Topic: [Regulated] Smart Property Trust (SPT) (Read 5452 times)

+1

Any news?

James,
I lost track of this thread, did you guys finalize things with this? Can we invest? Would you consider putting our shares on bitfunder if we purchased?

Also would you consider looking at really depressed areas such as detroit?

I apologise, when I said it was only mining and exchanging I was wrong, there are some other avenues, however the sector investment cap is tiny, you can't continuously grow your gambling site per btc invested nor increase the probable odds of you winning in gambling by having more to play with.

It is true that we need capital through BTC channels, I personally have a great credit rating and so does my partner, however the business we are going into while including Bitcoin investors is not something our local banks have shown interest in, as bitcoins are a "no-go area" for, at the very least, the vast majority of canadian financial institutions.

Accepting BTC as rent would produce a BTC return for a BTC investment, however that return would be pegged to the dollar as this whole thing is in "meatspace", where the dollar is king, there really isn't much of a way around that currently. That doesn't mean were not OPEN to complete unhinge of the USD and using BTC once bitcoin starts picking up traction, but that's currently not feasible in any means.

Our year/year projections indicate an average ROI of 14%. Now this isn't a major return, Tradefortress' www.coinlenders.com gives a 25% APR, but this is something that will be under complete US regulation, we physically can't run away with your money. If your money goes missing, we go to jail, period.
If we purchase a home and can't provide the ROI that we believe we can do, and you and your fellow investors are dissatisfied and call a vote for liquidation, that will legaly bind us to sell the property and return the investment to our shareholders, no funny business.

I have no problems with your questions, frankly they are quite good, and I've done my best to address your questions as best I can. Where currently putting all of our effort into finding a legal strategy for angel investment. There are quite a few glaringly obvious things missing from this listing, I agree 100% with you, I have a document outlining exactly what will be posted and when, however currently we're in "go/no-go" mode as finding an avenue to complete our incorporation is proving challenging.
if you have a specific set of information you would like to see such as your "glaringly obvious" questions, I'll be happy to answer them and put them in the FAQ when I have time.

+1

And smiles to everyone for some healthy debate. 

Firstly it's NOT true of all non-mining/exchange businesses.  Mining is generally fiat-denominated in practice - and is itself a short on Bitcoin (it's very simple to prove that).

There's other business areas that exist (or have existed in the past) that are purely BTC-denominated - examples being trading funds, currency-trading funds, gambling assets (to an extent - there IS some impact of exchange-rate there).  Pretty much anything that is a financial service can be BTC-denominated.

And businesses that trade primarily in USD-denominated assets can also generate income in BTC - they just have to make enough profit to be able to hedge/cover their exposure to fiat.  I run an LTC-denominated fund that mainly trades in BTC-denominated securities.  Despite that, the fund itself only has 15% exposure to BTC - with the other 85% being LTC-denominated exposure.  That's achieved by borrowing the BTC used so as to offset BTC-denominated assets with BTC-denominated liabilities (so the fund's own LTC-denominated assets are largely used just as collateral to borrow BTC).  The same could be done for fiat exposure.  Except the problem becomes that noone wants fiat exposure unless they can play along with the pretence that it's actually a BTC-denominated investment.  And, of course, if you could borrow fiat to reduce exposure then you wouldn't be trying to raise BTC in the first place.  The sad truth is that the primary reason for companies in a fiat-denominated business raising capital in BTC is simply that they lack the credit-rating/track-record/assets to get fiat-denominated capital.

I'm interested in what you mean by "the current climate" when saying you believe you can out-perform BTC.  What model for BTC price are you using to define this "current climate"?  It would have to be a very short-term model if based on history to conclude that BTC's growth could be matched by the growth of a USD-denominated real-estate investment.

There's nothing intrinsically wrong with raising funds here for a fiat-denominated business.  Just please don't try to insult everyone by pretending it's a Bitcoin-denominated investment or is likely to make more profit than just holding Bitcoin would.  Its target market should be those who want to invest fiat, not those who want to invest Bitcoin - and there should be a decent market for that from those who don't have much non-bitcoin capital and so could sensibly look at some fiat-denominated investments so that even if Bitcoin collapses they still have some assets left.

I take it as obvious that only mining operations "produce" Bitcoins; but it sounds like you are saying there are no other true Bitcoin businesses except for mining and exchange which could possibly exist. I'm not sure what you mean by "without being impacted by the dollar in any physical investment"; maybe you don't believe currency hedging is possible?

More to the point, however, you're saying that you believe your returns from a REIT using as-yet unspecified leverage and with as-yet unknown occupancy rates will more than exceed any rise in Bitcoin versus the dollar. You haven't mentioned where to find any evidence or argument to support this belief, but I understand that this implies a significantly negative view of Bitcoin's value versus the dollar, so it makes sense that you would be asking investors to share your view and take a short position in Bitcoin versus dollar-denominated real estate.


