Corporate Governance Initiatives

Corporate governance is an important theme for enhancing corporate value as well as meeting the expectations of all stakeholders, including unitholders, and fulfilling responsibility for them. JPR will work to further ensure the soundness of management as an investment corporation and a company trusted by its stakeholders.

JPR's corporate governance

Under the guidance of the Board of Directors, which is comprised of executive officers and supervising officers, JPR seeks to thoroughly implement and reinforce its corporate governance to ensure the successful operation of its business over the medium to long term.

JPR's decision-making organs

It is stipulated (Article 18 of the regulations) that JPR shall have up to two executive officers and up to four supervising officers (there must be at least one more supervising officer than executive officers).
At present, JPR's decision-making organs are the General Meeting of Unitholders (comprised of unitholders), the Board of Directors (comprised of all executive officers and supervising officers), and an accounting auditor. There are currently one executive officer and two supervising officers.

Breakdown of JPR's structure

  • General Meeting of Unitholders
  • Executive officers, supervising officers, and Board of Directors
  • Accounting auditor

Supervision system based on internal control and supervising officers

JPR holds a meeting of the Board of Directors once a month, in principle, where the executive officers explain the management status, TRIM provides supplemental explanations, and the supervising officers confirm them, thereby establishing an internal control system to exercise control through the Board of Directors.

Coordination of auditing and supervision based on internal control and supervising officers

  • Supervision by supervising officers
    At a meeting of the Board of Directors of JPR, the supervising officers receive reports on the management status from the executive officers and on the management status, compliance and risks from TRIM, and request TRIM to make a report as necessary.
  • Coordination between supervising officers and the accounting auditor
    The accounting auditor audits the financial statements of JPR for each accounting period, holds a debrief meeting for the supervising officers to make a report and submits the audit result explanatory documents to the supervising officers. If the accounting auditor has discovered misconduct or violation of laws, regulations or the Articles of Incorporation in relation to the execution of duties by executive officers, the accounting auditor has a duty to report it to the supervising officers.

System for management of affiliated corporations by JPR

If TRIM has a transaction with its interested party (a sponsor and its subsidiary), it requires the approval of the Board of Directors of JPR. In addition, if TRIM has revised the management guidelines or the management policy, it will be reported to the Board of Directors of JPR. TRIM also undertakes assistant work of executive officers, and if asked by a supervising officer to report on the management status, TRIM will respond to the request.
For details of the implementation status of the above, refer to "4. Investment Corporation Structure" in our securities reports.

Criteria for appointing investment corporation officers

It is a requirement that none of the grounds for disqualification stipulated in the laws concerning investment trusts and investment corporations shall apply to officers appointed by JPR. Officers are appointed by means of a resolution of the General Meeting of Unitholders.

Remuneration of officers

Remuneration for executive officers and supervising officers is stipulated in the investment corporation regulations as the amount decided by the Board of Directors (up to a maximum of 500,000 yen per month for each executive officer and 400,000 yen per month for each supervising officer). With the aim of ensuring transparency, remuneration of officers is disclosed in asset management reports.
Remuneration for supervising officers and the accounting auditor for the fiscal period ended June 30, 2019 and the fiscal period ended December 31, 2019 (January - December 2019) is as follows:

