French SCPI funds: when debt sets the timetable

SCPI: measuring the risk, part 5 of 6. Research cut-off: 13 September 2026.

Selling a building can raise cash without making any of it available for investors. Primopierre’s second-quarter 2026 bulletin says property-sale proceeds are being allocated to repay lenders. At the quarter-end, two assets were under preliminary sale agreements, but no transaction had completed during the quarter. An agreed sale and money in the bank are different stages. Primopierre bulletin, p. 2

LF Grand Paris Patrimoine raises a further possibility: some rental income could be directed towards repaying debt, potentially reducing the distribution forecast for the second half. The manager presents this as a possibility. The documents do not establish that the change has already been implemented. LF Grand Paris Patrimoine bulletin, PDF p. 3

The first four instalments examined withdrawal queues, resale prices, distributions and the economics of empty offices. This one turns to the liabilities. Investors may be willing to wait for a property recovery. A loan has a due date. Pressure builds when funding has to be found before the fund can let or sell buildings on acceptable terms.

Investor liquidity and property cash flow

A SCPI is a French property-investment vehicle holding real estate directly or through property companies. Investors own units in the vehicle. Selling them requires a buyer or an available redemption mechanism. LF Grand Paris Patrimoine’s information memorandum distinguishes subscription-matched withdrawals, a possible redemption fund and sales of units to another investor. Information memorandum, introduction and exit arrangements

That distinction matters for the secondary markets discussed in part two. An investor buying existing units provides the money needed to pay the seller, after applicable transaction costs. The trade does not, by itself, inject new equity into the fund to repay its property loans. Better trading conditions can help individual investors leave while leaving the property-financing problem largely untouched. Information memorandum, chapter 2

Selling a building is different: cash reaches the company that owns it. The next question is where that cash goes. Refurbishment, debt repayment, new investment and investor distributions compete for resources. The same euro cannot pay for all four.

Repaying principal, the amount originally borrowed, reduces both cash and debt. Interest is a separate expense. A fund can therefore report a profit while having to retain cash to repay its loans. For an investor, the more useful question is how much remains after expenditure and repayments that have to be made.

A leverage ceiling the manager says it exceeded

The most explicit finding in the documents is in LF Grand Paris Patrimoine’s 2025 annual report. On page 16, the manager states that the information memorandum’s leverage ceiling of 1.54 times net assets was not met at 31 December 2025. It reports AIFM leverage of 166%, calculated under the gross method, attributes the excess to declining property values and says it is examining ways to restore compliance. The manager itself acknowledges the exceedance. Annual report, p. 16

The measure concerns the fund’s exposure relative to its net asset value, the value left after liabilities are taken into account. As that net value falls, exposure can rise relative to it even without new borrowing. The exact calculation and adjustments belong to the fund’s disclosed methodology. Information memorandum, section 3.2

That finding does not establish a default on a bank loan. Exceeding a fund-level leverage ceiling, breaching a particular credit agreement and missing a payment are different events. The material collected here does not justify treating them as interchangeable.

The June 2026 information memorandum still contains the 1.54-times ceiling. We did not find an updated calculation in the collected documents establishing that the fund had returned below it, or public confirmation that this episode had caused lenders to accelerate their loans. The year-end exceedance is documented; the precise position on 13 September is not. June 2026 memorandum, section 3.2

Similar percentages can measure different things

The same annual-report page shows a 32.07% debt-and-commitments ratio against acquisition costs, below an authorised 35%, alongside 42.50% under the ASPIM method. Both refer to year-end 2025. Their difference is not, on its own, a contradiction: the denominator changes. Annual report, p. 16

Acquisition costs reflect what was invested in the properties. Appraisals estimate their value at a later date. The ASPIM debt-and-commitments ratio, or RDAE, divides those obligations by the fund’s realisation value plus the same obligations. Borrowing can consequently look contained against the historical purchase-cost base while a measure using revalued assets deteriorates. LF annual report, p. 16, ratio definitions

