GERMANY: Interpretive Decision on the Acquisition of an Alternative Investment Fund

Friday May 4 2018

BaFIN have published the interpretive decision on the acquisition of an Alternative Investment Fund ( AIF ).

The term “real estate company” is defined as a company that may only acquire real estate and the property necessary for the management of the real estate according to the Articles of Association or the Articles of Association. This definition does not exclude that a real estate company can be an AIF at the same time.

Investment funds in the form of companies can be acquired as real estate companies for real estate investment funds if at least the following conditions are met:

• The AIF must as a real estate company with the requirements of KAGB compatible form of society have. Investment funds in the form of a special fund can not be acquired for the sole reason that they do not have the legal form required by the term “real estate company”.
• The investment management company’s participation in the real estate company for the account of the fund must be a participation in the company , which conveys property and administrative rights.
• the AIF capital management company must have the majority of votes and capital in the real estate company that does not acquire a minority interest. The capital management company must be able to determine which property is acquired, if and how the property is externally financed, if a capital increase will be carried out, if the company will be liquidated and how the managing director will be.

In addition, the other KAGB regulation acquisition requirements apply to real estate companies.

The shareholding must also be in line with the other relevant investment rules , in particular those of the KAGB . For example, the advantages and disadvantages of participation and the form of participation must be weighed and the solution selected that is in the best interests of investors. In addition, the management company must, inter alia, ensure that the liquidity profile and the redemption policy of the investee fund are consistent. Furthermore, the capital management company has to make provision for it to be able to liquidate its majority shareholding in a timely manner, especially if the real estate investment fund needs liquidity.

The capital management company in the individual case must decide whether the participation and the concrete conditions of this investment in the best interests of investors. In addition, it must take precautions to ensure that its minority shareholding is met, in particular in the event of a liquidity need of the real estate investment fund or to liquidate the regulated case in a timely manner. In addition, the management company must also ensure that no risks can be realized that can not be avoided by liquidating the units ( eg, buying property above the market value and selling below the market value must be excluded).

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