To my mind, your personal history with Bitcoin doesn't seem in any way relevant to the proposal for a dollar-based REIT holding dollar-denominated assets and taking on unspecified levels of dollar-based debt with the intention of generating a principally dollar-based revenue stream. You could be a core programmer, or you could even be Satoshi, but that would make no difference whatsoever to the evaluation of the investment. Unless...you'd like to make it relevant by now introducing new information that you hadn't mentioned before: now you're planning Bitcoin rent, Bitcoin ATMs, Bitcoin mining with "reasonable power costs" (Bitcoin miners represent a significant part of your local market, I guess?), etc. Those extras which hadn't previously featured would require a basic grasp of Bitcoin.


The difference is that new entrants without any previous experience working in any REIT, let alone actually running one, do not typically aim to float their businesses with a public offering right from the get-go.

James, taking a step back from this for a moment, I can't escape the feeling that your priority seems to be arguing with me rather than informing potential investors. I asked about leverage -- which I take to be so blazingly obvious to ask of any REIT that its absence from the original details was glaring. There are many others in the 'blazingly obvious' category that haven't even been mentioned yet. And in response to your suggestion that this investment was somehow a hedge for Bitcoin volatility, I noted that it was, on the contrary, asking potential investors to take an unhedged short position in Bitcoin versus underlying dollar-denominated assets. Rather than just acknowledging explicitly that that is exactly how this is structured -- so as to inform your potential investors -- you've come back now a few times attempting to counter, broaden, and now even to speculate on the future exchange rate trajectory. Each time I have responded to the new points you have introduced, this kind of pattern has played out again.

I don't personally have much interest in engaging in that kind of pattern. I think the bottom line is that you've come asking for cash to set up a REIT, and it would be mildly zany to think that potential investors are going to keep their questions or observations to themselves. If those questions and observations are not at least as pointed and critical as those which would be brought to bear on a real, established company with a seasoned management team and significant operating history, looking to float on a regulated exchange or otherwise tap the capital markets, then your potential investors just aren't doing their due diligence. To the extent that you can acknowledge basic observations about financial structure and engage meaningfully in critical assessment of the investment itself, you'll be doing the job of informing investors, and that will reflect well on the proposed investment.

This would be true of ANY non mining/exchange business, as nothing can "produce" bitcoins without being impacted by the dollar in any physical investment. We believe our returns will be more than enough to counter the average bitcoin price inflation, at least in the current climate.

A) we look to the bitcoin economy for both revenue and to share interest, I'm personally an avid bitcoin user, I have been buying and selling goods with bitcoin since 2011 (I lost my GPG key for this and my previous account due to an unfortunate reformat which lost my private keys) we plan to intregrate bitcoin as much into the infrastructure of our business as possible: for example, allowing rent payment in bitcoins, (legality permitting) enabling bitcoin ATMs to be used, rentals of mining floorspace at reasonable power costs, etc. This isn't just an investment via bitcoin, its an REIT that integrates bitcoins into its DNA from day 0.

B)This isn't 100% the case, obviously there are a significant amount of exceptions, however if you look at (for an example) this Kimco Realty investment presentation, and look up the current managers of this fund, you can see that they have for the most part stuck with one or two funds their entire working career, we plan to offer something different to a different audience. We have the drive, the determination, the intelligence, and the ability fully manage a profitable REIT in the Canadian markets.

Given that debt is normally senior to equity in terms of capital structure, I'm guessing that potential investors who think it might be a good idea to take an unhedged short position in Bitcoin in order to buy an equity share in a fiat-based business taking on fiat-based debt in order to produce a fiat-based income stream will be glad to find out in advance just how much claim they'll have on the assets of the business.

That might be especially important seeing as the scheme is guaranteed to lose money in Bitcoin-denominated terms unless the fiat-denominated total returns of the investment exceed any appreciation in the value of Bitcoin versus the dollar...


From 'A.' I think I understand you to be saying that the only reason to be looking at the Bitcoin economy in the first place is that you'd like a source of capital to start a REIT, but that if you'd already managed to do so on your own, you wouldn't look at the Bitcoin economy as a source of capital at all. Any particular reason you favor the Bitcoin economy as a source of capital, given all the other sources of capital which are available, given that you're asking Bitcoin holders to take an unhedged short position to provide you capital, and given that the investment appears to be an entirely non-Bitcoin business from start to finish (apart from the obvious request for some Bitcoins to start you off)?

And from 'B.' I think I understand you to be saying that as far as you understand the industry, nobody has any experience running a REIT except those who have already destroyed one or those who are still running their first and only REIT. Do I have that right?

