Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.05 10/ 29/ 2021
C h a i r m a n ’s

C o l u m n

The local office market has deteriorated as much as Tokyo.
The fifth wave of the new coronavirus infectious disease has been contained and the state of emergency was finally lifted on September 30.
Aoyama Sogo Accounting Firm manages a large number of vehicles for real estate securitization projects. Not surprisingly, what I am concerned
about most of all is the trend of the office market, which accounts for about half of the total of those vehicles.
Particularly during the state of emergency, corporates and organizations thoroughly implemented working-from home arrangements in Tokyo,
where many headquarter functions are located. Among those corporates and organizations, some IT companies made a big turn, keeping 30% of
their head office space, cancelling the contracts for all the remaining space, and embracing free-address systems. Affected by thesedevelopments, rents in Tokyo are on a downward trend.
On the other hand, local cities have turned out to be a focus of attention due to the following reasons:① Teleworking has been less implemented than in Tokyo.
② Shared offices continue to open.
Source: Urban Research Institute Corporation (a think tank specializing in real estate within Mizuho Financial Group)
Symbolically, a major labor dispatching company declared that it would move its headquarters toAwaji Island, which became a topic of conversation.
I, myself, as a person from Ehime prefecture, thought for an instant that working in my hometown
with lower Covid infection risk might be a good idea given that nothing is different wherever I workfrom. Even with the state of emergency lifted - and we can go for a drink - there is no mood whichurges telework to go away. With the speed of communication being dramatically improved by 5G,
will the move from Tokyo to other regions continue to accelerate as we see now?
Like others, we are paying attention to this matter.
(Kazuhiro Matsuzawa, Representative Director and Chairman)

Renewable Energy Information
Toward the realization of carbon neutrality
On September 30, 2021, the Ministry of the Environment formulated a"Leading Tenant Action Plan" which outlined the efforts fordecarbonization by tenant companies, and began calling for companies
and municipalities to support the Action Plan and publishing their names.
The background of the publication of the Action Plan is that officebuildings accounting for a large proportion of emission volume arerequired to decarbonize in order to realize carbon neutrality in 2050.
Particularly in terms of tenant buildings, persons who develop and/oroperate buildings are not users of the same buildings, which is an issue
to resolve in order to accelerate efforts for decarbonization.
For this reason, the Ministry of the Environment, by formulating theAction Plan, calling for companies and municipalities to support the planand revealing their names, will inform building owners of the needs oftenant companies, and execute its plan to facilitate decarbonization oftenant buildings. More specifically, the Ministry will make widely
available the needs for buildings which contribute to decarbonizationsuch as ZEBs (Net Zero Energy Buildings) and let the owners know theefforts for decarbonization being made in cooperation with the ownersof the buildings after tenants move in. It explained that provision ofsuch information is expected to help building owners supply more
decarbonized buildings. It explained that provision of such information isexpected to help building owners supply more decarbonized buildings.

The Action Plan basically consists of an "action plan at the time of
selection of buildings to move into” and an "action plan after
moving in", and both of them are based on an idea of (1) energy
saving (improvement of energy performance and reduction ofenergy consumption), (2) utilization of renewable energy, and (3)securing safety, health and/or comfortableness, and intellectual
productivity, respectively, at the time of selecting the buildings andafter tenants move into the buildings.
The Ministry cites advantages of supporting the Action Plan:
communicating to owners the needs for tenant buildings which
contribute to decarbonization and letting them know the efforts
being made in cooperation with the owners of the buildings aftertenants move in are expected to result in more supply of tenantbuildings and ease of moving in; and such information provision asa part of the efforts for decarbonization and health management isexpected to lead to the improvement of corporate social reputationand promotion of ESG investment.
We can expect that the government will continue to implement
similar measures on the back of the situation where companies
cannot ignore measures taken and information provided for carbon
neutrality. If there is new useful information, we will keep you
informed in this newsletter.
(Hirokazu Ando, Executive Manager )Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.05

