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  4. Innovative initiatives based on unitholders’ perspectives

Innovative initiatives based on unitholders’ perspectives

In order to secure faithful and sound asset management, realize stable dividends and maximize unitholder value, GLP J-REIT has considered and implemented various innovative measures and initiatives that are believed to contribute to such causes.

Acquisition of sponsor’s flagship assets

By incorporating flagship assets of the sponsor GLP group’s portfolio, such as GLP Tokyo-II, GLP Tokyo and GLP Amagasaki, GLP J-REIT’s portfolio maintains a high quality equivalent to that of the best-in-class portfolio owned by the GLP Group, Japan’s largest leasable logistics facilities operator.

RoFL Agreement with the GLP Group

GLP J-REIT believes that the logistics facilities owned and operated by the GLP Group are an important pipeline for the future external growth of GLP J-REIT. Therefore, in order to enable stable and continuous acquisitions from this pipeline, we have entered into a Right-of-First-Look Agreement that allows GLP J-REIT to maintain a right-of-first-look with respect to 38 (as of the time of the contract) of the properties in Japan that the GLP group companies owned as of November 13, 2012, which is immediately before the listing of GLP J-REIT, other than through joint ventures with third parties. By doing so, GLP J-REIT presented a large-scale and specific “visible pipeline” to investors.

Distributions in excess of retained earnings each fiscal period on a continuous basis

GLP J-REIT became the first J-REIT to adopt the policy of making distributions in excess of retained earnings each fiscal period on a continuous basis. Under this policy, we can implement FFO (Funds From Operations)1- based distribution and work to achieve an optimal cash management to improve fund efficiency. This measure has been made possible due to logistics facilities’ characteristic that the amount of the capital expenditure actually required is less than the recorded amount of depreciation expense and the estimated amount of capital expenditure may be relatively accurate, as well as by making the most of the property management ability of Global Logistic Properties, which boasts a high degree of expertise and track record in the operation and management of logistics facilities.

Note 1: Indicates the cash flow generated from real estate rental operations, and is generally calculated by “net income + depreciation – gain or loss on sales and retirement of real estate, etc.”

IPO with one of the largest market capitalization and the lowest investment unit price

GLP J-REIT secured a certain amount of liquidity immediately after listing by carrying out the second largest IPO in the history of J-REIT as of December 2012 with approximately JPY 110 billion as the offering amount.
In addition, by offering a smaller lot of investment units (JPY 60,500 at IPO), the smallest for an J-REIT, it sought to expand its investor base and enhance liquidity.

Securing property acquisition opportunities that improve investment efficiency

As part of its bridge scheme to secure opportunities to acquire quality assets, GLP J-REIT adopted a new initiative called the Optimal Takeout Arrangement (OTA) in July 2015.
The OTA is a scheme that enables GLP J-REIT to acquire properties at a time of its designation at a discounted price by having a bridge company temporarily own the properties planned for acquisition in the future.
This scheme is designed to secure flexibility in the acquisition timing and increase investment return.
Please refer to this for specific examples of securing asset acquisition opportunities using OTA.

Performance-linked AM fees and management incentive bonuses at Asset Manager

Two thirds of the asset management fees that GLP J-REIT’s Asset Manager receives are linked to NOI and EPU.
In addition, bonuses for major executives at the Asset Manager are directly linked to EPU and relative unit price performance of investment units (vs. TSE REIT Index). (Note 2)

Note 2: Major executives at the Asset Manager refer to President & CEO, CFO and CIO.

Ownership by the sponsor group (same boat investment)

At the time of its listing in December 2012, GLP J-REIT carried out measures for its sponsor to maintain as much as a 15 % ownership of GLP J-REIT, which was uncommon in the J-REIT market at the time, with the aim of aligning the interests between unitholders and the GLP Group.

Introduction of a strict governance structure for related party transactions

GLP J-REIT is not allowed to carry out related party transactions without the approval of outside expert(s) on the Asset Manager’s investment and compliance committees, and establishes veto rights by outside expert(s) for related party transactions. In addition, in order to secure the effectiveness of the veto rights, the selection of the outside expert(s) requires the approval of the J-REIT board, and veto rights by the J-REIT board on the selection of outside expert(s) have been established.

Introduction of IR measures based on unitholders’ perspectives

Since listing, GLP J-REIT has continuously carried out same-day disclosure of the Japanese and English versions of press releases and various disclosure materials.
Financial results briefing session for institutional investors and analysts following the results announcements are held in Japanese as well as in English using a conference call system. Furthermore, from the fiscal period ended February 2015, the conference call system was introduced for financial results briefing sessions in Japanese too, to establish an environment where investors can participate in the session by telephone without having to come to the session venue.

Unique efforts upon offerings

GLP J-REIT has made several unique efforts in advance of other J-REITs when conducting offerings.
At the time of the offering in summer 2015, GLP J-REIT, for the first time for a J-REIT, conducted a management call (a group meeting using the conference call system) mainly for overseas institutional investors, to whom the management of the Asset Manager explained the outline and significance of the offering promptly and directly. In addition, for the same offering it conducted all marketing to overseas investors by conference calls without actually travelling abroad, which was unprecedented for a global offering by a J-REIT. Not only did this contribute to a reduction of offering-related costs, but it also maximized marketing opportunities by reducing traveling time.

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