Tue. Oct 4th, 2022

SOCIMI

This commentary provides an overview of Spanish listed real estate investment trusts (“SOCIMIs”), governed by Law 11/2009, as amended.

What is a SOCIMI?

SOCIMIs are Spanish listed companies incorporated for the following purposes:

  • Acquisition and development of urban properties for rental (including renovation);
  • Ownership interests in another SOCIMI;
  • The holding of shares in companies that are not listed on the Spanish market and that have the same corporate purpose and are subject to a mandatory dividend payment policy similar to that of SOCIMIs (“foreign listed SOCIMIs”);
  • The holding of shares in unlisted Spanish or foreign companies whose primary purpose is to acquire urban real estate and subject to a mandatory dividend payment policy similar to that of SOCIMIs. If they meet the investment requirements of SOCIMIs (“unlisted SOCIMIs”), provided that other conditions are met. e)
  • The holding of units in regulated real estate collective investment vehicles.

In addition, SOCIMIs should have:

  • 5 million, to be repaid in full.
  • There are no legal restrictions or limitations in the SOCIMI’s bylaws on the transfer of shares.
what is a socimi
This is our recommended reading on SOCIMIs. If you want to become a professional in this sector, you must read it!

List requirements

The SOCIMI’s shares must be traded continuously throughout the tax year, either on Spain’s regulated market or multilateral trading system. Or also in the European Union or the European Economic Area, or a regulated market of a country or territory with effective exchange of tax information with Spain. This listing requirement does not apply during the initial two-year grace period.

In addition, SOCIMIs must comply with the following requirements when listed on the Spanish multilateral trading market Mercado Alternativo Bursatil (“MAB”):

  • No minimum investment per investor is required. However, shareholders holding less than 5% of the SOCIMI’s share capital must hold a number of shares equal to or greater than one of the following:
    • An estimated market value of EUR 2 million, or
    • 25% of all shares issued by the SOCIMI;
  • Restriction period: significant shareholders and senior management must undertake, as a general rule, not to sell shares or engage in transactions similar to the sale of shares during the first year after the SOCIMI is listed on the MAB;
  • Disclosure of significant shareholdings: SOCIMIs are required to notify the MAB of any substantial acquisition or disposal of shares that increases the shareholding above or below 5% (1% in the case of directors and executives);
  • Disclosure and notification of shareholders’ agreements;
  • Change of control of the company: any shareholder is receiving a takeover offer that would result in the acquire acquiring of control of the company (more than 50 per cent) cannot accept such an offer unless the potential earn makes the same offer to all shareholders.

Investment requirements.

  • At least 80 per cent of the SOCIMI’s total assets must consist of:
    • leased municipal real estate (including similar foreign assets)
    • Land to be developed within three years
    • Qualifying equity instruments
  • At least 80% of income (excluding gains from the sale of real estate and qualifying equity instruments) must be derived from:
    • Leases to unrelated persons
    • Dividends from qualifying holdings
    • There is a minimum holding period of three years for real estate and equity investments.

Dividend distribution policy

The SOCIMI must distribute dividends out of the profits obtained in each financial year (after mandatory distributions under company law[1]) in the following amounts:

  • 100% of the profits from qualifying equity investments will be distributed;
  • 50% of the profits are derived from the sale of real estate. The remainder of the gain must be reinvested in another real estate for three years. If the reinvestment does not take place, the remaining 50% will be distributed in the year in which the reinvestment period ends;
  • 80% of other benefits.

The decision to distribute dividends must be taken within six months of the end of each financial year, and the prizes must be distributed within one month of that decision.

This mandatory distribution policy does not apply to a company that has opted for the SOCIMI regime in respect of income/profits that are not eligible for the SOCIMI regime, e.g. it does not apply to gains realised on the sale of real estate before the minimum period of three years has elapsed.

Special tax regime

SOCIMI – Corporate Income Tax (“CIT”)

Provided that the investment and dividend payment conditions are met:

  • SOCIMIs are subject to corporate income tax, although they are taxed at a rate of 0%, and
  • SOCIMIs will be taxed at a rate of 19% on the gross amount of dividends paid to shareholders holding at least a 5% stake in the SOCIMI if such tips (held by shareholders) are exempt or taxed at a rate of less than 10%. Such shareholders must inform the SOCIMI if they meet this requirement. 2

Shareholders

The tax treatment of dividends and capital gains received by SOCIMI shareholders is as follows:

  • Spanish shareholders of CIT or non-residents with a permanent establishment in Spain will be taxed on the dividends/capital gains of the SOCIMI without any tax deduction. General dividend withholding rules apply, but dividends paid to qualifying Spanish SOCIMIs are not withholding tax.
  • Individuals resident for tax purposes in Spain will be taxed on all dividends/profits from SOCIMIs as savings income (taxed at the single applicable rate). General dividend withholding rules apply.
  • Non-resident investors in Spain (not acting through a permanent establishment in Spain) would be subject to dividend withholding tax at the general rate (currently 19%). But they are entitled to benefit from reduced rates under tax treaties and even exemptions under the EU Parent-Subsidiary Directive, depending on their tax residence and tax status. The exemption from capital gains tax on listed shares does not apply to investors holding at least a five per cent stake in the SOCIMI.

