/ 1 4 9
NOTES TO THE FINANCIAL STATEMENTS
C A M B R I D G E I N D U S T R I A L T R U S T
A N N U A L R E P O R T 2 0 1 5
21.
Determination of fair values of investment properties (Cont’d)
Level 3 fair values
The reconciliation of investment properties for the financial year for Level 3 fair value measurements is shown in
Note 4.
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
Discounted cash flow approach
and capitalisation approach
• Market rental growth of
3.00% to 4.00% per annum
• Risk-adjusted discount rates
from 8.00% to 8.25%
• Capitalisation rates from
5.75% to 7.50%
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.
22.
Acquisition of subsidiary
In March 2015, the Trust incorporated a wholly owned subsidiary, Cambridge SPV2 Pte. Ltd. (“CSPV2”) with a
capital of $1. The Trust, together with CSPV2, increased its equity interest in Cambridge SPV1 LLP (“CSPV1”)
from 60% to 100% by acquiring the remaining 40% partnership interest in CSPV1 from Oxley Projects Pte. Ltd.,
an interested party to the Trust (“Cambridge LLP Acquisition”). CSPV1 became a wholly owned entity of the Trust
and its accounts are consolidated upon completion of the Cambridge LLP Acquisition in March 2015.
In the nine-months to 31 December 2015, CSPV1 contributed revenue of $2.0 million and total return of $1.2 million
of the Group’s results. If the acquisition had occurred on 1 January 2015, the Manager estimates that consolidated
gross revenue would have been $112.8 million and total return for the year would have been $52.7 million.
The previously held equity interest was at fair value as the investment property owned by CSPV1 was stated at
fair value. Accordingly, there was no resulting gain or loss recognised in profit or loss arising from the valuation
of the interest held before CSPV1 became a subsidiary.
