Ari Shpanya is the CEO at Slice RE, an STO that offers institutional grade commercial real-estate in prime markets.
AT: Is investing restricted to accredited investors?
AS: This would depend on the investor’s nationality. In general, Slice dedicates a great deal of time and resources to comply with the regulatory requirements of each jurisdiction our company targets. Accreditation is a US regulatory process, so in the United States investing is restricted to accredited investors. Other countries have different definitions and requirements, and Slice complies with these requirements. Oftentimes, we get approached by individuals of countries we’ve never dealt with, so our compliance officer helps these individuals find out whether they are eligible to invest or not.
AT: Slice RE currently enables international investors to take advantage of US real estate. Are there any geographical restrictions on the location of investors?
AS: Our current focus is on EMEA. More specifically, we are currently working with investors from countries like Singapore, Hong Kong, Japan, Europe and Israel.
AT: You recently partnered with StraightUp which offers commercial real estate in major hotspots such as Boston, Los Angeles, San Francisco, and New York. Any plans on further diversifying into secondary cities?
AS: In the long run, definitely. Our focus at the moment is commercial real estate projects in major US cities. For example, our Manhattan One project is in the heart of Manhattan in the sought-after Chelsea neighborhood. Our experience has taught us that international investors look for opportunities in markets they understand or are somewhat familiar with. Once they experience these investments first hand, they’ll be more inclined to invest in secondary and tertiary markets. We have a team of real estate analysts in Los Angeles and San Francisco that actively vets and sources deals nationwide.
AS: We don’t consider these companies competition. Slice is in the business of cross-border RE investments. Our current investments, like Manhattan One, can be treated as a traditional private equity deal. The tokens and optional liquidity are just an additional layer of benefits that lives on top of our core business. Liquidity is something that is going to be fully realized when secondary markets (like OpenFinance and tZero) will mature and facilitate meaningful trading volume.
AT: Can you explain what happens after an investor signs up and logins in for the first time? What’s the KYC and AML process?
AS: Our investors must go through 3 simple steps before they are able to invest in our offerings (registration, onboarding and investment).
During registration, investors provide general details like email and phone number to quickly set up an account. Onboarding is the process of Slice getting to know the investor on multiple facets: (1) initiating a KYC/AML/Accreditation process, (2) learning the investor’s intentions, expectations and experience with alternative investments (3) cultivating a meaningful relationship by assigning the investors with an account manager.
The KYC/AML process includes uploading:
- A selfie
- A government-issued ID (in English) or a passport
- A utility bill
The uploaded documents and information are then being verified and screened.
Once this is done, investors can explore offerings suited for their preferences. The investments can be subscribed using the platform, which includes a data room, eSigning and online payment modules. Later on, and depending on market volume, investors can expect to enjoy liquidity for their investments.
AT: Will investors be able to handpick the investment that they wish to be involved in? Or will it be simply an investor holds a security token, and that security token is invested in multiple properties?
AS: Slice lets investors cherry pick a specific project, as opposed to a traditional REIT model, where investors have to invest in a basket of projects of varying quality. We let investors get involved with a fairly little capital, because we understand that this type of investment vehicle is new for most investors, and we want to give them the opportunity to experience the benefits of this investment before adding more capital to their Slice real estate portfolio. The beauty of this model is that it allows investors to allocated small amounts to different projects and thus create a truly diversified real estate portfolio.
AT: Can you explain the investment style option which currently offers conservative, medium, or aggressive investments? I’ve seen this in traditional mutual funds, but it’s something that might be new for a lot of people in the real estate space. What are the different levels? Is this based on a projected yield/risk analysis?
AS: Real estate investments are typically divided into 3 main strategies based on perceived risk and projected returns. As the projected returns increase, so does the potential risk.
Core – Core assets are relatively stable yielding assets, located in major developed markets. They are characterized with strong fundamentals, high occupancy, credible tenants and a low degree of leverage. These projects are usually owned by institutional investors for a long holding period. These assets are considered to be a conservative investment, and the main objective investors choose them is wealth preservation.