Choice of special tax regime

The choice of the special tax regime must be approved by the general meeting of shareholders and notified to the tax authorities at any time before the beginning of the last three months of the tax year. An entity may elect to apply the SOCIMI tax regime even if the legal requirements are not met at the election date, to the extent that those requirements are fully assembled in the following two-year period (e.g. by listing).

The special tax regime will apply during the same tax year. The election was duly notified during the following tax years until the company announced the Spanish tax administration of its renunciation of the special tax regime.

Examples of SOCIMIs

Testa residencial Socimi

testa residencial socimi sa
testa residencial socimi sau

Testa Residencial is one of Spain’s leading residential rental companies with a portfolio of more than 10,600 homes in some of Spain’s main cities and metropolitan centres, valued at €2,637 million (GAV) as of December 2017.

Testa’s homes are located in selected major residential centres in Spain’s main cities, especially in Madrid, a region that accounts for approximately 60% of the gross value of its assets.

In addition, Testa Residential has a management team made up of recognised professionals with extensive experience in the real estate sector. Its active and professional property management and the size of its portfolio enable it to optimise occupancy and achieve economies of scale.

Vitruvio Socimi

socimi vitruvio
vitruvio real estate socimi

Vitruvio is a publicly listed real estate investment company.

Vitruvio is a private investor-backed company that invests in the office, residential and retail real estate markets with a conservative approach, low leverage and a long-term vision focused on transforming the assets under management by generating shareholder value.

Its main objective is to generate recurring income from its operations to reward shareholders quarterly. In addition to the dividend, Vitruvio seeks to transform the properties in its portfolio and provide shareholder value.

Vitruvio’s objective is to grow progressively through capital increases involving a highly diversified shareholder base, without controlling groups and with a high proportion of capital invested in real estate.

All Iron Socimi

all iron ventures
all iron real estate

All Iron Group is one of the leading alternative investment asset managers investing in private markets in Europe.

They are not just asset managers. First and foremost, they are investors themselves and therefore align their interests with their co-investors well above the industry average.

Five hundred million in assets under management manage investment vehicles in two main areas: real estate and private equity.

Atom Socimi

atom hoteles socimi
atom hoteles socimi sa

The first real estate investment fund in the Spanish hotel investment market.
ATOM HOTELES SOCIMI S.A. is a listed SOCIMI active in the hotel sector in Spain.

It was founded in January 2018 by Bankinter and GMA Capital and is subject to the SOCIMI tax regime. ATOM is currently the 1st real estate investment trust (REIT) in the Spanish hotel investment market and the 2nd largest hotel owner in Spain.

GMA manages atom Hoteles SOCIMI and currently owns 28 hotels, with 6,626 rooms, representing a more than 700 million euros portfolio. They focus on acquiring, managing, and developing rental properties in the hotel sector.

Lar Socimi

socimi lar
grupo lar socimi

Lar España operates in the real estate sector through its investment and management company, focusing its strategy on commercial assets throughout Spain office buildings in Madrid and Barcelona. They can invest part of their portfolio in residential real estate, all within an ambitious investment project in a high growth area.

Lar España is managed exclusively by the real estate company Grupo Lar. Whose extensive experience in the sector, knowledge of
Of different types of assets (commercial, office, residential, industrial) during the various real estate cycles of the last decades and their experience in the real estate sector. A long history of partnerships with the best-known international investors to highlight.

Elaia Investment Spain Socimi

elaia investment spain socimi sa
socimi elaia investment spain

Established in December 2015, EIS manages a tourism and residential assets portfolio valued at over €192.5 million as of 30 June 2018. The company was listed on the Spanish Stock Market (MAB) in the last quarter of 2017.

EIS has an initial investment target of ¤280 million divided between tourist (80%) and residential (20%) properties in Spain. The portfolio consists of 15 assets with a total committed investment cost of EUR 212 million.

Since its creation, EIS has implemented a value creation strategy, including the repositioning of acquired assets through redevelopment projects and the implementation of partnerships with major European operators. In August 2017, Batipart Immo Long Terme (Batipart Group) acquired a 66% stake in EIS from Eurosic, becoming its main shareholder.

Hispania Real Socimi

hispania real socimi cif
hispania real socimi s.a.u

Hispania Activos Inmobiliarios, SOCIMI, S.A. is a real estate investment trust (SOCIMI) listed on the Spanish Stock Exchange since March 2014.

Through its investments and active asset management, Hispania’s objective is to create a portfolio of high-quality real estate assets and to generate and revalue high income by investing primarily in hotels.

Hispania is the largest hotel owner in Spain with 46 hotels and more than 13,100 keys in Spain’s leading holiday destinations, operated by leading hotel operators. In addition, Hispania has a portfolio of 24 office buildings in Madrid and Barcelona and a development project in which two new office buildings are under construction. In total, Hispania has more than 180,000 m2 of leasable space. Hispania also has five residential buildings in Madrid and Barcelona, currently marketed through retail sales.

At Hispania, all investments are made by the highest criteria of profitability, integrity, transparency and sustainability. This way of doing things allows us to innovate and go further. We shape the opportunities we find, create value and achieve optimal results. Hispania is a pioneer in investing in the hotel complex market in Spain, acquiring assets with a high cash generation rate and a low-risk profile.

Hispania seeks to achieve above-average returns through dividend payments, NAV appreciation and the distribution of any proceeds associated with the sale of assets.

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