ESR AR 2019 EN

Notes to the Consolidated Financial Statements 31 December 2019 187 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ESR Annual Report 2019 19. INVESTMENT PROPERTIES (continued) (d) Fair value hierarchy (continued) The movement in fair value measurements within Level 3 during the years ended 31 December 2019 and 2018 are as follows: 2019 2018 USD’000 USD’000 At 1 January 1,865,300 1,052,997 Additions 333,437 51,888 Acquisition of subsidiaries 774,535 493,658 Changes in fair value of investment properties 192,178 151,271 Transfer from Level 2 to Level 3 20,202 176,952 Reclassification to asset held for sale (83,519) – Disposal of subsidiaries (276,711) (514) Disposal (231,110) – Exchange realignment (41,475) (60,952) 2,552,837 1,865,300 The valuation of investment properties categorised within Level 2 of the fair value hierarchy are based on comparable market transactions that consider sales of similar properties that have been transacted in the open market. Below is a summary of the valuation techniques used and the key unobservable inputs to the valuation of investment properties categorised within Level 3 of the fair value hierarchy: Investment property details Valuation technique Key unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Warehouse properties Income capitalisation Capitalisation rate: The PRC: 5.25% to 6.50% (2018: 6.15% to 7.10%) Japan: 4.20% to 4.50% (2018: 4.10% to 5.00%) Australia: 5.25% to 7.75% (2018: Nil) The estimated fair value varies inversely against the capitalisation rate Discounted cash flow Discount rate: The PRC: 8.5% to 9.0% (2018: 8.5% to 9.0%) Japan: 3.90% to 4.50% (2018: 4.00%) Australia: 5.75% to 8.00% (2018: Nil) The estimated fair value varies inversely against the discount rate Terminal capitalisation rate: The PRC: 5.25% to 6.50% (2018: 6.15% to 7.10%) Japan: 4.20% to 4.50% (2018: 4.10% to 5.00% Australia: 5.25% to 7.75% (2018: Nil) The estimated fair value varies inversely against the terminal capitalisation rate