Annual Report 2019

191 Transport International Holdings Limited 2019 Annual Report Notes to the Financial Statements 13 Investment properties, investment property under development, interest in leasehold land and other property, plant and equipment (continued) (c) Fair value measurement of properties (continued) (ii) Information about Level 3 fair value disclosures Valuation techniques Unobservable inputs Range Investment properties in Hong Kong – commercial properties Market comparison approach Discount/premium on quality of shops -60% to -25% (2018: -50% to 15%) Investment property in Hong Kong – industrial property Market comparison and residual valuation approaches Discount/premium on quality of redevelopment -50% to -10% (2018: -30% to 75%) Investment property under development in Hong Kong Market comparison and residual valuation approaches Discount/premium on quality of redevelopment -45% to 25% (2018: -30% to 10%) The Group adopted a market comparison approach for all its commercial properties in Hong Kong for the years ended 31 December 2019 and 2018. The fair value of commercial properties using a market comparison approach is determined by reference to the recent sales price of comparable properties on a price per square foot basis, adjusted for a premium or a discount specific to the quality of the Group’s commercial properties compared to recent sales. Higher premiums for higher quality buildings will result in a higher fair value measurement. The fair value of the industrial property in Hong Kong, taking into account its future redevelopment value, is determined using market comparison and residual valuation approaches. The market comparison approach determines the fair value of the gross development value with reference to recent transaction data of nearby projects, adjusted for a premium or a discount specific to the quality of the Group’s industrial property compared to the recent transactions. The residual valuation approach is a modification of an income approach based on discounted cash flows, making reference to the development potential of the Group’s industrial property after deduction of costs for completion of the development. The valuation relies upon a series of assumptions which produce an estimation of the expected current market value of the industrial property held for development or redevelopment. These assumptions include the statutory and non-statutory restrictions associated with development that may be imposed by the government. Comparable transactions of similar developments in the locality were gathered for gross development value assessment. A higher premium for higher quality redevelopment will result in a higher gross development value. The redevelopment of industrial property is considered as its highest and best use under HKFRS 13.