Real.Markets Rating Review

Rating Review

We rate The REAL Project at «Stable-». We rate the REAL token at “Underperform”. As a result we do not recommend purchasing the REAL tokens while ICO. We do not recommend long term investing into The Project.

The REAL Project is the Ethereum blockchain-based real estate investment platform using smart contracts. In fact it is a real estate investment trust (REIT). Its advantages are decentralization of the purchase and sale real estate transactions and simplifying of cross-border operations.

But there are many weaknesses and negative points.

The founders intend to buy real estate objects at the amount of more than the intended project budget. They do not consider the option if they do not raise the intended target while ICO. The founders assure they have the necessary amount of money but they do not prove this information. Possibly they will not able to purchase real estates because of the lack of money. Another negative point – if the founders do not raise the minimal target while ICO at100 000 ETH they will not intend to return money to investors.

They do not fix the maximal volume of transactions while ICO. The all tokens can be bought by one investor. They do not foresee additional tokens issue in future. It is a serious risk for investors.

The founders do not mention in the given documents that the Project budget and transactions (rent and sales income) are exposed to unhedged currency risk.

Besides that, income amount depends on the market season. Another serious risk that the founders do not speak about is a potential multiplication of volatility inside the Project investment instruments. Namely, besides the ETH/USD currency exchange risk there are factors causing the volatility presence in the American REIT market.

There are not real estate experts in the staff. MVP is not available. We are provided only with screenshots of graphic shell. Investment strategy is not disclosed. They do not explain the methods of real estate objects choice.

Marketing strategy is aggressive. They communicate with the community actively via social networks. They deal with online resources and chat with blockchain community. But at the same time they do not provide us with the clear marketing plan. But they foresee the marketing expenses.

The prices for remunerations are not competitive. The charge is 10% from the real estate income. It is more than other REIT’s charges by 5-10 times.

There are mistakes and invalid information in the Whitepaper. There are many mistakes in calculations. On Github repository the most reference links are dead. The reference links to the important documents are broken, too. The team has not published the audit conclusion on security yet.

About The Project and ICO

The REAL Project is a blockchain-based platform for managing assets. Its main activity is investments into the real estate objects. In fact it is the Ethereum blockchain-based real estate investment trust using smart contracts.

Company: Real Estate Asset Ledger Pte. Ltd., Singapore

Smart contracts platform: Blockchain Ethereum

Contract type: ERC-20

Token: REAL

Pre-ICO: August 24, 2017 (period - 24 hours)

Pre-ICO is limited with 25 000 ETH. Minimal participation amount - 100 ETH.

ICO Start: August 31, 2017, 13:00 UTC

Maximal ICO period: until September 30, 2017, or within 26 hours after soft-cap receipt.

Total issue amount: available tokens amount for sale is under 48 675 000 REAL. If the tokens volume for sale is 51%, the maximal tokens amount, in case of hard cap receipt, is 95 441 176 REAL. The all unallocated tokens are destroyed.

Minimal target: 100 000 ETH (soft-cap)

The founders assure if they do not receive the soft-cap they will launch The Project in any way because they have the certain amount of money for investments. There are no evidences proving the fact of money availability. It means The Project is not terminated after fail ICO. The funds are not returned to ICO participants.

Maximal target: 200 000 ETH (hard-cap)

ICO Price: 220 REAL = 1 ETH

Currency: ETH

Minimal and maximal volume of transactions is not foreseen at ICO, with the exception of pre-sale. So, the all tokens can be bought by one investor.

Bonus program is limited only with ICO and pre-sale periods. Bonus program is as follows:

Tokens distribution:

51% - allocated while ICO as mentioned above. 21% of issued tokens are locked inside the system for future issue. They are locked for 12 months. After one year they are issued or canceled in the founders’ discretion. 20% are distributed among the REAL team, advisors and strategic partners. They are vested for two years with a half year cliff.

They do not describe the process of future additional issues. They do not deny the additional issue possibility.

Raised capital distribution:

The Whitepaper describes the Core Operating Budget at 43 759 ETH. 1 ETH=250 USD. It is planned for 5 years. They do not disclose the sources of the mentioned budget in case if they do not receive the necessary amount at ICO. We cannot take into account the founders’ capital because we do not have any evidence of this information truthfulness.

