What are the costs and benefits of the creation of a Luxembourg Special Purpose Vehicle investing in real estate? - Analysis of a practical case

Abstract

This thesis’ purpose is to analyze the benefits and costs of the creation of a Special Purpose Vehicle in the Grand Duchy of Luxembourg in the field of real estate. The analysis is conducted through some literature review broaching the subject, and then the presentation of a practical case. The practical case considers the creation of a SPV by an investment fund after the acquisition of a real estate asset (a distribution center) located in Luxembourg. The case considered several different stages during the investment period. First, after the acquisition, some parts of the building are renovated. The asset is therefore not rented to anyone, and is not generating any income. However, the value of the asset increased thanks to the renovation. Then, the building is rented to two different tenants, which provide rental incomes to the SPV. Finally, the asset is sold as a higher value, and then the entity is dissolved. This whole process results to a global positive income for the Fund who invested in this NWT. In the practical case analysis, the tax situation is presented and the final outcomes are analyzed.