216
PERENNIAL REAL ESTATE HOLDINGS LIMITED
Annual Report 2015
NOTES TO THE FINANCIAL STATEMENTS
5 INVESTMENT PROPERTIES
Group
31/12/2015
30/6/2014
$’000
$’000
At beginning of the period/year
–
–
Additions
117,267
–
Acquisitions (note 4)
2,051,712
–
Change in fair value
90,870
–
Translation differences
30,957
–
At end of the period/year
2,290,806
–
During the period, the Group acquired investment properties as part of the acquisition of Target Assets and the
considerations were satisfied by the issuance of ordinary shares (see note 4).
Contingent rental, representing income based sales turnover by the tenants, recognised in profit or loss amounted to
$5.8 million.
The investment properties comprise 4 completed commercial properties which are leased to third parties and 1 investment
property under development. The leases contain initial lease terms ranging from 1 year to 20 years. Subsequent renewals are
negotiated with the lessees.
During the period, borrowing costs capitalised in investment property under development amounted to $8.5 million.
These borrowing costs were incurred at interest rates of 2.31% – 6.38% per annum.
The fair value of investment properties of the Group as at 31 December 2015 are based on valuation as at
31 December 2015 carried out by external independent valuers, having appropriate recognised professional
qualifications and recent experience in the location and category of the properties being valued. 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 valuer has considered valuation techniques including the direct comparison method, capitalisation approach and
discounted cash flows method in arriving at the open market value as at the reporting date. The direct comparison
method involves the analysis of comparable sales of similar properties and adjusting the sales prices to that, reflective
of the investment properties. The capitalisation approach capitalises an income stream into a present value using
revenue multipliers or single-year capitalisation rates. 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 to arrive
at the market value.
In deriving residual method of valuation, the estimated gross development costs and developer’s profit are deducted
from the gross development value to arrive at the residual value of land. The gross development value is the estimated
value of the property assuming satisfactory completion of the development as at the date of the valuation.
Changes in fair values are recognised as gains in profit or loss and included in other income. All gains are unrealised.
