Annual Report 2025 171 The following table shows the valuation techniques used in measuring Level 3 fair values of investment properties, as well as the significant unobservable inputs used. Valuation technique Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Discounted cash flow method: 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 and lease terms. Stapled Group • Discount rate: South East Asia and Australia: 5.91% –12.25% (2024: 5.56% – 10.30%) North Asia: 3.20% – 7.15% (2024: 3.20% – 7.12%) Europe and United Kingdom: 6.23% – 10.15% (2024: 4.68% – 8.95%) United States of America: 7.00% - 10.75% (2024: 9.00%) The estimated fair value would increase (decrease) if: • the discount rate was lower (higher); or • the terminal capitalisation rate was lower (higher). Stapled Group • Terminal capitalisation rate: South East Asia and Australia: 3.50% – 8.00% (2024: 3.75% – 7.50%) North Asia: 3.50% – 6.00% (2024: 3.70% – 6.25%) Europe and United Kingdom: 4.40% – 8.25% (2024: 3.75% – 7.50%) United States of America: 5.75% - 7.75% (2024: 6.75%) Direct capitalisation method: The valuation method considers the net present value of the expected future operating income of the property and dividing them by the capitalisation rate. This method is applied to the student accommodation properties which have relatively stable operating histories and expectations. Stapled Group • Capitalisation rate: United States of America: 5.00% – 6.00% (2024: 5.00% – 6.00%) The estimated fair value would increase (decrease) if the capitalisation rate was lower (higher). 4 Investment Properties (continued) Valuation technique and significant unobservable inputs (continued)
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