INTREAL Luxembourg – “We want to double assets under administration to €5bn”

02. Mar 2023

Published by REACT News on 1 March 2023

Conducting Officer Rudolf Kömen on why the firm’s international funds thrive in the Grand Duchy.

For a year, the real estate capital service company INTREAL has been active with a subsidiary in Luxembourg. Having achieved market leadership in Germany with €60bn assets under administration, the aim now is to win international customers.

In Luxembourg, INTREAL plans to launch debt funds and funds of funds for the first time and to enter the asset class of infrastructure. React News revealed on Tuesday that Intreal had hired Stephan Schilken as its new managing director in
the country.

One of Schilken’s new partners, Rudolf Kömen, has co-led INTREAL’s Luxembourg subsidiary as a conducting officer since 2022. His earlier roles – CEO of Credit Suisse Fund Management and MD of Managing SEB Asset Management – were also located in Luxembourg.

Talking to React News, he explains what the Grand Duchy has to offer real estate investors besides low taxes – and why the fund industry there was lacking a specialised real estate service provider.

What can Luxembourg do as a fund location that Germany cannot?

German asset managers are increasingly looking around for such international clients and launching funds for distribution outside Germany. Conversely, there are international asset managers looking to invest capital for German insurance companies, banks or pension funds for the first time.

The German special fund structure is established and well known in the German-speaking countries. Asset managers and investors from other European countries and other regions of the world, however, are more familiar with the Luxembourg structures.

With our AIFM licence, we can launch RAIF (Reserved Alternative Investment Funds) funds, for example, without having to apply separately for the fund from the supervisory authority. Luxembourg is the number one fund location in Europe, with a complete industry of managers, tax advisers and lawyers concentrated in a small market of around 650,000 inhabitants. In addition, this highly qualified workforce can communicate in all the main European languages.

To what extent do tax aspects also play a role?

To put it straight: we do not make any business that is induced by tax avoidance considerations. One special feature in Luxembourg is the tax d’abonnement. This amounts to 1 basis point a year on the fund volume. This is a low tax rate, and at the same time the only type of tax that affects the fund itself. At the same time, however, the investor must pay income tax in his home country.

What new customer groups is INTREAL tapping into with the Luxembourg business?

In the current environment, many foreign institutional investors are looking with interest at the German real estate market. They often have more risk appetite than domestic investors and are looking to enter as opportunities arise in sectors such as senior living or hotels.

Conversely, many German target customers are already working with INTREAL and want to do the same with their new international partners.

And the international companies are happy to get involved with a German service KVG? Aren’t there more established fund administrators in Luxembourg?

I would venture to say that there are none as specialised in real estate funds as we are. For many of our competitors, real estate is just one asset class alongside private equity, equity, bond or other securities funds. But a real estate asset manager who holds, say, 30 properties in 10 countries, many of them in his own property companies, needs depth and expertise in fund administration. It must know the average remaining terms of the leases for his entire portfolio as well as the energy consumption.

Data collection and reporting are becoming increasingly complex, especially when it comes to ESG issues. When an international asset manager enters the German market, he needs a partner who knows the ropes.

With the opening of the Luxembourg office, INTREAL also announced its entry into the debt fund, fund of funds and infrastructure fund business. What’s the reason behind this?

After successfully specialising in real estate funds in Germany, we now want to offer products via Luxembourg that go somewhat beyond this traditional business. With the funds of funds, we want to invest in a diversified manner in various real estate special and public funds. We have applied for a license extension to launch infrastructure funds.

The market potential, especially in the alternative energy sector, is enormous. Moreover, there are many parallels between the asset classes infrastructure and real estate: Both are cashflow-based, and for real estate investors, selling solar energy produced on the roofs of their buildings is also an attractive option.

You already have €2.5bn of assets under administration in Luxembourg. What is your next growth target?

We hope to double AuA to €5bn by the end of the year. Currently, our Luxembourg platform acts as AIFM and/or central administration for five funds. A prominent example is DIEAG Immobilienanlagen SCS RAIF, an individual mandate that the German developer and manager Dieag launched with us for its project development on Berlin’s Behrensufer. Four further funds are in preparation.

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