Annual Report 2025 193 Notes to the Financial Statements 31 December 2025 (b) Level 2 fair value measurements The following is a description of the valuation techniques and inputs used in the fair value measurement for assets and liabilities that are categorised within Level 2 of the fair value hierarchy: Derivatives The fair value of interest rate swaps, forward contracts and cross currency swaps are based on valuations provided by the financial institutions that are the counterparties of the transactions. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date. (c) Level 3 fair value measurements (i) Information about significant unobservable inputs used in Level 3 fair value measurement Investment properties and investment properties under development Investment properties and investment properties under development are stated at fair value based on valuations by independent professional valuers. The independent professional valuers have appropriate recognised professional qualifications and recent experience in the location and category of the properties being valued. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The independent professional valuers have considered valuation techniques including direct comparison method, capitalisation approach, discounted cash flows and residual land value method in arriving at the open market value as at the reporting date. These valuation methods involve certain estimates. The Manager has exercised its judgement and is satisfied that the valuation methods and estimates are reflective of the current market conditions. In 2025, for certain investment properties in Singapore, there is a change in valuation technique to capitalisation approach and discounted cash flow method (2024 : capitalisation approach, discounted cash flow method and direct comparison method) due to change in valuer. The direct comparison method involves the analysis of comparable sales of similar properties and adjusting the sale prices to that reflective of the investment properties. The capitalisation approach capitalises an income stream into a present value using a market-corroborated capitalisation rate. The discounted cash flows method involves the estimation of an income stream over a period and discounting the income stream with an expected internal rate of return and terminal yield. The residual land value method involves deducting the total gross development costs and the developer’s profit from the gross development value to arrive at the residual land value. The fair value of investment properties of the Group and the Trust was $18,202.4 million (2024: $16,758.4 million) and $10,669.2 million (2024 : $10,004.0 million) respectively. The fair value of investment properties under development of the Group and the Trust was $416.6 million (2024 : $268.7 million) and $147.6 million (2024 : $144.4 million) as at 31 December 2025 respectively. The above fair value has been classified as a Level 3 fair value based on the inputs to the valuation techniques used. 29. Fair Value Measurement (continued)
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