2023-07-30 03:00:00
In the economic landscape shaken by the crisis in the real estate market, real estate investment companies (SCPI) are now navigating in turbulent waters.
Amundi and BNP Paribas Reim, first to devalue their real estate shares
Asset management giant Amundi kicked off this worrying trend by announcing on Monday July 24 that it had devalued from 12% to 17%, the shares of three of its main real estate funds. A decision that might well be followed by other major market players.
Thus, BNP Paribas Reim has just announced a fall in the value of SCPI Accimmo, of between 15,28% et 17,28%. Last March, a first alert concerning AEW Patrimoine had already been launched, but had gone almost unnoticed when the company lowered the share of the SCPI Patrimmo Commerce.
⚠️ SCPI: warning shot from Amundi
The asset manager cut the price of shares in three of its main civil real estate investment companies by 12% to 17%. Popular in recent years, SCPIs are revealing the rise in interest rates.
Source @AgefiFrance
— Nicolas Cheron (@NCHeron_bourse) July 25, 2023
End of attractive returns?
Such devaluations might have a significant impact on savers and investors who have bet on SCPIs to diversify their portfolio and benefit from attractive returns in a context of low interest rates. These might face downward revisions in share value and therefore to a reduction in their capital invested in these financial products.
In addition, since the purpose of SCPIs is to acquire and manage a rental property portfolio, they are also exposed to economic consequences of the health crisis in the real estate market. Indeed, faced with the recession and growing unemployment, tenants might encounter difficulties in honoring their rents, which would directly impact the income of SCPIs and therefore the returns paid to savers and investors.
Which sectors are the most affected?
Certain sectors of the real estate market seem to be more affected than others by this crisis. Notably :
Trade : with the temporary closure of many businesses due to confinement, the rents received by SCPIs have been affected.
Office real estate : the massive development of teleworking might call into question the demand for office space and weigh on rent levels.
Hotels and tourist residences : these assets bear the full brunt of the fall in tourism and business travel, resulting in a drop in attendance and income for owners.
Possible rebound or continuation of the turmoil?
It is still too early to ensure that this devaluation of real estate shares is a lasting trend or a simple one-off adjustment in the face of the health crisis. Nevertheless, some market participants remain optimistic regarding a possible rebound in the coming months.
Indeed, SCPIs have always been considered as solid and less volatile investments than other financial products, offering regular returns thanks to the rents received over the long term. In addition, they make it possible to benefit from geographical and sectoral diversification which might mitigate the impact of the crisis on certain asset categories.
Factors that may favor a market recovery
Several elements might play in favor of a recovery of the SCPI market:
The post-Covid economic recovery : if the economy manages to recover quickly, tenants should be able to pay their rents, which would support the income of SCPIs and therefore the returns paid to savers and investors.
The fall in interest rates : in a context of low interest rates, SCPIs might benefit from advantageous financing costs to acquire new real estate assets or renegotiate their existing debt.
The appeal of real estate as an investment : faced with the uncertainty and volatility of the financial markets, investors might turn to more tangible investments such as real estate, thus supporting the demand for REITs.
Even if the current climate around SCPIs is worrying, it is important to keep an eye on the movements of the real estate market and on the strategies deployed by the various players to face this crisis. Savers and investors who have bet on SCPIs will have to be on the lookout, closely monitoring the evolution of the value of their shares and the returns offered by these financial products.
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