12. INVESTMENT PROPERTIES (CONTINUED)
The key assumptions and inputs for the fair value calculations are as follows:
#(A) The growth rate for the base rent is based on 2.00% (2013: 2.00%) of the preceding 12 months base rent while
the variable rent is the amount equivalent to 0.75% to 2.00% (2013: 0.75% to 2.00%) of the tenant’s gross
revenue for the preceding calendar year, depending on the tenant’s gross revenue growth.
#(B) No terminal rate was used for the valuation of Siloam Sriwijaya whose agreement with the provincial government
only allows for a fixed lease period.
Note 1: The valuation of the South Korea property for 2014 and 2013 were based on the direct capitalisation method. The
direct capitalisation method is a valuation method used to convert a single year’s income expectancy into a value
estimate. The income used is the market rental of this property adjusted for operating expenses (net operating
income). An overall capitalisation rate of 9.75% (2013: 9.00%) is applied to the net operating income to arrive at
the fair value of the property. The overall capitalisation rate used takes into account the level of risk associated
with the property.
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2014
Indonesia
2014
Indonesia
2013
Singapore
2014
Singapore
2013
South Korea
2014
South Korea
2013
1.
Estimated discount rates
using pre-tax rates that
reflect current market
assessments at the risks
specific to the properties
9.64% to
9.80%
9.29% to
9.92%
8.25%
8.25%
Note 1
Note 1
2.
Growth rates based on
escalation rate in the lease
agreements
#(A)
#(A)
2.00%
2.00%
Note 1
Note 1
3.
Cash flow forecasts
derived from the most
recent financial budgets
approved by management
10 years
10 years
10 years
10 years
Note 1
Note 1
4.
Terminal rate #(B)
9.00% to
11.00%
9.00% to
11.00%
6.00% to
6.50%
6.00% to
6.50%
Note 1
Note 1
5.
Dates of valuations
1 Oct and
31 Oct
7 Nov
31 Oct
7 Nov
31 Oct
7 Nov
71
FIRST REIT
ANNUAL REPORT 2014
