Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.06 11/ 30/ 2021
C h a i r m a n ’s

C o l u m n

DX Advances along with Coronavirus（COVID-19）
The COVID-19 infection situation has calmed down.
I would say that what we experienced during the days before overcoming the pandemic is that, contrary to expectations, wecan work from home even though there are some problems and we do not mind using Zoom for meetings with people wehave never met before. If the pandemic had not happened, people like me who are not tech savvy would still have come tothe office every day without changing their previous working styles.
In the future, by shifting from analogue to digital with Digital Transformation (DX), a situation in which we can access accurate
information to perform duties wherever we are will be generated, and DX should provide Japan with a good opportunity to
improve its labor productivity, which ranks at the lowest level among OECD member countries.
Aoyama Sogo Accounting Firm’s main service is the management of real estate funds.
The problem is that the accounting formats for original data and delivery methodsdiffer for each project. As a result, we are forced to deal with projects individually.
Looking at the situation overseas, fully straight reporting systems are being createdbased on property management reports using Yardi Voyage and MRI Commercial
Management. If the reporting system is generalized using a single platform, time spent
preparing reports will be shorter, improving productivity in one sitting, which may
reduce fees borne by clients.
Anyway, we should start being conscious of what we can digitalize besides the reporting system.
(Kazuhiro Matsuzawa, Representative Director and Chairman)

Renewable Energy Information
2021 Renewable Energy Trends
Only a small number of days left in 2021. Here, I will examine renewableenergy-related trends based on the projects for which we received
orders by the end of October.
In the projects for which Aoyama Sogo Accounting Firm (ASA) wasentrusted with administrative work in the real estate asset andrenewable energy categories, renewable asset projects account for
28.3% of the total this year. Since the renewable energy projects withwhich we were entrusted accounted for slightly less than half of all theprojects last year, the momentum of renewable energy seems to havesomewhat weakened.
Such weakness could be attributable to several factors such as that newdevelopment projects have tapered off because prices under the Feed-inTariffs continue to fall every year, and that clients gave up arranging
projects due to the secondary market surge.
Although the number of consultations
is increasing, those which do not turnout to be real projects are on an
upward trajectory.

Looking at the breakdown of renewable energy projects by asset,
solar power generation accounts for 90% of the total. Inquiries for
power generation and biomass power generation projects started
to increase and I expect that the number of non-solar power
projects under our management will increase in the future.
One recent trend is thatinvestment cases using LPS
schemes are on the rise.
Reasons for this may comefrom methods to inject funds
at the time of fund creation
which are relatively easy touse.
In addition, several clients who had not used SPCs such as GK-TK
schemes started to use them. Some of them said that they had a
hard time to explain the possible use of SPCs to their managements.
We are happy to support clients in such cases, beyond the issues
related to renewable energy, explaining the characteristics andmerits of SPCs as much as possible. We welcome your inquiries.
(ASA Reporting Professional K.K. Hirokazu Ando, COO)

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

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.06

11/ 30/ 2021

R e a l E s t a t e M a r k e tI n f o r m a t i o n

ESG Waves
According to the media, the value of green bond issuance by REITs (Real Estate Investment Trusts) in the first halfof 2021 amounted to a record high (cumulative value of issuance of 253.7 billion yen). The issuance ofSustainability-linked Bonds by Hulic became a hot topic last year. In addition, the use of evaluation criteria
focusing on ESG (Environmental, Social and Governance) performance in real estate investments such as GRESB(Global Real Estate Sustainability Benchmark)’s industry benchmarks has started showing signs of proliferation.
It seems that the impact of ESG on the real estate industry is becoming greater and greater nowadays.
CSR (Corporate Social Responsibility) became aboom slightly more than ten years ago. A realestate company I was working for tried to solicit
investors using an SRI (Socially ResponsibleInvestment) framework, but it was not yet anactivity pursuing sustainability in the true senseof word. (I do not disclose details, but if it
happened today, the company might be accusedof greenwashing.)
I remember that when asked about the green building certification system in Japan by a German institutional
investor who went one step ahead in terms of environmental issues at the time but, to be honest, I did not get it
so I told him half-jokingly, “you cannot buy if you are concerned with a such matter.” (It is a story from morethan 10 years ago).
I feel that the tide has changed since the GPIF (Government Pension Investment Fund) started investing in ESG in2017. It seems that along with the development in which major real estate companies and REITs started taking ESG
seriously, ESG awareness rose all at once in the industry.
Waves of change such as globalization and Digital
Transformation (DX) come to the real estateindustry last, but I feel that ESG has finally come.
We may not be able to get over the waves if we
respond half-heartedly, but if such difficult waves
lead to the improvement of the industry’s
sustainability, it will be really meaningful.
(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.06

11/ 30/ 2021

Global Real Estate NewsIt seems that with every passing day, there is more news about Country A’s net zero target date or Region B’s
renewable energy project. In this month’s issue, we take a look at new developments in the U.S. market.

