Blue Vault Discusses Velocity Ledger Blockchain-Enabled Trading Platform

February 7, 2018
 
Blue Vault Discusses Velocity Ledger Blockchain-Enabled Trading Platform
 

Blue Vault recently discussed the coming Velocity Ledger (“VL”) blockchain-enabled trading platform for nontraded REIT shares, DSTs, limited partnership interests in joint ventures, and eventually, individual commercial real estate properties and portfolios, with two of the company’s principals, Jon Haahr of Silver Portal Capital and Julian Jacobson of Fundamental Interactions (“FI”). We believe VL has the potential to revolutionize and transform the entire alternative investment industry for real estate, providing liquidity, transparency and fair valuation to the holders of these securities in the secondary market.

The key to this new platform for secondary trading and new security issuance of what are currently illiquid real estate securities is its application of the blockchain and distributed ledger technology. The platform will provide real estate sponsors, market makers, financial advisory firms, IBDs and investors with distributed ledger-based new issuance, tokenization, and trading solutions. But all of this sounds confusing to those of us who are unfamiliar with the blockchain and distributed ledger technology and what may be the greatest revolutionary development in financial markets since the internet.

Perhaps the best way to proceed with this discussion is to refer the reader to several articles on blockchain and distributed ledger technology to introduce the key concepts for those who, like most of us, haven’t gotten caught up in the enthusiasm (bordering on mania) over bitcoin and other “crypto-currencies.” Please see the end of this article for some helpful references. As Julian Jacobson said in our interview, we don’t need to know how our smartphones work to recognize their value and have them transform the way we go about our daily lives. Likewise, we won’t necessarily need to understand how blockchain and distributed ledgers work to use them to enhance the marketability and reduce the distribution cost of real estate securities.

Now, what are the founders of Silver Portal and Fundamental Interactions up to and how can their new platform revolutionize our industry?

First, a key element in this new initiative is the Delaware Board of Trade (“DBOT”) and its regulated Alternative Trading System (“ATS”) which is a strategic partner to Velocity Ledger as they inaugurate the new technology platform. When Blue Vault first heard about this proposal, many of our questions to Jon Haahr, the founder of Silver Portal, concerned the way the new platform would deal with the regulatory complexity of the nontraded REIT market and any other illiquid securities that could be traded. Because the DBOT ATS is already functioning within this regulatory environment, it is uniquely qualified to host Velocity Ledger’s technology platform. DBOT has already blazed a trail utilizing blockchain and distributed ledgers in security trading, fully compliant with FINRA/SEC regulations.

Likewise, Fundamental Interactions brings to the project their deep blockchain experience and existing trade matching and clearing technology that has been proven in the securities trading environment. FI has been involved in blockchain applications since 2013 and has a seven-year track record of designing high-performance multi-asset trading platforms for U.S. exchanges, brokers, dark pools and international execution venues.

For his part, Jon Haahr is the founder of Silver Portal Capital, LLC, a real estate investment/merchant banking and advisory boutique in San Diego, California, that provides a full complement of strategic/financial advice and capital formation services to high quality private real estate operators as well as public and non-traded REITs. Jon has more than 25 years of real estate, capital markets, and investment banking experience, and has been involved in advising on and raising capital of more than $20 billion over 140 transactions in the real estate sector.

When Blue Vault became acquainted with Jon Haahr’s proposal to create a secondary market for nontraded REIT shares and other illiquid securities, we shared his view that two of the major structural impediments to investors in these securities are their lack of liquidity and lack of transparency. Since their inception in the 1990’s, nontraded REITs have had very limited share redemption programs and only very infrequent re-valuations of their net asset values. Investors have been “locked in” for long holding periods with little transparency. Even recent regulatory changes that mandate more frequent valuations via third-party appraisals of real estate investment portfolios have only marginally improved the transparency for nontraded REIT shareholders. High sales commissions and other fees were prevalent in the industry, but for years capital raise was robust. New programs were introduced each year because of the relatively high distributions being paid and commercial real estate’s appeal as a diversification tool due to its low correlation with returns in other asset classes. The nontraded REIT industry has raised over $130 billion and currently has $85 billion in assets under management in over 60 programs.

The secondary markets that do exist to transact sales of nontraded REIT shares, for example, have significant transaction costs, wide bid-ask spreads, and cumbersome paperwork and settlement procedures for shareholders. Third -party tender offers by firms seeking to fill the need for shareholders who need to liquidate their nontraded shares come with huge discounts to NAV, planning to capitalize on shareholder desperation and profit from eventual full-cycle liquidity.

