What is the current legal landscape for Real Estate Funds in your jurisdiction?

Luxembourg continues to be one of the leading jurisdictions for real estate fund structuring, and recent market conditions have, if anything, reinforced its position. The combination of higher interest rates, asset repricing across real estate markets and an increasingly sophisticated pan-European investor base has highlighted the importance of flexibility, regulatory certainty and execution capability – all areas where Luxembourg performs strongly.

From a structuring perspective, Luxembourg’s real estate market continues to be driven by a combination of established fund regimes and flexible legal forms. The RAIF remains the default choice for many sponsors as a familiar, efficient and well-understood product wrapper. SIFs remain relevant, but are used more selectively, typically where direct CSSF supervision or specific investor requirements are a factor. Other regimes, such as Part II UCIs or SICARs, are available but generally used in more specific or investor-driven contexts.

These regimes are most commonly implemented through limited partnership structures, in particular the SCSp, which is closely aligned with the Anglo-Saxon limited partnership model and has become the standard vehicle for real estate strategies in Luxembourg. Other corporate forms, such as the SCA, remain relevant in more specific contexts, particularly where investor requirements or governance considerations favour a more corporate structure.

The SCSp is, however, not limited to regulated fund regimes and continues to be used on a standalone basis where appropriate, in particular where tax considerations (including anti-hybrid rules), investor expectations and distribution strategy allow it.

What has evolved is not so much the toolkit itself, but the expectations around how it is used. There is now a much greater focus on substance, governance and operational robustness, particularly at the level of the AIFM, from both regulators and investors. Recent CSSF guidance, including Circular 25/901, further underscores this trend and reflects Luxembourg’s broader effort to modernise and clarify regulatory expectations, in particular in relation to internal organisation, delegation arrangements and effective oversight. In that respect, Luxembourg’s deep ecosystem of AIFMs, depositaries and service providers remains a key differentiator, allowing sponsors to build fully operational and compliant platforms from day one.

At the same time, the regulatory environment is becoming more demanding. The implementation of AIFMD II is prompting managers to review and further calibrate their delegation models and substance arrangements, as well as their approach to liquidity and investor exit mechanisms, and in many cases this goes beyond a simple update of existing frameworks. In parallel, ESG considerations are no longer an overlay – they are increasingly embedded in the product itself, influencing structuring decisions, disclosures and investor due diligence.

Looking ahead, developments such as ELTIF 2.0 have the potential to broaden access to real estate strategies, particularly towards a wider investor base. While uptake has so far been gradual, Luxembourg is well positioned to support these structures as the market evolves, given its experience with both regulated products and cross-border distribution.

Overall, the legal landscape remains highly favourable, but it increasingly rewards sponsors who approach Luxembourg not just as a structuring jurisdiction, but as a fully integrated platform combining legal, regulatory and operational considerations.

 

What three essential pieces of advice would you give to clients involved in Real Estate Funds matters?

First, structure for the full lifecycle of the fund, not just the launch. In the current real estate environment, holding periods, refinancing conditions and exit timelines are less predictable than they were a few years ago. It is therefore important to ensure that fund documentation and the underlying Luxembourg structuring allows sufficient flexibility around extensions, disposals and capital deployment. In practice, this often requires careful alignment between the fund vehicle and the underlying asset-holding structures across jurisdictions.

Second, approach regulatory and operational requirements in an integrated way. In Luxembourg, the AIFM plays a central role, and expectations around substance, governance and oversight continue to increase. Regulatory frameworks such as AIFMD II and ESG-related rules should not be treated as standalone compliance exercises, but as part of the overall product design. Managers who take a coordinated approach – particularly in relation to valuation, reporting and risk management – tend to be better positioned in both fundraising and ongoing investor relations.

Third, anticipate the practical realities of managing a cross-border investor base. Luxembourg structures are often used for international fundraising, which brings with it complexity around subscription processes, side letters, reporting and ongoing investor servicing. These elements are sometimes underestimated at launch but are critical to the long-term success of the fund and the manager’s reputation with investors.

 

What are the greatest threats and opportunities in Real Estate Funds law in the next 12 months?