Soaring U.S. housing rents
Asking rents on U.S. apartments have soared 10.3% on anannual basis. Several factors have contributed to this rent
increase including employees renting close to reopened offices,
as well as a short supply of new apartments. Another factor isthat middle income households are priced out of the marketfrom purchasing a home, and thus resort to rental properties.
Mortgage lending for landowners has picked up significantly aswell after a period of lender uncertainty and governmentassisted forbearance programs helping to cover unpaid rents
during the pandemic. Under the current conditions, “You don’t
have a single private source of capital that isn’t interested inlending on multifamily”.
As evidence, major players are increasing their exposure tomulti-family residences. Cushman and Wakefiled will acquire
40% of Greystone's lending and loan servicing businessCalifornia’s solar panel mandate fornew buildings
California leads the nation in both economy andgreen initiatives. Since January 2020, California
mandated the installation of solar panels on all
newly constructed single-family homes and multifamily properties up to three stories. Recently thestate announced that commercial buildings and hirise multifamily residences will also be required toplace solar panels on new buildings starting 2023.
The state is in the process of getting the newadditions approved for inclusion to its Building Code.
There is concern however that such mandates will
increase construction costs and push home prices
and rents even higher (see article below).

(Yuichi Totani, Client Relations Group)

Tax-related Topic for This Month
Consumption Tax Refund Scheme when Acquiring
Residential Rental Buildings
Regarding the consumption tax on the acquisitions ofresidential rental buildings, there have been tax problems
mainly due to the following two matters:
The first problem was that taxpayers carried out transactions
called "vending machine schemes" and "gold investment
schemes." Taking advantage of these transactions, they
arbitrarily generated taxable sales and avoided calculations
necessary for tax adjustments after applying for a refund. Tax
authorities dealt with these acts through tax reforms on every
occasion, but it looked like a "cat and mouse game," making
the current legal structure extremely complicated.
The second problem was that there were no provisions clearlyclassifying taxable acquisitions of residential rental buildings
with existing tenants acquired by real estate sales dealers forthe purpose of sales. Due to this insufficiency, some conflicts
were seen between taxpayers and tax authorities.

In order to resolve these two problems, the tax reformin FY 2020 implemented a provision to the effect that,with respect to the consumption tax related to theacquisition of residential rental buildings, tax credits
cannot be claimed at the time of acquisition.
This development will resolve the above problems, but
the system in which “consumption tax credits on
taxable acquisitions can be claimed if certain events
such as selling these buildings within three years afteracquisitions occur” was introduced at the same time.
Accordingly, as before, we need to study if using theschemes is advantageous or disadvantageous from theperspective of tax when we create the schemes to sell
and/or buy residential rental buildings, while taking
several factors such as the time of sales in the futureand expected sales value into consideration in advance.
(Ikuo Tamagawa, Tax Consulting Group)

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

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.06

11/ 30/ 2021

Event Report

Annual Seminar 2021
Our 2021 Annual Seminar was held on November 18.
This year’s event was a hybrid of in-person and live streaming format.
We were able to fill our capacity of 50 attendees in addition to the many participants who joined us online.
We truly do thank all participants who made this year’s event another success.
We look forward to planning and delivering our clients with valuable information at future seminars andcertainly wish you will actively participate at our next event!

On-demand recording
available soon!

Comments from our attendees・It’s been a while since attending a seminar in live format. I enjoyed the atmosphere.（Institutional investor）
・Participating in the survey and viewing results in real time was entertaining. (Licensed professional）
・It was interesting to see different personalities among the panelists.（Real estate AM）
・Easy for viewers to participate and a format that can become standard for future seminars.（RE developer）
・Got a better sense of SDGs and ESG initiatives（Major bank rep）

Event Details
Topic

Post-Covid investment strategies of prominent overseas real estate funds
Guest Speakers（Panel order）

Nuveen Real EstateJPMorgan Asset Management (Japan) Ltd.

AEW Japan

Managing Director
Head of Japan

Real Estate Asia PacificHead of JapanCountry Manager

M r . S husa k u W a ta na be

M r . T etsuya Ka r a sa w a

Mr . Ki yo m a sa Ma tsuda

Mode rator

Aoyama Sogo Accounting Firm
Representative Director/Chairman, Kazuhiro Matsuzawa
Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.