Tokenized real estate is definitely an area with greatest potential for the security tokens to shine.
Imagine owning a piece of real estate that is otherwise out of reach if you were to own it as a whole?
That imagination is now a reality.
Thanks to projects like Smartlands, retail investors are now able to invest a small amount of capital, we are talking about $100 or $500 or whatever works for your personal financial situation, into a real estate investment which would have been confined to venture capitalists and big guys only few years ago.
Democratizing the investing space with fractional ownership
Smartlands recently completed a successful security token sale on a student accommodation in UK and reached £1,000,000 funding target..
“Buy-in threshold started only with £500 in fiat or cryptocurrency. By putting investment process on blockchain, we remove multiple middlemen and complicated structures, opening new opportunities for retail investors around the globe. . We democratize the investment space,” says Ila Obraztsov, CEO of Smartlands.
The idea of owning a piece of income generating real estate with a fractional investment cap is an idea that needs democratizing and Smartlands is playing a vital role in the UK market.
Soon, they want to take this idea to global markets. Smartlands already has an ambitious plan to start their service in the US in 2020 while increasing their footprint across Europe.
Providing alternative liquidity: Bulletin Board
To security tokens is similar to selling securities. Which means, you have to get through all the legal and licensing requirements that of an actual exchange. Getting a license to trade securities is very tough and sometimes long arduous process.
While Smartlands is looking to procure a license to trade in security tokens, it has a novel solution in the interim.
Smartlands offers a bulletin board.
This is a pure peer-to-peer transaction where individuals interested in selling a certain security token will post it on the board and those who are interested will then get in touch with the seller through the bulletin board.
The atomic swaps happen on the Stellar Network, once the seller and buyer come to an agreement.
In Ilia’s own words “we have an intermediary solution that we call bulletin board. People who want to sell their security tokens will post it on the bulletin board and those interested will buy them in a pure peer-to-peer transaction using atomic swaps.”
In the meantime, Smartlands has an agreement with Archax, an institutional-grade exchange, to list security tokens issued on its platform by the end of this year.
Big plans to tokenize real estate across the world
With the confidence gained from successful security token sale in the UK, Smartlands is expanding its international presence. To fuel its expansion plans company is offering an equity stake in own Holding company to raise the needed capital.
These plans include opening operations in the US.
“The biggest news right now is that we are open to sell an equity stake in the company to raise the capital to further our expansion plans. Please note that it’s not an STO, it’s a traditional fundraiser with shares in Smartlands for offer. You can find more information from our official announcement, or email us at firstname.lastname@example.org” Ilia said.
We wish all the best to Smartlands.
Here is the transcript of the interview with Ilia Obraztsov.
CryptoTapas: Tell us a bit about yourself and how you got started with Smartlands?
Before starting with Smartlands, I was a CTO of a Pando Innovations and worked with a lot of startups to develop a Minimum Viable Product (MVP) in Silicon Valley. Each year, we had about 20 startups in the portfolio and they were all diverse. During this time, I was involved with projects in AI, big data, Hyperledger and Stellar.
CryptoTapas: What is your elevator pitch for Smartlands?
Smartlands is a global platform for issuing digital securities in compliance with Financial Conduct Authority regulations. We aim to bring together token issuers and investors by creating blockchain-based securities backed by digital ownership of shares in multiple asset classes. By leveraging blockchain technology, we introduce a unique crowdfunding model which dramatically reduces costs of raising capital, opens access to higher-yield investment opportunities both to institutional and retail investors, and in the long run drives global financial inclusion.
CryptoTapas: Do you guys pick the projects that are already in business or do also encourage startups?
We have started incorporating startups with disruptive technology fund last week. However, our main focus is projects with high or medium yields. We are not promising sky-high returns but we are focusing on preserving and increasing the capital while providing a decent rate of return.
We are looking at a 15% to 20% rate of return.
CryptoTapas: Generally speaking, when you invest in a startup your capital is locked and generally you don’t see any return unless the company has a successful exit or goes IPO. Do you guys create a market for the initial investment without having to wait for an exit or an IPO?
Liquidity is a tough question.
Several platforms for trading of security tokens are in development but they are not launched yet. For one, by nature security tokens are securities as such to trade them you need platform licensed to trade securities.
There are few platforms that do facilitate trading of security tokens, however, such trades are restricted to institutions or accredited investors, not retail investors.
Smartlands does plan to get a Multilateral trading facility license (MTF) to facilitate security token trading, however, that is not an immediate solution that is available due to the process involved in acquiring the license.
