NOTES TO THE FINANCIAL STATEMENTS
22 Determination of fair values of investment properties and investment properties under development (Cont’d)
Level 3 fair values
The reconciliation of investment properties and investment properties under development from the beginning
balances to the ending balances for Level 3 fair valuemeasurements are shown in Note 4 and Note 5, respectively.
The following table shows the key unobservable inputs used in the valuation model:
Type
Key unobservable inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Investment properties & Investment properties under development
Discounted cash flow approach
and Capitalisation approach
Industrial properties for leasing
when comparable prices per
square metre for comparable
buildings and leases are not
available
• Market rental growth of
2.00% to 3.50%
• Risk-adjusted discount rates
from 8.00% to 8.25%
• Capitalisation rates from
6.25% to 8.00%
The estimated fair value would
increase/(decrease) if:
• expected market rental growth
were higher/(lower); or
• the risk-adjusted discount rate
were lower/(higher).
Key unobservable inputs correspond to:
•
Capitalisation rates derived from specialised publications from the industrial market and recent sales in
the industrial sector.
•
Discount rates, based on the risk-free rate for 10-year bonds issued by the Singapore government,
adjusted for a risk premium to reflect the increased risk of investing in the asset class.
CAMBRIDGE INDUSTRIAL TRUST | ANNUAL REPORT 2014
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