Principles for Customer-Oriented Business Conduct
We, Japan Hotel REIT Advisors Co., Ltd. (hereinafter called "JHRA") adopted "Principles for Customer-Oriented Business Conduct" (announced by Financial Services Agency of Japan on March 30, 2017, revised on January 15, 2021), and set policy of our initiatives for the principles as follows.
1. Formulation and Announcement of Policies regarding Customer-Oriented Business Conduct
JHRA is engaged in the asset management business including the asset management of Japan Hotel REIT Investment Corporation (hereinafter called “JHR”) (hereinafter called the “Asset Management Business of JHR”) as well as the investment advisory business and discretionary investment management business for customers other than JHR (hereinafter called the “Private Fund Business”). In managing these businesses, we hold up a mission statement, which is "Connecting hotels, people, and the future.” and we strive to create new value, to provide attractive investment opportunities in hotels, to gain credibility from our stakeholders and to contribute for development of local communities and society.
Aiming to realize our mission statement, in order to provide better services to unitholders of JHR and investors in the Private Fund Business (hereinafter separately or collectively called the “Customers”), JHRA formulated and announced the “Principles for Customer-Oriented Business Conduct” (hereinafter called the "Policy"). We regularly announce the status of Policy's implementation and review the Policy as necessary for the better business conduct.
2. Pursuit of Customers' Best Interest
JHRA aims to be a professional group to invest and manage hotels and to be selected by the Customers by maintaining a high level of expertise and professional ethics as an asset manager of J-REIT specializing in hotel assets, operating our business in a faithful and fair manner, and continuing to provide high added values.
In the Asset Management Business of JHR, we believe that realizing stable growth in dividend and improvement of asset value are the benefit to the Customers, and we conduct asset management with a high level of expertise as an asset manager of a J-REIT specializing in hotel assets.
To be more precise, we simultaneously pursue stability and upside potential. We pursue revenue enhancement of JHR by introduction of rent structures such as a variable rent and management contract that are linked to GOP (Gross Operating Profit) or revenue of the hotels and other measures. At the same time, we aim for stable revenue by applying a fixed rent structure.
Also, we have incentives to maximize unitholders' values through holding JHR's units ("a same-boat investment" alongside with investors).
In the Private Fund Business, we fully understand the needs of the Customers and take advantage of the high level of expertise we have cultivated in the Asset Management Business of JHR. We also include assets other than hotels in our investment targets and provide management and advisory services to the Customers based on the expertise mentioned above.
3. Appropriate Management of Conflicts of Interest
We believe it is necessary to strictly control conflicts of interest to earn credibility from the Customers. Therefore, we set decision-making process stricter than it is required by laws and regulations.
Specifically, in addition to interested parties stipulated by laws and regulations, JHRA stipulates all of our shareholders and their subsidiaries, etc. as sponsor-related parties. With regard to transactions with sponsor-related parties and our clients (including JHR and SPC of the private fund), JHRA, in principle, undergoes deliberations and resolutions by the Investment and Operation Committee, Compliance Committee which requires an attendance of an outside specialist (attorney) who is authorized to dismiss a proposal and the Board of Directors Meeting of JHRA. Moreover, in cases where JHR conducts transactions with sponsor-related parties, in principle, such transactions shall be conducted upon the deliberation and resolution by Board of Director's Meeting at JHR. In addition, we disclose major details of the transactions between sponsor-related parties and JHR on Securities Report and Asset Management Report, etc.
We secure high independence from our sponsor, as no director and employee of JHRA is a seconded employee of the sponsor, except for part-time directors, and a majority of the directors are persons other than those related to the sponsor. Furthermore, all directors of JHR consisted by third-party members who do not have any relationship with the sponsor-related parties. JHRA and JHR strive to comply with "arms-length rules" and ensure transparency in order to strictly manage conflicts of interest.
As mentioned above, we strictly manage conflicts of interest through governance both in our decision-making process and our management structure.
For more information on efforts to manage conflicts of interest transaction of JHR, please refer to “Corporate Governance” on the JHR’s website.
4. Clarification of Various Fees and Commissions
In the Asset Management Business of JHR, we strive to improve unitholders' values through implementation of "Active Asset Management" strategy, which uses advanced expertise and know-how on hotel investment and management in order to increase variable rent and other revenue through enhancement of hotel performance. JHRA receives the asset management fees from JHR as a counter value of such asset management. We have applied management fee structure in which a part of the asset management fees links to the profit of JHR and dividend per unit. The management fee structures provide us with incentives to increase dividend per unit.
