In Belgium, the Alternative Investment Fund Managers Directive (AIFMD) 2011/61/ EU of 8 June 2011 has led to the creation of a new REIT structure, which is similar to the existing closed- end real estate investment fund structure of the “vastgoedbevak”/ “sicafi”.

The majority of the existing vastgoedbevaks/ sicafis have indicated their willingness to convert to the new structure. Since their introduction in 1995, the Belgian closed-end real estate investment funds have been considered to be a specific category of investment funds, currently known as “undertakings for collective investment”, unlike the French SIIC, the German REIT-AG, the Dutch FBI and the UK REITs, which in most cases do not follow this structure. Since the Law of 19 April 2014 (implementing the AIFMD 2011/61/EU of 8 June 2011, which regulates the management of alternative investment funds) came into force, vastgoedbevaks/ sicafis should also be considered to  be alternative investment funds. The Law introduced additional obligations and restrictions, which many consider to add no value to the current system for the regulation of these vehicles.

A new Law was adopted on 12 May 2014 in order to remedy this (Belgian State Gazette, 30 June 2014).This Law, which came into effect on 16 July 2014, introduces a new structure known as a “regulated real estate company” (“Gereglementeerde Vastgoedvennootschap” or “GVV”/ “Société Immobilière Réglementée” or “SIR”), in addition to vastgoedbevaks/ sicafis, which will continue to exist. Vastgoedbevaks/ sicafis will continue to be regulated by the legislation on undertakings for collective investment, whereas a GVV/ SIR will benefit from a separate regime, which is however very similar to that governing existing vastgoedbevaks/ sicafis (see Michael Bollen,“The new Royal Decree on Belgian REITs” Real Estate Gazette (Issue 4, 2011) page 12).

The GVV/ SIR will be subject to obligations and restrictions as to diversification and spreading risk, dividend payout ratio, corporate governance, a specific accounting framework, appointment of an independent real estate expert(s), maximum indebtedness (65 per cent) and leveraged financing, statutory capital, etc., which are in many ways identical or at least very similar to the regulations applicable to vastgoedbevaks/ sicafis.

In addition, a public (that is to say, listed) GVV/ SIR is able to incorporate institutional GVV/ SIRs, together with qualifying investors, whilst remaining under the control of the public GVV/ SIR. Moreover, the requirements which apply to all listed companies will also hold for the GVV/ SIR. Likewise, a GVV/ SIR is subject to the supervision of the Financial Services and Markets Authority (FSMA).  From a tax point of view, there are no substantial differences: a GVV/ SIR will, in a nutshell, also only be taxed on disallowed expenses and abnormal or gratuitous advantages.  However, there are some differences between these two structures, and these are highlighted below.

Active real estate management

The statutory purpose and the authorized activities of vastgoedbevaks/ sicafis on the one hand, and those of the GVV/ SIR on the other, are not entirely similar.Whereas vastgoedbevaks/ sicafis, as undertakings for collective investment, have the single purpose of collectively investing in real estate, as legally defined, for the exclusive benefit of their shareholders, a public GVV/ SIR should carry out activities which consist in the placing of real estate at the disposal of end users, thus its activities will include the construction, rebuilding, renovating, developing, acquiring, selling, managing and operating of real estate.

The GVV/ SIR must pursue a business strategy enabling it to hold its real estate on a long- term basis and must focus on active management.This implies that the GVV/ SIR will itself be responsible for the development and property management of its real estate, without being able  to delegate that responsibility to third parties.

A GVV/ SIR can also hold indirect real estate investments (such as shares in vastgoedbevaks/ sicafis and real estate certificates, or options over such shares or certificates), provided the fair value of these investments does not exceed 20 per cent of the consolidated assets of the public GVV/ SIR. Under certain conditions additional or temporary investments in other securities are also permitted.

Requirement for natural persons

The law on GVV/ SIRs further states that all members of a public GVV/ SIR, the persons effectively having charge over the entity, as well as those undertaking functions relating to independent control (internal audit, compliance and/or risk management), must be natural persons.

Therefore it will no longer be possible to exercise those roles through a separate legal entity or management company (however, legal entities currently exercising those functions are allowed to complete their existing mandate).

The possibility of a public GVV/ SIR that operates as a limited liability (commanditepartnership (“Comm.VA”/ “SCA”) appointing a legal entity as its business manager is retained.

It should be noted that the rule on natural persons noted above also applies to those vastgoedbevaks/ sicafis opting to retain their current structure.

Optional regime

Any company that wishes  to adopt the status of public GVV/ SIR, should apply for consent from the FSMA and must comply with the relevant conditions under the Law.  The requirement for consent also applies to any current public vastgoedbevaks/ sicafis that wish to adopt the public GVV/ SIR structure.This is not mandatory, however: a public vastgoedbevak/ sicafi may opt to preserve its structure and therefore qualify as an alternative investment undertaking under the AIFMD provisions (subject to approval under those provisions).A public vastgoedbevak/ sicafi opting to convert to a public GVV/ SIR is required to adapt its articles of incorporation to comply with the new Law and to submit its request for approval within four months as from the date the Law became effective, that is, before 16 November 2014.

Exit right

An additional point to note is that the current shareholders of a public vastgoedbevak/ sicafi—to some extent at least—are not obliged to accept its conversion into a public GVV/ SIR.

Any shareholder who, at the general meeting of the public vastgoedbevak/ sicafi which approves the conversion to a GVV/ SIR, to be held within three months from receipt of FSMA approval, votes against that decision, benefits from a right to exit, that is, the vastgoedbevak/ sicafi may be required to buy the shares of that shareholder, at a share price to be determined in accordance with the Law.

This right can only be called upon for shares with a maximum value of €100,000, taking into account the price at which the exit has been exercised and only for those shares for which the shareholder has voted against the proposal. In addition, the shareholder should have been owner of these shares continuously at least from the thirtieth day prior to the general meeting where the conversion was on the agenda and until the end of the general meeting which approves the conversion.The proposal to amend the articles of incorporation may also be subject to a condition stating that the conversion will only take effect when the number of shares for which the withdrawal right is called upon does not exceed a certain percentage of the share capital.

At the time of writing (September 2014) the majority of the current vastgoedbevaks/ sicafis have already indicated their willingness to transfer to the new GVV/ SIR regime.