Several major SCPIs have announced a significant drop in the value of their shares. A situation unheard of for 3 decades. For specialists, this correction will make it possible to clean up the market. But it will not call into question these investment products with 80 billion euros in assets.
Some problems are observed on several old SCPIs. (…) We recommend that you take stock in order to offer you free arbitration to the medium of your choice. This summer, an email sent by a life insurance broker had investors worried. It refers to several major SCPIs, whose share value is contracting: -8.44% for Laffite Pierre (AEW Ciloger), -12.42% for Rivoli Avenir Patrimoine, -13.92% for Edissimo, -17.04 % for Gnpierre (Amundi), -17.07% for Accimmo Pierre (BNP Paribas REIM)…
And this is only the beginning. According to our information, reputable products such as PFO2, Patrimmo Commerce and several Primonial vehicles are in the appraisal phase with a view to possible depreciation.
Others may follow. The decline is important for these stone-paper titles, bringing together real estate, accessible directly or in life insurance. Those concerned are heavyweights, often exceeding one billion euros in capitalization.
Investing in SCPI: directly or via life insurance?
real estate crisis
How to explain it? Accounting, the value of the shares of SCPI must correspond more or less 10% of the value of reconstitution of the portfolio if all the goods were sold, details Jean-Marc Chevassus, responsible for the Master 2 wealth management at IAE Lyon. The benchmark is the market value.
But with the rise in rates, real estate is down. We are already approaching -10% in some large cities. Investors, cooled by the cost of credit, are waiting for prices to fall before buying. At the same time, banks are becoming more cautious about lending money. SCPIs, correlated to the market price, therefore follow this trend.
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We are witnessing a discount in steel wool SCPIs!
Yet real estate has not lost between 12 and 17%. Internally, a source offers insight: It’s not a simple adjustment. We are witnessing a haircut with steel wool! The SCPIs of large groups have sold less well recently, the most drastic hypotheses have therefore been preferred.
For her part Stellane Cohen, president of the online broker Altaprofits, assures that this situation is not surprising. This is the chronicle of an ad story! Since 2020, we knew that the real estate market was going to fall… It is often said that a real estate crisis follows an economic crisis. It is logical that vehicles decline this year… Even, according to the experts, next year.
A heterogeneous market
Not everyone is affected. Sofidy, Primaliance, Norma capital or Kyaneos have announced a stability of their shares in 2023. This disparity shows a leveling of products. We are moving from a very homogeneous real estate asset class to a heterogeneous market, says Yves Conan, managing director of online broker Linxea. Some will draw their savings from the game, others will stick out their tongues.
An opinion shared by the president of Altaprofits. There is SCPI and SCPI. It all depends on what you find there. She does not mince words: Me, you pay me, I would never have bought shares in certain large SCPIs! Because the portfolios are not necessarily optimized. You often find assets there that are a bit discounted. We want to get rid of them, we put them in SCPI!
Just because the real estate market goes down doesn’t mean all the shares will go down.
Not all managers have Cac 40 head offices, luxury hotels, etc. but, conversely, deserted commercial areas in the provinces, or empty offices at La Défense! We do not always have SCPIs with assets primecontinues Stellane Cohen.
It invites you to look under the bonnet of vehicles. You have to analyze what’s inside. at some point, there may be imbalances. Just because the real estate market is falling doesn’t mean that all shares will go down.
Vulnerabilities
In any case, this situation is a first for 30 years, and the crisis of the early 90s. SCPI had lost up to 40 or 50%, remembers Jean-Marc Chevassus. In 10 years, real estate has just exploded. As the saying goes, trees don’t rise to the sky!
Falling products are the most exposed to certain asset classes: offices, logistics… Investing in an SCPI specializing in a given theme means putting yourself in a vulnerable situation, warns Stellane Cohen. The exception is the hotel industry. According to Yves Conan, these are the ones that perform best. Because the rents adjust every day!
The main victims are the investors. Overnight, the value of their savings melted away! In life insurance, it is possible to react: the contracts guaranteeing the possibility of selling the assets at any time, one can try to compensate for the loss with other solutions. It is not the same thing for those who bought shares directly. Everyone forgets that SCPIs are not at all liquid, says Jean-Marc Chevassus. It’s gr gr. To sell an SCPI, you have to find a buyer. Which is more difficult in the downturn phase. During the previous crisis, it took up to three years to sell its shares at a knockdown price!
Don’t forget the rents
Linxea was logically approached by worried customers. There are two solutions: either we panic them, or we tell them that it’s just an unpleasant situation, explains Yves Conan. Just because two standard players drop doesn’t mean the whole market is affected! He criticizes his competitor’s email. A broker who sounds the alarm, invites flee, it is not realistic. Slightly catastrophic messages, this is not a good thing, bounces Stellane Cohen. This can be scary, create panic movements. Because massive redemptions and little collection could force managers to sell assets at a loss, aggravating the decline in shares!