These management fee structures, the ratio and amounts of the asset management fees, etc. are stipulated in Articles of Incorporation of JHR and disclosed in Asset Management Report, etc. Additionally, we disclose various fee structures and amount of fees related to outsourced business which are paid by JHR on Securities Report and Asset Management Report, etc.
In addition, in the Private Fund Business, the fees are stipulated based on the type, size, anticipated investment returns and structure, etc. of the assets to be invested, in consultation with the Customers.
5. Providing Important Information in an easy-to-understand manner
We understand that the status of hotel operations is one of the important information for the Customers in hotel investment and management.
Accordingly, in the Asset Management Business of JHR, in addition to information required by laws and regulations, JHRA discloses highly transparent information which enables our investors to immediately understand operating status of our hotels through monthly disclosure of major performance indicators of rooms department in major hotels, such as occupancy rates, ADR (Average Daily Rate), and RevPAR (Revenue Per Available Room), etc.
Moreover, JHRA endeavors to disclose important information for decision-making of investment, such as overview of financial result and growth strategy of JHR, in Asset Management Report, Financial Result Briefing as well as the JHR’s website in a quick, accurate, fair and easy-to-understand manner.
Furthermore, in the Private Fund Business, we endeavor to provide information that is easier for the Customers to understand about the services we provide, in addition to important information related to the operational status of the assets and investment decisions for investment.
6. Providing Suitable Service to Customers
We set the acquisition of the trust from the Customers and other stakeholders as an important management goal.
From this perspective, we always strive to ensure the transparency of asset management business from the Customer’s perspective and disclose information in a quick, accurate, fair and easy-to-understand manner in order to contribute to the Customers’ investment decisions. We also actively disclose related information that we believe may affect the Customers’ investment decisions.
In the Asset Management Business of JHR, JHRA and JHR have jointly established the "Sustainability Policy" in addition to policies stipulated by JHR's Articles of Incorporation and our investment and management guideline. JHRA also works on to enhance sustainability in mid-to-long term points of view through investment and management with consideration to risks and opportunities of ESG (Environment, Social and Governance). JHRA aims to improve unitholders' values for mid-to-long term through proactive review of our investment and management policy, etc. according to the change of market environment surrounding the hotel industry.
For more information on the sustainability initiatives of JHR and JHRA, including “Sustainability Policy,” please refer to “Sustainability Management” on the JHRA’s website.
In addition, in the Private Fund Business, after consulting with investors, we accurately ascertain the purpose of transactions and investment targets, and strive to provide more suitable services, including initiatives for sustainability.
Furthermore, currently JHRA does not offer or recommend packages of multiple financial instruments and services.
7. Framework for Adequate Motivation of its Employees
JHRA aims to provide high-quality added values to the Customers based on awareness as a professional by individual employees and high-quality business administration in order for adequate implementation of the Policy. To this end, we encourage and support our employees to participate in various training programs and acquire various qualifications to deepen their knowledge and improve business quality. We continuously implement trainings and other measures related to compliance to all employees since we request our employees to maintain high ethical perspective and awareness on compliance.
Established on March 20, 2018
Revised on June 1, 2021
Revised on October 1, 2021
Revised on June 30, 2022
Status of engagement based on Customer-Oriented Business Conduct
We are engaged in the Asset Management Business of Japan Hotel REIT Investment Corporation (hereinafter called “JHR”) and Private Fund Business in accordance with the aforementioned “Policy for Initiatives for Customer-Oriented Business Conduct” (hereinafter called the “Policy”). The status of our efforts related to the business conduct is as follows.
1. Formulation and Announcement of Policies regarding Customer-Oriented Business Conduct
In order to provide better services to the Customers, we regularly announce the status of the Policy's implementation and review the Policy as necessary for the better business conduct.
＜Formulation and Revision of the Policy＞
Formulated on March 20, 2018
Revised on June 1, 2021
Revised on October 1, 2021
Revised on June 30, 2022
＜Announcement of the Status of Initiatives＞
1st announcement on March 25, 2020
2nd announcement on June 30, 2021
3rd announcement on June 30, 2022
4th announcement on June 30, 2023
2. Pursuit of Customers' Best Interest
We maintain the high level of expertise and professional ethics that we have cultivated as an asset manager of the J-REIT specializing in hotel assets, operate our business in a faithful and fair manner, and continue to provide high added value to the Customers.
In the Asset Management Business of JHR, we conduct asset management based on the belief that realizing the stable growth of dividend of JHR and the improvement of asset value are the benefit to the Customers, and we conduct asset management with a high level of expertise as an asset manager of the J-REIT specializing in hotel assets.
The performance of dividend per unit and NAV per unit of JHR are as follows.