PortionNameOther Current AssignmentsRemuneration Fiscal period ended
June 30, 2019
(thousands of yen)
Remuneration Fiscal period ended
December 31, 2019
(thousands of yen)
Executive Officer Yoshihiro Jozaki (Note 3) President & CEO, Tokyo Realty Investment Management, Inc. Managing Officer, Tokyo Tatemono Co., Ltd.(Note 4) - -(Note 5)
Executive Officer Satoshi Okubo Director, Tokyo Realty Investment Management, Inc. 2,400 866
Supervising Officers(Note 1) Masato Denawa Partner Attorney, Spring Partners 4,200 4,200
Supervising Officers(Note 1) Nobuhisa Kusanagi Group Representative Partner of GYOSEI Certified Public Tax & Accountants' Co. 4,200 4,200
Independent Auditor(Note 2) EY ShinNihon LLC - 13,300 16,500
  • (Note 1) Supervising officers may be directors of corporations other than those indicated above, but have no conflict of interest with JPR at those and the above positions.
  • (Note 2) The independent auditor fees include fees regarding the audit of JPR's English financial statements and fees regarding the preparation of comfort letters for additional issuance of new investment units.
  • (Note 3) Satoshi Okubo retired as Executive Officer at the 12th General Meeting of Unitholders of JPR held on September 5, 2019. As a result, Yoshihiro Jozaki was elected and became Executive Officer on the same date.
  • (Note 4) Executive Officer Yoshihiro Jozaki retired as Managing Officer of Tokyo Tatemono Co., Ltd. with effect December 31, 2019.
  • (Note 5) Executive Officer Yoshihiro Jozaki does not receive remuneration from JPR.

Transactions with interested parties

In the asset management of JPR, the interests of JPR may conflict with the interests of TRIM's sponsor. Typical examples are cases where JPR acquires a property from TRIM's sponsor and JPR entrusts property management operations to TRIM's sponsor. To prevent JPR from suffering a loss in such cases, JPR and TRIM have organized a more rigorous system to prevent conflicts of interest than those provided for by laws and regulations.
JPR's Board of Directors' Regulations include provisions prohibiting executive officers and supervising officers from taking part in any resolution at a meeting of the Board of Directors in which they have an interest to ensure fairness in passing a resolution.
Meanwhile at TRIM, transactions between JPR and interested parties and transactions that require the approval of JPR are reviewed and examined by TRIM's Compliance Committee at the invitation of an external attorney. In order for a transaction approved by the Compliance Committee to be carried out, the prior consent of JPR's Board of Directors, whose members are independent of TRIM's shareholders, is required. Transactions are thus subject to multiple effective reviews before being carried out.
Transactions with interested parties include the following:

  • Acquisition of property/assets from an interested party
  • Disposal of property/assets to an interested party
  • Outsourcing of real estate management to an interested party
  • An interested party acting as an intermediary or representative for a transaction
  • Hiring an interested party to carry out construction work (if the work costs more than 10 million yen)
  • Leasing of property to an interested party

*Leasing of property to an interested party refers to: 1) Cases where a new rental contract is signed with an interested party, or 2) cases where the rent is frozen or set at a level below the average rent for the property when a lease is renewed.

TRIM's corporate governance

TRIM strives to increase management transparency and awareness of corporate ethics while making timely decisions and executing operations efficiently. TRIM aims to increase JPR's unitholder value by thoroughly implementing and reinforcing corporate governance.

TRIM's management structure

JPR entrusts management of its assets to TRIM.
TRIM's organizational framework is as shown below.

TRIM's management structure

Investment management decision-making organs

TRIM has established an Investment Policy Committee to make investment management-related decisions, which oversees an Investment Subcommittee and Management Subcommittee.
Matters relating to investment targets and management policy are decided by the Board of Directors, while matters relating to management plans and their execution are decided by the Investment Policy Committee. Other matters are decided by the Investment Subcommittee or Management Subcommittee.

The decision-making organs for property acquisitions are as shown below. Decisions on whether to acquire new investment properties are made via a stringent process.

Decision making process

Decision making process

Asset Management Fee

Fees for asset management with which TRIM is entrusted by JPR consist of fixed compensation and incentive-based compensation 1, 2 and 3, and their specific amounts, calculation methods and the time of payment are clearly defined.

