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Orion Constellation – SRPO Sub-Fund (“the Fund”) is a Luxemburg-based RAIF (Reserved Alternative Investment Fund) which was set-up in Q4 of 2020.  Moreover, the Fund has obtained the Article 8 label. Under Article 8, companies are required to demonstrate that their investment products promote environmental and/or social characteristics.The Fund (and all underlying Sub-Funds) is fully authorized within the scope of the EU AIFMD (Alternative Investment Fund Managers Directive) through its AIF manager IRE AIFM HUB. The AIFM (“Alternative Investment Fund Manager”) is directly approved and regulated by the CSSF, the financial regulator of Luxemburg. The full-scope AIFM status assures that the Fund’s appraisals, NAV calculation, risk and portfolio management are reviewed and verified by a regulated external party. In addition the AIFM has to approve every investment, that the General Partner (GP) aims to make, and ensures that all investments are in line with the investment objective as described in the PPM.

The Fund accounts are held at an authorized custodian bank, Banque du Luxembourg and the GP has appointed a regulated fund administrator and transfer agent, Alcyon SA. In addition the GP has appointed Wilton Investment Services BV as Investment (sub-)Advisor to the Fund. WIS is regulated by the AFM and FSMA. WIS is compensated by the GP as part of the management fees and shall not directly charge the Fund. The Fund, respectively the General Partner, and the AIFM shall not be bound to act by any advice or recommendation given by any Investment Advisor. Please refer to PPM for more details.

• The Fund’s partners are the largest occupied real estate institutional specialists active in this niche in Spain and employs well over 250 Full Time Equivalent employees including trained negotiators who personally visit all the assets, real estate appraisal experts and specialised lawyers.
• Proprietary appraisal software and database: including over 20 million properties with relevant parameters such as asking/selling price, surface, floor, elevator, location, etc. This enables the fund to analyse and bid on hundreds of occupied assets every week. The more assets the Fund and local Asset Manager can accurately bid on, the more likely some bids will be successful.
• Exclusive sourcing: The Fund’s advisors have over the years become trusted counterparties for banks, who are only willing to sell to reputable & ethical counterparties they know.
• Strict buying & selling discipline: Once an asset is up for sale, all activity (web, visits) is monitored and we only accept offers for repossessed assets that are higher than our internal market appraisal.

The Fund aims to work exclusively with local partners that upholds very high compliance and ethical standards. The local partners adheres to a very strict and well documented approach when repossessing occupied residential assets. The repossession manual, translated to English, is available upon request. The Fund will only work with advisors who are trained and experienced negotiators that approach and deal with occupants in ways that are respectful and non-threatening. 

Because occupied properties are of such sensitive nature and they are sold by national banks who are under strict supervision, it is very important to maintain a good reputation to be an ‘accepted’ buyer in this market. Because most occupants agree to leave voluntarily (often in exchange for compensation) they cannot claim they were ever forced. In the remaining minority of cases standard legal procedures will be pursued. There will absolutely be no use of any force, threats, or any other verbal aggression to convince occupants to vacate.

While risk of fraud can never be 100% avoided, the risk here is minimal as the Fund owns the real estate properties outright via 100% owned SPVs (i.e. Spanish companies). All the properties are verified with the land registry or cadastre by our service provider and purchased via local and registered notaries who make additional verifications. The AIFM (Alternative Investment Fund Manager) makes the final decision to purchase the properties, based on due diligence of the service provider and an independent third-party appraisal. The Fund is the sole owner of the SPVs, set-up and registered with an official notary, and the SPVs are the sole owner of the properties. Purchases deeds and proof of ownership will be held and verified by the Fund’s independent custodian.

The Fund has at its disposal fully equipped teams of experienced appraisal analysts in Madrid as well as an internally developed appraisal software and database.  

Once the relevant data (cadastral references etc) is received in the adequate format, the assets are uploaded in the appraisal tool. The program allows to automatically appraise up to 50.000 assets a day. The appraisal is based on comparable assets from the same neighbourhood.