Silver Portal and Fundamental Interactions saw the $50 to $60 billion in aggregate share values in the nontraded REIT sector that are currently “frozen” and unavailable to shareholders as just one example of a market in need of the technological solution that blockchain and distributed ledgers can provide. Velocity Ledger will give shareholders increased transparency, discovery and market-based pricing, as well as transaction settlement efficiencies, creating the potential to re-vitalize the nontraded REIT industry.

The business plan, as Velocity Ledger envisions it, is to establish the trading platform through DBOT in Q1 2018, begin the process of tokenizing secondary trading of nontraded REIT shares and begin trading in Q2 2018. The technology also has the capability to handle property titles and many of the functions currently fulfilled at significant cost by a host of intermediaries.

Importantly for VL, the vision is not limited to providing liquidity, transparency, and efficiency to the nontraded REIT market and the other illiquid securities mentioned above. The property sector is the largest asset class globally, and also the most opaque and inefficient. Worldwide valuation is estimated to exceed $217 trillion (with a “t”!) and it is estimated that $55-60 trillion is tied up in non-residential commercial, 90% of which is privately held and not traded on any exchange. Imagine if just a small percentage of that asset class were “tokenized” so that fractional interests could be efficiently and competitively priced and traded in the aftermarket with very low transaction costs. Combined with the inherent integrity and security of blockchain and distributed ledgers, that possibility hints at the enormous potential for Velocity Ledger’s platform.

In Part II of this report, we’ll get into the specifics of the Velocity Ledger platform.

DBOT ATS LLC Inc Announces The Official Launch Of Blockchain-Powered Crowd Funding And Secondary Market

The blockchain-powered platform is the first-of-its-kind alternative trading system (ATS) focused on over-the-counter securities to support cryptographic tokens for SEC registered securities.

WILMINGTON, Del. (PRWEB) January 04, 2018

DBOT ATS LLC makes capital raising and trading simple with an all-in-one system that supports a multi-tenant issuing portal, secondary trading and a blockchain ledger. The first to market solution reduces transaction cost and settlement time compared to current portals for crowd funded equities issued under Regulation A+.

Historically, investing in a crowd funded early stage company meant holding the security for a long amount of time because of the inherent lack of liquidity in those securities and the difficulty in transferring ownership. By combining issuance and secondary market and offering a hybrid of physical paper with blockchain-based smart-contract tokens, DBOT ATS has made a significant improvement in the investment process with a frictionless path from initial investment to liquidation and settlement of the transaction.

DBOT ATS Portal offers companies a simple process to raise capital. A company would just register and step through a template to create a tokenized security deal either using Regulation D, A+ or CF and once approve they are ready to accept new investments online. Investors can browse new deals on the website, request access to a deal and then fund an account either with crypto currencies or cash to pledge an investment. Shares offered through Reg A+ are traditionally eligible for resale by investors in the secondary market upon completion of an offering.

“This is a great achievement for DBOT ATS and a major step forward for the crowd funding industry.” says Shawn Sloves board member of the Delaware Board of Trade holding company (http://www.dbottrading.com) and CEO of Fundamental Interactions (http://www.finteractions.com). “The system being blockchain based signifies the start of the fusion of traditional and decentralized markets in a regulated entity, where securitized tokens become a reality for secondary trading.”

Delaware Board of Trade Holdings Inc.

The Delaware Board of Trade Holdings Inc. operates three companies: (i) DBOT ATS LLC, an SEC recognized Alternative Trading System; (ii) DBOT Issuer Services LLC, focused on setting and maintaining issuer standards, as well as the provision of issuer services to DBOT designated issuers; and (iii) DBOT Technology Services LLC, focused on the provision of market data and marketplace connectivity.

DBOT ATS LLC (“DBOT”)

DBOT is a FINRA Member Firm, and a member of the Securities Investor Protection Corporation (“SIPC”), that operates a fully automated, auto-execution Alternative Trading System (“ATS”).

ICO FOR VELCOITY LEDGER,A BLOCKCHAIN UTILITY FOR ILLIQUID REAL ESTATE SECURITIES TRADING

Silver Portal Capital announces the initial coin offering for Velocity Ledger - a blockchain utility designed to streamline and accelerate the investment cycle for illiquid real estate securities. The sale will take place on the technology crowdfunding portal of the DBOT ATS, LLC.