Value-Add – These investments holds a higher level of risk with a greater upside potential. These assets can be found in primary or secondary markets, where the manager can actively add value by renovating the asset, increasing occupancy, or improving the tenants quality.
Opportunistic – There are many types of opportunistic investments, but generally these are either highly distressed properties (major vacancy, financial distress), new development projects, or assets in emerging markets. These assets typically require significant rehabilitation and have little to no cash flow. They carry the highest risk, and require experienced management, but can generate the highest returns (most of the return will be generated when the asset is sold or refinanced).
AT: Investors can earn dividends from real estate. Will you be outsourcing the collection of rent, managing properties, etc. to a management company or will you create a management company to manage these assets?
AS: Slice is a tech company that specializes in the tokenization of commercial real estate investments. We believe in domain expertise and therefore work with professional property management firms and legal advisors to best serve our investors. These services are being outsource to contractors with a proven track record, as we have no intentions to become a property management company.
AT: With the potential economies of scale that can be had, what are the property management fees that we can expect?
AS: Again Slice is not a property management firm. The industry has its standards regarding fee structures, depending on the property type. Due to our team’s vast experience, and the numerous relationships we have with developers, we are able to compare and negotiate attractive terms and fee structures for our investors.
AT: What’s the average projected holding time? For example, is the idea to purchase the development in pre-construction, tenant it for a year, and then flip it?
AS: The holding periods depend on the underlying asset. This might be a 2-3 year hold for a new condo construction or a 5-year hold for an income-producing asset. Our model lets investors take charge of their own holding period and liquidate their position without having to pay a hefty premium. We believe that the introduction of secondary markets is around the corner and that the revolution of tradable private securities will be expanded to other asset classes like fine art, stock options, and more.
AT: How are you planning on attracting the retail investors who are new to the concept of blockchain and tokenization of real estate?
AS: At Slice, we are not in the business of overpromising; we believe that retail investors should be handled with special care and with full transparency. The true adoption of retail investors will come from the fruition of projects led by developers with a meaningful track record (like our partners @ HAP NYC), the continuous development of quality project, and the emergence of secondary markets with meaningful trade volumes. Once these three pillars are in place, we believe that more retail investors will be actively looking for these kind of deals, and regulators worldwide will approve investment vehicles that are aimed specifically for retail investors.
AT: What are your marketing plans for the next 12 months?
AS: We focus on educating the market about the benefits of security tokens for cross-border investors. Most prospects we talk to don’t fully understand the difference between utility tokens, which are backed by empty promises, and security tokens that are backed by real-world assets. These same investors certainly don’t understand security tokens advantages like fractional ownership, increased liquidity, rapid settlement, reduction in direct costs, automated compliance, and asset interoperability – so educating the market is key. This month, we are launching a webinar series to help prospective investors understand the benefits of our technology and get to know our strategic partners (like HAP) which build some of the projects we tokenize. This effort gives our audience an opportunity to meet our management team, ask questions, and ultimately build trust with our brand.
Srdjan Mahmutovich, Founder of Kriptomat – Interview Series
Srdjan Mahmutovich is a tech enthusiast and the founder of Kriptomat an exchange that is fundraising by offering a security token. Previously, he has built a successful B2B digital marketing agency with 40 employees and coworkers. He also worked as the head of web development at Telemach.
Antoine: When did Kriptomat first launch and why did you decide to launch a cryptocurrency exchange?
Srdjan: Kriptomat opened to the public on 15 July 2018. We identified the need for a service anyone could use (like our friends and family members). We are on a mission to bring crypto into every household and to do that we needed to create a simple yet powerful service anyone can use. This will enable complete beginners to enter the world of cryptocurrencies in an extremely simple, safe and quick manner.
Antoine: Which countries do you currently accept customers from?
