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.
Brian Collins, CEO at Horizon Globex – Interview Series
An experienced public and private company CEO, Brian founded Horizon Globex in 2010, which was listed on Nasdaq in 2012. From 1999-2010 Brian was CEO of Abbey Technology in Switzerland, specializing in the design of trading software for Swiss banks. Prior to this, Brian worked for Credit Suisse in Zürich designing and building proprietary equity trading solutions. Brian graduated in 1990 with a B.Sc.(Hons) in Computer Systems from the University of Limerick, Ireland.
AT: Horizon Globex features multiple products which target companies that are looking at launching a Digital Securities Offering. To begin, could you tell us about Tokenetics, and describe the issuance process?
BC: Tokenetics is our underlying digital security issuance, custody and disbursement software for issuers to launch a secure and compliant DSO. An issuer comes to us, and we collaborate with their team (including management, securities lawyers and investment bankers) to create an Ethereum ERC-20 smart contact for the digital securities that will be able to be issued pursuant to an exemption from the registration provisions of the federal securities laws such as Regulation D, Regulation S, Regulation A or pursuant to a registered offering on Form S-1.
We take a unique approach that we believe is most suited for today’s ever changing regulatory framework. Instead of integrating numerous layers of features onto a single digital securities’ smart contract, we prefer to apply additional regulatory compliance via “peered” smart contracts that are built alongside the primary-issuance smart contract, like our Transfer-Agent- Gatekeeper smart contract (via CustodyWare).
For example, if a holder becomes the CEO of the issuer (e.g. an affiliate who is now restricted from “insider” trading in the security), the issuer would be forced to burn the holder’s digital securities, reprogram with the new restrictions and issue a new token. With CustodyWare, the issuer can simply notify the Transfer Agent and the Transfer Agent c an input the CEO’s KYC’d wallet ID to the CustodyWare portal and apply relevant affiliate status restrictions on the securities in that wallet. Our approach puts control in the hands of properly SEC regulated Transfer Agents instead of developers or CEO’s.
AT: Tokenetics also offers secondary trading opportunities, could you describe these?
BC: The answer to this question lies in the ability for our software solutions to integrate with one another. Tokenetics integrates with KYCware, our white label investor onboarding and KYC identity verification smartphone app. AMLcop, our watchlist management sanctions and PEP screening solution, also integrates and acts as the gatekeeper for our entire ecosystem as an investor must be whitelisted to participate. Then, on completion of an offering and its potential holding period (e.g. SEC Rule 506(c)), a Transfer Agent utilizes CustodyWare, our Transfer Agent custody portal, to transfer the digital securities to a regulated ATS for compliant secondary trading. Our use of a Transfer Agent allows issuers to exercise good control, ensuring the identities of investors remain intact throughout the lifecycle of the digital securities. Ensuring that investor identities are known in the same way as traditional securities means that proxy notices can be sent, voting can be done, dividends can be paid, escheatment can be managed, and state and federal laws complied with for estate management and regulatory reporting.
We’ve also developed a dollarized secondary trading solution to provide liquidity assurance to investors and offer new investors the ability to take part in the secondary market, with trading-pairs priced in fiat. Investors both deposit and withdraw funds in fiat, minimizing risk of cryptocurrency regulatory and AML exposure.
AT: CustodyWare is another one of your products which describes itself as a compliant agent custody solution. Could you elaborate on what this product does?
BC: We believe that CustodyWare is the first regulatory compliant product for U.S. Transfer Agents to custody and manage digital securities on behalf of their clients pursuant to an SEC registered or a registration-exempt DSO. The CustodyWare portal integrates with ERC-20 issuances and supports all major Transfer Agent functions including issuance, custody, transfer query, reporting, affiliates and release, providing Transfer Agents with the ability to fulfill the same role for digital securities as they do for traditional securities. All transactions are signed by the Transfer Agent and are transparently and immutably stored on the Ethereum blockchain.
AT: In January 2019, you signed a deal to license CustodyWare to VStock Transfer, LLC “VStock” an SEC registered transfer agent and registrar. Could you tell us a little bit about this agreement?
BC: The agreement with VStock is a licensing agreement which enables VStock to expand upon their traditional business as a leading stock Transfer Agent and registrar firm and begin taking custody of digital securities issued pursuant to Regulation D, Regulation A, Regulation S, or registered offerings filed on Form S-1. We have licensed VStock Transfer our “portal” for them to manage holders and affiliates of digital securities, cancel and re-issue tokens if a holder’s private key is lost/stolen, and act as a paying agent to distribute dividends, etc.
