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2010 Real Estate Showcase: Structuring property investments - The lender's perspective


Property acquisitions in Belgium are subject to a fairly high property transfer tax (from 10% to 12,5% depending on the location). This tax is usually borne by the transferee. Share transfers on the other hand are exempted from any such tax.

In addition, where capital gains realized on the disposal of a real asset are taxed at the standard corporate income tax rate (33,99%), those realized on the sale of shares are totally exempted. For this reason many developments are lodged in a single purpose company, the shares of which, not the property, are sold to the investor. The price of the shares will typically be equal to the adjusted net asset value of the company, the adjustment reflecting the market value of the property and including a discount for the fiscal latency deriving from the difference between the book value and the market value of the property. Any investor willing to finance the acquisition of shares in such a single purpose company with borrowed money will be faced with a number of constraints. Despite the transaction bearing on shares, any lender will look at it as a property transaction and will structure the security package accordingly. Typically, he will require a mortgage on the property and a pledge over the rental income.

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Portrait ofBruno Duquesne
Bruno Duquesne