(1) Performance of Dividend per Unit
(2) Performance of NAV (*) per Unit of JHR
A part of management fee we receive from JHR is linked to the JHR’s revenue and dividend per unit, and by such fee structure, promoting the interest of the Customers is linked to secure a stable customer base and profits of us. For details of the management fees, please refer to “4. Clarification of fees, etc.” below.
In the private fund business, since we started private fund business in 2018, we have provided management or advisory services to the Customers based on full understanding of their needs through discussion with them while leveraging the high level of expertise we have cultivated through the asset management business of JHR. Although remuneration is not disclosed in accordance with contracts with customers, we determine our remuneration based on the type, size, anticipated income through management and structure, etc. of the assets to be invested. Through such measures, while we strive to ensure the best interests of our customers, we also aim to secure stable customer base and our profitability.
3. Appropriate Management of Conflicts of Interest
We established a more rigorous decision-making process than required by laws and regulations to strictly control conflicts of interest. In addition, our management structure is highly independent from the sponsor since we do not have seconded employees from the main sponsor except for the part-time directors, and half of the directors are persons other than those related to the sponsor. Furthermore, all officers of JHR are composed of the third parties who have no relationship with the sponsor-related parties. We and JHR work together to ensure compliance with the “arms-length rules” and transparency.
For relevant information, please refer to the followings:
Corporate Governance (“Decision-Making Process for Acquisition or Disposition of Portfolio Assets”)
https://www.jhrth.co.jp/en/esg/governance.html
IR Library (“Report on the Operating System, etc. of Issuers, etc. of Real Estate Investment Trust Securities”) (Japanese only)
https://www.jhrth.co.jp/ja/ir/library.html
Please refer to the following for the details of major transactions conducted with the sponsor-related parties in the Asset Management Business of JHR.
IR Library (“Transactions with interested parties, etc.” in “Asset Management Report”)
https://www.jhrth.co.jp/en/ir/library.html
In the Private Fund Business, as we set for the Asset Management Business of JHR above, we established a rigorous decision-making process to strictly control conflicts of interest.
4. Clarification of Various Fees and Commissions
In the Asset Management Business of JHR, we receive management fees from JHR as a counter value of its asset management business. We strive to disclose and provide information in an easy-to-understand manner so that the Customers can understand such management fees, including what kind of services it attributes to.
The structure of the asset management fees of the Asset Management Business of JHR is as follows.
| Type of fee | Method of calculation of fee |
|---|---|
| Management Fee 1 | Total Assets x 0.35% per annum (upper limit) |
| Management Fee 2 | NOI x 1.0% (upper limit) |
| Management Fee 3 | Dividend per unit before deducting Management Fee 3 x 43,000 |
| Acquisition Fee | Acquisition price x 0.75% (upper limit) (In the event that JHR acquires properties from a sponsor-related party, the fee shall be lowered by 0.25%) |
| Disposition Fee | Transfer price x 0.50% (upper limit) (In the event that JHR sells properties to a sponsor-related party, the fee shall be lowered by 0.25%) |
| Merger Fee | Appraisal value as of the merger date, of the real estate-related assets, etc. which JHR succeeds through merger x 0.25% (upper limit) |
For the asset management fees that we received from JHR, please refer to "Asset Management Report; I. Asset Management Report; Expenses and Liabilities; 1. Details of expenses related to asset management, etc." in the IR Library of JHR’s website.
IR Library (“Asset Management Report”)
https://www.jhrth.co.jp/en/ir/library.html
In the Private Fund Business, based on discussions with the Customers, we determine fees and commissions in accordance with the services we provide, type, size, anticipated investment returns and the structure of the investment, and these fees are clearly stated in related documents.
5. Providing Important Information in an easy-to-understand manner
In the Asset Management Business of JHR, in addition to the disclosure of information required by laws and regulations, we disclose information for the Customers to immediately grasp the status of hotel operations. For instance, we disclose monthly information on major performance indicators of accommodation departments in major hotels owned by JHR. We also disclose information in a fair and timely manner. For example, we hold financial results briefings on the mid-term and full year financial period of JHR and explaining its financial results and future growth strategies, etc. and disclose related information on the JHR’s website.
For the disclosure of JHR, please refer to the followings:
Press Releases (the historical results of the monthly data can also be found in the “Property” section (tab) y in the Press Releases)
https://www.jhrth.co.jp/en/ir/index.html
IR Library
https://www.jhrth.co.jp/en/ir/library.html
In the Private Fund Business, we endeavor to provide the Customers with information which is important in providing our services, such as risks in transactions, based on the Customer’s transaction experience and objectives. Moreover, we provide the operating status of the assets under management and important information related to investment decisions by the Customers in accordance with the services we provide.