10/ 29/ 2021

R e a l E s t a t e M a r k e t
I n f o r m a t i o nJ-REIT 20 years
Last month, J-REITs marked the 20th anniversary of their foundation.
I was involved in structuring of securitized products at a Japanese megabank back then. Since I had been feelingthe limit of product design in combining terminable debts such as corporate bonds and loans with indefinite real
rights of real estate, and triggered by the lift of the ban on real estate investment trusts following the revision of
the Investment Trust Act, I moved to a foreign investment bank and was preparing for listing a J-REIT.
On September 10, 200I, when Nippon Building Fund (NBF) sponsored by Mitsui Fudosan and Japan Real Estate
Investment (JRE) sponsored by Mitsubishi Estate were listed earlier than any other players, I was excited alongwith my colleagues, saying “at last, we are up next.”
The 9/11 terrorist attack happened next day. I still clearly remember that colleagues from other countries working
at midnight with me were glued to the emergency live videos on their PCs and started murmuring “Oh God…. ″After that, the stock market plunged and IPOs were postponed indefinitely. In the end, I changed my job to aforeign-affiliated real estate company, unfortunately before seeing the recovery of the market. But since then,those IPOs performed successfully and have grown to be real estate securities with an established reputation.
The market capitalization of J-REITs, which was 260 billion yen at the time of foundation, has expanded to 22
trillion yen including private placement REITs while overcoming various difficulties beginning with the 9/11
incident and continuing to the 2008 global financial crisis and the Great East Japan Earthquake. I believe thatJ-REITs will forcefully overcome difficulties and continue to grow.
I would like to extend my heartfelt congratulations on the 20th anniversary of J-REITs’ foundation.
(Shigeru Hirai, Client Relations Group)

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.05

10/ 29/ 2021

Global Real Estate NewsQ2 Boston Lab Market Report

Plans for $400 billion U.S. Desert City

Collier's Q2 Lab Report says that the Boston life science real estatemarket is booming, with peripheral cities gaining just as much traction.
VC funding is continuing, with very low vacancy and very high rents.
Lab space is in extremely high demand. Cambridge space is limited, socompanies that engage in R&D to production are looking to suburban areas.
Both conversions of existing properties and ground-up projects areprevalent, as “speed to market” is important right now.

Affect of U.K. Housing Boom on Post-Brexit economy
U.K.'s house prices are still rising fast. Reasons include short supply like inmany cities globally. Along with investor sentiment that "brick and mortar
investments" are viewed as safe during this time. Data suggests that there
is an inverse relation between increase in home prices and decrease inexports. As profitability in the construction and real estate sectors rise,
there is tendency for more workers and capital to flow from manufacturing
into those sectors. This puts downward pressure on manufacturing andconsequently to the competitiveness of U.K. exports.

“Telosa” (not Tesla) is a $400 billion project proposedby former Walmart CEO andarchitecture firm Bjarke Ingels Group to create asustainable city in the desert. Proposed locations
include Nevada, Utah, Idaho, Arizona, Texas and theAppalachian region. One of the key features is anendowment system that runs on the principle thatcitizens share in land ownership, contribute to thecommunity, and receive good education and healthcare.
The project will attempt to incorporate pretty much all
ESG related principles (City of Telosa).
Architecture firm Bjarke Ingels is also behind Toyota
Motor Corporation’s smart city in Japan. The project isunder way to create a fully sustainable 2,000 person“living laboratory” to test autonomous driving, smart
technology, and robotics. (Toyota press release)(Yuichi Totani, Client Relations Group)

Tax-related Topic for This Month
Invoice system to be introduced
Toward the introduction of the “qualified invoice retentionsystem” (so-called “invoice system”) for tax deductions fortaxable purchases pertaining to the consumption tax with effectfrom October 1, 2023, applications for registration of “qualifiedinvoice issuers” started to be received on October 1, 2021.
Under the new invoice system, in order to inform purchasers of
accurate consumption tax rates and the amount of consumptiontax, etc., sellers will be required to issue and retain “qualifiedinvoices” which fulfill certain conditions including description of
the registration numbers of qualified invoice-issuing enterprises.
In addition, purchasers will be required to retain qualified
invoices when they claim tax deductions for taxable purchases.
In order to become an enterprise which can issue "qualifiedinvoices,” it is necessary to apply for registration as a “qualifiedinvoice-issuing enterprise” to the tax office with jurisdiction over
the address where it is located. However, registration ofqualified invoice-issuing enterprises can be made only by taxable
enterprises pertaining to consumption tax, which means that taxexempt enterprises need to submit a " Report on the Selection ofTaxable Proprietor Status for Consumption Tax" to register.

After the introduction of the invoice system, in principle, tax
deductions for taxable purchases will not be granted forpurchases from persons other than qualified invoice-issuingenterprises such as tax-exempt enterprises and consumers
although transitional measures will allow tax deductions of
80% of taxable purchases from October 1, 2023, to September
30, 2026, and only 50% of the same from October 1, 2026, toSeptember 30, 2029. Accordingly, given that taxable
enterprises will review or avoid transactions with tax exempt
enterprises to which tax deductions for taxable purchase will
not be applied, tax exempt enterprises need to consider suchmeasures as resolutely choosing to become taxable enterprises
pertaining to the consumption tax, which are eligible to bequalified invoice-issuing enterprises, in order to continuetransactions underway before the introduction of the invoicesystem.

The qualified invoice retention system will be introduced about
two years later, but it is necessary for enterprises to fully
understand the system to begin with, and make necessary
arrangements as a seller or buyer,
respectively, including making adecision on whether or not to register.
(Sachie Aoki, Tax Consulting Group)

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.