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- 👋 Welcome to The ReCap
In this month's edition of The ReCap we'll be covering:
Industry News: There's a new national exchange in town 🥊
Real Estate News: A Growing Pipeline
Vendor of the Month: Digishares
Advisor Spotlight: Jessica Burns (Token Girl) 💁♀️
Client Spotlight: Curzio Equity Research 📈
Crypto Corner: The Basics 👌
Fun Fact: Crypto Coins
But first...
If you’re reading this then at some point you showed interest in the future of finance by subscribing to the Security Token Advisors newsletter. Well now you can stop holding your breath because The ReCap is finally here.
This newsletter will make sure you are aware of all the latest tokenization trends and headlines like JP Morgan saying 2022 could be the year of financial tokenization or Arca conducting an industry survey yielding 77% of capital market participants agreeing that securities will be digitized and settled on a blockchain in the next 5-10 years.
The team of nearly 10 consultants working day in and day out in this industry are all contributing to make this newsletter a trusted and useful read for you every first Tuesday of the month. As always, we love feedback so don’t hesitate to reach out.
Herwig Konings
Founder and CEO, Security Token Advisors
In June 2018, tZero and Box Digital announced a joint venture to build the first blockchain-integrated and compliant national securities exchange. On January 28, 2022 tZERO announced that its joint venture, Boston Security Token Exchange (BSTX) with Box Digital received approval to be the USA’s first regulated blockchain-enabled securities exchange. BSTX strives to offer U.S. capital markets faster settlements, blockchain-secured market data and solution access for early-stage companies.
The Winklevoss-owned crypto exchange initially applied for its broker-dealer license in mid-2019. FINRA approval allows Gemini to operate an alternative trading system (ATS) which is necessary in facilitating the trading of security tokens. To date, the exchange has gathered an impressive clutch of licenses, approvals and regulatory nods across its trading and custody divisions.
John Reinhardt, director of custody operations at Gemini, said it remains to be seen exactly what kind of offerings digital asset securities will include.
These securities will initially include private placements and, as the market matures, may include public offerings as well.
Founded in 2015 Fusang is Malaysia’s first licensed and regulated digital exchange for security tokens. The tokens will be listed on the company’s own Fusang Exchange by the end of the first quarter. The 2.5 million shares will be offered at a fixed price of US $4 apiece, for a total initial public offering of US $10 million.
Fusang IPO could prove that it is possible to bring real-world securities through an end-to-end IPO process but in token form...We wanted to run this as an open offering where there’s no distinction between institutional or individual investors
The European & Markets authority (ESMA) invited stakeholders across Europe for input on its regulatory technical standards (RTS). They are asking for input for the use of blockchain for:
Trading and settlement
The need for amending the RTS on regulatory reporting and transparency requirements.
The blockchain-based RTS will be the first regulation targeting the use of the tech in the issuing, trading, & settlement of bonds, stocks, and mutual funds in Europe. If regulations are passed, which is expected to be in March 2022, they will allow EU entities to issue stocks, ETFs, & bonds in a sandbox program at first before wider rollout.
As one of the most direct and prominently discussed industries for tokenization, real estate is a dominant force on the existing secondary trading markets. As research from our sister company, Security Token Market, shows below, the monthly trading market cap of real estate tokens grew by nearly 5x over the course of 2021, largely due to offerings through RealT, St. Regis Aspen ($ASPD), and Mt. Pelerin ($MPS).
stomarket.com
The existing secondary marketplace pales in comparison to what we have been seeing firsthand on the primary issuance side at Security Token Advisors. With a handful of $1+ billion real estate portfolios, managers, and asset owners coming through our consulting pipeline, it’s clear that the existing secondary markets will be dwindled upon these new issuances.
Without disclosing names, examples that we have seen showing “warm interest” in tokenizing an existing piece of their book of business include:
$1 billion gross asset value student housing portfolio
Single-family real estate portal servicing institutional clients that’s already transacted ~$3 billion of deals
“Slice-of-a-city” portal including a current $1.5 billion NYC portfolio with expansion plans across the UK
As for a recent development that we can directly speak on, Nolan Reynolds International (NRI) pioneered its own investment structure to cater towards both existing/traditional Limited Partners and forward-looking security token advocates. Called the “UPREIT,” this structure enables the conversion from analog LP interests in The THesis Hotel in Coral Gables, FL to tokenized shares. As originally covered by Security Token Group’s own Mike Lingle,
On the first day following the lock-up period, existing shareholders will have the option to convert their operating partnership units (“OP Units”) into shares of the REIT, represented by a security token. The operating partnership and the REIT will be bundled into an UPREIT (umbrella partnership real estate investment trust). This UPREIT allows LP owners to exchange their OP Units for shares in the REIT as a tax-free transaction, since they are contributing property to the REIT
This conversion is expected to go live in Q2 or Q3 2022.
