The investment properties were fair valued by Cabinet Razafindratandra, an independent professionally qualified valuer. The fair value was determined based on the replacement cost method whereby the valuation of the properties is discounted based on the future evolution of the zone in which the properties are found, the surrounding constructions access to infrastructure and the topography of the land.
(a) Valuation inputs and relationships to fair value
| Valuation model | Replacement Cost |
| Unobservable inputs | Obsolescence Rate/ Unobservable sale price per square meter |
| Range of inputs | 4.28% to 31.24% (2021: 6.02% to 53.22%) |
(b) Sensitivity analysis
A 5% increase or decrease in the obsolescence rate would lead to a decrease/increase of MUR11.7M (2021: MUR10.6M) in the fair value of investment properties.
(a) The investment properties of Ferney Limited (“FL”) comprise sugarcane land and agricultural land held for rental purposes as well as land earmarked for the Ferney Integrated Development Project under a Smart City Scheme developed through Ferney Development Limited (“FDL”). These lands were valued by CDDS Land Surveyors and Property Valuer, an independent and professionally qualified valuer, as at 30 June 2021. The valuation of land was derived using the residual approach and sales comparison approach by reference to land transactions in the vicinity.
(b) Ferney Integrated Development Project: On 17 November 2020, the Economic Development Board issued a letter of intent to FDL pursuant to Regulation 9(3) of the SCS Regulations. The letter of intent is issued on the basis that FDL will develop a Smart City Project based on five pillars - Sustainability, Agri-Hub, Nature and Science Economy, Eco-Tourism, of an extent of 500 Hectares under the Smart City Scheme (the “Scheme”).
(c) The land (the “earmarked land”) that has been earmarked for the purposes of carrying out the smart city development is currently owned by FL: the extent of the earmarked land is 500 Hectares so that a change in the ownership of the earmarked land from FL to FDL is required to enable FDL to develop the earmarked land in accordance with the Investment Promotion (Smart City Scheme) Regulations 2015. The earmarked land was previously valued at MUR0.6M per acre and the objective is to revalue the land based on the Smart City project. In May 2022, Ferney Development Ltd obtained its smart city certificate from the Economic Development Board.
(d) Basis of valuation of the earmarked land: The residual method of valuation is to estimate the possible revenue of the developable land and assuming all Smart City permits are granted net of all the costs of developing the entire Smart City, mostly being the cost of construction of the buildings and services, to end up with a value of bare developable land.
(e) In the year ended 30 June 2021, the earmarked land had been valued at MUR 1,576M giving rise to a fair value increase of MUR 942M. This represented an average estimated price per acre is MUR 1.5M. There has been no further increase/decrease in the valuation of investment property in the year ended 30 June 2022 following the desktop review done in 2022.
(f) The investment properties are classified as level 3 on the fair value hierarchy.
(g) The following table summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurements.
| Fair value at | Range of inputs | |||||
|---|---|---|---|---|---|---|
| Description | 2022 MUR '000 |
2021 MUR '000 |
Unobservable inputs | 2022 % |
2021 % |
Relationship of unobservable inputs to fair value |
| Smart City | 1,911,549 | 1,576,610 | Capitalisation rate | 1% - 9% | 1% - 9% | The higher the capitalisation rate and expected vacancy rate, the lower the fair value |
| Expected vacancy rate | 0% - 7.5% | 0% - 7.5% | ||||
| Remaining land | 774,288 | 810,979 | Years purchase | 3% - 5% | 3% - 5% | The higher the capitalisation rate and expected vacancy rate, the lower the fair value |
| Expected vacancy rate | 5% | 5% | ||||
| Discount rate | 5% | 5% | The higher the discount rate and terminal yield, the lower the fair value | |||
| Terminal yield | 3% - 5% | 3% - 5% | ||||
| Rental growth rate | 6.70% | 6.70% | The higher the rental growth rate and terminal yield, the higher the fair value |
(i) There were no transfers between levels during the year.
(j) Sensitivity analysis A 1% increase/decrease in the capitalisation rate and years purchase rate would lead to a decrease/increase of MUR 97.2M/MUR 127.6M in the fair value of the investment properties.
| Fair Value MUR’ 000 |
Range MUR '000 |
|
|---|---|---|
| Price per hectare - land | 236,230 | 1.8 to 5.6 |
| Price per m2 - Building | 877,150 | 13 to 300 |
| Description | Fair value MUR ‘000 |
Valuation model | Unobservable inputs | Range of inputs | Relationship of unobservable inputs to fair value |
|---|---|---|---|---|---|
| - Industrial buildings / Manufacturing sites | 549,000 | Direct income approach | All risk yield | 8% | The higher the all risk yield, the higher the equated yield which leads to a lower fair value. The higher the vacancy rate, the lower the fair value. |
| Equated yield | 11.1% | ||||
| Vacancies | 5-12.5% | ||||
| - Office buildings | 557,140 | Sales comparison | Capitalisation rate Expected vacancy rate |
7.5% | The higher the capitalisation rate and expected vacancy rate, the lower the fair value |
| - Other buildings | 7,240 | Direct comparison | Years purchase (YP) to perpetuity | 6.25% | The higher the YP to perpetuity rate, the lower the fair value |
1% increase/decrease in the capital would lead to a decrease/increase of MUR 29.9M/MUR 32.0M in the fair value of the properties.
The investment properties are classified as level 3 on the fair value hierarchy. There was no transfer between levels during the year.
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