A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

INDUSTRY OVERVIEW

Figure 5: Illustration of direct investment

Private equity real estate fund

Copyright CACEIS, 2009

> Or held through intermediary vehicles, the so-called Special Purpose Vehicles (SPVs) , which suit different purposes:

- An SPV can be inserted between the fund and the investment in order to benefit from more favourable tax treaties between the fund’s domicile and the location of the as- set, as illustrated in figure 6.

Figure 6: Illustration of the interposition of an SPV for tax purposes

Private equity fund

Domicile 1

SPV

Dividends/interest paid under the framework of a double taxation treaty between domicile 1 and 2

Domicile 2

Copyright CACEIS, 2009

- An SPV can be inherited from the previous owner from whom the asset is purchased: legacy ownership structures may involve offshore holding companies and may be the rule in some countries. - An SPV is in some cases necessary to concentrate some portion of the asset financing in its domicile or to concentrate some related operations, e.g. property management of a private equity real estate asset.

The combination of these scenarios for different setups can lead to complex structures combining the different options and ownership cascades.

page 18 | A thorough understanding of PE