AT: The third product that you have for STO solutions is KYCWare. There’s been a lot of KYC products that have hit the market, what differentiates yours?
BC: I think one of our biggest differentiators is our methodology and level of security when it comes to the protection of users’ sensitive information. We don’t perform KYC/AML “verifications” ourselves. Instead, KYCWare provides clients with a white-label mobile app solution and back- end portal to streamline the collection of CIP, KYC and AML information without ever sharing sensitive data with a third-party.
How it works is investors or customers are onboarded through a client-branded KYCWare app which incorporates advanced identity verification technology such as anti-gaming video interview solutions, machine readable ‘MRZ’ scans of passports, security hologram checks for IDs, and more unique layers and updates from traditional identity checks.
On the back-end issuers or customers are run through our AMLCop, anti-money laundering software solution. Then all this sensitive customer information is stored in memory until a representative of the company (whether it be a designated KYC/AML representative or broker- dealer engaged by a DSO issuer) downloads and reviews the submissions on an SEC Regulation S-P compliant medium (for example we recommend clients use a FIPS compliant external hard disk). We take this approach because in the eyes of the regulators, the issuer is ultimately responsible for making sure that all investors are properly K YC’d and AML’d, not the third-party who could further outsource the data to be verified.
AT: You’ve entered into a software license agreement with Tripoint Global Equities in order to provide them with software support to the BANQ branded security token platform. What is the BANQ platform?
BC: BANQ is the online division of TriPoint that is focused on private placements, Regulation A IPOs and digital security offerings. In addition to supporting the BANQ platform, Globex announced that we entered into a software licensing agreement with First Growth Funds Limited (FGF) to power fully regulated and compliant security token offerings in Australia and New Zealand. FGF is a publicly traded fund listed on the Australian stock exchange and is a diversified Investment company which focuses on increasing shareholder value by making investments across a broad range of asset classes including listed equities, private equity and token offerings.
AT: What’s the Globex API?
BC: The Globex API is simply a way for our four software applications to interact directly with Ethereum. Typically, if a company wants to integrate with Ethereum, they could use an open source API or a third-party resource but our ethos for software has always been to create the solutions ourselves. By doing this, if there’s an issue, we have total control over fixing the problem.
AT: One of the more interesting offerings on your website is that you offer a ‘Turnkey Financial Portal’ that can be branded to a company’s brand. What capabilities will these financial portals offer?
BC: The branded financing portals offer many benefits. On the front-end, issuers present investors or customers with an on-brand investment process from start to finish, maintaining a sense of trust and a seamless user experience. On the back-end, issuers, and their bankers, experience a hosted web portal where they can securely and compliantly manage their customers and necessary reports with no IT experience needed.
AT: You recently had some exciting news with Timeless Luxury Group AG, licensing the Globex full suite of blockchain software solutions to power its DSO, is there anything that you would like to share with our readers about this partnership?
BC: This is a key announcement because it showcases our blockchain software stack’s ability to address all aspects of a digital securities offering. The relationship began with an understanding of Timeless Luxury Groups’ desire to access US capital along with foreign investors in a fully compliant DSO and grant investors the right to a percentage of any future profits.
This offering marks the first offering in the United States to use an SEC registered Transfer Agent for the issuance and custody of digital securities. CustodyWare is being licensed by Timeless Luxury Groups’ designated transfer agent, VStock Transfer, granting VStock the ability to custody Ethereum ERC-20 securities while compliantly maintaining the identity of holders to facilitate the future payment of any dividends in US dollars and any other transfers that the Transfer Agent is responsible for administering (e.g. holds, releases, transfers, etc.).
AT: Is there anything else that you would like to share about Horizon Globex?
BC: There is a lot of hype in the industry with companies making claims about what they ‘will’ create, or even more detrimental, making false claims about the capabilities of their existing companies. We like our approach of coming to the market with live and proven software. In two years, our team of developers built out a comprehensive suite of blockchain software solutions that address the full lifecycle of a compliant digital securities offering. With the continued input from our experienced tech, Wall Street and public company executives, we aim to continue developing and bringing to market technologically advanced products that power the next generation of exchanges and securities offerings in the US and worldwide.
To learn more visit the Horizon Globex.
Oliver Bolton, CEO of Almond Impact Ltd – Interview Series
Oliver Bolton is the CEO of Almond, a free app that rewards consumers for buying responsible brands and helps them understand and reduce their carbon emissions. They are currently accepting investors for their STO.
