Roche & Cie

OPCI: Alternative French “real estate” investment

01 Feb 2017

In the french real-estate family, alongside SCPIs exist OPCIs, organizations that allow investing in real estate while benefiting from greater liquidity.

Real estate collective investment undertakings (OPCIs) complete the range of real estate products. Compared to real estate investment trusts (SCPIs), they are more liquid due to a limitation of the share devoted to real estate.

Although theoretically an OPCI can invest up to 90% of its assets in real estate, the financial market authority (Autorité des marchés financiers) has decided to issue its approval only to those whose assets consist of up to 65% Real estate, the balance being then composed of financial assets, more liquid than stone.

Is capital guaranteed?

No. You are not immune to a drop.

Is money available?

The Partners may resell their Units at any time, as the Company is obligated to purchase them at least 10% and no more than 40% of the assets under management. This is a difference with SCPI where, in most cases, resale is only possible if there is a buyer. In certain exceptional situations, a period of six months may exist.

How much does it pay?

The fund will be more oriented towards financial investments than for REITs. As real estate is currently more profitable than financial products, overall profitability – return and capital appreciation – will be lower than that of REITs. Count about 5%.

What is the tax rule?

The legislature created two distinct legal forms:

The OPCIs in the form of a real estate predominant investment company with variable capital (Sppicav), close to the SICAVs. Your income is then subject to the dividend system, as for the shares. Capital gains, too, are taxed as on shares.

Next, OPCI real estate investment trusts (REITs). This time, the earnings are taxable according to their origin: bonds, rents … Most of the coupons, however, are made up of income from land, taxable for income tax, either in micro-land or in real costs, exactly As in the general scheme.

The latter is more interesting if you have a lot of deductible expenses. Real estate gains are taxed at a rate of 19%, plus 15.5% social security levies for transfers of more than 15,000 euros. It is exonerated after twenty-two years of detention for the tax and thirty years for the share.

Where to subscribe?

At present, 12 OPCIs are accessible to individuals. They are mainly distributed by Axa, Banque Populaire, Caisse d’Epargne, Banque Postale, French AM or Swiss Life. But, in practice, you should be able to subscribe this product to your own institution by providing the ISIN code of the OPCI in question.