They are only three. But they are talked about a lot. What are SCPIs worth without subscription fees? And should you (really) bet on these new players to grow your savings at a lower cost?
A life insurance policy with no entry fees? Twenty years ago, the idea might have seemed absurd. But today, most insurers have revised these costs downward. And many even deleted them.
Can we expect to observe the same movement in the small world of stone-paper? It’s the meaning of historywants to believe Gautier Delabrousse-Mayoux, co-founder of the management company Iroko.
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New model
6 years ago, all real estate investment companies (SCPI) levied entry fees. In stone-paper jargon, this fee is called a subscription fee. And their amount is anything but trivial.
On average, SCPIs charge 10.47% subscription fees, according to a study by Rock-n-Data (1). It’s more than any other savings product, says Gautier Delabrousse-Mayoux.
These costs are paid in one go, at the time of acquisition of the units. They are used to remunerate the distribution, as well as the search for real estate assets in which the SCPI will invest your money, specifies Clément Renault, co-founder of Louve Invest.
For a long time, these fees were presented as a necessary evil. The price to pay to access the precious stone-paper. But the wheel turns. And on the 207 REITs available, three have had their underwriting fees skipped.
Their name: Iroko Zen, Novaxia Neo and Remake Live. But what does the SCPI model without subscription fees hide? Is it (really) viable on the hard way? And don’t these SCPIs make up for it on other costs? Response items.
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Aligned interests
While they have only been around for a few years, SCPIs with no subscription fees are enjoying increasing success with savers. Remake Live, for example, reached 119million euros outstanding in 9 months of existence barely.
However, these new SCPIs are not always unanimous. Far from it. Many people think that it’s just a marketing ploy. And that we compensate for the absence of subscription commission by other costs, regrets Gautier Delabrousse-Mayoux.
It must be said that Iroko Zen invoices 12% management fees. This is more than the average for other SCPIs, which is around 11.35%, according to figures from Rock-n-Data. These costs even go up to 18% at Novaxia Neo and Remake Live.
That said, sales charges and management fees have no not the same plate. The first are calculations on the total amount of your investment. And the latter on the rents paid.
Result? Classic SCPIs earn a lot of money at the time of subscription. And some management companies therefore focus more on acquiring new investors than on managing them, observes Gautier Delabrousse-Mayoux.
By contrast, SCPIs with no subscription fees are above all remunerated according to the rents they bring in. It is a virtuous model. Because the interests of the management company are aligned with those of investors, notes Clément Renault.
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Credit risk?
However, management fees are not not always the only costs taken by Iroko Zen, Remake Live and Novaxia Neo. Some of these SCPIs without subscription commission also invoice acquisition fee.
These costs apply when the SCPI buys a new property. And they look suspiciously like an underwriting commission in disguise. However, their amount is lower. He reaches 3% at Iroko Zen.
But that’s not all. Some believe that this type of fee encourages us to go into debt. And they are right, observes Gautier Delabrousse-Mayoux. Because if SCPIs borrow from banks to buy more goods, their acquisition commission will be higher.
What encourage these REITs to take disproportionate risks? Not necessarily. All of this is closely supervised by the Autorité des Marchés Financiers. We cannot go into debt more than 50%, reassures Gautier Delabrousse-Mayoux. Besides, debt isn’t necessarily a bad thing. On the contrary: well mastered it is an interesting performance lever, continues the leader.
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Inflated returns
The real strength of SCPIs without subscription fees is that they allow you to put more money to work. Let’s take an example: if you invest 100 euros in an SCPI which takes 10% sales charge, you will invest 90 euros in real estate.
Whereas if you invest your 100 euros via an SCPI with zero subscription fees but an acquisition commission of 3%you will invest 97euros In the real estate. In other words: for the same amount collected, the SCPI will buy more real estate.
And this is reflected in the returns received. Take the example of an SCPI which distributes a return 6%. If 90euros have been invested in real estate, you will receive 6% of 90euros, i.e. 5.40 euros of rents.
Whereas if 97euros have been invested, your earnings will amount to 6% of 97euros, i.e. 5.82 euros. This allows – comparable real estate – to make net management fees more efficient than for an SCPI with entry fees, estimates Gautier Delabrousse-Mayoux.
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Early exit
However, subscription fees have another purpose than that of remunerating SCPIs and their distribution network. More often than not, you have to keep your shares at least 8 years old to cushion these costs, says Jonathan Dhiver, founder of bellescpi.com.
In other words: once the partners have bought shares, they are somehow linked to the SCPI, because they know that if they sell too early, the operation will not be profitable. This reinforces the resilience of SCPIs. If everyone decides to sell at the same time, the SCPI could find itself in difficulty. The existence of subscription commissions makes it possible to limit this risk, explains Jonathan Dhiver.
Would SCPIs without subscription fees therefore be more risky? Not necessarily. Because these SCPIs have planned early exit fees. In case of resale of shares before 3 years detention, Iroko Zen, for example, charges an early exit commission of 6%. At Remake Live, the resale of shares before 5 years is also penalised.
We don’t want to be one arbitration product and having to manage entries or exits every 6 months, explains Gautier Delabrousse-Mayoux. Because the real estate investment is part of a long time. And that would complicate management too much.
That said, our goal is not for investors to remain captive, continues the leader. Moreover, the average investment period in SCPIs is 23 years. People don’t stay just to offset underwriting costs. They stay because they are happy.
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(1) Study dated April 2021, carried out on a sample of 96 SCPIs for management fees, and 97 SCPIs for subscription fees.