Letter from Brussels

We definitely live in interesting times but, as the ancient Chinese saying suggests, we could actually be cursed. 

While the non-listed real estate industry has worked hard to keep business running as usual during the pandemic, policy makers and regulators in Brussels, Paris and London have as well. They have pursued regulatory reform and, in recent months, we have been inundated with a record number of consultations on a variety of topics from AIFMD, Solvency II, ELTIFs and sustainability to minimum tax and AHCs in alternative fund structures.

[ad:content]

INREV, supported by the Public Affairs and Tax committees, has worked to provide information about the impact of regulations on non-listed real estate investment. We have also offered insights about how to improve certain aspects of regulations and recommendations on proposed changes in many areas over the past months. 

As reported in the last IQ, AIFMD has been a major focus and, on 28 January, after many weeks of intensive review and drafting, INREV filed responses to over one hundred questions on specific aspects of the AIFMD regime. These ranged from important issues such as whether additional restrictions on delegation are needed to more mundane question such as requiring funds to have LEI indicators. We developed our response early and shared with other real estate industry associations to developed aligned views where possible.

AIFMD has been a major focus and, on 28 January, after many weeks of intensive review and drafting, INREV filed responses to over one hundred questions on specific aspects of the AIFMD regime

In the autumn, INREV responded to the European Commission’s consultation on Solvency II, which is focused on a broad set of issues such incentivising European insurers to invest in long term and sustainable assets. Noting that most European insurers are inherently long-term investors that support sustainability, INREV also reminded the Commission that the data used to measure the volatility of real estate investments in Europe are not the best data for this purpose and lead to excessive capital requirements for non-listed real estate investments.

European long-term investment funds, ELTIFS, are another focus for the Commission. INREV noted that institutional investors can invest in tailored real estate fund structures that meet their needs and preferences, but the additional regulatory requirements attached to ELTIFs are perhaps more suited to retail investors. Importantly, though, the Commission recognised that real estate can be long-term investments that support the European economy and society.

Consultations focused on sustainable finance issues from required disclosures to the sustainable finance taxonomy have also kept INREV busy as we advocate workable standards that take into account the specific features of real estate.

In Paris, the OECD is developing proposals on minimum tax, and INREV worked to ensure that real estate funds and SPV structures are exempt

Policy makers outside Brussels have been active too. In Paris, the OECD is developing proposals on minimum tax, and INREV worked to ensure that real estate funds and SPV structures are exempt. In the UK, meanwhile, a Funds Review is exploring a range of issues from the use of asset holding companies in alternative fund structures to the possible introduction of a new fund structure and INREV is deeply engaged in efforts to ensure that policy makers understand the impacts that some of the proposals could have for non-listed real estate investment.
 
A curse or an opportunity, we definitely live in interesting times.