Srdjan: We currently accept customers from 82 countries around the world. They are listed here: https://kriptomat.io/global/
Antoine: How many active customers do you currently have? Where do most of these users originate from?
Srdjan: We currently have more than 10k registered users and steady growth of 20%-25% month on month. The majority of the users come from Europe, but with the recent addition of more payment methods, we are seeing a gradual increase in customers from all over the world. Our next goal is the 100k registered user mark and we are hoping to achieve this by the end of 2019.
Antoine: Are there plans on accepting Non-European customers any time soon?
Srdjan: We already accept Non-European customers, but we are working on adding more payment options in order to provide true worldwide support. Currently, we support Skrill which is really global, but we will be adding new locally popular payment methods.
Antoine: What currencies can be purchased on the Kriptomat exchange?
Srdjan: You can buy 29 cryptocurrencies; they are listed here: https://kriptomat.io/price-of-cryptocurrencies/
Antoine: Can you tell us about your upcoming security token sale? What’s the soft-cap, the hard-cap, and what will be the benefits offered to investors?
Srdjan: We have come to a stage where we need capital to speed up our growth and take us to the next level. We have decided to do an STO because it’s an innovative way to raise capital that allows our existing users and community members who already believe in us to invest in our project. We’re not only looking to get an investment but also loyal users that will evangelize and use our service as well. It’s a win-win situation. If we’re successful, our investors will be successful and we feel we’re in a much better position to build something big if our investors are our users who actually use the service.
We are looking for an investment of 1.8 million euros. We offer our investors an 8% share of our revenue and 4% of our audited profit.
The soft cap is 1 million euros and we reserve the right to cancel the issuing of the token if we don’t reach that. Detailed information can be found in our Security Offering document which you can get in the crowdfunding platform Desico which is going to issue our security. To get there go to https://kriptomat.io/sto
Antoine: What will these funds be used for?
Srdjan: So far, we have been focused on building a product, relationships and proving the business model. With the new funds, we will focus on creating user acquisition mechanisms and improving the platform.
The orientation of spending of the funds raised during the STO:
– 60% Growth – Marketing, customer base growth
– 18% Product development
– 12% Security, compliance
– 10% Operations, support
One important thing to note here is that crypto market is in its early stage and things are moving fast. We have been maneuvering quite successfully so far and adapting to the sudden market changes and that’s what we plan to do in the future as well. If the market situation changes significantly, we will pivot and change direction if necessary.
Antoine: The market is beginning to become saturated with exchanges, how will you differentiate yourselves?
Srdjan: Because we are creating some awesome new products. We are integrating the next-generation Ethereum-based ERC-1155 tokens into our Kriptomat exchange. This adoption of blockchain-based virtual items is the first of its kind and it is being made with the purpose of gamifying user experience. In other words, it is a blockchain-based reward program that will boost loyalty, increase the customer lifetime value and speed up user acquisition.
We have recently launched a revolutionary ERC1155 Token Mint Portal, giving everyone in the world an opportunity to create their own customized tokens. The use cases are countless and we haven’t even scratched the surface of what can be done with such a powerful tool.
So it seems we are going more in the direction of supporting gamers and game developers. This means we as an exchange will appeal more to the gaming community and they might just be the first customer segment to completely adopt crypto.
Antoine: What are long-term plans for Kriptomat?
Srdjan: Our mission is to bring cryptocurrencies into every household. This can be in terms of giving people the best way to exchange digital currencies, or in terms of giving them a valuable product or use-case that utilizes blockchain and crypto. Whatever the case, we truly believe that this technology will be integrated into every pore of our lives, and just like the internet protocols, people won’t have to know exactly how it works in order to use it.
Antoine: Is there anything else that you would like to share about Kriptomat?
Srdjan: We are very transparent with our community and we welcome an open discussion on our social media channels. I invite everyone reading this to join our Telegram channel where you can talk directly with our team members. We know that it is often hard to maintain a personal relationship with the community when the number of users starts to grow exponentially, but we make a concerted effort to reply to every single message.