LF’s June 2026 bulletin reports 29.14% on the acquisition-cost basis. That is not an updated version of the December 42.50% ASPIM number, and its decline does not itself establish that the leverage-ceiling issue has been resolved. Primopierre’s ASPIM ratio, meanwhile, moves from 38.8% at year-end 2025 to 41.3% at June 2026, an increase of 2.5 percentage points. Even this like-for-like change in the indicator is not sufficient evidence of additional nominal borrowing: lower asset values can raise the ratio. LF bulletin, PDF p. 10; Primopierre annual report, p. 27; Primopierre bulletin, pp. 3 and 6

These disclosures do not provide a single scale on which every fund can be ranked mechanically. Article 422-225 of the French market regulator’s General Regulation requires shareholder-approved maximum borrowing compatible with repayment capacity from ordinary receipts. It does not impose one universal 40% ceiling on all the measures above. AMF General Regulation

Primopierre’s subsidiary debt changes the picture

The perimeter matters as much as the percentage. Primopierre’s ownership-weighted economic disclosure, including controlled companies, reports €328.20 million of property loans at the parent SCPI and €618.23 million in subsidiaries at 31 December 2025. The unrounded total is €946,425,975.61. Subsidiaries account for approximately 65.3% of that amount. Annual report, p. 33; l0g calculation

Subsidiaries account for almost two-thirds of these loans. Stopping at the parent-only accounts would omit much of the disclosed economic exposure. Conversely, adding the subsidiary loans does not establish that the parent guarantees every obligation. Assessing a lender’s recourse requires identifying the borrower and the security or guarantees attached to that particular loan.

The maturity table on page 57 covers €328.20 million: no loans in the residual-maturity bucket of up to one year, €153 million between one and five years, and €175.20 million beyond five years. It does not allocate the €618.23 million of subsidiary borrowings across those time buckets. Annual report, p. 57

That table cannot support either a claim of a group-wide 2026 maturity wall or an assurance that the entire structure has no near-term maturities. There is another limitation: grouping loans by remaining maturity need not disclose all interim principal payments on amortising facilities. A complete debt-service schedule requires more than a final-maturity classification.

Refinancing is about the amount as well as the rate

LF Grand Paris Patrimoine publishes two identical numbers with different units: 2.53% average interest on mortgage financing and 2.53 years of weighted average remaining maturity. Neither is a refinancing offer. Nor does an average term imply that every loan expires on the same date. Bulletin, PDF p. 10

When a facility comes up for renewal, two questions have to be answered separately: how much will the new borrowing cost, and how much will the lender advance? Even a lower rate cannot fill a principal shortfall if the bank lends against a smaller share of a lower property valuation. The workshop below isolates that mechanism without purporting to know the offers received by the funds in this article.

Interest-rate protection also needs careful reading. An interest-rate cap provides protection above a contractual reference-rate threshold; it does not repay principal. Its accounting value is not the amount of debt protected. Primopierre reports approximately €5.19 million as the value of cap-type instruments at 31 December 2025. That number alone cannot establish the percentage of borrowing hedged. The notional amount, meaning the reference amount to which the hedge applies, its expiry and its contractual terms are needed. Annual report, p. 57

The report also discloses annual LTC and ICR tests in its financing arrangements. LTC means loan-to-cost, or borrowing relative to a specified cost base; ICR means interest coverage ratio, measuring how a contractually defined income covers interest. These ratio families appear in the European Banking Authority’s definitions, annex p. 27. Exact contractual definitions matter. The collected documents do not provide the full thresholds and calculations needed to measure headroom for each loan. The existence of financial covenants is documented; their breach is not established by this material. Annual report, p. 58

For 2025, Praemia reports no exceedance of regulatory, contractual or internal limits that could have changed Primopierre’s risk profile. This annual assessment provides neither the detailed calculations for each loan nor the position of the tests in September 2026. Primopierre annual report, p. 34

How disposals change recurring income

A disposal used to repay borrowing removes both debt and a property. Its effect on future income depends on the property’s contribution after operating expenditure, the interest saved and the costs avoided. Selling a vacant building facing expensive refurbishment may improve the position. Selling an income-producing asset can reduce recurring earnings when the contribution lost exceeds the financing saving.

