A Luxembourg FCP-RAIF Real Estate Parallel Fund lets sponsors combine different investor groups in one coordinated platform for cross-border property investment. It joins the flexibility of the RAIF (Reserved Alternative Investment Fund) regime, the contractual form of an FCP (fonds commun de placement), and the efficiency of a parallel structure.
Why Sponsors Choose The Luxembourg FCP-RAIF Real Estate Parallel Fund
Luxembourg is one of the main fund centres worldwide, with several trillion euros in assets managed through regulated and unregulated vehicles. Real estate and infrastructure strategies account for a growing share of new launches. Sponsors choose the FCP-RAIF because they can launch faster than a fully regulated product and still benefit from an authorised AIFM and a well-known jurisdiction. The parallel fund design allows each investor profile to sit in the wrapper that fits its regulatory and tax needs, while all investors access the same deal pipeline.
The structure works well for global sponsors that raise capital from qualified investors, entrepreneurs, private equity funds, pension funds, insurers, sovereign investors, at the same time. Many of these investors have different accounting rules, solvency rules, or home-country tax regimes. Instead of forcing everyone into one legal form, the platform uses one FCP-RAIF and one or more parallel investment vehicles such as SCSp or Sàrl. Together these vehicles own a set of SPVs that hold assets in several countries.
What Is A Luxembourg FCP-RAIF Real Estate Parallel Fund
An FCP-RAIF is a reserved alternative investment fund organised in the contractual form of a fonds commun de placement. It has no legal personality of its own. It is created by a management company for the benefit of unitholders and is governed by fund rules. The fund is reserved to well-informed investors. This includes professional investors, institutional investors, and high net worth investors that meet the eligibility tests under Luxembourg law.
The real estate FCP-RAIF does not own properties directly in most cases. It holds equity interests in special purpose vehicles, which own the assets in each country. These SPVs are usually Sàrl companies in Luxembourg or local property companies in the target markets. The FCP-RAIF invests alongside one or more parallel vehicles that are part of the same platform. The parallel vehicles often take the form of an SCSp, SCS, or corporate entity. Each pool of capital may have its own fee terms, carry rules, and risk profile. All of them share the same investment committee and asset management team.
Key Features And Benefits Of A Luxembourg FCP-RAIF Real Estate Parallel Fund
Let’s highlight the features and benefits that investors and sponsors normally look for in this structure.
- Reserved alternative investment fund regime with access limited to well-informed investors.
- Contractual FCP form that can be treated as tax transparent in many real estate cases.
- No prior CSSF product approval, which speeds up the fund launch when an authorised AIFM is appointed.
- Ability to sit in parallel with SCSp, SCS, or Sàrl vehicles that share the same SPVs and properties.
- Flexible investment policy covering core, core plus, value add, and opportunistic strategies.
- Choice between closed-ended and open-ended structures depending on investor demand.
- No Luxembourg withholding tax on distributions by the fund to investors under current rules.
- Access to the AIFMD marketing passport for professional investors across the European Union.
- Robust governance with an AIFM, depositary, central administrator, and external auditor.
- Recognised jurisdiction for global well-informed investors, family offices, pension funds, and sovereign wealth investors.
Industries And Asset Types In A Luxembourg FCP-RAIF Real Estate Parallel Fund
We set out the property sectors and linked industries that the structure can cover.
Many FCP-RAIF real estate platforms focus on office buildings in core business districts. Examples include towers in La Défense in Paris, campus-style offices in Frankfurt, or mixed-use complexes in Luxembourg City. Leases are often signed with tenants in finance, legal services, technology, and public administration. These buildings can host hundreds or thousands of employees, with lease terms ranging from five to ten years.
Logistics and industrial assets form another major pillar. Funds acquire big-box warehouses near major ports and highways, as well as last mile hubs close to city centres. Tenants include e-commerce platforms, parcel delivery groups, manufacturers, and retailers running omnichannel networks. Yields in this sector have compressed over the last decade, but demand for modern logistics space remains strong. Value can be created through new development, green upgrades, and lease extensions.
