IT S ALL ABOUT LOCATION LUXEMBOURG, THE IDEAL PLATFORM FOR INTERNATIONAL REAL ESTATE INVESTMENTS
Curriculum Vitae Catherine Rückel Catherine Rückel, Moderator Partner German Business Group Leader Luxemburg PwC 400, route d Esch, L-1014 Luxembourg Telephone: +352 494848-2137 Email: catherine.rueckel@lu.pwc.com Homepage: www.pwc.com Catherine is heading the business development for the German Business Group and the Asset Management Real Estate German Market. As an audit partner she works with international investment funds and real estate companies of German origin in Luxembourg. She was involved in the implementation and structuring of investment funds regarding tax and audit issues for many years. She has a profound experience in the domain of real estate funds for German investors, especially regarding Family Offices and institutional investors. Her advisory skills comprise financial accounting according to Lux GAAP and IFRS and the assistance of clients during the foundation/set-up phase in all aspects of structuring and functional questions for open-ended or closedended fund structures. With over 2,300 professionals at your service, PwC Luxembourg is not only the largest professional services firm in the country, but also a centre of excellence for investment and real estate management within the PwC Network. Our Real Estate and Infrastructure Team comprises more than 250 experts of which 40 are partners and directors. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 2
Curriculum Vitae Pierre Kreemer Pierre Kreemer Tax Partner Real Estate & Infrastructure Leader, Luxembourg KPMG 9, Allée Scheffer L-2520 Luxembourg Telephone: +352 22 51 51-5502 Email: pierre.kreemer@kpmg.lu Homepage: www.kpmg.lu Pierre has over 20 years experience in diversified international tax advisory services. He joined KPMG Tax in 1993 and also worked for the former trust division of KPMG. He was promoted partner in October 2006. He leads the Real Estate & Infrastructure Tax Group since 2009 and KPMG Luxembourg Real estate & Infrastructure Line of Business since 2012. Pierre has an International Corporate Tax background and is regularly involved in large transactions and reorganisations for high level international client base with a focus on corporate reorganisations and the structuring of real estate / infrastructure funds (both regulated and unregulated) and transactions. Since the crisis in 2009 he also leads several initiatives on the restructuring / work outs of distressed real estate funds and also assist in the set-up of debt funds. He is also part of the international team of KPMG servicing pension funds and sovereign wealth funds. He is also closely involved in analyzing the tax aspects of the EU AIFM Directive. He speaks French, English and German. He is member of the INREV Tax Committee and co-chairs the Strategy Working Group for Real Estate of the Luxembourg Investment Fund Association (ALFI) and is an active contributor to the ALFI real estate training courses. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 3
Curriculum Vitae Dr. Marcus Peter Dr. Marcus Peter, LL.M. eur. Partner Head of Private Equity and Alternative Investment Funds Bonn & Schmitt 22-24, Rives de Clausen L-2165 Luxembourg Telephone: +352 27 855-302 (direct) Email: mpeter@bonnschmitt.net Homepage: www.bonnschmitt.net Marcus is partner at Bonn & Schmitt, having joined the firm in 2004. Born in Germany, he was admitted to the German Bar in 2004 and the Luxembourg Bar in 2005. He attended high school in the United States for a year and studied law in Germany (obtaining a Ph.D. and LL.M. on European law). In addition, he studied at a Russian university (Rostow-na-Donu) and worked for a German and a Swiss law firm in Moscow before joining Bonn & Schmitt in Luxembourg. Marcus Peter is co-heading Bonn & Schmitt s Investment Management & Private Equity department. He is supervising the firm s teams dealing with alternative investment fund structures (real estate, infrastructure, hedge funds, private equity, debt funds etc.). He is also assisting the other co-head of the department, Corinne Philippe, pertaining to UCITS fund structures. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 4
Curriculum Vitae Adrian Aldinger Adrian Aldinger Senior Associate Private Equity & Real Estate Arendt & Medernach 14, rue Erasme L-2082 Luxembourg Telephone: +352 40 78 78-947 Email: adrian.aldinger@arendt.com Homepage: www.arendt.com Adrian is a senior associate in the private equity & real estate practice of Arendt & Medernach where he advises clients on the legal, corporate and regulatory aspects of alternative investment fund structuring/formation and related transactional work. He has been a member of the Berlin Bar (Germany) since 2010 and has been admitted by the Luxembourg Bar to practice in Luxembourg under his German professional title. He is a German qualified lawyer, who studied law in Erlangen and Berlin. Adrian Aldinger holds the German first (2007) and second (2009) state exam in law. He is also founding member and vice-chairman of the German Luxembourg Lawyers Association. Languages: English, French and German. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 5
