7 terms to know before investing in SCPIs

1. Paper stone: what exactly does it mean?

Paper real estate refers to professionally managed collective real estate investments. They include SCPIs, Sociétés Civiles Immobilières (SCIs) and Organismes de Placement Collectif en Immobilier (OPCIs).

The term "stone" refers to real estate and "paper" to the investment in the form of shares, acquired by the associates of these companies. Investing in paper real estate allows you to purchase property shares via a company and receive potential income from the rents received. This income is not guaranteed, and may rise or fall.

2. The value of an SCPI unit: a multiple definition...

There are four types of SCPI unit values:

• Subscription value. This corresponds to the purchase price at which investors buy their units, including front-end load and subscription commission, 
• Withdrawal value. This is the amount received by an associate when he or she leaves the SCPI, 
• The reconstitution value. This represents the amount required to buy back all the SCPI's real estate assets. This is the SCPI's recoverable value,
• Realizable value. This is the sum of the market value of the SCPI's real estate assets (i.e. the price at which a property can be sold on a given market) and the net value, i.e. less its financial assets.  

3. SCPI with fixed or variable capital

In the world of SCPIs, there are those with variable capital, whose capital fluctuates with subscriptions and withdrawals, and whose unit price varies according to the value of the buildings. And then there's the fixed-capital SCPI, whose capital cannot change, in which case it's only a question of exchanging shares, and the price of each share varies according to supply and demand.

With Variable-capital SCPI, you can sell or subscribe to units at any time. To sell your units, you have to go through the management company. It sets the price, based on the value of its real estate assets. Withdrawals can only be made if there are sufficient subscriptions.

The management company of a fixed-capital SCPI sets a capital ceiling at the outset. Unless there is a further capital increase, investors will have to go to the secondary market to buy units. The law of supply and demand applies. The value of units depends on the attractiveness of the SCPI to investors, and not just on the value of its real estate assets.

In both cases, it is important to note that the liquidity of the shares is not guaranteed.

4. SCPI de rendement and SCPI de capitalisation, what are we talking about?

Different types of SCPI exist, each with its own specific objectives..

Yielding SCPIs. Their main aim is to distribute regular dividends to investors, although income is not guaranteed. This income is derived from the rental of real estate assets (offices, warehouses, clinics, etc.).

Capitalization SCPIs. These do not distribute income to associates. They aim to generate long-term capital appreciation. They invest in low-cost, high-potential assets. For example, a building sold at below market price in a changing neighborhood.

5. Liquidity: is it easy to sell SCPI units?

In a variable-capital SCPI, the management company organizes liquidity and sets the value of the units in advance. Units can only be sold if sufficient subscriptions have been received. Liquidity is therefore not guaranteed by the management company. Conversely, in the case of a fixed-capital company, the secondary market is not managed by the management company. In this case, the offer to sell must meet the demand to buy.

6. What are dividends?

The shareholders of an SCPI receive dividends, i.e. income from rents collected by the company and any capital gains on assets sold, less the SCPI's management and operating costs. Dividends are generally paid quarterly, but may be monthly or half-yearly. Income is not guaranteed.

7. IRR and TD, performance indicators for analyzing SCPIs

The Internal Rate of Return (IRR) indicates the profitability of an investment over a given period, taking into account the acquisition price, the income received over the investment period and the withdrawal value.

The Distribution Rate (DR) is calculated by dividing the gross dividend, before withholding tax and other taxes paid by the fund on behalf of the associate in France or abroad, paid in respect of year n by the subscription price at January 1 n. Non-recurring income comprises distributions of capital gains, tax reset and foreign taxes.

Investing involves risk, particularly of capital loss, income is not guaranteed, and past performance is no guarantee of future performance. This is an advertising communication and does not constitute investment advice or a recommendation. Please refer to the fund information document and the key information document before making any final investment decision.