January 10, 2019
Less known than SCPIs, OPCIs are gaining increasing interest among investors. This collective real estate investment offers privileged access to dynamic asset management, generating both returns and capital gains.
The robust health of 'paper real estate'
Faced with prolonged low interest rates, investors have, in recent years, massively turned to real estate investments in all their forms. This appetite benefits 'paper real estate,' particularly Civil Real Estate Investment Companies (SCPIs), collective vehicles launched in the early 1970s. This strong preference for indirect real estate also extends to a younger investment, the Real Estate Collective Investment Scheme (OPCI). Created in 2008 during the financial crisis, these real estate-focused funds took time to emerge. However, in recent years, they have carved out their niche in the investment landscape. "Between 2012 and 2018, annual fundraising increased from 817 million to 2.2 billion euros," states Christian de Kerangal, CEO of the Institute for Real Estate and Land Savings.
The lesser-known charms of OPCIs
OPCIs offer significant advantages. Their investment universe in rental real estate remains as varied as that of their elder counterpart, the SCPI. However, their portfolio composition must include at least 60% real estate (in physical assets and listed real estate company shares), with the remainder able to be invested in non-real estate assets such as listed equities and/or UCITS. This composition provides OPCIs with intrinsic liquidity, unlike SCPIs, whose organized liquidity depends on the liquidity of the underlying assets.
By using debt, the OPCI management company benefits from significant leverage and enhanced purchasing power. "As for OPCI entry fees, they can be up to twice as low as those of an SCPI. This reduced cost benefits performance," notes Baptiste Saint-Martin, Product Development Manager at Mata Capital.
The OPPCI: The other face of the OPCI
Within the OPCI category, the Professional Real Estate Collective Investment Scheme (OPPCI) stands out for its 'high-end' nature. Designed for professional or quasi-professional investors, including institutional clients and high-net-worth individuals, this type of fund is accessible with an entry ticket of €100,000. Exempt from corporate tax, this 'tailor-made' vehicle must ensure high distributions. Its portfolio consists of prime assets, serving a niche theme. "With an OPPCI, the management company has great flexibility to plan and finance all types of work," says Jean-Baptiste Pracca, President of Mata Capital. When an OPPCI takes the form of a closed-end 'club deal' fund, its fundraising is deliberately calibrated in amount and limited in time. This dual control allows for targeting only sought-after properties, without pressure or urgency in the timing of fund allocation. "Over the period 2009 – 2017, the average annual global performance of OPPCIs, according to the MSCI index, was around 9.7% with low volatility of approximately 2%," emphasizes Christian de Kerangal.
'MCF Quality Street,' Mata Capital's OPPCI
With the 'Quality Street' OPPCI, Mata Capital remains true to its DNA: value creation. Similar to stock picking in equities, its acquisition strategy is deliberately opportunistic, targeting quality Parisian assets, the majority of which have medium-term appreciation potential. With a unit value equal to or less than 20 million euros, these 'smaller' entities, which are quite numerous in the market, allow for the creation of a diversified portfolio.
The 'Quality Street' portfolio includes a majority of ground-floor retail units whose rents will be revalued in the medium term, as well as offices, hotels, residential properties, and warehouses for last-mile logistics, to be valued in the short term.
A valuable addition to any portfolio
Provided they have an investment horizon of 5 to 8 years, a savvy investor has every interest in holding OPPCI units in their portfolio, as a complementary or alternative product to SCPIs. This unconventional investment offers access to high distributions (over 4% per year) and significant potential capital gains (IRR over 7%). This investment is subject to the Real Estate Wealth Tax (IFI).
*Alphacap is a partner of Mata Capital for distribution to private clients and for the digitalization of liability management.