Real Estate Funds in Luxembourg - Statistics Luxembourg an attractive place for real estate structures 35.00 AuM RE Funds 400 # RE funds/ SICAR EUR Billion 30.00 25.00 20.00 28.74 29.95 15.00 14.50 21.10 24.08 17.58 14.84 10.00 5.00 6.00 4.13 3.85 3.21 1.84 1.73 1.17 0.00 2008 2009 2010 2011 2012 2013 2014 SIF, Specialised Investment Fund Law of February 2007 Part 2 Funds - 2002 Law /2010 Law Number of Real Estate Funds 350 51 300 50 60 250 56 200 46 46 150 42 252 280 36 183 208 100 166 135 109 83 50 21 16 15 13 27 27 27 23 0 2007 2008 2009 2010 2011 2012 2013 2014 SICAR * SIF, Specialised Investment Fund Law of February 2007 Part 2 Funds - 2002 Law /2010 Law Source: CSSF July 2014 (*SICAR Estimation) It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 6
Real Estate Funds The INREV Universe Source: INREV Vehicle Universe Q2.2014 August 2014 It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 7
Real Estate Funds The INREV Universe Many funds are reaching maturity or are being wound up Investors are looking for new investments in the current low interest rate environment Initiators seek for substitute products Potential for new business Source: INREV Vehicle Universe Q2.2014 August 2014 It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 8
AIFMD Current state of implementation AIFM Licenses by Key European Asset Management Hubs 800 700 600 500 400 300 200 100 0 750 706 263 270 220 131 70 100 64 85 UK France Germany Ireland Luxembourg AIFM Licences (granted - approximately) AIFM Licenses (exp. end 2014) Sources: National Regulators, EFAMA, PwC It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 9
AIFMD New Structures available Setting the scene What? o complete overhaul of the common limited partnership (SCS - CLP) o creation of the special limited partnerships (SCSp - SLP) o modernisation of the corporate partnership limited by shares (SCA) Objective? o bridges the gap with Anglo-Saxon LP structures o offers solution to German initiators and managers It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 10
AIFMD New Structures available Luxembourg Limited Partnerships 300 250 240 251 200 208 182 150 100 50 69 46 88 53 105 64 123 75 148 91 101 116 126 130 Nbr companies SCSp Nbr companies SCS 0 16 17 21 11 13 1 3 1 28 21 It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 11
AIFMD New Structures available Special Limited Partnership Key features High Confidentiality Flexible governance Contractual flexibility SLP Ring-fencing No legal personality but domicile Full tax transparency It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 12
AIFMD New Structures available Luxembourg Limited Partnerships General Partner Interest(s) of the General Partner(s) SCS(p) Limited Partner Investors Interests or Debt Instruments SPV SCS and SCSp are commercial companies with and without legal personality, respectively (partnerships) Limited number of legal requirements (voting, economic rights and corporate governance) SIFs and SICARs can be set up as limited partnerships (with variable capital) Cash or contribution in kind is possible (even as a service) Interests may take the form of units Transfer and redemption of interests are covered by the limited partnership agreement Issue and redemption of units are not necessarily processed at NAV price Register of the limited partnership and limited partner s identity are not required to be published Management by GP or third party administrator (never by limited partners) Limited partners can perform (without loss of limited liability) internal administrative tasks such as advisory, monitoring and supervision activities. A personal creditor of a partner has no direct claim against the assets of the SCSp Tax transparency It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 13
Structuring Example (Real Estate Fund) Property Manager (ex-lux Possible) Appoints Luxembourg Chapter 16 Management Company (and AIFM) Unitholders Investment Manager (ex-lux Possible) Appoints Real Estate SIF-FCP Units Depositary Bank Luxembourg Compartment EUR Compartment CHF Compartment USD Central Administrative & Transfer and Registrar Agent (Luxembourg) Commercial RE in EUR countries Commercial RE in Switzerland Commercial RE the USA It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 22
Structuring Example (Debt Fund SIF) Investment Manager (ex-lux Possible) Appoints General Partner (Luxembourg, e.g. SARL) Limited Partners Appoints Limited Partner Parts Depositary Bank Luxembourg Debt Fund SCS, SIF Compartment EUR (Acquired Loans) Compartment (New Loans) Central Administrative & Transfer and Registrar Agent (Luxembourg) Acquisition of Existing Senior Loans Financing Commercial and Retail Real Estate Granting of Original New Senior Loans Financing Commercial and Retail Real Estate It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 23
Luxembourg Tax Update Tax Treaty Network Status as at 15.09.2014 It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 16
