REITs (Real Estate Investment Trust) are investment companies specialized in the real estate sector and quoted on a regulated market or on an alternative multilateral negotiation system (or are required to be quoted within a short period of time after constitution).
SOCIMIs (Sociedad Cotizada Anónima de Inversión en el Mercado Inmobiliario) are the equivalent of REITs in Spain.
SOCIMIs enjoy certain tax advantages over direct investments on real estate assets, in exchange for complying with strict requirements established by law.
SOCIMIs have experienced a strong development in the Spanish market over the last years, and are proving to be important catalysts for the real estate sector.
Transparent and liquid investment
The obligation to quote garantees that these vehicles are transparent and comply with all the information requirements imposed by stock exchanges and their regulators.
In addition, SOCIMIs have to distribute at least 80% of their profits in dividends. This provides another element of liquidity for investors.
Reduced entry capital
The minimum investment ticket for investor in these vehicles is much lower than that of a direct investment. This allows small investors to participate in these vehicles, and therefore invest in the real estate market, which would be prohibitive for them through direct investment due to the volume of capital required.
It is possible to invest in a wide range of properties at once (flats, shops, hospitals, hotels, shopping centres, etc.).
However, there are two important requirements. First, the assets in which the SOCIMIs invest must be rented and their income is obtained from rental income. Second, the assets must be held in the portfolio for a minimum period of 3 years.
They make it easy to invest in different countries, diversifying in this way the portfolio geographically.
However, until now, the absolute majority of SOCIMIs have focused their investments on the Spanish market.
Interesting tax advantages
The main tax advantage that SOCIMIs benefit from is the exemption from corporate income tax. In addition, in some specific situations they also have other tax benefits of lesser relevance.
Specialised advice for SOCIMIs
At act DA Lawyers we have a team specialising in real estate advice. Our team has been very active in advising SOCIMIs from the very beggining when the legislation allowing these vehicles came to light.
The professionals at act DA Lawyers have advised on the creation of several SOCIMIs, accompanying them in their growth and in the necessary step towards listing on the stock exchange.
In addition, the real estate experts at act DA Lawyers assisted in the creation and establishment of the Spanish SOCIMI association (ASOCIMI) and currently act as legal secretaries of this association.