To learn more visit the Kriptomat website.
Arnoldas Nauseda, CEO of Smartlands – Interview Series
Arnoldas Nauseda is the CEO of Smartlands a crowdfunding platform that tokenizes real-world assets. Prior to joining Smartlands, he spent four years as a full-time entrepreneur, developing businesses in the fields of technology, fintech, and robotics.
Antoine: How did you personally get involved in blockchain and cryptocurrency?
Arnoldas: Well, we need to acknowledge that getting involved in blockchain does not necessarily mean that you’re involved in cryptocurrencies and myself is a stark testimony to that, although, understanding ICOs as a mode of crowdfunding was step one for me.
I’m trained in finances and business development and for a while, have been an entrepreneur. I hold a bachelor degree in economics, MBA in Finance and International Executive, and I’ve made some strides co-founding companies in fintech, venture capital and robotics industries. In the past years, I’ve done a lot of projects, held top executive positions with fintech companies, did my share of consulting and, of course, was heavily involved with real estate.
The point is, even though I was a little late in the game, but by 2017 an executive of my stature and experience would have to have heard of blockchain, it was inevitable. At that time I felt that building a business on DLT was not only a clear sign of “progressiveness” as a business person, but it was also a real unadulterated adventure when I felt reborn every day waking up for work. It was great, still is!
Antoine: What made you decide to get on-board as the CEO of Smartlands?
Arnoldas: I dedicated a year to studying DLT, what it could do for my field, read countless pages and visited hosts of blockchain conferences, gatherings, meetups. At one such event, I was introduced to one of Smartlands co-founders, and we immediately hit it off. We both realized that cryptocurrencies as one of many DLT derivatives are a fascinating use case and an excellent tool for transforming financial markets, but the real value of blockchain lays in providing trustless access. The immutable ownership rights embedded in smart contracts… You don’t have to be a specialist to imagine what it could do in a world where the right to claim ownership was the reason for war for thousands of years. Smartlands and I were on the same page: attributing digital ownership to an asset and giving the owner the ability to use that piece of code as they saw fit was the wave of the future, and we wanted to unveil that future to people.
Antoine: Smartlands is a crowdfunding platform that focuses on tokenizing real-world assets, what will some of these asset types be?
Arnoldas: Literally, anything. As long as an asset has a documented rightful owner, it can be turned into a security token using Smrtlands proprietary tech. With that comes liquidity – the Holy Grail of asset tokenization. Naturally, the sort of flexibility in holding, trading or exiting investment that we can provide is something any asset owner or investor is after.
Antoine: The first project on your platform is purpose-built student accommodation in Nottingham, UK. Could you tell us a bit about it?
Arnoldas: We’ve selected this type of asset after careful consideration and with the help of our community. Purpose-built student accommodation complex in Nottingham, UK is a perfect starter use case for a tokenization platform like Smartlands: it’s a hands-free investment with the projected 15.72% annualized return, revenue comes from rent as well as property appreciation. The equity share is 30%, and we are aiming at £1 million funding target.
Overall, student housing in the UK is an up-and-coming asset class. The United Kingdom remains one of the top global destinations for those seeking quality marketable education, which means that the revenue stream from students paying rent is not about to dry up. Also, if you’re looking to benefit from current weakness of the pound sterling, inexpensive real estate in the British heartland is where you’d be looking to park your capital right now.
Antoine: How many more projects should we be expecting in 2019? Are you at liberty to discuss any of these?
Arnoldas: I can’t give you the details right now but I will say that we’re looking at a pipeline of six more asset tokenization projects to go live before the year’s end and the portfolio we’re preparing is highly diversified. We are looking at agricultural assets, various types of real estate, private equity. Like I said before, the essential benefit of our proprietary technology is unlimited access: asset owners and managers looking to crowdfund capital get access to investors, in turn, investors are given the opportunity for what we call “fractional ownership.” With the lowest in the industry threshold for investment, we are granting regular people the opportunity to get verified as accredited investors on the Smartlands platform and through the use of security tokens issued on Smartlands own a share of a property in the UK.
