NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 5 INVESTMENT PROPERTIES (CONT’D) (e) Determination of fair value The fair values for a majority of the Group’s investment properties are determined by independent external valuers who have appropriate recognised professional qualifications and recent experience in the location and category of the investment properties being valued. The fair values of certain investment properties located in Singapore are based on in-house valuations conducted by a licensed valuer who is also an officer of the Company. The internal valuer has appropriate recognised professional qualifications and experience in the location and category of the investment properties being valued. The fair values of the investment properties were estimated using the discounted cash flow, income capitalisation, direct comparison, standardised land value adjustment and residual methods. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with an internal rate of return to arrive at the market value. The income capitalisation method capitalises an income stream into a present value using revenue multipliers or single-year capitalisation rates. The direct comparison method involves an analysis of comparable sales of similar properties and adjusting the transacted prices to those reflective of the investment properties of the Group. The standardised land value adjustment method considers the price of standard land in the current situation of development and utilisation, under normal market conditions within legal maximum use term as at a special date, that is assessed and approved by the local government. The residual method involves deducting the estimated cost to complete as of valuation date and other relevant costs from gross development value of the proposed development assuming satisfactory completion and accounting for developer’s profit. The fair value disclosure for the investment properties for the Group and the Company of $10,899,043,000 (2021 (restated): $10,966,900,000) and $1,820,028,000 (2021: $1,662,892,000) respectively has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used. 6 ASSETS HELD FOR SALE Group 2022 2021 $’000 $’000 Restated* Assets held for sale Property, plant and equipment 14,417 334,190 Investment properties – 53,837 Trade and other receivables – 68 Cash and cash equivalents – 631 14,417 388,726 Liabilities directly associated with the assets held for sale Trade and other payables – 412 Other liabilities – 425 Provision for taxation – 257 Deferred tax liabilities – 107 – 1,201 * Refer to Note 47 At 31 December 2022, assets held for sale relates to the proposed disposal by an indirect subsidiary of the Group, Millennium & Copthorne Hotels Limited (M&C), of Millennium Harvest House Boulder (which is in the hotel operations segment), to a third party for a sale consideration of $96.7 million. The sale is expected to be completed within the next one year. 5 INVESTMENT PROPERTIES (CONT’D) The key assumptions used in estimating the recoverable amounts are set out below: 2022 China UK Capitalisation rate N/A 5.6% to 9.0% Rental rate per bed N/A $290 Gross development value $119 million N/A Estimated cost to completion $22 million N/A Price per square metre (“psm”) $147 – $3,121 psm N/A 2021 Maldives Italy UK Occupancy rate 54.4% to 67.2% 75.0% to 81.0% N/A Average room rate growth 1.8% 2.7% N/A Discount rate 11.8% 5.3% to 6.3% N/A Terminal rates 8.8% 4.0% to 5.0% N/A Capitalisation rate 8.5% N/A 5.0% As at 31 December 2021, the forecasts under the discounted cash flow method covered a ten-year period, and cash flows beyond this period are extrapolated using a growth rate ranging between 1.2% and 2.0%, which was based upon the expected trading growth for each hotel and inflation in the country in which the property was located. Sensitivity analysis The Group’s impairment review is sensitive to changes in the key assumptions used. An increase in occupancy rate, average room rate growth, price psm or gross development value in isolation would result in a higher recoverable amount. An increase in discount rate, terminal rate, capitalisation rate or estimated cost to completion in isolation would result in a lower recoverable amount. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 162 163
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