Management’s Discussion and Analysis Dollar amounts are in thousands of Canadian dollars (except as noted) PART VI Investment Properties  as at December 31, 2013 2012 % change (i) Investment properties $1,451,743 $1,296,724 12.0% (ii) IPUC 24,373 57,941 (57.9)% $1,476,116 $1,354,665 9.0% as at and for the years ended December 31, 2013 2012 Balance, beginning of the year $1,296,724 $1,246,645 Acquisition of properties 119,667 58,821 Disposition of properties (69,680) (72,889) Transfer from IPUC 70,315 ‑ Capital expenditures 21,647 22,467 Fair value adjustments 13,070 41,680 Balance, end of year $1,451,743 $1,296,724 The following table summarizes the changes in value of Killam’s investment properties for the years ended December 31, 2013, and 2012. Continuity of Investment Properties Capitalization Rates The key valuation assumption used to determine the fair market value, using the direct capitalization method, is the cap‑rate. A summary of  the high, low and weighted average cap‑rates used in the valuation models as at December 31, 2013 and 2012 as provided by Killam’s External  Valuator, are as follows: As highlighted in the above chart, the effective weighted average cap‑rate used to value the apartment properties decreased by 14 bps  year‑over‑year, generating an increased valuation for some properties. This was partially offset by a rise in cap‑rates in the Saint John market in  late 2013 due to the softening economy. The effective weighted average cap‑rate used to value the MHCs decreased 18 bps from December 31,  2012, reflecting increased valuations for most properties in the MHC portfolio. December 31, 2013  December 31, 2012  Low High Effective  Weighted  Average low High Effective  Weighted  average apartments 4.50% 8.00% 5.88% 4.50%  8.00%  6.02%  mHcs 6.00% 8.25% 6.86% 6.50%  8.50%  7.04%  Killam ProPerties inc | 2013  47