Hi James,

I have some tough questions to ask about this investment, and I am going to raise some glaring concerns. For the record, I own several investment properties.

Firstly, let us make the assumption that you get investors on board, and you purchase the property you mentioned would be the typical property you would purchase ( https://www.dropbox.com/s/39zz0oeaf65isyo/Minerva-Gardens-Brochure.pdf )

So according to that document, you would expect something like $125k operating income per year, on a $2.2m investment, or, 5.71% ROI. So investors would typically get 5.71% return every year on their money. In bitcoin terms, this return rate can only be described as abhorrent. Not to mention that expenses are almost always understated, particularly when they are estimated with no historical hard-numbers on it. This also assumes that no funds need to be borrowed from a bank, which interest rates would eat significantly in to the profits.

A single month of Asicminer shares would earn more than an entire year of this investment. Now here's the really bad part - This is BEFORE fees are deducted. You list your fee as 3% initially on NAV and then 2% per year. So, an investors will actually need to pay $66,000 out of their income, so the real return on investment is more like 2.7% per year. Most people could make more than double this just by putting their money in a bank, let alone Bitcoin investments which offer double, and even triple digit returns per year.

Now you might say, "What about capital growth?" Well, sure. The property may grow by say, 3% value over a year, which is an income of $66,000, pushing ROI back up to around 5.71%. You might also say, "well, we plan on renovating these properties to make them worth a lot more, and rent for a lot more." If that is the case, then great. This may increase the return significantly, but it is also very risky. Do you, or your partner have any experience renovating properties for profit? Because I do, and I can assure you that if you haven't done it before, or you don't have a crap load of contacts in the construction industry, you will not make a good return on money invested in renovation. It is messy, things go wrong/over budget, and at the end of the day you may add less value to the property then you spent.

So in my eyes, there is a hell of a lot risk, for really really low return. Anything under 25% return per year in bitcoin is a bad investment, particularly if it's risky. This is not even considering the dozens of other risks and issues trust, legality, errors, learning curve and all kinds of other issues that will inevitably affect your profits.

Can you please comment on how you believe you can turn this in to a good investment?

Yes, we will be leveraging with mortgages, the specific Debt ratio is to be decided.
We won't be touching other instruments such as bonds, keeping this as simple as possible.
The shareholder indenture that will be forthcoming following angel investment will outline the specific creditor status of all unit holders.

We have real estate management experience, but no REIT management experience, if we did we either would have:
 A. An already established REIT, which basically  means we would have absolutely no need to look into the bitcoin economy.
 B. Have experience forming a REIT, however it failed for some reason and we're seeking on forming a new one.

I posted in your other thread about the peculiarity of describing this as a way to hedge Bitcoin volatility, since that's where you had promoted the idea, but since this seems to be the thread where you're talking more about specific investment plans, maybe this is the place to ask another question or two. Normally, equity REITs are at least moderately leveraged, but as far as I can tell in what you've provided here, you've talked only about equity. Do you have plans for debt financing as well? (If so, will you be describing where equity holders will sit in terms of capital structure relative to future creditors?) And can you point us in the direction of material explaining more about the team's background in real estate management in general and REITs in particular?

updated the main post, the FAQ, first property and preferred units, and investment.

I'll be available to answer any questions for the next few hours

big update today, we are nearing completion of everything sans legal/accounting, we're currently in talks with some angel investors on securing funding to complete the full, regulated incorporation structure. The business model we will be using will be updated this evening.

agreed, I wouldn't form a corporation in the EU right now, I wouldn't even know where to start.

Also todays update is up, not much change from yesterday however we're moving forward day by day, the REIT incorporation fees might be larger than anticipated.

Are you kidding? I've lived in both and Europe is a bureaucratic clusterfuck.

OK, good luck, I will follow your progress, if there is anything i could help, just PM me. Anyway, I am from Europe, so it is pretty different here and North America is over regulated in my view, but we are following slowly US way 

I'll take a look and pass the idea off to my partner, but yes from what we've been able to see we shouldn't have any serious problems with unit-holders investing via bitcoin, as long as we are below the radar of AML legislation (sub $10k per person, per day), we should in theory not need a ridiculous amount of personal information on our investors.

I understand, I work for a company incorporating offshore IBCs, there is still good option to incorporate UAE /Dubai for example/ company, but still it is probably not what you are looking for. But if REIT would work for bitcoin currency, then it is a big step

Filing as an offshore company could work for a short term investment for us, however we anticipate being in business for the long term, which means that we want to set it up right the first time, an REIT is a registered company which will be doing exactly what we plan to do, just we do it in Bitcoin rather than the conventional fiat investing unitholder.

In short: we don't want to play around with things that could work, we want to do it right, the first time, even if it takes a little longer to get the i's dotted and the T's crossed.