Antoine: How do you choose which projects to list on your platform?
Arnoldas: We put a lot of thought and careful analysis in the process of selecting the right assets for our investors. In fact, that’s one other major benefit of Smartlands: we have a team of researchers formulating investment documents for our clients so that the scope and scale of a project are revealed to an investor at the earliest stages of participation. As a result, the process is as straightforward as it can be on a regulated investment crowdfunding platform registered with the British Financial Conduct Authority, FCA.
Antoine: Smartlands recently launched a Stellar Powered Wallet, what is the benefit of this for investors?
Arnoldas: Essentially, it’s a multisig wallet primarily designed on the Stellar’s SEP8 protocol but with the addition of some cool proprietary features such as AI-driven compliance engine, account recovery/mapping, and others. Smartlands wallet operates within the compliant segment of the Stellar network, which to an investor means that all transactions with security tokens as well as XLM and our native token SLT are carefully sourced to prevent any risks connected with illicit activities.
Antoine: Where do you see Smartlands being positioned in 5 years?
Arnoldas: At the Consensus 2019 event in New York, we’ve introduced our “Unicorn Vision” – the strategy of consumer-centric approach that envisages our transformation from a security token issuance platform to a global investment ecosystem focusing on the most lucrative equity types and asset classes. The Vision is all about unlocking liquidity for various kinds of currently illiquid assets and, of course, going fully mobile. Basically, Smartlands is about to become a one-click operation with a built-in exchange where investors will be able to track offers and manage portfolios right from their mobile devices using multiple fiat currencies and cryptocurrencies.
We will be issuing Smartlands Card with the genuinely unique functionality of a multi-wallet payment system. All the wealth you create using the Platform will be stored in your account – digital assets, fiat currencies, and crypto. The Card will be used just like Visa or Mastercard enabling our customers to engage in IBAN and SEPA transfers as well as for value storage.
Remy Jacobson, CEO of RealT – Interview Series
Remy Jacobson recently launched a crowdfunding platform called RealT that allows cryptocurrency investors to invest in real estate assets, starting with rental homes in Detroit, Michigan. The company is expanding next to Cleveland, New Orleans and South Florida.
In South Florida, Jacobson heads the Aventura-based development firm J Cube Development. In November, he sold a development site in Wynwood to Quadrum Global for $8.55 million.
Antoine: RealT plans on tokenizing real estate in the city of Detroit, Michigan. Why did you choose Detroit versus competing cities with stronger real estate markets?
Remy: Detroit is the optimal place for RealT to get started. Properties in Detroit are already in high demand among international investors, due to their low price tags and high rental rates. As RealToken owners, the rental income is the tangible source of gratification they receive. Having low-cost properties with high rental rates is a great way to provide value for our early adopters.
Antoine: Will you be focusing on capital gains or rental yields?
Remy: We will be looking at both areas. Rental yields will be paid to the investor via their Ethereum wallet on an ongoing basis and, as the value of the property and rent price increase, so will their rental income. Investors also have the option of selling on their tokens, after due diligence has been carried out, to yield capital gains too.
Antoine: What will be the average holding period?
Remy: RealTokens sold overseas will be freely transferable overseas to non-U.S. persons who have qualified following AML/KYC reviews, but, in order to comply with U.S. applicable securities laws, these ReatTokens may not flow back into the United States for a period of 12 months. RealTokens that are sold to accredited investors in the U.S. may be transferred to other whitelisted accredited investors after 90 days and will become freely transferable to anyone after 12 months.
As a practical matter, it is too early to tell how long purchasers will want to hold their RealTokens.
Antoine: What made you decide on the tokenization model?
