ESR Group Limited Annual Report 2022 Notes to the Consolidated Financial Statements 31 December 2022 183 18. INVESTMENT PROPERTIES (continued) (d) Fair value hierarchy (continued) The movement in fair value measurements within Level 3 during the years ended 31 December 2022 and 2021 are as follows: 2022 2021 US$’000 US$’000 At 1 January 3,250,778 2,550,909 Additions 258,701 523,817 Acquisition of subsidiaries 44,941 226,364 Changes in fair value of investment properties 178,232 211,414 Transfer from Level 2 to Level 3 153,438 3,702 Reclassification to assets held for sale (239,902) — Disposal of subsidiaries (720,435) (259,895) Disposal — — Exchange realignment (301,544) (5,533) At 31 December 2,624,209 3,250,778 The valuation of investment properties categorised within Level 2 of the fair value hierarchy is based on comparable market transactions for which the Group considers sales of similar properties that have been transacted in the open market. Below is a summary of the valuation techniques used and the key unobservable inputs to the valuation of investment properties categorised within Level 3 of the fair value hierarchy: Investment property details Valuation technique Key unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Warehouse Income capitalisation Capitalisation rate: The estimated fair value varies inversely against the capitalisation rate properties China: 5.40% to 6.85% (2021: 5.00% to 6.25%) Japan: 3.80% to 5.10% (2021: 3.90% to 5.60%) Hong Kong: 3.00% (2021: 3.00%) India: 7.75% (2021: 8.00%) Discounted cash flows Discount rate: The estimated fair value varies inversely against the discount rate China: 7.75% to 9.00% (2021: 8.00% to 9.25%) Japan: 3.80% to 5.00% (2021: 3.70% to 6.00%) Hong Kong: 7.00% (2021: 7.00%) India: 9.83% to 13.85% (2021: 12.85% to 13.70%) Terminal capitalisation rate: The estimated fair value varies inversely against the terminal capitalisation rate China: 4.75% to 6.25% (2021: 5.00% to 6.25%) Japan: 3.90% to 5.50% (2021: 4.00% to 5.50%) Hong Kong: 3.00% (2021: 3.00%) India: 7.50% (2021: 8.00%) STRATEGIC REPORT FINANCIAL STATEMENT CORPORATE GOVERNANCE
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