When receiving the quarterly report of a SCPI and noticing a gap between the subscription price and the reconstitution value, the first reaction is often to wonder if one has paid too much. This reflex is healthy.
The reconstitution value of a SCPI represents the total amount that would need to be spent to recreate its real estate portfolio identically, including fees. Understanding how it is calculated allows for a proper reading of the signals that the management company sends regarding the actual health of the investment.
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Tolerance range and adjustment of the subscription price
On the ground, the reconstitution value is not only used to satisfy theoretical curiosity. It triggers concrete decisions from the management company. When the gap between the subscription price and the reconstitution value exceeds the commonly accepted tolerance band (between -10% and +10%), the management company must adjust the share price.
This mechanism has direct consequences for the investor. A SCPI whose subscription price is significantly below its reconstitution value potentially offers a discount at purchase. Conversely, a price above the upper band signals a premium that may weigh on future returns.
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The market remains heterogeneous on this point. Some SCPIs have recently raised their share price to align with the revaluation of their real estate assets, while others have lowered it after less favorable appraisals. To delve deeper into the reconstitution value of SCPIs, one must first understand the components of its calculation.
Calculation of the reconstitution value: the items to add
The formula seems simple, but each line hides a subtlety of evaluation.
Realization value: the foundation of the calculation
We start with the realization value, which includes two elements: the market value of the buildings (estimated by independent experts) and the net financial assets of the SCPI (cash, receivables, short-term investments minus debts). This realization value gives the price at which one could theoretically resell the entire portfolio at a given moment.
Reconstitution fees and rights: the often underestimated item
To obtain the reconstitution value, we add to the realization value all the fees that would need to be incurred to repurchase this portfolio. Here are the main items:
- Transfer duties (commonly referred to as notary fees), which represent a significant part of the real estate acquisition cost in France
- Notary deed fees and transaction-related fees
- Any construction or refurbishment costs for buildings that have undergone work since their acquisition
- Research and structuring commissions paid during the portfolio formation
The reconstitution value is therefore always higher than the realization value, as it includes these entry fees. This is logical: recreating a portfolio costs more than selling it.
Reconstitution value per share: moving from the global to the individual
The overall figure of the reconstitution value is not particularly useful in itself for the investor. What matters is the reconstitution value per share. We simply divide the total reconstitution value by the number of shares in circulation.
This figure is then compared to the subscription price displayed by the management company. A subscription price lower than the reconstitution value per share indicates a discount. A higher price signals a premium.
This comparison should not be read in isolation. It benefits from being cross-referenced with the distribution rate and the internal rate of return to have a complete view of the investment’s performance. A discounted price does not guarantee a good investment if the underlying real estate generates declining income.
Publication frequency and transparency for investors
The reconstitution value is calculated at least twice a year, based on independent real estate appraisals. This frequency allows for tracking the actual evolution of the portfolio and detecting upcoming price adjustments.
In practice, responses vary regarding the reactivity of management companies. Some quickly publish updated values and adjust the share price accordingly. Others take longer, which temporarily creates more pronounced gaps between the subscription price and the reconstitution value.
For an investor in SCPI, regularly reading this indicator is part of the minimum management of their investment. Here are the points to check in the reports:
- The percentage gap between the subscription price and the reconstitution value per share
- The evolution of the market value of the buildings from one year to the next (increase, stability, or decrease)
- The trend over several semesters, more revealing than an isolated figure
Premium and discount: what the gap reveals about the SCPI market
The gap between the subscription price and the reconstitution value is not a flaw in the system. It reflects management choices and the conditions of the real estate market. In a bullish market phase, appraisals tend to revalue assets, pushing the reconstitution value up. The management company can then raise the share price.
In a correction phase, the mechanism reverses. Decreases in share prices reflect a decline in the value of the real estate portfolio, not an arbitrary loss of confidence. It is the mechanical reflection of the appraisals.
The current market remains in a phase of readjustment, with some SCPIs increasing and others decreasing their subscription prices depending on the nature and location of their real estate assets. The reconstitution value helps distinguish justified adjustments from situations where the share price strays too far from the reality of the portfolio.
The reconstitution value remains one of the few indicators that links the price paid by the investor to the actual economic value of the assets held by the SCPI. One cannot manage a stone-paper investment without regularly consulting it, just like the distribution rate or the annual report of the management company.