SIGIs "bring much more liquidity and transparency to the market"

SIGIs "bring much more liquidity and transparency to the market"


The words are from João Cristina, from Merlin Properties, according to whom this welcome vehicle «brings much more liquidity and transparence to the market». He was talking at a round table during the event «REITs - SIGIs, um novo veículo para o imobiliário em Portugal» (REITs – SIGIs, a new vehicle for the real estate sector in Portugal), which took place this Thursday in Lisbon, organized by Confidencial Imobiliário and Abreu Advogados.

Pedro Seabra, from Explorer Investments, noted that «this type of vehicle can suit any type of investor», while Pedro Silveira, from Grupo SIL group, highlights that this is a vehicle which «can democratize investment and pursue big investors». Pedro Coelho, from Square AM, guarantees that «there is a market» for this more transparent type of investment, known in the US since the 60’s, and that its only fault is appearing only now.

Ricardo Guimarães, from Ci, contextualized that «if we projected the housing prices since the crisis, following the inflation trend, the price índex would remain on the same level. This means that the market, in general, is currently at the same point it would be if there hadn’t been a crisis». Right now, «the market is guided by the rents’ evolution, which is the “natural habitat” for these investors operating through REITs – a long term perspective. These investors are welcome into the market and they may meet the housing market’s needs», he concluded.

Among this vehicle’s advantages are, for example, the greater transparency and the democratization of investment, considers Isabel Ucha, from Euronext. And, despite the rise of the interest rates being more likely to happen now than a few years ago, «we still look at the launch of the SIGIs as something which is very favourable», she mentioned.


Do not overcomplicate a vehicle the international investor already knows

However, and despite the decree not being finalized yet, these professionals anticipate some requirements that might slowdown investment. The requirement to allocate two thirds of investment for housing is one of them. João Cristina considers that in a scenario of high demand and little offer, «rising prices would be the only way to release the pressure. The investor will look for the sector which provides him more return and, if we create this barrier, it will be bad for investment. And it might be difficult to redefine these rules when it stops making sense».

Pedro Seabra disagrees on the requirement that the vehicles be created by several members from the start, since «it takes time until you can disperse the capital. This should not be done on the level of the vehicle, but on the level of the market where the vehicle is listed». Pedro Silveira agrees, because «the benefits created for the market, regardless of the SIGIs having more or less members, are the same », he considers.

Pedro Coelho, believes that «it is easier to have a flexible and thorough legislation than to try to guide it. The REIT’s great advantage is that they are similar to what already exists in other countries and are well known to investors. There is no point in complicating it».

João Cristina also highlighted the need for 20% free float, which he considers «very high, because as the track record increases, the small investors start to participate, and it becomes easier to follow that requirement».


Instrument was «a success» in Spain

SOCIMIs, the Spanish REIT model, are booming in Spain. The Mercado Alternativo Bursátil currently has 109 companies listed, of which 67 are SOCIMIs and only 4 others are listed at the regular market. This number should consolidate in the near future.

«Tax clarity is the key». After a slow and less interesting start, «the change in the system into a regime similar to the rest of the world was decisive, that was what attracted the foreign investors, especially at a time when nobody wanted to buy anything», says Jesús Nieto-Márquez, from Madrid’s MAB, one of the guest speakers at this session to share the experience of the Spanish REITs. Clear information and a message of confidence passed on to the investors are fundamental to activate this type of mechanism, he considered.

The Spanish SOCIMIs invest mainly in the office (28.9%), mixed (26.9%), retail (18.5%), housing (12.8%) and hotel (9.2%) sectors. This vehicle was «essential to change the image of the real estate sector in Spain, which was less transparent in the past», points out Nieto-Márquez. Besides, «it allows small investors to benefit from an interesting and reasonably controlled long term business».

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