Fraser & Neave Holdings Bhd Annual Report 2020

179 06 financial statements ANNUAL REPORT 2020 Notes to The Financial Statements (Cont’d.) 5. INVESTMENT PROPERTIES (CONTINUED) Investment properties comprise commercial property and car park that are leased to third parties. Each of the lease contains an initial non-cancellable period of two to three years and subsequent renewals are negotiated with the lessee. No contingent rents are charged. The Group does not charge variable lease payments that do not depend on an index or rate. The following are recognised in profit or loss in respect of investment properties: Group 2020 RM’000 2019 RM’000 Lease income 337 402 Direct operating expenses – income generating investment properties (635) (714) – non-income generating investment properties (482) (535) FAIR VALUE INFORMATION Fair values of investment properties are categorised as follows: Group 2020 Level 3 RM’000 2019 Level 3 RM’000 Buildings 47,569 48,775 Level 3 fair value The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models. Range and rate Properties Valuation technique Significant unobservable inputs 2020 2019 Commercial property Investment approach Estimated rental value per square feet per month (RM) – 1st to 5th year 4.00-5.50 4.00-5.50 – 6th year onwards 4.00-5.50 4.00-5.50 Capitalisation rate – 6th year onwards 7.25% 7.25% Void factor – 1st to 5th year 50% 50% – 6th year onwards 12.50% 10% Capital expenditure reserve per square feet (RM) 1.00 1.00 Discount factor – 1st to 5th year 7.00% 7.00% – 6th year onwards 7.25% 7.25% Market interruption 20.00% – Car park Direct comparison approach Value per car park bay RM30,000 RM30,000 Increase/(Decrease) in estimated rental value would result in higher/(lower) fair value of the investment properties assuming if all other assumptions were held constant. Increases/(Decreases) in the capitalisation rate, void factor, capital expenditure reserve, discount factor and market interruption would result in lower/ (higher) fair value assuming if all other assumptions were held constant.