Interesting framework for regulated and unregulated Real Estate Fund structures
Luxembourg's tax and legal framework is flexible and so fullfils a wide range of needs for investors and promoters in terms of regulated and non-regulated Real Estate Fund Structures.
Real Estate Vehicles
Institutional, professional and private investors interested in creating an international real estate portfolio will find a range of sophisticated investment vehicles in Luxembourg to meet their specific preferences. The diversity and flexibility of these opportunities has made Luxembourg the premier European domicile for international real estate investment vehicles.
Such a vehicle can either be set up as a non-regulated entity (a commercial company) or as an entity regulated by the CSSF (for instance, a collective investment scheme). The choice will depend on the method by which capital is to be raised, the type of investor targeted, the investments to be made, and particular tax considerations.
Most Luxembourg real estate funds are regulated collective investment schemes, either set up as a company (a variable capital investment company - SICAV, or a fixed capital investment company - SICAF) or as a common investment fund (Fonds Commun de Placement - FCP).
Three other popular structures are:
A real estate investment vehicle established in either the form of a collective investment scheme or a risk capital investment company can adopt a multiple compartment structure..
Non-regulated real estate investment vehicles can choose between four legal forms. Most frequently used is the public limited company structure (société anonyme - S.A.), but there is also scope for funds to set up a private limited company (société à responsabilité limitée - Sàrl.). As commercial companies, these can benefit from Luxembourg's double tax treaty network and the EU Directive on the tax regime applicable to parent companies and their subsidiaries.
A real estate investment vehicle can also be established as a securitisation vehicle.
Real Estate Unregulated Investment Vehicles
In practice, the legal form of a public limited company (Société Anonyme or SA) or a private limited company (Société à Responsabilité Limitée or Sàrl) is most commonly chosen for companies investing in real estate. One of the main features of these two forms of company is that liability of each shareholder is limited to the amount of his participation in the company.
This company invests in estate established in Luxembourg or abroad in two ways:
*By owning shares in a private company, such as a civil company (société civile), established in Luxembourg or in another country to own the building.
*Via a process of securitisation where an estate is securitised by a Luxembourg Securitisation Fund, which then acquires the ownership of the underlying assets and issues shares or notes which are linked to the value and the income of the latter. These structures must be regulated if they issue shares/bonds continuously in the public sphere; otherwise they remain non-regulated and may be set up by promoters, investors, HNWIs or family office, managers.
Real Estate Regulated Investment Vehicles
Various regulated entities may also be incorporated to hold or maintain real estate in Luxembourg or abroad:
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The SICAV which is a company with variable capital in which various investors pool their assets.
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The SICAR which is also a fund which invests in risky assets. For real estate this implies that the investment in real estate bears a certain risk, for example private equity real estate.
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The SIF, specialised investment fund, which is a vehicle dedicated to well informed investors such as institutional, family offices, HNWIs, etc who can hold shares in real estate companies, in other funds, or hold the estates directly.
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The securitisation companies issuing their shares or bonds to the public and investing in underlying assets which are linked with real estate, such as mortgage backed securities or in real estate directly.
Generally, investment in real estate is made through different companies and implies a debt structuring.
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Regulated or
Unregulated 