On Medium discussions the authors of The Project say that they recalculated the Core Operating Budget taking into account new ETH/USD ratio. The new estimated budget amount is 27 000 ETH. But in the Whitepaper they do not provide us with the updated information.

The founders intend to spend the amount being the difference between the ICO raised amount and the REAL budget for the real estate objects purchase. They estimate this difference at 80-90% from the raised amount. So they believe they will get the soft-cap at least.

Core Operating Budget distribution:

The authors disclose the budget showings as to the possible future expenses. They do not take into account any exogenous factors, including currency exchanges rates, macroeconomic state in the certain regions, average salary and so on.

Information about The Project is available in the Whitepaper and on the website.

The Project Services And Their Usage

REAL is a crowdfunding platform where the investors are able to buy the ownership rights using the cryptocurrency. In this way they invest the investment project. It is planned any investor is able to buy the rights for several real estate objects and create an investment portfolio. The founders assure such investment portfolio will generate the constant income. The minimal investing amount is 1000 REAL tokens.

Besides that the service gives the opportunity to sell assets rights. The holder receives the opportunity to convert them into more marketable assets.  

In any case the real estate ownership rights transfer is carried out with the smart contracts. The contracts are planned to be concluded under the Ethereum blockchain-based decentralized computer network. The blockchain technologies will help the investors to cooperate directly without intermediaries in online mode.

In the personal account the developers will show the necessary factors to manage the investment portfolio. Among them are total assets, available REAL tokens to invest, amount of projects, amount of invested capital, average sum invested per project, capital gains profit, and total benefits. It is important to note the mentioned factors are the general information on the investment portfolio. It is too little information for investment decisions.

So, The Project considers itself as the infrastructural platform. The main objective of it is simplifying of the process of small private investments into real estate. Firstly they intend to invest into the real estate objects in USA, Spain, and the Caribbean. Spain and the Caribbean are chosen because of their popularity for tourists. Speaking about USA The Project intends to occupy the share in the New York market.

You can read about the crowdfunding platform functioning in the Whitepaper in details. In fact it is like the operational algorithm of REIT because The REAL Project buys the real estate objects and manages them offering the investors to participate in income generating from rent and sales.

  1. PROPERTY
    1. REAL Platform invests in the acquisition of a property and offer participations to platform users. For that, we will create a REAL Property Contract (RPC), a smart contract of physical property.
    2. REAL Platform creates participations that are offered to the users through REAL Property Participations (RPP). Those are internal tokens that describe the participation details for each property with their different valuations and participation percentages.
    3. Users will get REAL Tokens in the Token sale or at exchanges. We will facilitate on our site the exchanges link where users can buy REAL Tokens.
    4. Once the users have REAL, they will be able to acquire RPP (Real Property Participations) paying with REAL Tokens.
  2. RENTAL PROFITS
    1. Property participations of each property can generate profits through rentals.
    2. These profits will be split according the participation percentage of each user in that property that will be detailed in the RPPs.
    3. Rental profits will be paid monthly among the RPP owners in ETH.
  3. SALE PROFITS
    1. REAL Platform sells the property.
    2. We will obtain profits from that sale.
    3. Those profits will be split according the percentage that corresponds to each user. As detailed in the RPP tokens.
    4. Each user profits will be paid in ETH.
    5. Each user will get their REAL Tokens back when the sale transaction is finished.

At the moment of the review writing the website of the crowdfunding platform is under development. The team of The Project is not gathered in full, too. This team is planned to maintain the platform operating. It is planned the team consists of experts in the field of searching and management of real estate objects.

The Market

  1.  Investment objects

The authors show three ways of investments into real estate: USA (We want to be opportunistic if we get the chance of buying properties in unique markets such as NY), Spain (Ibiza, Mallorca, Menorca and Canary Islands), and the Caribbean (Riviera Maya in Mexico and Punta Cana in Dominican Republic). In this review we examine the case with Spain real estate. Firstly, because we don’t understand what the USA unique market the founders mean. And speaking about the Caribbean resorts they highlight some certain cities. And the information on these cites is little.

