While the public sale of the FUND token is ongoing, the issuer would like to provide interested partners with some additional information to help them better understand the FUND Token.
Each and every investment decision that one makes should first be carefully thought through. Doing so means having the essential information to hand, as well as an understanding of the basic structure of the potential investment. With that in mind, this blog post will guide through the FUND Token setup. For further information, please take a look at the approved securities prospectus.
The investment strategy explained in 2 min.
A bond is a traditional financial product that can have a variety of characteristics. One key characteristic is the repayment of the invested amount at the end of the term, which is accompanied by a fixed or variable return throughout the lifecycle of the bond.
The FUND Token is no different: the issuer is obliged to pay back 100 % of the investment at the end of term, as well as a variable return that depends on the performance of the assets. We expects the current return of the FUND Token to be around 4 % p.a. from rents. In case a property is sold, the expected return could double to 8 % p.a. from sales proceeds that will be passed on to the investors.
1) Variable rate of return/full upside
Investments in real estate usually follow three steps: Firstly, the property is acquired and developed. Subsequently, the property is managed and rents are collected (approx. return 4 % p.a.). Finally, the property may be sold to other investors (i.e. portfolio funds, which is expected to generate return of another 4 % p.a. — that totals to an expected return of 4-8 % p.a.). The return on the investment is dynamic throughout these stages. For example, initially the return is at the lower end of the spectrum as each acquisition generates costs. If the property is sold, the return is usually much higher.
We strongly believe that investors should always get the full upside and participate in the success of their investment. As a consequence, investors will receive the full economic profit generated by the issuer. It is expected to grow towards the end of the term due to sales proceeds. In addition to the variable return, the initial investment (EUR 1 per Token) will be paid back at the end of the term.
2) Token price/payout
Since the token can be traded on secondary markets, there are two ways to liquidate the return: Either by a simple dividend payout to token holders or by token holders themselves selling tokens on secondary markets where the value appreciation is reflected in the token price. Both ways are possible.
Currently, liquid secondary markets for security tokens do not exist. However, we are in advanced talks with various exchanges and will make further announcements very soon. Judging by the many companies and projects out there, both in the centralized and the decentralized exchange space, we are confident that once the emission phase is over, there will be plenty of choices for token holders to trade.
If trading venues with sufficient liquidity are available, it is best to sell the token on secondary markets in order to achieve these value increases in the portfolio. The reasons for this are two-fold: firstly, the asset manager can reinvest profits in the growth and further development of the real estate portfolio. Secondly, it’s more tax-efficient both for the issuer and the token holders, if gains are attained through secondary markets as opposed to dividend payments. Token holders will then be able to liquidate their return whenever they need to.
If there is a payout, we will announce the respective date in advance. At the specific time, we will snapshot the token distribution and will pay out the respective dividends accordingly.