The primary motivation for this feature was early liquidity for existing LPs, especially as the THesis Hotel as an asset reached an adequate point for recap funding. Simply put: It makes sense to enable existing investors to “cash out” at this point, should they wish to.
NRI has over $500 million in real estate assets and is using the THesis Hotel as a beta test for the power of tokenization. Should this prove to be as successful as we anticipate, it’s quite likely NRI will roll this tokenized UPREIT structure out to many more in its portfolio.
And as we know, one major domino falling will apply pressure to the others, and giants like Related Group, Savills, and Starwood Capital will adjust their eyes to all things tokenization.
Highlighting a security token developer and issuance platform out of the Benelux region, The ReCap applauds DigiShares for its industry-friendly services and team.
With consistent education and an upcoming webinar surrounding real estate tokenization, Claus Skaaning and his team have been putting the pieces in place to further connect TradFi assets with the DeFi ecosystem.
STA's Advisor of the Month for our inaugural issue is the incomparable Jessica Burns. Jessica is our resident Boss Woman, powerfully pushing our client projects to new levels and creating amazing content on her new show Spilling The NFTea through our sister company, Security Token Market.
Jessica is a native Canadian / Michigander, who has made South Florida her home now for over ten years. Prior to her arrival at STA, Jessica was and continues to be a serial entrepreneur and networker, co-founding a company that taught kids how to program actual satellites, a fashion boutique, and her own marketing agency.
Jessica heads our Investor Relations department, assists with Marketing, and is always on the lookout for new women to bring into the cryptosphere. We're proud to have Jessica on the team and congratulate her on her selection as our first ever Advisor of the Month recipient!
Let's get to know Curzio Research...
They are
an independent financial newsletter publisher dedicated to providing deep-dive market analysis, unique stock ideas, and the tools individual investors need to consistently generate market-beating returns
Frank Curzio comes from an extensive financial background on a mission to bring Wall Street back to Main Street, something we strongly believe in at STA!
So what did Security Token Advisors do for Curzio?
Great question! STA helped Frank Curzio launch the Curzio Equity Owners (CEO) Token on Securitize, becoming one of the first successful STOs in current history, building a brand, an audience, and a demand for the token!
This shows the power of community as the company raised most of the offering from its own client base!
Here's a breakdown of the offering...
$CEO Token Offering Summary:
Total Raise: $4M USD
Issuance Platform: Securitize
Exemptions Used: Regulation D and Regulation S
Lock Up Period: 12 Months
For those unfamiliar with regulation exemptions, reference below.
Regulation Exemptions:
Regulation D says that an issuer doesn't have to register with the SEC, but they can only raise from accredited investors*
Regulation S allows an issuer to raise from international investors, accredited or not, without having to register
*Accredited investors have a net worth of $1M (excluding primary residence) or annual income of $200K (single) or $300K (married)
So, what's next?
In 2020 Frank Curzio chose to list $CEO on MERJ Exchange for secondary trading, making it the FIRST United States-based private company to list tokenized securities on a foreign public exchange.
Because it's now in secondary markets, you no longer have to be an accredited investor to partake!
Fast forward to yesterday: tZERO is now the new home for the $CEO token, delisting from MERJ!
tZERO is one of the most well-known alternative trading systems (ATS's) in the space and co-owns the Boston Security Token Exchange (BSTX). BSTX just got approved to operate as a national securities exchange and compete against Nasdaq and the NYSE!
This could have very positive ramifications for Curzio.
Want to know more on that? Click their logo below!
Welcome to Crypto Corner by Jessica Burns!
Since Miami is now the crypto capital of the world, it only makes sense that we would talk crypto- and offer a place for the beginners to learn!
Let’s start this off simple, by literally defining some of the most commonly heard crypto terms.
Decentralized: In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual or group thereof) to a distributed network. FOREX market is an great example because there is no one physical location where investors go to buy and sell
Centralized: Centralized organizational structures rely on one individual to make decisions and provide direction. An example would be Apple.
Staking: Crypto staking is the process of locking up crypto holdings in order to obtain rewards or earn interest
HODL: HODL is actually anchored in the traditional buy-and-hold investment strategy and stands for HOLD ON FOR DEAR LIFE.
To read more on crypto basics & introduction to Crypto please check out my medium page or check out the debut episode of Spilling The NFTea on the STO Youtube Channel.
Note: Spilling the NFTea is a new show to teach the crypto basics, to anyone who didn’t know where to get started! You can find new episodes on the Security Token Market Youtube channel every Tuesday at 9am.
Crypto coins are usually based on 4 things:
Currency
Meme
Tangible asset
Object
