SCPI Fees: Understanding the Cost Structure to Optimize Your Return

SCPIs (Sociétés Civiles de Placement Immobilier) are attracting more and more investors seeking potential regular income and exposure to real estate without the hassles of rental property management. Available through a life insurance policy or directly, they allow investors to invest in a diversified real estate portfolio consisting of offices, retail spaces, healthcare facilities, and logistics properties.

But before investing in real estate investment trusts (SCPIs), it’s essential to understand the associated fees. Subscription fees, management fees, trading fees, and redemption values—the fee structure may seem complex at first glance.

However, these fees play a key role in the operation of SCPIs and in the quality of real estate portfolio management. Understanding them thoroughly allows investors, above all, to more accurately assess the actual net return on their investment and to choose the investment vehicle best suited to their investment horizon.

What are the main costs associated with SCPIs?

Investing in an SCPI involves several types of fees. Some are apparent at the time of subscription, while others are built directly into the management of the investment vehicle.

Subscription fees (or front-end loads)

Subscription fees are generally the largest expense when investing in a traditional SCPI. They often range from 7% to 12% of the amount invested, depending on the management company.

Contrary to popular belief, these fees are not charged immediately in the form of a separate invoice. Subscription fees are included in the unit price at the time of purchase. Their impact is felt primarily upon resale, since the redemption value is lower than the subscription price.

In practical terms, when an investor purchases a share in an SCPI, there are two important concepts to consider:

• the subscription price;
• the withdrawal amount.

The main difference between the two is the subscription fee.

A concrete example

This means that in the event of an immediate resale, the investor will receive approximately €900 per share, regardless of changes in the real estate market.

These fees are primarily used to fund:

• the acquisition of real estate;
• notary fees;
• registration fees;
• marketing;
• the organization of the real estate portfolio.

This is also why SCPIs are considered long-term investments, with a generally recommended holding period of at least 8 to 10 years.

Why are SCPI fees higher than those of a securities account?

This comparison often comes up among investors who are accustomed to ETFs or stocks on the stock market. However, the two investment vehicles operate on very different principles.

A securities account essentially allows you to purchase listed financial assets with relatively low transaction costs.

Conversely, an SCPI invests in physical real estate assets that require:

• real estate acquisitions;
• audits;
• rental management;
• construction work;
• of the interview;
• trade-offs;
• finding tenants;
• rent collection.

In other words, behind the SCPI fees lies a full-fledged real estate management operation.

Annual Management Fees

Management fees represent the compensation paid to the management company for administering the SCPI's real estate portfolio.

These fees are generally deducted directly from the rent collected before it is distributed to investors.

In particular, they are used to fund:

• administrative management;
• building maintenance;
• the work;
• finding tenants;
• asset tracking;
• real estate arbitration.

On average, management fees generally range from 8% to 12% of the rent collected, although some newer SCPIs charge higher rates.

Is the return shown already net of fees?

Yes, in most cases, the return reported by SCPIs—often expressed as the payout ratio—is already net of management fees. However, it is not net of taxes.

This means that investors must also take into account:

• on the taxation of property income
• social security contributions
• or the specific tax treatment of life insurance when SCPIs are held in this context

Arbitration and construction costs

SCPIs regularly engage in real estate portfolio rebalancing. This involves selling certain assets in order to acquire new ones that are better suited to the economic environment or market opportunities.

These transactions may result in additional fees related to:

• real estate transactions
• for the renovation work
• restructuring of the fleet

Nevertheless, these costs contribute to the potential long-term appreciation of the portfolio and to improving the quality of the assets held.

As part of an active management approach, these trade-offs also make it possible to adapt the real estate strategy to market changes.

What costs should you expect when selling your shares?

The resale of SCPI shares may involve certain costs that should be anticipated.

The withdrawal amount

As mentioned earlier, the redemption value is lower than the subscription price in traditional SCPIs. This automatically represents a cost that must be factored into the profitability calculation.

Transfer Fees

In certain situations, particularly in connection with a specific transfer or sale, transfer fees may apply.

Liquidity Risk

Unlike publicly traded stocks, SCPI shares do not always offer immediate liquidity. The time it takes to resell them depends, in particular, on:

• the existence of buyers;
• market conditions;
• the functioning of the SCPI secondary market.

That is why SCPIs should be viewed as medium- or long-term investments.

Traditional SCPI or SCPI with no entry fees: Which should you choose?

In recent years, new SCPIs known as “no-entry-fee” SCPIs have appeared on the market.

Their promise is simple: to eliminate the initial subscription fee.

But does that automatically mean they're more profitable? Not necessarily.

Comparison: Traditional SCPI vs. SCPI with No Entry Fees

SCPIs with no entry fees often make up for the lack of initial fees by:

• higher management fees;
• exit fees;
• or a different redistribution of income.

The choice therefore depends mainly on:

• your investment horizon;
• of your wealth management strategy;
• your potential need for liquidity.

How do you calculate the actual net return on an SCPI?

To evaluate the performance of an SCPI investment, it is important not to limit yourself to the stated return.

Investors must take into account:

• subscription fees;
• management fees;
• taxation;
• potential changes in the unit price;
• and the length of detention.

This is where the IRR (Internal Rate of Return) comes into play.

IRR measures the overall performance of an investment over several years by taking into account:

• distributed income;
• expenses;
• any potential revaluation of the shares;
• and the final resale price.

The IRR thus provides a much more realistic picture of an SCPI’s actual profitability over the long term.

Why is the length of detention so important?

Since the subscription fees for traditional SCPIs are amortized over time, holding them for too short a period can significantly reduce returns.

Let's look at a simplified example:

• An investor pays a 10% entry fee;
• He sold his shares after only two years;
• The income received will generally not have been enough to offset these initial costs.

Conversely, over a period of 10 years or more, the distributed dividends and the potential appreciation in the value of the shares help to smooth out the initial costs.

It is precisely for this reason that SCPIs are often considered long-term wealth-building investments.

Investing in SCPIs Through Life Insurance: What Are the Benefits?

Some SCPIs may be accessible through a life insurance policy offered by a partner insurer. 

In this context, SCPIs take the form of unit-linked investments within the policy. Fees associated with the life insurance policy may then be added to the SCPI’s own fees.

This solution may offer several advantages:

• potentially more favorable tax treatment depending on the length of ownership;
• an attractive estate planning framework;
• broader diversification of the contract;
• the ability to incorporate various investment vehicles into a single wealth management strategy.

At Raizers, investment opportunities are carefully selected and presented in an educational manner within the life insurance policy, to help individual investors better understand the investment vehicles offered and how they work.

Key Takeaways on SCPI Fees

SCPI fees may seem high at first glance, especially when compared to other financial investments. However, they reflect the reality of professional and active real estate management.

To properly evaluate an investment in an SCPI, it is essential to:

• think long-term;
• analyze the actual net return;
• compare fee structures;
• and take into account their financial goals.

Traditional SCPIs and SCPIs with no entry fees are based on different principles. The key, therefore, is not so much to look for “the cheapest SCPI” as it is to identify the one that best aligns with your investment goals.

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Sources

• Public Services – Life Insurance and Taxation
• Finance for Everyone – SCPI: How They Work and Fees
• SCPIs: A Closer Look at This Investment
• ASPIM: I Want to Understand SCPIs
• French Financial Markets Authority (AMF) - Learn About SCPIs

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