SCPI: Should you choose those with fixed or variable capital?

Liquidity or stability? Fixed-capital SCPIs offer limited liquidity. In contrast, variable-capital SCPIs offer greater stability. 
 

Investing in Real Estate Investment Trusts (SCPIs) offers you the opportunity to enter the real estate market with a modest initial investment. However, before committing to this long-term investment, it is essential to fully understand the differences between fixed-capital and variable-capital SCPIs.
SCPIs raise funds from investors, acquire real estate, lease it out, collect rent, and distribute a portion of this income to their shareholders. By purchasing SCPI shares, you become a shareholder in these entities. The terms for buying and selling these shares depend on the type of SCPI.
 

Fixed-capital SCPIs have limited liquidity. When an SCPI is established, a capital ceiling is set, representing the maximum amount of anticipated subscriptions. Once this ceiling is reached, the management company may carry out a capital increase by issuing new shares, which are offered to existing shareholders or new investors.
During a capital increase, shareholders may choose to sell all or part of their shares. However, between these transactions, the capital remains stable. To sell shares, a shareholder must turn to the secondary market managed by the management company or opt for an over-the-counter sale. Registration fees apply when purchasing shares of fixed-capital SCPIs on the secondary market; these fees amount to 5% of the investment and are paid by the buyer.
 

Buy and sell orders are matched on this secondary market, with an execution period ranging from one day to three months, as determined by the management company. The price of the shares is determined by investor supply and demand and may differ from the actual value of the real estate held by the SCPI. As a result, the liquidity (the ease of buying and selling without significant price fluctuations) of fixed-capital SCPIs is limited.
 

In contrast, open-end SCPIs offer greater stability. They have the ability to issue or redeem shares at any time, thereby simplifying subscriptions and redemptions for investors. As long as the maximum statutory capital has not been reached, investors can invest in the SCPI.
Open-end SCPIs do not really have a secondary market. The management company sets the value of the shares at purchase and resale based on the SCPI’s assets. The trading price is therefore fixed and is not influenced by supply and demand.
However, this system is not foolproof. In times of crisis, if no buyer is willing to pay the price set by the management company, the capital ceases to fluctuate, and an adjustment between supply and demand becomes necessary.
Variable-capital SCPIs are less speculative than fixed-capital SCPIs. However, other factors, such as the composition of the portfolio and the SCPI’s strategic objectives, must also be taken into account to make an informed investment decision.