The most immediate risk over the next twelve months is the number of funds approaching the end of their initial term in an environment where exit conditions remain challenging. Ongoing uncertainty around valuations and tighter financing conditions continue to weigh on transaction activity and exit timing. For Luxembourg real estate funds, this is already translating into more frequent discussions around extensions, amendments and investor alignment. These situations can be legally and operationally complex, particularly in structures with a diverse international investor base, and tend to expose any lack of flexibility in the original documentation.

From a regulatory perspective, the environment is becoming more detailed rather than fundamentally different. The implementation of AIFMD II and the continued development of ESG frameworks are increasing expectations around governance, reporting and documentation. For real estate strategies, this is particularly relevant in areas such as valuation processes and disclosure, where consistency and transparency are under closer scrutiny.

At the same time, these conditions are creating opportunities. One is the increase in distressed and special situations strategies, including restructurings, loan portfolio transactions and preferred equity investments. Luxembourg’s flexible structuring options are well suited to these types of transactions, particularly where multi-jurisdictional elements are involved.

Another opportunity lies in the gradual development of semi-liquid real estate products and broader investor access, including under frameworks such as ELTIF 2.0. While the market is still developing, Luxembourg is well positioned to support these strategies as they evolve.

More broadly, the continued focus on sustainable and energy-efficient real estate is driving changes in investment strategies and fund structuring, with ESG considerations increasingly influencing both asset selection and investor demand.

 

How do you ensure high client satisfaction levels are maintained by your practice?

Maintaining high levels of client satisfaction is ultimately about delivering advice that is both technically robust and genuinely useful in the context in which clients operate.

A key element is ensuring that our advice is firmly anchored in Luxembourg market practice. Clients rely on clear, actionable guidance that reflects not only the legal framework but also how structures are implemented in practice, often across multiple jurisdictions simultaneously. That means being willing to give a view, not just set out the options.

At the same time, we place strong emphasis on understanding our clients’ businesses at a deeper level. We aim to act as close advisers, with a detailed understanding of our clients’ platforms, their investor base and their strategic objectives, so that our advice reflects not just the legal position but also the commercial context in which decisions are being made.

Responsiveness is also critical, particularly in a transaction-driven environment. The Luxembourg market is known for its ability to move quickly, and we structure our teams and workflows so that legal input facilitates rather than delays execution. In practice, this means senior involvement throughout, and a genuine commitment to availability when transactions require it.

We also prioritise continuity. Real estate fund structures evolve over time through asset events, investor changes, regulatory updates and fund life extensions, and clients benefit from advisers who have followed that evolution from the beginning. This allows us to provide more efficient, better-calibrated advice at each stage rather than rebuilding context from scratch.

Finally, we see our role as extending beyond execution to strategic input: helping clients think through market developments, regulatory changes and structuring options at the platform level, not just on a transaction-by-transaction basis.

 

What technological advancements are reshaping Real Estate Funds law and how can clients benefit from them?

Technology is increasingly shaping both legal practice and the wider Luxembourg funds ecosystem, with a focus on efficiency, transparency and scalability.

One of the most visible developments is the continued digitalisation of fund operations, including investor onboarding, corporate governance processes and regulatory reporting. For Luxembourg structures with international investor bases, this can significantly improve efficiency and consistency across what are often complex, multi-party processes.

We are also seeing increased use of data and reporting tools, particularly in relation to ESG. For real estate funds, the ability to collect, verify and report asset-level data is becoming increasingly important, both from a regulatory perspective and in response to investor expectations. This is changing not just how compliance is managed, but what is possible in terms of transparency.

From a legal perspective, automation and AI-assisted tools are improving efficiency in areas such as document production, due diligence and subscription review. This allows legal teams to focus more on structuring, judgement and strategic advice — the areas where experience and market knowledge add the most value.

Luxembourg’s evolving framework around digital assets and tokenisation is also worth noting. The legislative developments introduced since 2019 – recognising the issuance, holding and transfer of securities using distributed ledger technology – have given digital securities a clear and workable legal footing. In real estate, tokenisation remains at an early stage, but initial use cases are beginning to emerge and Luxembourg’s proactive approach means it is well placed as this develops further.

Finally, the development of regulatory technology is reshaping how compliance functions operate, with increasing reliance on automated systems and integrated platforms. For clients, this translates into more streamlined processes and greater transparency – both of which are increasingly important in a cross-border fundraising environment where investor and regulatory expectations continue to increase.