SCPI: Is this property investment solution equipped to stand up to the crisis?

SCPI: spreading the risk

It is still too early to measure the real impact that the Covid-19 crisis will have on SCPI performances in 2020. SCPI is a property investment solution, requiring as little as a few hundred euro from investors and which seeks to invest in leased property assets (offices, retail, residential, healthcare, etc.). The asset management company manages these assets on behalf of the SCPI investors. The leasing of these assets allows the SCPI to distribute potential revenues to their investors in the form of dividends, generally paid out quarterly.

The strength of SCPI that generate returns lies in their diversification in terms of asset numbers, investment locations, asset types and tenant variety. This allows them to spread out any leasing risks. This strategy means that SCPI seem to be well equipped to deal with the unforeseen contextual difficulties of the moment. However not all SCPI are the same. The larger SCPI provide better risk diversification thanks to the large number of tenants associated with their asset holdings. In the same way, we think that certain property sectors, such as the healthcare and office property sectors will come out of the crisis better placed than other property sectors. However, those SCPI with mostly small businesses as tenants, that have invested in non-essential retail or the tourism sector will be more exposed to risk, their tenants will have suffered the worst of the effects of the confinement.

SCPI: reactive professionals

SCPI that are oriented towards more prudent property investment strategies will stand up to the public health crisis and its consequences better. More than ever, building quality, location and tenant choice are the essential fundamentals and key indicators for choosing the right SCPI. Additionally, certain asset management companies were able to take the correct measures to support their tenants during the period of forced closure. Rent payment postponements and instalment schemes have been negotiated with those tenants who have suffered the most allowing them to build up their treasuries. These measures have reduced the payment issues, and made the recovery of rent easier on the agreed dates and thus preserved the interests of investors for 2020.

SCPI: can a secure investment be competitive?

Even if, it remains impossible to foresee how the crisis will end, remember that the properties in which the SCPI have invested are considered as secure long-term values. They are managed by professionals and constantly adapt their property selection processes in terms of market changes.

In addition, SCPI have shown excellent results over the past years, which means that many consider them as solid financial reserves. If necessary, these reserves could be used to compensate any falls in returns, depending on the policies applied by the asset management company. According to the French Association of property investment companies (Aspim), the impacts of the Covid-19 crisis on the property market will be nothing like as bad as those expected for the financial markets. SCPI performances for 2020 will remain competitive compared to other financial investment plans (shares, savings - ‘Livret A’ or Euro trusts).