Residential strategies range from multi-family blocks in German cities to build-to-rent schemes in Spain and Portugal. Student housing near universities in the Netherlands or the Nordics provides another source of stable income. In these cases, the link to the education sector is important. Occupancy rates often stay above 90% when the properties are located close to campuses and public transport.
Retail assets in current strategies tend to focus on necessity-based retail. Grocery-anchored parks, DIY stores, and discount retailers account for a significant share of rent roll. This differs from older strategies that targeted pure fashion-oriented malls. Sponsors that still invest in shopping centres often choose to reposition them with food, entertainment, and community uses.
Hospitality and leisure assets form a separate sleeve in many platforms. Targets include three and four star city hotels, roadside hotels along motorway corridors, and serviced apartments for extended stays. Operators can be global brands or regional groups. Revenue per available room and occupancy data are key indicators. The FCP-RAIF structure can combine hotel properties in France, Italy, Spain, and Portugal within one diversified hospitality portfolio.
Healthcare and life science real estate are growing segments. Funds acquire clinics, medical office buildings, senior living properties, and lab-enabled offices. These assets serve healthcare providers, pharmaceutical groups, and biotech firms. Lease terms can reach ten to fifteen years, often with inflation-linked rent indexation. The combination of demographic trends and the need for specialised buildings supports long-term demand.
Data centres and digital infrastructure form a niche but expanding area. Assets include server farms, colocation centres, and edge facilities close to urban clusters. Tenants may be telecoms operators, cloud providers, or technology companies. These properties require robust power and cooling systems and long-term contracts.
Geographic Focus And Country Examples
Let’s check how sponsors use the Luxembourg FCP-RAIF Real Estate Parallel Fund for multi-country portfolios.
A common approach is to focus on Western Europe. For example, a fund might allocate 30% of equity to Germany, 20% to France, 20% to Spain and Italy, 15% to the Benelux region, and 15% to the Nordics. Within that allocation, logistics assets might dominate in Germany and the Netherlands, while offices and residential assets account for more of the exposure in France and Spain. This spread helps smooth out differences in economic cycles and rental growth.
Another approach is to combine Western Europe with Central and Eastern Europe. Some sponsors allocate up to 25% of their portfolio to Poland, Czech Republic, Hungary, or Romania, where yields may be higher than in core markets. A logistics warehouse in Warsaw or Poznań can offer a net initial yield that is 100 to 150 basis points above a comparable asset in Germany or the Netherlands. Such exposure can lift the overall return of the platform while keeping tenant quality and lease terms under control.
Some platforms are country-focused. A German residential FCP-RAIF may own blocks in Berlin, Hamburg, Munich, Frankfurt, Cologne, and Düsseldorf. The rationale is to benefit from scale in one regulatory and tax environment while still diversifying across cities and micro-markets. Another example is a French office strategy focusing on the Greater Paris region and a few strong regional cities such as Lyon, Bordeaux, and Lille.
Fund Size, Leverage, And Performance Targets
First-generation Luxembourg FCP-RAIF Real Estate Parallel Funds often target between EUR 75 million and EUR 300 million of equity. Established managers may raise EUR 500 million or more in a single vintage. With levered structures, a fund with EUR 300 million of equity and 50% loan-to-value can reach a gross property value of about EUR 600 million. If the average ticket size per asset is EUR 30 million, this allows ownership of around 20 buildings within one fund.
Leverage most often sits between 40% and 55% loan-to-value at portfolio level. Lower leverage is typical for core and core plus income strategies, while higher leverage appears in value add and opportunistic projects. Lenders may require interest coverage ratios of at least 1.8x to 2.0x and set covenants based on debt yield or debt service cover.
Return targets depend on the risk profile.
In a core strategy, investors may look for a net distribution yield between 4% and 5% and a net IRR between 6% and 8%. Core plus strategies may target net IRRs between 8% and 10%. Value add strategies that include refurbishment or re-leasing may present gross IRR targets between 12% and 16% and equity multiples of 1.6x to 2.0x over six to eight years. Opportunistic development strategies can aim for even higher returns but come with longer timelines and additional construction and exit risk.