Yves Conan therefore invites you to take the height. A SCPI delivers rents that must be included in the equation. Many people bought shares 5 or more years ago. If they are shown the real table, the purchase value and the rents, more often than not the balance is positive. Or minimum break-even, even for a 17% discount! A client who invested on the same date in a bad fund in euros or an equity product of average quality would be at the same level at best. It would not be the most profitable investment, but it helps to mitigate the disappointment.
At Altaprofits, withdrawals remain sporadic. Stellane Cohen suggests that it is linked to the savings strategy. When you invest in units of account, you don’t leave for a year or two. The investment horizon is much longer than if you invest in funds in euros. The recommended holding period exceeds 8 years. The treasure is that we receive relatively stable rents, adds Yves Conan. In a decade, that preserves bad surprises.
Unawareness
The main concern is that defensive customers have placed on this product. With the ban on paying 100% into the euro fund, units of account had to be chosen, says Jean-Marc Chevassus. We got some very safe people out of the woods. The distribution networks then massively sold these titles, reputed to be stable and without danger. Many French people do not understand that to have a return, you need risk, reminds Jean-Marc Chevassus. There are uncertainties, as with any financial asset.
Following a current or a fashion is sure to be old-fashioned one day!
If customers find out, they have been badly advised, regrets Stellane Cohen. Or they haven’t read all the contract documents. Jean-Marc Chevassus does not want to overwhelm savers. We get people to sign papers all over the place. Giving all this information to those who don’t have a financial culture doesn’t help much. Yves Conan supposes that there could have been a problem in the sales process, even aggressive sales.
Biased advice?
Were the advisors overconfident? These are not good behaviors, reasons Stellane Cohen. When we advise clients, we don’t focus on an asset class, but we look at the personal situation, investment horizon, age, risk aversion…
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The error can be to concentrate one’s savings on few products. This is irresponsible on the part of advisors! In our profession, we must have an ethic in the way we support customers. She emphasizes that you have to be wary of herding behavior: Following a current or a fashion is sure to be old-fashioned one day!
But Jean-Marc Chevassus suspects that there is no chance. The distribution bias is the entry fee. For SCPIs, they can reach 12%. This means that the sales network, of intermediaries, will receive 6 to 10% commission. It is inevitably tempting to place a product that is easy to sell and very profitable. Some have said that the SCPI is easy, we can get out of it at the same price in 3 years with 5% coupons.
Given the current situation, the operation is not so juicy! Yves Conan recommends a piece of advice: test his adviser! If he is able to explain how the SCPI works, it means that the product is well sold. Otherwise, you have to ask questions!
Patience!
Is it urgent to sell? Jean-Marc Chevassus warns investors: those who have invested at the highest will lose on all counts. They will have paid 10% entry fees, and will exit at a 15% discount. That makes a lot! Yves Conan calls for patience. People who returned last year on vehicles that are discounting had an interest in not rushing. In a few years, rents can catch up with losses. If you tolerate red lines on your statement!
For balanced savings, Stellane Cohen sets out a basic principle: The first rule is diversification. Between assets, but also between SCPIs. Alone or with the help of specialists, it is best to dissect the content of each SCPI, the management, the reserves… Altaprofits organizes several meetings between managers and investors each year. A good way to better understand the market.
An ideal timing to perform over the next few years, by acquiring assets that are discounting
If there is no martingale, the current crisis makes it possible to understand that real estate is not without risk. But the SCPIs remain interesting to bet on the stone, according to the specialists: They are shared vehicles, without problems of management, tenants, works…
A time to invest
The challenge is therefore not to run away, but to respect the long-term spirit of this product. If we avoid speculating, betting on SCPIs remains a relevant strategy. With the appraisal values, which are public, a specialist can analyze the future trend, notes Yves Conan. In life insurance, it is easy to re-diversify. In the current times, we must not be an ostrich! Because opportunities do exist in their eyes: new vehicles on the rise, such as Corum, Remake Live, Iroko… For them, it’s ideal timing to perform over the next few years, by acquiring goods at a discount. We are going to see a sorting out between those who have the wind in their sails and others in a slightly more delicate situation.
Even if Jean-Marc Chevassus tempers this perspective: The new SCPIs invest abroad. The crisis is starting in France, but there is no reason why it should not spread elsewhere. And in this case, they could have more trouble with the situation than a historical group.
Conversely, he argues that now is an interesting time to invest. Buying falling shares means increasing the rate of return on rents, our experts certify. We are therefore far from disaster.
Jean-Marc Chevassus makes a simple calculation if in your global saving, you have 10% of SCPI, and that they lost 20%, in the end, you lost 2%! Yves Conan does not believe in the great evening of discount, with 30 or 40% drop. It will last a year or two, but the model will not collapse. After a fire, trees eventually grow back.