6. Providing Suitable Service to Customers
We strive to improve the knowledge and business quality of our employees in order to contribute to the provision of services suitable for the Customers. At the same time, we endeavor to actively provide information that we believe may affect the investment decisions of the Customers in order to maintain long-term relationships of trust with the Customers.
Furthermore, we believe that sound management that enables to coexist with society and environment will contribute to enhancement of the asset value of the Customers over the medium to long term, and we are also working to improve sustainability through consideration for ESG (Environment, Social and Governance).
Please refer to the sustainability initiatives in the Asset Management Business of JHR as follows.
Sustainability Initiatives
https://www.jhrth.co.jp/en/esg/index.html
In the Private Fund Business, we strive to provide better services to the Customers, including sustainability initiatives, based on an accurate understanding of their intentions, such as their transaction objectives and investment targets, etc.
Furthermore, currently we do not offer or recommend packages of multiple financial instruments and services.
7. Framework for Adequate Motivation of its Employees
We encourage our employees to obtain various types of qualifications in order to maintain a high level of expertise and maintain stable asset management. Specifically, in addition to providing training and examination for the acquisition and maintenance of specialized qualifications, we also provide support for obtaining a wide range of knowledge and skills beneficial to business operations. Moreover, through continuous implementation of training on compliance, ESG, and other topics, we are working to increase awareness among employees of the importance of customer-oriented business operations.
【Number of officers and employees who hold professional licenses】
|
| (As of December 31,2022) |
【Record of Compliance Training】
| Fiscal Year | No. of Times | Main Topics |
|---|---|---|
| FY2018 | 19 |
|
| FY2019 | 20 |
|
| FY2020 | 7 |
|
| FY2021 | 15 |
|
| FY2022 | 14 |
|
Date of disclosure or update: June 30, 2023
Table Corresponding to Principles for Customer-Oriented Business Conduct
| Name of Financial Business Operator | Japan Hotel REIT Advisors |
| URL for Principles | https://www.jhra.co.jp/en/principles/ |
| URL for Status of Correspondence | https://www.jhra.co.jp/en/principles/ |
| Principles | Implemented or not | Corresponding Section for Policy for Implementation | Corresponding Section for Status of Implementation | ||
|---|---|---|---|---|---|
| Principle 2 |
Pursuit of Customers' Best Interest Financial institutions should maintain a high level of expertise and professional ethics, operate businesses for customers with integrity and fairness, and pursue the customers' best interests. Financial institutions also should strive to establish such business operations as their corporate culture. |
Implemented | 2. Pursuit of Customers' Best Interest | 2. Pursuit of Customers' Best Interest | |
| (Note) | Financial institutions should aim to secure their stable customer base and profits by providing high-quality customer-oriented services and pursuing the best interests of customers in transactions with their customers. | Implemented | 2. Pursuit of Customers' Best Interest | 2. Pursuit of Customers' Best Interest | |
| Principle 3 |
Appropriate Management of Conflicts of Interest Financial institutions should accurately identify potential conflicts of interest with customers in transactions, and if there is a potential conflict of interest, they should manage such conflict of interest appropriately. Financial institutions should develop a specific policy in advance for this purpose. |
Implemented | 3. Appropriate Management of Conflicts of Interest | 3. Appropriate Management of Conflicts of Interest | |
| (Note) | Financial institutions should consider the impact of the following situations on their transactions or operations when assessing potential conflicts of interest.