Management fees often range from 1% to 1.75% per year on commitments during the investment period and on invested capital thereafter. Performance fees or carried interest structures are aligned with return hurdles. For example, a value add fund may offer a 20% carry above an 8% preferred return, with catch-up mechanics and tiered carry for higher return levels.
Practical Case 1: Pan-European Logistics Platform
A sponsor launches a Luxembourg FCP-RAIF Real Estate Parallel Fund with a logistics focus. The platform targets a gross property value of EUR 500 million over five years. Target markets include Germany, the Netherlands, Belgium, and Poland. Two investment funds and one pension fund from Northern Europe become anchor investors. They commit EUR 160 million through the FCP-RAIF. Parallel to this pool, an SCSp raises EUR 90 million from family offices located in Switzerland, the Middle East, and Asia.
The platform acquires warehouses near Hamburg, Rotterdam, Antwerp, and Warsaw, as well as several last mile hubs near large cities. Average loan-to-value is 45%. Weighted average lease length is seven years. Tenants include logistics operators, food retailers, and e-commerce groups. The sponsor targets a net yield of 4.5% per year and a gross IRR of around 9% to 10% over the life of the fund.
The investors benefit from a transparent, institutional-grade vehicle. The family offices in the SCSp benefit from co-investment rights and the ability to adjust leverage at their level. Both pools receive quarterly reports showing occupancy, rent collection, covenant headroom, and ESG indicators such as energy usage and carbon intensity.
Practical Case 2: Southern European Residential Value Add
A sponsor designs a strategy to acquire under-managed residential blocks in Madrid, Barcelona, Lisbon, and Milan. Many buildings were built in the 1970s and 1980s. They need modernisation of common areas, energy systems, and apartments. Occupancy at acquisition is around 80%. The sponsor plans to invest capex equal to about 8% of property value and expects rent uplift between 15% and 25% over four years.
The Luxembourg FCP-RAIF Real Estate Parallel Fund raises EUR 140 million from a French insurer and a Spanish private equity fund that want long-term exposure to Southern European rental housing. A parallel SCSp raises EUR 60 million from entrepreneurs in the region who are comfortable with operational risk. Bank loans cover the remaining 45% of property value. The platform acquires 14 properties with an average ticket of EUR 14 million.
As the business plan progresses, vacancy drops to below 5% and rents increase. The sponsor aims for a gross IRR of 14% and an equity multiple close to 1.9x over seven years. For the insurer and private equity fund, the stabilised income provides predictable cash flows while still offering upside on exit.
Practical Case 3: Hotels And Serviced Apartments
A midscale hotel operator wants to expand in France, Italy, and Portugal. It targets three and four star hotels with 80 to 150 rooms and plans to convert some units into serviced apartments. Entry yields are between 6% and 7%. After renovation and repositioning, the operator expects stabilised yields near 5% with higher occupancy and stronger average daily rates.
The Luxembourg FCP-RAIF Real Estate Parallel Fund receives EUR 110 million from a Nordic investment fund and a UK-based family office that prefer a fund unit format. A parallel Sàrl holds EUR 50 million of co-investment capital provided by the operator and high net worth investors. Bank financing increases total purchasing power to around EUR 320 million of assets at 50% loan-to-value.
Over the investment period, the platform acquires eight hotels and two serviced apartment properties in Paris, Lyon, Milan, Rome, Lisbon, and Porto. After renovation, the portfolio stabilises with occupancy above 70% and strong cash flow. Net yields rise from 2% in the first years to nearly 6% as ramp-up finishes. The sponsor expects a gross IRR between 14% and 18% over eight years.
Investor Profiles And Capital Formation
Some investors often prefer the FCP-RAIF because it is a recognised fund structure that fits well with their internal processes. They may also face rules that limit direct participation in partnerships. The parallel vehicles, usually SCSp or Sàrl, attract family offices, entrepreneurs, and sometimes fund-of-funds. Sovereign wealth funds can join either side depending on their internal preferences.
