Merlin and Colonial, the two largest listed real estate investment companies (SOCIMIs) in Spain, have threatened this Wednesday the Government with leaving the country if the fiscal plan agreed between the PSOE and Sumar is approved. Last Monday, both groups agreed to “remove” the special tax regime of these companies (for which they pay 1% in Corporate Tax), “which has not served to improve the supply of housing.”
Merlin and Colonial, the only two SOCIMIs listed on the Ibex 35, and which are mainly dedicated to renting offices, have come out against this plan after leading the falls on the Ibex on Tuesday and collapsing 7.3% and 5 %, respectively.
The earliest riser was Merlin. The largest real estate agency on the Ibex has announced in a statement sent to the National Securities Market Commission (CNMV) that it is studying different scenarios and contingency plans, in defense of its shareholders, clients and employees, “without excluding any legal possibility within its reach. ”.
Although there is no evidence that as of today the fiscal agreement between PSOE and Sumar will have “sufficient political and technical consensus for its approval”, Merlin will calculate, in the short term, the effective impact on the ‘cash flow’ of said agreement. tax proposal, which, in any case, foresees that it be “limited” by the joint effect of various tax regulations.
In the medium and long term, Merlin will focus its evaluation on determining the measures to adopt to safeguard the interest of shareholders, clients and employees, without excluding legal actions.
The company recalls that SOCIMIs are equivalent in Spain to real estate investment funds (REITs) and regrets that the tax modifications introduced in the PSOE-Sumar agreement “represent, in practice, the suppression of the SOCIMI regime.”
The company founded and managed by the Extremaduran financier Ismael Clemente has defended that there is a “clear” economic justification for the Spanish version of the regime known as international REIT, “based on introducing active business structures into the market, with means and personnel directly affected by the activity (as opposed to funds), which are responsible for promoting, building, acquiring and operating infrastructures necessary for the different economic sectors (offices, shopping centers, logistics, data centers, hotels, parking lots or telephone towers).”
All of this, he adds, “with daily liquidity and as a popular form of savings for individuals and essential for the proper functioning of pension funds, investment funds, mutual funds, insurance companies, family offices and sovereign funds.”
“Very serious”
For his part, the president of Colonial, Juan José Brugera, has indicated in statements to Europa Press that the agreement is “very serious” and would make Spain a “prohibited territory” for international investment and that, if approved, it would be will rethink its strategy and the location of its activities.
“The changes that some propose are very serious. The socimi regime is nothing more than the adaptation to the Spanish case of the norm established in international markets. These types of modifications turn the Spanish market into a prohibited territory for international investment.”
In his opinion, the legal framework should protect companies that have opted to attract international investment, and make it compatible with the best social purposes.
In any case, Brugera defends that Colonial’s current business model is diversified in different geographies, with a relevant presence in the Paris market, which allows the group “great strength in scenarios of fragility of the regulatory framework.”
“If the reform of the legal regime of Socimis is approved, Colonial will reevaluate its investment strategy and the location of its activities and its legal structure, and will adopt, where appropriate, the measures that best suit the interest of its shareholders and investors, all with the aim that these potential measures do not have a negative impact on society.”
PSOE and Sumar closed a tax agreement on Monday to tax banks, tourist apartments and yachts, which also includes the elimination of the special tax regime for socimis. These companies are dedicated to buying real estate assets, such as apartments, offices or shopping centers to rent their spaces to tenants, companies or stores in exchange for rent, without having to pay taxes on the profits they distribute to their shareholders.
The SOCIMI regime is subject to these companies distributing at least 80% of the profits to their shareholders, having all their acquisitions in the portfolio for a minimum of three years, being listed on the stock market, having a floating capital of 25% and distribute a minimum of 50% of the profits generated by the transfer of real estate or shares.
The regulation of SOCIMIs in Spain was established in a 2009 law, in the context created by the bursting of the real estate bubble, in order to provide liquidity to investments in the real estate sector, ensuring a continuous flow of investments through of investors’ savings, although its explosion occurred after a regulatory change introduced by the Government of Mariano Rajoy.
At the end of the 2023 financial year, there were 116 SOCIMIs listed in Spain, which positions the country as the main market in Europe in terms of the number of SOCIMIs, with a market capitalization of 24 billion euros.
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