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- Background on the Asset Manager and Corporate Governance
Background on the Asset Manager
Industrial & Infrastructure Fund Investment Corporation ("IIF" or the "Fund") entered into an asset management agreement with Mitsubishi Corp.-UBS Realty Inc. (the "Asset Manager") in March 2007. The Asset Manager, which is the first cross-border J-REIT asset management company, is comprised of 51% ownership by Mitsubishi Corporation and 49% ownership by UBS AG. Pursuant to the Investment Trust Law governing J-REITs (Japanese Real Estate Investment Trusts), J-REITs are not permitted to have employees and, as such, are required to outsource various functions relating to their operations (e.g. asset management, custody and other administrative functions) to third-party service providers (the Asset Manager in the case of our asset management activities). Accordingly, the Asset Manager has broad discretion over the Fund's investment and financing strategies, asset acquisition and disposition policies and property management.
By way of background, the intent of Mitsubishi Corporation, the original sponsor of our Fund and one of Japan's leading enterprises, was to capitalize on the complementary skill set of UBS, which is not only one of the world's leading financial firms, but also one of the largest asset managers in the world (including ranking as one of the largest global real estate asset managers). We believe that the resulting blend of complementary skills and expertise within our cross-border joint venture asset management company distinguishes us in the J-REIT marketplace. Moreover, within our Asset Management Company, we have striven to put in place some of the strongest real estate asset management practices from around the world.
Corporate Governance of Our Asset Manager
Our asset manager's board of directors consists of eight members, four of whom are proposed by Mitsubishi Corporation and four of whom are proposed by UBS Global Asset Management. Approval of six of the eight directors is required for certain significant matters or transactions involving us, our asset manager's shareholders and/or their subsidiaries or affiliates, including matters or transactions that may raise perceived conflicts of interest. For example, the acquisitions of eight of the nine properties we purchased in connection with the initial public offerings required supermajority approval, because we purchased the properties from Mitsubishi Corporation or its affiliates.