The relevant starting point is the net proceeds actually applied to debt, not an asking price or a preliminary agreement. Transaction costs, applicable taxes, early-repayment charges and hedge termination costs may matter. The published material does not allow that bridge to be reconstructed for every disposal examined. The rental income lost has to be assessed for each disposal.

Completed transactions also show a more varied picture. LF Grand Paris Patrimoine’s three 2025 disposals show €55.3722 million of gross proceeds, compared with €55.901759 million of reference appraisals, at the fund’s ownership share. The calculated difference is −0.95%. The benchmark is December 2024 for the first-half sale and June 2025 for the second-half transactions. Annual report, p. 10; l0g calculation

That comparison is not a reconstruction of net cash received. It also says little about the price at which all the unsold assets could be sold: properties that found buyers are not a random sample of the remaining portfolio. For this selection, total gross proceeds remain close to the last disclosed appraisals.

Workshop: less leverage, potentially less income

Every number in this workshop is fictional. Amounts are in millions of euros. The model is not a forecast for any named SCPI. It excludes other assets and liabilities, transaction costs, taxes, penalties, hedges and reinvestment. Net asset value here is a simplified economic subtraction, not a reported accounting balance.

1. Leverage can rise without a new loan

Start with property worth 100 and debt of 40, leaving net value of 60. Debt represents 40% of the property value.

The properties are then revalued to 80. Debt is still 40, but net value is now 40 and debt/property value rises to 50%. A 20% fall in property value has produced a 33.3% fall in net value. No cash has yet left the bank account.

This simplified ratio is neither the full ASPIM formula nor a particular loan covenant.

2. Selling and repaying can lower leverage while reducing annual income

Within the portfolio now worth 80, one property is worth 20. It sells for that amount, all of which goes to repay debt. The remaining properties are worth 60, debt is 20 and net value is still 40. Debt/property value falls to 33.3%. Repayment has not itself recreated the 20 of net value lost in the revaluation.

Assume the sold property contributed 1.2 a year after property operating expenses, before financing. Repaying 20 of debt costing 4% saves 0.8 a year in interest. The recurring balance therefore falls by 0.4 a year, before the excluded costs.

Alternative: if the property produced no net operating income and the other assumptions were unchanged, the interest saving would improve that balance by 0.8. Which property is sold matters, not just how much borrowing disappears.

3. An affordable refinancing rate may still leave a funding gap

This is an alternative to the sale, not the next step after it. Property remains worth 80 and debt to refinance remains 40. Suppose the new lender will advance only 40% of current property value. The offer is 32, leaving 8 to find elsewhere to repay the old loan in full.

The 40% limit is a fictional lending assumption, not a universal rule. A lower interest rate on 32 does not provide the missing 8. Selling an asset, retaining cash, raising additional capital or negotiating revised terms are possible responses, not solutions assumed to be available.

Financing structures can provide meaningful protection

Immorente is a useful counterpoint. At 30 June 2026, Sofidy reports €792 million of bank debt, 98.7% at fixed rates, an average maturity of four years, and 50% amortising debt. Its 19.0% ratio compares debt with property value; it is not directly interchangeable with the other ratios discussed above. Immorente bulletin, PDF p. 2

A fixed rate limits the immediate effect of interest-rate movements on the relevant loans. Gradual amortisation reduces the principal still needing refinancing at the end, but requires cash before that final date. Neither protection makes a building liquid or guarantees a future credit offer. Both explain why debt structures should be assessed individually.

Immorente also reports nine completed second-quarter disposals generating €12.5 million net to the seller, at prices averaging 12% above the 31 December 2025 appraisals, according to Sofidy. These management figures have not been independently checked against sale deeds. They nevertheless provide a counterexample to the proposition that every current disposal must be a distressed sale. Bulletin, PDF pp. 1 and 3

For a fund-specific investigation, four reconciliations would be the priority: debt and maturities by borrower; financial covenants and the latest test results; signed sales and net cash received; income lost and financing costs saved. A single fundraising, distribution or leverage figure cannot substitute for them.