NEW YORK (PRWEB) DECEMBER 05, 2017

Silver Portal Capital LLC and Fundamental Interactions Inc. have partnered to deploy Velocity Ledger (previously Silver Portal Markets), a blockchain-based utility designed to provide liquidity and transparency to direct issuance, secondary trading and settlement of illiquid real estate securities. The utility will provide real estate sponsors, investment banks, financial advisory firms and end-investors with distributed ledger-based issuance, trading and settlement solutions. Select security types will be tokenized for trading, including Non-Traded REITs, Delaware Statutory Trusts and Limited Partnership interests in institutional Joint Ventures. Following the initial launch, the partners plan to expand implementation of the platform’s blockchain technology to disrupt other process-intensive real estate verticals that revolve around buying and selling direct real estate, including the trust and title industries.

Velocity Ledger uses Ethereum’s ERC20 protocol to tokenize and maintain a dynamic, real-time ledger of securities as well as cash and utility coins to support direct securities issuance and electronic secondary trading. The blockchain utility integrates seamlessly with the Fundamental Interactions’ Nano Exchange market platform, which powers Automated Trading Systems (“ATS”) and exchanges around the world. The DBOT ATS, LLC "DBOT" will use the utility to manage listings, settlement and securities issuance. As a partner to Velocity Ledger and a listing venue for illiquid real estate securities, DBOT will be the first in a cross-platform community of regulated securities markets to manage ledger operations on the utility. DBOT will accept Velocity Ledger utility tokens as a means of payment for services and intends to make the tokens available for trading between member firms on its ATS.

Velocity Ledger Token Sale: San Diego-based real estate investment and merchant bank, Silver Portal Capital LLC, will perform the sale of Velocity Ledger coins over the DBOT ATS technology crowdfunding portal. The offering will be  utilizing the SAFT (“Simple Agreement for Future Tokens”) framework. The alpha version of Velocity Ledger is fully operational, allowing proceeds from the sale to be used for next phase technology build-out and operations to onboard key market participants. Tokens will be offered at a discount to select real estate firms as ‘network credits’ for the future use of the utility, with the tokens as the means of payment for issuance, trading and settlement.

Velocity Ledger Technology: Fundamental Interactions plans to ‘open source’ key components of its private/public version of Ethereum smart contracts to allow the broader global community to adopt and utilize the network in conjunction with the Nano Exchange platform. Tokens will confer upon their owners both voting rights for the management of the utility as well as revenue participation in the network’s earnings as adoption grows and institutions purchase/use Velocity Ledger tokens.

About Silver Portal Capital LLC

About Silver Portal Capital: Silver Portal Capital is one of the nation’s premier real estate investment/merchant banking and advisory boutiques, providing a full complement of strategic/financial advice and capital raising services for high-quality private platform operators as well as public and Non-Traded REITs. Silver Portal also sponsors targeted real estate discretionary funds in demographically-driven property types, and tax-advantaged, 1031 Exchange investment opportunities in beneficial interests of Delaware Statutory Trusts or whole ownership. The principal and partners of Silver Portal have been involved in advising on and raising capital of more than $20 billion in over 140 transactions, exclusively in the real estate sector.

About Fundamental Interactions

About Fundamental Interactions: Rising to challenges and opportunities posed by regulation, technology, and market structure shifts – Fundamental Interactions develops leading enterprise market center technology platforms. The systems are widely deployed by securities exchanges, ATS, and inter-dealer brokers across a variety of asset classes and geographic regions.

About Delaware Board of Trade

About Delaware Board of Trade Holdings: Delaware Board of Trade Holdings Inc. operates three companies: (i) DBOT ATS LLC, their SEC-registered Alternative Trading System; (ii) DBOT Issuer Services LLC, focused on setting and maintaining issuer standards as well as the provision of issuer services to DBOT designated issuers; and (iii) DBOT Technology Services LLC, focused on the provision of market data and marketplace connectivity.

Why Does CRE Need A Direct-Issuance And Trading Platform?

AUGUST 3, 2017 | BY CARRIE ROSSENFELD

Non-traded REITS, DSTs and JVs held in portfolio by institutional investors are illiquid once owned. SPM will solve this problem by creating a web-based Nano exchange platform to offer and trade these assets, Jon Haahr tells GlobeSt.com.

Haahr: “The platform will reshape what has historically been an inefficient network into a dynamic competitive marketplace.”
SAN DIEGO—Non-traded REITS, Delaware Statutory Trusts and joint ventures held in portfolio by institutional investors are illiquid once owned. Silver Portal Markets aims to solve this problem by creating a web-based Nano exchange platform to offer and trade these assets, founder and senior managing principal of Silver Portal Capital Jon Haahr tells GlobeSt.com.

Haahr’s firm believes that distributed ledger technology is the way of the future—and even that the future is already here—because of its ability to decrease costs of trade reconciliation and settlement by disintermediating the large institutions in the middle. He says Silver Portal Markets can do this with confidence given the immutability characteristic of blockchain. The firm has partnered with Fundamental Interactions, which he says is two years ahead of the rest of the market in the blockchain arena.