Generic Real Estate Structure for foreign investors Luxembourg Investor(s) 100% Lux LP (SIF) < 5% Lux GP General Tax transparency and tax neutrality at the level of Luxembourg LP. Investments to be organized via a two tier Luxembourg feeder structure involving Lux LP as sole shareholder of LuxHoldCo, a Luxembourg fully taxable company. 100% LuxHoldCo can further grant loans to various SPVs. Other jurisdictions LuxHoldCo SPVs SPVs SPVs Double Tax Treaty access and Participation exemption at LuxHoldCo level. The funds to be provided to Lux LP can be denominated in USD whereas Lux LP can provide EUR denominated funds to LuxHoldCo and Lux LP can opt for USD functional currency. Instead of a Luxembourg Limited Partnership, specific Luxembourg feeder fund vehicles (regulated or not) can also be implemented as well as a direct investment in LuxHoldCo. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 25
Structure for investment in French real estate Investors Luxembourg 100% < 5% Lux GP Lux LP 100% LuxHoldCo France French OPCI French Management company It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 18
Structure for investment in Spanish real estate Investors Luxembourg 100% < 5% Lux GP Lux LP 100% LuxHoldCo LuxSubCo Spain Spanish SOCIMI It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 19
Key reasons for choosing a Luxembourg over a German fund vehicle 1. Luxembourg is a well-known location for structuring investment funds and therefore very appealing for international investors 2. A Luxembourg Specialized Investment Fund (SIF) has no restriction in regard to the financing of interim holding companies or property companies whereas a German fund may only finance directly property companies with a limitation of 50% of debt funding. Therefore, the Luxembourg SIF provides all flexibilities to structure real estate investments in a tax efficient manner, giving regard to foreign tax requirements. 3. Equal to Luxembourg contractual funds, a German fund would be a flow through in case of foreign investments (and based on the assumption that the investors are not resident in Germany). However, the German fund would in most cases not be able to access treaty benefits. A Luxembourg SIF structure in the form of an FCP may benefit from tax treaties when structuring investments via a Luxembourg SOPARFI. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 20
Example - Luxembourg investment structure Investors Lux ManCo ForeignCo IBL SIF (FCP) Tracking financing instrument Lux MasterCo IBL Lux SCS Luxembourg or local PropCo German property Luxembourg or foreign property It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 21
ELTIF Long-term investment capital in order to finance tangible assets (energy, transport and communication infrastructures, industrial and service facilities, housing and climate change and eco-innovation technologies), intangible assets (education and research and development). No early redemption rights for investors no potential conflicts of interests between exiting and remaining investors. Listing possible. Close-ended EU AIF with 'second retail passport ELTIF European Long Term Investment Funds Retail ELTIFS : No preferential treatment or specific economic benefits granted to individual investors or groups of investors, not structured as a partnership. Available Q1/2015 Eligible assets: Min. 70% in long-term investments: infrastructure projects, unlisted companies (mainly SMEs); investments in real estate assets (buildings or direct purchase of an infrastructure asset) ELTIF, EuVECA oder EuSEF. Follows the tried-and-tested UCITS approach on product specifications and risk spreading, specific rules on conflicts of interest, increase transparency (costs), limited use of derivatives and leverage. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 22
Real Estate Funds in Luxembourg - Statistics Luxembourg The place to be On European level Luxembourg is ranked 1. Target Investors of Luxembourg funds are in general not domiciled in Luxembourg. Germany, UK and the Netherlands focus the launch of their funds more on the national market. Luxembourg - The place to be : For international real estate portfolios Distribution to institutional investors from different countries But also for investors with specific regulatory requirements ( Versorgungswerke and Unterstüzungskassen ) Source: INREV Vehicle Universe Q2.2014 August 2014 It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 23
Why Luxembourg? Luxembourg should continue to be attractive as a real estate fund location. One should avail of creativity and stability as both attract productive and visionary minds. This is what you will find in the Luxembourg fund universe become a part of it and start benefitting. Luxembourg is ideally positioned to ride the regulatory tidal wave now and in the future. We are looking forward to welcome you in Luxembourg It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 24
Thank you for your attention. It s all about location: Luxembourg, the ideal platform for international real estate investments 6 October 2014 25