The warning is about a shrinking choice of timing

The cases examined call for a fund-by-fund assessment. ASPIM and IEIF report an average debt-and-commitments ratio of 18.3% for 2025, against 18.4% in 2024. The Banque de France still judged commercial-property credit risk contained in its June 2026 stability report. Neither the sector average nor that dated assessment certifies the position of an individual SCPI. ASPIM, 15 May 2026 release; Banque de France, report published 24 June

Our documents establish that Primopierre allocates disposal proceeds to creditors, that LF Grand Paris Patrimoine has raised the possibility of using rental income for debt repayment, and that the latter acknowledged a leverage-ceiling exceedance in its 2025 report. They do not establish a national refinancing requirement, identify a bank-loan default from these facts alone or date every subsidiary maturity.

What matters is the room to choose: hold the property, wait for a better price, pay for refurbishment or distribute cash. That room narrows when several uses of cash become urgent at once. Deleveraging can protect investors. Its success also has to be judged by the properties and earning capacity left after the debt has been repaid.

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This instalment uses public documents. Management figures remain attributed to their issuers and have not been checked against loan agreements or sale deeds. The fictional examples explain mechanisms; they are neither forecasts nor recommendations to buy or sell.

Earlier instalments: withdrawal registers, resale prices, yields and income, and the cost of empty offices.

Continue the series with SCPI funds: who bears the losses?, tracing the links between property funds, life insurance and banks.

Sources and method

Balance-sheet observations refer to 31 December 2025 or 30 June 2026 as stated, not to the publication date of this article. Time comparisons use the same defined ratio. Subsidiary borrowings are ownership-weighted; preliminary sale agreements are not cash receipts. Exact release dates that could not be confirmed remain unspecified.

A separate Primopierre table, on p. 27, uses €951,534,001 of debt for its borrowing ratio, compared with €946,425,975.61 of property loans in the entity breakdown on p. 33. A detailed reconciliation between these amounts is unavailable to us. The first chart uses only the latter line and does not reconstruct every ratio in the report. Primopierre annual report, pp. 27 and 33

Ten sources and their scope

1. Praemia REIM France: Primopierre : Bulletin trimestriel, deuxième trimestre 2026. At 30 June 2026: sale proceeds allocated to creditors, no transaction completed in the quarter, two preliminary sale agreements and the debt/commitments ratio. Exact release date unconfirmed.
2. La Française REM: LF Grand Paris Patrimoine : Bulletin trimestriel au 30 juin 2026. Possible diversion of rental income to principal repayment; acquisition-cost ratio, mortgage interest rate and average remaining term. The conditional wording is preserved.
3. La Française REM: LF Grand Paris Patrimoine : Rapport annuel 2025. Manager-reported leverage-limit exceedance, differently defined ratios and the three-disposal table. The 24 June 2026 meeting date is not used as the publication date.
4. La Française REM / Moniwan: LF Grand Paris Patrimoine : Note d’information et statuts, juin 2026. 66-page version marked June 2026. Borrowing and leverage limits; permitted hedging instruments. Another manager URL serves a February version and must not be substituted silently.
5. Praemia REIM France: Primopierre : Rapport annuel 2025. Ownership-weighted debt in controlled companies, the parent-only maturity table, ratios and covenants. Parent accounts do not automatically cover subsidiary borrowings.
6. Sofidy: Immorente : Bulletin trimestriel, deuxième trimestre 2026. Debt structure and completed disposals: manager disclosures, not independently checked against loan agreements or sale deeds.
7. ASPIM / IEIF: Collecte au T1 2026 et principaux indicateurs des SCPI en 2025. Average debt and commitments ratio: 18.3% in 2025 versus 18.4% in 2024. Trade-association/IEIF statistics, not a fund-by-fund audit.
8. Banque de France: Rapport sur la stabilité financière : Juin 2026. Commercial-property credit risk judged contained at that date. The aggregate assessment is neither a certificate for a particular fund nor a September guarantee.
9. AMF / Légifrance: Règlement général de l’AMF : Article 422-225. Shareholder-approved maximum borrowing and compatibility with repayment capacity from ordinary receipts. This provision does not set a universal 40% limit.
10. European Banking Authority: Final report on draft RTS on crowdfunding. Report dated 29 April 2022, annex p. 27: illustrative definitions of LTC and ICR. Used for terminology, not as the terms of the SCPI loan agreements.