Asset management fee prior to January 1, 2020
ItemAmount of compensation and time of payment
Fixed compensation [Amount of payment] 12.5 million yen/month
[Time of payment] At the end of March, June, September and December
(Compensation for January to March, April to June, July to September, and October to December will be paid in arrears at the end of March, June, September and December, respectively.)
Incentive-based compensation 1 [Calculation method of compensation]
Amount equivalent to 2% of total revenue for the relevant business period that is determined in the accounting period
[Time of payment] Within 3 months after each accounting period
Incentive-based compensation 2 [Calculation method of compensation]
Amount equivalent to 3% of income before income taxes before deducting incentive-based compensation 2 in the relevant business period that is determined in the accounting period
[Time of payment] Within 3 months after each accounting period
Incentive-based compensation 3 [Calculation method of compensation]
If real estate or asset-backed securities that have real estate as their primary investments are acquired, an amount equivalent to 0.25% of the acquisition price (excluding expenses for acquisition, such as consumption taxes)
[Time of payment] No later than the final day of the month following the month that includes the date of acquisition
Asset management fee from January 1, 2020
ItemAmount of compensation and time of payment
Asset management fee 1 Calculation method of compensation:
Total acquisition price × 0.05%
* Total acquisition price means the total amount of the acquisition prices of portfolio assets at the end of the immediately preceding fiscal period.
* If the relevant business period is less than 6 months, the fee is prorated based on the actual number of days in the period.
Asset management fee 2 Calculation method of compensation:
1.2% of total revenue for the relevant business period that is determined in the accounting period
* Total revenue means the total amount of rent, CAM charges, parking lot income, incidental income, facility charges, facility installation charges, late charges, penalty fees associated with lease agreement termination and similar monies or other income arising from leasing business, interest and dividend income, and similar income arising from the portfolio real estate (includes trust beneficiary interests and other underlying real estate).
Asset management fee 3 Calculation method of compensation:
Basic distributable amount × 3.8% × Rate of fluctuation of basic distributable amount per unit (Basic distributable amount per unit for the relevant business period ÷ Average basic distributable amount per unit for the three most recent business periods excluding the relevant business period)
* Basic distributable amount means income before income taxes, before deduction of asset management fee 3 and nondeductible consumption taxes in the relevant business period that is determined in the accounting period and it includes gain or loss on sale of assets under management.
* Basic distributable amount per unit is calculated by dividing the basic distributable amount by the total number of units at the end of each business period (excluding any treasury investment units held by the Investment Corporation if the Investment Corporation acquires its own investment units and holds treasury investment units that have yet to be disposed of or cancelled at the end of each business period)
* If either of the circumstances described below took effect in the four most recent business periods including the relevant period and the total number of issued investment units increased or decreased, the total number of issued investment units at the end of each of the four most recent business periods including the relevant business period shall be adjusted to exclude the impact of such increase or decrease on the basic distributable amount per unit.
* The lower bound of the rate of variation of the basic distributable amount per unit shall be 80% and the upper bound shall be 120%.
Asset management fee 4 Calculation method of compensation:
Amount equivalent to 0.5% of the acquisition price in the case where the Investment Corporation acquired real estate, etc. or asset backed securities with real estate, etc. as the main investment target (hereinafter referred to as "real estate-related assets").
Asset management fee 5 Calculation method of compensation:
Amount equivalent to 0.5% of the sale price in the case where the Investment Corporation sold real estate-related assets.
Asset management fee 5 shall not arise, however, if the sale of the relevant real estate-related assets would result in a loss on sale after deduction of the amount equivalent to asset management fee 5 calculated in accordance with the foregoing.
A breakdown of the compensation that TRIM received from JPR is as follows.
Jun. '19 Fiscal Period
(Jan. - Jun. 2019)
(thousands of yen)
Dec. '19 Fiscal Period
(Jul. - Dec. 2019)
(thousands of yen)
Fixed compensation 75,000 75,000
Incentive-based compensation1 276,506 280,189
Incentive-based compensation2 223,388 213,945
Incentive-based compensation3 24,302 -
Total 599,196 569,134

Transactions with interested parties

The appropriateness and validity of transactions between JPR and interested parties are reviewed and examined by the Compliance Committee, which meets once a month as a rule. The four full-time directors of TRIM and one outside member who is independent from TRIM and its sponsors attend the meetings of the Compliance Committee, and proposals shall be approved unanimously by all the members, in principle. The Compliance Committee secures its fairness through the participation of the independent outside member.

