10.4 Reconciliation of the balance of recurring fair value measurement categorized within Level III of the fair value hierarchy

Change in the balance of investment property categorized within Level III of the fair value hierarchy 1 January - 31 December 2015 1 January - 31 December 2014
Opening balance 2,074,970 1,312,329
Acquisition 268,919 667,058
Reclassification from own property 2,942 33,964
Profits or losses disclosed in profit or loss as: 85,752 76,391
- net profit/loss on realization and impairment loss on investments - (693)
- net change in the fair value of assets and liabilities measured at fair value 85,752 77,084
Profits or losses recognized in other comprehensive income as "Reclassification of real property from property, plant and equipment to investment property" - 8,725
Reclassification to own property (29,644) -
Reclassification to assets held for sale (1,347,832) (10,786)
Disposal - (15,307)
Change in group composition - 3,481
Exchange differences (691) (885)
Closing balance 1,054,416 2,074,970
fair_value_6_pzu2015.xlsx

Property classified to Level III of the fair value

No. Name of the property Fair value as at 31 December 2015 Fair value as at 31 December 2014 Measurement approach Unobservable data Ranges of unobservable data As at 31 December 2015 Ranges of unobservable data As at 31 December 2014
1. Office complex, Wrocław 273,500 276,220 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Capitalization rate EUR 14.25 – 15.501) EUR 14.25 – 15.501)
2. Warehouse park, Bielany Wrocławskie 214,900 88,830 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Monthly rental rate per 1 m2 (warehouse space) Capitalization rate Construction costs EUR 7.50 – 9.00EUR 2.50 – 4.201)2) EUR 8.00 – 9.00EUR 2.40 – 4.201)2)
3. Office building, Warsaw 155,100 156,000 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Monthly rental rate (parking lot) Capitalization rate EUR 11.70 – 14.10 EUR 70.00 – 150.001) EUR 12.00 – 15.00 EUR 70.00 – 150.001)
4. Warehouse park under construction, Komorniki 118,900 101,190 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Monthly rental rate per 1 m2 (warehouse space) Capitalization rate Construction costs EUR 7.50 – 9.00EUR 2.50 – 4.001)2) EUR 8.50 – 9.00EUR 2.30 – 4.201)2)
5. Warehouse park under construction, Sosnowiec Pieńki 115,700 n/a Mixed approach with the use of the residual method Monthly rental rate per 1 m2 (office space ) Monthly rental rate per 1 m2 (warehouse space) Capitalization rate Construction costs EUR 7.50 – 9.00EUR 2.50 – 4.001)2) n/an/an/an/a
6. Office building, Warsaw 114,100 115,330 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Monthly rental rate (parking lot) Capitalization rate EUR 10.09 – 12.91 EUR 35.20 – 84.481) EUR 11.50 – 14.50 EUR 55.00 – 85.001)
7. Warehouse park under construction, Sosnowiec 37,160 n/a Mixed approach with the use of the residual method Monthly rental rate per 1 m2 (office space ) Monthly rental rate per 1 m2 (warehouse space)   Capitalization rate Construction costs EUR 7.50 – 9.00EUR 2.90 – 4.301)2) n/an/a n/an/a
8. Office building under construction, Wrocław 7,160 4,250 Income approach using the investment method and the income stream discounting technique Monthly rental rate per 1 m2 (office space ) Capitalization rate Construction costs EUR 11.00 – 15.50 EUR 11.00 – 15.50
9. Other 17,896 1,333,150 3) n/a n/a n/a n/a
  Total 1,054,416 2,074,970        

1) Capitalization rate was established upon the analysis of return rates in transactions concerning similar properties and with consideration of risk perception by potential investors on the real property market

2) The value of construction costs was determined based on market cost of construction less costs incurred as at the measurement date.

3) Investment properties at the value of PLN 1,280,130 thousand were re-classified to assets held for sale. Additional information about this issue is presented in Note 41.

fair_value_7_pzu2015.xlsx

Measurement of Level III real property is sensitive to changes in parameters used for measurement purposes and the aforesaid parameters depend on the macroeconomic environment (e.g. economic growth, inflation rate, interest rates), supply and demand on individual local property markets (taking into account both the lease market and the demand for complete items of real property, expressed by financial investors). The parameters used for measurement purposes may be interrelated, whereas the dependence is not fixed and may change depending on the market conditions.