Fraser & Neave Holdings Bhd Annual Report 2021

5. INVESTMENT PROPERTIES #CONTINUED$ FAIR VALUE INFORMATION #CONTINUED$ 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. Significant unobservable inputs Range and rate Properties Valuation technique 2021 2020 Commercial property Investment approach: The valuation method considers the present value of net cash flows to be generated from the property, taking into account estimated rental value per square feet per month, capitalisation rate, void factor, capital expenditure reserve per square feet, discount factor, market interruption (if any) and other costs not paid by tenants. Estimated rental value per square feet per month (RM) – 1 st to 5 th year 4.00-5.50 4.00-5.50 – 6 th year onwards 4.00-5.50 4.00-5.50 Capitalisation rate – 6 th year onwards 7.25% 7.25% Void factor – 1 st to 5 th year 50% 50% – 6 th year onwards 12.50% 12.50% Capital expenditure reserve per square feet (RM) 1.00 1.00 Discount factor – 1 st to 5 th year 7.00% 7.00% – 6 th year onwards 7.25% 7.25% Market interruption 20.00% 20.00% Car park Direct comparison approach: The valuation method considers the sales of comparable or substitute properties are adjusted for di!erences in key attributes such as property size. The most significant input into this valuation approach is price per square foot 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. Valuation processes applied by the Group for Level 3 fair value The fair values of investment properties are based on valuation performed by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. The valuation company provides the fair value of the Group’s investment property portfolio annually. Changes in Level 3 fair values are analysed by the management annually after obtaining valuation report from the valuation company. Highest and best use The Group’s investment properties comprise o&ce building and car park which represented the highest and best use of the properties as they are on prime land in the city centre. Financial Statements 197 Fraser & Neave Holdings Bhd ! Annual Report 2021