Maya Van Belleghem
Senior Manager – Financial Services Legal & Regulatory
Maya Van Belleghem will also speak to these issues with her colleagues the 15th of november 2016 (Brussels) for our conference on AIFMD & UCITS V.
On 20 July 2016, the Parliament voted on Program Act II modifying amongst others the Belgian Act of 19 April 2014 on alternative investment funds and their managers (AIFM Law). These modifications were necessary to enable the adoption of a new royal decree implementing a new regime for real estate investment funds referred to as “Fonds d’investissement immobiliers spécialisés” (FIIS – in Dutch: ‘gespecialiseerde vastgoedbeleggingsfondsen’ (GVBF)).
A new investment vehicle for real estate
The current Belgian regulatory landscape does not allow the set-up of flexible and efficient real estate investment funds dedicated for institutional and professional investors. Indeed, the other available Belgian real estate vehicle is the regulated real estate company (société immobilière réglementée – SIR; ‘gereglementeerde vastgoedvennootschap’ – GVV) which is not an investment fund but a listed company available for retail investors with a long-term corporate strategy. Hence, the objective of this new regime is to fill this gap and to set up a solid but flexible, legal, regulatory and tax framework for institutional real estate investment funds. The FIIS will in most cases be regulated under Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers (AIFMD) and will benefit from the corresponding European passport, but will not be supervised by the Financial Services and Markets Authority (FSMA). The FIIS will only need to comply with a light registration procedure with the Ministry of Finance (SPF Finances / FOD Financiën) making it an attractive vehicle from a time-to-market perspective.
The AIFM Law has now been amended to allow for the adoption of the draft FIIS Royal Decree which should be during the summer.
Key features provided for by the draft FIIS Royal Decree
- Light registration: unlike other European fund regimes, the FIIS will not be subject to a prior approval procedure or ongoing supervision of the FSMA. Only a registration with the Ministry of Finance is required, which means the FIIS can be established and operational in record-time of approximately 15 days, without high constitution costs.
- Sole investor: by derogation to the Belgian Companies’ Code, a sole investor may hold all the shares of the FIIS. In such a case, the FIIS will fall outside the scope of the AIMFD.
- No listing obligation: the FIIS is a closed-end fund with no requirement to be listed.
- Broad definition of real estate: the definition of real estate includes amongst others real estate assets, shares in real estate companies or Belgian or foreign REITs, real estate certificates, rights under real estate leasing, shares in other FIIS or in foreign real estate investment funds.
- Various corporate forms are available: SA/NV, SCA/Comm. VA and SCS/Comm. V.
- No risk diversification requirements: a FIIS may hold one single real estate asset.
- No limits on the use of leverage.
- Distribution: as is the case for Belgian REITs, it will be mandatory for the FIIS to distribute 80% of its net income.
- Minimum capital and asset value: the FIIS should have a minimum share capital of at least EUR 1.2 million. Within two years, the total value of the assets held by the FIIS has to exceed EUR 10 million
- Direct investments in Belgian real estate: the FIIS may not hold Belgian real estate indirectly. Indirect investments through subsidiaries are allowed only temporarily as the FIIS acquiring Belgian real estate indirectly will benefit from a 24-month period to proceed to a restructuring.
- No developer: it is prohibited for a FIIS to act as a real estate developer during 5 years after construction.
- Limited duration: the FIIS must have a duration of maximum 10 years with the possibility for shareholders to unanimously decide to extend such duration for successive periods of maximum 5 years each.
The FIIS should become a vehicle of choice for asset managers and investors looking to combine legal and regulatory flexibility with tax efficiency. In addition, for FIIS qualifying as AIFs, this flexible and efficient framework will be combined with both the investors’ protection of AIFMD and the marketability of a real estate investment vehicle benefiting from the European passport.
 The SICAFI regime has become obsolete since the conversion of all SICAFIs into SIRs