Notes to the Financial Statements For the financial year ended 31 December 2025 Notes to the Financial Statements For the financial year ended 31 December 2025 6 INVESTMENT PROPERTIES (continued) Contingent rental, based on tenants’ gross turnover rental, recognised in profit or loss amounted to $6.4 million (2024: $2.3 million). During the year, borrowing costs capitalised in investment properties under development amounted to $16.8 million (2024: $19.4 million).These borrowing costs were incurred at interest rates ranging from 3.75% to 7.31% (2024: 4.20% to 9.95%) per annum. Classification of investment properties In determining whether a property is classified as investment property or development property, the Group determines the business model of the property. There has been no transfer to or from investment properties during the year (2024: none). Measurement of fair value The fair value of investment properties is determined by external independent valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the properties being valued. The valuers have considered valuation techniques including the residual method, 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. The gross development value is derived based on valuation techniques above. Changes in fair values are recognised as gains/losses in profit or loss and included in other income. All gains/losses are unrealised. Fair value hierarchy As at 31 December 2025, the fair value measurement for the investment properties of $4,393.1 million (2024: $4,254.8 million) has been categorised as a Level 3 fair value based on the inputs to the valuation technique used (see Note 3.4). Level 3 fair values The Level 3 fair value table which shows a reconciliation from the opening to the ending balance is set out in the table above. 6 INVESTMENT PROPERTIES (continued) Valuation technique and significant unobservable inputs The following table shows the Group’s valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used. Type Valuation technique Significant unobservable inputs Inter-relationship between key unobservable input and fair value measurement Investment properties – Singapore Capitalisation approach • Capitalisation rate 4.25% – 6.25% (2024: 4.25% – 6.50%) The estimated fair value increases with decreases in the capitalisation rate. Investment properties – PRC Direct comparison • Average value of RMB8,200 – RMB28,300 (2024: RMB8,200 – RMB14,900) per square metre The estimated fair value increases with increases in average value of a similar class of assets. Discounted cash flow method • Discount rate 7.50% – 8.00% (2024: 8.00% – 8.25%) • Terminal yield rate 5.00% – 5.50% (2024: 5.00% – 5.50%) The estimated fair value increases with decreases in the discount rate and terminal yield rate. Capitalisation approach • Capitalisation rate 5.50% (2024: 5.50%) The estimated fair value increases with decreases in the capitalisation rate. Investment properties under development – PRC Capitalisation approach • Capitalisation rate 4.00% – 6.50% (2024: 4.00% – 6.50%) The estimated fair value increases with decreases in the capitalisation rate. Direct comparison • Average value of RMB13,000 – RMB51,000 (2024: RMB3,589 – RMB51,000) per square metre The estimated fair value increases with increases in average value of a similar class of assets. Security As at 31 December 2025, investment properties together with land use rights with a total carrying amount of $3,859.8 million (2024: $3,736.1 million) were pledged as security for loans and borrowings (see Note 12). OVERVIEW PERFORMANCE SUSTAINABILITY FINANCIALS APPENDIX 197 196 PERENNIAL HOLDINGS PRIVATE LIMITED ANNUAL REPORT 2025
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