The specific features of the tourist market are the dependence on season and rent income volatility. They are additional risks for REAL token holders. If the factors mentioned above meet together they cause large investors’ losses. Let us examine one of the geographic places proposed by the authors – the Balearic Islands (Ibiza, Mallorca, Menorca, and others).

After 10% decrease of tourists within 2009-2010 we see the tourist number increase in Balearic Islands. Due to data of statista.com within the last seven years the number of tourists visited the Balearic Islands is increased by 1.44 times. The reasons are the resorts popularity, developed infrastructure, and growing of global economics causing the peoples’ income growth.  

Annual number of international tourists visiting the Balearic Islands from 2001 to 2016 (in 1,000s)

In spite of the Balearic Islands are becoming more popular for tourists it should be noted the accommodation market sector is seasonal. The peak season is from May till September. Within this time we see the highest KPI. Hotels are busiest.

If we examine the data given by the Balearic Islands Hotel Market Snapshot, Balearic Ministry for Innovation, Research and Tourism, and showings of Menorca resorts as for 2014-2015 we see that August is the most profitable month in 2015. The hotels were occupied at 91,4%. Maximal yearly Average Daily Rate is 118,8 Euro. Maximal yearly Revenue per available room per day is 108,6 Euro. In May, 2015 the Average Daily Rate and Revenue per available room per day was half the August showings. It was the beginning of the peak season. 

So, we can make a conclusion that the season business in Spain influences the REAL token holders’ income and the crowdfunding platform operation. Redevelopment opportunities existence is caused not by undermanagement and underinvestments but by the season business and very competitive market while the peak season. The hotels have to take into account poor income within the low season distributing their receipts. They need to maintain hotels all the year round. It is one more problem for investors.

2.  REIT Market USA

It is necessary to examine the USA REIT market and its distinctive features because in fact the platform operates like REITs. And it is necessary to compare possible incomes of REIT investors and the REAL investors. It is necessary to incent the traditional REIT investors. The founders should promise them at least the same income they get from REIT.

In the chart below we see market capitalization changes of two USA REITs: Equity and Mortage. We should say the both Equity REIT and Mortage REIT increased their capital after default in 2007-2008. By 2016 their market capitalization was 1 US billion dollars and 0,960 US billion dollars. By 2008 the capital was increased by 5,3 and 5,5 times.

Total return to the index, Benchmarked at December 2011 = 100.00; returns in percent

Income of funds is different within 2012 – 2016 years.

In 2012 the Mortgage REITs’ Compound Total Return was 22,85%. It was more than the showings of S&P, Russell 2000, and Dow Jones. In 2013 the Mortgage REITs’ Compound Total Return decreased. And only in June of 2016 it was restored. Five-year Cumulative Total Return was only 55,11%. And S&P 500 - 98,18%, Russell 2000 - 96,45%, and Dow Jones - 83,61%. In 2011-2016 the Mortage REITs had high income volatility. The income was not stable. It caused their failure in the long run in comparison with the traditional income indexes.

Compound Total Return

 

 

All REITs

Equity REITs

Mortgage

REITs

S&P 500

Russell 2000

Dow Jones

1-Year

9,28

8,52

22,85

11,96

21,31

16,5

3-Year

12,43

13,38

9,69

8,87

6,74

8,71

5-Year

12

12,01

9,18

14,66

14,46

12,92

 

Cumulative Total Return

 

All REITs

Equity REITs

Mortgage

REITs

S&P 500

Russell 2000

Dow Jones

3-Year

42,13

45,74

31,96

29,05

21,63

28,47

5-Year

76,24

76,3

55,11

98,18

96,45

83,61

We see the Equity REITs’ showings within 2012-2016 are better than Mortgage REITs’ ones. Three-year Compound Total Returns and Cumulative Total Returns of Equity REITs are higher than the showing of traditional indexes of S&P 500, Russell 2000, and Dow Jones. The mentioned assets income decreased in 2015. And Equity REITs met more losses than traditional indexes. And as a result it failed in the long run in the comparison of the traditional indexes. By the end of 2016 the 5-year income of the Equity REITs assets was 76,3%. It is 21,88% less than the income from S&P assets, 20,15% less than the income from Russell 2000, and 7,31% less than the income from Dow Jones assets.