Remy: We wanted to make investing in US property more accessible, notably to foreign investors. By tokenizing property, we can offer investments at accessible prices to a greater number of people. It’s also important that blockchain is the technology that backs tokenization because this ensures the efficiency and traceability of real estate investment that the traditional real estate sector is clearly lacking. Our tokenization model offers the advantage of a regular real estate transaction on top of blockchain transparency. RealT is a bridge between the physical and the digital world: all deeds, operations agreements, and other legal documents are viewable on the blockchain, while at the same time held in trust with a law firm.
Antoine: How are you planning on attracting retail investors who may not be familiar with security tokens or cryptocurrency in general?
Remy: RealT has lowered the barrier of entry to real estate, to an accessible and affordable amount. RealT can provide an integral part of a modern investor’s portfolio, and now it can be held inside on Ethereum’s wallet. We aim to be the Coinbase of real estate assets. One of our main aims is to make the concept and process of investing in property as straightforward as possible. It’s important to us that people who would have otherwise never considered investing in property through blockchain understand that they don’t have to be bogged down in bureaucracy and jargon to participate. Our marketplace and buying process is intuitive and runs buyers through digestible steps before purchasing tokens.
Antoine: Can you share with us the benefits that investors will be offered?
Remy: Investors can enjoy passive rental income that will be paid continually into their Ethereum wallet once they have invested in a property. This income will be paid in stable coins which are pegged to the US dollar so that investors don’t have to concern themselves with the volatility of a particular cryptocurrency at any given point. As token owners, investors can also contribute to the significant decisions required concerning the upkeep and maintenance of the property in which they’ve invested. This is done through a simple voting process.
Antoine: Will investors be able to select the investment they wish to be involved in? Or will the security token act as a fund which holds multiple properties?
Remy: With RealT, you can select specific properties and become an owner in the property. As an investor, you get to own the actual real estate. RealTokens are important building blocks in the Ethereum ecosystem. By going all the way down to the foundation of real estate, to the individual properties themselves, RealT enables anyone to create a real estate portfolio using RealTokens. It’s an important distinction; the real estate funds of the future may very well have RealTokens as the asset. This is why RealT investors have full visibility on our marketplace and can choose the exact property they wish to invest in and how many tokens they want to purchase for that property. The rent they then yield will come directly from the property that they’ve invested in.
Antoine: Is this offering exclusive to US accredited investors? Will you be accepting international investors?
Remy: The offering is primarily targeted at international investors. Traditionally, the US real estate market has been relatively inaccessible to those residing outside of the US. We want to change this and open up the possibility for anyone in the world to invest in US real estate and benefit from passive rental income. We, of course, accept accredited investors.
The offering is being made in the U.S. only to accredited investors pursuant to Regulation D under the Securities Act of 1933, and overseas to non-U.S. persons pursuant to Regulation S under the Securities Act.
Antoine: How are you planning on differentiating yourself from competitors such as BlockEstate, Realecoin, Slice RE, etc.
Remy: The main differentiator is that RealT is up and live. To the best of our knowledge, we are the first platform to officially launch and offer the prospect of buying into tokenized property. Additionally, RealT is tokenizing properties themselves, rather than offering an investment fund that specializes in real estate. This returns autonomy to the individual, and allows them to choose the properties they want, at the investment size they chose. We have a very strong team behind RealT, with both blockchain and cryptocurrency expertise as well as extensive real estate knowledge. Many projects in the area of tokenized real estate are either run by crypto enthusiasts or real estate professionals, but at RealT we combine these areas of expertise to offer a comprehensive, fully-compliant service.
Antoine: Is there anything else that you would like to share with us about RealT?
Remy: RealT will continue to add new property types, from various cities, to continue to sample what our customers want to see available for purchase. RealT has plans to tokenize properties in all major U.S. cities, and we look forward to seeing which cities generate the most demand. And creating liquidity.
To learn more visit the RealT website.
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