REIT ASIAPAC
MARKET
HOTEL DEVELOPMENT PROJECT IN A
TOKEN WORLD
Market
VIRTUAL
OR REALITY:
LIFE IN A TOKEN
WORLD
By Tan Kok Keong,
Co-Founder, FundPlaces
PROJECT STRUCTURE:
THREE TOKENS
1
H.O.T.
HOTEL-OWNERS TOKEN
Equity holders
2
A tokenized property would be analogous to a
REIT with much more flexibility and minimal fees
for intermediaries. Tan Kok Keong, Co-Founder of
FundPlaces, explains how to finance, build, and lease a
hotel with three types of tokens.
Loans from investors. Each
new issuance of LITs, similar
to fixed-income products, may
be auctioned and traded.
3
1
2
Smart contracts enabling
automated payments
to token holders
H.U.T.
HOTEL-USE TOKEN
Token holders can use the tokens
to occupy or resell the rooms
PROJECT CONSTRUCTION &
MANAGEMENT:
DIGITALLY-DRIVEN, REDUCING
WASTE & TIME
1
2
Construction technologies
include 3D-Printing,
as well as Augmented
and Virtual Reality.
THE GENESIS OF A TOKENISED
HOTEL PROJECT
At present, blockchain is no longer test-
tube babies with uncertain use cases
and a questionable future. Regulators
have started to institute laws that
facilitate blockchain adoption and even
spearheading projects.
Tan Kok Keong,
Co-founder of FundPlaces
In November 2017, Propy brokered the
sale of an apartment in Kiev, Ukraine to
Michael Arrington, co-founder of the
technology media website TechCrunch,
for US$60,000 via smart contracts on
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the Ethereum blockchain. Propy has sold numerous other
properties in a similar fashion in California and Vermont in
the U.S., and even a 40 million euros Italian mansion. Last
November, Proppelr and Fluidity started working with the
developer of a luxury apartment in Manhattan’s East Village,
Thirteen East + West, to tokenise the $30 million project on
the Ethereum blockchain. This is the first tokenisation of a
premium asset of such magnitude. Its success could entice
more building owners to consider the same. But how does
tokenisation work, and what are the advantages of executing
a tokenised real estate project?
Cloud-based
accounting system
L.I.T.
LOAN-INTEREST TOKEN
Blockchain has come under scrutiny following recent
security breaches at Bitcoin exchanges. However, its
proponents would regard the incidents as a blip in the
journey of a technology whose use would eventually
become the norm. For instance, developments in
tokenisation—the process of converting an asset into
a token that can be transacted on a blockchain—have
continued to gain pace.
PROJECT FINANCIALS:
REAL-TIME
Teams are formed based
on cloud-based, data-
powered procurement and
management platforms
HOTEL OWNERS TOKEN (HOT)
In undertaking a real estate development, the key risks are the
process of securing equity funding, the challenges of securing
financing at tolerable interest rates, and most importantly, the
uncertain demand upon completion. Can tokenisation of real estate
change this equation? HOTs are similar to equity stakes in a development project. HOT
owners are assigned their proportionate economic rights similar
to an owner of the project. The project financials will be recorded
on a cloud-based accounting system. Project teams are formed
via Honest Buildings, a data-driven platform for procurement of
services, to ensure projects are developed on budget and on time.
Let’s start with a use case where I want to acquire a site for hotel
development. Before executing on the land purchase, I start sourcing
for buyers of three types of tokens: Hotel-Owners Token (HOT),
Loan-Interest Token (LIT,) and Hotel-Use Token (HUT). If these
tokens are entirely sold, I would have de-risked the development
entirely. Advanced construction technology in the areas of pre-fabrication,
automation or even 3-D printing, will help to reduce the variations
in project schedules. Contractual agreements will be on smart
contracts whereby collections and payments are automatically
triggered. The system will then provide a real-time risk-adjusted
value of the project, i.e., the value of HOT. Assuming HOT starts
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