€250 Million Bond
This STO will see Fundament distribute token based bonds, representing fractionalized ownership of a portfolio, backed by German real-estate. It is the intent of Fundament to sell €250 million worth of bonds.
Fundament Real Estate Token gets approval by German Financial Supervisory Authority!
We received green light for the sale of our #securitytoken.
The token is backed by a real estate portfolio worth EUR 250 million.
Stay tuned for exclusive news on our upcoming public sale. pic.twitter.com/ipBw3abp1X
— Fundament Group (@GroupFundament) July 23, 2019
A Closer Look
The opportunity will be structured as ‘subordinated token-based bonds with annual variable interest rates’. Fundament indicates that these tokens are to be ERC-20 based, with investors expected to receive returns ranging from 4-8% (IRR) p.a.
Dividends, based upon the performance of the portfolio backed by German real estate, are paid out annually. The investments are to mature in 2033, at which time, investors will see their investments returned.
To learn the full details and inner workings of the offering, Fundament has made their prospectus available HERE.
Facilitated by Ethereum
While various competitors have popped up in recent months, Ethereum is still the ‘big-dog’ in the digital securities sector. The protocol continues to retain a top-ranking within the industry, and benefits from massive developmental efforts.
Between the ‘first-to-market’ boon, and established network, it stands to reason that it will be some time before Ethereum is supplanted as the most commonly used protocol within digital securities.
Fundament Group representatives took the time to comment on the regulatory greenlight with multiple entities. Speaking with CoinDesk, Fundament Founder, Florian Glatz, had the following to say.
“The reason we went through this long tedious process with regulators was to get rid of any restriction. Normally these projects are limited either by the minimum investment amount, which would be north of €100,000 or limited heavily in the amount of investors you could have. So it’s the first really like mass-market tokenized real estate for the world.”
To date, arguably the most popular implementation of asset backed tokenization, would be in real estate markets. In an industry comprised of high value- low liquidity, assets, which are geographically restricted, digital securities provides an answer to each of these issues.
Through tokenization, and distribution of digital securities backed by real estate, these assets now have the ability to become borderless. Investors will be able to gain exposure to lucrative real estate markets around the globe. By opening these opportunities to a global pool of investors, they are also benefitting from the increased liquidity being seen through secondary market trading.
While there is a plethora of industry that has the potential to be turned upside-down through tokenization, real estate remains the clear, and obvious, choice of industry participants thus far.
Fundament Group was founded in 2018, and is based out of Berlin Germany. The team at Fundament has developed a suite of services providing clients with a ‘one-stop-shop’ for the tokenization of assets. These services will be on full display, as the company completes their very own STO, as discussed here today.
CEO, Thomas Ermel, currently oversees company operations.
This European regulatory body is tasked with imposing rules and guidelines, to ensure fair practice among industry participants in finance. This includes various sectors, such as banking, securities, and insurance.
Investment Activity in Japan Signals Interest in Digital Securitization
All the pieces are falling into place for the digital securities market in Japan. One of the biggest traditional financial institutions in Japan, Tokai Tokyo Financial Holdings is advancing rapidly with its plans to digitize the financial services the company provides in a traditional sense.
New Investment in Blockchain Company by Tokai Tokyo
According to a Nikkei report, Tokai Tokyo completed a new investment in blockchain development company Hash Dash Holdings. Tokai Tokyo Financial Holdings will own 33% shares of the company, which is working on integrating the blockchain technology into the traditional financial industry. The aim is to enable the issuance of digital securities while providing investors with a trading service on their mobile devices.
Digital securitization is picking up steam as more traditional financial institutions dare into the digital asset space. With uncertainty looming over traditional markets, digital assets are piquing the interest of investors – and not only retail, but institutions are taking clear steps to be part of the paradigm shift. Tokai Tokyo’s efforts to build a digital securities exchange is an example of the latest venture into the field.
Per the report, Tokai Tokyo’s platform will tokenize securities, and will start with Japan’s real estate industry with plans to explore digitization of Intellectual Property assets as well as corporate bonds.
Alongside Tokai Tokyo, other shareholders are the founder of Hash Dash and ICH X Tech, the company operating iSTOX. With this venture, the goal is to issue digital securities powered by blockchain technology and trade these on iSTOX, the digital security exchange based in Singapore.
