Notes to The
Financial Statements
Year ended 31 December 2015
4 Investment properties (Cont’d)
Determination of fair value (cont’d)
Fair value hierarchy
The table below analyses the fair value measurement for investment properties of the Group and the Trust that
have been categorised as Level 3 fair values based on inputs to the valuation technique used.
Level 3
$’000
31 December 2015
Group
Investment properties
1,635,308
Trust
Investment properties
1,037,400
31 December 2014
Group
Investment properties
1,500,610
Trust
Investment properties
1,053,600
The following table shows the key unobservable inputs used in the valuation model:
Type
Key unobservable inputs
Inter-relationship between key
unobservable inputs and fair value
measurement
Investment properties
Discounted cash
flow approach
and capitalisation
approach
•
Risk-adjusted discount rates
range from
5.1% to 7.8%
(2014: 5.3% to 8.0%).
•
Capitalisation rates range from
4.5% to 7.4%
(2014: 5.0% to 7.9%).
•
Terminal yield rates range from
5.4% to 7.5%
(2014: 5.6% to 8.0%).
The estimated fair value would
increase/(decrease) if:
•
the risk-adjusted discount rates
were lower/(higher);
•
the capitalisation rates were
lower/(higher); or
•
the terminal yield rates were
lower/(higher).
Key unobservable inputs
Key unobservable inputs correspond to:
•
Capitalisation rate corresponds to a rate of return on investment properties on the expected income that
the property will generate.
•
Discount rates, based on the risk-free rate for bonds issued by government in the relevant market, adjusted
for a risk premium to reflect the increased risk of investing in the asset class.
•
Terminal yield rate is the estimated capitalisation rate at maturity of the holding period.
111
ParkwayLife REIT
Annual Report 2015
