Residential Real Estate – That’s Us
An integrated residential property company.
The remuneration system established by the Management Board applies to all employees of
d.i.i. Investment GmbH (hereinafter Company) and the Managers.
The remuneration is consistent with the Company’s business strategy and the remuneration practice in accordance with Section 37 KAGB [German Capital Investment Code] and the ESMA guidelines on sound remuneration policies.
The Company is aware of its ecological, business, social and societal responsibility, so that we integrate sustainability issues into the business decision-making at all management levels and consequently also into our remuneration system.
The remuneration is intended to promote the management of the funds in the interest of the investors whilst respecting the integrity of the market and avoiding conflicts of interest.
In particular, the remuneration system is based on sound and effective risk management systems, which take our sustainability issues into consideration and promote these, excluding incentives to enter into risks, which are not reconcilable with the risk profile, our ESG strategy, the terms of investment and the articles of association of the managed AIF.
This guideline applies to all organisational units of d.i.i. Investment GmbH.
This guideline is governed by the resolution of the Management Board of d.i.i. Investment GmbH.
Changes and amendments require the respective express written consent of the Management Board.
The new version of the remuneration guideline in Version 4.0 entered into force with effect from 15 June 2021.
|AIF:||Alternative Investment Fund|
|AIFM:||Alternative Investment Fund Manager|
|ESG||Environmental, Social, Governance|
|ESMA:||European Securities and Market Authority|
Categories of employees, including the management staff,risk bearers, and employees with control functions and all employees, who receive total remuneration, on the basis of which they are in the same income level as the management staff and risk bearers, whose professional activity has significant implications for the risk profiles of the AIFM or on the risk profiles of the AIF that they manage and categories of employees of the institution(s), to which the portfolio management or risk management activities have been transferred by the AIFM and whose professional activity has significant implications for the risk profiles of the AIF managed by the AIFM.
Units of the AIF managed by the AIFM or equivalent investments (including – for AIF that only issue units – instruments linked with unit), depending on the legal structure of the affected AIF and their contractual terms and conditions or statutes, or instruments linked with units or equivalent cashless instruments.
Employees (except for management staff), who are responsible for the risk management, the
|Waiting period:||Period during which the variable remuneration, which has already been acquired and paid out in the form of instruments, cannot be sold.|
Part of the Management Board’s responsibility is to define the remuneration principles and to ensure their application. As a corporate management tool, the remuneration system focuses on achieving the objectives set forth in the business strategy.
The Management Board strives to establish a sound and prudent remuneration policy while eliminating ways to bypass it through abusive circumvention. The remuneration system is structured so as to offer no incentives to executives or employees to enter into disproportionate risks.
An integral component of our remuneration system is to ensure a performance-based remuneration. Therefore, the total compensation generally includes fixed and variable compensation elements, where applicable, as well as possible fringe benefits for some employees.
Fixed and variable remuneration are in reasonable proportion to each other.
The fixed remuneration is adequate to reward the professional services provided fairly and in proportion to the function performed, to the market conditions and to a given employee’s qualification and skill set. The idea is to ensure that employee efforts on behalf of the Company are not primarily motivated by a desire for variable remuneration.
The remuneration system will be reviewed at least once per year regarding its adequacy and compliance with all legal requirements and adapted, where necessary.
In its function as the supervisory body, the Supervision Board is involved by the Management Board in changing the remuneration policy.
The Supervisory Board supervises the implementation of the remuneration policy and receives a report on a regular basis, however, at least annually, as well as for specific reasons, as soon as a change to the remuneration policy is intended to be completed.
As part of its supervisory function, the Supervisory Board ensures that the aims of the remuneration policy are consistent with the regulatory requirements, as well as a sound business strategy of the Company, in compliance with general corporate governance principles, management of the funds in the interest of the investors and whilst respecting the integrity of the market and avoiding conflicts of interest due to remuneration policy.
Furthermore, the Supervisory Board will ensure adequate integration of the control functions (risk management, compliance, internal audit).
The remuneration of the Managing Directors is reviewed by the Supervisory Board on a regular basis.
According to the ESMA guidelines, the guidelines apply to the AIFM and their identified employees.
Therefore, the Company must ensure which employees in the Company are regarded as so-called identified employees. In addition to the managers, these include the employees whose activity has a significant influence on the risk profile of the Company or the managed investment fund (risk bearers) and employees with control functions.
In addition, identified employees also include those who receive a total remuneration, on the basis of which they find themselves in the same income level as managers and risk bearers. For the identification of the relevant employees, in addition to the hierarchical position, the activity in a risk-bearer-relevant area or in a control unit and the employees’ opportunities to influence the risk profile of the Company are of crucial importance.
It needed to be taken into consideration that within the Company, final decisions were solely made by the managers, regarding the purchase and sale of assets for the investment funds, as well as for their management.
Independently, the other employees have no significant influence on the risk profile of the Company and the managed investment funds. In fact, these employees only prepare relevant decisions for the Management Board.
