Notes to the Consolidated Financial Statements Dollar amounts are in thousands of Canadian dollars (except share and per share amounts) 5.  Investment Properties (continued) Valuation Process For year ended December 31, 2013, interest costs associated with the general corporate borrowings used to fund development have been  capitalized to the respective development using the Company’s weighted average borrowing rate of 4.38% (December 31, 2012 ‑ 4.50%).  Interest costs associated with construction loans are capitalized to the respective development using the actual borrowing rate associated  with the loan. Investment properties with a fair value of $1,432,731 at December 31, 2013, (December 31, 2012 ‑ $1,294,317) are pledged as collateral  against the company’s mortgages payable. The management group that determines the Company’s valuation policies and procedures for investment property valuations comprises  the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Each year, the CEO and CFO decide which external valuator to  appoint to be responsible for the external valuations of the Company’s properties. Selection criteria include market knowledge, reputation,  independence and whether professional standards are maintained. The CEO and CFO decide each quarter after consultation with the Company’s external valuator and the Company’s finance department: Valuations are performed on a quarterly basis at each interim reporting date. Valuations for interim reporting purposes are prepared  internally by the Company’s finance department using cap‑rates provided by the Company’s external valuator. On an annual basis the  Company obtains full valuation reports from an external valuator for approximately 20% of its investment property portfolio, and therefore  every property is externally valued at least once every five years.  At each reporting date, the finance department analyses the movement in each property’s value. For this analysis, the finance department  verifies the major inputs applied in the latest valuation by referencing supporting information in the calculation to market reports and  other relevant documents. For each property, the latest valuation is also compared with the valuations in the preceding quarter. If the fair  value change (positive or negative) is more than 5%, the change is further analyzed to ensure reasonability, as well as absence of expected  changes.  On a quarterly basis, the finance department discusses assumptions used in the valuations, with an emphasis on: (i) properties with fair  value changes outside of the relevant threshold set out above; and (ii) IPUC. The following table presents the following for each class of investment property: •  whether a property’s fair value can be reliably determined (IPUC are valued at cost until such time as fair value becomes reliably  determinable);  •  which valuation method should be applied for each property; and •  the assumptions made for unobservable inputs that are used in the valuation methods. •  the level of the fair value hierarchy; •  the carrying amount or fair value of the investment property; •  a description of the valuation technique; and •  for Level 3 fair value measurements, quantitative information about significant unobservable inputs. Class of  property Fair value at  December 31,  2013 Fair value at  December 31,  2012 Valuation  technique Unobservable inputs 2013 Inputs  2012 Inputs Apartments ‑Level 3 $1,334,153 $1,126,189 income capitalization  approach ‑ Capitalization rate (weighted average) ‑ Vacancy rate (weighted average) ‑ Management fee rate 5.88% 3.50% 3.50% 6.02% 3.50% 3.50% MHCs ‑Level 3 $115,414 $168,401 income capitalization  approach ‑ Capitalization rate (weighted average) ‑ Vacancy rate ‑ Management fee rate 6.86% 1.70% 3.00% 7.04% 1.70% 3.00% Killam ProPerties inc | 2013  79