Notes to The
Financial Statements
Year ended 31 December 2015
4 Investment properties
Group
Trust
2015
2014
2015
2014
$’000
$’000
$’000
$’000
At 1 January
1,500,610
1,483,820
1,053,600
1,021,400
Acquisition of investment properties
95,272
78,442
–
–
Acquisition related costs
1,180
3,637
–
–
Disposal of investment properties
–
(73,803)
–
–
Capital expenditure
6,041
5,059
4,829
3,598
Translation difference
26,471
(41,596)
–
–
1,629,574
1,455,559
1,058,429
1,024,998
Net change in fair value of investment properties
5,734
45,051
(21,029)
28,602
At 31 December
1,635,308
1,500,610
1,037,400
1,053,600
Determination of fair value
Investment properties are stated at fair value based on valuations as at 31 December 2015 performed by
independent professional valuers having appropriate recognised professional qualification and experience in the
location and category of property being valued.
In determining the fair value, the valuers have used valuation methods which involved certain estimates. In relying
on the valuation reports, the Manager is of the view that the valuation methods and estimates are reflective of the
current market conditions.
The fair values are based on open market values, being the estimated amount for which a property could be
exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction
after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
The independent professional valuers have considered valuation techniques including direct income, cost,
discounted cash flow, and direct comparison approach in arriving at the open market value as at the reporting
date. The key assumptions used to determine the fair value of investment properties include market-corroborated
capitalisation yield, terminal yield, discount rate and average growth rate.
The direct income approach capitalises an income stream into a present value using revenue multipliers or single-
year capitalisation rates. The discounted cash flow approach involves the estimation and projection of an income
stream over a period and discounting the income stream with an appropriate rate of return. The cost approach
involves the estimation of the replacement cost of improvements and the market value of the land. The direct
comparison approach involves the analysis of recent recorded transactions of comparable properties in the vicinity
after making the necessary adjustments where appropriate for differences.
Valuation processes applied by the Group and Trust
As explained under note 3.3, valuation of investment properties is performed in accordance with the Trust Deed. In
assessing the fair value measurements, the Manager reviews the valuation methodologies and evaluates the
assessments made by the valuers.
110
ParkwayLife REIT
Annual Report 2015
