Luxembourg’s rental market is one of the most supply-constrained in Europe, and co-living is the format that responds most directly to the structural shortage. Reckenthal is a long-hold operational bet underwritten with a single experienced operator, priced on in-place income and a Grand Duchy exit cap-rate floor that has never broken.

The opportunity

A ground-up co-living scheme of eight premium-format units across 1,372 sqm of GLA in Reckenthal, immediately proximate to the Kirchberg financial district. Designed for professional single and couple tenants on 12–36 month licences; lease-up underwritten to stabilise at month 12 post-completion.

Luxembourg-based developer-operator with an in-house management platform and three prior co-living schemes under continuous operation. Sponsor is both the builder and the long-term operator — the incentive to deliver an asset that lets well is internal, not contracted out.

Site & submarket

Walking distance to two major employer campuses and a direct tram line into the CBD. Comparable operating schemes in the sub-market maintain 96%+ occupancy on rolling three-year windows; rents have compounded at 3.5–4% per annum with no observed rental ceiling.

Capital structure

SCSp → Luxembourg SCI, senior debt from a Luxembourg commercial bank at 55% LTC, sponsor equity 30%, M24 Sunshine equity 15% with a preferred return and participation. Operating cash flow services debt from stabilisation; distributions begin at month 18.

Underwriting

Target project ROI of 33%, investor net IRR of 21% over a 36-month hold. The underwrite is operationally led: stabilised NOI is the primary driver, with exit on a long-hold income multiple rather than development-profit compression.

Risks & mitigants

  • Lease-up velocity — co-living absorbs faster than conventional residential in this sub-market; break-even occupancy is 71%, comfortably below the operator’s observed stabilised 94–97%.
  • Regulatory shift — Luxembourg co-living regulation is stable; the scheme complies with current and proposed residential-use classifications.
  • Operator concentration — mitigated by sponsor alignment (same party builds and operates) and a step-in right if operational KPIs breach thresholds for two consecutive quarters.

Exit

Sale at stabilisation to a long-duration European residential fund, or refinance-and-hold if the operational yield clears the M24 fund’s hold-mandate gate. Both paths clear target inside 36 months.