Sponsors typically run a formal capital raising process. They secure one or two anchor investors that cover 30% to 40% of the target size. Once documentation is ready, they hold a first closing at a minimum size, for example EUR 100 million. Additional closings over 12 to 24 months bring the fund to its final size. During this period, capital is drawn through capital calls as properties are acquired and capex needs arise. Investors know the target pace of deployment and the pipeline of deals that the sponsor intends to source.
How To Set Up A Luxembourg FCP-RAIF Real Estate Parallel Fund
We guide our clients with simple step-by-step outline to launch their Luxembourg FCP-RAIF parallel fund.
- Define the investment thesis, including target sectors, countries, risk level, fund size, and hold period. Prepare a clear concept note.
- Segment prospective investors into groups that prefer a contractual fund, a partnership, or a company vehicle. Decide which group will invest through the FCP-RAIF and which will join parallel vehicles.
- Select an AIFM with experience in real estate funds and the ability to passport the fund into the main investor home states. Choose a depositary, central administrator, and auditor with strong Luxembourg track records.
- Draft fund rules for the FCP-RAIF, partnership agreements for any SCSp or SCS, and articles for Sàrl holding companies. Define management fees, carry, distribution waterfalls, and ESG commitments.
- Build a realistic seed pipeline of assets and prepare marketing materials that show examples, financial projections, and downside scenarios. Agree term sheets with potential anchor investors where possible.
- Launch pre-marketing and then formal marketing under AIFMD rules. Hold the first closing once minimum size is reached. Continue fundraising while executing initial acquisitions and capex plans.
- Operate the platform with regular investment committee meetings, investor updates, and risk reviews. Adjust strategy as markets evolve and prepare exit options such as portfolio sales, refinancing, or extensions of the fund term.
When A Luxembourg FCP-RAIF Real Estate Parallel Fund Is The Right Choice
The structure is most relevant once equity commitments exceed roughly EUR 100 million and the sponsor plans to combine several investor profiles or countries. It works well when the strategy requires both income and value creation, such as logistics with development, or residential upgrade programmes. It is less suited to a small club deal with two or three investors, where a single SPV or partnership might be sufficient.
The ability to replicate the structure across vintages is another advantage. A sponsor can launch a first vintage, refine governance and reporting, then create second and third vintages that reuse the same framework. Over time, the platform can grow into a multi-billion euro series of funds without redesigning documentation every time.
How Damalion Supports Luxembourg FCP-RAIF Real Estate Parallel Fund Sponsors
A Luxembourg FCP-RAIF Real Estate Parallel Fund requires coordination across fund structuring, tax, regulation, banking, and ongoing administration. Damalion works with sponsors, investors, and family offices to design the platform, select service providers, and align documentation with investor expectations. Support can range from preliminary structuring analysis and jurisdiction comparisons to introductions to bank partners and assistance with substance and governance questions. This practical support helps sponsors move from concept to first closing while keeping compliance and investor communication under control. Please contact your Damalion experts now.
Frequently Asked Questions – Luxembourg FCP-RAIF Real Estate Parallel Fund
What is a Luxembourg FCP-RAIF Real Estate Parallel Fund?
A Luxembourg FCP-RAIF Real Estate Parallel Fund is a contractual Luxembourg fund that invests in real estate assets alongside parallel vehicles under a shared strategy.
How does a Luxembourg FCP-RAIF Real Estate Parallel Fund work in practice?
A Luxembourg FCP-RAIF Real Estate Parallel Fund works by pooling capital from investors, investing through SPVs into properties, and co-investing with parallel vehicles in the same deals.
Who can invest in a Luxembourg FCP-RAIF Real Estate Parallel Fund?
A Luxembourg FCP-RAIF Real Estate Parallel Fund is open to well-informed investors such as professional investors, institutional investors, and high net worth individuals.
Why do sponsors use this structure instead of a single fund vehicle?
Sponsors use this structure to accommodate different investor types while maintaining one coordinated investment strategy.
Which industries and real estate assets can the fund target?
It can target offices, logistics, residential, retail parks, hotels, serviced apartments, healthcare assets, and data centres.