So, we see the income from Equity REITs and Mortgage REITs assets is more fluctuating than from the traditional indexes. On the one hand we get larger speculative income within the short period. But in accordance with the mentioned showing as for 2012-2016 traditional indexes are more profitable in the long run.

 We can consider the above mentioned information as positive points for the REAL Project. If they generate average assets income between the traditional indexes and, for example, Equity REITs showings they will incent potential investors to create their portfolios with the REAL Project.

 But there is a negative point, too. It is the possibility of volatility multiplication inside The Project investment instruments. The asset income depends on many factors. Among them are season business type, and ETH/USD rate volatility. These are additional risks for the potential investors.

Staff

There are 6 members in the staff. The same number of invited advisors is in the team.

The both founders are venture capitalists and entrepreneurs. They established many projects. In the staff there are two engineers in the field of blockchain technologies, a business development manager, and a PR expert in start-up companies promotion. In the team there are not real estate experts at all!

 At the moment of the review writing the founders were looking for key specialists in real estate and data science.

The team is not anonymous and active on a few social networks, such as AngelList, Twitter, Facebook. PR Manager of The Company communicates actively on Telegram and Bitcointalk. Information on LinkedIn proves the personnel’s experience.

Management

Serial entrepreneur and Business Angel with over 15 years of experience. Due to mass media directly after getting started with his adult life, Enrique built an online bingo site with an initial investment of 3 000 euros from his grandmother. At the age of 24, he sold it for 8 mln euros.

He also has founded and raised online companies like Wamba.com -the european Myspace- (Raised 3MM€). He also co-founded a development company in Uruguay -SXNetworksand a Blog Network -MediaGambling- sold to CMedia. (transaction conclusion evidences are not available)

Due to AngelList, Enrique made investments into 34 start-up companies. There were 3 exits. Besides that he was the founder of 12 start-up companies.

Enrique also co-founded Mola.com, internet startup accelerator in Spain. The company receives more than 2 000 submissions every year from entrepreneurs seeking their backing and support. In accordance with crunchbase Mola has a net worth of € 4 million and currently participates in approximately 35 companies in which it has invested a total of € 11 million in collaboration with other investors. In accordance with the information given in the techcrunch article, dated 2012, Mola raised €1.2M. Among the investors there is a Co-Founder of The REAL Project - Bernardo Hernández. He is advisor and judge of several estate-run Startup programs like Startup Chile and Startup Peru and a frequent speaker in entrepreneurship schools and events. On YouTube you can see the Enrique’s statement in Spanish, dated 2013 году.

Serial entrepreneur, Internet Executive and Venture Capitalist. Currently a director in e-Ventures in Germany, he cofounded Tuenti.com (sold to Telefonica for 80MM€). Due to mass media publications he worked for Tuenti as a Marketing Manager. In LinkedIn he says he is a CoFounder of Idealista - the biggest Real Estate site in Spain (sold to APAX for 273MM€). But there is no information about him in the APAX press release about the Idealista purchase. Besides that, he was the senior marketing and product positions at Google. In May 2013 he joined Yahoo as the Head of Flickr, which he ran until May 2015. On Spain websites you can find more information about the investor proving his experience. In LinkedIn he says he is a CFA Charterholder. We did not find his name in the CFA Holders List. But we have found the article where his name is among famous company members: https://www.finquiz.com/blog/5-famous-cfa-charterholders-how-they-did-it/. The founders explained the situation. Several years ago Bernardo denied paying CFA charges.

 

Tech

Experienced full stack software engineer with vast experience in Python, Java and Blockchain. He got a degree in UIB and is currently studying a postgraduate in UOC University. Before coding at REAL, Javier specialized himself in Blockchain system architecture. He is also actively involved in the development of the Blockchain technology. His research interest covers cryptocurrency trading, Cloud computing, BigData, Security in Trusted/Untrusted environment.