AT: What inspired you to launch Almond?
OB: 2 years ago my son arrived (and last month my daughter!), and with the climate crisis I can’t stop thinking about their future and what type of world they’ll live in. I really want to use my time to make a positive impact and have decided to focus on consumption which in the UK represents 50%+ of our personal CO2 emissions
AT: Almond has a huge environment mission which includes rewarding consumers for buying sustainable products. Can you tell us what some of these sustainability goals are? Does it involve reducing excessive packaging, sustainable harvesting of products, etc.
OB: Our overarching goal is to help people lower their CO2 footprints by at least 50% over the next decade (with a focus on consumption). Specific assessment metrics are still being developed and will be based on the UN’s SDG. Packaging, ingredients, processing and the LCA of products will all be contributing factories to certification. The foundation will ultimately develop its own impact assessment program for accreditation.
AT: Almond will enable consumers to learn about the carbon footprint of each product. Can you elaborate on how this is done and what information will be available to the consumer?
OB: Using the supply chain data (ingredients origin and production processes) and other product information that is uploaded, we can calculate an LCA CO2 footprint at point of manufacture. We then plan to use a dynamic per mile average CO2 score (to represent storage/distribution/display emissions) to calculate the footprint from point of production to point of consumption to create an estimated total footprint score.
AT: What type of process will brands have to go through in order to be selected for the platform?
OB: To start with we are aligning with best in class certification labels in their respective categories. For example ‘B Corp’ in Food & Drink and ‘Cradle to Cradle’ in clothing. Over time we will build out our own impact assessment which will integrate the supply chain data above, accreditation and a detailed business questionnaire to reach an Almond score (run by the foundation).
AT: You’re launching with food products initially, what are the other types of products that you plan to add to the platform?
OB: In 2019 we are piloting several cross-sector consumer products including food, drinks, clothing, health, beauty and fresh produce products. We want to include any consumer product (and some services) that contribute to our user’s carbon footprints
AT: Almond s launching in the United Kingdom first, what markets will you be targeting afterwards?
OB: The richest 10% around the world are responsible for 50% of CO2 emissions. The wealthiest consumers in developed economies will be our priority. A US pilot is planned for early 2020.
AT: The Almond token model has both a security token (ALMA) and a utility token to offer rewards (ALMD). Can you tell us about the use cases of the ALMD utility token?
OB: Due to the structure of the project, the tech and IP is owned by the foundation and can never acquired by a third party. The ALMA security token allows investors to exit their investment post their lock-up periods. We also hope to democratise investment into the project and will make ALMA security tokens available for purchase to the wider community through ALMD reward coins conversion. To clarify, the ALMD reward token is a fiat backed stable-coin rather than utility token. The reason for taking this route is that often products are sold in multiple countries so we need a cross-fiat global rewards currency. This ALMD stable-coin for good also opens up other potential opportunities for the project.
Can you tell us about the ALMA security token, and the benefits it offers investors?
OB: ALMA security tokens will offer similar rights to traditional equity such as ownership, dividend rights and are EIS eligible (subject to conditions). We plan to list them on an exchange in late 2019 to provide early liquidity to our investors.
AT: Investors are obviously interested in the business aspect of Almond. Currently, you plan on generating revenue via a ‘Tokenisation Service Fee’ which is a fee incurred by merchants. Can you tell us about this fee?
OB: There are multi income streams, the core being the Tokenisation Service Fee which is charged when physical codes are created to be placed on partner products. The fee structure scales down from 0.5% of the tokenised product’s retail sales value to 0.2% of retail sales value. Other income is projected from marketing and ecommerce solutions.
AT: In a perfect world, where do you see Almond being positioned in five years?
In five years we hope to have a presence in those key countries that are contributing to climate change and an active user-base around the world. We hope to show hard data and evidence that we are helping our users reduce their carbon footprints (in line with our 10-year plan to reduce by 50%) and evidence to show how we have helped responsible brands rapidly gain market share.
To learn more about Almond visit the Almond Website
Investor information is available here
Graham Rodford, CEO of Archax Exchange – Interview Series
Graham Rodford is the CEO and Co-Founder of Archax exchange based in London, England. Graham has almost 20 years of experience in the traditional funds/investment world and is applying that knowledge and experience to digital securities. A testament to Graham and his team’s experience is that Archax is one of the very few regulated digital securities exchanges, in arguably the world’s largest financial centre.
