Eternam Sanction: Managing risks for your real estate club deals in light of the Financial Markets Authority's case law
In its Sanctions Committee's decision of September 9, 2025, issued against an authorized management company for the management of alternative investment funds (AIFs), the AMF reiterates (among other very interesting lessons) that certain club deals structured as joint-stock companies can be reclassified as "Other AIFs."
On September 9, 2025, the Sanctions Committee of the French Financial Markets Authority (AMF) fined the management company Eternam 400,000 euros for deficiencies in the management of club deals real estate reclassified as Other AIFs. This decision firmly reiterates a clear framework: as soon as a club deal meets the cumulative criteria of Article L.214-24 of the Monetary and Financial Code, the obligations of the AIFM Directive apply — whether a management company has been appointed or not.
The club deal real estate is defined by its hybrid nature. It is an intermediate solution, positioned between direct real estate investment and inherently regulated collective investment vehicles (OPPCI, SCPI, FPS).
Unlike public funds, the club deal brings together a limited number of investors sharing common objectives for return and duration.
The key characteristics of this model, as analyzed by the Sanctions Committee, are as follows:
- Access to exclusive assets: Pooling capital allows for the acquisition of high-value single assets (hotels, prime offices, logistics) or confidential markets inaccessible to individual investors.
- Extensive use of leverage: Bank debt frequently exceeds 50%, boosting the target IRR but exposing the structure to increased valuation risk.
- Constrained time horizon: Capital is locked in for a determined period, often between 2 and 7 years, with predefined exit windows.
- Closed governance: The structure relies on a circle of partners united by a common economic interest.
For those wishing to structure such a vehicle, decision-making flexibility and full transparency on the asset are major advantages. However, if this flexibility is not accompanied by active governance from the partners, the vehicle automatically falls within the scope of the AIFM Directive.
Such a reclassification entails significant obligations: the appointment of an authorized portfolio management company and the designation of a depositary.
AMF Analysis Criteria:
The AMF analyzed the operational reality of club deals, by cross-referencing different types of data:
- Marketing materials. During an inspection, the AMF analyzes the pitch deck, investor FAQs, the website related to the operation, etc. For example, the mention of an IRR or overly precise acquisition criteria are considered strong indicators for qualifying as a "defined investment policy," a characteristic of an AIF.
- Governance. The entities where investors of a club deal must allow for discretionary power of these investors over day-to-day operations. The AMF analyzes the legal documentation of the operation (articles of association, shareholders' agreement, etc.) to ensure that investors' rights are not practically absorbed by a third-party operator. If investors are passive, the risk of being classified as an AIF is very high.
- The overall consistency of the operation. When it examines club deals, the AMF considers a combination of factors and assesses overall consistency. An operation may seem legally secure, but can become risky if the governance, legal documentation, and marketing materials do not tell exactly the same story.
Written by Sylvain Clavé and Germain Chaux
For any questions regarding the structuring or securing of your club deals, please contact us.