The iSTOX exchange also has previous strong ties with Tokai Tokyo, as the latter had announced a $4.5 million investment in ICH X Tech just seven months ago in November 2019.
As reported, the iSTOX digital exchange was part of the MAS Fintech Sandbox program undergone by the Monetary Authority of Singapore and was one of the select successful products. The motivation behind the investment was to make digital securities on the iSTOX platform available to Japanese investors; this being possible through the brokerage capabilities of Tokai Tokyo Financial Holdings.
If at the time, the digital securities exchange was a sandbox, it has since become a recognized market operator with a capital market services license. Other iSTOX investors included the Singapore Exchange (SGX), state-owned Temasek’s investment firm Heliconia Capital, and Hanwha Asset Management.
Asian countries have been known to be at the forefront of the digital asset industry – starting off with a dominant presence in the mining industry to having a lot of cryptocurrency exchange platforms across different countries and a population eager to experiment with novel cryptocurrencies.
Japanese Companies Bringing Digital Securitization Closer to Mainstream
In the past few years, Japanese companies have also been actively seeking opportunities to enter the digital securitization space. SBI Holdings has been long making the headlines in the industry with their collaboration with Ripple and XRP.
In the past year, Nomura and Nomura Research Institute started the BOOSTRY platform, which focuses on securities and bonds issuance. Tokenization platform Securitize already created a Japanese real estate investment platform, receiving funding from numerous high profile Japanese investment firms.
While Tokai Tokyo Financial Holdings is almost a century old company with deep roots in the traditional financial markets, the company is determined to adapt to changing market conditions.
In December, Tokai Tokyo made an investment of 500 million yen ($4.7 million) in Huobi Japan, the popular crypto exchange licensed in Japan. In order to execute their vision of becoming an “advanced financial integrated group”, Tokai Tokyo is focused on meeting consumer needs by deploying leading technologies from FinTech and the cryptocurrency space, according to the company’s press release at the time.
Further in the press release it was stated:
Also, in March Tokai Tokyo became a member of Japan Security Token Offering Association, a self-regulatory organization for STOs.
The intent from the Japanese financial giant is clear and it looks like the company is making it a priority to have a strong foothold in the digital securitization industry.
Overall, it’s a natural and likely necessary progression that financial institutions have to consider, seeing that in the next decade digital securities may become the prevalent financial products that investors look for.
Real Estate Increasingly Popular within Digital Securities – Vertalo and Tokensoft each Launch New Platforms
On The Hunt
Blockchain based endeavours, such as cryptocurrencies, are only now beginning to grasp where they can thrive. It has taken a decade, but there are finally a crop of ‘killer applications’ being developed. This is most recently evident through the growth of decentralized finance (DeFi).
Digital securities are a step behind cryptocurrencies, and are still in the searching phase. With the sector first being distinguished only a few years ago, it is still in its infancy. In time, will it be tokenized art that catches on? Or maybe it will be supercars?
Multiple companies believe that they have determined the best use case for digital securities, and their accompanying services – Real Estate.
There are a variety of reasons which make real estate the perfect asset class to undergo restructuring with digital securities.
- Traditionally, real estate suffers from low-liquidity
- High fees and various ‘middlemen’
- Restrictive access
While each of these issues may not stand out as being blatantly detrimental, they most certainly hold back the potential of an industry, ripe for change.
Through the use and implementation of digital securities, each of these points can be addressed. In doing so, opportunities will arise where there were none before; All the while, giving more people access to a newly liquid asset class.
To learn more about why digital securities and real estate are a perfect fit, check out Vertalo’s FAQ on the subject HERE.
In the past week, we have seen two big announcements surrounding digital securities and real estate. These have come from a pair of U.S. based companies, each quickly becoming leaders within their space – Austin based, Vertalo, and San Francisco based, TokenSoft.
Vertalo Real Estate
An influx of digital securities into real estate has shown enough promise, that Vertalo has just formed/launched an entire new branch of their company named Vertalo Real Estate (VRE).
In order to hit the ground running, Vertalo hired the full team at Advantage Blockchain. With this experienced team spearheading the new endeavour, there will, surely, be new and positive developments announced in the coming months.