Compliance system

Compliance is essential for the continuous growth of JPR. Through sound management and operation of JPR based on laws, regulations and other requirements, Tokyo Realty Investment Management, Inc. (TRIM) will endeavor to merit the trust of JPR, its unitholders, tenants and a variety of other stakeholders.

Basic Policy on Compliance by TRIM

In an effort to correctly recognize social and public duties within asset management for investment corporations, and maintain and enhance the trust of investors and society, Tokyo Realty Investment Management, Inc. (TRIM) shall follow the following basic policy as a code of conduct for its officers and employees in order to ensure that every member of the company adheres to the utmost professional ethics, abides by laws and regulations, and implements sound business operations with integrity.

  1. In conducting operations of asset management for investment corporations, our officers and employees shall abide by public and voluntary regulations set forth in laws and regulations related to the relevant operations, government and ministerial ordinances, voluntary rules of the industry and internal rules on its own (hereinafter, the laws and regulations, etc.).
  2. Our officers and employees shall fully understand the purposes and substance of the laws and regulations stated in the above item and, when their actions, although seemingly compliant with the provisions of laws and regulations, etc., have deviated from the purposes and substance of the provisions, they shall strictly refrain from taking such actions.
  3. Our officers and employees shall recognize that progress in financial liberalization and greater relaxation of restrictions on asset management, etc. would increase and diversify risks as well as require business management to more closely observe the principle of self-responsibility. With such recognition, they shall endeavor to thoroughly implement risk management.
  4. Our officers and employees shall endeavor to enhance their asset management and risk management capabilities for implementing operations of asset management for investment corporations so as to maintain and enhance the trust imparted by investors and society. Each division and group of TRIM shall work to establish a system that helps reinforce the capabilities of its members in order to achieve the purposes of such operations.
  5. Our officers and employees shall recognize that securing fair and free competition is indispensable for the continuity and sound development of TRIM, and shall avoid any behavior that hampers fair competition, such as industry meetings to restrict competition, consent with other companies intended to restrict trade, restraint of business activities of suppliers or client companies by taking advantage of a superior position in business, and unjust discrimination in transaction terms and conditions.
  6. Our officers and employees shall fully recognize the importance of protecting personal information and, when handling customer data and other internal information possessed by the company, implement appropriate and stringent control of such information in accordance with the internal rules.
  7. Whether business or personal, we will oppose with firm resolve any demand, including provision of donations and contributions and subscription of information magazines as well as provision of money and other articles, from anti-social forces that threaten the order and safety of civil society.
  8. We will prevent any laundering of money generated from criminal behavior.
  9. We will work to utilize the company's assets and expenses fairly and efficiently, and will not make inappropriate, unjust or inefficient use of them, such as confusing business and private use and spending for unnecessary items or matters.
  10. We will abide by the employment regulations, labor agreements and other rules to secure a sound, efficient and comfortable workplace environment. Moreover, our officers and employees shall not engage, among themselves, in 1) lending money or similar behavior and 2) sending courteous gifts beyond the extent deemed appropriate under normal social conventions.
  11. We will respect individual human rights and personality. We understand that it is unacceptable, in terms of common sense in society, to assume discriminatory behavior by reason of nationality, sex, birthplace, religion, belief, illness or physical features, or behavior that may result in sexual harassment, and will not engage in such behavior.
  12. Fully understanding that we are involved in business of a highly public nature, we will maintain efforts to enhance our ethical view in our social life and act with a good sense of social being.

Organization to Promote Compliance

TRIM promotes compliance through the following organization.

Organization to Promote Compliance

  • At present, the Compliance Committee has called on an outside attorney as its special member.
  • In an effort to strengthen its compliance system, TRIM receives advice from outside advisers with regard to the enhancement of internal control.
  • The Compliance Officer is authorized to suspend the execution of actions that conflict with relevant regulations including laws regulations and internal rules.