Once the desktop appraisal is created, the analysis teams exclude from the benchmark all the assets for which valuation quality is substandard. This means that all the assets that do not have enough available comparable assets to produce a comfortable valuation are discarded.

Next the teams review each asset, potentially revising the appraisal up or downwards based on their expertise and knowledge. Moreover, they value elements of the asset that are extraordinary, like views, nearby services, quality of the street, etc. Each asset receives at least 3 valuations from 3 different in-house analysts, in addition to the automated valuation.

In addition, the properties are appraised by an independent third-party appraisal firm immediately before or at the time of purchase.

The AIFM (“Alternative Investment Fund Manager”) values the assets held by the Fund in a 2-step re-valuation process. Please refer to the PPM for the full description of the valuation process. The fair value is based on the appraisal of a local independent third-party appraiser at or around the time of the purchase. The third party appraises the property as if it were vacant. The AIFM next applies discounts to this appraisal based on projected costs for refurbishment, security improvements, repossession and sale, taxes and fees for lawyers, notaries and other service providers. If the AIFM deems the third-party appraisal to be overly optimistic, we may use our more conservative internal valuation as the base appraisal to which we apply discounts.

All investments, including an investment in the Fund are subject to a variety of risks and the potential loss of capital. This is an illiquid investment strategy, properties cannot be readily converted into cash, so investors should be aware that redemptions may take up to one year or longer to fulfill. Past performance is not a guarantee of future performance.

The Fund is committed to upholding the highest standards of environmental, social, and governance (ESG) responsibility in all its operations. We recognize the importance of:

1. Promoting social characteristics and fostering social equity through our investments in distressed real estate portfolios, with a particular focus on increasing access to affordable residential real estate in Spain.
2. Minimizing the Fund’s environmental footprint.
3. Promoting strong governance practices.

Environmental Responsibility

We are committed to minimizing our environmental footprint. This includes ensuring that our property refurbishments and operations comply with local and international environmental regulations; promoting the use of sustainable materials and energy-efficient technologies in the renovation of distressed properties; revitalizing existing infrastructure rather than constructing new buildings, reducing the carbon footprint associated with new construction; and encouraging responsible land use by repurposing existing properties rather than encroaching on undeveloped land, which helps preserve natural habitats and biodiversity.

During its due diligence, the Fund always requests, if available, an Energy Performance Certificate for each asset, and uses its best efforts to improve, to the extent possible, the rating of each asset during the time of possession (isolation, solar panels, etc.). This takes into account that most of our assets are old (40+ years buildings).

Social Responsibility

Our social responsibility is centered on the promotion of social equity and the provision of affordable housing.

Key aspects include:

• Affordable housing initiatives: Increasing access to quality housing for low- and middle-income families in Spain.
• Respect and equality: Respect and equal treatment of all individuals involved in our operations, including illegal occupants, without discrimination based on age, sex, ethnicity, religion, sexual orientation, or any other characteristic.
• Occupant assessment and support: Identification of any risks of social exclusion or special circumstances (e.g., disabilities).
• Ethical repossessions procedure: Repossessions carried out through friendly agreements.

Governance

The Fund works with local partners that uphold very high compliance and ethical standards. The local partners adhere to a strict and well-documented approach when repossessing occupied residential assets. The staff are trained and experienced negotiators that approach and deal with occupants in ways that are respectful and non-threatening. Additionally, the Fund and its servicers promote diversity and gender equality in their staff, particularly but not only among mediators.

The Fund adheres to the following governance principles:

1. Transparency: All procedures and decisions are documented and reviewed.
2. Compliance: Adherence to all local and international laws and regulations, and our own ethical guidelines (ESG policy available upon request).
3. Continuous training and development: Provided to our local partners’ staff to ensure they are well-versed in ethical negotiation practices and the latest compliance requirements. Negotiators and other relevant staff members are required to sign and adhere to our Repossession Procedure and Code of Ethics.