Project Overview
Client
Lessors & Lessees
Property Type
Infrastructure Including Toll Roads, Airports & Shipping Port Facilities
Reason for Service
Rental Assessments & Determinations
Preston Rowe Paterson was appointed as the independent determining valuer to resolve a market rent review dispute between Port Botany Operations Pty Ltd (NSW Ports) and Caltex Australia Petroleum Pty Ltd relating to a long-term sublease of strategically important port land at 1-3 Penrhyn Road, Port Botany, NSW.
The instruction required an independent determination of the Current Market Rent effective 1 January 2017 in accordance with the lease provisions, following substantially different rental assessments and valuation methodologies presented by the landlord and tenant.
Summary of Scope of Services
Our engagement involved:
- Reviewing the registered sublease and applicable market rent review provisions
- Considering the written valuation submissions presented by both parties
- Reviewing the relevant definition of Market Rent
- Analysing comparable leasing evidence within the Port Botany precinct
- Assessing site-specific factors including access, land configuration, location and relationships with surrounding port infrastructure
- Determining the appropriate valuation methodology
- Issuing an independent and binding Current Market Rent determination in accordance with the lease
The Challenge
The subject property comprised approximately 31,163m² of assessable land after exclusion of the lease-defined Canal Land area of 3,267m². The lease required determination of the Current Market Rent assuming the premises were vacant and available for immediate occupation, while disregarding tenant-funded improvements and incentives.
The dispute was not simply about the level of rent. It involved a fundamental disagreement regarding the appropriate valuation methodology.
Asset Overview:
The subject property comprised a strategically located bulk liquids terminal site at 1–3 Penrhyn Road, Port Botany, NSW.
The adopted assessable land area was approximately 31,163 square metres, following the exclusion of a 3,267-square-metre Canal Land area as defined under the lease. The valuation was required to assume that the premises were vacant and available for immediate occupation, while disregarding tenant-funded improvements and incentives.
As port-related industrial land, the property required consideration of specialised factors including:
- Access to the surrounding road network
- Internal port location
- Land configuration and shape
- Relationships with established port infrastructure
- The presence or absence of direct berth access
Valuation Methodology
NSW Ports relied on a direct rental comparison approach, using leased land transactions within the Port Botany precinct.
Caltex relied primarily on a capital value approach, analysing industrial land sales outside the port precinct and applying a 6% return to derive an annual ground rental.
Preston Rowe Paterson reviewed both methodologies and concluded that direct leasing evidence should be afforded greater weight where sufficient comparable rental transactions were available. The evidence considered included leasing transactions at Friendship Road, Bumborah Point Road and Simblist Road within Port Botany.
Preston Rowe Paterson Expertise
Preston Rowe Paterson applied independent valuation expertise to resolve a complex rental dispute involving specialised port and industrial land.
The determination demonstrated the firm’s ability to:
- Interpret and apply detailed lease-based market rent provisions
- Evaluate competing valuation methodologies and submissions
- Analyse specialised rental evidence within an active port environment
- Make appropriate adjustments for access, configuration, location and utility
- Provide a transparent and evidence-based determination
- Deliver an independent expert outcome in accordance with the lease
The assignment also highlighted the importance of using market evidence that most closely reflects the property characteristics contemplated by the lease. Where adequate comparable leasing transactions were available, direct rental evidence was preferred over a capital value methodology based on surrounding industrial land sales.
Approximately
31,163m²
Assessable land area
Approximately
3,267m²
Canal Land Area
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