SOCIMIs are listed companies whose implementing regulations provide a series of fiscal advantages. They essentially work by acquiring real estate assets, offices, buildings, shopping centres, or hotels for leasing and/or possessing shares in the social capital of other SOCIMIs. The profits generated are exempt from the corporate tax provided that at least 80% of the SOCIMI’s income of each year comes from property leases and/or the dividends or profits from shares of other SOCIMIs.
In addition, a minimum of 80% of the SOCIMI’s assets must be invested in real estate property of an urban nature for leasing, in land for the development of real estate property, as well as in shares of capital or assets of other SOCIMIs.
Equally, the SOCIMI’s shares must be submitted for trading in a regulated market or in a multilateral trading system.
In 2015, Spain saw an emergence of these listed companies, which are investing large traditional fortunes and major investment funds on a worldwide scale. SOCIMIs have also multiplied their investments, significantly amplifying their portfolios of offices and other real estate.
In Spain, there are four major SOCIMI listed in the Spanish market (Merlin Properties, Hispania, Axiare and LAR) and whose income tripled last year.
In addition, there exists a multilateral trading system known as the Alternative Stock Market (MAB), that could define itself as the Small and medium-sized enterprise Market, which already includes 13 SOCIMIs. The MAB is the suitable system for SOCIMIs given that it is more flexible than traditional stock markets and it is not subject to the extensive and arduous regulation of official markets. This is definitely a stock market whose characteristics of regulations and operation is orientated around small and medium size companies, with costs and processes adapted to the characteristics of these companies, facilitating access to financing, and maintaining at the same time adequate levels of transparency and information, thereby generating the necessary confidence of investors for their participation in the market.
Analysts’ prediction for these investment vehicles, alongside arguments such as the profitability of dividends offered by SOCIMIs and the positive figures of the real estate market, are optimistic and the outlook of profitability for the sector range between 3% and 5%.
There is no doubt that this model allows for the investment in real estate assets of a professional and diversified nature, with a portfolio that can include homes to hotels or commercial offices, and in a relatively secure form. In this sense, the natural low risk of its business (rent from buildings previously selected by its managers) means that SOCIMIs in a certain sense resemble a product of fixed rent, but with profitability due to dividends which can reach more than 3%.
This article is not considered as legal advice