2022-11-01-德勤-房地产STO白皮书_第2章_42页_17mb

Real Estate STO Whitepaper Chapter 2 Summary

Core Content

This chapter of the Real Estate Security Token Offering (STO) Whitepaper provides an in-depth analysis of the end-to-end process of a security token offering in the real estate sector, highlighting the roles of various professional service providers and the benefits STOs bring over traditional fundraising structures such as private real estate funds and REITs.

Main Points

1. Overview of STOs in Real Estate

• Definition and Regulation: Security tokens are widely regulated as 'securities' in major jurisdictions like the USA, UK, Japan, Singapore, and Hong Kong.
• Benefits of STOs:
  • Lower structuring costs and complexity
  • Greater flexibility in investment scope, portfolio components, and underlying assets
  • Enhanced liquidity with lower investment thresholds and no mandatory lock-up periods
  • Greater operational efficiency via smart contracts for programmed distributions

2. Comparison with Traditional Structures

• Private Real Estate Funds:
  • High investment ticket size and long lock-up periods
  • Administrative burdens for secondary trading and distribution
• REITs:
  • High structuring costs and complexity
  • Highly regulated with limited investment flexibility
  • Restricted in terms of asset management and dividend distribution
• STOs:
  • Offer a more accessible and efficient alternative
  • Enable real-time, transparent asset valuation through blockchain

3. Global STO Landscape

• The number of regulated STO exchanges has increased, with approximately 20 globally.
• Examples of successful real estate STOs:
  • Sunbelt Multifamily Fund: Represents interests in a US multifamily apartment portfolio, issued in Singapore as equity tokens.
  • RedSwan CRE Value-Add Fund: Represents interests in a diverse portfolio of commercial properties across the US, issued as equity tokens.

4. End-to-End STO Process

• The process involves multiple stages, including pre-issuance, issuance, and post-issuance.
• Pre-issuance:
  • Financial adviser engagement
  • Due diligence
  • Product structuring (volume, economics, token features)
  • Legal structure (offshore/onshore, fund types, asset segregation)
  • Valuation (NAV, credit rating)
  • Tax considerations
  • Tech advisory (blockchain selection, smart contracts, custody solutions)
• Issuance:
  • Tokenization and market making
  • Roadshows and book building
• Post-issuance:
  • Dividend/coupon distributions
  • Investor communication
  • Performance reporting
  • Exchange operations (T+0 settlement)

5. Technology Providers' Roles

• Token Product Structuring: Ensures the token structure meets compliance and commercial needs.
• Smart Contract Auditing: Involves specialized firms to examine code for vulnerabilities and ensure compliance with blockchain protocols.
• Digital Asset Custody: Offers secure storage solutions for security tokens, with custodial wallets providing insurance and additional services, while non-custodial wallets offer more control but less security.

6. Wallet Types and Insurance

• Custodial Wallets: Offer institutional-grade security, insurance coverage, and value-added services. Suitable for professional investors.
• Non-Custodial Wallets: Provide full control but are more vulnerable to theft or hacking.
• Digital Asset Insurance:
  • Covers third-party hacks, internal theft, and physical damage to private keys.
  • Does not cover technological failures, hardware malfunctions, or losses involving individuals with more than 5% ownership.

7. Market Landscape for Digital Asset Insurance

• Insurers like OneDegree and Lloyd’s are beginning to offer coverage for digital assets.
• The insurance market is still underdeveloped due to a lack of data and interdisciplinary knowledge.
• As demand grows, the insurance industry needs to become more proactive in offering tailored solutions for the digital asset sector.

Key Considerations for Issuers and Investors

• Regulatory Compliance: STOs must comply with local securities laws, and the process involves legal, financial, and tax professionals.
• Operational Efficiency: Smart contracts automate compliance and corporate actions, reducing administrative burdens.
• Liquidity: STOs offer more liquidity than traditional structures, making them accessible to a broader range of investors.
• Cybersecurity: Investors must be aware of the risks associated with private key management and the importance of using insured custodial solutions.

Future Outlook

• The real estate STO market in Hong Kong and the Greater Bay Area (GBA) is expected to grow as the sector matures.
• Continued regulatory clarity, technological advancements, and market adoption will be critical for the expansion of real estate STOs in these regions.
• The role of professional service providers, including technology enablers and insurance firms, will become increasingly important in ensuring the success and sustainability of real estate STOs.

Conclusion

This chapter outlines the process and benefits of real estate STOs, emphasizing the importance of collaboration between financial, legal, and technology professionals. It also highlights the need for a robust insurance framework to support the growing digital asset market, particularly in the real estate sector.