4 INVESTMENT PROPERTIES
Group and Trust
2014
2013
$’000
$’000
At 1 January
1,211,430 1,130,943
Purchase of investment properties
54,908
67,965
Capital expenditure on investment properties
1,216
81
Net change in fair value of investment properties
(7,501)
12,441
At 31 December
1,260,053
1,211,430
Security
As at 31 December 2014, investment properties of the Group and the Trust with an aggregate carrying
amount of $931,153,000 (2013: $1,034,074,000) are pledged as security to secure certain borrowing
facilities (see Note 10).
Subsequent to 31 December 2014, investments properties of the Group and the Trust with an aggregate
amount of $720,553,000 remain secured under certain borrowing facilities (see Note 10).
Measurement of fair value
Investment properties are stated at fair value based on valuations performed by independent professional
valuers having appropriate recognised professional qualifications and recent experience in the location
and category of property being valued. 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 willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably
prudently and without compulsion.
In determining the fair value, the valuer has used valuation techniques which involve certain estimates.
In relying on the valuation reports, the Manager has exercised its judgement and is satisfied that the
valuation methods and estimates are reflective of current market conditions. The valuation reports are
prepared in accordance with recognised appraisal and valuation standards. The estimates underlying
the valuation techniques in the next financial year may differ from current estimates, which may result in
valuations that may be materially different from the valuations as at the reporting date.
The valuer has considered the capitalisation approach and/or discounted cash flow method in arriving at
the open market value as at the reporting date. The capitalisation approach capitalises an income stream
into a present value using single-year capitalisation rates. The income stream used is adjusted to market
rentals currently being achieved within comparable investment properties and recent leasing transactions
achieved within the investment properties. The discounted cash flow method involves the estimation and
projection of an income stream over a period and discounting the income stream with an internal rate
of return (“Discount Rate”) to arrive at the market value. The discounted cash flow method requires the
valuer to assume a rental growth rate indicative of market and the selection of a Discount Rate consistent
with current market requirements.
Year ended 31 December 2014
NOTES TO THE FINANCIAL STATEMENTS
SABANA REIT
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ANNUAL REPORT 2014
113