Provision of Compliance Training

TRIM periodically provides training for all of its officers and employees to inform themselves on matters of compliance. TRIM has been working on raising awareness of the importance of compliance, such as making training participation compulsory for all officers and employees, and implementing tests to assess their understanding or conducting questionnaires after training sessions.

Prevention of Transactions with Anti-Social Forces

Neither TRIM nor its officers and employees shall have any relations whatsoever with anti-social activities and anti-social forces that threaten the order and safety of civil society and hamper economic activities. Any unjust demand from anti-social forces, including the provision of donations and contributions as well as the provision of money and other articles will be firmly opposed.
Moreover, TRIM has established "rules for facing anti-social forces" with the aim of preventing the company from being damaged by anti-social forces and to help it perform its social responsibilities. Under the rules, TRIM endeavors to eliminate anti-social forces through constant, close coordination with such external specialized institutions as the police and lawyers.

Risk Management

JPR and TRIM have developed an effective risk management system for the asset management of JPR through the following verification systems to produce the maximum effect. The policy of JPR and TRIM is to make as many efforts as possible to avoid the occurrence of risks on investment and management and to take measures if a risk has occurred.

JPR's system

It is stipulated that JPR's executive officers shall hold Board of Directors meetings at least once every three months, and in reality, meetings are held roughly once a month as a rule. In addition to the discussion of matters stipulated by law, Board of Directors meetings also involve approving certain transactions with interested parties and detailed reports on the execution status of JPR's and TRIM's operations. These procedures maintain a structure that enables supervising officers to accurately monitor the execution of executive officer operations from a standpoint that is independent of TRIM, parties with an interest in TRIM, and other interested parties as prescribed by law. Moreover, by means of these procedures, JPR strives to verify whether there is any possibility of a conflict of interest in transactions with parties with an interest in TRIM or other interested parties and to manage risks relating to conflicts of interest.
JPR has the right to receive reports from TRIM and to examine TRIM's account books and other documents. By exercising these rights, JPR maintains a structure that enables it to monitor TRIM's execution of operations.
In addition, JPR strives to prevent activities such as insider trading by officers through the establishment of insider trading regulations.

TRIM's system

As a rule, TRIM monitors and manages operation- and management-related risks through multiple verification systems at different levels.
TRIM has established portfolio operation standards and investment standards in its operation guidelines. It strives to manage risks relating to real estate and real estate trust beneficiary rights by adhering to such guidelines.

  • TRIM has established portfolio operation standards and investment standards in its operation guidelines. It strives to manage risks relating to real estate and real estate trust beneficiary rights by adhering to such guidelines. TRIM has established Investment Policy Committee regulations with the aim of clarifying the decision-making process for key matters related to JPR asset management. It also strives to manage risk by establishing objective operating procedures, such as creating procedure manuals each covering the inspection, acquisition, operation, and management of real estate as well as other tasks.
  • TRIM has established compliance regulations and a compliance manual, while the compliance officer and Compliance Subcommittee verify legal compliance and the Compliance Committee verifies the presence of conflicts of interest in transactions with interested parties. Through these measures, it strives to prevent the risk of legal violations and conflicts of interest.
  • TRIM aims to prevent activities such as insider trading by its officers and employees through the establishment of insider trading regulations.
  • TRIM has established a forward commitment manual, and when making forward commitments, it strives in particular to manage risk through a process involving careful reviews and thorough deliberation.
    *Forward commitment refers to agreements for transactions that will be carried out at a later date. In the case of J-REITs, risk disclosure is required for transactions that will be carried out more than one month after the agreement date.

Information security

To continuously conduct its business securely, JPR and TRIM strives to make appropriate use of information and prevent unauthorized access and information loss/leakage. In managing information, it implements safety measures to counter various threats (damage, accident, mishandling, unauthorized use, destruction, theft, and leakage). It has also put recovery measures in place in the event that problems occur and has established a contingency plan for dealing with any damage.
TRIM has also made security management preparations and has established a department to oversee information management. This department ensures the validity of information management and protection through regular inspections and has developed safety measures and steps to be taken if problems occur.