Archax is a London-based regulated exchange for trading asset-backed tokens; the exchange is geared primarily towards the professional investor community. Archax aims to bridge the crypto world and the traditional investment space with an institution-quality approach.
RS: In one sentence, how would you describe Archax?
GR: Archax is a forthcoming regulated, institutional, digital securities exchange based in London.
RS: What is the long-term vision for Archax?
GR: Our vision for Archax is to be the leading venues for the primary issuance and secondary trading of digital securities globally, operating a 24×7 market.
RS: Who will be able to use the Archax platform?
GR: Our focus is in professional investors and institutional clients from all over the world as direct users – both the buy-side and sell-side. Any retail participation will be through brokers.
RS: What differentiators does Archax have from similar exchanges? How will those appeal to the professional investor community?
GR: A focus only on institutions/professional investors – most other venues cover retail flow.
A focus on security tokens – most other venues cover cryptocurrencies/utility tokens, which are unappealing to institutions currently.
The first digital securities exchange regulated in London, the world’s leading financial centre – most other venues are regulated in peripheral jurisdictions.
Archax team all come from the traditional financial markets world and are used to operating in regulated markets globally.
All our technology partners are proven suppliers to the traditional institutional space.
Archax will be integrated into the existing traditional trading workflow through vendor partnerships
Archax supports industry standard trading APIs like FIX
All the above appeals to the professional investor community.
RS: Archax is a regulated digital securities exchange; can you tell us some more about where you’re regulated and what the regulation means for the investors and companies listed on the exchange.
GR: Most other crypto exchanges are unregulated, and those that are regulated tend to be from peripheral jurisdictions. The traditional institutional investment world does not like trading in venues regulated in those types of jurisdictions, they want to trade on venues regulated in leading financial centres like London.
Companies looking to list a digital security want exposure to the blue-chip institutional investment world – an exchange like Archax gives them that exposure.
RS: You’ve formed a few new exciting partnerships recently; can you tell us some of the benefits these partnerships will provide?
GR: Our partnerships with proven technology firms from the traditional space like Aquis and Quod give us proven capabilities and direct links straight into our target marketplace.
Our partnership with tokeniser firms like Tokeny and Securitize gives us a flow of quality digital security listings for our exchange.
Our partnership with ClearBank gives us institutional-grade banking capabilities – all backed up by the Bank of England.
RS: When do you expect Archax to go live?
GR: We expect Archax to go live in late Q3 early Q4 this year.
RS: As someone with extensive experience in financial markets, where do you envision the digital securities market going in the next 2 years, and 5 years?
GR: It is still early days for security tokens and over the next two years we expect to see the required supporting ecosystem continue to emerge with the key players in primary issuance, custody and secondary market trading establish themselves. The regulatory landscape will evolve too with the regulators in major financial centres clarifying their position regarding security tokens other crypto assets too. The number of firms looking to issue security tokens will grow as well, with larger and more prominent issuances appearing as the whole landscape starts to take shape.
Looking out to five years, all this activity will create liquidity on these new markets and nurture mainstream adoption which we expect to build momentum quite fast. We will also start to see existing financial instruments use blockchain/digital security tokenisation too – as this is a far more efficient and frictionless way of handling financial assets than is used currently – particular in the post-trade clearing and settlement space.
RS: Is there anything else you would like to tell us?
GR: The tokenisation of real-world assets using blockchain technology will not only unlock liquidity and create secondary markets for assets that are currently hard to trade, but also has the potential to disrupt all traditional financial markets too. Already there are more than 150 firms who have used or are looking to use security tokens as a way to raise capital or unlock asset value – a total value of over $2billion, with $400m raised so far. This momentum is building with new initiatives appearing every day. The types of token range from tokenising equity/revenue/debt as a way of raising business capital, tokenising property or funds to create secondary market liquidity, and even tokenising more niche or exotic assets – like art, race horses, diamonds, container ships, aircraft – to unlock value in new, innovative ways.
You can find more news coverage about Archax here.
And reach the Archax home page here.
- Stellar Chosen by Wevest for Security Token Offering Platform April 21, 2019
- Vtoken Exchange Celebrates SEC Filing in Time Square April 20, 2019
- AlphaPoint and Elevated Returns to Develop Secondary Market April 19, 2019
- Due Diligence Process Delays tZERO Investment April 18, 2019
- Brian Collins, CEO at Horizon Globex – Interview Series April 18, 2019