Definition of Spanish REIT (Real Estate Investment Trust)
SOCIMIs (Sociedades Anónimas Cotizadas de Inversión Inmobiliaria) are public limited companies whose main activity is to invest, directly or indirectly, in urban real estate for leasing. It is the Spanish adaptation to vehicles known as Real Estate Investment Trusts already existing in Europe: in France, the sociétés d’investissements immobiliers cotées (SIICs); in Germany, the Immobilien-Aktienge-sellschaft mit bÃ¶rsennotierten Anteilen; or, the Real Estate Investment Trusts (REIT) in the United Kingdom.
Law 11/2009 of 26 October 2009, was introduced in Spain to regulate Real Estate Investment Listed Companies. This is a new instrument to boost investment in a market, which is in decline, with the objective of boosting renting in Spain.
The legal regime was subsequently amended by Law 16/2016 of 27 December 2016, to relax the legal requirements of a SOCIMI, remove the regulatory barriers, and improve the tax treatment applicable to SOCIMIs.
SOCIMIs (Real Estate Investment Trust) are mainly characterized as being limited companies listed on stock exchange markets whose activity is restricted to the use of properties for leasing or the participation in other SOCIMIs, which have important advantages in taxation matters and is capable of attracting capital from investors thanks to its stable and liquid profitability. Therefore, these companies are seen as attractive investments.
Legal Requirements of a SOCIMI (Real Estate Investment Trust)
The legal regulations on SOCIMIs establish a series of basic requirements that companies must comply with, which mainly consists of the following:
- The SOCIMI (Real Estate Investment Trust) must have as its main activity or purpose the acquisition and development of urban real estate for leasing and/or hold a stake in the share capital of other SOCIMIs or entities without residence in Spain that have the same corporate purpose and are subject to a similar regime.
- The SOCIMI must invest at least 80% of its assets in urban real estate for leasing, in lands for development of leasable property or shares in other SOCIMIs or similar companies.
- Additionally, at least 80%of income from each financial year — excluding any income arising from the transfer of shares and real estate attached to the main activity — must come from leasing real estate and/or dividends or profits from shares in other SOCIMIs or similar companies.
- Real estate that belongs to the assets of the company must remain leased for at least three years.
- The shares of the SOCIMI must be listed for trading on a regulated market or on a multi-lateral trading system, such as the MAB.
- The SOCIMI must have a minimum share capital of 5 million euros.
- An independent expert appointed by the business register should appropriately price the non-cash contributions for the establishment or expansion of capital that are made in real estate at the time of the contribution.
- The SOCIMI (Real Estate Investment Trust) must distribute to its shareholders in the form of dividends, the benefits obtained each year as follows:
- 100% of the profits received as dividends or profits coming from other entities.
- At least 50% of the profits obtained in the transfer of assets and stocks or shares in other entities.
- At least 80% of overall earnings, for example, the earnings from the leasing of properties.
This article is not considered as legal advice