The page on github was made in July of 2017. There is no information about him in official publications except the publications connected with the REAL Project.  

Started with Blockchain in 2016 testing different capabilities for public and private blockchains as ethereum and multichain. He spends his spare time reading about security in smart contracts. Before Blockchain he was iOS developer in several big projects like FCBarcelona official APP or Glassy Pro. Specialties: Blockchain, Design Patterns, agile methodologies, team leading, iOS development, Apple, mysql and postgresql, HTML5, CSS3, Django, Web standards.

The page on github was made in 2013. There is no information in public media except personal social net accounts.

Business Development

14 years of Business Development experience with usability, sales, design and programming experience having held positions at all startups Enrique has founded. He has a degree in Business Administration.

Senior PR consultant for Online Startups for the past 10 years, she is also a e-Food entrepreneur and won several awards including Startup Chile and Actualidad Económica prize. She studied

Communications and PR London Metropolitan University. We contacted with Melissa while the review writing. She answered our questions promptly.

Advisers

Co-Founder of Blueport Capital, San Francisco. He is an MBA Stanford class of 10-12, MIT Master Thesis 2007, Electrical Engineer and Business Bachelor & Master. He has experience in Hedge Funds having worked for years at Viking Global Investors. (there are evidences proven the information)

The Whitepaper says that Arnau Porto is the co-founder de Jaguar Capital, a Real Estate fund based in Colombia and Portblue Hotels.

Due to mass media Arnau Porto is a Manager of the chain of Portblue Hotels since 2011. (photo is available). At the same time due to LinkedIn he studied in Stanford and got MBA. He worked for Viking Global. There is no any information in LinkedIn that he is a Founder of Jaguar Capital and deals with Portblue Hotels. But such expert would be useful for The Project intending to work in the Spain resorts.

 Director of Investment Advisory & Real Estate Valuations in Aktua (Lindorff Group). Member of the founder management team (2009), Full time member of the Board of Directors and Strategy Committee, reporting directly to the CEO of the company and the Lindorff group. Currently developing the new "Global Real Estate" business unit in Lindorff, providing support in the acquisition of NPL / REO portfolios, Carve-out of existing units, and M&A processes at a global scale.

In LinkedIn he says he is a Founder of geniuzz.com. On loogic.com there is an article, dated 2013, where there is information that the Mola Fund invested 200 thousand Euros into a start-up. It confirms the connection between Gregorio and Enrique Dubois. Of course there are no evidences if he is the exact person working for Lindorff. But it is possible.

Experienced economic advisor in Real Estate transactions. He founded O&M Advisory boutique in Mallorca in 2001. He holds a degree on Economics from Ruprecht-Karls-Universität in Heideberg.

Engineer with entrepreneurial behavior, Blockchain Enthusiast, Studies Telecom Engineering in UPC. Ex-member in the Google's awarded project Android Beyond the Stratosphere in the field of energy management software development., CEO & Co-founder of the company leading the sector of the magic apps and show business , pioneers in the I+D of new technologies : Abracadapp. Trader in the stock market and Forex, specialized in psicotrading and stop losses.

The account in LinkedIn has been registered recently.

Full-Stack Developer, Blockchain Engineer and Entrepreneur. CTO of Prakma (Blockchain-based Startup) and Founder of Beat.BCN, education project that manages many educational institutions in Spain. He has also worked as developer at Vueling, Skyscanner and ex-CTO of Inhours.

The account in LinkedIn has been registered recently. Information about Carlos is available only in the articles connected with The REAL Project.

Blockchain expert & advisor, speaker and development Engineer. Director at Atraura Blockchain, one of the first companies 100% focused on the use of Blockchain technology. He is also the President of Barcelona Mobile Apps, one of the most important mobile app entrepreneurs association of Barcelona (www.bma.cat).

Development strategy and Roadmap

The Roadmap is available in the Whitepaper of The Project:

Please, note! The founders promise to launch beta-version of The Project in October. At the moment only screenshot graphic shell of the future website is available on the REAL site. It is very difficult to judge the services under the available information.

