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APPII: SIGI are a step towards real estate market’s sustainability
11 February 2020 | Ana Tavares

The SIGI (Portuguese REITs) regime is in effect and the market awaits the creation of these new societies. A type of companies which «is important in order for the industry to become sustainable».

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The words were from José Almeida Guerra, vice-president at APPII, who spoke at the association’s XXX Executive Breakfast Session, in Lisbon, dedicated to the theme of investment and the new Portuguese REITs. «We need to organise and professionalise ourselves, and the tax regime is fundamental to consolidate the real estate development companies», he defended, since «worse days will come».

During the conference, Isabel Ucha, from Euronext Lisbon, highlighted that one of the Portuguese SIGI’s great advantages is the fact that the regime is harmonised with the international REIT regimes, which have had «enormous success in other European countries. Investors are used to investing in these vehicles, and are now able to find in Portugal a similar regime».

With a minimum capital share of 5 million euro, SIGI’s allocate 80% of their capital to real estate, 75% of which must generate yields. More than 90% of its dividends must be distributed, as well as 75% of other distributable profits. Total debt cannot exceed 60%. SIGIs must also follow capital dispersion rules, as well as article 22 of the Portuguese Tax Incentive Statute, which states they must be assessed by an independent auditor every 7 years.

«This can be a diversified financing instrument», and it provides individual investors «access to a real estate portfolio with less costs», besides diversifying the investors’ portfolio. SIGI can benefit «many segments, such as hotels, hospitals, retail, student accommodation, etc. They allow a separation between the real estate and management activities», pointed out Isabel Ucha.

Despite not having yet created a SIGI in Portugal, Merlin recently became the first SOCIMI (Spanish REIT) listed at Euronext Lisbon, in a dual listing system, highlighted Isabel Ucha. The company has a 6.000 million euro market capitalisation.

During this debate, the issue of whether it would be possible to transform open real estate funds into SIGIs, was raised, but Isabel Ucha explained that only real estate societies are eligible to become SIGIs: «converting a fund into another vehicle has to comply with the rules that were already in place, and there doesn’t seem to be any openness for that to change».

This possibility could be a way for funds «to achieve a greater balance between small savings investors and more institutional shareholders who do not, typically, participate in open funds. It could attract more institutional investment and create more critical mass», defended António Gil Machado, director at VI.

 

Sonae Sierra has already created the first SIGI

Together with Bankinter, Sonae Sierra has already created the first Portuguese SIGI (Portuguese REIT), Olimpo Real Estate Portugal SIGI, S.A., a society which should replicate Spanish SOCIMI Ores SOCIMI’s model, with a 500 million euro endowment.

According to Sonae Sierra, also present at the breakfast session, the company started in 2016 treading «part of the path needed to be followed in Portugal. We considered we were ready to take off, and we did. We now have a few months to start investing».

Questioned as to why only one SIGI was created until now, Isabel Ucha recalled that the regime, despite having been approved during the first quarter of 2019, had to be returned to Parliament, and await clarification in terms of the tax regime.

 

Stability in order to not «sabotage» investment

The same as with any other measure designed to boost investment, fiscal stability is paramount. The "golden visas" are an example of that.

Ricardo Guimarães, director at Ci, commented during the breakfast session, that the changes recently approved to that regime within the context of the 2020 Portuguese State Budget, which suspended the issuing of visas in Lisbon, Porto and coastal municipalities, «jeopardise the country’s reputation in terms of investment. We have to send a clear message of how fundamental stability is».

Hugo Santos Ferreira, executive vice-president at APPII, pointed out that this is a «serious problem. Portugal is already being shown in the press as a country that is no longer attractive to invest in. And investors who were considering investing in Portugal will not do so, after reading this news. The message we are sending out is that we are no longer interested in attracting investment».