Among the talent coming on board from Advantage is RECM President, Gary Brandeis. In this new position Brandeis will operate as the President of Vertalo Real Estate.
This new branch is described as being “focused on transforming ownership structures for the commercial real estate market…throughout the United States.”
While initial focus may remain on commercial opportunities, the end goal is to expand into real estate opportunities of all sizes.
“…the hiring of the Advantage Blockchain team reflects the dramatic increase in interest from commercial real estate owners for increased efficiency and secondary liquidity. Vertalo has always considered commercial real estate – and eventually residential portfolios of all sizes – to be an ideal target market for digital transformation.”
TokenSoft Real Estate
Much like Vertalo, the merits of digital securities merging with real estate has not escaped the attention of TokenSoft. This young company has just announced the launch of a ‘private label marketplace for real estate’.
The purpose of this new platform is a simple, but lofty, goal – enable secondary sales of real estate based private equity. Beyond secondary sales, Tokensoft offers a full suite of services made possible through partnerships with companies, such as Signature Bank and Inveniam Capital Partners
“Real estate investments like these are traditionally illiquid for several years. Leveraging a combination of regulatory automation by use of the blockchain, we’ve been able to bring a much needed liquidity solution to market.”
In Other News
To learn more about why such importance is placed on liquidity, make sure to peruse Borys Pikalov’s thoughts in the following article.
Vertalo to Underpin Tokenization Effort Surrounding RECM Portfolio
$300 million worth of real estate assets will be, potentially, tokenized in the coming months. These assets are part of a pair of investment funds managed by Real Estate Capital Management (RECM).
- Advantage Blockchain
- Prime Trust
This group of companies, each working together, will provide their own areas of expertise. Vertalo will facilitate tokenization through use of the Tezos blockchain and act as a digital transfer agent, while tZERO will provide liquidity via secondary markets and act as a broker/dealer. Advantage Blockchain, meanwhile, will act as a marketing and consulting firm, and Prime Trust will provide custodial and settlement services.
This joint effort is slated to begin by focusing their efforts on an initial $90 million worth of real estate- leaving $210 million in untapped potential for the near future.
Two notable properties to be first up, include hotels located in, both, the United States and Costa Rica.
Blockchain of Choice
Increasingly, the digital securities sector is moving towards utilizing Tezos for undertaking, such as the one discussed here today. Reasoning behind this often point to increased versatility provided by the blockchain through highly programmable smart contracts.
This shift has caught our attention in the past. It was only months ago that Vertalo, themselves, announced their decision to follow suit.
Upon announcing this endeavour, RECM President, Gary Grandeis, took the time to elaborate. He stated,
“Real estate is the perfect industry to take advantage of the newest innovations with those companies transitioning us to digital platforms and flexible ownership structures having the largest impact. Advantage Blockchain is focused on bringing breakthrough financial technology solutions to commercial real estate owners.
“As a Pennsylvania-based commercial real estate owner and developer, Real Estate Capital Management is working with Advantage to identify and implement real estate tokenization solutions with the goal of increasing ownership efficiencies and creating real estate liquidity where it hasn’t existed before. Real Estate Capital Management looks forward to being a leader in this space and is excited to work with both the Advantage Blockchain and Vertalo teams.”
Founded in 2017, Advantage Blockchain maintains operations in Philadelphia, Pennsylvania. Above all, the team at Advantage Blockchain works to ‘unlock new value for businesses by providing strategies and solutions centered around cutting edge revenue creation’.
CEO, Dylan Rhodes, currently oversees company operations.
Operating out of Austin, Texas, Vertalo was founded in 2017. In the time since, this company has managed to establish themselves as a clear leader with the burgeoning digital securities sector. Beginning as cap-table specialists, Vertalo has expanded their areas of expertise to become a diverse service provider.
CEO, Dave Hendricks, currently oversees company operations.
A product of Medici Ventures, tZERO describes their goal as ‘enabling the market to create and trade digital securities using blockchain technologies’. This has led tZERO to develope a fast growing secondary market, providing liquidity for digital securities.
CEO, Saum Noursalehi, currently oversees company operations.
In Other News
In recent weeks Tezos has generated buzz on various occasions. This is, not only, in part due to the recent adoption being seen through the digital securities sector, but due to the potential closing of a turbulent chapter in its history. The following articles take a look at both of these.