OPCI Investment

The 2000s saw a strong development of property savings in France with:

  • the creation of SIIC (Listed Real Estate Investment Company) which has enabled the development of the Paris Bourse real estate compartment
  • and the creation of OPCI (Collective Real Estate Placement Organism) in 2005

These vehicles complete the existing investment system in the “paper stone” sector, which are the “Société Civile de Placement Immobilier” (SCPI).

The multiplication of regulations in the financial field, both internationally and in France, pushes qualified and unskilled investors to seek OPCIs which offer specific advantages.

OPCIs were created in 2005 by Order No. 2005-1278. They are approved by the “Autorité des Marchés Financiers” (AMF). Like SICAV or FCP, they allow several investors to pool their equity and invest in stone in an indirect form.

OPCI: A regulated instrument

The OPCI (collective real estate investment organism) is placed under the control of the AMF (Autorité des Marchés Financiers), which approves and controls all the SGP and each new OPCI as well as any major decision concerning them (modification of the prospectus, operation, liquidity, merger , dissolution,…)

Several actors are involved in its operation and governance:

  • a management company (SGP),
  • a depositary for the control and conservation of securities,
  • a real estate expert,
  • an auditor,
  • and depending on its status, a board of directors for SPPICAVs or a supervisory board for REITs.

The management company is solely responsible for investment and must report its management policy to the shareholders.

What is the information for the investor?

Prior to their subscription of units / shares of an OPCI, the investor must receive:

  • the key investor information document (in UCITS format until December 31, 2019, then PRIIPs format from January 2, 2020), which is a document intended to provide summary information presenting the essential information necessary for taking investor decision (investment objectives and policy, risk and return profile, risks, costs, past performance and practical information),
  • the prospectus and the statutes of the SPPICAV which detail and supplement the information contained in the KIID;
  • the last annual report, which notably includes the management report, the certified accounts and the CAC report and possibly a summary of the remuneration paid by the management company;
  • the last net asset value (or the last market price of the unit / share) and the subscription form.

The investor regularly receives reporting documents: semi-annual report with the composition of the assets.

OPCI: Main Features

What is an OPCI and why this type of vehicle?
The OPCI is an alternative investment fund (AIF) approved by the AMF.

The OPCI is characterized by its Investment flexibility and its Legal and Financial Benefits:

  1. The OPCI can invest in a wide range of real estate supports while benefiting from a great investment flexibility concerning the assets acquired, the financing, the duration of their holding.
    The OPCI can acquire:
    • Either directly real estate assets of any kind (built, in future state of completion (VEFA), under real estate promotion contract (CPI), or even bare building plots),
    • Or in various indirect forms:
      • shares in partnerships whose assets consist mainly of buildings acquired or constructed with a view to their rental, or of credit-taker rights: Sociétés Civiles Immobilières, SA, SAS, shares of unlisted real estate companies, shares of SCPI
      • listed real estate shares: SIIC
      • units or shares of other OPCIs
      • units or shares: real estate Sicavs, etc.
    • The management company can thus organize dynamic management of the property portfolio, optimized according to the legal supports desired and the nature of the buildings sought.
  2. The purely rental return on property is also accompanied by a search for capital gain on its assets which benefits the unit holder since OPCIs have a distribution obligation.
  3.  We also seek to optimize the return on equity by using debt, the level of which is strictly controlled, within the regulatory limit of:
    • 40% of the value of buildings held directly or indirectly (art. L. 214-95 of the Monetary and Financial Code)
    • and up to 80% for OPPCI EL (Leverage Effect).

