced by comparing the property with the evidence obtained from market transactions that fulfil the criteria for the relevant basis of value and property type. My approach is to adopt the market value of the land on the basis of its development potential, so called hope value having regard to prices paid for strategic land/hope value assets as shown in my Schedule of Comparables at Appendix XX - a market value approach reflecting significant uncertainty as to (i) planning - land being identified as essential open space (ii) access and environmental constraints (iii) need for third party land to overcome access issue (iv) evidence of purchase price (13 years ago) when a premium of agricultural value was paid EVS guidance
My valuation approach in outline Starting with the agreed agricultural value of Euro 1.2 million, I consider how much any additional value a (hypothetical) willing buyer would be prepared to pay for the land without current planning permission (or zoning designation), taking into account that we are also to assume a willing seller (i.e. neither party acting under compulsion), at the valuation date Ms Planner s report (on behalf of my client) sets out the significant issues which militate against permission being secured for a rail linked logistics development (understood to be the claimant s favoured aspiration) or indeed any other commercial development at this location. Access and environmental constraints also pertain. Thus in my view a premium to exisiting (agricultural value) is applicable as it was at the sate of acquisition in 2009. This is sometimes referred to as a bottom up approach (ag value +) as opposed to top down full development value discounted being the basis applied by the claimant s valuer. Whilst in some cases it may sometimes be appropriate to arrive at a value based on a top down approach in the case of the subject land, my opinion is that due to constraints applying it is unsustainable. The market would be too risk averse The circumstances which applied in 2009 have improved and are in fact less favourable than when purchased by the claimant. The lack of any market transactions involving similar designated open space land in proximity to the airport at anything in excess of a modest enhancement to exisiting use value is highly persuasive.
My valuation (conclusions) Whilst the subject land may be considered to have some distant potential for development it would not, at the valuation date, have been anything like sufficent to overcome the open space designation That being the case, it is my opinion that the willing buyer would be prepared to pay a 100% (2x) premium of the agricultural value at the valuation date The sum of 2.4m This valuation approach is in line with several decided cases at expert Tribunals (as detailed in my evidence) involving hope value land.
Critique of the claimant s valuer s valuation Mr Sanderson s view that there is significant hope value (approaching full development value) in the subject land is an unsubstantiated opinion which is contrary to the evidence from the purchase and fails to reflect adverse market sentiment in respect of risk including the very significant costs in respect of pursuing a planning application. In my opinion, the protected green belt designation and lack of planning policy support means it is wholly unrealistic to adopt such value. The level of risk and uncertainty is such and the acquiring authorities planning evidence clearly shows that permission for such development would be extremely unlikely to be obtained
I have provided the required Statement of Truth and appropriate Declaration in the attached Appendices confirming my understanding of the role of an expert witness in these proceedings The duty of an expert witness My primary duty is to assist the Tribunal in determining the open market value of the subject land as at the relevant valuation date as the basis for the payment of fair compensation for the compulsory acquisition of the freehold interest in the land being taken
I have stated my opinion of the market value of the subject land and the basis on which it has been provided It is vital to ensure that the claimants in this case receive their proper entitlement to compensation for the land that is being taken from them conclusion My valuation reflects what, in my experience and based on the evidence I have put forward is the price that would be agreed between a willing seller and a willing buyer for the subject land I would be pleased to provide any further information that the Tribunal might find helpful