Silver Portal’s expertise is in the real estate sector, where its partners have experience in advising and raising more than $20 billion in capital in more than 150 transactions in the public and private real estate capital markets. SPM will be a web-based market, providing both real-time secondary trading and direct issuance for illiquid real estate securities and institutional joint ventures. The market will disintermediate the traditionally inefficient system of sponsors, inter-dealer brokers and RIAs into a more efficient and competitive trading marketplace, using Ethereum smart contracts to provide real-time reconciliation and settlement of trades, thereby greatly reducing time and cost to create a peer-to-peer platform for real estate liquidity.

We spoke with Haahr about why this platform makes sense, who can use it and the effects it will have on the industry.
GlobeSt.com: Why does it make sense to have a direct-issuance and trading platform for commercial real estate?

Haahr: This is for select types of real estate securities and institutional joint ventures: non-traded REITs, DSTs and joint ventures held in portfolio by institutional investors. These are by nature illiquid once owned. They are not DTTC registered or eligible and therefore cannot be cleared or settled like an equity or corporate bond, for example. As such, they have no real market or mechanism by which they can be traded actively—that is, they are not listed on any exchange.The result historically is a very inefficient market for buying and selling in the aftermarket—if you can sell at all—which results in a wide bid/ask spread, and the seller usually taking a big discount on re-sale. Buyers are typically opportunistic in nature and looking to take advantage of the lack of a ready market and lack of transparency in these types of real estate assets.
SPM will solve this illiquidity problem by creating a web-based Nano exchange platform to offer and trade these securities and institutional joint-venture pieces. We will achieve this by using technology pioneered by our partner, Fundamental Interactions in New York City. The platform will reshape what has historically been an inefficient network into a dynamic competitive marketplace.
GlobeSt.com: How do you plan to roll out this program to the market, and who is your target customer?

Haahr: The customer base is broad and varied: NTR and DST sponsors (for new issuance and secondary trading), independent broker-dealer networks that have traditionally sole NTR, wire houses now selling NTR product, holders and owners of the NTR and DST securities, institutional owners and investors, as well as traders who want to be involved in the assets. The beauty of SPM is that it is a winning proposition for everyone. Current sponsors of NTRs and DSTs as well as buyers of the product have long fought against the fact that once an investor buys the security, there is no real ability for the investor to get out of the trade—except for some very limited redemption features that are under the control of the sponsor or through an opportunity fund purchase, which occurs at an often-steep discount. So, sponsors will be very enthused about the chance to tell prospective brokers selling their products and their clients that a true secondary market exists should they desire to sell in the future, and the buyer will know they have the ability to sell at a fair, market-determined price.
Institutional investors (pensions/foundations/endowments/opportunity funds) can sell peer-to-peer or to a fund dedicated to acquiring these illiquid pieces, but the process is time consuming, rarely competitive and not transparent. The ability to bring this sale to a broader market in an efficient and transparent way now will significantly decrease the implied cost of the sale and allow the market to set a fair competitive price for the JV piece. Traders can also actively participate in the buying and selling of these assets, benefiting all parties by creating enhanced liquidity and decreasing the discount and spread between the bid and ask.
GlobeSt.com: What effect do you believe this platform will have on the industry?

Haahr: For each of these three segments of the real estate market—NTR, DST and institutional JV—SPM in partnership with FI and its technology will create a trading platform where all participants in the market: (issuers, traders, investors and sellers) can transact in an environment that is efficient, transparent and highly competitive, thereby reducing costs of trade reconciliation and settlement, increasing transparency and ensuring optimal price execution for all parties.

GlobeSt.com: What else should our readers know about this platform?

Haahr: We understand the importance of “ease of use.” SPM will employ a simple web interface that provides access to a sophisticated multi-dealer electronic trading infrastructure where information can be accessed, the history and current market for the real estate security or asset easily understood and trades executed through our customer order matching technology.

Silver Portal Capital to Launch Blockchain-Enabled Trading Platform for Illiquid Real Estate Securities

Silver Portal Capital will deploy the Fundamental Interactions technology platform to pioneer new primary and secondary trading markets in illiquid real estate securities, leveraging the blockchain and utilizing the FINRA-regulated DBOT ATS (Delaware Board of Trade) for order matching and regulatory trade reporting.