In the meanwhile, we have an intermediary solution that we call bulletin board. People who want to sell their security tokens will post it on the bulletin board and those interested will buy them in a pure peer-to-peer transaction using atomic swaps.
We implement this atomic swaps on the Stellar network.
CryptoTapas: Is this peer-to-peer atomic swap available for all projects on Smartlands?
There may be some restrictions based on specific offerings, however, from a technology point of view, it is possible to offer atomic swap for all projects. The question that we have to answer is from a legal requirements point of view.
However, because this is a peer-to-peer transaction – there will be fewer restrictions.
CryptoTapas: What are the qualification requirements to participate on Smartlands?
Users have to complete KYC and AML verification process by submitting their passport and other documents to establish their identity.
They are also required to go through a knowledge test to make sure that they understand the risks of investment. For sophisticated investors who want to invest higher amounts we may also require proof of source of funds or other documents.
CryptoTapas: Are the services available in the USA?
Currently we are not allowing any American investors at this point, however, the USA is in our development timeline.
We are now inviting investments and we will be using these funds to expand our operations worldwide, including obtaining necessary licences to run compliant STOs in the USA.
CryptoTapas: What qualifies for a project to be listed on Smartlands?
First of all, it has to be a real world asset and in case of a startup – it has to be a later stage startup.
We focus on the investment return of the proposed project and the possibility of achieving the goals.
CryptoTapas: How big is Smartlands team?
We have three offices in Europe and have around 20 people working on the project.
CryptoTapas: What are your goals for Smartlands in the next 3-4 years?
Opening multiple offices around multiple jurisdictions facilitating for retail investors to be able to invest in multiple jurisdictions through single KYC/AML process is one of our goals.
We also want to tokenize one billion of assets by 2024.
In addition, we are also planning to make Smartlands a platform for others to offer security issuance services on. In other words, turning Smartlands into a security-token as a service platform.
This is a big idea because we have to ensure we are compliant in all the jurisdictions we operate or provide services in. We know it is possible and we are working towards that goal.
Check out the roadmap here.
CryptoTapas: Do you guys provide end-to-end securities solution or do you only help raise the capital through security tokens?
We provide end-to-end solution. We are one stop-shop solution.
We manage KYC/AML to onboard investors. We help companies run their campaigns on our platform and also provide post-issuance services like dividends distribution and investor communications.
CryptoTapas: What are the sources of revenue for Smartlands to sustain?
Our main source of income is the fees. We charge companies for issuance and there is investor fees for use of the platform. We charge our fees in our native tokens. The fee schedule is:
Platform Transaction Fees: 2% of the value of investment. Custody Fees charged by Globacap Ltd: 0.25% of the value of investment. Distribution Fees charged by Globacap Ltd: 1% of distribution amount.
Foreign Currency Exchange Fees: If investing in EUR or USD, you will be notified of the agreed exchange rate from EUR or USD to GBP prior to or at the time of such Investment by the Smartlands Platform. The exchange rate will only be valid for a certain specified period.
XLM to fiat Conversion Fees: If investing in XLM, you will be notified of the agreed exchange rate from XLM to GBP prior to or at the time of such Investment by the Smartlands Platform. The conversion rate will only be valid for a certain specified period.
Bank Transfer Fees: These will be charged at the applicable rate.
CryptoTapas: What excites you to work on the Smartlands every day?
When I was working as a freelancer, I was making a decent amount of money. I know it is not in vogue for millennials to think about investments and retirement, but I was thinking about investing the money I earned.
I was researching a lot but most investments did not make sense to me. Real estate was an investment that made a lot of sense but needed a lot of capital to invest.
During that time – I came across Smartlands. The idea that retail investors could own a piece of real estate by investing $100 or $500 or whatever they want to was amazing. The concept really spoke to me.
The success of Smartlands is also a matter of pension fund for me personally.
CryptoTapas: Talk a little bit about the risks of investing in smartlands?
Every investment comes with risk. Smartlands also comes with risk, for instance, let’s say one of the properties gets damaged.
Having said that, we are very selective in picking the projects that yield a 15% rate of return on investment while backing the investment with a real world asset. So in 3 years, investors are gaining 50% of their investment.
Individuals are investing in the companies that are in turn investing in real world assets. These companies are then maintaining the property and paying dividends on the investment.
CryptoTapas: What are the immediate things lined up for Smartlands?
The biggest news right now is that we are offering an equity stake in the company to raise the capital to further our expansion plans.
You can find more information from our official announcement.
CryptoTapas: Thank you very much for giving this opportunity, it was a pleasure talking to you.
Thank you for reading the article.
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RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.
Read more about the author here.