The French listed real estate investment trust model or SIIC may lose its shine for international investors due to new taxation rules, the Chief Executive of the European Public Real Estate Association (EPRA) said on Wednesday. Since its creation in 2003, the SIIC model has attracted billions of euros of foreign investment into French real estate.

Speaking at the SIMI real estate trade fair in Paris, EPRA CEO Philip Charls compared the French SIIC regime to the 'Grand Cru' of listed real estate internationally and said that it was a model for other major property markets including the UK and Germany. 'It has been a reassuringly robust presence for the property industry amongst the debris of the ongoing financial crisis - continuing to service the infrastructure needs of French businesses and residents in a professional and prudent manner, whilst providing investors with stable, long-term cash flows. So any threat to this stability would be unwelcome for the French economy and international investors.'

Under plans announced by the French government, the threshold of foreign ownership in SIICs where international investors are required to pay withholding tax on dividends at source will be lowered to 10% of the shareholder base, from 20% at present. The tax rate will also be raised to 30% from 20%. Another change involves the withdrawal of the tax exemption granted to individual investors who hold shares in SIICs within their PEA pension plans (Plan d'Epargne en Actions). The government is also considering a new requirement to make investments in residential property compulsory as part of the portfolio.

Since the introduction of the French SIIC in 2003, the total market capitalisation of the French listed sector has grown to just over EUR 50 bn from little more than EUR 10 bn. This makes it the largest contributor to the expansion of the entire European listed real estate sector over this period. Currently the French listed sector accounts for 25% of the FTSE EPRA/NAREIT Europe Index and is second only in size to the UK.

International investors account for around 60% of the total shareholder base of the French listed real estate sector.