Non-German Real Estate Funds (and Trusts) as Eligible Investments for German Real Estate Funds

by Jones Day

Jones Day

In Short

The Situation: Due to strict investment rules governing German open-ended real estate funds, questions remained regarding whether those funds could indirectly invest in non-German real estate, via structures or vehicles qualifying as real estate funds.

The Development: Based on an interpretive decision by the German Federal Financial Services Authority, German real estate funds, provided they adhere to certain conditions, can invest in non-German real estate funds, including real estate trusts.

Looking Ahead: The clarification broadens the investment horizon for German real estate funds.

The German Federal Financial Services Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin") clarified on April 9, 2018, in an interpretative decision, that non-German real estate funds, including real estate trusts, qualify as eligible investments for certain types of German real estate funds, provided certain conditions are met.

Until now, investors debated whether German real estate funds could, from a German/European law perspective, indirectly invest in real estate through structures or vehicles qualifying as real estate funds. In particular, the question arose in connection with any proposed investments by such German funds in non-German real estate funds and trusts.

The debate revolved around the strict investment rules applicable to German open-ended real estate funds in the contractual form (Sondervermögen), including real estate "Spezialfonds", the latter being reserved for, and widely used by, institutional investors. According to the statutory rules applicable to these funds, indirect investments in real estate could be made only through "real estate companies." Traditionally, real estate companies were set up in the form of limited liability companies and limited liability partnerships. This established practice raised a number of questions including, for example, whether a U.S. private REIT ("Real Estate Investment Trust") could also qualify as "real estate company."

BaFin has now clarified that the qualification of any vehicle or structure qualifying as a real estate fund from a German/European law perspective does not exclude the simultaneous qualification as a "real estate company," provided that certain conditions are met. One such condition dictates that the structure in question does not convey only property rights to the German fund, but also membership rights. Applied to trust structures, in the opinion of BaFin, this would occur if the German fund does not acquire only an interest in the trust but also in the trustee. An investment in the trust and the trustee must connect in such a way that both investments cannot be disposed of separately, but only in conjunction.

The welcome regulatory clarification potentially widens the investment horizon for German real estate funds. This should generally benefit the German fund's investors, and institutional investors in particular. Nevertheless, observance of numerous additional requirements must accompany an indirect investment by German real estate funds. This applies in particular with respect to certain regulated investors such as German insurers or pension funds. BaFin's interpretative decision covers only some of these requirements.

Four Key Takeaways

  1. A clarification by Germany's Federal Financial Services Authority confirmed that German real estate investment funds can invest in non-German real estate funds, including real estate trusts.
  2. However, numerous additional requirements must accompany an indirect investment by German real estate funds. This particularly applies to certain regulated investors, including German insurers or pension funds.
  3. One condition dictates that the investment structure under consideration must convey membership rights to the German fund, not just property rights.
  4. The interpretative decision does not cover all the requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jones Day | Attorney Advertising

Written by:

Jones Day

Jones Day on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.