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Japan: J-REIT disclosure changes

Teruyoshi Takahashi
On April 1 2014, Tokyo Stock Exchange enforced an Amendment to the Securities Listing Regulations. Events that will trigger timely disclosure for listed real estate investment trust (REIT) securities (disclosure events) are substantially expanded. This Amendment was brought about in connection with the Amendment to the Financial Instruments and Exchange Act as of April 1 2014, which made insider trading rules applicable to the trading of listed investment units issued by J-REITs which invest in real estate properties.

Under the new Securities Listing Regulations, the following items (in summary and not limited to the following) are newly provided as disclosure events (for some items, exemptions are provided in the Enforcement Rules for Securities Listing Regulations):

  • Decision events of J-REITs: (i) execution or termination of an asset management agreement; (ii) cash distribution; and (iii) request for purchase in order to cope with a tender offer.
  • Occurrence events of J-REITs: (i) damage arising from disaster or in the course of performing operations; (ii) filing of an action, or its relevant judgment; (iii) filing of provisional disposition for suspension of asset management; (iv) cancellation of registration; (v) application for the commencement of a bankruptcy proceeding; (vi) dishonour of drafts, debt relief, or extension of repayment periods; (vii) default on financial obligations of a debtor; (viii) suspension of deals with major customers; and (ix) discovery of resources.
  • Decision events of asset managers: (i) application for the commencement of a bankruptcy proceeding; (ii) suspension or abolition of the business or the asset management services entrusted by a J-REIT; (iii) company split, business transfer, share exchange or share transfer; (iv) termination of an asset management agreement; and (v) commencement of managing new-typed assets.
  • Occurrence events of asset managers: (i) change of specified related parties or major shareholders; (ii) filing of an action pertaining to asset management, or its relevant judgment; (iii) filing of provisional disposition for suspension of an asset management business; and (iv) application for the commencement of a bankruptcy proceeding (including that of a specified related party).

In addition, commencement or termination of lease of assets with a great impact on income or profit and some other items are newly-provided as disclosure events.

The Amendment will increase the monitoring and disclosure costs for J-REITs and their asset managers, but enhance timely disclosure by J-REITs, and useful information will be available for investors and stakeholders of J-REITs.

Teruyoshi Takahashi

Nagashima Ohno & Tsunematsu

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