B U S I N E S S
R E A L E S TAT E
Pole position Text Sarah Pitt — Illustration Myriam Heinzel
Renowned for its long track record, broad offerings and diverse pool of expertise, Luxembourg has held the position of the LEADING
DOMICILE
for international real estate funds in Europe for quite some time. How does it intend to stay there?
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uxembourg is an active funds market and a major hub for investors, with real estate funds established here investing all over the world. According to Michael Hornsby and Keith Burman, co-chairs of the Association of the Luxembourg Fund Industry ( Alfi) Real Estate Investment Funds (Reif) technical committee, the appeal of Luxembourg is clear: the country remains at the forefront of the global fund management industry by being fast and flexible in terms of creating what the market needs, and offers a comprehensive toolbox aligned with the latest investment requirements. The Luxembourg fund centre has longstanding credibility with institutional investors and the nation has a long history of facilitating the holding of private and public assets in other countries. Luxembourg’s excellent track record and serious but practical regulatory environment makes it an attractive and safe destination for investors looking to set up real estate funds. “A fund manager would need to have a good reason not to set up here!” notes Hornsby, partner at EY Luxembourg, specialised in international real estate and private equity structures. THE ATTRACTION Alfi’s latest annual Reif survey, featuring data from 30 September 2016, lists numerous facts and figures that underpin Luxembourg
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as being top of the game. Released in March 2017, the 11th edition shows steady growth in a number of funds and net assets, from the early 2000s when real estate funds became an established sector. It reveals that total net real estate assets under management in regulated funds supervised by the CSSF in Luxembourg had reached more than €43bn by the end of 2015, up from €34bn a year before. The total number of Reifs increased by 10% from last year’s survey and Luxembourg’s net assets at the end of 2016 were approaching €50 billion. Luxembourg domiciled structures are used by many of the world’s leading managers, including over
“Luxembourg is a safe and stable worldclass governance environment for global investment products.” Keith Burman
ManagementPlus
half of the top 50 Private Equity Real Estate (Pere) managers. “Funds in Luxembourg collect capital from investors all over the world; within Europe, Luxembourg funds benefit from the AIFMD passporting regime, which allows us to engage with investors in the EU on a marketing passport basis,” explains Hornsby. “Equally, outside the EU, investors in Asia, the US and other global locations all use Luxembourg structures to pool capital.” Luxembourg is also popular due to the range of fund vehicles and types of investment products that it can offer. It currently has more than 330 regulated real estate funds of various types investing directly in properties, and considerably more regulated funds and unregulated partnerships, joint ventures and other holding companies which invest in direct property but also into real estate debt, real estate fund of funds and other real assets such as infrastructure. “As opposed to larger markets such as Germany, France or the UK, Luxembourg real estate funds are less likely to be a mass retail investment product. Cross-border investing is much more complicated and requires a longer timeframe,” states Keith Burman, partner at corporate governance firm ManagementPlus. “The last five years have seen an increase in institutional allocations to real estate, due to the generally
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