French real estate investment funds go shopping in Paris
French SCPI funds are confirming their expanding role in the property investment landscape in France. In the first quarter of 2015, SCPI capitalization overall reached €29.9 billion, according to figures published by fund monitor MeilleureSCPI. A Société Civile de Placement dans l’Immobilier (SCPI) is a private investment company set up for the purpose of buying and managing real estate.
SCPI funds attracted net inflows of €800 million in the first quarter of 2015, of which they invested €454 million, slightly over half. Fifty two percent of the funds were invested in Ile-de-France – 25% in Paris and the rest to the provinces. The average yield for the period came out at 4,83%, with the top performers in the commercial real estate category in Q1 showing yields of up to 6,73% on current market value.
The SCPI structure offers several advantages. It is the preferred vehicle for a group of investors to acquire real estate and avoid the unanimous decision-making required in collective ownership of real estate en indivision in France. A group of properties of different valuations can be easily divided and shared in a single portfolio, and the buying and selling of a negotiable instrument (the shares in the SCPI) is far simpler than transacting on the underlying real property.
The majority of SCPIs invest in commercial and industrial property, including substantial investment in new build properties. The funds generate income from rents, and profits are paid out to its institutional or individual shareholders in the form of dividends. There are currently about 200 SCPIs in existence, several with a capitalization in excess of €1 billion. The U.S. or U.K. counterpart to the SCPI is a Real Estate Investment Trust (REIT).
An SCPI is not the same as a Société Civile Immobilière (SCI). An SCI is a limited liability company designed for small groups, often families, to jointly own French real property. SCPIs have existed in France since the 70s. Under current French law, they are not traded on the stock exchange.
Photo: Jean-Pierre Dalbéra