In the Whitepaper the founders describe the strategy of investment into the real estate objects within The Project. It is called «value investing». The concept of the strategy is to buy assets undervalued at the moment of purchase. The Project team does not disclose methods of objects evaluation inside The Project, discounts estimation. We can conclude The REAL Project does not have the exact investment strategy.

Here the team compares the USA fund market income with the real estate market. But they do not explain the real estate benchmark source.

Marketing Strategy

The Company does its best to attract the community’s attention to the future ICO.

  • Many article on REAL ICO are published in the online periodicals specialized in ICO and cryptocurrency: cryptocoinsnews.com, coinjournal.net, cointelegraph.com, bitcoinist.com, news.bitcoin.com, coinidol.com, smarticoinvestor.com, themerkle.com, cryptosrus.com и blog.icoalert.com.
    You can read an interview with CEO on http://coinnoob.com.
  • The founders discuss themes with the community on Bitcointalk and Telegram (435 followers). Facebook - 1 376 followers. Twitter - 1 977 followers. Retweets of each post – 100. The numbers are valid as for the moment of the review writing.
  • On YouTube there is a channel with 77 followers. Two advertisement videos are located there. One of the videos gained 33 100 views (26 likes and 14 dislikes), another one - 57 616 views (8 likes and 4 dislikes)
  • Besides that, on YouTube there is a video of the Coin Mong Chines channel describing the REAL ICO in details (894 views). We cannot estimate if the video author made the video on his own discretion or for the REAL remuneration.
  • CEO made a speech in the Blockchain event and CoinAgenda in Madrid. He participated in the pitch battle on100xinvestors.com. The theme was Pirate’s Plank: Token Sale Pitch Competition.
  • Bounty Program:

A total of 100,000 REAL tokens (aprox. 100,000 USD) allocated for the whole bounty program lasting perhaps less than a month which will be divided as follows:

  • 20% Social Media Campaign: Telegram, Slack, Twitter, Facebook;
  • 20% Reddit Campaign;
  • 20% Translation and Community Manager;
  • 20% Signature Campaign;
  • 20% Real Meetups in your town/city.

Bounty Program is planned in details. The essential requirements are explained to Facebook, Twitter, and Reddit participants as to their accounts execution, and comments writing.

There is an interesting opportunity to earn tokens organizing offline meeting in the certain town to discuss The Project and future ICO.

There is no detailed description of the marketing strategy in the documentation. The team only mentions that they will invite investors with the help of online marketing. «Online marketing in order to generate awareness in the Real Estate sector and acquiring cryptocurrency holders».

More detailed description of the marketing strategy we got discussing it with the team representatives via Telegram.

The Company plans to use the all available instruments to promote their business. Namely: remarketing, referral program, e-mail marketing, and even TV advertisement. The last method for the tokens promotion is not reasonable from our point of view. Because it is very expensive advertisement and TV cannot attract the target audience. Besides the above, the Company intends to use performance marketing. The customer acquisition cost is planned to be less than lifetime value. Lifetime value is a total income received from one client for the whole cooperation period. But it is impossible to calculate the lifetime value in this case. «It is too soon to have a LTV for sure as it is a new business but if average investor invests 5000$, and profits are 750$ per year, we make 75$. So we can assume they invest 3 years resulting in a LTV of 225$. We will acquire users below 50$ so the profit margins will be very high». We believe there should not be such calculations at marketing strategy planning.

The Company does not take an account the fact that many of the above mentioned marketing instruments are not reasonable for the tokens promotion campaign. The PR Manager of The Projects assures the members of the team are 15-year experienced professionals in the field of business promotion. We question their competence looking at the available marketing strategy plan.

In spite of the lack of the exact marketing strategy the founders have estimated the marketing budget.

The budget of the marketing for one year is 1 200 ETH for the next five years. It is 15% of the all operational expenses of The Company. If 250 USD is 1 ETH the yearly marketing budget is $300 thousand.  

It is difficult to calculate expenses amount.

The team has elaborated the scheme of fundraising but they haven’t planned the marketing strategy for The Project promotion. It is a negative point for the investor.