At the same time, the identified employees include those, who do not make decisions independently, but can still have a significant influence on the decision-making.
Employees in the control units were also identifiable, who can have a significant influence due to their control functions.
In accordance with these criteria, this results in the following identification of relevant employees for the Company:
- Head of Product Conception
- Head of Real Estate Purchasing, Fund Controlling and Real Estate Portfolio Management
- Head of Risk Management
- Head of Sales
Employees in control functions are those who are working in the following areas:
- Risk Management
- Internal Audit
d.i.i. Investment GmbH also sources services for the areas of asset management, construction project management, personnel and IT / IT security from d.i.i. Deutsche Invest Immobilien AG and has outsourced the accounting / fund accounting to d.i.i. Deutsche Invest Immobilien AG. Internal audit is outsourced to an external audit firm and the whistleblower system is outsourced to an external law firm. Within the scope of sourcing our outsourcing services, the employees and managers of d.i.i. Deutsche Invest Immobilien AG have no significant influence on the risk profile of d.i.i. Investment GmbH or on the AIFs that it manages, as d.i.i. Investment GmbH makes decisions that could have an influence on the risk profile.
No additional identified employees exist, in terms of their functional position.
d.i.i. Investment GmbH is not bound by collective wage agreements. In principle, the remuneration of the employees is freely negotiated and contractually agree and is comprised of a fixed basic salary (monetary payments irrespective of performance criteria) and in individual cases, a variable remuneration component (additional monetary payments and benefits, which may be granted on the basis of performance criteria or, in specific cases, on the basis of other contractual criteria).
Furthermore, the ESG risks determined at the Company and fund level also flow into the annual employee appraisals for performance assessment.
During the course of the appraisal, an assessment is made as to the extent that the measures have been complied with by the employees and managers for the implementation of the ESG strategy. The measures to be implemented are described in detail and anchored in the ESG Directive.
The remuneration system established by the Company relies on a sound and effective risk management system and promotes this by excluding incentives to take risks, which are not reconcilable with the risk profile, the terms of investment, the statutes or the articles of association of the managed AIF.
Therefore, the objective of the remuneration policy is the orientation towards the business model, sustainable success and the Company’s risk structure.
As a result of this, the following applies to the remuneration of the employees:
Annual fixed salary
The basic salary is paid in 12 monthly instalments. The fixed remuneration will be specified when the employee is hired in consideration of conformity with the market and adequacy. The system of annual fixed salaries is based on the status of the position/the performed function according to the market conditions.
Inter alia, the requirements for the qualification and the skills of the employees are relevant for remuneration. By structuring the remuneration policy, particularly the amount of the annual fixed salary, it is ensured that no dependency on a variable remuneration is created for the employees. Work and service contracts, which show obligations to pay severance payments when employees leave, do not exist with the Company.
In general, the Company’s remuneration system is based on a pure annual fixed salary payment of the employees.
A variable share of the remuneration as an annual bonus may be specified by the Company for some of the employees on the basis of the risk-adjusted profit of the Company and the business fields, as well as the individual performance of the employee.
The variable portion of the remuneration is specified in a defined process in the first quarter of a calendar year by the Management Board and paid out with the payroll in the following months.
Whereby the variable remuneration components are basically only distributed if the short-term and medium-term risk situation of the Company allows it and no gross breaches of duty and immoral conduct, as well as infringements of our compliance regulations, exist. Any necessary adaptations to the fixed and variable remuneration will be discussed once per year between the superior who is responsible for human resources and the employee, after which it will be decided on by the Management Board.
Variable remuneration in the form of instruments that are intended to simplify circumventing the requirements of the AIFMD Directive, are not paid.
Guaranteed variable remuneration can only be paid in exceptional cases in connection with the hiring of new employees and is limited to the first year.
Rewarding failure in connection with the premature termination of contacts does not take place.
For employees in control functions, the variable remuneration only accounts for a small amount of the total remuneration, insofar as it is envisaged for these employees. Furthermore, individual performance targets must be agreed for the respective employees in the control functions, in order to avoid dependencies and conflicts of interests with the performance of the areas to be controlled.
The contracts of the Managing Directors envisage fixed and variable portions, whereby the variable portions depend on the success of the Company and account for a maximum of 30 % of the total remuneration, as a rule.
The remuneration is based on the authorities, duties, expertise and responsibilities of the Managing Directors. The concrete disbursement amounts are specified as part of the management assessment between the Management Board and the Supervisory Board.
In particular, the success of the Company and the performance of the Managing Director in the current and past year, the current risk situation and the corporate planning for the next years are used.
The performance is thereby analysed and assessed over multiple years.
The Managing Directors are prohibited from concluding personal hedging strategies or remuneration-based and liability-based insurances, with which the orientation towards risk behaviour anchored in the remuneration policy are undermined.
The Company offers various incentives and benefits to its employees. These include:
inter alia, further education and fitness offers, participation in the occupational old-age pension scheme, free Jobticket and safeguarding the employees through group accident insurance.