|
Implemented | 3. Appropriate Management of Conflicts of Interest | 3. Appropriate Management of Conflicts of Interest | |
| Principle 4 |
Clarification of Various Fees and Commissions Financial institutions should provide detailed information of the fees and other costs incurred by customers regardless of names, in a manner that customers can understand, including services provided in exchange for such fees, etc. |
Implemented | 4. Clarification of Various Fees and Commissions | 4. Clarification of Various Fees and Commissions | |
| Principle 5 |
Providing Important Information in an easy-to-understand manner Given the asymmetry of information with customers, financial institutions should provide important information related to the sale and recommendation of financial products/services, in addition to the matters indicated in Principle 4 above, in an easy-to-understand manner so that customers can understand. |
Implemented | 5. Providing Important Information in an Easy-to-understand manner | 5. Providing Important Information in an Easy-to-understand manner | |
| (Note 1) | Important information should include:
|
Implemented | 5. Providing Important Information in an Easy-to-understand manner | 5. Providing Important Information in an Easy-to-understand manner | |
| (Note 2) | When financial institutions sell or recommend multiple financial products/services as a package, they should indicate to customers whether or not they can purchase the financial products/services separately and should provide important information about each financial product/service so that the customers can compare the packaged and non-packaged products/services (The same applies when providing information on fees, etc. in Note 2 through Note 5). | Not Applicable | 6. Providing Suitable Service to Customers * We do not sell or recommend financial products/services and this is stated in the Policy and Status of Implementation on our website. |
6. Providing Suitable Service to Customers * We do not sell or recommend financial products/services and this is stated in the Policy and Status of Implementation on our website. |
|
| (Note 3) | Financial institutions should provide information in a clear, plain, and sincere manner that is not misleading, taking into account the transaction experience and financial knowledge of their customers. | Implemented | 5. Providing Important Information in an Easy-to-understand manner | 5. Providing Important Information in an Easy-to-understand manner | |
| (Note 4) | Financial institutions should provide information in an easy-to-understand manner that is commensurate with the complexity of the financial products and services it sells or recommends to customers. For example, when selling or recommending simple, low-risk products, financial institutions should provide concise information. When selling or recommending complex or high-risk products, financial institutions should provide detailed and easy-to-understand information including basic structures such as the relationship between risk and return using materials that enable customers to compare the product with similar products. | Implemented | 5. Providing Important Information in an Easy-to-understand manner | 5. Providing Important Information in an Easy-to-understand manner | |
| (Note 5) | When providing information to customers, financial institutions should differentiate information according to its importance and draw the customer's attention to more important information by placing special emphasis on such information. | Implemented | 5. Providing Important Information in an Easy-to-understand manner | 5. Providing Important Information in an Easy-to-understand manner | |
| Principle 6 |
Providing Suitable Service to Customers Financial institutions should understand the customers' status of assets, trading experiences, knowledge, trading purpose, and needs and structure, sell, and recommend financial products/services suitable for each customer. |
Implemented | 6. Providing Suitable Service to Customers | 6. Providing Suitable Service to Customers | |
| (Note 1) |
Financial institutions should keep in mind the following points in selling or recommending financial products and services.
|
Implemented | 6. Providing Suitable Service to Customers | 6. Providing Suitable Service to Customers | |
| (Note 2) | When financial institutions sell or recommend multiple financial products/services as a package to customers, they should consider whether the package as a whole is suitable for the customers. | Not Applicable | 6. Providing Suitable Service to Customers * We do not sell or recommend financial products/services and this is stated in the Policy and Status of Implementation on our website. |
6. Providing Suitable Service to Customers * We do not sell or recommend financial products/services and this is stated in the Policy and Status of Implementation on our website. |
|
| (Note 3) | Financial institutions, which are involved in structuring financial products, should specify and disclose the customer attributes that they expect to sell the products to, based on the characteristics of the products. Also, financial institutions, which are involved in selling the products, should ensure that the products will be sold in accordance with the specified attributes of the customers. | Implemented | 6. Providing Suitable Service to Customers | 6. Providing Suitable Service to Customers | |
| (Note 4) | When selling or recommending particularly complex or risky financial products, or when selling or recommending products to a group of customers who are vulnerable to damage from financial transactions, financial institutions should examine more carefully whether such sales or recommendations, etc. are appropriate, depending on the products and the attributes of customers. | Implemented | 6. Providing Suitable Service to Customers | 6. Providing Suitable Service to Customers | |
| (Note 5) | Financial institutions should strive to deepen employees' understanding of the structure, etc. of the financial products they offer, and actively provide information to their customers so that they can obtain basic knowledge of the financial transactions in accordance with their attributes. | Implemented | 6. Providing Suitable Service to Customers | 6. Providing Suitable Service to Customers | |
| Principle 7 |
Framework for Adequate Motivation of its Employees Financial institutions should establish an appropriate framework to motivate their employees such as a compensation/performance evaluation system, employee training programs designed to promote actions to pursue best interests of customers, fair treatment of customers, and appropriate management of conflicts of interest, in addition to an appropriate governance structure within its organization. |
Implemented | 7. Framework for Adequate Motivation of its Employees | 7. Framework for Adequate Motivation of its Employees | |
| (Note) | Financial institutions should inform measures to be implemented regarding each principle (including notes attached to them) and any alternative measures to be taken for the measures above its employees who participate in these measures, and establish a system to support and verify the performance of such employees. | Implemented | 7. Framework for Adequate Motivation of its Employees | 7. Framework for Adequate Motivation of its Employees | |
| Inquiries | |
| Section | Compliance Office |
| Contact Address | +81-3-6422-0530 |