Silver Portal Markets brings new viability to previously constrained aftermarkets by creating additional liquidity and ease of access for best-in-class real estate sponsors and issuers

NEW YORK, NY (PRWEB) JULY 25, 2017

San Diego-based real estate investment and merchant bank, Silver Portal Capital LLC, has partnered with New York electronic trading and technology provider, Fundamental Interactions Inc., to launch Silver Portal Markets (http://www.silverportalmarkets.com): a web accessible marketplace that will provide both real-time secondary trading and direct issuance funding for select real estate securities. The market will support public and private real estate securities, including Non-Traded REITs, Delaware Statutory Trusts and Limited Partnership interests in strategic Joint Ventures. “Silver Portal Markets brings new viability to previously constrained aftermarkets by creating additional liquidity and ease of access for best-in-class real estate sponsors and issuers,” concludes Jon K. Haahr, Founder, and Jean-Louis Guinchard, Senior Managing Principal, of Silver Portal Capital. “We’re very excited to bring this new opportunity to the market.”

The secondary market will reshape the historically dislocated network of real estate sponsors, inter-dealer brokers, and registered investment advisers into a dynamic and competitive trading marketplace. A simple web interface provides access to a sophisticated multi-dealer electronic trading infrastructure where customer orders are matched on a central limit order book operated by the DBOT ATS, a subsidiary of the Delaware Board of Trade.
The automated primary issuance platform within Silver Portal Markets will allow select real estate sponsors and investment banks to directly syndicate equity out to investors, principally through 506(b) and 506(c) offerings. This will enable sponsors to raise capital more efficiently and cost effectively, and ultimately create liquidity for new issuers on the platform.

The marketplace utilizes Ethereum smart contracts to provide real-time reconciliation and settlement of trades among inter-dealer counter parties, providing analysis of moment-to-moment net settlement exposures on a peer-to-peer basis. In the case of the primary market, new equity issues are written into smart contracts on a distributed ledger as a basis for shareholder services and tracking beneficial ownership. “We are pleased to support the addition of these new products to the market center, especially here in Delaware, which has already legally embraced the blockchain for equities issuance and settlement,” says Jose A. Guadalupe, DBOT Board Member and representative of S.S. Lootah Group. James Slazas, Director of ConsenSys Capital, also adds, “ConsenSys is excited to support the innovative marketplace in its use of smart contracts for trusted settlement and greater transparency.”
About Silver Portal Capital: Silver Portal Capital, a registered broker-dealer, is one of the nation’s premier real estate investment/merchant banking and advisory boutiques, providing a full complement of strategic/financial advice and capital raising services for high-quality private platform operators as well as public and non-traded REITs. Silver Portal also sponsors targeted real estate discretionary funds in demographically-driven property types, and provides tax-advantaged, 1031 Exchange investment opportunities in beneficial interests of Delaware Statutory Trusts (DSTs) or whole ownership. The principals of Silver Portal have advised on and raised more than $20 billion of capital in over 150 transactions, exclusively in the real estate sector.

About Fundamental Interactions: Rising to challenges and opportunities posed by regulation, technology, and market structure shifts – Fundamental Interactions develops leading enterprise market center technology platforms. The system is widely deployed by securities exchanges, ATS systems, and inter-dealer brokers across a variety of asset classes and geographic regions.

About Delaware Board of Trade Holdings: Delaware Board of Trade Holdings Inc. operates three companies: (i) DBOT ATS LLC, their SEC recognized Alternative Trading System; (ii) DBOT Issuer Services LLC, focused on setting and maintaining issuer standards, as well as the provision of issuer services to DBOT designated issuers; and (iii) DBOT Technology Services LLC, focused on the provision of market data and marketplace connectivity.

About DBOT ATS: DBOT is a FINRA Member Firm, and a member of the Securities Investor Protection Corporation (“SIPC”), that operates a fully automated, auto-execution Alternative Trading System (“ATS”).

About S.S. Lootah Group: Established in Dubai in 1956, S.S. Lootah Group is a family-owned diversified business house with ventures across key industries from Construction, Real Estate, Energy, Food and Hospitality to Financial Services, Applied Research, ICT, Education and Healthcare among others along with a remarkable portfolio of not-for-profit educational institutions. From the first contracting company and first medical College in the United Arab Emirates to the first Islamic bank in the world, the entrepreneurial spirit of S.S. Lootah Group has been the catalyst that has brought home-grown business and community ventures to the global stage. This extraordinary portfolio carries the hallmark of the visionary Haj Saeed Bin Ahmed Al Lootah, the founder and Chairman of S.S. Lootah Group.

About ConsenSys: ConsenSys is a venture production studio building decentralized applications and various developer and end-user tools for blockchain ecosystems, primarily focused on Ethereum.

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