A New Royal Decree was published on June, 21 2006 regarding the Belgian Real Estate Investment Trusts (SICAFI). This Decree is principally dedicated to the formal application of the new IFRS accounting norms and their consequences for the SICAFI. It also gives some more suppleness in the general operating rules of the SICAFI and definitely settles the debate about the real impact of (the high level of) the Belgian transaction costs.
For more easiness in the comparisons, SICAFI who are now only publishing statutory accounts were allowed to apply the IFRS norms valid for consolidated accounts, from January 1, 2006 (with pro forma figures for 2005).
Investment properties appearing as a non-current asset on the assets side of the balance sheet are booked at the fair value (investment value less 2.5% for the average rate of registration costs, if the property value is higher than 2.5 million), the compensation of that on the total shareholders' equity side being the opening of a new negative account "Impact on fair value of estimated transaction costs resulting from hypothetical disposal of investment properties". It is also specified that the 30% minimum of the capital of a SICAFI to be offered for sale at the occasion of the Initial Public Offering have to be calculated on the enlarged capital at the end of the offer, if there is any capital increase included in the offer.
The most spectacular measure is of course the rise of the debt ratio from the existing level of 50% to 65%. That puts an end to a long discussion between the SICAFI themselves and a long awaited decision from the Public Authorities. The composition of the debt items to be taken into account for the calculation of the ratio was slightly adapted The minimum rate of profit distribution remains unchanged - 80% - but the composition of the profit items to be taken into account for the calculation of the ratio was also slightly adapted.
Both adaptations were motivated by the use of the IFRS norms, on the one hand, and the necessity of simplification, on the other hand.
Last but not least, there is a new rule regarding the risk concentration ratio and involving the possibility for a SICAFI to invest more than the existing limit of 20% of its assets in properties rented to only one tenant or user and under long term contracts, provided that he should be a State Member of the European Economic Space (EES). The International Public Bodies who emanate from one or more than one State Members of the EES and the Regional Authorities of a State Member are considered as State Members of the EES.
This long awaited Royal Decree is a first step in the suppleness of the former SICAFI regulation. Member of the Board and asset managers of the SICAFI are now waiting for a second Royal Decree more particularly dedicated to certain operating characteristics of the SICAFI which could be published before the end of this autumn.