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5 INVESTMENT PROPERTIES (CONT’D)
Measurement of fair value
Fair value hierarchy
The investment properties are stated at fair value based on valuations performed by independent professional valuers
(see Portfolio Statements). The fair values are based on 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 specific risks inherent in each of the properties are taken into consideration in arriving at the property valuation.
The valuation methods (see Portfolio Statements) used in determining the fair value involve certain estimates including
those relating to capitalisation rate, discount rate and terminal yield. In relying on the valuation reports, the H-REIT
Manager has exercised its judgement and is satisfied that the valuation methods and estimates used are reflective of
market conditions prevailing at the end of the financial year.
The fair value measurement for investment properties has been categorised as a Level 3 fair value based on the inputs
to the valuation technique used (see Note 2.4).
Valuation techniques and significant unobservable inputs
The following table shows the H-REIT Group’s and the Stapled Group’s valuation technique used in measuring the fair
value of investment property, as well as the significant unobservable inputs used.
Type
Valuation techniques
Unobservable input
2015
Range
2014
Range
Singapore
Discounted Cash flow/
Capitalisation
Discount rate
Terminal yield
Capitalisation rate
7.50%
5.50% - 6.50%
5.25% - 6.25%
7.75%
5.75% - 6.75%
5.50% - 6.50%
New Zealand
Discounted Cash flow/
Capitalisation/
Sales Comparison
Discount rate
Terminal yield
Capitalisation rate
11.00%
8.00%
7.75%
10.75%
8.25%
8.25%
Australia
Discounted Cash flow
Discount rate
Terminal yield
10.00%
8.00% - 8.50%
10.50%
8.50% - 9.00%
Maldives
Discounted Cash flow Discount rate
Terminal yield
13.50% - 13.75%
8.50% - 8.75%
11.50% -12.00%
9.50% - 10.00%
Inter-relationship between key unobservable inputs and fair value measurement
The significant unobservable inputs used in the fair value measurement of investment properties are discount rate,
terminal yield and capitalisation rate. Significant increases in discount rate, terminal yield and capitalisation rate in
isolation would result in a significantly lower fair value.
NOTES TO THE FINANCIAL STATEMENTS