Furthermore, individual employees, particularly the members of the Management Board, as well as individual employees in leadership functions, receive company cars through the Company.
However, this offer is not available for all of the Company’s employees.
For a possibly necessary adaptation of the fixed salary and for the concrete amount of the variable remuneration, the Management Board uses, inter alia, the performance of the individual employee, the risk-adjusted success of the Company and the business fields, as criteria.
The remuneration policy is reconcilable with sound and effective risk management and does not encourage the acceptance of risks.
According Subsection VII.I Subsection 26 of the ESMA guidelines, the principle of proportionality can be used to substantiate the non-application of individual, selected requirements. This justifies why they are not applicable to all identified employees.
Only the non-application of the following requirements is possible:
- Variable remuneration in the form of instruments
- Waiting period
- Ex-post consideration of the risk of the variable remuneration
The various risk profiles and features of the AIFM justify a proportional implementation of the remuneration principles. Specific criteria, which are of interest for the application of proportionality are the size of the AIFM and the AIF managed by it, the internal organisation and the nature, scope and complexity of the transactions, must be taken into consideration.
With respect to d.i.i. Investment GmbH, specific criteria have been identified, which lead to the application of the principle of proportionality and are explained below:
With presently 17 FTEs (incl. Management Board), d.i.i. Investment GmbH is a small company, whose structures are manageable, transparent and not comparable with listed companies.
d.i.i. Investment GmbH also has no system relevance for the financial market. Transactions are only performed in accordance with the business licence.
d.i.i. Investment GmbH makes investments in the German residential property market for its managed AIFs. At present, no cross-border AIFs are being managed or marketed. This leads to a significant reduction of the risk.
Until 2019, sales were exclusively made to professional and semi-professional investors. From 2020, sales are also made to private investors for the newly launched closed-end public AIF.
b) Internal organisation
d.i.i. Investment GmbH performs the risk management, the sale and compliance itself in the Company and enlists the services of the parent company, d.i.i. Deutsche Invest Immobilien AG, as part of an optimised value chain.
In light of the many years of experience of both companies in the area of managing real estate assets, the standardised and optimised processes also contribute to a functioning and reliable process organisation.
c) Nature, scope and complexity of the transactions
The managed funds are primarily invested in residential properties. No investments are made in risky types of use, such as commercial properties.
The invested market – Germany – is highly regulated and has a transparent real estate market.
The AIFs pursue a balance debt financing strategy and no complex investments are made in securities.
In total, d.i.i. Investment GmbH manages a small to medium-sized volume of assets and is predominantly a manager of a low-risk and manageable portfolio, on the basis of the number of employees, the complexity of the business and the risk profile of the individual AIFs and in relation to the purely German residential properties.
With respect to the internal organisation and complexity of the transactions, it becomes clear that an introduction of a complex remuneration system would be excessive for d.i.i. Investment GmbH.
The same applies to the Human Resources area and the process organisation. Without the cooperation of the Management Board, individual employees do not have the opportunity to influence the risk profile or the managed AIFs significantly.
Internal competence and approval regulations (from a minimum of 4-eyes to 8-eyes principle) contribute to employees only being able to process and approve significant business transactions collectively.
Due to the aforementioned features, use is made of the non-application of individual requirements on the basis of proportionality for the identified employees.
The requirements in relation to the disbursement of the variable remuneration in the form of instruments, the introduction of a waiting period, the deferment and the ex-post consideration of the risk of the variable remuneration are therefore not applied to the identified employees.
According to the ESMA remuneration guidelines, it is not necessary to set up a remuneration committee for companies where the value of the portfolio of AIF, which they manage, is below EUR 1,25 billion and the company employs fewer than 50 staff.
As the Company employs significantly fewer than 50 staff and the value of the portfolio of the AIFs (NAV) being managed amounted to around EUR 260 million according to the annual financial statements at the end of 2019 and is therefore significantly below EUR 1.25 billion, the setup of a remuneration committee is refrained from.
The Management Board will deal with the remuneration system on a regular basis, however, at least once per year. In the review, the Supervisory Board is involved as soon as a change is to be implemented to the remuneration policy.
The emphasis of the review is on the adequacy of the remuneration system in view of the size, the internal organisation and the nature, scope and complexity of its transactions. In particular the setup of a remuneration committee is examined.
Furthermore, additional aspects are also included for specific reasons, such as the implications of the remuneration policy (e.g. annual fixed salary) on the fluctuation and motivation of the employees, as well as indications of circumventions.
Insofar as an adaptation of the remuneration rates is necessary from the perspective of the Management Board and the Supervisory Board, the risk management function, the compliance function and internal audit are involved in this revision.
While for the risk management function, e.g. the influence on the risk profile of the AIFM and for the compliance function e.g. the influence on compliance with legal and internal standards plays a role, internal audit contributes the experiences regarding the implementation of and effect of the remuneration policy from its regular, independent audit.