Real Estate Funds have become increasingly popular for both UK and global investment opportunities. There is no standard design but there are common issues.
Why are Real Estate Funds Popular?
Investors can use Real Estate Funds to invest through managers and structures to meet the relevant investment objectives. They allow a number of investors to combine in a tax efficient manner and avoid imposing on the investors the liabilities or responsibilities involved in owning the investments directly.
How is a Real Estate Fund structured?
The most popular Real Estate Fund vehicles take into account the investments and activities involved as well as the management arrangements for the Fund. The investment may be for a specific assset or a portfolio on a general or sector specific basis (e.g. offices, retail, industrial or mixed). The activities may relate to investment (over a longer period), trading (over a shorter period) or development. The Fund may also be classified as core, core plus or opportunistic, depending on the risk and returns being sought.
A Real Estate Fund will also be designed for the different types of investor (e.g. pension funds, corporates or insurance companies) and their respecitve jurisdictions.
The vehicles encountered typically include:
- Limited partnerships.
- Unit trusts.
- Property investment companies.
Limited partnerships and property investment companies often include the UK, Channel Islands or Cayman Islands, depending on the circumstances. Unit trusts are typically UK or Channel Islands based. European vehicles include Luxembourg FCPs and Sàrls and Dutch CVs. What does a Real Estate Fund look like? A Fund may often include the following:
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What are the terms of a Real Estate Fund?
The terms of a Real Estate Fund will cover a number of commercial and technical matters including:
- Purpose and objective.
- Life of Fund.
- Open or closed ended nature.
- Corporate Governance and reporting.
- Transfers of interests.
- Management and fees.
The exact documents will depend on the nature of the vehicle involved.