The Project Competitive Strengths

This year several companies carried out its ICO. They are the platforms for management of assets and projects focusing on real estate, investment platforms. The REAL Project is the pioneer blockchain-based fund for the real estate management. There are no direct competitors in the cryptocurrency market. The REAL’s plans and interests are not connected with other blockchain-based projects.

The direct competitor of The REAL is REIT. In fact The Project is REIT in itself. The only advantage and distinctive feature of The Project is the real estate transactions decentralization. It simplifies the cross-border transactions on real estate purchase and sale. The founders assure they do not intend to adopt a payment instrument for cross-border transactions.

Engineering aspects of The Project

The system is developed in the Open Source mode. The source codes are published on the GITHUB repositories. The main publications are sent from Javier Llabrés, and software engineer of The Project:

Due to github repositories the development process is dynamic. The team publishes smart contracts responsible for ICO. You can read about the main contracts on README.md.

The most reference links are broken. Some reference links to very important documents are not active.

The staff has not provided with the audit conclusion on security of the published contracts. There is only an announcement about this audit on their website: “Security Audits: We are working with some of the most respected Ethereum security advisors. The results of the audits will be made public.”[1]

The Project cooperation with Bitcoin Suisse AG is a positive point. The all assets are stored in the cold storage preserving them in safety: «All raised funds are kept by the world’s most secure multi-sig storage solution. All handling is performed in an isolated room, without any video or audio recordings. The keys are only handled by senior employees of Bitcoin Suisse AG”.

Technology stack:

The web application:

  • Python
  • Angular 4

  Mobile apps:

  • Swift 4 for iOS
  • Java for Android

  Smart contracts:

  • Truffle
  • Solidity
  • Zeppelin
  • Web3

The tokens satisfy the ERC 20 Standard requirements. The prototype of MiniMe Token, used in Status and Aragon ICO, is the basis for the token. This standard is one of the safest ones due to several security audits[2].

The Project Economics

The Project intends to raise 200 000 ETH at crowdsale. If ETH is 285$ the total REAL capitalization is about $57 million. The minimal volume of raised capital is $28,5 million (100 000 ETH). Taking into account today’s ICO market trends and The Project marketing program we believe they overestimate the minimal target. Besides that, in the Whitepaper they say they intend to spend 80-90% of the total volume of crowdsale raised capital for the real estate objects purchase. But it is possible only if they receive the intended soft cap. They cannot guarantee it.

It is planned the client pays The Project 10% from his profit received from the investment property. But the team does not explain the further distribution plans on the received remunerations. We believe this kind of remunerations is interesting only for the potential investors but it is not a reasonable kind of remuneration for the business profitability.

If The Company receives income at the output it bears the risks together with the client. The market volatility influences The Company profit stability. It is more reasonable to reduce remuneration and receive it at the beginning. As a result they get the constant income. And The Company can plan its further financial development.

The Project fundraising plan is calculated using ETH. They fixed the rate at1 ETH = 250 USD. On the chart below the white line is a historical ETH/USD ratio change:

We see about two months ago ETH rate was lower this level. Taking into account a high volatility of ETH/USD ratio the price of 1 ETH can fall down far from the rate of 250$. As a result The Company will not have money for its operating activity and further investments. The operating expenses are in FIAT money so it is better to execute the financial plan in the used currency for settlements.  

The team calculates future profit and losses. They use arithmetic model for tokens price formation. There are clerical errors in the document. Besides that, there are many mistakes in their calculations:

  • It is provided that the assets are sold after the operating margin receipt or after the certain period. But they do not explain what they intend to do if the price falls down to the level lower than the purchase price;
  • They say the REAL token price growth will increase the rent income for the investor:

 “REAL Tokens price grows X% post-Token sale prior to investing in the Crowdfunding: When that happens, you will benefit from a discount at the time of investing in our Crowdfunding marketplace and a multiplier of the ETH profit payments… If the Real Estate asset returns 15% annually, you would obtain 15% x 3 = 45%.”