Which countries are commonly included in the portfolio?
Typical portfolios include Germany, France, Spain, Italy, the Netherlands, Belgium, Poland, and selected European markets.
What is the typical fund size?
Typical sizes range from EUR 150 million to more than EUR 500 million of equity commitments.
What returns do investors usually expect?
Investors often expect net yields between 4% and 6% and gross IRRs from 8% to above 15% depending on the strategy.
Is the Luxembourg FCP-RAIF Real Estate Parallel Fund tax transparent?
Yes. It is generally treated as tax transparent in Luxembourg, with investors taxed in their own jurisdictions.
Are distributions subject to Luxembourg withholding tax?
Distributions by the Luxembourg FCP-RAIF Real Estate Parallel Fund typically do not incur Luxembourg withholding tax.
How is risk managed?
Risk is managed through diversification, conservative leverage, tenant analysis, stress testing, and AIFM oversight.
What does the AIFM do?
The AIFM handles portfolio management, risk supervision, compliance, and reporting under AIFMD rules.
How long is the setup process?
Launching the fund usually takes a few months, depending on documentation and investor commitments.
Can the fund be closed-ended or open-ended?
Yes. It can be structured as either, depending on liquidity and strategy.
How do capital calls work?
Capital calls are made as investments close or when capex is required, up to each investor’s commitments.
What are typical fees?
Fees often include management fees on commitments or invested capital and performance fees aligned with return hurdles.
Can it co-invest with club deals or separate accounts?
Yes, when conflicts are managed through appropriate governance procedures.
Who is this fund suitable for?
It is suitable for sponsors and well-informed investors seeking diversified European real estate exposure.
What documents govern the fund?
It is governed by fund rules, the offering memorandum, AIFM and depositary agreements, and parallel vehicle documentation.
How can sponsors receive support to launch this fund?
Sponsors can work with advisory partners such as Damalion to coordinate regulatory, legal, tax, and banking aspects.
Glossary – Luxembourg FCP-RAIF Real Estate Parallel Fund
Luxembourg FCP-RAIF Real Estate Parallel Fund
A Luxembourg FCP-RAIF Real Estate Parallel Fund is a contractual Luxembourg fund that co-invests with parallel vehicles in real estate portfolios under one strategy.
FCP (Fonds Commun de Placement)
An FCP is a contractual fund without legal personality that is formed by a management company for investors.
RAIF (Reserved Alternative Investment Fund)
A RAIF is a Luxembourg investment fund requiring an authorised AIFM but no CSSF pre-approval.
Parallel fund
A parallel fund invests in the same deals as another vehicle but may have different investors or economic terms.
SPV (Special Purpose Vehicle)
An SPV holds real estate assets on behalf of the fund and handles property-level financing.
Core asset
A core asset is a stabilised property with strong tenants and long leases.
Value add asset
A value add asset requires leasing, refurbishment, or repositioning to create upside.
Logistics asset
A logistics asset is a warehouse or distribution property used for storage and transport.
Hospitality asset
A hospitality asset includes hotels, serviced apartments, and resort properties.
Residential block
A residential block contains multiple rental apartments for household tenants.
Office tower
An office tower is a multi-floor building leased to corporate or institutional tenants.
LTV (Loan-to-Value)
The loan-to-value ratio compares a loan amount to the market value of a property.
IRR (Internal Rate of Return)
IRR measures the annualised return at which net present value of cash flows equals zero.
Capital call
A capital call is issued when the fund requires investors to provide committed capital.
Commitment period
The period during which the fund may call committed capital for investments.
Closed-ended fund
A closed-ended fund has a fixed lifespan and usually no early redemptions.
Family office investor
A family office investor allocates private wealth into real estate strategies.
Pension fund investor
A pension fund investor allocates retirement capital into long-term real estate portfolios.
AIFM (Alternative Investment Fund Manager)
A regulated manager responsible for risk oversight, portfolio management, and AIFMD compliance.
NAV (Net Asset Value)
NAV represents the value of assets minus liabilities at a valuation date.
