NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2023 4. INVESTMENT PROPERTIES (continued) The fair values are based on open 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 wherein the parties had each acted knowledgeably and without compulsion. The fair value measurement for all of the investment properties of $4.5 million (2022: $4.9 billion) has been categorised as a Level 3 fair value based on the inputs to the valuation technique used (see Note 2(d)). 2023 2022 $’000 $’000 Fair value of investment properties (based on valuation reports) 4,543,213 4,904,326 Add: Carrying amount of lease liabilities – 5,051 Carrying amount of investment properties 4,543,213 4,909,377 The valuers have considered valuation techniques including the markets comparable, capitalisation and discounted cash flows approaches in arriving at the open market value as at the reporting date. The market comparable approach involves the analysis of comparable sales of similar properties and adjusting the sale prices to that reflective of the investment property. The capitalisation approach is an investment approach whereby the estimated gross passing income (on both passing and market rent bases) is adjusted to reflect anticipated operating costs to produce a net income on a fully leased basis. The adopted fully leased net income is capitalised over the remaining term of the lease from the valuation date at an appropriate capitalisation rate. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with risk adjusted discount rates to arrive at the market value. Fair value of the investment properties were based on independent professional full valuations carried out by the following valuers on the dates stated below: Valuers Valuation Date Valuation Date CBRE (Shanghai) Management Limited 31 December 2023 31 December 2022 Cushman & Wakefield International Property Advisers (Shanghai) Co., Ltd. 31 December 2023 31 December 2022 Jones Lang LaSalle Corporate Appraisal and Advisory Limited 31 December 2023 31 December 2022 The valuation reports obtained from one of the independent valuers for our assets draw attention to material valuation uncertainty clause as China’s economic growth remained underwhelming, coupled with financial issues of a number of mainland China’s largest developers which struggled to meet or defaulted on their financial obligations. There will be less certainty as to how long the valuation may sustain and property prices may fluctuate over a short period of time, therefore a higher degree of caution should be attached to the valuations when making investment decisions. This clause does not invalidate the valuations, but implies that there is substantially more uncertainty than under normal market conditions. Investment properties comprise retail, business parks and logistics parks properties that are held mainly for use by tenants under operating leases. Most leases contain an initial non-cancellable period of within 1 to 3 years (2022: within 1 to 3 years). See Note 13 for further information. Contingent rents, representing income based on certain sales achieved by tenants, recognised in the statement of total return during the year amounted to $6.9 million (2022: $4.5 million). ANNUAL REPORT 2023 183 Financials Framework Portfolio Performance Leadership Overview
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