Sicafi Immobiliere -- Belgium REITs
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On December 4, 1990 Belgium law introduced a form of publicly traded, closed-end real estate companies termed Sicafi Immobiliere, short for "Societe d'Investissement Immobiliere a Capital Fixe publique." (Fixed capital real estate investment trust). In Dutch it's a Vastgoed BEVAK. A Royal Decree date April 10, 1995 enacted the law, effective May 23, 1995.
Sicafis are regulated by the Belgium Commission Bancaire, Financiere et des Assurances -- the Banking, Finance and Assurance Commission. They may invest only in real estate (no third party property development.) on a passive basis. Some development is allowed, but they may not sell it in less than five years. They may invest in subsidiaries engaging in qualified (that is, the same passive real estate) activities. They may invest in hotels, but may not manage them.
Sicafi are closed-end funds with corporate structures. They can be either externally or internally managed. They are listed on the Brussels EuroNext exchange.
Sicafi are Subject to Many Requirements
Belgium Sicafi's debt level is limited to 65% of their net asset values -- 75% of any one building. That's using true market value, not original value minus depreciation.
They're required to value their portfolio of properties at true market value, so they don't count depreciation. They're not allowed to have more than 20% of their assets in any one property group (no longer applies to properties subject to long term commitments of a Member State of the European Economic Area ((EEA)) or international organizations in which EEA Member States participate.). Their interest coverage ratio must be 125%.
They're also required to get independent appraisals of their properties on a quarterly basis. They must follow strict rules intended to prevent conflicts of interest. They can be set up as either a limited liability company or a public limited partnership. When they're listed, there are requirements such as a 30% free float.
They're required to distribute at least 80% of their income to avoid paying corporate income taxes, after net debt reduction and excluding capital gains. Unfortunately, distributions are annual, making them impractical to depend on for retirement income.
All Sicafi Immobiliere must be listed
Private real estate companies do not qualify for Sicafi tax status. Their share capital must be a minimum of 1.25 million euros. They are not subject to shareholder restrictions, so shareholders may be residents of Belgium or Luxembourg, or outside those countries.
They also are not restricted in owning property outside Belgium or Luxembourg. However, this may not be practical because of taxes they have to pay in the other country. If a company converts to SICAFI status, they must pay a 16.995% tax on unrealized capital gains.
Belgium Sicafi are still subject to the 39.9% corporate income tax, but only on a notional tax basis. That is, for income with disallowed expenses or abnormal or gratuitous benefits. In effect, their income from rents and dividends is not taxed. (Provided, of course, they distribute at least 80% to owners.)
They are subject to an annual 0.08% on their net asset value.
If you're a resident of Belgium, the Sicafi is required to withhold 15% of your distributions to make sure you pay your income taxes. However, this is not imposed on foreign investors. However, this requirement is waived for Sicafi that have at least 60% of their net assets invested in residential properties.
Belgium Sicafi include:
- Cofinimmo -- largest real estate investor in Belgium with office buildings, pubs, and medical buildings
- Aedifica SCA -- residential properties in Belgium
- Montea s.c.a. -- logistics and semi-industrial properties in Belgium and France
- Befimmo SCA -- large office buildings
- Intervest Offices & Warehouses -- office buildings and logistics properties
- Leasinvest Real Estate -- office buildings, logistics and retail properties
- Intervest Retail -- many retail properties in Belgium
- Retail Estates -- retail
- Warehouse Estates Belgium -- warehouse properties
- WDP (Warehouses De Pauw) -- logistics, warehouses in five countries
- Home Invest Belgium -- residential
- Ascensio -- many different properties
- Serviceflats Invest -- senior residential properties
Therefore, Belgium Sicafi Real Estate Investment Trusts are a terrific way to profit from economy activity in Belgium, a small but prosperous Western European country.
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