HAW PAR CORPORATION LIMITED
78
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
For the financial year ended 31 December 2014
10. INVESTMENT PROPERTIES
(CONTINUED)
Fair value changes of investment properties amounted to gains of $3,075,000 (2013: $10,664,000). These fair
value changes are non-cash in nature.
The following amounts are recognised in profit or loss:
The Group
2014
$’000
2013
$’000
Rental income (Note 3)
16,387
17,197
Direct operating expenses arising from investment properties
that generated rental income
(4,882)
(4,757)
Certain investment properties valued at approximately $178,100,000 (2013: $175,100,000) are pledged to the
banks as security for bank credit facilities (Note 19).
Fair value hierarchy
The following table illustrates the fair value measurement hierarchy of the Group’s investment properties:
Fair value measurements using
Quoted prices
in active
markets
Significant
observable
inputs
Significant
unobservable
inputs
Description
(Level 1)
(Level 2)
(Level 3)
Total
$’000
$’000
$’000
$’000
Recurring fair value measurement for:
31 December 2014
Commercial properties
–
–
148,435
148,435
Industrial properties
–
9,514
67,300
76,814
Total
–
9,514
215,735
225,249
31 December 2013
Commercial properties
–
38,291
107,800
146,091
Industrial properties
–
8,748
67,300
76,048
Total
–
47,039
175,100
222,139
Level 2 fair values of the Group’s properties have been generally derived using the investment method cross referenced
with the direct sales comparison approach, where there have been recent transactions of similar properties in similar
locations in an active market. The cross reference revealed no significant variation in valuation. The most significant
input into the direct sales comparison approach is selling price per square metre. Level 3 fair values of the Group’s
properties have been derived using the income capitalisation approach which the valuers have also cross referenced
with that obtained under the sales comparison approach. Sales prices of comparable properties in close proximity
are adjusted for differences in key attributes such as property size, age, tenure, condition of buildings, availability
of carparking facilities, dates of transaction and prevailing market conditions. The most significant input into the
income capitalisation valuation approach is capitalisation rate.
Under Level 3 fair value measurement, the fair value of the investment properties was calculated using a capitalisation
rate ranging from 5.25% to 7% (2013: 5.3% to 6.25%) for commercial properties and 7% (2013: 7%) for Industrial
properties. An increase in capitalisation rate will result in a decrease to the fair value of an investment property.