It should be noted the composite income in USD depends on ETH/USD and REAL/ETH ratio. And here we see other results. The investors get their income only in case of constant or reduced rates of ETH/USD. If the rates of ETH/USD increase the investor get fewer ETH for the sold property than he spent for the REAL tokens purchase. And rent income will not able to cover ETH/USD conversion losses. It is better to make calculations using the single currency, for example US dollars;

  • The founders foresee the model of future development as if assets income and clients’ reinvestment level do not depend on time:

The market is variable within the different periods of time. As a result, the asset income is changed. These calculations are not true.

There are many other errors and mistakes through the content.  

The Project Risks

The Project intends to work in the real estate markets in different countries. So the team needs to do calculations in different FIAT currencies and digital currencies. They will bear system risks of the real estate market and currency risks at the same time.

There are possible legal risks. They meet difficulties as to their Project legalization under different countries jurisdiction. The Whitepaper do not mention this problem. They do not answer the following questions:

  • Who is the owner of the real estate in fact?
  • Will they insure the investment property?
  • Obligations and rights fulfillment under force majeure. Who incurs expenses?
  • Tax liability for investors.

 

There are some answers on some legal questions on Medium and Bitcointalk discussions. But there are not detailed answers on the above mentioned questions.

There are financial risks, too. The Project financial model depends on ETH/USD volatility. Besides that, there is little information in financial and economic Project development in the given documents and media. The marketing strategy is not planned.

They plan their future expecting the cryptocurrency market capitalization will be more than $50-100 billion. They hope if the market capitalization increases the more investors will participate in the cryptocurrency assets projects. The founders do not take into account in their calculations the cases if the cryptocurrency market capitalization growing period is more than they expect or the blockchain technologies market falls into a profound crisis.

Besides that, it is necessary to take into account the fact the real estate income depends on interest rates. High interest rates cause the low real estate price and high debts costs. Usually we see inverse correlation of the real estate price and income with the interest rates.

US Treasury 10-year notes:

The founders intend to invest mostly into the USA real estate so you should take into account the monetary policy of this country. The Federal Reserve Service is increasing interest rates within the last time so the real estate income is decreased. That is why many investors do not want to participate in this market.

There is a risk of the lack of the potential investors’ loyalty. In accordance with the Whitepaper the founders intend to invite traditional investors into their fund: “We believe that REAL Tokens will be more attractive than traditional Real Estate investment because Real Estate will become liquid with Tokenized ownership”.

There is no absolute attractiveness of the REAL tokens for the traditional investors. The potential investor pays for the assets using the cryptocurrency and receives the assets income in FIAT money. The investor gets profit only if ETH/USD and ETH/REAL rates are constant or increased. If the ETH/USD and ETH/REAL decrease the investor gets fewer ETH amount from the sold property than the amount he spent for the REAL tokens purchase. Speaking about rent income it is not able to cover currency exchange losses.

The investor has a choice if he participates in the REAL Project or invests into the SIMON PROPERTY GROUP (it is on the top of REIT list as to capitalization). One share of the SIMON PROPERTY GROUP is $156.

The next risk is the tourist business depending on seasons. Besides the season the rent income is very fluctuating.

And the most important risk is if the founders do not raise soft-cap they launch The Project in any way. The investors do not take their funds back. The founders assure they have already got the necessary amount to launch The Project. They do not give any evidences to prove the fact of their money availability. The Project intends to raise at least 100 000 ETH. Unreturned money is the additional risk for the investors.

The Token Investment Highlights

The REAL tokens are used only for cross-border transactions payments. The token is useless for settlements inside a certain country. So tokens demand is limited.

One of the income items is a rent income. But the rent is paid with FIAT money. So the rent income depends on ETH/REAL and ETH/USD rate fluctuation. The investors will meet the currency risk, too, if they decide to sell their real estate objects. The founders do not take this risk into account while their calculations. They do not foresee this kind of risk hedging. Of course, it is very difficult to implement.

The Project charge at 10% is not competitive. It is more than other REIT charges by 5-10 times. The REAL token is not profitable for the traditional real estate investments.

 

 

 

 

The information contained in the document is for informational purposes only. The views expressed in this document are solely personal stance of the ICOrating Team, based on data from open access and information that developers provided to the team through Skype, email or other means of communication.

Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud.

We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.