33 FAIR VALUE OF ASSETS AND LIABILITIES
(continued)
(c) Level 3 fair value measurements
(continued)
(ii) Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in measuring Level 2 and
Level 3 fair values, as well as the significant unobservable inputs used.
Type
Valuation technique
Significant
unobservable inputs
Inter-relationship
between key
unobservable inputs
and fair value
measurement
Serviced residence
properties
Discounted cash flows:
The valuation model
considers the present
value of net cash flows
to be generated from
the property, taking into
account expected rental
growth rate and
occupancy rate. The
expected net cash flows
are discounted using
risk-adjusted discount
rates. Among other
factors, the discount
rate estimation
considers the quality of
a building and its
location, tenant credit
quality and lease terms.
Group
• Discount rate:
4.60% – 15.00%
(2013: 4.60% –
15.00%)
• Terminal capitalisation
rate:
3.25% – 9.50% (2013:
3.25% – 10.00%)
Trust
• Discount rate:
5.75% – 8.00% (2013:
5.75% – 8.00%)
• Terminal capitalisation
rate:
3.25% – 5.50% (2013:
3.25% – 5.50%)
The estimated fair
value would increase
(decrease) if:
• the discount rate
were lower
(higher); or
• the terminal
capitalisation rate
were lower
(higher).
Assets held for
sale
Direct comparison and
income capitalisation
approaches: The direct
comparison approach is
used by making
reference to comparable
sales and asking prices
of similar properties in
the relevant market, with
adjustments made to
differentiate the
comparables in terms of
location, area, quality
and other relevant
matters. The income
capitalisation approach
is used by capitalising
the income potential.
Group
• Capitalisation rate:
4.25% (2013: 5.00%)
• Direct comparison –
price/sqm:
$8,656/sqm (2013:
$8,534/sqm)
The estimated fair
value would increase
(decrease) if:
• the terminal
capitalisation rate
were lower
(higher).
Notes to the Financial Statements
Year ended 31 December 2014
200 | Ascott Residence Trust Annual Report 2014
