Just one SIGI created in two years

 In News, Real Estate, REITS

Over the past two years only one REIT (real estate investment trust), referred to as SIGI in Portugal, has been set up.

Since July 2019 the one REIT was created by the shopping centre management company Sonae Sierra and Bankinter. The failure of REITs in Portugal in recent years means, according to experts and the stock market management company Euronext, that the real estate vehicle regime has to change.
When REITS (SOCIMIs in Spain) were allowed in Portugal, at the time they were welcomed by the Portuguese real estate sector as international investment magnets. The Government promised that the REITS would boost the market and bring in liquidity to the rental market, but from the start investors pointed out that there needed to be changes in how the instrument was configured and managed.
With just one set up, Euronext Lisbon has admitted that the regime may, after all, not be sufficiently attractive” to bring in investment.
Governments had promised the real estate sector to allow REITs in Portugal since 2015, but the regime was only approved by parliament in 2019 despite various obstacles.
REITs are companies listed on stock markets which invest in residential and commercial real estate. Some 75% of the total value of the portfolio must correspond to properties destined for rent and that they must remain in the portfolio for three years. The law also stipulates that 20% of the capital of REITs must be spread out over small investors and 90% of the profits must be distributed in the form of dividends.
On 18 September 2018, the minister of the Economy (then Mário Centeno), confirmed that SIGIs would “cap a failure in the market” and contribute towards “the creation of affordable urban housing”. Later on 27 February 2019 it was admitted that after all these vehicles would not “boost the (Portuguese) housing market”, although he did admit the possibility of “other operators appearing” who would be interested in “investing in the (Portuguese) housing market”.
The focus of these vehicles would now be the commercial real estate market, more specifically offices and logistics.
In April 2019, during the Portugal Real Estate Summit, the president of Euronext, Isabel Ucha, called REITs “very simple instruments that invest in real estate that generate an income and distributes this income”.
She called it an “interesting alternative” and an “investment opportunity” for institutional and private investors. In its current form it may not be so interesting after all!