EUROPE NEWS: Directive becomes reality

It has been a long journey to Regulation Station for Europe’s real estate fund managers, but firms finally are gaining the authorization they have been required to obtain ahead of a July 22 deadline.

A search of the alternative investment manager database of the European Securities and Markets Authority (ESMA) reveals that at least 35 real estate managers, most with stated headquarters in Germany, the UK and France, now have received a license from an EU member state, with at least another 15 large multi-asset management groups with real estate franchises also gaining one.

However, according to several sources, the granting of authorization is taking much longer than hoped and, as a result, fewer licenses have been granted than applicants would have hoped.

“I understand that [national regulatory bodies] have received more applications than they anticipated, as a significant number of fund managers not required to apply for authorization are electing to opt in,” one source said. “In addition, the information required to be submitted during the application process is quite extensive, and regulators are being very thorough and ensuring they understand the fund managers’ structures and operations. It’s all new in many cases, so it just takes time.”

One fund administrator with a significant roster of real estate clients noted that four or five of its 20 client firms had received a license so far, “so it is still delayed.” London-based Tristan Capital Partners was just one firm awaiting an imminent authorization at press time.

It was the the European Commission that introduced the Alternative Investment Fund Managers Directive (AIFMD) in 2009 to help protect investors in the wake of the Bernard Madoff scandal and the 2008 global financial crisis, and the Directive finally came into force last summer. This month – five years since its introduction – the grace period during which existing fund managers need to become compliant in order to fit in with Europe’s new regulatory regime ends.

The July 2014 deadline caused a “mad scramble” last year to submit applications for licenses, experts noted. Firms scrambled in the knowledge that, in general, they no longer would be permitted to access capital through a real estate fund after July 22 without being licensed in accordance with the AIMFD. However, in certain jurisdictions such as the UK, financial services regulatory bodies are allowing fund managers to continue until the authority has determined their application.

Despite the log jam of applications in certain countries, managers finally are gaining the licenses they have been seeking. For example, on June 10, CBRE Global Multi Manager, which manages $12.3 billion of real estate assets, said it had become one of the first property fund managers to have been granted authorization from the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. It also has been granted a ‘passport’ to market its funds across Europe without the need to regard each country’s private placement regime – one of the main benefits to gaining a license.

Also on June 10, Stockholm-based Genesta said it had become the first Nordic-focused real estate fund manager to be accepted. Genesta explained that it wanted to meet the July 2014 deadline, so it submitted its application in Luxembourg in mid-October. However, it did not want to submit its application too early because it wanted to wait until the regulator and advisors had understood what was required to obtain an AIFMD passport. Such a passport has gained much attention as a positive aspect to the regulation because it unifies the regulatory fundraising framework for all of Europe’s financial regulators.

“I am not a big fan of regulation per se, but I think we have taken a big step toward becoming an investment class,” said Genesta chief executive David Neil. He added that the concept of compliant risk management and other in-house processes is where the industry needed to take “the next step.”

Getting the green light
Some of the better-known names in real estate to have gained AIFMD authorization:
1. BNP Paribas Real Estate Investment Management,
HQ: Paris
2. Bouwinvest Real Estate, HQ: Amsterdam
3. Catella Real Estate, HQ: Munich
4. CBRE Global Multi Manager, HQ: London
5. Commerz Real, HQ: Wiesbaden, Germany
6. Deka Immobilien, HQ: Frankfurt
7. ECE Real Estate Partners, HQ: Hamburg
8. First Property Asset Management, HQ: London
9. Genesta, HQ: Stockholm
10. GLL Real Estate Partners, HQ: Munich
11. Grosvenor Investment Management, HQ: London
12. Jamestown US-Immobilien, HQ: Cologne
13. Henderson Property Management, HQ: London
14. Hines, HQ: Houston
15. Internos Global Investors, HQ: Frankfurt
16. IVG, HQ: Frankfurt
17. LaSalle Investment Management, HQ: Munich
18. Legal and General Property Partners, HQ: London
19. Lend Lease Real Estate Investments, HQ: London
20. Meadow Partners, HQ: New York
21. Moorfield Group, HQ: London
22. Morgan Stanley Real Estate Investment, HQ: Frankfurt
23. Patrizia, HQ: Hamburg
24. TMW Pramerica Property Investment, HQ: Munich
25. Vesteda Investment Management, HQ: Amsterdam
26. Union Investment Real Estate, HQ: Hamburg

Source: ESMA, FCA