Developments In Relation To Irish Real Estate Funds

Author:Mr Andrew Bates
Profession:Dillon Eustace

Developments In Relation

To Irish Real Estate Funds


We have set out below in

summary format the key changes which we have managed to negotiate with the

Irish Financial Regulator over the last number of months which we think will

lead to a much brighter future for the development of regulated real estate

funds in Ireland.

Please note, however, that

what is detailed below applies for the moment only to qualifying investor funds

("QIFs") and not to professional investor funds or retail funds.

The principal changes that

we have negotiated are as follows:

Property and Property

Related Assets

The definitions of

"Property" and "Property Related Assets" in the Financial

Regulator's current property notice (NU18.3) will not apply to QIFs and, instead,

far broader definitions can be given with no limitation on tenure, on minimum

unexpired lease term or on the type of interest in land or building that can be

acquired. Property derivatives will be allowed (provided appropriately

explained/disclosed) and exposures taken via companies, partnerships, trusts or

other forms of collective investment scheme, regulated or unregulated etc can

be provided for.

Loans by Real Estate


In the past, it was only

permissible for funds to make loans to wholly owned subsidiaries but now the

Financial Regulator has clarified its position that it is also willing to

permit loans made as an investment provided linked to some element of equity

investment. We explained to the Financial Regulator that it may be the case that,

for tax or other structuring reasons (including for exit purposes), one might

invest Euro 1 as equity and Euro 99 as debt (in the form of a loan or another

debt instrument). The Financial Regulator has accepted this and does not

consider it to breach the general prohibition on funds making loans.

Joint Venture and

Co-Investor Arrangements

The Regulator has finally

made it clear that it has no objection to joint venture arrangements,

coinvestment arrangements or any other form of investment where the Fund

invests along with or side by side with other investors in a particular

investment (i.e. where it does not hold 100% of either the investing vehicle or

of the investment). However, they will treat such an investment in the same

manner as if the Fund were investing in an unregulated collective investment

scheme so that, while there is no aggregate limit on the exposure to such joint

ventures or co-investment or other types of investment scheme/arrangement, the

maximum exposure to any one such joint venture or...

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