The OPCI (collective real estate investment organism) is placed under the control of the AMF (Autorité des Marchés Financiers), which approves and controls all the SGP and each new OPCI as well as any major decision concerning them (modification of the prospectus, operation, liquidity, merger , dissolution,…)

  • Several actors are involved in its operation and governance:
    • a management company (SGP),
    • a depositary for the control and conservation of securities,
    • a real estate expert,
    • an auditor,
    • and depending on its status, a board of directors for SPPICAVs or a supervisory board for REITs.
  • The management company is solely responsible for investment and must report its management policy to the shareholders.
  • What is the information for the investor?
    • Prior to their subscription of units / shares of an OPCI, the investor must receive:
    • the key investor information document (in UCITS format until December 31, 2019, then PRIIPs format from January 2, 2020), which is a document intended to provide summary information presenting the essential information necessary for taking investor decision (investment objectives and policy, risk and return profile, risks, costs, past performance and practical information),
    • the prospectus and the statutes of the SPPICAV which detail and supplement the information contained in the KIID;
    • the last annual report, which notably includes the management report, the certified accounts and the CAC report and possibly a summary of the remuneration paid by the management company;
    • the last net asset value (or the last market price of the unit / share) and the subscription form.

The investor regularly receives reporting documents: semi-annual report with the composition of the assets.

OPCI: Advantageous Taxation

The OPCI can take two legal forms, which correspond to two different tax regimes:

  • Investment company with predominantly real estate with variable capital (SPPICAV)
  • Real Estate Investment Funds (REITs).

  • The SPPICAV is a public limited company with variable capital (SICAV model); it has legal personality.
    It falls under the regime of income from movable capital and allows investors to benefit from the tax regime applicable to holders of shares.
  •  The FPI or REIT is a joint ownership (on the model of the FCP); he has no legal personality.
    It is subject to the property income tax regime and is intended for investors who wish to benefit from the taxation methods for SCPI units.
  •  The creation of these two types of company allows investors to choose the tax regime best suited to their wealth needs. Whatever the legal form chosen, the OPCI is exempt from IS; in return the SPPICAV must distribute:
    • Minimum 85% of net rental income (85% also for the REIT),
    • 50% of the net capital gains realized on the disposal of assets, (85% for the FPI)
    • 100% of dividends from unlisted companies subject to the SIIC regime (85% for the REIT).

The OPCI is exempt from the tax on the market value of buildings owned in France by legal persons (known as “3% tax”) without having to comply with certain reporting obligations to the tax authorities (article 990 E, 3 ° , c of the CGI).

Redemption of shares or units: in both forms of OPCIs, this redemption is exempt from transfer duties, provided that the shares or units held do not exceed:

  • 10% of the total shares or OPCI shares, for individuals (or family groups),
  • 20% of the total shares or OPCI shares, for legal persons.

Dividend distributions are taxed in the hands of the partners as income from securities regardless of the nature of the income / capital gains realized by the SPPICAV.

  • Concerning legal persons subject to the IS:
    • For dividend distributions, whatever their origin (rents, financial income, capital gains on real estate): taxation at corporate tax at the rate of common law (currently 28% up to 500,000 euros in taxable profit and 33, 33% on account of the surplus (to which may be added the contribution of 3.3% (based on the amount of the CIT));
    • For capital gains on the redemption (or disposal) of their shares: taxation under the same conditions as above.
  • Concerning individuals who are French tax residents:
    • For dividend distributions, whatever their origin (rents, financial income, capital gains on property): taxation at income tax (IR) at the single flat rate of 30% (12.8% IR + 17.2% of social security contributions), or at the option of the taxpayer: taxation on the progressive scale of IR (without the benefit of the 40% reduction) to which social security contributions (17.2% including 6 , 8% is deductible from the IR base);
    • For capital gains on the redemption (or disposal) of their shares: taxation on the IR at a single flat rate of 30% (12.8% of IR + 17.2% of social security contributions), or on the option of taxpayer (and only for SPPPICAV shares acquired or subscribed before January 1, 2018): taxation at the progressive scale of the IR (with possibly the benefit of deductions for holding period) to which social security contributions are added (17, 2%, of which 6.8% is deductible from the IR base);

For the real estate share of the net asset value of their shares: submission to the Real Estate Fortune Tax (IFI).