NIPPON REIT Investment Corporation

Securities code:3296

JAPANESE

Governance Initiatives

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Based on Article 95 of the Act on Investment Trusts and Investment Corporations, NRT's Board of Officers consists of one executive officer, as well as two supervisory officers, which exceeds the number of executive officers by more than one.
Based on Article 109 of the Act, the executive officer executes the duties of NRT and represents NRT.
Based on Article 111 of the Act, supervisory officers supervise the executive officer's execution of duties. Moreover, in line with Article 100 of the Act, a person who has a personal interest in NRT or SRA cannot be appointed as supervisory officer.
Executive officers' remuneration will not exceed 800,000 yen per person per month, and supervisory officer's remuneration will not exceed 500,000 yen per person per month, with the monthly amount to be determined by the Board of Officers. Please refer to Article 21 of the Articles of Incorporation for more details. The Article of Incorporation are revised by the decision of the General Meeting of Unitholders.
The remuneration paid to each officer is disclosed in "the Asset Management Report" for each fiscal period.

Decision-Making Process Securing Third-Party Monitoring Function

<Decision-making process regarding Transaction of Assets under Management with interested parties>

(Note 1) We note that the following transactions must be approved by the Board of Officers of NRT but do not require the consent of NRT.
・Transactions other that those stipulated in Article 201-2 (1) of the Act on Investment Trusts and Investment Corporations (Investment Trust Act)
・Transactions stipulated in Article 245-2 of the enforcement regulations in the Investment Trust Act
(Note 2) The Board of Directors makes a decision after confirming that each procedure has been appropriately completed.

Asset Management Fee Structure to SRA

Management Fee System Linked to Distribution per Unit

NRT adopts an asset management fee system in which part of the fees to be paid to SRA based on the Articles of Incorporation and SRA is linked to distribution per unit. We believe that adoption of such an asset management fee system should give an incentive to SRA to work to maximize the unitholder value of NRT

■Asset management fees for the fiscal period starting on September 20,2019

<Asset management fee 1 and asset management fee 2>

Calculation method
Asset management fee 1 Total assets of the immediately preceding fiscal period × annual rate of 0.35% (maximum rate)
Asset management fee 2 NOI × DPU volatility (Note 1) × 2.5% (maximum rate)
(Note 1) “DPU volatility” is a figure calculated by using the following formula
DPU volatility = (Adjusted distribution per unit for a certain fiscal period (Note 2) —adjusted distribution per unit for the preceding fiscal period) / adjusted distribution per unit for the previous fiscal period+1
However, when the adjusted distribution per unit for the preceding fiscal period is null, the DPU volatility is deemed to be 1. Moreover, when the DPU volatility for the preceding fiscal period was 0.75 or less and the DPU volatility for the current fiscal period calculated by using the above formula surpassed 1, the DPU volatility is deemed to be 1.
(Note 2) “Adjusted distribution per unit” is the amount obtained by dividing the distributable amount before deducting fees and compensations (Note 3) for a certain fiscal period by the number of investment units issued and outstanding as of the settlement date for the fiscal period (rounded down to the nearest one yen). In calculating adjusted distribution per unit, proper adjustment shall be made in the case of holding its own investment units that have not been disposed of or retired in the accounting period for the business period in which it acquired its investment units and, in the case of increasing the total number of investment units outstanding by splitting own investment units or conducting a gratis allocation of new shares through subscription rights.
(Note 3) “Distributable amount before deducting fees and compensations” is the amount of income before income taxes for the fiscal period calculated in accordance with the accounting practices generally accepted in Japan (on the condition that the asset management fee 2 and gain or loss on sale of specified assets, consumption tax not subject to deductions, etc. are not added to or subtracted from the amount).

<Acquisition fee and disposition fee>

Calculation method
Acquisition fee Acquisition price (Note 1) × 1.0% (maximum rate)
*Acquisition from interested parties: acquisition price × 0.5% (maximum rate)
Disposition fee
(Note 2)
Transfer price (Note 3) × 1.0% (maximum rate)
*Transfer to interested parties: transfer price × 0.5% (maximum rate)
(Note 1) This means the amount paid for the purchase in the case of a purchase, the appraised value of the asset transferred through exchange in the case of an exchange and the amount contributed in the case of capital contribution, excluding consumption taxes and acquisition expenses
(Note 2) Disposition fee shall be paid only when gain on sale of specified assets is accrued.
(Note 3) This means the amount paid for the sale in the case of a sale and the appraised value of the asset transferred through exchange in the case of an exchange, excluding consumption taxes and transfer expenses

Same-Boat Investment by the Sponsors

Sojitz Corporation, the main sponsor Owns 15,500 of NIPPON REIT’s investment units

Sojitz, Cushman and Agility have declared in the sponsor support agreement that, when they acquire the investment units issued by NRT, they intend to continue owning the units for the time being unless there are special circumstances occured.

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